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 MORGAN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th October 2009

Lord Justice Lloyd:

1. This is an oral renewal of an application for permission to appeal against an order of Morgan J, made at the conclusion of a seven-day trial in a reserved judgment handed down on 20 May 2009, the order being made as of that date.
2. The order gave judgment for the claimant against the first defendant for the sum of £643,000 odd, with interest and costs, and a sum on account of costs of £225,000, and permission to appeal was refused. Stanley Burnton LJ considered the matter on paper on 17 July and refused permission. The first defendant appellant exercised its right to renew orally.
3. The claim arose under what was said to be an agreement for the sharing of costs in relation to a proposed development scheme in Bristol, which the judge held to have been made between Norwich Union (whom I will "Aviva"). I need not specify precisely which company within the relevant group. Aviva alleged that it was one of the parties and that Strand Street Properties (the first defendant) was the other, acting by its agent (the second defendant) London and Paris Estates Limited. SSP (for short) denied any agreement, disputed that there was consideration if there was an agreement, denied the agency of LPE, denied alternatively the case put that it had ratified the agreement, and took points on the nature of the liability arising if there was an agreement.
4. The judge reviewed the facts on the evidence in great detail in a long judgment which shows every sign of having been most carefully prepared. Mr McGhee, appearing today, leading Ms Hayes who appeared at the trial, contends that there are seven grounds on which an appeal has a good prospect of success. Eight grounds of appeal were originally identified, but the third is not sought to be relied on.
5. The first ground is a point on the judge's reasoning. The judge found two agreements, both of them made orally, the first on 2 July 2001 and the second, a more specific agreement and supplemental to the earlier one, made on 6 July 2001. As I say, he reviewed the documentation relating to the history at considerable length -- I do not mean, in saying that, to be at all critical -- and it was necessary to look at the documentation fully. This was particularly so because, although he heard some oral evidence, he found that it was not of much assistance to him for two different reasons. The first was that he regarded Mr Delafield, a witness called for the defendants, as not convincing. On the other hand, he found Mr Peacock and Mr Ashcroft, called for the claimant, to be truthful but limited in their recollection. So a great deal depended on the documents, as he said in terms. In the course of his chronological review of the documents between paragraph 34 and paragraph 156, he came to the crucial period at the beginning of July 2001 when he referred at paragraph 115 to a series of meetings that took place on 2 July. He recorded the notes that exist in relation to the meetings on that date, saying there was no reliable note of one of the meetings. Then he went on to what happened immediately afterwards. At paragraph 120 he referred to events on 5 July, including a telephone call and then a letter by Mr Delafield to Mr Ashcroft of 5 July. In that letter there is a reference in regard to which the judge says:

"In the telephone conversation on 5^th July 2001 (according to what was stated in the letter) Mr Peacock asked Mr Delafield to confirm 'London and Paris's' agreement to sharing fees on a 50/50 basis. The letter […] did not itself record any such agreement or commit LPE to paying fees on a 50/50 basis. Instead, the letter appeared to be designed to avoid giving that commitment."

Then he set out what the letter did say. He went on to what happened immediately afterwards.

6. So that is in his review of the course of the documents. He then considered the witnesses and, for reasons to which I have alluded, he found them not a great deal of help. In the latter part of his judgment, he came to the question, first of all, as to whether there was a fee-sharing agreement or agreements? At paragraph 206 he said this:

"I find that LPE and Norwich Union agreed at the meeting on 2^nd July 2001 that the fees up to that date and thereafter up to 16^th July 2001 would be split 50/50 between the two sides. I accept the evidence of Mr Peacock and Mr Ashcroft on that point and I reject any evidence from Mr Delafield to the contrary."

Then he went on to 6 July and found that there was a further agreement on that date of a more limited scope.

