Cook v Consolidated Finance Ltd

The issues on this appeal are (a) whether the judge who heard this matter gave sufficient reasons and, if so, (b) whether he had good reasons for deciding that the appellant, Mr Phillip Cook, owed the respondent Consolidated Finance Limited ("CFL"), the sum of £146,798.90.

The relevant facts are as follows: on 15 November 2007 a Bankruptcy Order was made against Mr Cook. He formally instructed Bankruptcy Protection Fund Ltd ("BPF"), and their lawyers Leeds Lloyd Whitley ("LLW") for assistance in sorting out his finances and annulling the Bankruptcy Order.

BPF's terms and conditions stated that that assistance would be from a third party which in the event turned out to be CFL, a close affiliate but independent company from BPF. The assistance involved a facility £1.675 million with a repayment deadline of 90 days, together with a charge over a property owned by Mr Cook, 1 and 1A Holland Park Court, Holland Park Garden, London W14. It was agreed that the facility would be recorded in a Sterling Facility Letter ("SFL") and the charge in a third party legal charge which were executed on the basis that they would only be dated and take effect once the Bankruptcy Order was annulled. Consequent on these arrangements Mr Cook’s creditors were paid off and the Bankruptcy Order was annulled on 16 May 2008 following which the SFL and the legal charge were dated and took effect.

BPF’s terms and conditions, upon which Mr Cook entered into these agreements, were contained in a document with ten paragraphs, which included the following:

“5.

BPF may refer to a mortgage broker who will use their best endeavours to arrange through their agents a re-mortgage of your property for such an amount as is required to pay off the full indebtedness to the third party funder, [CFL] together with the amount outstanding on any charge on your property and costs incurred herewith.

"7.

BPF will charge a maximum fee of £5,000 plus VAT and disbursements provided you cooperate fully. We reserve the right to amend this charge if the matter becomes unduly protracted as a result of your failure to cooperate.”

The SFL was addressed to Mr Cook and the first paragraph was in these terms:

“We are pleased to confirm that Consolidated Finance Limited (the "Lender") has agreed to make available a term loan of £1.675,000.00 (One million, six hundred and seventy five thousand pounds sterling) (the "Loan" which expression where the context so admits, means the amount thereof for the time being outstanding) ..."

The only other provision of the SFL to which it is necessary to refer is clause 7 which says this:

“Subject to clause 7.4, interest on the loan will be charged at the rate of 2.00% per month (or part thereof). ….”

The charge was duly registered at the Land Registry on 26 June 2008. The 90 days having expired without due payment, CFL, on 15 August 2008, demanded repayment of what they said was the sum then due from Mr Cook. That sum was £75,102.33. It included the costs of the legal proceedings, which were some £17,000 (the annulment proceedings) plus a fee for BPF of £15,000.

There were then several e-mail exchanges over the period June to August, when discussion of the amount owing was not raised: Mr Cook did not challenge the figures put forward by CFL but contended that he was seeking to sell assets to repay. He did not repay, and accordingly SFL began proceedings in the Wandsworth County Court on 29September 2008 for a possession order in respect of the property and payment of the monies they said were outstanding. This led to a full scale hearing before Recorder Widdup, which Mr Cook gave evidence on his own behalf and Mr Michael Seward and the general manager of CFL gave evidence on CFL’s behalf.

In his judgment the recorder accepted that there were four points at issue as put forward by Mr Radley Gardner, who appeared on behalf of CFL as he does today, and those issues were identified in paragraph 13 of his judgment:

The Recorder then went onto consider the oral evidence given to him by the parties, and in paragraphs 20 and 21 of his judgment he said this:

I was left with the distrinct impression when hearing his evidence, and I find, that he is looking for some pretext for defending these proceedings and putting off the evil day when he must discharge all or part of this loan. In contract, I find that Mr Seward gave his evidence with some care and was not unwilling to say when he was unsure of anything. In contract to Mr Seward, I find that the defendant's evidence wholly lacked credibility. I can attach no credibility to a man who is, so far as I am aware, a successful interntional businessman in the financial world who claims to be unaware of the details of these transactions when he was advised initially by specialist counsel dealing in bankruptcy work and by solicitors who were then representing him and when he had LLW appointed on his behalf. I also note that the contemporaneous documents in the shape of the mortgage information sheet show that these matters were explained to him. I find that his credibility is also damaged by the contrast between his attempts to defeat the claimant's claim now and his past acknowledgements of the debt made in the summer of 2008 in the emails to which I have already referred. "

In other words the judge accepted Mr Seward as a clear and honest witness, and did not find Mr Cook’s evidence convincing.

Having identified the issues, set out the evidence, and made his findings about the witnesses, the Recorder then went on to decide the four issues which called for consideration according to his judgment and concluded in paragraph 34 in these terms:

“I find, therefore, that the claimants did obtain a valid charge over the defendant’s property in May 2008 and they have made a claim for repayment of the monies secured by that charge. That claim has not been met by the defendant and, in all the circumstances, the claimant's claim succeeds.”

