England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT AT MANCHESTER
MANCHESTER DISTRICT REGISTRY
QUEEN'S BENCH DIVISION
MERCANTILE LIST
(His Honour Judge Kershaw QC)

		Royal Courts of Justice Strand London WC2
		Tuesday, 23rd January 2001

1. LORD JUSTICE MAY:This is an application by Mr Gerald Norden for permission to appeal against two decisions of His Honour Judge Kershaw QC made at a hearing on 13th November 2000 in the High Court at Manchester.
2. Judge Kershaw made plain that he appreciated that Mr Norden feels very strongly indeed about the matters of which these proceedings are part. I have obtained a very clear picture to the same effect from what Mr Norden has told me this morning and from reading the documents that he has put before the court.
3. It is a long and complicated story. Mr Norden was the managing director of two companies. One was called Norden Optical Company Limited ("NOC") and the other was called Norden Optical G M Limited ("NOGM"). NOC was a spectacle manufacturing business and ophthalmic retail opticians, trading from a number of shop premises in Essex. Mr Norden ceased to be managing director of these two companies somewhere around 15th November 1990, when he was dismissed by the respondents, who by then were joint administrative receivers of the assets of the two companies. They had been so appointed by Barclays Bank, to whom Mr Norden had, during 1989, provided written guarantees in relation to the two companies.
4. Mr Norden's former wife, Mrs Norden, was also concerned with these businesses but, unfortunately for them, they became involved in divorce proceedings some time slightly before the period to which I am now referring. They jointly owned four shop premises in Essex. The respondents to this application (the defendants in the proceedings in Manchester), Mr Yeldon and Mr Mills, are licensed insolvency practitioners. They were appointed joint administrative receivers of the assets of the two companies by Barclays on 7th November 1990. In September 1992 they were also appointed Law of Property Act receivers in relation to the three then remaining shop premises. Before that date the respondents had sold one of the shop premises at 41 Maldon Road, Whitham, and allowed Mrs Norden to trade from the remaining three shops. Put shortly, the remaining properties were sold to her for a sum of £212,500. She also purchased the business and assets of the retail shops for, I think, £8,000. The essence of Mr Norden's complaint is that the two defendants, Mr Yeldon and Mr Mills, who owed him a duty of care, were in breach of that duty and, I think he would also say, fraudulent in relation to the sale of these properties and perhaps other properties at undervalue to his former wife, in collusion with Barclays Bank.
5. One of the difficulties that Mr Norden faces is that Barclays Bank are not parties to these proceedings. There were proceedings between Mr Norden and Barclays Bank. Barclays Bank obtained judgment against him some time back in 1993. He reckoned, and still reckons, that he has a substantial counterclaim against Barclays Bank. He had, and conceivably still has, a legal aid certificate in relation to that counterclaim, but he tells me that, one firm of solicitors having declared a conflict of interest, he has been unable to get any firm of solicitors to act for him in that matter. Accordingly, it is unfortunate, but it is evident, that Barclays, against whom some at least of Mr Norden's complaints lie, are not parties to these proceedings. These proceedings against the receivers alone contain allegations by Mr Norden, as I have said, that they sold the properties and the business at undervalue, that they were in breach of duty to him in doing so and (by amendment or re-amendment) that they acted fraudulently.
6. After numerous interlocutory hearings, the hearing of this action came before His Honour Judge Kershaw in Manchester on 13th November 2000. At the start of the proceedings Mr Norden wanted to amend the, by then, re-re-re-amended statement of claim to include a claim for punitive damages. This application Judge Kershaw dismissed. He heard, and considered, submissions relating to two specialist machines which Mr Norden said had been sold at an undervalue. It was said to have constituted improper conduct by the receivers, coupled with alleged interference by Barclays Bank. Of this, Judge Kershaw said:

"... even if Mr Norden were to establish a substantial loss overall from the conduct of the receivership and breaches of duty by receivers in many aspects and, in particular, failure by them to consider the value of the machine, he could not, in my judgment, conceivably succeed in a claim for punitive damages.

It would have required an overwhelmingly strong reason to allow a claim for punitive damages to be made so long after the events giving rise to the claim and at a stage when the trial of the action is about to begin, indeed, but for this application, would already have started. So far from an overwhelmingly strong reason for allowing that claim to be made, there is, in my judgment, no basis whatsoever for allowing it to be made, and I dismiss this application."