7. Mr McGhee's point is that although the judge has, of course, and fairly, referred to the 5 July letter in paragraph 120, he has not explained how he comes to his conclusion at paragraph 206 that there was an agreement, notwithstanding Mr Delafield's evidently careful failure, or in fact refusal, to confirm, in response to the request made to him by telephone, that there was indeed such an agreement in the communications by telephone and by letter only three days later. Mr McGhee says that that is a point which fatally undermines the judge's finding that there was an agreement because it shows that the judge's conclusion does not address one of the most critical features of the evidence relevant to the point. As I say, the judge had accepted that he had to place particular reliance on the contempory documents. Here was a document only three days later than the critical date, relevant to the point in a specific way, and, although the judge had set it out fully at paragraph 120, by the time he came, 86 paragraphs later, to his conclusion, he failed to explain why he reached the conclusion that he did, notwithstanding that letter. I do not think Mr McGhee can put it so high as to say it would be impossible to reach that finding consistently with the letter. What he does say is that the letter needs to be addressed, and it was not addressed in that context. It is difficult to suppose that the judge had forgotten about the letter in the course of his preparation of his very full and careful judgment in a period of some three months or so since the conclusion of the hearing, which was followed, I should say, by the submission of written representations by counsel on both sides.
8. It is evident from the judgment that the judge was a master of the factual material and of the issues, but it is said that he did not discharge the necessary task of a judge in explaining why he could come to that conclusion at paragraph 206 consistently with what Mr McGhee would say was the most crucial single piece of evidence on the point, namely the letter. That is the first ground.
9. The second ground of appeal is a rather different kind of point as to what the nature of the cause of action was under the agreement, and that arises in this way. As I say, the agreement, if there was one, was for the sharing of costs on a 50/50 basis, and there is no doubt that there were costs which had been paid by Aviva for which it was looking for its 50% contribution from SSP. It is also the case, although it did not feature in the same way in the claim, that SSP, or LPE at any rate, had incurred costs which, if there was to be this sharing, would be brought into the account as a credit. The point made here -- and it was made at trial on behalf of SSP -- is that the claim of Aviva under this agreement, if there was one, was to an account. Aviva incurred expense; SSP/LPE incurred expense; the liability of each was to bear 50% of the aggregate and that was to be measured by the taking of an account. The significance of that is that this claim was not for an account; this claim was for a sum of £643,000, which is taken to be half of the expenses incurred by Aviva. Now of course Aviva could not object to SSP taking credit for the expenses that it had incurred, but it said and argued before the judge that its claim was in debt and that the credit to SSP would have arisen by way of a set off. SSP contended at the outset that the true nature of the liability was to an account and to pay a sum found due on the taking of the account. The point of that is that the liability to account would have arisen in the middle of July 2001. These proceedings were commenced in June 2007 as a claim in debt. They could, of course, have included a claim for the taking of an account, and that would have been within time under the Limitation Act. But a new claim for an account would now be out of time. The judge referred to this point at paragraph 6 of his judgment. He recognised that if it was a claim to an account it would be statute-barred, and the point was mentioned, as I understand it, at the outset of the trial. He records that Aviva had deliberately not sought permission to claim such an account; it rested on its pleaded claim to recover a debt. Of course, if there had been an application to amend, issues might have arisen as to whether, because it was by then out of time, it was proper to give permission to amend; but, if permission had been given, then the claim would have been within time. So the point here is that Aviva, by Mr Clark, its counsel at trial, took a stand such that it depended entirely on the nature of the claim under the agreement, once found, being analysed as debt rather than account.
10. The judge held at paragraph 212 that it was not a liability to an account but a liability to pay, when demanded, 50% of the fees paid by Aviva subject to a set off of the costs claimed the other way. That is, therefore, a legal issue as to the nature of the liability arising under this oral agreement which Mr McGhee says again is a short point. It is a point of legal analysis and he says it is a point on which he has at the least a reasonable prospect of success.
11. Passing over ground 3 which is not relied on, ground 4 is a distinct point that there was no consideration for the agreement, if there was one. This is dealt with at paragraph 210 of the judge's judgment. He says:

"Whatever the legal basis of that submission, it fails on the facts. The submission presupposes it was completely clear that only Norwich Union and not LPE/SSP had a liability to the third parties to pay their fees. In fact, the evidence from the document shows that the person who had instructed the third parties, and whether it was LPE/SSP or Norwich Union or both of them, was completely obscure. The benefit which LPE/SSP obtained from an agreement that Norwich Union would pay 50% of all the fees owed to their parties was that LPE/SSP avoided a situation where [it] could end up having to pay a 100% of the fee claimed by a third party who claimed that it had been instructed by LPE/SSP."

