Before : |
Sir Michael Birt, Kt., Bailiff, sitting alone. |
Between |
Harcourt Developments Limited |
First Plaintiff |
|
Esplanade Financial Centre Limited |
Second Plaintiff |
|
Les Jardins Residential Limited |
Third Plaintiff |
|
Les Jardins Leisure Limited |
Fourth Plaintiff |
|
Harcourt Developments (Jersey) Limited |
Fifth Plaintiff |
And |
The States of Jersey Development Company Limited |
First Defendant |
|
Minister for Treasury and Resources |
Second Defendant |
Advocate P. D. James for the Plaintiffs.
H. Sharp, Q.C., HM Solicitor General for the Second Defendant.
judgment
the bailiff:
1. This is an application by the second defendant ("the Minister") to strike out the Order of Justice in so far as it contains claims against him. The application is brought under RCR 6/13(1)(a), (b) and (d) and the inherent jurisdiction of the Court on the grounds that the Order of Justice discloses no cause of action, is scandalous, frivolous or is otherwise an abuse of the process of the Court.
2. At the conclusion of the hearing I adjourned the application and directed that the plaintiffs should have one month in which to file an application seeking leave to amend the Order of Justice, which I would then consider. I now set out the reasons for my decision. Given that the matter may come back for a further hearing on the application to amend and that this would be the occasion to consider some of the arguments put forward by Advocate James, I propose to be brief.
3. I take the background from the contents of the Order of Justice, always bearing in mind of course that these are merely allegations at this stage. The first defendant (formerly known as Waterfront Enterprise Board Limited and to which I shall refer as WEB) has filed an answer but the Minister has not done so pending the outcome of this application.
4. The second to fifth plaintiffs are subsidiaries of the first plaintiff ("Harcourt") which is a property development company incorporated in the Republic of Ireland. The Order of Justice pleads that in September 2004 WEB announced the initiation of a tender process and wrote to Harcourt amongst others to enquire whether Harcourt wished to express an interest in establishing a "long term development partnership" with WEB for the development of an area of land situated at the Waterfront and known as Esplanade Square ("the Esplanade Square Site"). The pleading then sets out the subsequent history of the matter but for today's purposes it is sufficient to say that, following this process, WEB selected Harcourt as its preferred development partner for the Esplanade Square Site and heads of term were signed on 10th October, 2006.
5. At about the same time various discussions were taking place concerning an adjacent area of land known as the Les Jardins site. Following a review by Hopkins, a firm of architects, WEB decided that, subject to the principle of the Hopkins proposal being approved by the States and formally adopted by the Minister of Planning and Environment as planning policy, the development of the Esplanade Square Site and the Les Jardins site should proceed on the basis of the Hopkins proposal, which was that the two sites should be joined together by sinking the main road which divided them through an underground tunnel. The combined sites subsequently became known as the Esplanade Quarter.
6. In due course, on 19th July, 2007, heads of terms ("the July Heads of Terms") were signed by the first to fourth plaintiffs and WEB in relation to the Esplanade Quarter. Although the July Heads of Terms dealt with a number of matters, the essence was that the parties would negotiate the details of a Development Agreement, which would cover the development of the Esplanade Quarter. Once the Development Agreement had been agreed and the conditions precedent of that Development Agreement fulfilled, it was envisaged that WEB would leave the Esplanade Quarter to the second plaintiff (the developer). One of the conditions precedent envisaged in the July Heads of Terms was that, prior to entering into the lease of the Esplanade Quarter, Harcourt would procure the issue of a guarantee by a bank or insurance company acceptable to WEB in respect of the substantial sums which would be payable to WEB under the lease.
7. Although the Minister was not a signatory to the July Heads of Terms, the first page of those Terms included the words "subject to the approval of the Treasury and Resources Minister". Paragraph 2.24 of the Order of Justice infers that the Minister subsequently gave his approval and WEB's answer confirms that he did so on 29th October, 2007.
8. The essence of the plaintiff's claim is set out at paragraph 3 of the Order of Justice in the following terms:-
"3.1 The Plaintiffs aver that the effect of Clause 3.4 of the July Heads of Terms was to impose a binding contractual duty on the parties thereto to negotiate the terms of the Development Agreement in good faith and with all due diligence. Further, by reason of the fact that the Second Defendant was required to and did approve the July Heads of Terms clause 3.4 thereof thereafter also took effect as between the Plaintiffs and the Second Defendant.
3.2 Further or in the alternative, by reason of the Plaintiffs' participation in the Tender Process initiated by WEB and by reason of the Second Defendant having assumed responsibility for the conduct of the Tender Process together with WEB the Defendants became subject to a duty to conduct that process (including any variations thereto) in a fair, transparent and consistent way."