Having given judgment, it is common ground that although we have not got a transcript, the judge was asked to indicate how much money was owed to CFL from Mr Cook and he identified a figure of £146,798.90.

Mr Cook applied to this court for permission to appeal on effectively all the issues which the judge decided. In a careful written determination, Patten LJ on 29 October 2009 refused permission to appeal on all the issues save on the following ground: “The only serious area of dispute is in relation to the amounts incurred by the charge. I think there are obvious issues about the calculation of these amounts that the Recorder does not address in his judgment. I think the defendant is therefore entitled to given permission to appeal on these limited issue of quantum”. Patten LJ went on to explain that as he was not granting permission to appeal in any other respect, there would be no stay of the order.

In the skeleton argument, prepared by counsel who acted on behalf of Mr Cook below, Mr Armstrong’s points are made in relation to the issue in which permission to appeal has been granted in paragraphs 75 to 82. In effect, there are four issues. The first is that the sum of £146,000 included the sum of £15,000 in respect of BPF's fees, but condition 7 limited that sum to £5,000. Secondly, that Mr Seward admitted that he could not say whether the legal fees had actually been paid by CFL to the solicitors and counsel acting in respect of the annulment. Thirdly, that interest had been effectively calculated on the basis that the legal fees had been paid on 16 August 2008 because interest ran from that date. Finally, that there were no, or no sufficient, reasons given in the judgment for the conclusion that the amount owing was £146,000.

So far as the first issue is concerned, there is no doubt that the first sentence of clause 7 does have the effect of entitling Mr Cook, in the absence of any good reason to the contrary, to contend that the fee of £15,000 was £10,000 too much. However, there was the second sentence of condition 7, which entitled CFL to increase the fee to more than £5000: “if the matter becomes unduly protracted as a result of [Mr Cook’s] failure to cooperate.”

In his judgment the recorder made relatively brief reference to the issue of failure to cooperate. At the end of paragraph 25, he said this:

“I find that costs were incurred incidental to the annulment of the bankruptcy. I have been told that, at the defendant’s request, a leading counsel Mr Brougham QC, was instructed for the hearing in May 2008. That hearing would have taken place earlier, but was adjourned because of some complication involving one of the creditors."

We have been taken by Mr Radley Gardner, who has conducted this appeal on behalf of CFL, clearly, fairly and competently, to evidence on the issue of whether or not CFL was entitled to rely on the second sentence. In his written submissions Mr Armstrong (who no longer appears for Mr Cook, who has presented his case simply and clearly) relied on one answer given by Mr Seward in cross-examination. Having been asked by Mr Armstrong whether Mr Cook failed to cooperate, Mr Seward’s answer was, “It wasn’t a failure of cooperation". Taken on its own, that undoubtedly appears to support the contention that it was not open to CFL to rely upon the second sentence of condition 7. However, if, as Mr Radley Gardner says, one pursues the cross-examination a little further to the next page of the transcript, there is a question put in cross-examination to Mr Seward, Mr Seward said: “He cooperated with me, yes, but he did not disclose various matters that became evident during the course of the annulment.” The question that followed was: “You are saying he had not disclosed certain matters before you accepted instruction” The answer was: “Absolutely.” In re-examination Mr Radley Gardner put to Mr Seward the straightforward question: “The fees have gone above £5000 can you explain why? Answer: “Because it was an unduly protracted case and we were not given full disclosure of Mr Cook's circumstances right at the beginning.” That is then examined in more detail.

As the contemporaneous correspondence shows, there was a failure to reveal a possible claim in relation to approximately £300,000 worth of shares in a company called Tollard Investments Ltd of which Mr Green was liquidator, and negotiations had to be entered into with Mr Green in order to deal with the problem, as a result of which the first hearing as the Recorder explained, had to be adjourned. It is also fair to say that, as already mentioned, there was no suggestion in the correspondence or e-mail exchanges of any objection by Mr Cook to the £15,000 fee. In his defence to the proceedings Mr Cook merely put CFL to proof as to the amount claimed, and it was only in the skeleton argument (which we have not seen) lodged on behalf of Mr Cook at the hearing that this point was first taken. It is therefore unsurprising that the matter was dealt with in the way that it was in the evidence, and understandable that the judge did not deal with it more fully, although there is no doubt that in a perfect world he should have done. In those circumstances for my part, subject to the question of reasons to which I will turn at the end, it seems to me that this ground of appeal is not a good one.

