Summit Property Ltd v Pitmans Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE LONGMORE,LORD JUSTICE TUCKEY,LORD JUSTICE CHADWICK
Judgment Date19 November 2001
Neutral Citation[2001] EWCA Civ 2020
CourtCourt of Appeal (Civil Division)
Docket NumberA3 01/0335
Date19 November 2001
Summit Property Limited
and
Pitmans (a Firm)
Appellants

[2001] EWCA Civ 2020

Before

Lord Justice Chadwick

Lord Justice Tuckey

Lord Justice Longmore

A3 01/0335

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(Mr Justice Park)

Royal Courts of Justice

Strand

London WC2

MR. A. STEINFELD Q.C. and MR. G. COOPER (instructed by Messrs Ince & Co., London, EC3) appeared on behalf of the Appellant.

MR. P. BROOK SMITH (instructed by Messrs Davies Arnold Cooper, London, EC4) appeared on behalf of the Respondent.

LORD JUSTICE LONGMORE
1

This is an appeal on costs from the order of Park J, after a six day trial between the 3rd and 11th January 2000 in the Chancery Division, in which he gave judgment for the defendant firm of solicitors. He ordered the unsuccessful claimant property company to pay 30 per cent of the successful defendant's costs and he ordered the successful defendant firm to pay 65 per cent of the costs of the unsuccessful claimant. We were not given precise figures of costs on either side but we were given ballpark figures which indicate that the costs on either side are in the same range, varying between £140,000 and £146,000.

2

The reason why the judge made this comparatively unusual order is that the defendants failed on what he regarded as the main issue in the case, viz the question whether they were in breach of duty as solicitors to their client. They succeeded ultimately on what he called a point of law on causation or, perhaps more accurately, the quantum of the claim, namely that, even if the defendants had performed their duty and had obtained for the claimant the benefit of the transaction which they lost, the claimant would have obtained that benefit by virtue of being in possession of confidential information from a third party and could not have kept that benefit because it would have been accountable for it to that third party.

3

It is necessary to say a little about the facts of the case. The action was a claim by a property investment company called Summit Property Ltd ("Summit") for damages for breach of contract and negligence against the defendant firm of solicitors, Messrs Pitmans. The claim was based on the contention that Pitmans had acted in breach of a retainer to act for Summit which they, Pitmans, had accepted on 18th December 1996. Summit had been introduced on that day to Pitmans by a property developer, Stanley Hetherington ("Mr Hetherington") who had, many months previously, been offered, by reason of his personal connections, the opportunity to acquire a properly known as The Pincents Kiln Estate, near Reading, at a highly advantageous price.

4

Before Summit became involved Pitmans had been acting for Mr Hetherington's company, Longwood Estates, ("Longwood") and the negotiations were already at an advanced stage. The vendors had set a deadline for exchange of contracts on 24th December 1996 but Longwood were in need of finance. In these circumstances, Mr Hetherington had approached Summit to see whether they were prepared to finance the transaction. They eventually said they would be but only on terms, which Mr Hetherington was prepared to accept, that the acquisition be in the name of a company to be wholly owned by Summit, and that the profits on resale would be split 50/50.

5

Summit were on 18th December 1996 introduced to Pitmans and Pitmans agreed to act for Summit for the purpose of exchanging contracts in the name of an "off the shelf" company which Summit would own, it being left to the parties themselves to finalize and document the proposed profit sharing agreement. Pitmans alleged that by agreeing to act in this way for Summit they were not ceasing to act for Longwood, but there was in effect a joint retainer to act for both Longwood and Summit, with Summit as the funder being in an analogous position to that of a mortgage lender, and that such joint retainer would come to an end, leaving Pitmans free to act for Longwood alone should the parties fall out before exchange of contracts had taken place.

6

The judge, however, found that this was not the case. In essence, he held that, because the purchase was to be in the name of a Summit owned company, the retainer which Pitmans accepted on 18th December was necessarily a retainer to act exclusively for Summit, and that by such acceptance Pitmans had ceased to act for Longwood at all. There is no appeal from that decision.

