Lewis v Yeeles

This appeal is from an order made on 8 June 2009 by Mr Bernard Livesey QC (sitting as a Deputy Judge of the Chancery Division) upholding a claim for procuring a breach of contract: [2009] EWHC 1259 Ch. Miss Jennifer Yeeles, a beauty therapist without any business experience, is the claimant. Mr Mayhew Lewis is a defendant. The other defendants are Mr Simon Benton, who is the alleged contract-breaker and has some experience of buying properties on buy-to-let mortgages, and Strand Corporation Limited (Strand), a company of which the two personal defendants are directors and shareholders. Judgment was given against the personal defendants jointly and severally in the sum of £73,784, together with interest, making a total of £90,492.16. They were ordered to pay 2/3rds of the claimant’s costs and to make an interim payment on account of costs.

The litigation is an unplanned consequence of two ventures for the development by the parties of properties in the Sevenoaks area. In February 2003 Miss Yeeles and Mr Benton, without capital, without specialist knowledge of, or advice on, property development and without any financial projections or costings, orally agreed to enter into a profit-sharing venture for the purchase and development of a property. Mr Benton would fund the purchase costs not met by mortgage. Miss Yeeles would fund the development costs. Her partner, Mr Clive Taylor, is a builder by trade.

The property on which they finally settled as suitable for development was at 74 Seal Road, Sevenoaks (Seal Road). The purchase price was £175,000. Miss Yeeles provided the deposit of £42,500, as Mr Benton was unable to raise it. £32,500 of that sum was contributed by GT Building and Contractors Limited (GTBC), a construction firm for which Mr Taylor worked. The deputy judge found that Miss Yeeles acted as nominee for GTBC. The remaining £10,000 of the deposit was provided by Miss Anita Laban from her personal funds. She is Mr Taylor’s sister, an accountant and sole director of GTBC. Miss Yeeles is Company Secretary of GTBC. Neither Miss Yeeles nor Miss Laban had even an elementary understanding of the building and construction business.

On 30 April 2003 contracts were exchanged for the purchase of Seal Road. Mr Michael Leach, a solicitor with the firm of Copley Clarke & Bennett, acted for both Miss Yeeles and Mr Benton in the joint purchase. The balance of the purchase price (£132,500) was obtained by Mr Benton by way of a mortgage advance from the Bank of Scotland. Completion took place on 9 May 2003. At the insistence of the mortgagee, Seal Road was transferred into the sole name of Mr Benton. Miss Yeeles, who was not made aware of that fact at the time, says that she had a beneficial interest and that Mr Benton held Seal Road on trust for himself and for her.

GTBC spent £35,629.59 on an “at cost” basis in developing and converting Seal Road into two flats. From 13 January 2004 the ground floor flat was let on an assured shorthold tenancy at £475 per month. On 14 May 2004 the upper floor flat was sold on a 999 year lease for £146,000. The mortgage was discharged. Mr Benton received the net proceeds of £1,482.38.

Between January and April 2004 Miss Yeeles and Mr Benton agreed upon a variation of their original agreement so as to provide that the ground floor flat would be transferred to her in partial payment of her share in the equity of Seal Road. Any balance due from her would be paid by her in satisfaction of the agreement to share profits equally. However, Mr Benton did not keep to his agreement to transfer the ground floor flat into her name. By letters dated 11 and 14 May 2004 he instructed his solicitors, Copley Clark & Bennett, to transfer the freehold title of the ground floor flat to Strand, but that transfer was not made either. Instead, the ground floor flat was ultimately sold on 7 March 2005 on a 999 year lease for £97,000. Strand received £69,972.97 and the balance of £22,725.44 went to Mr Benton personally. None of the proceeds went to Miss Yeeles.

Why were the proceeds of the ground floor flat at Seal Road paid to Strand? The answer lies in the circumstances that link Seal Road to the development of another property in the Sevenoaks area by GTBC, Mr Benton, and Mr Mayhew Lewis, who had worked with Mr Benton in the music business. Strand was the corporate vehicle formed in March 2003 and subsequently used by Mr Benton and Mr Mayhew Lewis for the purchase and redevelopment of Broadview House, a derelict property in Hadlow (Broadview). Broadview was purchased in late August 2003. The development was expected to yield a substantial profit. The redevelopment works were carried out by GTBC, which was paid a total of £112,650. Then they fell out. Strand terminated GTBC’s contract because of significant defects in the building work. The work done was valued at £78,914.22. The costs of rectification of the defects amounted to £58,000. Strand took the view that it had overpaid GTBC by £26,336 and that GTBC was liable to Strand in the total sum of £69,586. Mr Taylor disputed overpayment and he denied liability for the cost of remedial works. GTBC were instructed to leave the site. The dispute between Strand and GTBC was unresolved. New building contractors were to be appointed.