9. The Order of Justice then goes on at paragraph 4 to summarise the defendants' alleged breaches of duty as follows:-
"4. In breach of the duties pleaded at paragraphs 3.1 and 3.2 hereof:
4.1 the Defendants did not negotiate the terms of the Development Agreement in good faith and with all due diligence; and
4.2 the Defendants did not conduct the Tender Process in a fair, transparent and consistent way."
10. The Order of Justice then goes on to set out the particulars of the manner in which the defendants are said to have breached their respective duties. It says first that there were delays in progressing the draft Development Agreement. It says secondly that the defendants sought to include in a "Revised Proposed Development Agreement" in March 2009 contains precedent which were not reflected in the July Heads of Terms. A number of matters were raised but the key one for present purposes is that the Revised Proposed Development Agreement envisaged Harcourt having to produce the guarantee prior to execution of the Development Agreement rather than after entering into the Development Agreement but prior to taking a lease of Esplanade Quarter. It is said that this was a condition precedent which no developer could conceivably have complied with because a bank or financial institution would not produce a guarantee until Harcourt had contractual certainty by means of the execution of the Development Agreement. The consequence was, says Harcourt, that this led to a breakdown in negotiations and in due course in July 2009 WEB gave Harcourt formal notification of the purported exercise of its right to terminate the July Heads of Terms. Harcourt pleads that it incurred considerable expense in the tender process and has lost the opportunity of making substantial profits following execution of the Development Agreement.
11. The claim against WEB is a straightforward one for breach of contract in relation to the July Heads of Terms. That is denied by WEB but it is accepted that the Order of Justice raises an issue for trial.
12. The claim against the Minister as set out in the Order of Justice is in contract and in tort. The contractual claim is based on the assertion at para 3.1 of the Order of Justice that, because he approved the July Heads of Terms, he in effect became a party to that contract and was bound by its terms.
13. The claim in tort is based solely on the assertion at para 3.2 of the Order of Justice, namely that by reason of his having assumed responsibility for the conduct of the tender process, he became subject to a duty to conduct that process in a fair transparent and consistent way.
14. Finally, there is a claim in unjust enrichment against WEB and the Minister on the basis that the expenditure incurred by Harcourt was for the defendants' benefit and was incurred with their full knowledge and approval.
15. The submissions of the Solicitor General on behalf of the Minister were simple. In relation to the claim in contract, he submitted that the claim was completely unsustainable. The Minister was not a party to the July Heads of Terms. The parties were specifically defined in clause 1 of the Heads of Terms as being WEB, Harcourt and the developer (the second plaintiff). It was only the parties to the contract who were bound by it. This was emphasised in, for example, clause 3.4 (which formed the basis of the plaintiff's claim against WEB) which provided:-
"3.4 By the execution of these Heads of Terms the Parties are hereby each agreeing to act in good faith and with all due diligence with a view to seeking to agree the terms of the Development Agreement and the aforementioned ancillary documents and contracts and to enter into the Development Agreement within the timescale referred to in paragraph 6.2." (emphasis added)
16. The fact that the Heads of Terms were expressed to be subject to the consent of the Minister did not make him a party to the contract so as to become bound by it. If, for example, the Heads of Terms had said that they were subject to the approval of a named architect or building expert, that would not render the architect or building expert a party to the contract and would not give the plaintiffs a cause of action against that architect or building expert. Seeking someone's approval is materially different from inviting them to join into a legally binding contract.
17. As to the claim in tort, paragraph 3.2 of the Order of Justice states simply that the Minister "assumed responsibility for the conduct of the tender process" and therefore owed the plaintiffs a duty of care. However, the Order of Justice says nothing about what the Minister did (or did not do) beyond conduct that falls within the normal shareholder / company relationship. The Solicitor General argued that no facts and matters have been pleaded which could give rise to an assumption of responsibility and therefore a duty in tort as set out in Henderson-v-Merrett Syndicates [1995] 2 AC 145 at 178D & G and 179.
18. When received shortly before the hearing of the strike out application, the plaintiffs' skeleton argument - which was consistent with the oral submissions subsequently advanced at the hearing - bore little relation to the Order of Justice. Advocate James said that this was explained by the fact that his firm had only taken over conduct of the case some ten days before the strike out application and had not been responsible for drafting the Order of Justice.
19. The arguments put forward by Advocate James in support of the claims against the Minister can be summarised as follows.
