Crooks v Newdigate Properties Ltd & Ors

This is an appeal, brought with permission granted by Lawrence Collins LJ, against an order dated 29 September 2008 of HH Judge David Cooke, sitting as a judge of the Chancery Division in the Birmingham District Registry. By that order, he made a declaration that the liability of Andrew Thomas Grogan, the third defendant in the action and the respondent to this appeal, under a judgment in default entered against him on 11 September 2003 in the sum of £253,334.25 was discharged in full by the payment to the claimant of a total sum of £293,000 by the other defendants pursuant to the terms of a consent order dated 27 April 2005. Accordingly, the judgment could not be enforced by Kevin Patrick Mason, the fourth defendant in the action and the appellant on this appeal, as assignee of the judgment.

The claim in the action brought by Andrew John Crooks arose out of an agreement whereby the first defendant (UPUK) agreed to pay a finders’ fee of £250,000 to Mr Crooks, subject to the acquisition and sale by UPUK of the relevant property found by Mr Crooks. UPUK acquired an option to purchase the property and then assigned it to the second defendant The Next Big Thing Limited (NBT). Mr Crooks alleged that by assigning the option UPUK acted in breach of contract and with a view to defeating his entitlement to the finders’ fee. Mr Grogan, Mr Mason and the fifth defendant controlled UPUK and NBT and Mr Crooks alleged that they procured the assignment.

In the particulars of claim, Mr Crooks alleged that NBT and the individual defendants (i) procured UPUK to act in breach of its obligations to him, (ii) interfered in the relationship between him and UPUK, and (iii) conspired with UPUK to act in breach of its obligations to him and in order to injure his interests, and had therefore committed the torts of inducing breach of contract, interference with business and conspiracy to injure by the use of unlawful means. Mr Crooks claimed that each of the defendants were liable in damages quantified at £250,000.

All the claims against NBT and the individuals were for the same loss and were based on the same causes of action. There were additional separate claims against UPUK but where a claim was made against all five defendants it was again for the same loss and based on the same cause of action.

Mr Grogan took no steps to defend the claim. In a witness statement dated 7 February 2008, he states that this was because of his financial circumstances at the time of the claim and his belief that NBT was liable to Mr Crooks for the sums claimed. A default judgment for £253,304.25, including interest, and for £30 costs, was entered against him on 11 September 2003. There were discussions between him and Mr Crooks’ solicitors who agreed to give him seven days’ notice of any steps to enforce the judgment.

The action against the other defendants was fixed for trial in early May 2005. On 27 April 2005 the parties other than Mr Grogan agreed the terms of an order staying the action pending implementation of the scheduled terms (the consent order). Paragraphs 1 to 3 of the schedule provided:

“1.

The First, Second, Fourth and Fifth Defendants do pay the Claimant the sum of £293,000 in full and [final] settlement of the Claimants claim against the First, Second, Fourth and Fifth Defendants to include any claim for interest and costs;

2.

The sum of £293,000 to be paid in instalments as follows:-

i.

£150,000 within 24 hours of the parties agreeing this order;

ii.

£143,000 by no later than 4pm on Wednesday 27^th July 2005.

3.

Upon the Claimant receiving the total settlement sum, he is to assign his judgment against the Third Defendant to the Second Defendant, to be recorded in a Deed of Assignment between the Claimant and the Second Defendant, and to be completed on payment of the sum at paragraph 2ii above.”

It is agreed that paragraph 1 should be read with the addition of the word “final” as shown. A recital to the order stated “Upon the Court noting that there is a judgment in this case against the Third Defendant, and as such, this order does not apply to him”.

By a deed dated 26 July 2005, Mr Crooks assigned to NBT the benefit of the judgment debt of £253,304.25 against Mr Grogan, interest thereon and the order for costs of £30. It was stated to be in consideration for the payment of £293,000 by the defendants other than Mr Grogan, of which £150,000 had been paid and the balance of £143,000 was payable on 27 July 2005. The further sum of £143,000 was duly paid to Mr Crooks on 27 July 2005. By a deed dated 24 March 2006, NBT assigned the benefit of the judgment debt, interest and the costs order to Mr Mason. No notice of either assignment was given to Mr Grogan until a letter dated 21 January 2008 from Mr Mason’s solicitors. Mr Grogan acted promptly to take steps to dispute the validity of the assignments or the right of Mr Mason to enforce the judgment debt, interest and costs.

Mr Grogan contends that his liability under the judgment has been discharged by the total payment of £293,000 under the consent order. The remaining defendants could have sought contribution from him under the Civil Liability (Contribution) Act 1978 but failed to do so within the period of two years allowed under s.10 of the Limitation Act 1980.

On 7 February 2008 Mr Grogan issued the application on which the order now under appeal was made. He sought in the alternative an order setting aside the default judgment against him. The judge agreed with Mr Grogan’s suggestion that the application to set aside the judgment should be adjourned pending determination of the first issue.

In paragraphs 14 and 15 of his judgment, the judge summarised the issue before him as being whether the payments made under the consent order had the effect of satisfying the judgment debt against Mr Grogan. If so, Mr Grogan contended that there was nothing left to enforce against him. In contrast, Mr Mason contended that, as assignee, he was entitled to receive full payment without giving any credit for the amounts which had been paid.