Miss Yeeles says that Mr Mayhew Lewis procured Mr Benton to break his contract with her. He did so by persuading Mr Benton to sell the ground floor flat at Seal Road and then to pass the proceeds, in which she has a beneficial interest, to Strand. Mr Mayhew Lewis, she says, also dishonestly assisted in a breach of trust when Mr Benton directed the transfer of Seal Road to Strand.

The deputy judge found that Mr Benton intended to break his contract relating to the ground floor flat. During the first week of May 2004 he spoke to Mr Taylor and told him that, if he did not repay the money overpaid by Strand in connection with Broadview, they would withhold the transfer of the ground floor flat at Seal Road, deduct what was due and pay over only the balance. On 7 May Mr Benton made contact with Mr Brahams of Messrs Winemans, who were Mr Mayhew Lewis’s personal solicitors. Mr Benton then wrote on 11 May to Mr Leach of Copley, Clarke & Bennett on Strand notepaper giving instructions that the deeds of the ground floor flat were to be registered in the name of Strand and held for collection by Mr Mayhew Lewis. By letter of 14 May Mr Benton instructed Mr Leach to send the paperwork to Winemans and informed him that Mr Mayhew Lewis was to receive full power of attorney in relation to any dealings or transactions occurring while Mr Benton was away in China from 15 May 2004.

The deputy judge quoted from a letter written by Mr Mayhew Lewis on Strand headed notepaper to GTBC on 26 May 2004, the day of Mr Benton’s return from China. The letter, to which Mr Benton contributed some of the wording, said

“ …it will come as no surprise that I have decided not to sell you the ground floor flat at 74 Seal Road and to recoup our losses and costs of rectifying the roof, plastering, windows and other items pertaining to Broadview House from the £42,000 deposit we hold and return you the balance…”

Mr Mayhew Lewis denies that he procured a breach of contract by Mr Benton. He says that he was given to understand by Mr Benton that the Seal Road deal was with GTBC. He had no knowledge of any rights or interests of Miss Yeeles over Seal Road, or of any contract between her and Mr Benton. He also says that, as regards the breach of contract, Mr Benton had made up his mind on his own without being persuaded to do so and that the alleged act of procurement occurred after the breach of contract by Mr Benton, the intended date of the transfer of the ground floor flat being 14 May 2004. The letter of 26 May 2004 could not have been an act of procurement by him, if Mr Benton had decided to break and had in fact broken his contract with Miss Yeeles before that date.

The deputy judge held that Mr Mayhew Lewis was liable in damages to Miss Yeeles. He rejected the defence of Mr Mayhew Lewis that he had not procured a breach, because Mr Benton had made up his own mind to break his contract with Miss Yeeles before the alleged procurement. The deputy judge found that it was probable that Mr Mayhew Lewis caused Mr Benton to decide to refuse to allow the transfer of the ground floor flat to Mr Taylor/GTBC/ Ms Yeeles, because of the strength of the case that he believed Strand had in connection with the Broadview contract with GTBC. He persuaded Mr Benton to take a tougher line. That involved abandoning his solicitor, Mr Leach, and instructing Mr Mayhew Lewis’s personal solicitor, Mr Brahams, in the first week of May.

The deputy judge also found that Mr Mayhew Lewis knew that there was a contract for the transfer of the ground floor flat. It did not matter, he said, whether the particular contract happened to be with GTBC rather than with Miss Yeeles. It was unrealistic to think that Mr Benton had not told Mr Mayhew Lewis that the deposit had been contributed for the original purchase of Seal Road as part of a contractual joint venture.

The following paragraphs in the judgment summarise the reasons for the failure of Mr Mayhew Lewis’s defences :-

“76.

