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 OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE HENDERSON)

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd May 2007

Lord Justice Toulson:

1. This application for permission to appeal arises from an unfortunate background. Mr Hicks seeks permission to appeal against the judgment of Henderson J on 27 April 2007 in which he found that the respondents had been negligent and in breach of contract, but that the claimant had suffered no loss. In the result, judgment was entered for the claimant for nominal damages.
2. The background is helpfully set out in the skeleton argument of Mr Parker on behalf of the respondent. Mr Hicks himself appears in person. Mr Hicks used to run a hotel business in Hinckley which he owned through a limited company, HIHL. HIHL borrowed substantial sums from the Humberclyde Group of Companies. In September 1991 Humberclyde took possession of the hotel. Mr Hicks claimed that Humberclyde took possession through an unlawful conspiracy with HIHL's former accountants, Robson Rhodes. HIHL began proceedings in respect of that claim in October 1993.
3. In November 1993 an order was made for HIHL to be wound up. Mr Hicks asked its liquidator, the Official Receiver, to assign the conspiracy claim to himself and his former wife. Humberclyde resisted the assignment. The liquidator applied to the court for directions and the matter came before Chadwick J in June 1997. In his judgment dated 20 June 1997 Chadwick J concluded that the conspiracy action might yield a valuable judgment and he directed the liquidator to assign the claim to Mr Hicks. Humberclyde had a right against HIHL in debt, which the judge took to be worth £13.5 million, but he worked on the basis that the value of the hotel at that date was in the region of £18-£20 million.
4. Humberclyde appealed, raising a very large number of grounds of appeal. In connection with its appeal it served two affidavits of Mr Alan Reason, his 6th and 7th affidavits. In the 7th affidavit he referred to a valuation prepared by Christie and Co in August 1991 in which they valued the hotel at only £10 million. Mr Hicks retained the respondents in connection with the appeal and they retained leading and junior counsel. Leading counsel was Mr Michael Brindle QC, but he was very busy.
5. A directions hearing took place on 27 January 1998 at which the Court of Appeal adjourned Humberclyde's application for leave to adduce new evidence to be dealt with on the hearing of the appeal. On 28 January Humberclyde's solicitors wrote to the respondents putting them on notice that they would object to any evidence from Mr Hicks in reply, unless it was served at least 28 days before the hearing of the appeal. Junior counsel advised that leading counsel ought to be instructed to advise on the question of putting in further evidence, but for various reasons the respondents were unable to arrange a consultation with Mr Brindle until 13 May 1998. That was after skeleton arguments had been exchanged for the hearing of an appeal and only six days before the appeal. Everyone accepted that it was by then likely to be far too late to put in any evidence for Mr Hicks in reply to Mr Reason's sixth and 7th affidavits. On 12 March 1998 Mr Samuels, the case handler at the respondents, had written to Humberclyde's solicitors confirming that it was their intention to serve any affidavit evidence, if at all, no later than Friday, 17 April.
6. At the conference with Mr Brindle he advised that statements should be taken from Mr Hicks and his former wife setting out their comments on the 7th affidavit in order, at least, that he would be prepared to try to use that information to oppose Humberclyde's attempts to introduce further evidence.
7. At the hearing of the appeal on 19 May 1998, the Court of Appeal permitted Humberclyde to adduce evidence of the August 1991 valuation on the basis that it had in fact been referred to in evidence before Chadwick J; therefore, leave was not required to adduce it. They did not admit any other evidence. Mr Brindle vainly sought to put in some responsive evidence on behalf of Mr Hicks. Morritt LJ rejecting that application said as follows:

"The Directors have had ample time in which to prepare and seek leave to adduce any further evidence they wished. During that time they have been legally represented and, as the correspondence demonstrates, the question whether to do so has been under active consideration. The reason why the opportunity was not taken and whether, as the Directors claim, it was due to incompetence on the part of some or all of their advisers are not matters for this court."