Counsel for Mr Grogan accepted that the terms of the consent order did not amount to an agreement to release Mr Grogan from the judgment against him and that the inclusion of paragraph 3 providing for the assignment reserved the benefit (if any) of the judgment. He submitted that credit had to be given for the payments made under the consent order and that in total they extinguished Mr Grogan’s liability on the judgment. The judge noted that it appeared to be accepted that the payments in fact discharged the full amount of Mr Crook’s claim in the action, and that certainly he had heard no evidence or arguments to the contrary. Before us it was accepted for Mr Mason that the appeal must proceed on the basis that the payments under the consent order represented a full recovery for Mr Crooks.

As recorded in paragraph 20 of the judgment, the submission of counsel for Mr Mason was that the payments made under the consent order were not in satisfaction of the claim against the defendants, but were payments made for the benefit of the assignment of the judgment debt. The judgment debt therefore survived intact.

This was a question of construction of the consent order. The judge’s analysis and conclusions are set out in paragraphs 25 and 26 of his judgment:

“25.

First of all, it seems to me to be clear from the terms of paragraph 1, (which is the essential operating provision of that schedule) that the payment that is made is paid in full and final settlement of the claimant’s claim against the first, second, fourth and fifth defendants. It seems to me that that language is completely inconsistent with the terms agreed between the parties being an agreement for sale and assignment of the claim. If the agreement had, in fact, been for assignment without satisfaction of the claim, it seems to me that, firstly, clause 1 would have been written in considerably different terms. Secondly, there would have been the need for some additional provision in respect of the position of the first, fourth, and fifth defendants because the assignment that was provided for here is an assignment to one of those defendants only, although the payment was apparently coming from all four of them in proportions that are not set out in the schedule. Also, on the face of it, if the claim were not satisfied by these payments, the first, fourth, and fifth defendants would have been at risk of being sued for the original claim, as now assigned, by the second defendant.

26.

My conclusion about the terms of clause 1 is not affected by the fact that clause 3 subsequently provides for an assignment of the judgment debt against the third defendant to the second defendant. It seems to me that that is a secondary provision and not the primary provision of this document. Nor is that conclusion affected by the language of the assignment document that was eventually entered into. Mr Pryor did not, in terms, rely upon that. It seems to me that that document is a subsequent document. It is not entered into between the same parties and it cannot, itself, have the effect of changing the terms which are to be construed as being agreed in this schedule. ”

In paragraph 27 the judge gave his view of the likely reason for the provision for the assignment of the judgment against Mr Grogan contained in paragraph 3 of the schedule to the consent order:

“It would appear that the most likely explanation of the existence of clause 3 is that it represented an attempt to preserve a right of recovery for the four defendants who were making payment against the third defendant without the limitations inherent in pursuing a contribution claim. A contribution claim would plainly, in principle, have been open to them, but they may have thought by adopting this mechanism, they would put themselves in a better position as against Mr Grogan than if they had simply paid and pursued him for a right of contribution. If that was their intention, in my judgment, the mechanism they chose is ineffective. The fact that it is ineffective is not, in my view, a reason to overturn the plain and obvious construction of clause 1, notwithstanding Mr Pryor’s submission that, essentially, I should find that the mere fact that an assignment had been provided for would mean that it was a nonsense to construe the payment that was being made under this agreement as being a payment in satisfaction of the very obligation that was intended to be assigned.”

On this appeal, Mr Pryor, counsel for Mr Mason, accepts that the judge correctly stated the issue before him in paragraphs 14 and 15 of his judgment. But he submits that there is a fundamental contradiction in the judgment in that, on the one hand, the judge correctly records that the consent order does not have the effect of releasing Mr Grogan’s liability under the judgment because of the terms of paragraph 3 of the schedule to the order but, on the other hand, the judge seems in paragraphs 25 and 26 to accept a contrary construction and finds that the effect of payment of the sums due under the order discharged Mr Grogan from liability under the judgment.

Mr Morgan, counsel for Mr Grogan, does not dispute on this appeal, any more than he did before the judge, that the agreement in paragraph 3 to assign the judgment is consistent only with, and in effect amounts expressly to, a reservation of rights (such as they may be) under the judgment against Mr Grogan. As such it is effective to prevent paragraph 1 of the schedule to the order operating as a release of such rights, consistently with such authorities as Watts v Aldington (Times 16.12.93, CA), Johnson v Davies [1999] Ch 117, Jameson v CEGB [2000] AC 455 and Heaton v AXA Equity and Law Life Assurance Society plc [2002] 2 AC 329.

The submission of Mr Morgan, and the ground for the judge’s decision, is that although there was no release of the judgment by operation of law as a result of paragraph 1 of the schedule, the payments in fact at least equalled the full amount of Mr Crooks’ claim and therefore extinguished Mr Grogan’s liability under the judgment. Mr Crooks could not have sought enforcement of the judgment without giving credit for the sums paid by the other defendants and Mr Mason, as assignee of the judgment, was in no better position.