…I think it probable that Mr Mayhew Lewis did cause Mr Benton to decide to refuse to allow the transfer of the ground floor flat to Mr Taylor/GTBC/Miss Yeeles. It is probable that he did this by persuading Mr Benton that he needed to take a tougher line with Mr Taylor: one way of doing this was to abandon Mr Leach and accept advice from Winemans. The decision to change solicitors had obviously been made just shortly before the memorandum evidencing contact with those solicitors on 7^th May 2004: it was at the same time that Mr Benton orally threatened Mr Taylor that Strand would withhold the ‘deposit’ of £42,500 if he did not meet their demands.

77.

In my judgment it is unrealistic to think that Mr Benton had not told Mr Mayhew Lewis the basic fact, that the ‘deposit’ had been contributed for the original purchase of Seal Road as part of a contractual joint venture. I do not accept the account put to me that Mr Mayhew Lewis thought that Mr Taylor was in no different position than that of a person who had put a deposit on a property but had failed to complete and whose deposit was forfeit. This was no ‘deposit’ figure; it was almost half the value of the lower flat; there was no contract requiring completion within a particular time and providing for the forfeit if completion was not made by the due date; the property was in any event tenanted and it was unreasonable to expect the full purchase price to be produced at a time when vacant possession could not be given. And apart from all of this, there is no evidence that Miss Yeeles was being pushed to complete and the evidence shows that she did indeed manage to obtain an offer from the Birmingham Midshires Building Society which would have enabled her to buy out the interest of Mr Benton, with money to spare to pay off in cash a large proportion of the money she had borrowed from GTBC. When Mr Benton saw Mr Brahams on 27^th May 2004 he came with the correct account, that GTBC had contributed £42,000 to the original purchase as part of a joint venture and I do not see any reason to suggest that this was not the account he would have given to Mr Mayhew Lewis. Nor do I think they could have discussed the future without this coming onto the conversation. In my judgment it matters not that the particular contract governing the venture happened to be with GTBC (as I have found) rather than Miss Yeeles (as was pleaded in the Particulars of Claim): I am satisfied that Mr Mayhew Lewis knew that there was a contract and caused Mr Benton to take the step of breaking it. The reason he did so was because of the strength of the case he believed Strand had in respect of the Broadview contract.”

The main grounds of appeal are that the deputy judge wrongly found that a breach of contract was procured by Mr Mayhew Lewis after Mr Benton had already decided to breach his contract; wrongly found that the acts of Mr Mayhew Lewis amounted to, or could constitute, procurement; failed to consider the capacity in which he acted and wrongly held that he was personally liable for acts done in his capacity as a director of Strand; and wrongly exercised his discretion on costs. As permission to appeal was not given for the last ground, I say no more about it.

There is no serious disagreement about the relevant legal principles. They are well established in cases of the highest authority. The question is whether the judge correctly applied the law to the facts. I will deal with the submissions under 4 headings.

This ground of appeal is that the alleged procurement occurred after Mr Benton broke his contract for the transfer the ground floor flat to Miss Yeeles. It is, of course, the case that Mr Mayhew Lewis could only be liable for procuring a breach, if he had committed some act before the breach of contract by Mr Benton. Liability for procuring a breach of contract only arises if there is a causal connection with the breach.

However, this ground fails on the facts found by the deputy judge that Mr Mayhew Lewis caused Mr Benton to decide to refuse to transfer the ground floor flat and did so by acts dating back to the first week in May. The letter of 26 May 2004 was not the first or only act of Mr Mayhew Lewis evidencing his involvement in Mr Benton’s decision not to transfer the ground floor flat to Miss Yeeles. His involvement in the breach began before that decision and it continued down to and beyond Mr Benton’s breach of contract. In the first week of May 2004 he persuaded Mr Benton to take a tougher line by abandoning Mr Leach, the solicitor who had acted for Mr Benton and Miss Yeeles in connection with the purchase of Seal Road, in favour of his own solicitor, Mr Brahams of Messrs Wineman with whom Mr Benton first made contact on 7 May 2004.

At that time Mr Benton was threatening Mr Taylor that Strand would withhold the “deposit” of £42,000 if he did not meet Strand’s demands. Mr Mayhew Lewis, as a director and shareholder in Strand, clearly had a financial interest in Mr Benton taking a tougher line to secure a favourable resolution of the on-going dispute between Strand and GTBC/Mr Taylor about overpayments and defective works relating to Broadview. There are no grounds for questioning the deputy judge’s finding that Mr Mayhew Lewis caused Mr Benton to break his contract with Miss Yeeles and to pass the benefit of the ground floor flat to Strand.

