Skip to Main Content

Find Case LawBeta

Judgments and decisions from 2001 onwards

Gateley Manchester LLP v Rose & Anor

[2013] EWCA Civ 401

Case No: B2/2012/1295
Neutral Citation Number: [2013] EWCA Civ 401
IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM MANCHESTER COUNTY COURT

(DISTRICT JUDGE CAVE)

Royal Courts of Justice

Strand, London, WC2A 2LL

Tuesday, 5th March 2013

Before:

LORD JUSTICE MUMMERY

LORD JUSTICE RICHARDS

and

LORD JUSTICE LEVESON

GATELEY MANCHESTER LLP

Respondent

- and -

ROSE & ANR

Applicants

(DAR Transcript of

WordWave International Limited

A Merrill Communications Company

165 Fleet Street, London EC4A 2DY

Tel No: 020 7404 1400 Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr David Uff (instructed by Abbey) appeared on behalf of the Applicants

Ms Eleanor Temple (instructed by Gateley (Manchester) LLP) appeared on behalf of the Respondent.

Judgment

Lord Justice Mummery:

1.

This case arises out of a firm of solicitors in Manchester, Halliwells LLP, going into administration on 20 July 2010. By a Deed of Assignment of the same day “Assigned Assets” (as defined in that Deed) were assigned by Halliwells acting by the administrators. The assignment was made to another Manchester firm of solicitors, Gateley, who are the respondents in this appeal. They took over part, though not all, of Halliwells’ practice. The expression “Assigned Assets” was defined in the Deed. I refer to clause 1, where it was defined as “Debtor Receivables and Work in Progress”. There was a further definition of “Debtor Receivables”, which was referred to as “all receivables (gross of VAT)”, as extended in three subparagraphs, (a), (b) and (c).

2.

On 28 March 2011 Gateley, in its capacity as assignee, issued proceedings against the appellants. They have been clients of Halliwells. The claim in the proceedings was for breach of contract. The claim arose from the non-payment of invoices rendered to the appellants between 30 April 2009 and 23 August 2010 in respect of advice and other legal services provided by Halliwells on behalf of the appellants. The total claim was for £48,668.16 plus interest. Neither Halliwells nor the administrators were joined as parties to those proceedings. The Particulars of Claim gave details of 13 invoices. Dates, invoice numbers, and amounts invoiced are referred to. The Deed was relied on in the Particulars of Claim as assigning to Gateley the right to collect certain debts, work in progress and unbilled disbursements which would otherwise be collected by Halliwells.

3.

The appellants put in a Defence on 11 July 2011. It was a general putting Gateley to proof of the allegations made in the Particulars. The Defence also referred, in a complaining kind of way, to the difficulties that had been encountered by the appellants as a result of Gateley’s refusal to return to them bundles of papers relating to the proceedings in which the alleged sums were due.

4.

Coming to the substantive points of defence, the appellants laid out their case as follows: (1) The invoices particularised were not delivered in a signed form and the sums invoiced were not due. (2) The Deed was not sufficient to transfer to Gateley the alleged debts or the right to bring the proceedings. The scope of the Deed was not, it was alleged, sufficient to encompass the sums of the claim. (3) The appellants had an express agreement with Halliwells which was binding on Gateley, and, in consequence of the terms that were expressly agreed, or were to be implied, no sums were due from the appellants. The details of the terms of the agreement are pleaded in paragraph 7 of the Defence. (4) Gateley was seeking to recover disbursements to counsel for the appellants, but it was alleged they were not within the scope of the Deed. (5) Halliwells had exceeded its authority in agreeing counsel’s fees in excess of the sums agreed with the appellants. (6) The appellants had already paid more than was sufficient to Halliwells in order to discharge the alleged indebtedness. (7) The invoices contained double-billing. They were not accurate, they were not reasonable and they had never been accepted by the appellants.

5.

By an order on 21 September 2011 District Judge Smith allocated the case to the multi-track. He gave detailed directions for preparations for trial. Gateley requested, and the appellants supplied, further information. That information was provided on 3 November 2011. By an application notice dated 19 January 2012 (as supported by a witness statement) Gateley asked the court to order the determination of a preliminary issue. The notice was not specific about the form or precise terms of the issue. The witness statement referred in general terms to the appellants’ case that Gateley was not entitled to seek payment of the sums claimed.