8. The appeal then took a very short course. On the basis of the Christie valuation of the hotel at £10 million, with no contradictory evidence, the court concluded that Chadwick J had proceeded on a wrong basis in thinking that the value of the conspiracy claim could exceed the debt owed to Humberclyde. Accordingly, it allowed Humberclyde's appeal against the order requiring the liquidator to assign the conspiracy claim to Mr Hicks. In those circumstances the court found it unnecessary to deal with any of the other arguments which had been raised in the case.
9. In the present action, Mr Hicks claimed that the solicitors had been negligent in failing to obtain rebuttal evidence and put it before the court, with the result that Mr Hicks had lost the value of the conspiracy action.
10. The judgment of Henderson J is model of clarity. In paragraph 144 he made some important findings. He held that the point about the August 1991 valuation, raised by Mr Reason in his 7th affidavit, and the potential damage which this could do to the claimants' case, ought to have been appreciated by a competent solicitor. He went on to find:

"Furthermore, once the point had been identified, I have no doubt that it was then incumbent on them to discuss it with, and seek instructions from, the Claimants, as well as seeking advice at the earliest opportunity from leading counsel."

11. In paragraph 148 he went on to decide the issue of liability in favour of Mr Hicks, holding that a number of the pleaded particulars of negligence and breach of duty had been made good, in particular the following:

"a) Failed to take instructions on Mr Reason's 6th and 7th affidavits and in particular the August 1991 Valuation exhibited to the 7th Affidavit until 13 May 1998 that is to say 6 actual days and 3 working days before the Court of Appeal hearing;

[…]

"c) Failed to take instructions (until on or after 13 May 1998) on the August 1991 valuation and on the information provided to the valuer by Robson Rhodes one of the alleged conspirators …"

12. He then went on to consider what would have happened if the solicitors had not been negligent. Beginning at paragraph 149, he addressed the question what Mr Brindle would have advised if he had been consulted in proper time. In paragraph 155 he concluded as follows:

"Accordingly, for the reasons I have given, I conclude that even if Mr Brindle had been consulted in good time, his advice would still have been not to prepare or seek to adduce fresh evidence in answer to Mr Reason's affidavits, and not to obtain a further retrospective valuation of the Hotel. Such advice would not have been negligent, even if with the benefit of hindsight it may appear to have been mistaken, and RJW could not have been criticised for following it. I am therefore unable to see any basis for saying that RJW were themselves in breach of duty by failing to prepare such evidence in reply, or failing to obtain a further valuation."

Having reached that conclusion, he went on to find that no damage had been caused by the negligence.

13. Reading the pleadings, the claimants' skeleton argument, the Notice of Appeal and the skeleton argument put in by Mr Hicks, Mr Hicks' strongest point appeared to me to be one not raised by him in direct terms, although I think that it is encompassed by certain his grounds of appeal. It is as follows. The judge found that the solicitors were negligent in two respects: failing to take proper instructions from Mr Hicks and failing to obtain advice from leading counsel in proper time.
14. As I have indicated, he went on to consider what would have happened if Mr Brindle had been consulted earlier, but the point which has concerned me is that the judgment does not address the following separate question: given that the solicitors did not instruct Mr Brindle in time, what ought they to have done and what consequences flowed from their failure to obtain earlier instructions from Mr Hicks?
15. It seems to me, at least on an arguable basis, that there are two different issues here: the failure to obtain timely advice from Mr Brindle and the failure to take proper instructions from Mr Hicks. Given that they did not obtain proper advice from Mr Brindle, the claimant arguably is entitled to approach the matter not simply by considering what would have happened if Mr Brindle had been instructed in time, but also what would have happened if they had taken proper instructions from Mr Hicks in the context of their inability to arrange a conference with Mr Brindle.
16. The claimants' written opening before Henderson J made the point in paragraph 39 that the claimant had been keen to serve a substantial affidavit dealing in detail with the value and merits of the conspiracy action, and it is stated that this was recorded in the instructions finally delivered to Mr Brindle, which I have not seen. Mr Samuels said in his witness statement at paragraph 68(i) as follows:

"Mr Hicks was keen to serve a substantial affidavit dealing in detail with the value and merits of the Conspiracy Action, was concerned that to enter no evidence in response on the basis that the merits were not relevant was a weak position and wanted to serve evidence dealing with the merits so that there was a 'plan b' in the event that the Sixth and Seventh Affidavits were allowed into evidence by the Court of Appeal."

