Gladman Commercial Properties v Fisher Hargreaves Proctor & Ors

This is an appeal from the Order of Arnold J made on 13^th February 2013, by which he struck out the claim of the Appellant, Gladman Commerical Properties, for damages for fraudulent or negligent misrepresentation, in connection with its aborted purchase of two adjacent properties in Dunkirk, Nottingham (“the Properties”), from the Nottinghamshire and City of Nottingham Fire Authority (“the Fire Authority”) and Nottingham City Council (“the Council”). For reasons which will become apparent, I will refer to this claim as “the Second Claim”. It was issued in May 2012.

The defendants to the Second Claim (and Respondents to this appeal) are two firms of chartered surveyors and two individuals, who were partners in or directors of the two firms. They are alleged to have falsely stated that the Properties were, together, suitable for redevelopment as student accommodation, in letters to the Appellant dated 7^th August 2006, and by that means to have induced the Appellant to enter into contracts to purchase them.

The basis upon which the Respondents sought to strike out the Second Claim derived almost entirely from circumstances arising from earlier proceedings by the Fire Authority against the Appellant, seeking specific performance of contracts for the purchase by the Appellant of the Properties. I will refer to those proceedings as “the First Claim”. The Appellant defended the First Claim, and counter-claimed against both the Fire Authority and the Council, relying on the same misrepresentations as are sued upon in the Second Claim, but alleging that the Fire Authority and the Council were liable for them, having been made by the surveyors on their behalf.

The First Claim was issued in May 2009. It came on for a liability only trial in March 2011 before Peter Smith J. It was compromised by a settlement agreement dated 30^th September 2011 (“the Settlement Agreement”), later attached to a Tomlin Order on 5^th October 2011, during a period when the trial had been adjourned to facilitate negotiations.

In bare outline, the strike out application was made on the following four grounds:

The judge dealt with grounds (1) to (3) in a comprehensively detailed reserved judgment on 18 January 2013. After giving the Appellant time to attempt to amend its Particulars of Claim in the Second Claim, he dealt with ground (4) in a second reserved judgment, after a further short hearing, handed down on 13 February 2013.

The Appellant has challenged the judge’s conclusions on grounds (1), (3) and (4) on this appeal. The Respondents challenged his rejection of their case on ground (2) by a respondents’ notice, but in the light of a sensible concession by Mr. Paul Chaisty QC for the Appellant, namely that the Fire Authority, the Council and the Respondents were all joint rather than concurrent tortfeasors, ground (2) has fallen by the wayside.

Ground (1) raises matters of legal analysis and interpretation of the Settlement Agreement, within what should have been a fairly narrow compass, there being no dispute as to the background facts. By contrast, grounds (3) and (4) called for a different and in some respects wider review of the circumstances. We therefore considered it convenient to hear all argument on ground (1) first, which occupied the first of the two days set aside for the hearing of the appeal. Having formed a clear and unanimous view that the judge was right about ground (1), we announced our decision, with reasons to follow, at the end of the first day, and our view that, in those circumstances, it was unnecessary for the court to hear argument on the remaining points. Nonetheless Counsel were unanimous in encouraging us to hear full arguments on grounds (3) and (4), against the possibility that ground (1) might be the subject of a further appeal. We acceded with some reluctance and, in the event, oral argument on ground (3) took the whole of the second day. Counsel eventually agreed that we should decide ground (4) on the basis of the parties’ written submissions (in skeleton arguments) without a further oral hearing. I shall therefore set out my conclusions and reasons on each of grounds (1), (3) and (4) separately, reflecting the way in which the matter has been dealt with in submissions.

In view of the comprehensive description of the relevant facts by the judge, it is necessary for me only to provide a bare outline.

The Properties consisted of a disused fire station owned by the Fire Authority and adjoining land owned by the Council. Recognising that both Properties would be likely to sell best as a single development site, the Fire Authority and the Council jointly retained the First and Third Respondents (“FHP” and “HEB”) to market them together. The Second and Fourth Respondents, Mr. Hargreaves and Mr. Bishop, were the individuals at each firm in charge of the marketing process.

On 7^th August 2006, Mr. Bishop and Mr. Hargreaves (on behalf of HEB and FHP respectively) each wrote in substantially identical terms to the Appellant. The letters were headed “Student/Keyworker Development Site” and contained the following passages:

“DEVELOPMENT OPPORTUNITY

We have considered both a residential apartment scheme and a student accommodation scheme on this site with our clients’ architects and feel that the most appropriate use for this site would be the provision of additional keyworker/student accommodation, particularly bearing in mind the presence of the Queens Medical Centre and the University opposite.

Our clients estimate that the Fire Station site alone would accommodate approximately: -

600 bedrooms

for keyworkers/students although prospective developers should produce their own scheme and discuss it with the relevant Planning Officer at the City Council

…

PRICE

Our instructions are to seek bids in respect of the combined Fire Station and Council site (1.478 acres) in excess of:

£4,000,000

(Four Million Pounds)

on a subject to planning basis.”

I will refer to those letters as “the August 2006 Letters”.

The Appellant claims that it was induced to bid for and then contract to purchase the Properties, by the contents of the August 2006 Letters. Contracts were exchanged on 19 September 2007, by which the Appellant agreed to buy the fire station site from the Fire Authority for £4.2 million and the Council’s adjoining site for £1.8 million. The usual 10% deposits were paid on exchange.

The Appellant declined to complete either contract having, on its case, by then ascertained that there were planning problems standing in the way of the redevelopment of the Properties as student or keyworker accommodation. The Fire Authority served a notice to complete on 29^th January 2009, and the Council served its own notice to complete two days later. The First Claim was then issued by the Fire Authority on 19^th May 2009, seeking specific performance.

