ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
Arnold J [2015] EWHC 716 (Ch)
HC 2014 000516
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
LORD JUSTICE PATTEN
Between :
HUGHMANS (a firm) | Claimant/ Appellant |
- and - | |
DUNHILL | Defendant/Respondent |
Steven Gee QC (instructed by Direct Access) for the Defendant
Hearing date : 9 December 2015
Judgment
Lord Justice Patten :
This is a renewed application by the Defendant, Ms Dunhill (“AD”), for permission to appeal from the order of Arnold J dated 11 May 2015 granting summary judgment to the claimant for £187,593.28 (including interest) in respect of unpaid fees. The judge also dismissed the Defendant’s own application for summary judgment on certain issues relating to her counterclaim and dismissed the counterclaim under CPR 24.2.
As drafted, there were 53 grounds of appeal but, at my request, these have been reduced considerably in number, although some further refinement would, I suspect, be possible and certainly preferable. Arnold J’s judgment extends to 254 paragraphs and I do not propose as part of this judgment to set out all the facts or even all the arguments in the same sort of detail. I shall assume that the readers of this judgment will have familiarised themselves with the facts and issues involved.
In short summary, the claim is by a firm of solicitors against a former client for unpaid fees. Hughmans (in the person of Mr Peter Black, a partner) were instructed in April 2010 by AD in connection with an ongoing dispute with her then husband, Mr Charles Turner (“CT”), about the level of periodical payments which he was making. AD claims that Mr Black was negligent in the handling of her instructions and that she therefore has a counterclaim for losses which she has suffered as a result. These include legal fees both before and after Hughmans’ retainer was terminated in 2012 and also the loss of her house at 71 Eaton Terrace in London where she lived with her children. She is now on the verge of bankruptcy.
She also relies on claims by the children against Hughmans based either in contract or on a tortious duty of care. These claims have now been assigned to AD. The same allegations of breach of duty are relied upon to support the argument that Hughmans committed various fundamental breaches of the contract of retainer which amounted to a repudiation. As the retainer is an entire contract, this would be a defence to the claim for unpaid fees. AD and the children had also made applications to recover wasted costs either under s.51(6) of the Senior Courts Act 1981 or under the Court’s inherent jurisdiction.
In order to make AD’s position more comprehensible, it is possible to summarise the main heads of her claim as follows:
She instructed Hughmans in connection with her matrimonial affairs and, in particular, in relation to her husband’s reduction in the periodical payments he was making;
As of 2010 her income and asset position were governed by the two Consent Orders made in 2003 (judgment: [17]-[20]) and CT’s voluntary payment to her of a total of £7,000 per calendar month which started in January 2006 (judgment: [44]). It was common ground before the judge that the Second 2003 Consent Order was effective to vary the Alexandra Settlement Trust (“AST”) so that the proceeds of sale of 33 Chelsea Park Gardens were held on trust on the terms of that order. Subsequently the proceeds of sale were used by AD and CT (judgment: [29]) to pay out to themselves the sums contemplated by paragraph 1.5 of the order which, in the case of AD, were used to fund the purchase of 71 Eaton Terrace. But, in the case of CT, it is said that the monies were used to fund his general expenses in breach of paragraph 1.5.
These payments were not in terms authorised by the trustees under clause 1.4 of the Second 2003 Consent Order but it is difficult to see how this affects their status as trust monies. The only monies advanced to CT and AD beneficially were those referred to in paragraph 1.4.1.
AD claims that the position reached by March 2004 when these payments had been made was the result of two separate frauds on her by CT. The first was his failure to disclose in his 2002 Form E financial statement made in the judicial separation proceedings that he had an interest in various Welsh properties through a Panamanian company (Yorkton) which were sold by January 2003 so as to produce an undisclosed net gain of £425,000 (judgment: [7]-[13]). Had this been disclosed, it is said that little or no provision would have been made for CT under the Second 2003 Consent Order either by way of the Charles Turner Fund or in the sum of £150,000 for his own use. The second fraud which CT is alleged to have carried out was in relation to the promises made by him in the 2004 correspondence (judgment: [25]-[29]) which led to AD agreeing to disburse the paragraph 1.4.2 settled funds without the concurrence of the trustees.
In essence, AD’s case against Hughmans is that, when they took on the task of advising her in 2010 in relation to CT’s reduction in the £7,000 per calendar month payments, they should have concentrated on two main issues: (i) CT’s 2003 non-disclosure of the Welsh assets and (ii) the fact that a significant part of the value of 71 Eaton Terrace consisted of a trust asset in which she had no more than a life interest and her children the interest in remainder. As it was, she was advised to produce a Form E and a witness statement specifying that the property was owned 100% by her. This, she says, led District Judge Berry to conclude that he should terminate her maintenance payments leaving CT liable to continue to make periodical payments to the children (judgment: [144]). 71 Eaton Terrace was treated as hers to dispose of so that she could sell the property, buy a less expensive house and use the balance to fund her own maintenance The District Judge would, she says, have been likely have made a different order had he realised that the property was not one of her free assets.
