County Leasing Ltd v Quotepool Ltd

This is a renewed application for permission to appeal, Etherton LJ having refused permission on the papers on 1 February 2011. He took the view that the appeal would have no real prospect of success. It was seeking, on insufficient bases, to challenge findings of fact and an exercise of discretion as to costs.

The applicant (claimant in the proceedings) is County Leasing Limited (‘CL’). The respondent (defendant) is Quotepool Limited. The claim was tried before Her Honour Judge Hampton in Northampton County Court over four days in August 2010. It was tried together with another claim in which CL was a co-claimant with County Leasing Asset Management Limited (‘CLAM’) and the four defendants were Michael Green Plant Limited (‘MGP’), Mark Hawkes, Quotepool, and Green Plant Sweepers Limited. The judge delivered her judgment in December 2010, resulting in the order dated 16 December 2010 the subject of the proposed appeal.

CL and CLAM are finance companies of which Andrew Kirkpatrick is a director and shareholder. Mr Hawkes owned businesses in the demolition and clearance field. In October 2004 these businesses were in financial difficulty and the Revenue had on 7 October presented a winding up petition against one of his companies, an earlier incarnation of MGP, which I will call MGP1. The petition was based on a debt of over £311,000. Mr Hawkes was anxious to raise finance to save his businesses and in that context was introduced via a Mr Charlesworth to Mr Kirkpatrick, who in turn introduced him to an associate, Gordon Cook, who traded under the name of Chard Wallis. Mr Hawkes did not know that Mr Cook, who held himself out as an expert in insolvency and business recovery, was an undischarged bankrupt and was also disqualified from acting as a company director.

Meetings followed and their fruit was the making of agreements, in the negotiation and execution of which Mr Cook played a central role: (i) a sale by MGP1 and Green Plant Services of land, plant and equipment to one or other of CL and CLAM, such sales generating proceeds of £225,000 (the land was sold by MGP1 to CL); (ii) a lease back of the plant and equipment to MGP; and (iv) a lease back of the land to Quotepool for a five year term at a rent of £16,500 a year, with an option to buy the land back for £143,000 at the end of the lease. Only £40,000 of the sale proceeds was applied in satisfying MGP1’s creditors. £58,750 (including VAT) of it (described by Mr Cook as an ‘agreed kick back’) went to a partnership run by Mr Kirkpatrick and his wife; and £88,003.61 (inclusive of VAT) went to Mr Cook in fees. The agreements were entered into in late 2004 or early 2005. Three of them and their associated guarantees were the subject of the claims by CL and CLAM.

Defaults on the leases followed and CL and CLAM sued, as lessors, to recover possession of the equipment and land. This application arises out of CL’s claim against Quotepool to recover possession of the land. The defences, including that by Quotepool in the CL claim, were that the transactions were all induced by misrepresentations made by Mr Kirkpatrick on behalf of CL and CLAM to Mr Hawkes on behalf of the defendants. The defendants (including Quotepoool in the land action) counter-claimed for damages. It was these issues that were tried by the judge.

The judge set out in paragraphs 44 to 50 of her judgment the representations made by Mr Kirkpatrick to Mr Hawkes. In paragraph 45, she found that representations were made that Mr Hawkes would not be able to acquire the equipment or land from a liquidator of MGP1 but that, by adopting the package that was being proposed, he would, to his advantage, be able to retain control of the equipment and land; and, in paragraph 50, that the representations made to Mr Hawkes ‘continued to operate, to induce all relevant agreements in 2004 and 2005.’ The judge found, in paragraph 51 that, with a minor qualification, the representations were false; and, in paragraph 52, that - despite his desperation to re-finance his companies at the time - Mr Hawkes would not have agreed to the transactions had he known the true position.

In CL’s claim against Quotepool, the judge set aside Quotepool’s lease; ordered Quotepool to give possession of the land to CL on the basis that Quotepool had occupied as tenants at will; ordered Quotepool to pay mesne profits from 30 November 2010 until possession was given; awarded Quotepool damages against CL based on the difference between what it had paid under the lease and a fair market rent, a sum amounting to £32,442.67, including interest; and ordered CL to pay 50% of Quotepool’s costs.

There are five grounds of appeal. The first is that, in making her findings, the judge failed to take account of Mr Hawkes’s concession in cross-examination that, subsequent to the making of the representations and before entering into any of the transactions, he received advice from his accountant, Adrian Ward, said to have been to the effect that he should not to enter into the transactions. The assertion that the judge failed to take account of the fact that Mr Hawkes had received advice from his accountant is wrong, since she referred to the point in the penultimate sentence of paragraph 39 of her judgment. The ground of appeal is that, as Mr Hawkes entered into the transactions despite such advice, it followed that he would done so even if the misrepresentations found by the judge to have induced them had not been made. Therefore, it is said, the case based on misrepresentation ought to have failed, since Mr Hawkes failed to prove the necessary reliance.

I would agree that if the evidence justified the conclusion that Mr Hawkes would have entered into the transactions with the claimants even if the representations had not been made, that would have been fatal to the claim. There is, however, no warrant for the conclusion that he would have done. Mr Deegan sought to make the point good by referring to the part of Mr Hawkes’s witness statement dealing with the taking of his accountant’s advice, in which he said that he spoke to his accountant, Mr Ward, some time after 2 December 2004 who ‘was uncomfortable with the proposals.’ That appears to have been the extent of his evidence as to the accountant’s contribution, Mr Deegan not suggesting that there was any more evidence about it at the trial. The judge was aware that Mr Hawkes had consulted his accountant but still made the factual findings I have summarised in paragraph [6] above, including the finding that the representations induced Mr Hawkes to enter into the transactions.