On 30^th July 2009 the Appellant served its defence and counterclaim, joining the Council as a Part 20 defendant. It sought rescission of the contracts, and damages, upon the basis that the parts of the August 2006 Letters quoted above contained fraudulent misrepresentations made by the Fire Authority and the Council through the Respondents as their sales agents. As amended in January 2011 the counterclaim asserted that all four of the Respondents had been jointly instructed by the Fire Authority and the Council to market the properties, that the representations as to the suitability of the Properties for development as student accommodation were false, and that the Fire Authority, the Council and all the Respondents knew that when the representations were made.

On 1^st March 2011, a week before the start of the trial, the Appellant’s solicitors wrote to Mr. Hargreaves and Mr. Bishop (who were to be called by the Fire Authority and the Council as witnesses) in the following terms:

“You are a witness in the above case and as you know it is proceeding to trial. We have written to you before and you advised us that your legal representatives are Browne Jacobson. We are not writing to you in connection with the trial, but looking ahead to what may happen afterwards.

No doubt you are aware of the more detailed particulars in the Amended Defence and Counterclaim concerning knowledge and the fraudulent misrepresentation. You were heavily involved in the allegations of fraudulent misrepresentation. There are issues of principals/agents and your ability to bind the City Council and the Fire Authority. Whilst Gladman is very confident of success, if it is unsuccessful in whole, or in part, we put you on notice that Gladman will take proceedings against your firm.

For your information, and for your insurers, Gladman’s claim for damages, if it is successful, runs into several of tens of millions of pounds. The site was expected to make £12 million profit. The planning problems with this site prevented Gladman buying it but the £6million has remained put aside, because of the exposure, which has also prevented them from purchasing two similar sites, using the profits anticipated on the sale of this site, which would have been affordable with bank borrowings to gear up the equity to some £18 million. These three sites alone would have produced profits in excess of £30 million.”

I will refer to those letters as “the March 2011 Letters”.

The trial began before Peter Smith J on 8^th March. Both Mr. Hargreaves and Mr. Bishop gave evidence and were cross-examined, over an aggregate period of some five days. During the course of the trial the March 2011 Letters came to the attention of all parties to the First Claim, and were commented upon by the trial judge. There was also discussion between the judge and the Appellant about the absence of any pleaded claim in negligence. A draft amended pleading was formulated for that purpose, but not in the event pursued.

The trial was adjourned part-heard in April 2011, and again in May, to facilitate negotiations between the parties. By then it had run for 15 days, greatly exceeding the original 5 day estimate, and the evidence was still not complete. The negotiations led to the making of the Settlement Agreement, signed by solicitors for the Fire Authority, the Council and the Appellant on 30^th September 2011, containing the following material provisions:

“ 1. The Third Party/Part 20 Defendant shall pay to the Defendant the sum of £2.7 million within 7 days of the date of this Order.

2.

The said payment shall be in satisfaction of all claims by the Defendant against the Claimant and the Third Party/Part 20 Defendant in respect of damages, interest, costs (including any interlocutory orders for costs) and repayment of deposits (paid by the Defendant under the agreements hereinafter mentioned) herein and is in full and final settlement of all and any existing or potential claims of any nature, whether or not contemplated, that the Defendant has against the other parties.”

The “agreements hereinafter mentioned” were identified as the contracts to purchase the Properties. Clauses 4 and 5 of the Settlement Agreement provided for a full mutual release of all obligations contained in those contracts, between their respective parties. The First Claim was then stayed by a Tomlin Order to which the Settlement Agreement was annexed as a Schedule, on 5^th October 2011.

The result was that the Appellant obtained £2.7 million, but the Fire Authority and the Council retained the deposits of £0.6 million. Thus £2.1 million represented payment on account of the Appellant’s damages claim, its costs of the First Claim and its out of pocket expenses of the aborted sale. It appears to have been broadly common ground before Arnold J that the Appellant obtained £1.318 million-odd as its net compensation for the alleged misrepresentations.

The Appellant issued the Second Claim, against the four Respondents and two others, on 21^st May 2012. The claim against the two others has since been settled. Against the Respondents the claim is for fraudulent misrepresentation, based upon the above-quoted content of the August 2006 Letters, albeit formulated slightly differently, with an alternative case that the same misrepresentations were negligent.

Defences have yet to be served, because the Respondents launched the strike-out application first. Nonetheless in evidence in support the Respondents deny falsity, fraud and negligence, for reasons which do not matter for present purposes.

At common law (leaving aside statutory intervention) if A claimed to be the victim of a tort committed by joint tortfeasors, and if A obtained either a judgment against one or more of them, or the benefit of a settlement by which he released one or more of them, then subject to certain exceptions, A thereby released the others: see Bryanston Finance Limited v de Vries [1975] QB 703, per Lord Diplock at 730.

Parliament has since intervened to abolish that rule in relation to judgments, in what is now Section 3 of the Civil Liability (Contribution) Act 1978, replacing a similar provision in the Law Reform (Married Women and Tortfeasors) Act 1935. But the common law rule remains in full force and effect in relation to compromises: see Foskett on The Law and Practice of Compromise (7^th ed.) at paragraph 6-41, and Watts v Aldington [1999] L&TR 578 (but decided in 1993), in which this court considered itself bound by the rule, albeit that the High Court of Australia later reached a different conclusion in Thompson v Australian Capital Television Pty Ltd (1996) 141 ALR 1. Mr Chaisty politely declined the opportunity to persuade us not to follow the Watts case, reserving his ammunition for a higher court. .

Originally the theory was that, in cases of joint tortfeasors, there was only a single cause of action, so that the release of one (or more) necessarily released all. By contrast, a settlement with one or more under which, for good consideration, the claimant merely covenanted not to sue them, left the cause of action intact, so that all joint tortfeasors outside the benefit of the covenant remained vulnerable to further proceedings: see Duck v Mayeu [1892] 2 QB 511.