The second ground of appeal runs into the same difficulty as the first. It is submitted that, at the time of the procurement, Mr Mayhew Lewis had no knowledge of the contract between Mr Benton and Miss Yeeles. He was a stranger to the contract with no knowledge of who the parties to it were. He could only be liable for procuring a breach of contract, if he knew of the contract. He and Mr Benton gave evidence at trial that the contract was with GTBC. He cannot be liable, he says, for procuring a breach of contract unless there was “intentional causative participation”: OBG Ltd. V. Allan [2008] 1 AC 1 at pp 62-63 per Lord Nicholls. There could be no intentional participation in the breach of a contract with Miss Yeeles if he had no knowledge of her contract.

The proposition of law is correct, but, unfortunately for Mr Mayhew Lewis, it does not fit the facts. The deputy judge found that Mr Mayhew Lewis knew, probably because he was told so by Mr Benton, that there was a contract and that the “deposit” was contributed to the original purchase of Seal Road as part of a contractual joint venture relating to that property, which was no ordinary purchase of it. As a matter of law that degree of knowledge was sufficient to render Mr Mayhew Lewis liable for procuring a breach: it is not necessary in law to show that he knew exactly all the terms of the contract or the identity of the contracting parties, such as whether the Seal Road venture was with GTBC rather than with Miss Yeeles.

The next ground of appeal is that the actions identified by the judge did not amount to acts of procurement of breach of contract. They amounted to no more than advice sought by Mr Benton after he had already made up his mind to break his contract with Miss Yeeles. Mere advice on the contractual facts is not procurement or persuasion to break the contract: DC Thomson & Co Ltd v. Deakin [1952] Ch 646 at 686 per Evershed MR.

It is submitted that Mr Benton went to Winemans on the advice of Mr Mayhew Lewis in order to seek advice from that firm, the breach of contract having already taken place when Mr Benton decided to break the contract by instructing his own solicitor, Mr Leach, to transfer Seal Road to Strand and away from Miss Yeeles. That breach would have occurred in any event. It was not bought about by the actions of Mr Mayhew Lewis. The emphasis is on the tort as a form of secondary, accessory liability. Mr Mayhew Lewis was not to blame for arranging contact with, and advice from, his solicitors.

This ground takes Mr Mayhew Lewis nowhere on the facts of the case. It was found as a fact that he “did cause Mr Benton to decide to refuse to allow the transfer of the ground floor flat” and that he did this “by persuading Mr Benton that he needed to take a tougher line with Mr Taylor...” Mr Mayhew Lewis went beyond the allowable area of arranging for advice to be given about the contract and entered the prohibited pastures of persuasion and procurement.

The final ground of appeal is that the deputy judge was wrong to find Mr Mayhew Lewis personally liable, as he was at all times acting in his capacity as a director of Strand, not in a personal capacity. He wrote on its notepaper to Mr Taylor about Broadview and about Strand’s entitlement to recover its losses on Broadview from GTBC by retaining the ground floor flat at Seal Road. That property was to be registered in the name of Strand. The proceeds of it were received by Strand. There had been no assumption of personal responsibility by Mr Mayhew Lewis so as to create a special relationship between him personally and Miss Yeeles: Williams v. Natural Life Health Foods Limited [1998] 1 WLR 830 at 835-836 per Lord Steyn (a case on negligent mis-statement in which the issue was whether, applying an objective test, a director of a one man company had made a personal assumption of responsibility upon which there was reliance).

This point was not dealt with in the judgment, because, though pleaded, it was not argued at trial. I agree with Mr Robin Howard, who appears for Miss Yeeles, that it would have made no difference to the outcome if it had been argued. Procuring a breach of contract is a tort. In general, an individual tortfeasor is personally liable for his own torts, even if he is a director of a limited liability company, which may also be liable for the tort. The fact that a director acts as agent for his company does not give him a defence to personal liability for torts committed by him.

All the grounds of appeal fly in the face of the unappealed findings of fact made by the deputy judge in his excellent judgment. I would dismiss the appeal.

I agree.

I also agree.