Strand, London, WC2A 2LL
B e f o r e :
| RONALD JOHN PEARCE
|- and -
|(1) EUROPEAN REINSURANCE CONSULTANTS AND RUN-OFF LIMITED
(2) CHRISTOPHER NORMAN PALMER
(3) BDO STOY HAYWARD (A PARTNERSHIP)
Mr Mark Simpson (instructed by Simmons & Simmons) for the Third Defendant.
Hearing dates: 29, 30th June 2005
Crown Copyright ©
Mr. Justice Hart:
"Mr Pearce is entitled by way of damages and/or equitable compensation to be restored to the position if the valuation had been carried out properly and impartially and in accordance with Article 14 of the Articles of Association. ERCRO and/or Mr Palmer and/or BDO are liable to Mr Pearce for all losses sustained by Mr Pearce which were caused by their respective breaches of duties, on the basis that the shares had been properly valued and the sum properly due to him had been paid by Mr Palmer. Any order of restitution to Mr Pearce to the position where the shares were transferred to him and a further valuation carried out would be of no benefit to Mr Pearce having regard to the fact that Mr Palmer has conducted the business of ERCRO since 5 September 2001 in his own interest and without any regard to the interests of Mr Pearce and ERCRO has now ceased to trade and has no assets. Accordingly, Mr Pearce seeks the sums set out below.
PARTICULARS OF LOSS
(a) Mr Pearce has sustained substantial prejudice in the valuation process by reason of the partial acts and/or acts in breach of BDO's duties and has been put to expense in discovering the true position of the steps taken by BDO to value the shares;
(b) Mr Pearce's shares in ERCRO have been purportedly valued at £400 per share and £10,400 in total. The valuation placed upon the shares by BDO ignores, amongst other things, the past income position of ERCRO and excludes any future business likely to be carried out by ERCRO. Mr Pearce contends his shareholding in ERCRO should have been valued in excess of £350,000;
(c) Mr Pearce will contend that had the valuation of the shares been conducted diligently and promptly and in accordance with the obligations set out above the bankruptcy proceedings would not have taken place and Mr Pearce would not have been put to expense in defending the said proceedings. Accordingly, Mr Pearce is entitled to recover his costs incurred as from 5 September 2001 and subsequently in defending the bankruptcy proceedings insofar as those costs have not been recovered from any other party;
(d) ERCRO issued statutory demands against Mr Pearce on 2 November 2001 for £11,009.64 and 12 November 2001 for £25,000 and presented a bankruptcy petition on 19 December 2001 against Mr Pearce based on the first statutory demand notwithstanding:
(i) ERCRO held security for the sums alleged then to be due; and
(ii) the valuation of the shares had not taken place;
(e) Mr Pearce was made bankrupt on 26 February 2002;
(f) the bankruptcy order was set aside on appeal by order of the Honourable Mr Justice Lloyd on 27 June 2002;
(g) the petition was ultimately dismissed by the court on 7 January 2003 with costs to be paid by ERCRO;
(h) Mr Pearce was put to expense in funding the costs of the bankruptcy proceedings and numerous appeals. The unrecovered costs incurred by Mr Pearce and which would have been avoided if ERCRO and/or Mr Palmer and/or BDO had complied with their respective duties as set out above are estimated at approximately £100,000;
(i) Mr Pearce has been put to expense by reason of finance charges and higher interest rates arising from having to re-mortgage his property and borrowing monies to pay for some of the bankruptcy costs;
(j) Mr Pearce has been put to expense by reason of the loss arising from the sale of one of the family cars at a reduced price to pay for urgent expenses, including urgent costs in respect of the bankruptcy proceedings;
(k) Mr Pearce has been put to expense by reason of the loss arising from the cancellation of a holiday;
(l) Mr Pearce has suffered loss arising from the loss of opportunity to invest money from the sale of his shares;
(m) Further, Mr Pearce has been put to substantial inconvenience and distress by the delay in valuation and/or institution and/or continuation of the bankruptcy proceedings which would have been avoided had ERCRO and/or Mr Palmer and/or BDO complied with their respective duties above;
(n) Mr Pearce has been put to further expense in investigating the valuation of the shares and the actions of ERCRO and Mr Palmer and BDO and in establishing the true position of the valuation."
Loss of Value
The Bankruptcy Costs
"Starting with Caparo v Dickman, the courts have moved away from characterising questions as to the measure of damages for the tort of negligence as questions of causation and remoteness. The path that once led in that direction now leads in a new direction. The courts now analyse such questions by enquiring whether the duty which the tortfeasor owed was a duty in respect of the kind of loss of which the victim complains. Duty is no longer determined in abstraction from the consequences or vice-versa. The same test applies whether the duty of care is contractual or tortious. To determine the scope of the duty the court must examine carefully the purpose for which advice was being given and generally the surrounding circumstances. The determination of the scope of the duty thus involves an intensely fact-sensitive exercise. The final result turns on the facts, and it is likely to be only the general principles rather than the solution in any individual case that are of assistance in later cases."