In the Watts case, this court recognised an additional exception, namely where the agreement for the release of one (or more) joint tortfeasors contained a reservation of the claimant’s right to sue the others. That reservation may be express or, as in that case, implied. Both Steyn and Simon Brown LJJ were, in that case, critical of the logic behind the common law rule, especially following its statutory curtailment. Steyn LJ called it a “trap for the unwary”. Simon Brown LJ called it a “juridical relic”. The concept of a reservation of a right to sue might be thought equally illogical, if there really is a single cause of action. Some have suggested that such a reservation converts an apparent release into what is in substance only a covenant not to sue the defendant or defendants with whom the settlement is made.

On the question whether in any particular compromise agreement a reservation of the claimant’s right to sue other joint tortfeasors was to be implied, it is evident that this court considered that the general law as to the implication of terms was to be applied. In a passage which might be thought to anticipate more recent developments, Steyn LJ (with whom Simon Brown LJ agreed) said that:

“The touchstone of implication is strict necessity.”

He added that the two practical tests then in vogue, namely the officious bystander and business efficacy tests were “merely aids to determining that issue”. By “necessity”, Steyn LJ meant that the proposed implication had to be shown to be “strictly necessary if the reasonable expectations of the parties are not to be defeated”.

The judge’s analysis of ground (1) may be summarised as follows:

Both the grounds of appeal and Mr. Chaisty’s skeleton argument challenged the first and third stages in the judge’s analysis, but not the second or the fourth. In his oral submissions, Mr Chaisty sensibly abandoned any challenge to the judge’s conclusion that the parties were joint, rather than concurrent, tortfeasors. He was plainly right to do so. Quite apart from the judge’s conclusion based upon agency, there was in this case a single alleged misrepresentation, in the August 2006 Letters, written by Mr. Bishop and Mr. Hargreaves, and the whole of the Appellant’s case in the First Claim depended upon establishing that the Fire Authority and the Council (and in the Second Claim the two firms) were liable for them. Thus the appeal in relation to ground (1) boiled down to the deceptively short question whether the judge was wrong not to identify a reservation of the right to sue the Respondents as an implied term of the Settlement Agreement or, as Mr. Chaisty would prefer to characterise it, whether it was or was not intended that the Settlement Agreement should prevent the Appellant suing the Respondents, when read in the context of the background matrix of fact.

Both before the judge and on this appeal, the parties sought to identify a range of competing contextual matters which, they each submitted, pointed towards a positive or negative conclusion as to the presence of the requisite implied release. The judge identified seven matters advanced by Mr. Chaisty (at paragraph 139 of his judgment), none of which, either singly or in the aggregate, pointed in his view to the requisite implication. In this court both Mr. Chaisty and Mr. Christopher Smith QC (who undertook the burden of responding on ground (1) for all the Respondents) identified rafts of contextual matters, descending in some instances to the fine detail of provisional observations on the merits and the credibility of witnesses by Peter Smith J during the part-heard trial of the First Claim, to questions about the extent of the parties’ respective research and preparation on quantum issues, to speculation about whether, had the trial proceeded further, the tide would have turned against the Appellant on the merits, and to fine comparisons between the factors present in this case, and those identified in other reported cases.

I recognise that, in the words of Lord Hoffmann in ICS Limited v West Bromwich Building Society [1998] 1 WLR 896, at 912-3, the background matrix of fact may include “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man”. Nonetheless it seems to me that this broad invitation has tended to lead to levels of minute examination of the contextual background extending way beyond the sensible boundaries of any legitimate aid to interpretation. This is a case in point. The Settlement Agreement is a short, simple, one page document negotiated between sophisticated lawyers. Lord Hoffmann’s reasonable man might be forgiven for thinking that its meaning was easily to be ascertained from its straightforward language, without the need for a painstaking recollection or analysis of events which had taken place between the parties to it during the previous six months, a process which it took counsel most of a day to develop before this court.

I mean no disrespect to counsel therefore by declining to engage with more than a very few of the contextual matters debated before us at such length. In my view most of them simply failed to surmount the threshold below which the reasonable man would think them insignificant. Nonetheless, before setting out my own analysis, I must briefly address certain of Mr. Chaisty’s submissions.

First, he placed reliance upon the following dictum of Eady J in Ansari v Knowles & Ors [2012] EWHC 3137(QB), at paragraph 18:

“The modern approach is to apply ordinary principles of construction to such agreements in seeking to determine the intention of the parties and, in particular, that of the relevant claimant.”

While I agree that the modern approach is to apply ordinary principles of construction to settlement agreements with one or more of a number of joint tortfeasors, the ‘intention of the parties’ to be identified by the process of interpretation is their imputed common intention, rather than that of one or other of them. The phrase means no more than the meaning of the agreement which they have made, objectively ascertained, read against the relevant background: see the Belize case (supra) at paragraphs 16 and 21. The search is not for the subjective intention of the parties, still less the intention of one or other of them.

Mr. Chaisty sought to make much of the fact that the judge reached a different conclusion from his disinclination to find an implied reservation when addressing ground (1), when he came to ask himself under ground (2) whether, had the parties been concurrent rather than joint tortfeasors, the Settlement Agreement would have constituted full satisfaction to the Appellant for its loss. He decided that it would not, so that the Respondents would not thereby have been released from further liability. How, Mr. Chaisty asked, could the same agreement mean opposite things, dependent upon the technical question whether the parties were joint or concurrent tortfeasors? He submitted that this was an outcome at variance with the internal coherence and consistency of the structure of the law aimed at by the modern process of interpretation: see Stena Line Limited v Merchant Navy Ratings Pension Fund Trustees Limited [2011] EWCA Civ 543, per Arden LJ at paragraph 36.