20. In relation to the contractual claim, he accepted that the Minister had not signed the Heads of Terms nor was he named as a party. However, he submitted that the Minister was bound by the Heads of Terms on the basis that WEB had signed as his agent even though this was not stated on the face of the document. He based this assertion on the fact that the Minister retained overall political responsibility for the development of the Esplanade Quarter and that the Heads of Terms related to certain land of which WEB was not the owner; the Public was. He said that the Minister represented the Public. Because WEB did not own some of the land comprised in the Esplanade Quarter it could only have entered the Heads of Terms as agent for the Minister. He accepted that none of this was pleaded.
21. In relation to the claim in tort, the skeleton argument contended that the tort in question was not a breach of duty based on a special relationship (as pleaded in the Order of Justice) but the tort of procuring a breach of contract. Advocate James contended that it was the Minister who had instructed WEB to put forward the Revised Proposed Development Agreement, which was inconsistent with the July Heads of Terms. Indeed he pointed to the answer of WEB which asserted at para 47.3.8 that it was the Minister who required certain changes to be made to the Development Agreement, which changes were reflected in the Revised Proposed Development Agreement. Advocate James contended therefore that, if this amounted to a breach of the Heads of Terms, it was the Minister who had procured it.
22. In the light of my decision, I do not need to rehearse the Solicitor General's response to these two arguments put forward by Advocate James, save to say that he did not accept their validity.
23. I am quite satisfied, for the reasons put forward by the Solicitor General, that the Order of Justice in its present form does not disclose a reasonable cause of action. So far as the claim in breach of contract is concerned, there is nothing in the Order of Justice to explain how or why the Minister is a party to the contract. The only matter relied upon is the fact that the Heads of Terms were expressly made subject to his agreement but I accept entirely the Solicitor General's argument that this of itself cannot possibly mean that the Minister thereby became a party to the contract and bound by all its terms. On the pleading as it stands, the claim in breach of contract is doomed to failure. Of course Advocate James' arguments were based on a completely different contention, namely that WEB had signed the July Heads of Terms as agent for the Minister as an undisclosed principal.
24. Similarly, in relation to the claim in tort, nothing is pleaded which sets out any fact or matter which is sufficient to give rise to a duty of care on the basis of a special relationship. There is simply a bland assertion at para 1.6 that, together with WEB, the Minister was responsible for the proper conduct of the tender process with an assertion that, as a result, the Minister became subject to a duty to conduct that process in a fair transparent and consistent way. No proper grounds are given as to why the Minister is said to have become subject to such a duty; and of course Advocate James relied on a completely different tort in his oral submissions.
25. Finally, as to the claim in unjust enrichment, the Order of Justice refers only to expenditure by the plaintiffs being with the knowledge of and for the benefit of the Minister. No fact or matter is pleaded which explains properly the basis for a claim in unjust enrichment.
26. It follows that, were the matter to remain there, I would have no hesitation in striking out the claims against the Minister on the basis that the Order of Justice discloses no reasonable cause of action.
27. However, the authorities are clear that the Court should not strike out a pleading if it is capable of being rescued by amendment; see Supreme Court Practice (1999 edition) at 18/19/2. I have to say that I am by no means clear that the Order of Justice can be rescued on the basis of the arguments put forward by Advocate James but it seems to me wrong that it should be struck out completely without his having the opportunity of reducing those parts to writing in the form of an amended pleading and supporting his application to amend by a fully argued case, upon which the Solicitor General would have the opportunity of commenting. The way in which this current strike out application proceeded meant that both the arguments put forward by Advocate James and the response of the Solicitor General came very much at the last moment and were not fully developed.
28. Accordingly, I adjourned the application on the basis that the plaintiffs should within one month file a summons applying to amend the Order of Justice in the form of a draft which would have to be attached to the summons. That draft must set out fully and clearly the exact nature of the claims now relied upon, whether in contract, tort or unjust enrichment. If the Solicitor General were to be convinced that this amended pleading disclosed a reasonable cause of action, the matter could proceed by agreement. If the Solicitor General were to remain of the view that the proposed amended pleading still disclosed no reasonable cause of action, I would hear argument on that summons and decide whether to give leave to amend or not. Leave to amend would be given if I was satisfied that there was an arguable cause of action and would be refused if I concluded that there was not.
29. I also ordered that the plaintiffs should pay the costs on the standard basis of and incidental to this summons to date, on the basis that the Order of Justice as currently drafted does not disclose a reasonable cause of action and the costs of this summons were therefore wholly the plaintiffs' responsibility.
Authorities
Royal Court Rules.
Henderson-v-Merrett Syndicates [1995] 2 AC 145.
Supreme Court Practice (1999 edition).