In my judgment, the judge was correct in his approach and his conclusion. The claims against all the defendants, except some claims specific to UPUK, were the same, for the most part being in conspiracy and other economic torts. Mr Pryor correctly observed their liability was joint. Joint liability arises where, as here, the allegedly wrongful acts are in furtherance of a common design. Even in the case of a joint liability, an express or implied reservation of rights in a compromise with only some of those liable will prevent the release of the others: Watts v Aldington, Johnson v Davies. In Watts v Aldington Lord Aldington had obtained judgment for damages of £1.5m for defamation against Mr Watts and Count Tolstoy. An agreement whereby Lord Aldington accepted £10,000 in full and final settlement of the claim against Mr Watts was held to contain an implied reservation of Lord Aldington’s rights in respect of the judgment against Count Tolstoy.

Importantly for present purposes, it was accepted without argument that Lord Aldington would have to give credit for the sum of £10,000 received from Mr Watts. This rests on the basic principle that a claimant cannot in total recover more than his loss, expressed as follows by Lord Nicholls of Birkenhead in Tang Man Sit v Capacious Investments Ltd [1996] AC 514 (PC) at 522 and cited by Lord Hope of Craighead in Jameson v CEGB [2000] 1 AC 455:

“A third limitation is that a plaintiff cannot recover in the aggregate from one or more defendants an amount in excess of his loss. Part satisfaction of a judgment against one person does not operate as a bar to the plaintiff thereafter bringing an action against another who is also liable, but it does operate to reduce the amount recoverable in the second action. However, once a plaintiff has fully recouped his loss, of necessity he cannot thereafter pursue any other remedy he might have and which he might have pursued earlier. Having recouped the whole of his loss, any further proceedings would lack a subject matter. The principle of full satisfaction prevents double recovery.”

Mr Pryor accepts that Mr Crooks would have to give credit for the sums paid under the consent order if he were seeking to enforce the judgment against Mr Grogan. There would otherwise be double recovery by Mr Crooks. He submits, however, that because Mr Mason has not received any payment in respect of the judgment there is no bar to enforcement by him because there will be no double recovery. As assignee, Mr Mason is not required to give credit for sums received by Mr Crooks in or toward satisfaction of the joint liability. Even though the payments under paragraph 1 represented a full recovery for Mr Crooks, Mr Pryor submits that the court must give effect to paragraph 3 of the schedule by construing it as a reservation of Mr Crooks’ full rights against Mr Grogan for the purposes of giving effect to the assignment of the rights to NBT. He submits that otherwise paragraph 3 achieves nothing, and the court should strive to give effect to all parts of a contract.

In my judgment, the appellant’s submissions founder on basic principles. First, the provision in paragraph 3 of the schedule for assignment of the judgment debt against Mr Grogan was expressed to be conditional “upon the Claimant receiving the total settlement sum”. By the time agreed for the assignment, the debt would already be extinguished by the payments under paragraph 1. There was, as Hooper LJ pointed out in argument, nothing for Mr Crooks to assign. In fact, the assignment was executed on 26 July 2005, immediately before the final payment, but nothing can turn on this, as it is not suggested that there was any variation in the agreed terms and the assignment must in effect have been held in escrow pending satisfaction of the condition.

Secondly, even if there were a debt to assign, the assignment of a debt does not change the character of the debt. Mr Grogan remained liable after the assignment as he was before, under a judgment in respect of a joint liability in tort. Payments by the other joint tortfeasors necessarily reduced or extinguished Mr Grogan’s liability. The assignee can in this respect be in no better position than the assignor. An assignment of a debt, including a judgment debt, is subject to equities, including the right of the debtor to raise defences to enforcement arising out of the subject matter of the assignment. This includes the right to require credit to be given for sums paid in or towards satisfaction of the underlying liability. This would be so even if the payments were made not only after the assignment but after notice of the assignment had been given to the debtor. In fact, however, notice was not given to Mr Grogan until January 2008. The creditor cannot deprive the debtor of this right by an agreement with the assignee to which the debtor is not a party.

In seeking to construe the consent order to avoid these obstacles, Mr Pryor put the case quite generally in this court. One way or another, the court should construe it to prevent either or both of the above principles from applying to the judgment debt, so as to give substance to the agreement for assignment. In my view, this was to attempt the impossible. The parties to the consent order could not effectively contract to exclude these principles.

Before the judge, Mr Pryor’s argument was more targeted. As recorded in the judgment, he submitted that the payments under paragraph 1 should be construed as consideration for the assignment of the judgment debt under paragraph 3. This construction is inconsistent with the express terms of the schedule and, for the reasons given by the judge, is not sustainable. Even if it had been drafted in those terms, I doubt whether it would be effective to sidestep the operation of the principles to which I have referred or the limitations inherent in pursuing a claim under the Civil Liability (Contribution) Act 1978 to which the judge referred in paragraph 27 of his judgment. Those limitations are, first, the two year limitation period and, secondly, the discretion vested in the court to decide whether to order contribution and, if so, its extent.

For these reasons, I would dismiss the appeal.

I agree.

I also agree.