The short answer to Mr. Chaisty’s rhetorical question is, in my judgment, that the fact that the parties were joint rather than concurrent tortfeasors makes all the difference, and fully justifies the judge’s alternative conclusions. The judge described it as a “crucial difference in context” (at paragraph 145). In my view he was right to do so. I regard the fact that the Fire Authority, the Council and the Respondents were all (on the case alleged) joint rather than concurrent tortfeasors to be the cardinal aspect of the contextual background. The established legal consequence of a release of one or more joint tortfeasors is that there is a release of all of them. By contrast, the legal consequence of a release of one or more concurrent tortfeasors is precisely the opposite.

The importance of this contextual starting point is well illustrated by Lord Bingham’s analysis of the settlement of a claim against some, but not all, concurrent tortfeasors in Heaton v AXA Equity and Law [2002] 2 AC 329, at 337. He said:

“…the agreement must be construed in its appropriate factual context. In construing it various significant points must in my opinion be borne clearly in mind:

1)

The release of one concurrent tortfeasor does not have the effect in law of releasing another concurrent tortfeasor…”

It takes little imagination to envisage Lord Bingham beginning his analysis of the present case with the same first sub-paragraph, but with the “not” removed.

The Heaton case also provides the answer to another of Mr. Chaisty’s submissions. He said that it was significant in the present case that the Fire Authority and the Council had not sought to protect themselves from being sued for contribution by the Respondents if the Appellant later proceeded against them, either by an indemnity, or by a covenant by the Appellant not to sue the Respondents, in the Settlement Agreement. A similar point was made in the Heaton case about the absence of any express reservation by the claimant of his right to sue the other concurrent tortfeasor. Lord Bingham answered it at paragraph 9(4) as follows:

“While an express reservation by A of his right to sue C will fortify the inference that A is not treating the sum recovered from B as representing the full measure of his loss, the absence of such a reservation is of lesser and perhaps of no significance, since there is no need for A to reserve a right to do that which A is in the ordinary way fully entitled to do without any such reservation.”

Applied to this case, the absence of any indemnity, or express covenant not to sue the Respondents, is in my view of no significance, because the ordinary effect of a settlement by the claimant against one or more joint tortfeasors is, without more, to prohibit any proceedings by the claimant against the others. There is therefore no need for an indemnity, or for an express covenant not to sue the other joint tortfeasors.

Mr. Chaisty made much, both before the judge and on this appeal, of the contents of the March 2011 Letters, as a clear statement by the Appellant, known to the Fire Authority and the Council, of its intention to sue the Respondents, which had not thereafter been withdrawn by the time of the making of the Settlement Agreement. The judge’s view (at paragraph 140(iv)) was that the threat made in those letters was only “to sue the [Respondents] “if [the Appellant] is unsuccessful”, not to do so if it had made a substantial recovery from the Council”.

The relevant parts of the March 2011 Letters read as follows:

“There are issues of principals/agents and your ability to bind the Council and the Fire Authority. While Gladman is very confident of success, if it is unsuccessful in whole, or in part, we put you on notice that Gladman will take proceedings against your firm.”

Mr. Smith submitted that, taken as a whole, this part of the March 2011 Letters was concerned with the Appellant’s success or otherwise in dealing with the Council and Fire Authority’s by then pleaded denial that the Respondents had made the representations in the August 2006 Letters with their authority. This had been specifically put in issue by an amendment to its Reply and Defence to Counterclaim by the Fire Authority on 23^rd February 2011, and by the Council, by amendment, on the following day. The Appellant’s pleaded response was served, again by amendment, on the same day as it sent the March 2011 Letters to the Respondent.

In my view the judge was right about this. The effect of the Settlement Agreement was that the Appellant succeeded both against the Fire Authority and the Council, both in its defence to the claim for specific performance, and in recovering agreed compensation for misrepresentation, notwithstanding those pleas of want of authority. It follows that, by September 2011, the March 2011 Letters did not constitute a continuing assertion that the Appellant would, or reserved its right to, sue the Respondents after the settlement of the First Claim.

Returning directly to the question of interpretation raised by ground (1), like the judge I can see no reason why a reservation of the right to sue the Respondents should be implied in the Settlement Agreement. My reasons follow.

This is not a case (unlike the Belize case) where the agreement failed to make express provision for what is to happen when some event occurs. The undoubted legal consequence of the express terms of the Settlement Agreement, made as it was between the Appellant and two of a number of potential joint tortfeasors, was to release the Respondents. This Mr. Chaisty accepts, reserving arguments to the contrary for a higher court. As I have said, the fact that the Fire Authority, the Council and the Respondents were all, on the Appellant’s case, joint tortfeasors, is a cardinal background fact. It is unquestionably part of the “background knowledge which would reasonably be available to the audience to whom the instrumental is addressed” (per Lord Hoffmann in the Belize case at paragraph 16), because the addressees were the parties to the agreement, all of them were legally advised and represented during the settlement negotiations, so that the parties must reasonably be supposed to have understood the legal consequences of a settlement with some, but not all, joint tortfeasors.

The Settlement Agreement was made at the end of lengthy and extremely expensive litigation. The trial, although only part heard, had gone on for some fifteen days, and hundreds of thousands of pounds of costs had been spent on each side. The reasonable addressee may be forgiven for thinking that the parties intended thereby to put an end to their dispute yet, if the reservation of a right to sue the Respondents is to be implied, the Council and the Fire Authority were giving up a specific performance claim worth £6 million less the value of the Properties, paying a further £2.7million and nonetheless by implied agreement exposing themselves to the likelihood of contribution claims from the Respondents, if sued thereafter by the Appellant. That the Council and Fire Authority should be regarded as having agreed by implication to do so while professionally represented seems to me to be an altogether improbable hypothesis. This is not to focus on their presumed intention ahead of that of the Appellant. It simply shows that no such common intention can sensibly be presumed.

