Shepherds Investments Ltd v Walters and Others

JurisdictionEngland & Wales
JudgeLord Justice Mummery,Lady Justice Smith,Lord Justice Toulson
Judgment Date03 April 2007
Neutral Citation[2007] EWCA Civ 292
Docket NumberCase No: A2/2006/1540
CourtCourt of Appeal (Civil Division)
Date03 April 2007
Between
Shepherds Investments Limited
Appellant
and
Andrew Walters & Others
Respondent

[2007] EWCA Civ 292

Before

Lord Justice Mummery

Lady Justice Smith and

Lord Justice Toulson

Case No: A2/2006/1540

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

MR JUSTICE ETHERTON

HC04C02668

Royal Courts of Justice

Strand, London, WC2A 2LL

MR PAUL NICHOLLS (instructed by Dechert LLP) for the Appellant

MR IAIN QUIRK (instructed by Messrs Eversheds) for the Respondents

Hearing dates: 16 th March 2007

Lord Justice Mummery

Introduction

1

The appeal is against an order for costs made by Etherton J on 22 June 2006. The judge refused permission to appeal, which was hesitantly granted by Jonathan Parker LJ on 16 October 2006.

2

The point is a short one. It is about the timing of the trial judge's exercise of his discretion on costs in a case where, following an order for a split trial, liability has been established, but quantum has yet to be determined. The Claimants assert that they made a Part 36 offer, which entitled them to an immediate order for indemnity costs of the trial of the liability issues. The trial judge declined to make this order and instead reserved the costs till after the outcome of an account of profits was known. The claimants contend that this was contrary to principle and was plainly a wrong exercise of the trial judge's discretion.

3

Only one claimant is left in the action. Shepherds Investments Limited is the sole appellant following the liquidation of Shepherds (Financial) Limited. It is, however, convenient to refer to the parties to the appeal as Claimants and defendants respectively. As was the case before the judge, Mr Paul Nicholls appears for the Claimants and Mr Iain Quirk for the defendants.

The proceedings

4

After a 7 day trial Etherton J gave judgment on 12 April 2006 on liability. The judge held that the first three individual defendants, who were formerly directors or employees of the claimants, had acted in breach of fiduciary duty and breach of contract in establishing the competing corporate defendants. The judge rejected a claim for misuse of confidential information. He also held that not all the pleaded claims for breach of contract were made out and that the Claimants had failed to establish any loss.

5

The Claimants elected for an account of profits, which was ordered in relation to a period after 12 August 2003. The defendants asserted that there were no relevant profits in the period covered by the limited account.

6

At a later hearing on 22 June 2006 the judge heard arguments on costs. He rejected the Claimants' contention that the defendants should be ordered to pay all the costs of the trial on an indemnity basis. He made an order that—

“Costs of the trial be reserved until after the determination of the account of profits.”

Part 36 offer point

7

Both before the judge and on this appeal the Claimants' principal contention was based on the terms of a letter sent by their solicitors to the defendants' solicitors on 9 March 2005. The letter contained a section headed “Part 36 Settlement Offer.” It stated that the Claimants were prepared to pursue the litigation vigorously, but expressed concern that the defendants did not have sufficient resources to discharge any judgment against them. The letter continued —

“Accordingly, in an attempt to dispose of this dispute, our clients will accept a payment of £1.00 inclusive of interest in full and final settlement of all their claims under claim number HC04C02668. If this offer is accepted our clients will be entitled to their costs to the date of acceptance. Accordingly, the offer is that our clients will settle for £1 plus their costs. In accordance with CPR 36.14, for the purposes of assisting the Defendants in clarifying the basis of our clients' offer, we confirm that our clients' costs to date are £99,230.00 (inclusive of VAT)”

8

The Claimants argued that this was a valid Part 36 offer and that it was relevant to how the judge should exercise his discretion on costs at the conclusion of the trial on liability. The offer was to settle the action for £1 plus costs. It was not accepted by the defendants. The Claimants submitted that, even if they recover nothing on the account, as the defendants assert will be the case, the offer to settle for nominal sum of £1 was in substance no worse than a failure to recover any profits on the taking of the account. The Claimants succeeded in establishing liability on the part of the defendants and they obtained an order for an account. Whatever the result of the account, their offer to settle for £1 was one that the defendants ought to have accepted. The defendants could not do better than that and should therefore be immediately ordered to pay the costs of the action after 30 March 2005 now rather than await the taking of the account.