Her other main complaint against Mr Black is that his pursuit of the non-disclosure by CT was inadequately focused and insufficiently vigorous in terms of the evidence which Hughmans assembled and was therefore available to their counsel to put to CT. As a result, the District Judge largely accepted CT’s evidence that he was not guilty of material non-disclosure and that he had given a genuine account of his correct financial position. One aspect of this was his evidence that, due to ill health, he was likely to have to retire or curtail his business activities much earlier than would otherwise be the case. There was expert evidence about this but AD criticises Hughmans for not taking steps to compel the attendance as a witness of Professor Gazzard, CT’s consultant physician.
The judge was inclined to accept that AD had an arguable case that Hughmans should have been more energetic in their pursuit of CT (judgment: [223]) but rejected the complaint about not calling Professor Gazzard (judgment: [224]-[229]).
This over-brief summary of the main thrust of AD’s case raises one general and a number of subsidiary issues. The first is whether the defence and counterclaim as a whole is capable of being determined on a summary basis. Quite apart from the issues which exist about the scope of the retainer (including whether any duty was owed to the children) and whether Hughmans acted in breach, there is a major issue about causation on which the judge based his dismissal of the counterclaim even if he was wrong about the prior issues of breach and scope of duty. This centres on the 2014 consent order made after the challenge mounted by AD to District Judge Berry’s proposed orders in 2013. As the judge explains (judgment [164]-168]), this was a disastrous expedition for AD who incurred considerable additional legal costs but ended up with a worse result. However, as Mr Gee QC has reminded me, there is no allegation of failure to mitigate or that the action AD took after 2012 broke the claim of causation. The argument which the judge accepted was that it could be inferred from the terms of the 2014 order (when all the issues about what happened in 2003/4 either had been or could have been raised) that, had the same application been made by Hughmans in 2010, the result would have been no different. Mr Gee says that this is a wrong (or, at least, arguably wrong) view because, by 2014, the District Judge had already embarked on a hearing involving CT; had largely accepted his evidence; and had indicated what he proposed to order. The 2014 proceedings were therefore a belated (and probably too late) attempt to challenge those findings in part on an appeal and under much greater pressure in terms of costs. Had the same course been taken much earlier in 2010/11, those difficulties would not have existed. The two situations are not therefore comparable and the judge was wrong to treat them as such.
I turn then to consider the grounds of appeal and, for this purpose, I propose to refer to the grounds in the appellant’s notice with the omissions indicated by Mr Gee In due course the grounds will have to be amended to take account of those changes.
CPR 24
I grant permission on ground 1 which is the general ground to the effect that the judge conducted a mini trial of a case which was unsuitable for determination under CPR Part 24. It seems to me clearly arguable that 71 Eaton Terrace remained in large part a trust asset and that Mr Black’s view that the trust had somehow been dissolved in 2003/4 was not tenable. On that basis, I do not consider that the disclosure of this fact could have made no difference to the outcome. It is at least properly arguable (on the basis of a loss of a chance) that the District Judge would have had to have resorted to an exercise of his powers under Matrimonial Causes Act 1973 s.31 in order to have released capital for AD and that the focus would therefore have been very different including in relation to the use of property in which the children had a beneficial interest: s.31(7).
The judge was therefore arguably wrong to have decided (for CPR 24 purposes) that it would have made no difference and that the same went for the non-disclosure by CT in 2003 (judgment: [247-8]).
Scope of duty
I grant permission on grounds 3-6 and 4 (p. 2) and on grounds 13, 15 and 16, all of which relate to the scope of the solicitors’ duty. These seem to me to be in part fact-specific in relation to what a reasonably competent solicitor in Mr Black’s position ought to have done and advised upon in order properly to handle AD’s matrimonial affairs. I am not satisfied that they are susceptible to determination on a summary basis but, in any event, I think that the judge was arguably wrong to find that Hughmans had no duty to advise her in relation to the AST which (as varied by the Second 2003 Consent Order) was central to whether 71 Eaton Terrace was a trust asset.
AD’s summary judgment application
I grant permission on ground 6 (p. 3) in relation to the issues there identified. It is difficult to see how acquiesance by the trustees (judgment: [194]) can have affected the question whether the payments were trust monies. They were within the terms of the Second 2003 Consent Order which only permitted their disbursement (with the trustees’ consent) on the trusts declared in paragraph 1.5.
The children’s claims
There are obvious difficulties about imposing a tortious duty of care in this case as the judge identified. But I do not regard the terms of the retainer as the final word on this given the children’s interests in the outcome. I propose to grant permission on grounds 8 (p. 3), and 24-27.
Scope of the retainer
This is the point about a duty to advise on the AST. There is a considerable amount of duplication between grounds 28 and 29 and the earlier grounds of appeal which need to be eliminated but I give permission on these grounds.
Breach
Permission is granted on grounds 33 and 35.
Professor Gazzard
Permission on ground 37 is refused. The point is unarguable for the reasons identified the in judgment: [224]-[228].
Causation
For the reasons already explained, I give permission on grounds 38, 39, 41, 45-47 and 49. Again, these grounds need to be revised to eliminate duplication.
Inherent jurisdiction/s.51(6)
Like the judge, I doubt whether these grounds add very much. But I give permission on grounds 50 and 52.
Generally
The appeal will be listed for 2 days with a constitution to include at least one Chancery Lord/Lady Justice and one Family Lord/Lady Justice. AD’s application to adduce additional evidence is adjourned to be heard with the appeal. The stay which I granted earlier will continue until after judgment in the appeal.