It is for those reasons, together with those given by the judge, that I concluded at the end of oral argument that the Appeal on ground (1) should be dismissed.

The judge’s decision that the bringing of the Second Claim amounted to an abuse of process by the Appellant was, although not involving the exercise of discretion, the result of his balancing of relevant factual and other considerations, with which an appellate court will be reluctant to interfere: see Aldi Stores Limited v WSP Group PLC [2008] 1 WLR 748 at 762, per Thomas LJ at paragraph 16, applying Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577. Generally, this court will only interfere where the judge has taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion that was impermissible, not open to him or, as is sometimes said, plainly wrong.

The legal principles applicable to an allegation of what is commonly called Henderson v Henderson abuse (where the doctrines of res judicata and issue estoppel are not engaged) are well settled. They are to be found in the well known passage from Lord Bingham’s speech in Johnson v Gore Wood & Co [2002] 2 AC 1, at 31, cited in full by the judge at paragraph 149, as amplified in the Aldi Stores case, Dexter Limited v Vlieland-Boddy [2003] EWCA Civ 14, and more recently in Stuart v Goldberg Linde [2008] 1 WLR 823. Again, the judge had fully in mind, and cited passages from, all three of those cases.

It would be mere surplusage to repeat all those citations in this judgment, and an attempt to compress would achieve nothing other than risk imprecision. In fact, subject only to one point to which I shall return, Mr. Chaisty did not challenge the judge’s summary of the legal principles in any way.

The judge’s conclusion that the bringing of the Second Claim amounted to an abuse was a result of his accepting two main submissions from the Respondents. The first was that the Second Claim involved essentially a re-litigation of the whole of the Appellant’s case in the First Claim, at a further trial likely to last between 20 and 30 days, to expose Mr. Hargreaves and Mr. Bishop to a re-run of lengthy and hostile cross-examination alleging fraud, and threatening professional ruin for both of them, and to expose the Fire Authority and the Council to a re-litigation of the claim against them, if (as the judge thought likely) brought back in by the Respondents for contribution.

The second submission was that, ignoring this court’s advice in both the Aldi and the Stuart cases that a claimant wishing to preserve the opportunity to bring further claims against the same or other defendants should apply for directions at the earliest opportunity in the earlier proceedings, the Appellant had done nothing along those lines until the March 2011 Letters came to the attention of the trial judge in the First Claim, despite having concluded, on available materials, that the Respondents had been guilty of fraudulent misrepresentation, by the beginning of October 2010, six months before the date fixed for the trial.

The main thrust of Mr. Chaisty’s criticisms of the judge’s analysis may be summarised as follows:

This is, of course, not a case in which the allegedly abusive claim is being pursued against persons who were defendants to the earlier claim. It therefore falls within that category where the absence of overlap between defendants is a powerful factor against finding abuse, but not a bar: see per Thomas LJ in the Aldi case at paragraphs 6, 9 and 10. Nonetheless, the judge plainly had these considerations in mind, since he cited the very passages in the Aldi case in which they are set out, at paragraphs 151-2 of his judgment.

What plainly overrode this consideration in the judge’s mind was the almost complete overlap between the issues in the First and Second Claims, the need for them to be litigated again over many weeks at a second trial (after fifteen days part-heard in the first trial) and, in particular, the consequential oppression of Mr. Bishop and Mr. Hargreaves in being required to defend their careers and professional reputations from the most serious allegations not once, but twice.

The judge was plainly aware that, merely because the claims against the Respondents could have been brought in the First Claim, it did not follow that they should have been. His conclusion that, in fact, they should have been flowed from his perception that this would have saved enormous cost, avoided multiplicity of litigation about the same issues, and saved Mr. Bishop and Mr. Hargreaves from the double jeopardy of repeated hostile cross-examination.

In my judgment it cannot be said that, in these respects, the judge omitted any relevant considerations, or took into account irrelevant considerations, still less that his conclusion on that aspect of the abuse allegation was perverse or plainly wrong. On the contrary, in my view it was right. It is hard to imagine a case in which the dispute between all the potential parties could cry out more strongly for determination at a single trial.

Mr. Chaisty’s second point really amounted to a challenge to the judge’s finding that, in fact, the Appellant was in a position to join the Respondents as defendants to a claim in fraudulent misrepresentation by the beginning of October 2010 at the latest. He also challenged the judge’s conclusion that, had an application for joinder been made then, the Respondents could have been accommodated as additional Part 20 defendants without loss of the March 2011 trial date.

There were undoubtedly witness statements both from Mr. Gladman and from Mr. Davidson, the solicitor with the conduct of the First Claim for the Appellant, setting out in considerable detail the litigation history and the development of the Appellant’s understanding of the identity of those persons employed or retained by the Council and the Fire Authority against whom allegations of personal dishonesty could be properly be made. I have reviewed that evidence. The judge referred to it in his judgment, albeit briefly. Nonetheless he was persuaded that, in fact, the Appellant had the requisite material and indeed had itself been satisfied that there was sufficient to plead a case of personal dishonesty against the Respondents, mainly by reference to the contents of Mr. Gladman’s witness statement prepared for the trial of the First Claim and dated 1^st October 2010.

That witness statement contained the following passages. Under the heading:

“Documented knowledge of the Fire Authority, the City Council and their Sales Agents of the SPD”

he said:

“I spent considerable time reading the information disclosed at various times by the two Authorities. What I read left me wild with anger, as it was now clear beyond any shred of doubt that numerous Officers, employees and Agents of both Authorities had been repeatedly advised by the City Council’s planning officers (advice from at least five planners) about the planning policy problem and its effect upon the value of the sites.”

