Ross River Ltd and Another v waverly Commercial Ltd and Another

JurisdictionEngland & Wales
JudgeMr Justice Morgan
Judgment Date09 October 2012
Neutral Citation[2012] EWHC 3006 (Ch)
Docket NumberCase No: HC09C00596
CourtChancery Division
Date09 October 2012

[2012] EWHC 3006 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

7 Rolls Building

Fetter Lane

London

EC4A 1NL

Before:

Mr Justice Morgan

Case No: HC09C00596

Between:
(1) Ross River Limited
(2) Blue River Limited Partnership
Claimants
and
(1) waverly Commercial Limited
(2) Mr Peter Barnett
Defendants

Mr David Caplan (Instructed by Messrs Mishcon de Reya, Summit House, 12 Red Lion Square, London WC1R 4QD) appeared on behalf of the Claimants

Mr Piers Hill (Instructed by Messrs Geoffrey Leaver Solicitors LLP, 251 Upper Third Street, Bouverie Square, Central Milton Keynes, Bucks MK9 1DR) appeared on behalf of the Defendants

Mr Justice Morgan
1

I will now deal with the costs of the various parties incurred in connection with this litigation. Although a formal order has not yet been drawn up following the judgments which have been given, dealing with the substance of the litigation, I think I can describe quite briefly the outcome of this dispute. I have held that the claimants are entitled to be paid a sum of £1,043,926 by WCL pursuant to the joint venture agreement and the side agreement. I have also held in relation to the claim which the claimants brought against Mr Barnett personally, that there should be no order that he should pay equitable compensation to the claimants.

2

I was given some information about the costs incurred by both sides to date. On the claimants' side, they have incurred legal costs of £2.1 million. On the defendants' side (treating WCL and Mr Barnett together for this purpose), they have incurred costs of £1.25 million. The total expenditure on legal fees in relation to this dispute has been £3.35 million. In other words, the claimants spent £2.1 million chasing a figure which turns out to be £1 million and was probably never going to be very much more than £1 million, and the defendants spent £1.25 million defending a claim which has ended up with a recovery of £1 million.

3

I mention these matters because the question of proportionality of this expenditure may well be a very important topic and I am asked, to some extent, to deal with the proportionality of the expenditure, in that, as I will explain, I am being asked to award costs on the indemnity basis rather than on the standard basis.

4

The positions taken by the parties can be summarised as follows. Turning, first, to the claimants' position, the claimants say that WCL should pay 100 per cent of the claimants' costs, that is for the entirety of the proceedings, and that they should be paid on the indemnity basis. That order, in practical terms, would not lead to the claimants recovering very much from WCL. WCL is in liquidation. It is insolvent. I have referred in an earlier judgment to the very partial information I have as to the extent of the insolvency and the amount of any dividend.

5

Turning to the claim against Mr Barnett, the claimants say that the right order here is that Mr Barnett should pay 100 per cent of the claimants' costs, that is throughout the entire period of the litigation, and that they should be assessed on the indemnity basis.

6

The position put forward on behalf of the defendants can be summarised as follows. WCL says that the claims to which it was a party or where it was involved, can really be divided into three categories. There are costs relating to the determination of net profit. There are then costs in relation to the side agreement arguments and, apart from those two categories, everything else is in a residual category, i.e. the rest of the issues. It is then submitted on behalf of WCL that, if one looked at the amount of the expenditure on WCL's part in relation to these three areas of dispute, 10 per cent of the expenditure could be safely allocated to the taking of the account, the determination of net profits, 10 per cent could be allocated to the side agreement issues, and 80 per cent to the rest.

7

As to who should bear these percentages, it is said on behalf of WCL that there should be no order as to the 10 per cent of the costs referable to the taking of the account. As to the 10 per cent spent on the side agreement, it is accepted that WCL has lost the issue about the side agreement and should pay the claimants' costs. As to the rest, the 80 per cent taken up by the remainder of the issues, WCL says that in this case the claimants essentially lost all those points and so the claimant should pay WCL's costs in that respect. So if there is no order as to costs as to 10 per cent, WCL pays 10 per cent for the side agreement and receives 80 per cent for the rest, the net result, WCL submits, should be that WCL receives from the claimants 70 per cent of its costs and these costs should not be on the standard basis, but should be on the indemnity basis.