The second and third issues concern the fees paid to counsel and solicitors in connection with the annulment. In that connection, as I have mentioned two points are taken. First, it is argued that Mr Seward could not say that the money had been paid. In that connection Mr Radley Gardner has two answers, both of which, to my mind, are good. The first is that in his judgment the judge carefully considered the point that Mr Seward was not able to say from his own knowledge that the payments had been made. In paragraph 26 he said:

“I accept the oral evidence of Mr Seward. In cross-examination, he said that he personally did not deal with payments. This was done by the finance director and staff of BPF. They find out who is to be paid. They receive the money from CFL. They pay the creditors. The money is paid by CFL to the creditors rather than to BPF. A director of CFL then signs the cheque. Well, Mr Seward can speak of the mechanics which are used by CFL and I accept his evidence. Although there is this gap in the evidence, I find that CFL did provide the money to pay the creditors and that Mr Armstrong's contention that the claimants have failed to come up to proof on this is not well founded. I am therefore satisfied on the evidence that this money was advanced to LLW by the claimant. Had they not done so, the bankruptcy order would not have been annulled.”

It seems to me that the Recorder was entitled to reach the view that he did in the circumstances that he did. He had documentary evidence that the fees had been paid and he was entitled to conclude that they had been paid. Even if that is not right, the second point made by Mr Radley Gardner is that the last part of condition 5 entitled CFL to add to the amount of the loan the sums due, if they had not been paid. As he points out, this is perfectly logical because those disbursements would have had to have been paid and they were therefore a liability on CFL in any event. Therefore they were properly part of the principal sum of the loan, £75,102.33, upon which the claim was brought.

The other point made in relation to the legal costs, is that interest was charged from 16 August, the date which the SFL was dated and took effect. Mr Radley Gardner suggested that this was justified even if the legal costs had not been paid on or before that date, in the light of the evidence given by Mr Seward as to how the overall arrangement would work. He said that the amount of money which had to be paid out by CFL was in part paid out before 16 May, because it had to be paid out to secure the annulment which took place on 16 May, and was in part, presumably so far as legal costs were concerned, paid out after 16 May. Interest nonetheless ran from 16 May in respect of all sums and therefore there was an element of swings and roundabouts. He also said that the money in respect of legal costs had to be "ring-fenced" as he put it, and, therefore, even if not paid out on 16 May the sum had become due on 16 May. Therefore it was perfectly properly treated as subject to interest from that date.

I see the force of the first point. I am not sure I see the force of the second point. However, whether either or both points have force, in the end the right to recover the money appears to me to be governed by the terms of the contractual documentation and in particular the SFL. It seems to me that Mr Cook’s argument on this limited issue is a fair one. Clause 7.1, when read together with definition of the loan at the beginning of the SFL, envisages that the 2% per month interest will be paid in respect of what is outstanding. As a matter of ordinary language, it seems to me that the sum is not outstanding unless it has actually been paid. Although CFL may have been obliged to pay the lawyers fees, the money was in their bank, earning interest for them, until it was actually paid, therefore, in accordance with what I think is the natural meaning of clause 7.1, interest should only have payable by Mr Cook in respect of these disbursements once the disbursements had actually been paid. To that extent therefore, I think, Mr Cook has a good point.

Fourthly and finally, there is the issue of the adequacy of the judge’s reasoning. In the course of this judgment I have referred to the passages in the judgment. To my mind when one bears in mind the principles which have been laid down by this court the judgment is sufficiently reasoned, and this ground of appeal should be rejected. The important principle that the parties should know, the reasons why they won or lost is emphasised by this court in the well known case of English v Emery Reimbold & Strick Ltd [2002] 1WLR 2409, especially at paragraphs 6 and 26. In Harris v CDMR Purfleet Ltd [2009] EWCA Civ 1645, Smith LJ said at paragraph 21 when assessing whether or not a judgment was sufficiently reasoned one must consider:

“ … the judgment with knowledge of the evidence and submissions made at the trial …”

It seems to me that that observation emphasises that the question whether a judgment is sufficiently reasoned must depend on all the facts and circumstances of the case. In this case I think that the circumstances were such that the judgment was sufficiently reasoned.

Accordingly, subject to the one point about the date when interest started to be payable on the legal fees, this appeal should be dismissed. The question therefore is what order should be made. Subject to anything Mr Cook or Mr Radley Gardner may say and subject of course to any better thoughts that my Lords may have, it seems to me that the right order for us to make is that the appeal is dismissed save in relation to the sum payable in respect of interest on the “Petitioner's legal costs” as recorded in the client’s status report on page 32 of the bundle, as at 4 November 2008. As to that form, when an account comes to be taken following the enforcement of the charge and an assessment of how much money is to be paid to CFL, Mr Cook should be entitled to challenge and have determined the amount of interest payable in respect of those legal costs. As I see it, the amount payable should be calculated not from 16May 2008 but from the date on which those legal costs were actually paid. No doubt, Mr Radley Gardener can draft an appropriate order. Subject to that one point on which Mr Cook has succeeded, I would dismiss this appeal.

Lord Justice Thomas:

I agree.

Lord Justice Wall:

I also agree.