The reference to “Agents” was in its context unmistakably a reference to the Respondents.

Later he continued:

“One area of the documents disclosed which particularly incensed me was the creative language generated and refined over time by Jonathan Bishop, who was an Agent for both Authorities. He drew on various iterations to describe a site as suitable for Student Accommodation when he was fully aware that this was untrue…”

Moreover, an amended Defence and Counterclaim by the Appellant was prepared by Counsel on instructions which preceded the giving of further disclosure by the Council and the Fire Authority in January 2011 (as Mr. Chaisty acknowledged) and which must therefore have been based upon the information already available by October 2010, and indeed mainly upon disclosure given by those parties in February 2010. That amended pleading specifically alleged that the representations in the August 2006 Letters involved personal dishonesty by each of the Respondents, at paragraph 34D.

The judge’s finding that, in fact, the Appellant both had the material sufficient to advance such a claim against the Respondents, and knew that such a claim existed, by the beginning of October 2010, was of course based purely on his appraisal of documentary materials rather than evidence given in the witness box. This court is therefore as well placed as was the judge to address that factual issue, by reference to the same materials. In my view, having reviewed those same materials, the judge was eminently justified in reaching the conclusion which he did. Nothing in Mr. Davidson’s lengthy witness statement, nor in Mr. Gladman’s further witness statement, significantly undermined the conclusions which flow inevitably from the passages in Mr. Gladman’s trial witness statement to which I have referred, and from the Appellant’s amended pleading, based as it was on information available to the Appellant by, and in reality long before, October 2010.

There is no basis upon which this court can second-guess the judge’s conclusion that, had an application to join the Respondents been made in October 2010, they could have been accommodated as additional Part 20 defendants without the loss of the trial date. Arnold J is an experienced Chancery judge and case manager. Mr. Chaisty’s submission that he was wrong on this point was no more than bare assertion. My own recent experience as a Chancery judge (and of having case managed heavy litigation from issue to trial in six months) leaves me in no doubt that the judge’s estimate can properly be relied upon.

It was Mr. Chaisty’s third main submission that raised a point of principle. It is I think implicit in this part of the judge’s judgment that he did regard the Appellant’s failure to apply to court in the First Claim for case management directions pursuant to the Aldi Guidelines between October 2010 and early 2011 as contributing to a conclusion that the Second Claim amounted to an abuse. Mr. Chaisty submitted that, in the absence of a change in the Civil Procedure Rules or Practice Directions, it was not permissible to treat a failure to comply with the Aldi Guidelines as a matter relevant to the question whether subsequent proceedings constituted an abuse. He submitted that a fair reading of the Aldi and Stuart decisions as a whole pointed to the opposite conclusion. The starting point, he said, was paragraph 24 of Thomas LJ’s judgment in the Aldi case, which I set out below:

“The factors which I have set out are largely the private interest factors. As was made clear in Johnson v Gore Wood & Co, the public interest extends not only to finality and preventing a party being vexed twice, but also to economy and efficiency in litigation. The judge considered that the decision of Aldi not to bring its claims against WSP and Aspinwall in the original action was an abuse or misuse of the process of the TCC. I do not see how the mere fact that this action may require a trial and hence take up judicial time (which could have been saved if Aldi had exercised its right to being an action in a different way) can make the action impermissible. If an action can be properly brought, it is the duty of the state to provide the necessary resources; the litigant cannot be denied the right to bring a claim (for which he in any event pays under the system which operates in England and Wales) on the basis that he could have acted differently and so made more efficient use of the court’s resources. Although the judge was self evidently right in saying that it was the duty of the TCC to achieve the just and cost effective disposal of litigation and that this served the interests of the business community, he was wrong to find that the action brought by Aldi flew in the face of that policy. As I seek to explain at paras 29-31 below, the problems that have arisen in this case should have been dealt with through case management.”

To that it is necessary to add paragraphs 29-31:

“I also wish to add a word as to the approach that should be adopted if a similar problem arises in the future. In circumstances such as those that arose in this case, the proper course is to raise the issue with the court. Aldi did write the court, as I have set out at para 2(xiii), but not in terms that made it clear what the court was being invited to do. WSP and Aspinwall knew of Aldi’s position and were before the court on numerous occasions; they did nothing to raise it.

Parties are sometimes faced with the issue of wishing to pursue other proceedings whilst reserving a right in existing proceedings. Often, no problem arises; in this case, Aldi, WSP and Aspinwall each in truth knew at one time or another between August 2003 and the settlement of the original action in January 2004 that there was a potential problem, but it was never raised with the court. I have already expressed the view that it should have been. The court would, at the very least, have been able to express its view as to the proper use of its resources and on the efficient and economical conduct of the litigation. It may have seen if a way could have been found to determine the issues applicable to Aldi in a manner proportionate to the size of Aldi’s claim and without the very large expenditure that would have been necessary if Aldi had to participate in the trial of the actions. It may be that the court would have said that it was for Aldi to elect whether it wished to pursue its claim in the proceedings, but if it did not, that would be the end of the matter. It might have inquired whether the action against excess underwriters could have been expedited. Whatever might have happened in this case is a matter of speculation.

However, for the future, if a similar issue arises in complex commercial multi-party litigation, it must be referred to the court seised of the proceedings. It is plainly not only in the interest of the parties, but also in the public interest and in the interest of the efficient use of court resources that this is done. There can be no excuse for failure to do so in the future.”

At paragraph 36 Wall LJ associated himself with what Thomas LJ had said in paragraphs 29-31. At paragraph 42, Longmore LJ added:

“I also agree with paras 29-31 of Thomas LJ’s judgment. The parties should have raised the possible difficulties of a further set of proceedings with the court at a stage when the matter could have been sorted out in a proper way at a case management conference and not left it to fester in a way that has now made the difficulties problematic, time-wasting and expensive at a later stage.”