7. It seems to me that, although in form Mr Norden's application for permission to appeal to this court encompasses that decision, the decision is decidedly subsidiary to the second and main one which Judge Kershaw made. I would only say that it seems to me that Mr Norden has put forward no basis upon which that decision, the refusal of permission to re-re-re-amend the statement of claim, could conceivably succeed in this court.
8. As I have said, Mr Norden claimed that, in breach of their duties as administrative receivers or Law of Property Act receivers, Mr Yeldon and Mr Mills failed to collect in the assets of the companies properly. Further, he maintained that they knowingly allowed the conduct of any duties to be influenced and dictated by Barclays, with the result that the remaining properties and the assets of the business were sold to his former wife at an undervalue. He says that Barclays had previously obtained a guarantee from her under duress and were, as a result, placed in a compromising position so far as their dealings with her were concerned. He says that for this reason Barclays were keen that Mrs Norden should purchase the remaining premises and the business assets. But he offered no evidence to substantiate this claim and, so far as what he has put before the court is concerned, I am really relating what he has told me this morning.
9. Mr Norden says that, as a consequence of the breaches of duty by the receivers, Barclays made a claim upon him as guarantor of the two companies. Barclays were successful in obtaining summary judgment against him in April 1993 and, under the terms of that judgment, he was ordered to pay Barclays £213,536 plus costs in respect of his guarantee. He is also liable to Barclays as guarantor of the other company.
10. Judge Kershaw, in effect, gave summary judgment in favour of the defendants on the grounds that, whatever Mr Norden might establish, he had no prospect of establishing any amount of money that he had lost as a result of the allegations that were made. The whole basis of Judge Kershaw's decision is that Mr Norden was bringing forward no proper evidence in support of the quantum of his claim. There was reference to a preliminary, I think it is fair to say, report by a firm of chartered accountants called Morse Rowland. This was supplied with a "without prejudice" letter dated 8th June 2000 and gave an estimate of losses at something over £400,000. However, the letter explicitly stated that it constituted merely a guideline of values that would arise in Mr Norden's statement of claim. The letter said that the report was not a valuation of damages that might be awarded. It sought to provide financial information to assist Mr Norden's counsel at court to assess the appropriate amount of damages. Judge Kershaw evidently reckoned that this was not evidence upon which he could proceed.
11. Mr Norden has this morning explained how, at an earlier stage and under the benefit of his legal aid certificate, Ernst & Young, a firm of accountants, were asked to do work on the quantification of his claim. He tells me that they charged something in the order of £25,000 for producing a report which, in his terms, was "woolly", and his position is that that report and the money that went to provide it was wasted. It was subsequent to that, I believe, that that particular element of his legal aid was withdrawn.
12. Judge Kershaw in his judgment said that, before Mr Norden could establish that the defendants had caused him to be liable to the bank as guarantor when he would not otherwise have been liable, or liable to the bank for more than he would otherwise have been liable, he would have to show that the alleged misconduct of the receivers led to a shortfall of more than £43,000 before his own position could be any worse as a result of the alleged misconduct. That was because there was a sum in the order of £43,000 due to preferential creditors, so that that had to be written off, as it were, before Mr Norden was going to get anything at all. Mr Norden tells me this morning that he has uncovered documents indicating that at one stage somebody made an offer of £75,000 or thereabout for the business, which was not accepted, and that at a later stage that same person purchased the assets of the business for a sum in the order of £45,000. He says that that constitutes evidence for two-thirds or maybe three-quarters of the £43,000 to which Judge Kershaw referred.
13. The judgment that the judge gave on this topic included (at p.6 of the transcript) the following. Counsel for the defendants had submitted that Mr Norden had brought forward no evidence to establish the quantum of his claim. Of that, the judge said:

"It was a point that, if correct, would undermine the whole of Mr Norden's case and I gave Mr Norden the opportunity to come back on the point or to supplement his opening by telling me, and just as importantly, telling the defendant, how he put his case on this point. In the course of doing so, what Mr Norden said was - I did not note verbatim his words - that he could not prove quantum (and he used that word quantum himself because he has obviously picked it up from lawyers or from me perhaps in the various hearings which I alluded to earlier) and he said - and I got this more or less verbatim - the exact words can be confirmed if necessary from the tape, he said, 'I have sufficient evidence of misconduct that the length of the receivership must have been to my detriment', and he said, 'I would have owed the bank nothing because the bank interfered with the receivers and directed the receivers in their misconduct'.