17. Putting the matter rhetorically: if that was the known position of the client and if the solicitors were unable through their own negligence to obtain advice from leading counsel, ought they not to have discussed the matter more fully with their client and prepared the evidence which they knew that the client wished to put before the court? Or is it at least arguable that they were negligent in that regard and that arguably Mr Hicks may have lost the appeal in the Humberclyde action because of the failure to adduce such evidence?
18. Mr Parker, on behalf of the respondents, in brief but well expressed submissions, has suggested, first, that this point would not be open to Mr Hicks to run on this appeal because that is not how the case was argued below, and that is the reason why this argument was not addressed by the judge in his judgment. It does seem to me that on the pleadings and in the light of the skeleton opening it was at least open to have been argued. It may be a fine point whether it is open to Mr Hicks to argue it now and, in particular, whether it would cause any prejudice to the respondents for him to be allowed to put a point which was available to him on pleadings but not directly run at trial. If the point would have depended on conflicting factual evidence, then one could readily see that it would not be open for him to do so. But since there seems to have been no dispute on the respondents' own evidence that Mr Hicks was very keen to get this evidence in, it is at least arguable that there was no factual issue there to be explored and that it would be just that Mr Hicks should be able to develop the point.
19. Mr Parker also made a number of other points. He submitted that the implicit in the findings in paragraph 155 of the judgment (which I have read) it necessarily followed that the solicitors were not negligent in themselves deciding not to prepare rebuttal evidence, because if it would have been proper advice from Mr Brindle to have said that it was not necessary, it was proper for the solicitors to conclude that it was not necessary.
20. I see the argument but I am not persuaded that it necessarily provides an answer to a complaint by the client that it was he who ought to have been asked what he wanted to do, since it was after all his appeal. It may be that he would have accepted Mr Brindle's advice if coming from leading counsel who had considered the point fully. Whether he would have readily concluded that he did not want, as a precautionary measure, to serve rebuttal evidence, on the say-so of solicitors who had not been able to consult leading counsel, may be a different matter.
21. Mr Parker also submitted that the solicitors were governed by what the Legal Aid Board would permit. That does not sound to me to be a knock-out point. If they had thought it necessary to get the Legal Aid Board's approval for the service of further evidence in the circumstances where they were bound to do so by a given date, and were unable to obtain leading counsel's advice, it seems to me most unlikely that any Legal Aid Board would have said that they could not do it, and that is making the assumption that it would have been necessary to have the Legal Aid Board's approval.
22. At this stage, all I am concerned with is whether this appeal is arguable. I see real difficulties in Mr Hicks' path for the reasons which have been put forward by Mr Parker, but I am left with a nagging concern about the case which makes me feel that, as a matter of justice, I ought to give permission to appeal. I do so on the basis that grounds of appeal 1 and 3 are arguable. Ground 1 is that the judge failed to find the respondent was in breach of contract in failing to obtain expert evidence in good time to answer the August 1991 valuation. That does seem to me to cross the threshold of arguability, on the basis that if they had properly sought Mr Hicks' instructions that is what they would and should have done.
23. Ground 3 is that the judge misdirected himself in failing to hold that the respondents' breaches of contract were negligent and causative of the appellant's failure before the Court of Appeal on 19 May 1998. That would follow if the court should have been persuaded that the solicitors ought to have prepared counter-evidence and put it before the court, and that, had this happened, it was unlikely that the hearing of the appeal would have taken the short-cut which it did.
24. I should add that Mr Parker has submitted also that when the judge found that the solicitors were negligent in failing to take Mr Hicks' instructions, accepting in that regard the pleaded allegations to which I have referred, there may be an ambiguity in the expression "failing to take instructions". It could mean simply "obtain the client's comments on the evidence" or it could mean "obtain the client's instructions on what he wished to do". But it seems to me that it is at least arguable that the wider obligation was owed.
25. Mr Hicks has further sought to argue that the judge was wrong to find that if Mr Brindle had been consulted at the right time, his advice would have been not to prepare evidence in answer to Mr Reason's affidavits. His argument in summary is that Mr Brindle was inevitably having to look at the matter with the benefit of hindsight, and that the judge ought to have looked at the matter by reference to what the probabilities would have been.
26. It is submitted that, if proper evidence had been obtained before any decision was made whether to deploy it, the natural course would indeed have been to obtain and disclose in rebuttal the valuation evidence which was subsequently obtained, and there would have been little, if any, downside in sending that to the other side on a provisional basis.
27. Mr Hicks would face a very difficult task in persuading any appellate court that they ought to reverse the findings of the judge on this point in a very careful judgment delivered after he had heard and seen the witnesses. I would not give permission to appeal on that point, but rather I would leave that, if Mr Hicks wishes to seek to advance this appeal on that ground, he will have to renew his application to the full court. The appeal should be heard by three Lord Justices.


Order: Permission to appeal granted on Grounds 1 and 3. Stay granted.