In the Stuart case both Sedley LJ and Sir Anthony Clarke MR returned to this theme. At paragraph 77, Sedley LJ said that, as the Aldi case had made clear:

“A claimant who keeps a second claim against the same defendant up his sleeve while prosecuting the first is at high risk of being held to have abused the court’s process. Moreover, putting his cards on the table does not simply mean warning the defendant that another action is or may be in the pipeline. It means making it possible for the court to manage the issues so as to be fair to both sides.”

At paragraph 96, Sir Anthony Clarke MR continued:

“For my part, I do not think that parties should keep future claims secret merely because a second claim might involve other issues. The proper course is for parties to put their cards on the table so that no one is taken by surprise and the appropriate course in case management terms can be considered by the judge. In particular parties should not keep quiet in the hope of improving their position in respect of a claim arising out of similar facts or evidence in the future. Nor should they do so simply because a second claim may involve other complex issues. On the contrary they should come clean so that the court can decide whether one or more trials is required and when. The time for such a decision to be taken is before there is a trial of any of the issues. In this way the underlying approach of the Civil Procedure Rules, namely that of co-operation between the parties, robust case management and disposing of cases, including particular issues, justly can be forwarded and not frustrated.

At paragraph 101 he concluded:

“I only add by way of postscript that litigants and their advisers should heed the points made by this court in the Aldi Stores Ltd case and underlined here that the approach of the CPR is to require cards to be put on the table in cases of this kind or run the risk of a second action being held to be an abuse of the process.”

It may fairly be said that, if read in isolation from what followed, paragraph 24 of Thomas LJ’s judgment in the Aldi case might appear to lie uncomfortably alongside any conclusion that his later observations were intended to mean that a failure to follow the sensible case management advice there set out might increase the risk that a subsequent claim could be found to constitute an abuse. But I do not consider that a careful reading of paragraph 24 justifies that conclusion. Thomas LJ begins by recognising the public interest in the avoidance of multiplicity and achieving economy and efficiency in litigation. He qualified this only by his observation that the “mere fact” that a second action might require a trial could not on its own make it impermissible and that a “properly brought” action could not be denied a trial on the ground of limited state resources, or because it might have been more efficiently brought.

By contrast, his observations about avoiding these difficulties by a prompt application for pro-active case management were directed mainly at the future rather than the past. He plainly regarded the requirement to refer a contemplated future claim for case management directions in the earlier claim as mandatory, and as serving the public interest in the efficient use of court resources. He described a failure to do so as inexcusable. Furthermore, in the Stuart case, both Sedley LJ and Sir Anthony Clarke MR spelt out in express terms that a failure to follow the Aldi guidelines involved the claimant running a risk that the pursuit of a second claim would constitute an abuse.

As has been repeatedly stated, the conduct of civil proceedings is a process in which the stakeholders include not merely the parties, but also other litigants waiting for their cases to be tried, and the public at large, who have an interest in the efficient and economic conduct of litigation. I consider that Arnold J was correct to treat a failure by the Appellant to follow guidelines laid down as mandatory future conduct in two successive reported decisions of this court as relevant matters pointing to a conclusion that the Second Claim constituted an abuse of the process of civil litigation.

The shocking consequence of permitting the Second Claim to continue would be that precisely the same issues would fall to be litigated at two successive trials involving the waste of between four and six working weeks of court time and, no doubt, millions of pounds of wasted costs and lost management time, quite apart from the double jeopardy faced by Mr. Bishop and Mr. Hargreaves to which I have referred. The judge’s conclusion was that compliance with what were by then mandatory guidelines could have entirely avoided that wasteful duplication of time, money and effort. I agree that the failure was, as described in the Aldi case, inexcusable. An inexcusable failure to do something which would have contributed so substantially to the economy and efficiency with which this dispute might have been resolved seems to me to be a primary candidate for identification as an abuse.

At one point in his submissions Mr Chaisty seemed to suggest that it was purely a matter for the parties to decide whether to pursue a dispute in one or more related sets of proceedings, regardless of its effect upon the burdens facing the court. If that was ever a legitimate view (and the Henderson case strongly suggests otherwise), civil litigants need to understand that it is not now.

It follows that, on ground (3), not only can the judge’s decision not be faulted, but it was, in my view, plainly correct.

Since this last ground upon which Arnold J struck out the Second Claim is of relevance only if a higher court were to find that the judge’s conclusions on grounds (1) and (3) were wrong, and since this fourth point was, due to shortage of time, necessarily to be dealt with on written submissions, I hope that I may be forgiven if I deal with it relatively briefly.

From first to last (beginning with the March 2011 Letters), the Appellant has maintained as against the Respondents that the loss occasioned to it by their allegedly fraudulent misrepresentation was in excess of £30 million. When it is borne in mind that, by the time of its commencement of the Second Claim, the Appellant had been compensated by the Council for loss occasioned by precisely the same alleged misrepresentations in a net amount in excess of £1.3 million (which it admits in its Particulars of Claim in the Second Claim), this is on any view an ambitious assertion. In paragraph 33 of its amended Particulars of Claim, the Appellant sought:

“damages of between £30 million to £39 million for the opportunities it has lost to develop other student accommodation schemes and in due course it will seek permission to call PKF to give forensic accountancy expert evidence. As matters stand, Gladman estimates that but for the conduct of the defendant, it would have developed a total of six student accommodation schemes.”

It is hardly surprising that, faced with a plea of that grandeur and high-level of generality, the Respondents applied to strike it out. The complaint was that the plea was embarrassing and vexatious, and that it failed to set out any causative link between the Appellant’s decision to contract to purchase the Properties and its alleged inability to develop other schemes. By the time of the hearing before Arnold J in December 2012, the Appellant had served an expert’s report by a Mr. Mathew-Jones, at the centre of which was the assertion (made by the expert on instructions) that the Appellant had been forced to earmark, and therefore sterilise, an initial £6million rising to £7million of its funds against the risk of liability to complete the purchase of the Properties, were it to lose the First Claim.