So what Mr Norden is hoping to do is to invite me to infer loss such that the bank should have got enough to repay itself to be repaid or to reduce Mr Norden's liabilities as guarantor: to infer that position from the enormity of the misconduct of the defendants and for the participation in it of the bank, indeed, that the bank was the inspiration for the misconduct of the receivers.

As a matter of sheer logic or common sense, that simply isn't right. The degree of culpability and morally reprehensible conduct has nothing to do with the extent of the loss which it causes in a case like this. When a claimant has an obvious hurdle to clear, in this case the forty-three thousand pound hurdle of the preferential creditors, it is all the more essential to be able to prove loss."

14. In refusing permission to appeal to this court, Judge Kershaw said that Mr Norden could not point in opening to any evidence whatsoever on the figures in order to be entitled to an indemnity against his liability as guarantor to the bank.
15. The written grounds of Mr Norden's proposed appeal are three in number. They are, in summary, these. He has written that the court was biased. He says it was tainted by misconduct just previous to the trial. The trial was improper and corrupt, contrary to his rights to a fair trial under Article 6 of the European Convention on Human Rights. His second ground, which really is in support of the first, is that the defendants must have communicated with the judge before the trial and sought to influence him. The third ground of appeal is that he was prevented or dissuaded from making a strike-out application in relation to the defence.
16. The claim that he makes on paper in relation to bias is, as I understand it, founded upon a suggestion that counsel for the defendants must have communicated with the judge privately before the hearing. It centres on a discussion during the course of the proceedings relating to a delay by the defendants' solicitors in providing the bundles for the hearing to Mr Norden. He says that he had not mentioned this point to the judge and the judge can only have known about it if there had been some communication with the judge in his absence. As a matter of fact, the transcript on p.15 indicates that Mr Norden had himself mentioned the solicitors' delay in providing bundles to him at the beginning of the proceedings.
17. To put it comprehensively, it seems to me that there is absolutely no basis whatever for a suggestion that the judge had communicated improperly and privately with the defendants or their representatives. It seems to me that this forms no proper basis whatsoever for an appeal. It is entirely fair to say that Mr Norden this morning has not concentrated upon that at all and it is not, I believe, his main basis for coming to this court. Nor, indeed, is the third written ground of appeal, that he was prevented from making a strike-out application in relation to the defence.
18. The whole burden of any application to this court would have to address Judge Kershaw's decision that Mr Norden had brought before him no material to substantiate the quantification of his claim. As to that, Mr Norden tells me this morning that the basis of his complaint (leaving aside, as he regrets he has to, Barclays Bank, against whom he has many complaints) is that the receivers sold these properties and this business at an undervaluation. He submits that they should have got valuations, but they did not get them; that they relied, in so far as they may have done, on the valuations provided by others, and in particular those concerned with his former wife's affairs; and that, as he said to me just now, it is not fair that his action should fail for want of this material when the receivers themselves should have got it in the first place.
19. I understand that as a proposition and, indeed, I understand the force and the strength of feeling with which Mr Norden views events over the past ten years, which have led him to the state where, as he tells me this morning, he has run out of money. He cannot do any more. He cannot provide the material which Judge Kershaw said was necessary to his claim. He submits that in those circumstances he should at least be allowed to proceed with his action or, in this instance, to proceed with an appeal.
20. I regret to say that, in the circumstances which I have described, I have reached the conclusion that there is no proper basis for challenging Judge Kershaw's decision on grounds such as these. It may be that Mr Norden's position is that the receivers should have got valuations. But the fact remains that those who bring proceedings in court - this includes everybody, not just Mr Norden - have to establish their claim by evidence. An essential part of Mr Norden's claim in this case has to be the establishment of the loss which he says has flowed from the breaches of duty or fraud that he would allege against these defendants. He came to court for the trial of his action on 13th November last year with no such evidence at all and, more difficultly than that, no evidence which established a loss (as he had to do to succeed) in excess of £43,000.
21. In those circumstances I regret to say that I am not persuaded that there is any reasonable prospect of Mr Norden successfully appealing Judge Kershaw's decision. Accordingly, his application for permission to appeal is refused.
Order: application for permission to appeal dismissed.