I do not understand on what basis it is thought that the Court of Appeal could or might second-guess the judge on that. The point sought to be made was, Mr Deegan told me, also made to the judge and so she was well aware of it. She nevertheless made the findings that she did. They were findings that Mr Hawkes was induced to enter into the transactions by the misrepresentations. In my view, they foreclose any prospect of a successful appeal on the first ground. I refuse permission on that ground.

The second ground of appeal is that Mr Hawkes had solicitors, Wilson Browne, acting for him as from about 17 December 2004, who were also able to advise him as to the wisdom of the transactions. The judge’s finding in paragraph 55 was that Mr Hawkes did not seek their advice about the nature of the transaction, which I understand, in the context, to mean whether the transaction proposed was the same as a mortgage; and Mr Hawkes’s case was that Mr Kirkpatrick had misrepresented to him that the transaction was of the same nature as a mortgage. In that particular respect the judge did not accept his evidence and found that anyway, in their letter of engagement of 17 December 2004, the solicitors had given Mr Hawkes a clear explanation that the proposed transaction was a sale and lease back.

The letter of 17 December 2004 gave no advice, however, as to the wisdom of the proposed transaction and there is no further reference in the judgment to any advice that Mr Hawkes received from his solicitors in relation to the transaction. Any such advice would, subject to any point that privilege had been waived, have been privileged. The inference from the way in which the second ground of appeal is formulated, and from Mr Deegan’s skeleton argument, is that Mr Hawkes’ evidence was that he neither sought nor received any advice from his solicitors about the proposed transaction. He was challenged about that in cross-examination and Mr Deegan told me that he asked Mr Hawkes to produce his solicitors’ file. Mr Hawkes did not agree to do so but Mr Deegan made no application to the judge for its disclosure and no disclosure order was made.

The basis of the second ground of appeal is that, as the solicitors’ file, was not disclosed, the truth of Mr Hawkes’s account that he had received no advice from his solicitors about the wisdom of the transaction could not be tested. The point seems to be a complaint that there was no disclosure of material that was prima facie privileged. Assuming, upon which I express no view, that Mr Hawkes had in fact waived privilege, I anyway do not understand how it is thought that this point might be made good in the Court of Appeal when no application for the disclosure of the file was made. A submission to the effect that ‘the judge was wrong to accept Mr Hawkes’s evidence when it could have been tested by reference to a file for the production of which CL chose not to apply’ appears to me to have a fairly obvious flaw in it. I consider, therefore, that there is also no substance in this ground of appeal, for which I also refuse permission. The judge was implicitly accepting Mr Hawkes’s case that his solicitors had not pointed out the misleading nature of the representations made to him and there is no evidence to undermine that finding.

The third ground is that it is said that the judge was wrong simply to accept Mr Hawkes’s assertion as to the nature of the advice given to him in the absence of disclosure of his solicitors’ file. This ground has no more substance than the second ground, and I refuse permission on this ground too.

The fourth ground is, as Mr Deegan explained it to me, based on the ground that the lease back to CL could not be regarded as induced by the misrepresentations because there was a gap between the sale of the land to CL (the sale contract was on 22 December 2004, with completion fixed for 14 January 2005) and the lease back to Quotepool (which was on 31 January 2005). The proposition is, as I follow it, that the existence of that gap gave Quotepool the opportunity to consider the wisdom of entering into the lease; and the only reason that it did enter it is because Mr Hawkes was desperate to do so, although it had a choice not to do so.

That argument appears to me to be ruled out by the judge’s express finding that the misrepresentations, which related to a composite package of transactions, induced all the agreements in 2004 and 2005. The substance was that the lease was simply part of the overall package that was represented to Mr Hawkes as being the only means by which he could keep control of the equipment and the land. There can be no real prospect of the Court of Appeal substituting a different finding of fact for that found by the judge. I would refuse permission on this ground too.

Finally, there is an argument that the costs order the judge made was wrong. I have summarised in paragraph [7] above the order, including as to costs, that the judge made. It is said that Quotepool’s aim had been to stay in occupation but that it had failed, and so it was therefore not only wrong for the judge to order CL to pay any of Quotepool’s costs, the judge should instead have ordered Quotepool to pay part of CL’s costs.

In ruling on costs, the judge said:

In my judgment, the bid to challenge that order is hopeless. The original sale of the land could not be set aside, because the vendor was MGP1, which was not a party to the proceedings. But Quotepool succeeded in setting aside the lease and obtaining damages; and although CL succeeded in obtaining possession, it failed to do so on its pleaded case, which asserted a forfeiture of the lease. It succeeded in recovering possession merely on the alternative basis – not, I understand, originally (perhaps ever) pleaded - that its commencement of possession proceedings terminated the tenancy at will that had sprung up in place of the rescinded lease.

The outcome was therefore, as the judge said, a degree of success on both sides. The judge’s costs order suggests that she regarded Quotepool’s measure of success as having been the greater and as thus deserving the costs award she made. It would in my view be close to impossible for the Court of Appeal to attempt to put itself into the judge’s shoes with a view to reviewing her order. She had the advantage of presiding over the trial and so assessing and measuring the extent to which CL and Quotepool achieved their respective successes on the issues contested before her. An order for costs is pre-eminently a matter for the judge’s discretion and I am not persuaded that the order that the judge made was other than properly within the wide ambit of the discretion that she was entitled to exercise. There is in my view no real prospect of the Court of Appeal concluding that she misdirected herself in principle in the way in which she exercised it. I refuse permission on this ground too.

The result is that, in agreement with Etherton LJ, I consider that permission to appeal should be refused on all grounds. I refuse permission to CL to appeal.