The judge’s view, set out at paragraphs 169 to 175 of his January 2013 reserved judgment, was that reliance upon an expert’s report was inherently unsatisfactory as a method of pleading the facts required to support a case that the fraud complained of caused a loss of more than £30 million and that, in any event, the expert’s report failed to make good the deficiency, because it contained no explanation of what the Appellant actually did to earmark or sterilise the £7 million.

These conclusions merely repeated provisional observations made by the judge during the hearing in December 2012, following which he had offered the Appellant an opportunity to remedy those deficiencies by serving a further statement of case in relation to these matters. This was served on 10^th January 2013, in the form of a document entitled “Further Particulars on the Issues of Causation and Loss”. It proved impossible for the judge to hear submissions from the Respondents about the adequacy or otherwise of this document before he handed down his reserved judgment on 18^th January. Accordingly, the question whether the Further Particulars remedied the deficiency was argued on 7^th February, and in a reserved judgment on 13^th February, the judge held that they had not.

On this appeal no significant challenge is made to the judge’s conclusion in December 2012 that the original pleading was inadequate. It plainly was. Rather, the appeal relates to the judge’s conclusion that the Further Particulars did not, as a matter of pleading, remedy that inadequacy, and his further conclusion that, even if they had, the Further Particulars were so inconsistent with the contemporaneous documents and the Appellant’s evidence in the First Claim that, without any sufficient explanation for the departure, it ought not be permitted. It is sufficient for me to focus on the first of the judge’s reasons.

The Further Particulars consisted of slightly more than six pages of closely typed detail. The judge summarised them at paragraph 4 of his 13^th February judgment. I would summarise them more briefly as follows:

Ignoring the apparent mission creep from 4-5 to 7 sites, the difficulty with the explanation in the Further Particulars is, as the judge identified, that it provided no explanation why the sterilisation of £7 million due to a difficulty with the second site in the programme should have led to a conclusion by the Appellant’s directors that “the student division was not viable”. The Appellant’s case is and remains that, but for its difficulties with the Properties, the programme was likely to produce profits of £30-39 million, from the application of Headroom of £30 million. Why should a reduction in Headroom from £30 million to £23 million lead to the student division not merely being less profitable, but unviable?

Mr. Chaisty attempted to talk his client out these difficulties before the judge, and recited part of his oral submission before the judge in his skeleton argument on this appeal. It was in substance an attempt to escape from the consequences of the clear assertion in paragraph 6 of the Further Particulars that the Appellant had planned to allocate £30 million in Headroom for its student division. All I can say is that his explanation did not persuade the judge and its repetition has not persuaded me. The purpose of a statement of case is to provide to the opposing party, and to the court, a sufficient written explanation of the case which has to be met. If the document is defective for that purpose, it is not to be made good merely by oral submissions.

The judge decided that the Further Particulars were additionally defective because there was no plea that the Appellant lacked alternative sources of funding (such as, for example, equity) with which to make good the shortfall of £7 million sterilised by reason of the alleged misrepresentations. Mr. Chaisty submitted that it was for the Respondents to prove at trial that the Appellant had alternative funds rather for the Appellant to prove the negative. I am, for my part, less persuaded than was the judge by this point. In any event, it is a matter which could easily be put right by further amendment.

Nonetheless, the absence of any pleaded causative link between the sterilisation of £7 million of an available funding Headroom of £30 million originally allocated to the student accommodation division and its alleged non-viability remains for me, as it was for the judge, an insuperable objection to the adequacy of the Appellant’s pleading on causation and loss, so that I would dismiss the appeal on ground (4) as well.

I have therefore found it unnecessary to consider whether the Further Particulars were, even if adequate as a pleading, objectionable because of the unexplained departure from the Appellant’s evidence and materials deployed in the First Claim. Mr. Chaisty described this outcome as something of an ambush, because the original objection to the Appellant’s pleading was merely that it was embarrassing through the absence of particularity, rather than because of an unexplained departure from an earlier case. I have some sympathy with that submission, but it is unnecessary for me to travel the considerable further distance into the evidential materials which would be required for a proper evaluation of it.

The result of the foregoing point by point analysis is that this appeal must be dismissed. The Second Claim consists of an abusive attempt to pursue a cause of action already released, with no coherent basis pleaded for the ambitious proposition that the Appellant was not fully compensated for the alleged loss by the Settlement Agreement.

I agree.

I also agree.

I would only add that this case provides an opportunity to assess the value of the much criticised rule that release of one joint tortfeasor releases all other tortfeasors. One can see that the rule is a “trap for the unwary” if one means by “unwary” an unrepresented litigant. But in a case like the present, in which commercial firms or companies are represented by sophisticated legal teams, that consideration is much less powerful.

The virtue of a rule is that it is comparatively easy of application even if the question of implication of a term in the settlement agreement may lead to some legal argument. In the absence of a rule, the issue of abuse of process will often arise and it may be necessary, as it was in this case, to review the parties’ relations over a lengthy period of time. My Lord has indicated the detail of some of those submissions, even descending to evaluating the weight (if any) to be given to a number of interlocutory observations of the trial judge while witnesses were giving evidence in the course of the original trial which in due course concluded in the settlement. A one day appeal became a two day appeal; it was only possible to complete the abuse argument in two days because the court had done a considerable amount of pre-reading; even then there was no time for oral submissions on the amendment applications. A short appeal has become a heavy appeal, that could have been avoided by a straightforward application of what some regard as an old-fashioned and outdated rule.