Stewart v Scottish Widows & Life Assurance Society Plc
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Eccles Q.C. |
| Judgment Date | 22 June 2005 |
| Neutral Citation | [2005] EWHC 1831 (QB) |
| Docket Number | Case No: HQ 02X01814 |
| Court | Queen's Bench Division |
| Date | 22 June 2005 |
[2005] EWHC 1831 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
His Honour Judge Eccles Q.C. (sitting as a Judge of the High Court)
Case No: HQ 02X01814
Case No: HQ 04X03298
Mr David Holland (instructed by Speechly Bircham) for Scottish Widows PLC
Mr Peter Crampin Q.C. and Mr Ulick Staunton (instructed by Rich & Bailey) for Ricci Stewart
Hearing dates : 16 to 27 May 2005
APPROVED JUDGMENT
His Honour Judge Eccles Q.C.:
Introduction
[1] In 2001 a company registered in the name of Chandler Stewart Limited ("CSL") was the tenant of Unit 2, Beddington Cross Industrial Estate, Croydon. Its landlord was the Scottish Widows and Life Assurance Society plc ("Scottish Widows"). From those premises Mr Ricci Stewart ("Mr Stewart") carried on a business specialising in the repair of high performance and prestige motor cars, such as Porsche, Ferrari and Mercedes, and he had been trading in that way since the 8 th October 1998. Mr Stewart was the principal shareholder in and director of CSL, and he guaranteed its obligations under the lease. Over the weekend of the 6 th October 2001 contractors acting on the instructions of Scottish Widows' managing agents, Jones Lang LaSalle, installed some speed humps in the main road through the estate. The laudable aim was to reduce the speed of traffic using the estate, but there was an incidental and very unfortunate effect so far as Mr Stewart was concerned. Low slung sports cars, including a number of Porsche models, were liable either to damage their front spoilers when going over the humps, or to become grounded.
[2] Mr Stewart devised various ways of getting cars over the speed humps, but customers were not best pleased when their already damaged and expensive vehicles received further damage on the way to being repaired. Trade fell off, and despite the complaints of Mr Stewart to Jones Lang LaSalle there was no immediate acknowledgment that the speed humps were materially damaging his business. Eventually, on the 2 nd October 2002 the humps were removed. Trade began to pick up again, but by this time CSL had defaulted on its obligation to pay rent. Scottish Widows sued for the rent and obtained summary judgment on the 30 th October 2002. The judgment sum and subsequent rents and service charges remained unpaid. CSL, by now known as Chandler Stewart (Croydon) Limited, ("CS(C)L") was placed into a creditors' voluntary liquidation ("CVL") on the 4 th December 2002. The lease was then forfeited by re-entry on the 22 nd January 2003.
[3] As a result of these events Scottish Widows, who in fact sold Beddington Cross Industrial Estate in December 2003, took proceedings as claimant in what has become the second action to recover the sums it alleges are still owing by its former tenant, and sued Mr Stewart as guarantor of the covenanted obligations of CSL under the lease and under a supplemental deed to the main lease. The company as defendant then counterclaimed as a Part 20 claimant for the losses it had allegedly sustained as a result of the fall off in trade caused by the speed humps. The liquidator of the company assigned the rights under the counterclaim to Mr Stewart's father, who assigned them to Mr Stewart himself, and so it came about that Mr Stewart was substituted as the Part 20 claimant in what has now become the first action. By an order of Butterfield J. dated the 15 th October 2004 both actions were to be tried together.
[4] Before the court, therefore, are two actions. In the first, Mr Stewart as assignee of the rights of CSL, now CS(C)L, claims damages as a Part 20 claimant for the losses allegedly sustained by the company and caused by Scottish Widows' breach of (i) its covenant under the lease for quiet enjoyment; and (ii) its implied obligation not to derogate from the grant to CSL. In the second action Scottish Widows claims to recover from Mr Stewart as defendant the sums owed by CSL or by him personally under the lease and the supplemental deed. In the first action Scottish Widows admitted liability about a week before trial for the two forms of breach alleged by Mr Stewart, but it denies that Mr Stewart, or any company in which he has an interest, has sustained anything like the level of loss for which he now contends, and it raises some contentions in relation to the assignments of the causes of action, which, if well founded, would absolve it from any liability to Mr Stewart at all, other than nominal damages. In the second action there are disputes about the sums owing by CSL and Mr Stewart and, quite apart from any set-off which might arise if damages are awarded in the first action, Mr Stewart contends that in the circumstances that have arisen here he is not as guarantor liable for all the sums claimed by Scottish Widows.
