Skylight Maritime SA v Ascot Underwriting and Others
| Jurisdiction | England & Wales |
| Judge | COLMAN J. |
| Judgment Date | 18 January 2005 |
| Neutral Citation | [2005] EWHC 15 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 January 2005 |
| Docket Number | Case No: 2003 FOLIO 983 |
[2005] EWHC 15 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Colman J.
Case No: 2003 FOLIO 983
Mr Matthew Reeve (instructed by Clyde & Co) for the Third Defendant
Miss Jo Cunningham (instructed by Beachcroft Wansbroughs for Jackson Parton)
for the Claimant
Hearing dates: 3 and 10 December 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Colman:
Introduction
The application now before the court is of a somewhat unusual nature. It does, however, raise matters which are of some importance for those conducting litigation in London on behalf of overseas clients.
The applicants are Houlder Insurance Services (Marine) Ltd ("Houlder"), the long-established London insurance brokers and the respondents are Jackson Parton, ("JP") the well-known London firm of specialist maritime solicitors. Houlder apply for a summary order that JP should pay their indemnity costs incurred in relation to the defence of a claim by JP's former client, Skylight Maritime ("Skylight"). The claim was initially against the insurers (the first and second defendants) of the claimants' yacht, TIGER II, for actual or constructive total loss on 14 July 2002 and the claim form was issued on 5 November 2002. Following service of the insurers' defence, the claimants by JP, their solicitors, joined Houlder as third defendants, claiming against them breach of duty and/or contract as the claimants' placing brokers. That was pursuant to an order of Cooke J. obtained by consent on 30 March 2004. It was alleged that, in breach of their duties as the claimants' brokers, Houlder had failed to remit premium by reason of which the first and second defendant insurers never came on risk, alternatively, if the insurers, having come on risk, were, as they alleged, entitled to avoid for material non-disclosure or misrepresentation, such non-disclosure or misrepresentation was the result of negligent breach of duty by Houlder as Skylight's placing brokers.
Skylight was a one-yacht Panamanian company. The vessel was kept in Greek waters and, having allegedly been stolen from its anchorage, was wrecked off the island of Poros in the Aegean. The company had a board of three Panamanian directors but it was apparently subject to a large measure of control by one George Sigalas who claimed to be the sole beneficial owner of Skylight. Mr Sigalas died at the end of February 2004. At the time of the loss, apart from its claim for insurance proceeds it appears that Skylight had no or at least no significant assets.
A case management conference took place before Langley J. on 21 May 2004. On that occasion Skylight did not appear. Nor were JP before the court. They had come off the record some three days earlier. The grounds for their application to come off the record have not been disclosed. Langley J. struck out Skylight's claim against the insurers on the grounds that Skylight had not given JP authority to commence the proceedings.
By the present application Houlder, but not the insurers, ask for an order that JP should pay their entire costs of the proceedings on the grounds that the claim against them was commenced by JP without the authority of Skylight.
The Procedure
It is clear from the authorities that if a solicitor commences or pursues proceedings without the authority of his apparent client, the court has a jurisdiction to make a summary order against that solicitor for costs incurred by the opposite party caused by the solicitor's unauthorised conduct. In Yonge v. Toynbee [1910] 1 KB 215 the Court of Appeal approved such summary procedure and identified the conceptual basis for such summary orders as breach of an implied contract or warranty given by the solicitor that he was authorised so to act by his client: see Buckley LJ. at p229 and Swinfen Eady LJ. at p231. The nature of the remedy was confirmed to be a claim for damages and the measure of damages the costs thrown away by the opposite party.
The exercise of this summary jurisdiction, without the need for the opposite party to start new proceedings against the solicitor, emanates from the solicitor being an officer of the court with a duty to act in the proceedings before it only with appropriate authority.