6.

The application was heard by District Judge Stonier on 30 January 2012, when he made the following order after hearing the parties:

“The following issue shall be tried as a preliminary issue:-”

In fact there were then set out in three subparagraphs distinct issues:

“a)

Whether the terms of the Deed of assignment dated 20 July 2012 are sufficient to transfer this to the Claimant the debt incurred by the defendants with Halliwells LLP (In Administration) and/or the right to bring the present proceedings.

b)

Whether the terms of the Deed of Assignment dated 20 July 2010 enables the claimant to recover from the Defendants Counsels fees incurred by Hallywells LLP (In Administration) on behalf of the Defendants.

c)

Whether the agreements referred to in paragraph 7 of the Defence were made, and, if they were so made, what were the terms of those agreements?”

There were then directions given in relation to the preliminary issue as to the filing of witness evidence, and as to the service of skeleton arguments, and the preparation and lodging of a bundle of documents. It was provided in paragraph 6 of the order that, following the determination of the preliminary issues, the court would give further case management directions as necessary for the final hearing of the claim.

7.

This appeal is from the order that was made by District Judge Smith in the Manchester County Court on 8 May 2012, having heard argument on the preliminary issues. The order contained his ruling on the preliminary issue. As we shall see, the District Judge did not, as would normally be the case, respond with answers to the issues which had been directed following the wording of those issues. What he did, after a long discussion with counsel at the hearing, was to make a one-paragraph order on the preliminary issue, in which he said this. (It may be slightly difficult to understand before I explain how he arrived at it.)

“1.

The terms of the Deed of Arrangement ...”

I pause there to say that was obviously a typing error for “assignment”.

“... dated 20 July 2010 are sufficient to transfer to the claimant the alleged debt (including any fees of counsel) the subject of the monies listed in the Particulars of Claim up to 20 July 2012,...”

I pause there to mention that the reason for that date will be explained when I refer to the judgment given by District Judge Smith. And then adding:

“...subject to the claimant establishing at trial that the defendants were not classified internally by Halliwells LLP as a Manchester insurance litigation matter partner debt ...”

I pause to mention there that that expression, “Manchester insurance litigation matter partner debt”, is taken from subparagraph (a) of the definition of “Debtor Receivables”, which provide that matters falling within that description are excluded from the assignment.

8.

That is the order from which the appeal is brought. I granted permission for the appeal on 2 October 2012, estimating that the appeal would last for a day. That has been falsified by later events since the court was informed, only a few days ago, that Gateley had decided not to oppose this appeal save that, in the event of the appeal succeeding, it expressly reserved its position as to liability for costs here and below, having, it was stated, made a “without prejudice” offer to the appellants by a letter of 21 January 2013. I will come to the terms of that letter when dealing with the question of costs.

9.