[5] As will appear later in this judgment both the first and second actions give rise to some issues of law and a number of complex issues of fact, and it is necessary therefore, despite the admission of liability that results in the first action being limited now to causation and quantum, to set out the facts and the history in quite some detail.
The history and the facts
[6] Mr Stewart left school at the age of 15 and was apprenticed to a body repair shop called Thames Autobodies Limited, formerly Alona Limited, and later Chalcroft. Over a number of years he became expert in the business of repairing high performance cars and worked his way up through the company until he became the General Manager. There is an issue as to whether he was a director or not. He says he was not, but there is a company return signed by him as director. In about 1997 he decided to leave his employment and to set up on his own. To that end he spent the best part of a year putting a business plan together. He received help and advice from accountants by the name of Hartford Michaels, but prepared parts of it himself. His intention was to obtain approval from Porsche GB to carry on business as an approved repairer, the advantage of which was that the owners of damaged cars would retain the benefits of their Porsche warranty if they used an approved as opposed to a non-approved repairer. Higher labour rates could be charged than insurers would authorise in the case of non-approved repairers, and although it would prove more expensive for approved repairers to be used, the evidence of Mr Stewart was that insurers would in fact pay the larger charge out rates if their insured owners insisted. So there was a financial advantage to be gained in obtaining approval.
[7] Mr Stewart then needed premises from which to trade, and after making various enquiries he decided to approach Croydon Land (No 2) Limited, the company that in 1998 owned the Beddington Cross Industrial Estate, with a view to acquiring a lease of Unit 2, which was relatively close to the eastern end of the site near the entrance from Beddington Farm Road. Croydon Land (No 2) Limited and Porsche GB both indicated that they needed to be assured that Mr Stewart had a sound plan to develop the proposed business which involved incorporating a start-up company, the former in order to safeguard the reputation of Porsche, the latter in order to be satisfied that the prospective tenant would be good for the covenants under the lease.
[8] In October 1997 Mr Stewart arranged for the incorporation of the company through which he intended to trade. It was called Chandler Stewart Limited after himself and his partner, and was wholly owned by Mr Stewart. Mr Stewart became the director and it is accepted that he controlled the company. In June 1998 he completed the business plan for CSL. I will have to return to the plan at a later stage in this judgment. Suffice it to say here that his intention, which he believed was realistic, was to repair an average of 96 Porsches a month, producing a turnover of £200,000 per month and a net annual profit before tax of about £144,000. According to the plan this was achievable in the first year from start-up. In addition, but not included in the plan itself, was Mr Stewart's further intention to repair marques other than Porsche, especially Ferrari and Mercedes. This side of the business, however, might not be as profitable as the Porsche trade because of lower labour charge out rates and various other factors, although Ferrari rates according to Mr Stewart were nonetheless pretty advantageous for the repairer.
[9] In September 1998 Mr Stewart's father agreed to lend CSL £100,000 and at some stage an overdraft facility of £75,000 was agreed with the bank. On the 1st April 1999, which was after trading had started, CSL and Porsche signed the approval agreement that contained a large number of specific terms designed to ensure that the approved repairer maintained high standards of workmanship and probity. As part of the agreement it was provided that CSL would be allocated a catchment area for potential customers, and the company would be associated with a particular Porsche franchised dealer who would be expected to direct repair work to the approved repairer. In the case of CSL the associated dealer was Lancaster Bow in London, and the catchment area consisted of a number of identified post-codes in and around Croydon, broadly within the M25. It was because of the opportunity to service this area that Mr Stewart had chosen Croydon as a reasonably central and convenient location.
[10] On a date not given in evidence CSL also entered into an approval agreement with Mercedes. And according to the evidence of Mr Webb, the general manager from late in 2001, when...
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