Shepherd v Pinsent & Company
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 19 January 2012 |
| Neutral Citation | [2012] EWHC 43 (TCC) |
| Date | 19 January 2012 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-11-188 |
[2012] EWHC 43 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case No: HT-11-188
Paul Darling QC and Simon Hughes QC (instructed by Nabarro LLP) for the Claimant
Roger Stewart QC (instructed by Beale & Company Solicitors LLP) for the Defendant
Hearing date: 13 January 2012
In these and later related proceedings, Shepherd Construction Ltd ("Shepherd") seeks substantial damages from its solicitors Pinsent Masons LLP ("PMLLP") and previous predecessor firms, Masons and Pinsent Masons, for alleged professional negligence relating to advice given or not given concerning various standard forms of contract which Shepherd was proposing to use. PMLLP seeks to strike out or challenge allegations made in a proposed draft Amended Particulars of Claim that there was a "Single Contract" between Shepherd and the various solicitor partnerships with which it had dealings since 1994 and pursuant to which it is said that the various solicitors should from time to time have reviewed and revised advice and draft sub-contract terms provided by them in 1998.
The Background
Masons was from the early 1970s a well known firm of solicitors who specialised in construction law. By the early 1990s, the firm had substantially expanded and had offices around the country and indeed abroad. Pinsent & Co was originally a substantial Birmingham law firm which expanded rapidly in the 1990s by way of amalgamation with other firms. In 2004, Masons and Pinsent amalgamated and a new firm, Pinsent Masons, was formed. As from March 2008, this partnership became a limited liability partnership, PMLLP.
The facts which follow are based on the proposed draft Amended Particulars of Claim and the evidence which has been submitted by the parties for purposes of this application. They are not intended to be binding on the final trial judge.
Shepherd is and was a national building contractor based in North Yorkshire. Masons opened their Manchester office in about 1989 and Shepherd was invited to various promotional seminars at the Manchester office. Masons was instructed by Shepherd on a substantial project at Exchange Quay, Manchester, initially to advise later on a substantial dispute arising out of it, between about 1989 and 1992. In about 1994, Masons was retained by Shepherd to advise on issues arising on a substantial construction project at Farnborough in Hampshire, with partners from the Manchester office attending monthly meetings to provide such advice. From about this time. Shepherd first began to be advised by non-contentious lawyers from the Manchester office, in particular by Mr Job and Mr Baker; this advice included advice about and drafting of contractual terms.
In mid-1998, Shepherd instructed Masons to advise on the draft contract specific and bespoke amendments to use with the DOM/1 and DOM/2 standard forms of subcontract recommended for use with the Joint Contract Tribunal's 1998 suite of standard main contracts. At this time, the provisions of the Housing Grants, Construction and Regeneration Act 1996 ("the 1996 Act") were coming into force which effectively outlawed "pay when paid" clauses in construction contracts. Section 113 (1) provided that a "provision making payment under a construction contract conditional on the payer receiving payment from a third person is ineffective, unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent". Section 113 (2) so far as is material provided that "a company becomes insolvent (a) on the making of an administration order against it under Part II of the Insolvency Act 1986".
Masons included in the draft a verbatim repetition of Section 113 (2) of the 1996 and also advised on the desirability of a "pay when paid" clause along the lines of the draft which had been incorporated in but later admitted from an earlier version of DOM/1. Masons also made certain amendments to the payment provisions, purportedly to bring them in line with Sections 110 and 111 of the 1996 Act. Clause 21.3.4 was prefaced with the words "Notwithstanding anything to the contrary contained in the Sub-Contract" and went on to say that the Contractor was not entitled to withhold payment after the final date of payment unless within a specific time it had given a "withholding notice".
The Enterprise Act 2002 made some alterations to the Insolvency Act 1986, adding at least one additional route whereby a company could go into administration, namely by it or its directors passing a resolution to that effect. It can be seen that the company resolution route for administration was not one which was expressly or in so many words covered by the insolvency provisions of the draft DOM/1 and DOM/2 and prepared by Masons four years earlier.