8

Turning to Mr Barnett's stance in the submissions made on his behalf, he submits that he should have his costs, 100 per cent of them, for the entire period of the litigation and they should be on the indemnity basis. So there is no meeting of minds at all in relation to these submissions made to me about the outcome of costs. The arguments on costs have ranged widely. This has been lengthy litigation; it has been hard-fought; it has given rise to many issues. It has also given rise to many interlocutory steps. The costs, as I have described, are very substantial. In the course of submissions many points have been made, not all of which it is appropriate for me to deal with separately. Indeed, apart from the range of the argument, the argument went to places where arguments on costs have not previously gone and submissions of an entirely novel character have been made which, it will be seen, will not find favour.

9

It seems to me that the most constructive thing to do is to deal with the claimants' claims against WCL, say one or two general things about that, and then indicate the conclusion I have reached, giving my essential reasons and dealing thereby with the substantial points which have been raised. I will then deal with the claimants' claims against Mr Barnett and follow a similar course.

10

Starting then with the position between the claimants and WCL, the claimants have looked at costs throughout the litigation in a single way. They have not divided up the litigation as to one period and then another period, whereas WCL in its submissions have divided the period of the litigation by reference to the various pleadings at various stages. This has meant that I have had to do some legal archaeology in looking at the pleading which was the relevant pleading at the trial, and the pleading on which I gave my first judgment. That pleading was amended four times, and therefore there are various periods in the life of the litigation when the case was put one way and then put another way. I think I ought to describe how matters started and then how matters developed, but I will do this as briefly as I can.

11

The original Particulars of Claim were served in around April 2009. There was a lengthy pleading of the relationship between the parties, the agreements made, the history of the development and many matters of detail. Eventually, at paragraph 57, we come to the pleading as to claims against WCL and/or Mr Barnett, and indeed Mr Harney, but I do not deal with his position.

12

Paragraph 57 extended to some two and a half pages of pleading (perhaps a little less) but none of that was investigated at the trial because, by the stage of the purple amendments to which I will refer, these allegations were no longer pursued.

13

Turning to paragraph 58 under the heading "Breach of trust and/or breach of fiduciary duty", significant parts of paragraph 58 fell away and were not the subject of argument at the trial, and certainly not the subject of judgment following the trial. Some parts of paragraph 58 did not fall away, but speaking generally, there are places in paragraph 58 where the pleading survived, but it was not appropriate for the judgment to deal with the matter. An example is paragraph 58(1)(i). That was never withdrawn by a later amendment, but there is no ruling upon it. The same can be said about one or two other places in paragraph 58.

14

Starting with paragraph 59, the case about the claim under the side agreement is pleaded. In paragraph 63 there is a claim to recover a sum of money which is £325,000 plus £470,000. The next bit of the pleading starts at paragraph 64, claims against the fourth defendant, Westbury Properties Limited. These were all removed, paragraphs 64 to 71, so they were not dealt with at the trial and were not the subject of the judgment. Following on between paragraphs 72 and 73, there is a claim in conspiracy against all defendants, therefore, including WCL and Mr Barnett. Some of this was removed by amendment but there was, in the end, no ruling on the matter as against either WCL or Mr Barnett. As to loss and damage starting at paragraph 74, the original pleading was significantly altered and parts were removed.

15

That was how matters started. The next development was that on 8 September 2009, the pleadings were amended in red. The essential point being made in the red amendment was that there had been a misrepresentation made by one or more of the defendants as to the likely profitability of the development and that had caused a loss to the claimant. This was essentially in the alternative to the claimants' principal case, although not at that time pleaded, which was they were entitled to more than the base figure. But if it should turn out that they were not entitled to more than the base figure, they said they had been tricked, effectively, into electing for a net profit which was less favourable than the base figure.

16

Those red amendments were...

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