Before considering the submissions and my conclusions of them, I should refer to the judgment of District Judge Smith. It is not altogether easy to follow what was going on. The transcript contains a short judgment followed by lengthy discussions about the matters on which the judge gave judgment, about the terms of the order he should make in the light of his judgment and about what order he should make as to costs. District Judge Smith referred to the order for the preliminary issues made by District Judge Stonier. He referred to the pleadings briefly and gave a summary of the background facts. He then made a number of rulings. (1) He held that he had jurisdiction. It is not necessary to go into any doubts about whether he had jurisdiction. (2) He could not make a decision on two of the invoices. Those were dated 19 and 23 August 2010. They post-dated the Deed. They were not in evidence, so nobody knew what they related to. (3) As to the other invoices particularised, it was not clear what they related to, so he could not make any finding about them. But it did not matter, he said, because it was irrelevant. The real issue before him was whether those invoices were “Debtor Receivables” within the meaning of the Deed as part of the Deed’s definition of creditor “Assigned Assets.” (4) He noted the oddity that, although the Deed contained a definition of “Disbursements”, it did not contain any express assignment of disbursements. (5) There was no evidence as to which category of matter the appellants fell into, so he could not determine whether it was a “Manchester Insurance Litigation Matter Partner Debt”, as referred to in subparagraph (a) of clause 1 by way of exclusion of the “Debtor Receivables”. (6) The appellants were not parties to the Deed, so it was incumbent on Gateley to satisfy the court that Gateley was entitled to bring the claim in reliance on the terms of the Deed. (7) The judge said he could not finally determine the preliminary issue in favour of Gateley, as he did not know whether the appellants were defined as a “Manchester Insurance Litigation Matter Partner Debt”. (8) In the ensuing discussions with counsel about what order he should make, he said that he would order that the terms of the Deed were sufficient to transfer to Gateley the alleged debt incurred by the appellants and the right to bring the proceedings; subject, however, to proof that it was not a “Manchester Insurance Litigation Matter Partner Debt”. That issue had to be resolved at the final trial of the matter. (9) He said that, on the second item, he had to find in favour of the appellants, as the Deed did not assign unbilled disbursements. (10) At the end of the discussion about costs, the judge said that it would be declared that the terms of the Deed were sufficient to transfer to Gateley the alleged debt including any fees of counsel, subject to the listed invoices, up to 20 July 2010 (that is, the date of the Deed) subject to Gateley establishing at trial that the appellants were not classified internally by Halliwells as a “Manchester Insurance Litigation Matter Partner Debt”. (11) The judge made an order for costs in the cause. He said that Gateley had failed to meet the required burden of proof in establishing that it was entitled to recover the debt claimed by it and it had failed to bring evidence as to why the debt fell within the terms of the Deed. At the same time, however, he said that the appellants had been evasive in establishing why the matter did not fall within the scope of the Deed, which was not in keeping with the spirit of the Overriding Objective. (12) The judge concluded by describing the hearing as “an utterly fruitless detour”. At an earlier stage in the discussions, counsel for the appellants, Mr Uff, had commented, when submitting that the appellants had succeeded, that “...we have not advanced this claim one jot today”. Ms Temple, who appeared for Gateley, submitted that her application had been successful, and that Gateley should be awarded its costs.

10.

The relief which is sought on this appeal by Mr Uff’s clients, the appellants, is set out in Annex 1 to the Notice of Appeal. As I mentioned earlier, the appeal is not opposed. That does not mean that there is a consent to it. It is not opposed, and the position on costs has been reserved. The position taken by the appellants sets out two alternatives. The first is that, if the appeal is successful, then the claim made by Gateley against the appellants should be dismissed and Gateley should pay the defendants’ costs in the action, including costs of the appeal, on the standard basis, to be assessed if not agreed. That was the primary submission advanced by Mr Uff on behalf of the appellants at the opening of the appeal. He put it forward on the simple basis that that order would be consistent with the Overriding Objective, which he spelt out in some detail by reference to particular points concerning the time and costs of the parties and the time of the court. He said, quite simply, that Gateley had asked for preliminary issues and, when they were before the court, they had failed to discharge the burden of proof on those issues.

11.

The right course to take in those circumstances was as if this were a final determination of rights. If the preliminary issues were not decided in favour of Gateley, then that was a final decision. It would not be right that they should be allowed to re-argue the point by later bringing forward evidence which would have been available to them at the trial of the preliminary issues. And so, for those reasons, he said we should simply dismiss the claim. Alternatively, he said that, if the appeal was successful on ground 2 before the appeal, then no order should be made on the hearing of the preliminary issues. Those issues will be determined in the county court at the trial of the claim. The proper order for costs in that event was that Gateley were to pay the appellant’s costs of and occasioned by the preliminary issues, to be summarily assessed on the standard basis.

12.

There were then set out in the skeleton arguments elaborating the grounds of appeal as to why this appeal should succeed. I am not going to go into the details of that beyond saying quite briefly this. This case never was suitable for trial of a preliminary issue. The trial of the preliminary issue was a non-event. It was not possible to extract these particular issues as issues of law from their factual matrix and it was not possible, in my view, to extract those facts that would be relevant to the preliminary issue from those facts that would be relevant to the determination of other issues. This was not truly a preliminary issue of either law or fact which could have been resolved by the District Judge. It is no wonder that he found difficulties at almost every stage in his judgment, and in the ensuing discussions in deciding how he should deal with these matters. The position arrived at by him was that almost everything had to be left over to the trial, because they were matters of fact that had to be decided and which he could not decide on the documents or evidence then before him.

13.