It is said by Shepherd that, between 1998 and 2008, Masons, Pinsent Masons and PMLLP drafted 13 separate sub-contracts or sets of subcontract amendments for it. Six "bespoke" sub-contracts or amendments are specifically identified as being the subject matter of advice and drafting between mid September 2003 and August 2008. The first was by Masons relating to the "Birmingham B5" project, carried out between August and October 2003 for which £16,450 was invoiced. The second, by Pinsent Masons, related to amendments provided for a JCT sub-contract for use with the JCT Major Project Form; £3,238.30 was invoiced with the work said to be done up to the end of July 2005. The third related to further drafting by Pinsent Masons of amendments to the GC Works standard form sub-contract with work done up to early December 2006 for which £4,700 was invoiced. The fourth, again by Pinsent Masons, involved amendments for the JCT 2005 standard form sub-contract, the work being done for work up to 17 November 2006 between 30 May and 7 June 2007 and some £8,000 was invoiced for this. The fifth involved amendments for use with the NEC3 standard sub-contract form with work done in August 2007 for which just over £7,000 was invoiced. The sixth involved drafting by PMLLP of a revised schedule of amendments for use with the NEC3 form; the work was carried out in August 2008 and some £7,000 was invoiced.
It is now not contentious that the separate practices of Masons and Pinsent were merged in December 2004 into a new partnership under the name Pinsent Masons with the Masons' partnership being dissolved at that time also. Although PMLLP was incorporated as an LLP in December 2007, it started to trade on 1 March 2008 with Pinsent Masons in effect ceasing to practice and transferring its business and assets to PMLLP on that day.
Appendix 2 to the Particulars of Claim identifies that there was a wide range of contentious and non-contentious business undertaken by the various firms for Shepherd between 1998 and 2009, with further work indeed being done thereafter. Over 70 items of work are referred to in Appendix 2.The contentious business appears to have comprised adjudications and dealing with and advising upon disputes as they arose on a number of contracts. There is said to have been some "in-house training" together with various briefings provided by the firms.
In late 2007, Trinity Walk Wakefield Ltd ("Trinity") engaged Shepherd as main contractor to carry out a shopping centre development in Wakefield in West Yorkshire. Shepherd engaged at least three sub-contractors on this development. CR Reynolds (Construction) Ltd was engaged to carry out by way of an NEC3 sub-contract highway improvement works and by way of a DOM/2 sub-contract groundworks, drainage works and temporary works. Composite Ltd ("Composite") was engaged on the basis of DOM/2 sub-contract conditions to construct a precast concrete car park. William Hare Ltd (" Hare") was engaged to provide structural steel work and other facilities on a subcontract incorporating the DOM/2 sub-contract conditions. These are the subcontracts were said to have been entered into before Trinity went into administration on 19 March 2009 following a resolution passed by the Board of Directors to appoint joint administrators on 11 March 2009.
In the case of Reynolds and Composite, they each secured adjudication decisions against Shepherd. In the case of Hare, Hare issued Part 8 proceedings in June 2009 addressing the issue raised by Shepherd, namely that Clause 32 of the sub-contract, materially said to have been the same as that drafted back in 1998 by Masons, permitted it not to pay in circumstances in which Trinity had gone into administration by whichever route. Mr Justice Coulson disagreed, effectively saying that Clause 32 allowed a pay when paid arrangement only where administration of the type specifically identified in Clause 32 occurred ( [2009] EWHC 1603 TCC). Therefore, as administration following a directors' resolution was not specified, Shepherd was required to pay Hare what was due even though it had not itself be paid by Trinity. This was upheld in the Court of Appeal ( [2010] EWCA Civ 283).
Substantial losses are said to have arisen as a result of ineffective pay when paid clauses in sub-contracts on the Trinity development and another development known as the Grand Arcade in Wigan. The total losses are said to exceed £10.6 million.
These Proceedings
Shepherd issued and served its Claim together with Particulars of Claim by the end of May 2011. The Claim was initially directed only at PMLLP on the basis that it was "the successor practice" to Masons and Pinsent Masons. It would perhaps not be wholly unfair to say that elements of this pleading are not as "crystal" clear as they might be. There was...
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