12. Mr McGhee has shown me a number of invoices which were addressed to Aviva (care of LPE, not of SSP) and, although he accepts that there were certain fees that were paid by LPE, he says there was in fact no evidence which could justify the judge's conclusion that there was the slightest uncertainty, as regards what Aviva was paying, as to who was liable, and therefore this is a conclusion that simply is not borne out by the evidence and it is perverse.
13. I should have mentioned perhaps that, although the respondents are, as normal, not represented today, they have put in a brief submission, in October, of certain points that they would invite the court to take into account. It annexes a document dated February which was at the stage of the written submissions following the conclusion of the hearing.
14. On this particular point Mr Clark of counsel for the respondent says that it was accepted that a promise to perform a contractual duty already owed constituted good consideration if the promisee benefited, and he annexes a one-page list of benefits that was sent to the judge in the course of the written submissions to which, he says, the appellant did not respond in its final written submissions in March, and those deal with other points. To that Mr McGhee's point is: well, so be it, but that is not what the judge relied on. The judge made no mention of that. The judge placed his reliance on uncertainty as to whether LPE, and possibly SSP, had a direct liability to third parties to pay the fees which in fact Aviva was paying. So he says the safety of the judge's conclusion depends entirely on whether there was any evidence on which that conclusion could be reached, and it is fair to say that so far as my reading of the judgment goes, and I have read it in full more than once, I do not see where the judge deals with the underlying facts on that point.
15. The other grounds of appeal can be taken in effect together, because they deal with authority and ratification: the question of the agency of LPE on behalf of SSP. There is a point on authority which the judge did not decide; the judge decided that on the basis of ratification; and as to that Mr McGhee takes two points. One is that the evidence relied on by the judge, and identified at paragraphs 245 and 246, simply does not justify a finding of ratification in the sense that it does not justify a holding that SSP knew that, if there was an agreement such as is alleged, it had been made and therefore they could not be said to be put, as it were, on the spot to ratify it or not. The second point is that the point was not pleaded, a point which was taken at the outset of the trial because, although not pleaded, it featured in the claimant's written opening submissions. I have been shown passages in the transcript which show Ms Hayes taking the point and objecting and saying, "if this is to be taken it needs to be the subject of an amendment specifying all the relevant facts, which would of course include any allegation of relevant knowledge on the part of SSP acting by a particular natural employee or agent". Mr Clark said, "well, it is up to me what amendment I ask to make", and the judge said, in a passage which I have been shown at page 961 of the third of the bundles:

"[I propose to proceed on the basis of the issues as pleaded] … I will only consider the issues on the pleadings. Although there may have been things said this morning, I am not regarding that as a substitute for pleadings. The pleadings bind each party until they are amended."

16. So, that being so, and an entirely proper attitude, Mr McGhee says it was not properly open to the judge to make a finding of authority or ratification, certainly not ratification, because there was no such pleaded case; and although Mr Clark in his document to this court refers to an application to adjourn, which was dealt with in a particular way in the course of the first week, he does not deal with the point now made which is that the judge, in the course of that first day, addressed the question of what was pleaded and what was in issue and stated in his transcript, although not repeated on this aspect of the case in his judgment (unlike what he said at paragraph 6 about the claim for an account), that he would not decide an issue that was not pleaded. Mr McGhee also says that, as I say, the two particular items relied on at 245 and 246 would not justify a finding of ratification, and I can see having looked at them why he comes to that submission.
17. So there are seven separate grounds of appeal relied on of rather different natures; four of them more or less going together in terms of authority and ratification; two appeals on fact, or fact and/or reasoning, namely the question of the judge's failure to take into account the 5 July letter, and his conclusion at paragraph 210 that there was consideration of a particular kind which, Mr McGhee says, there simply was not, and then the question of the nature of the cause of action arising.
18. As I read the papers for this application and the judge's long and careful judgment it seemed to me that Mr McGhee would face an uphill task in demonstrating that the judge had even arguably gone wrong. But, bearing in mind that this is a filter process for the cases which really do not have any reasonable prospect of appeal, I have come to the conclusion, with the benefit of Mr McGhee's submissions, that it would be right to grant permission to appeal on all seven grounds of appeal that are sought to be relied on. It is not common to grant permission to appeal on issues of fact, and it may be that there is a good clear answer, or an adequate answer, to the appeals on the factual points. In particular on the first point it may be that the Court of Appeal will conclude that the judge, despite his failure specifically to refer to the 5 July letter at the point where he came to his conclusion about the agreement, must have had it in mind, unless it can be said that it is impossible to reconcile the finding of fact as sound. But it seems to me that the first defendant ought to have the opportunity to ventilate all of the seven grounds of appeal before the full court, and accordingly I grant permission to appeal on all grounds of appeal, other than ground number 3 which is not relied on.

Order: Permission to appeal granted