In those circumstances, I think that this appeal should be allowed. As for the Overriding Objective points put by Mr Uff, I think that the true position is not that the claim should be dismissed, because I do not think the claims have been dealt with justly. They have been dealt with in a most confused and confusing manner, because of the inappropriateness of the preliminary issue procedure for determination of this dispute. Rather than dismiss the claim, in my view the proper course to take, in order to achieve a just resolution of this dispute, is for this whole matter to be remitted to the Manchester County Court and for that court to make such further and additional directions as are required for the trial. For example, it is not for this court to decide what the position should be about the proper parties for the trial. The point taken by Mr Uff in his skeleton argument was to the effect that the proceedings were not properly constituted for declaratory relief in relation, for example, to the interpretation of the Deed, because the assignor, Halliwells, was not a party, nor were the administrators through whom Halliwells were acting. I am expressing no view about that. That is a matter for the parties to consider, and for the Manchester County Court to decide when giving further directions for the trial of the action.

14.

That leaves simply the matter of costs. The position taken on that by Mr Uff for the appellants is that they should have their costs of the hearing below and of this appeal, to be summarily assessed on the standard basis. The position taken by Ms Temple on behalf of Gateley was that that was not an appropriate order to make in relation to the appeal costs. As I understand it, she did not contest in principle the liability to pay the costs of the hearing below, but, as far as this court is concerned, she relied on a letter sent by Gateley to the appellants’ solicitors dated 21 January 2013, headed “Without prejudice save as to costs”, and she relied on the terms of that letter for saying that there should not be an order for costs against Gateley in relation to the appeal.

15.

In my view, the letter is no help at all to Gateley. It is misconceived insofar as the proposal put forward was that the appeal would be stayed pending the outcome of a joint application to the court. The joint application envisaged was that paragraphs 1 and 2 of the order made by District Judge Smith on 8 May 2012 should be set aside and that that could be achieved by the parties concurring in a joint application to the court for that order to be made. Secondly, the proposals made in the “without prejudice” letter for costs are of no help to Gateley. It was simply proposed that the costs of the hearing of 8 May 2012 and the costs of the appeal to date should be reserved. In my view, that “without prejudice” letter had no impact at all on the prima facie liability of Gateley for the costs of the hearing and the costs of this appeal. As to the costs of the hearing, the preliminary issues hearing took place because of an application that had been made by Gateley for preliminary issues. As I have already observed, the preliminary issues were not properly identified in the application or in the supporting witness statement and, in my view, the order that they had obtained from District Judge Stonier was a wholly inappropriate way of dealing with this dispute. They should therefore be liable for those costs on this court allowing the appeal. They should also be liable for the costs of the appeal, which they have not opposed.

16.

We then come to the Statements of Costs. These were not supplied to us until after the hearing of the argument on the appeal. We have two sets of Statements of Costs. As to the costs below, some correction was made by Mr Uff, so that the sum now claimed for the costs below by way of summary assessment is £3,508 plus VAT. Subject to the re-calculation of the VAT, that is the order we would make in relation to the costs below.

17.

As for the appeal costs, we have heard submissions from Ms Temple as to why she says that the figure of £14,818.12 is excessive, and the court has asked questions of Mr Uff relating to certain items, in particular the 9.2 hours at £160 an hour spent for work done on documents in preparation for the appeal and another particular item, and that is for two counsels’ fees: not only for Mr Uff but for Mr Daniel Metcalfe.

18.

On this point, we agree with Ms Temple that the sums which are claimed in the Schedule of Costs for the appeal are excessive. In particular we have had difficulty in understanding how 9.2 hours was spent on work done on documents for the appeal when, according to the Statement of Costs for the first-instance hearing, the work done on documents was only 2.2 hours. There is plain excess in relation to that item, and this court is not able to understand why two counsel were required for the argument in this appeal.

19.

In all the circumstances, what we propose is to summarily assess the costs of the appeal inclusive of VAT at £8,000. So the order we make as to costs is that Gateley, as respondent, will pay to the appellants the sum of £3,508 plus re-calculated VAT in respect of costs at first instance and £8,000 inclusive of VAT as the assessed costs of the appeal.

Lord Justice Leveson:

20.

I agree.

Lord Justice Richards:

21.

I also agree.

Order: Appeal allowed.

Gateley Manchester LLP v Rose & Anor

[2013] EWCA Civ 401

Download options

Download this judgment as a PDF (143.8 KB)

The original format of the judgment as handed down by the court, for printing and downloading.

Download this judgment as XML

The judgment in machine-readable LegalDocML format for developers, data scientists and researchers.