7

Four days later, on the very day before exchange was due to take place, Summit told Mr Hetherington that they were only prepared to proceed on the basis that the profit share arrangement was to be revised in their favour, so that they received 75 per cent instead of 50 per cent of the profit, and Longwood would accordingly receive only 25 per cent of any profit on resale. Mr Hetherington was naturally furious at this last minute volte face but reluctantly expressed his agreement in principle on the basis that Summit had left him with no choice. Shortly after the meeting he changed his mind. At trial Summit contended, in support of their assertion that they were entitled to proceed with exchange the following day, even in the teeth of objection by Mr Hetherington, that it was too late for him to change his mind because he was contractually bound by what he had agreed the previous day. This contention was rejected by the judge.

8

The following morning, 24th December, Mr. Hetherington visited his bank manager and managed to arrange sufficient funds for the deposit in his own name. He then instructed Pitmans to exchange contracts in the name of a newly acquired off-the-shelf company to the exclusion of Summit. Pitmans, in breach of their retainer from Summit, did just that. Summit allege that Pitmans acted in breach of their retainer by accepting instructions from Mr Hetherington and claimed that, as a result of that breach, they had lost the opportunity to purchase the property. They claimed damages equal to the loss of profit which they said they would have earned. Ultimately this claim was defeated because the judge held that Summit had received the information about the property being available for sale at an advantageous price in confidence from Longwood, and that they would thus be accountable to Longwood for any profit to be made on the resale unless Longwood had agreed that they could retain any part of it. No such agreement had been reached.

9

When it came to costs the judge decided that, since by far the greater part of the trial had been taken up by the question whether Pitmans were in breach of their retainer and since he had held that they were, the costs of the case should be determined essentially on an issue basis. The point on which Pitmans had won had been introduced by amendment on 6th June 2000, four weeks before the case began, and, according to the judge, took only a comparatively short time to argue. No doubt he also bore in mind that the responsible partner in Pitmans had already, by the time of trial, been reprimanded by the Office for the Supervision of Solicitors on the basis that the firm was in breach of its retainer.

10

The judge in the course of his judgment said this:

"On the face of the papers in the case which I read before the trial began, the main issue being raised by the defendants, Pitmans, by way of defence to the claim against them, was that Summit Property had ceased to be their client before the crucial event as described in my main judgment, and that therefore Pitmans were not in breach of their duty to Summit …

rather than the confidentiality issue. The case turned in the end on the confidentiality issue and on the basis of it Pitmans succeeded. It was, however, in essence a point of law. It was in my judgment a short and convincing point of law but the introduction of the point did not lead to Pitmans deciding to drop what I believe to have been its misguided arguments based on breach of duty. Lest there be any misunderstanding I do not suggest, by saying that the arguments were misguided, that there was, in the terms of the Elgindata case anything improper or unreasonable about them being raised."

11

I interpose to say that that is a reference to the Elgindata Ltd (No 2) [1982] 1 WLR 1207. Continuing the quotation:

"I think that issue based costs orders such as I believe are appropriate in this case will be exceptional. I would not want to be thought to be encouraging or believing that there will develop a general trend in the majority of cases for the courts to make costs orders in both directions. I do, however, consider that the circumstances in this case are special and particularly strong. I believe that it is open to me to make an issue based costs order and I am going to do so. Before I adapt my order so as to produce practical convenience, the principle of it would be that I would order Summit Property to pay to Pitmans its costs attributable to the confidentiality issue. I would order Pitmans to pay to Summit Property Summit Property's costs of and attributable to the breach of duty issues. Further, to introduce a detailed point which I have not mentioned yet, I would make no order for costs in favour of either party on costs of and attributable to the loss of a chance issue."

12

Mr. Steinfeld QC, who appears for the defendants, Pitmans, attacks that exercise of discretion by the judge. He has to do that by reference to the new Civil Procedure Rules and any relevant binding Court of Appeal authority. Part 44.3 of the rules is entitled: "Court's discretion and circumstances to be taken into account when exercising its discretion as to costs", and provides relevantly:

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