9

The judge rejected the Claimants' submissions and agreed with the defendants that the letter of 9 March 2005 was not a valid Part 36 offer, as it included a term as to costs: see Mitchell v. James [2004] 1WLR 158 at paragraphs 29 to 34. If the terms of the offer were ambiguous, they should be interpreted against the Claimants who made the offer. The better interpretation was that it was an offer to settle for payment of £1 in respect of liability and £99,230 inclusive of VAT in respect of their costs. There was no reference to an assessment of costs. On the reasoning of the decision in Mitchell v. James the Claimants' offer fell outside the scope of Part 36 because it included a term as to costs.

10

There were subsequent offers made without prejudice save as to costs, but no further Part 36 offer was made.

Discretion point

11

The judge then considered the exercise of his discretion on the basis that his interpretation of the letter might be wrong. He said—

“13. Even if I am wrong, however, on that point of interpretation, I take the view that, since the court retains, notwithstanding a Part 36 offer by a claimant, a general discretion, which is more particularly contained in CPR 36.21(4) [sic], it would be unwise and precipitate in the present case to make an order for costs against [the three individual defendants] at this stage. I cannot be certain that the Claimants will recover even £1 in view of the evidence of Mr Walters ….that [the relevant corporate...

To continue reading

Request your trial
27 cases
  • Smile Inc. Dental Surgeons Pte Ltd v Lui Andrew Stewart
    • Singapore
    • Court of Appeal (Singapore)
    • 31 July 2012
    ...... Asia Hotel Investments Ltd v Starwood Asia Pacific Management Pte Ltd [2007] SGHC 50 (refd) ... Brokers (Western) Inc (2009) 301 DLR (4th) 522 (refd) Shepherds Investments Ltd v Walters [2007] FSR 15 (distd) Singapore ...What is clear is that these various arguments - and perhaps others as well - would need to be canvassed when the issue of the applicability ......
  • GHLM Trading Ltd v Anil Kumar Maroo and Others
    • United Kingdom
    • Chancery Division
    • 23 January 2012
    ...a director to act in what he considers in good faith to be in the best interests of the company (to quote from Etherton J in Shepherds Investments Ltd v Walters [2006] EWHC 836 (Ch), [2007] 2 BCLC 202, at paragraph 132), there is no reason to restrict the disclosure that can be necessary t......
  • Cook v Ministry of Sound Ltd
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 9 July 2009
    ...British Midland Tool Ltd v. Midland International Tooling Ltd and Others [2003] 2 BCLC 523, at 558, per Hart J; and Shepherds Investments Ltd v. Walters and Others [2007] IRLR 110, at paragraph 108, per Etherton J. He submitted that there can, in relation to this breach, be no question of ......
  • Customer Systems Plc v Jeremy Ranson and Others
    • United Kingdom
    • Queen's Bench Division
    • 16 December 2011
    ...the employer if the activity of the employee in question had concerned sales, or if he had been employed as a designer. 69 In Shepherds Investments Ltd v Walters [2007] FSR 15 at 395 Etherton J had to consider whether preparatory acts carried out by directors were in breach of their fiducia......
  • Request a trial to view additional results
1 firm's commentaries
  • Employee Competition: Recent Cases
    • United Kingdom
    • Mondaq United Kingdom
    • 7 July 2010
    ...[2003] 2 BCLC 523 (Hart J); Item Software (UK) Ltd v Fassihi [2005] ICR 450, [2004] IRLR 928 (CA); Shepherds Investments Ltd v Walters[2007] IRLR 110 (Etherton J); Helmet Integrated Systems Ltd v Tunnard [2007] IRLR 126 (CA); Kynixa Ltd v Hynes [2008] EWHC 1495 (QB) (Wyn Williams J); Foster......
2 books & journal articles
  • Litigation
    • United Kingdom
    • Construction Law. Volume III - Third Edition
    • 13 April 2020
    ...[2000] BLR 70. See also Intense Investments Ltd v Development Ventures Ltd [2006] EWHC 1628 (TCC); Shepherd Investments Ltd v Walters [2007] EWCA Civ 292 at [19], per Mummery LJ. 1096 Foster v Farquhar [1893] 1 QB 564 at 570, per Bowen LJ. 2264 LITIGATION basis”. 1097 he “winner-takes-all” ......
  • The Employment Relationship and Fiduciary Obligations
    • United Kingdom
    • Edinburgh Law Review No. , May 2012
    • 1 May 2012
    ...including England, some senior employees are regarded as fiduciaries.88Shepherds Investment v Walters [2006] EWHC 836 (Ch), [2007] IRLR 110. The scope of the contractual obligations undertaken may impact on the extent to which fiduciary obligations are owed by the employee. The Australian c......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT