The Rt Hon David Mellor PC QC and Others v John Arthur Partridge and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice McCombe,Sir Stephen Sedley |
| Judgment Date | 03 May 2013 |
| Neutral Citation | [2013] EWCA Civ 477 |
| Docket Number | Case No: A2/2012/1893 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 May 2013 |
[2013] EWCA civ 477
Lord Justice Lewison
Lord Justice Mccombe
and
Sir Stephen Sedley
Case No: A2/2012/1893
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
MR JUSTICE BEATSON
HQ0X05544/HQ12X0369
Royal Courts of Justice
Strand, London, WC2A 2LL
MR R TAGER QC (instructed by Jeffrey Green Russell) for the Appellants
MR J BRISBY QC & MR P GREENWOOD (instructed by Streathers LLP) for the Respondents
Hearing dates: 16 and 17 April 2013
Partridge Fine Arts plc ("PFA"), established in 1900, was an old established and very well-known New Bond Street dealer in antiques and fine art which by 2005 had fallen on hard times. In that year, after previous unsuccessful attempts to sell it, Amor Holdings Ltd ("Amor") made a bid for the majority of its share capital on the terms of an offer letter ("the Offer Letter"). Amor was a newly incorporated company set up for the purposes of the acquisition by Messrs Mellor, Jemmett and Law. They guaranteed a number of obligations undertaken by Amor towards the shareholders in PFA. Despite the efforts of the buyers, and in particular of Mr Law, PFA did not prosper. On 20 July 2009, PFA entered administration; and on 12 July 2011 it went into liquidation.
Messrs Mellor, Jemmett and Law now make claims against Messrs John Partridge ("John") and his son Frank Partridge ("Frank"). After various procedural vicissitudes (which I need not recount) the relevant claim form was issued on 31 January 201Their claims are of three different kinds:
i) Claims which they advance in their personal capacity;
ii) Claims which they advance as assignees of claims that were claims vested in Amor; and
iii) Claims which they advance as assignees of claims that were claims vested in PFA.
John and Frank applied for summary judgment on all the claims made against them. That application came before Beatson J (as he was then) who summarily dismissed some of the claims, but refused to dismiss others on the summary basis. Both sides now appeal. Our task is not to decide whether the claimants are right. Our task is to decide which parts of the case (if any) are fit to go to trial. If I may repeat something I have said before ( Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), approved by this court in AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098):
"The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
Stripped to its bare essentials the claimants' personal claim against John is that:
i) In the course of negotiations John:
a) Dishonestly told them that PFA had a long-standing and ongoing relationship with the Getty Museum when in fact that relationship had terminated on bad terms some twenty years earlier ("the Getty representation");
b) Repeatedly told them of PFA's high standing and reputation in the specialist market, thereby implicitly representing that that reputation was justified, without revealing that it was liable to be undermined or destroyed if certain alleged systematic fraudulent trading practices of both John and Frank were to come to light ("the reputation representation");
c) Encouraged them to rely on financial information provided by PFA (including balance sheets and stock valuations) when that financial information did not enable the discovery of the financial effect of the alleged fraudulent trading practices, and in particular did not enable them to discover that PFA might be vulnerable to claims from dissatisfied customers alleging that PFA had sold them fakes ("the balance sheet representation");
d) Stated in the Offer Letter that the "only contracts, not being contracts entered into in the ordinary course of business", that had been entered into between 18 November 2003 and 12 December 2006 and that "are or may be material" were two particular agreements. In fact there are two other highly material agreements, namely an agreement with a dissatisfied customer to compromise a claim over the authenticity of two commodes known as the Bantry House Commodes, and an agreement under which Frank resigned as a director of PFA.
ii) These misrepresentations were fraudulently made;
iii) These misrepresentations caused the individual claimants to guarantee Amor's obligations to shareholders, which they would not have done if they had known the truth.
The claim that the claimants pursue as Amor's assignees is essentially the same, except that the inducement alleged is that Amor was induced by the misrepresentations to make its offer for the majority shareholding, which it would not have done if it had known the truth.
The losses claimed under this head fall into two broad categories. First, there is the amount paid to shareholders for the acquisition of the shares. Part of this was paid by Amor and part by Messrs Mellor and Jemmett when their guarantee was called on. The second broad category is losses arising out of further payments made for the benefit of PFA and, in Mr Law's case, the lost opportunity to develop an alternative business. I will return in more detail to the categories of loss in due course.
The claim that the claimants pursue as assignees of PFA is that the alleged systematic fraudulent trading practices amounted to breaches by John and Frank of their contractual and fiduciary duties to PFA. The pleaded claim is that the consequence of these breaches was that PFA was (or became) worthless as a going concern.
I need hardly add that both John and Frank vigorously deny the accusations levelled against them. Nothing in this judgment should be taken as a finding that these allegations are true.
At root these allegations are based on a series of transactions which are alleged to support the conclusion that John and Frank conducted a systematically fraudulent business. It is important to stress that the pleaded transactions are said to be examples only. In his witness statement Mr Law says:
"[27] … Reputation is everything. Had we known of any one serious historic claim against [PFA], we would never have been able to quantify what else might be out there, and would never have taken the risk of acquiring this liability."
"[37] The relevant complaint that we make in these proceedings is that the Claimants (through Amor) purchased a company with poor liquidity, but the one asset that we did believe we were buying and which we believed and had been led to believe was of such great worth that we were...
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