In most cases of a solicitor acting without the authority of a client the lack of authority will be clearly established and the consequences of that solicitor acting or continuing to act without such authority will also be very clear. The opposite party will normally have incurred expenditure on legal costs which he cannot recover by means of an order for costs against the apparent client who had never authorised the solicitor to act. In such cases there is likely to be little dispute as to the facts, either as to the lack of authority of the solicitor or loss suffered by the opposite party.
However, there may be cases where the factual position is less clear. Thus, in Yonge v. Toynbee, supra, Vaughan Williams LJ. stated at p235:
"I have only to add that, if there had been a contest as to facts before us, as there seems to have been at chambers, I should have thought it a better course to leave the plaintiff to her action rather than dispose of the matter on a summary disciplinary order."
The "action" referred to was clearly an action against the solicitors for breach of warranty of authority of the nature identified in Collen v. Wright 8E&B 647.
In Babury Ltd v. London Industrial plc (1989) NLJ 1596 Steyn J. stated at, 1596:
"Our courts have for many years exercised a summary jurisdiction to order solicitors, who acted without authority on behalf of a plaintiff or a defendant, to pay the costs needlessly incurred by the opposing party. That jurisdiction, although exercisable in summary fashion rather than in the shape of a fully blown action against the solicitor, has always been exercised only after the solicitor has been given a fair opportunity to put his case before the court. It has never been considered to be a bar to the exercise of this jurisdiction that the solicitor acted bona fide and in reasonable reliance upon instructions."
and at p1597:
"On the other hand, the general rule may sometimes have to yield to special circumstances, for example in a case where the opposing party's solicitor is informed that there was a doubt about the solicitor's authority, in which case there is no unequivocal representation of authority. Corderey at page 94, gives further illustrations of special circumstances where the court did not order a solicitor to pay costs. It might, for example, sometimes in less than clear-cut cases be right to leave the aggrieved party to his remedy in an action in damages for breach of warranty of authority against the solicitor. Having made clear that there is no inflexible rule, it is nevertheless right, in my view, to emphasise that a solicitor who clearly acted without authority, causing by his representation of authority the opposing party to incur wasted costs, must usually expect to be ordered to pay the costs in the exercise of the court's summary jurisdiction."
In the course of his judgment, Steyn J. also pointed out by reference to the judgment of Kekewich J. in In re Margetsons & Jones [1897] 2 Ch 318, the importance for the administration of the courts that, when a solicitor appeared to act with the authority of a party to litigation, that implied representation could be relied upon by the opposite party.
The result of the authorities and the demands of the twin objectives of making solicitors accountable for their unauthorised conduct of litigation and yet of protecting them against untested allegations of want of authority is that, whereas in clear cases of breach of warranty of authority and consequent recoverable loss, the court can summarily determine the solicitors' liability for damages, in cases where there are real issues as to the facts or law, the courts should not do so but should leave the opposite party to start proceedings by issuing a claim for breach of warranty of authority.
It is, however, important to keep in mind that, although the court can exercise a summary jurisdiction by reason of its special supervisory jurisdiction over solicitors, the underlying purpose of that jurisdiction is compensatory and not punitive. It follows that proof of loss is essential before there can be recovery of damages.
The question that then arises is what is the appropriate measure of loss?
It is important not to lose sight of the fact that the relevant breach of warranty is the non-existence of the authority that was warranted. Therefore, the opposite party or promisee has lost the benefit of the position he would have been in had the warranty been true. In other words, the court is concerned to quantify what benefit has been lost by reason of the fact that the supposed client is not after all a party to the proceedings. In the ordinary case, the promisee will have lost the ability to recover from that client the costs of the proceedings in the event of a costs order in the promisee's favour. This is usually quantified as the amount of costs thrown away by the promisee in relation to the proceedings from the first participant in them of the solicitor until the promisee is apprised of the solicitor's lack of authority.
In Firbank's Executors v. Humphreys (1886) 18 QBD 54, Lord Esher MR stated at p60:
"The damages under the general rule...
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