Smith v Eversheds

This is an application seeking permission to appeal the decision of Sir William Blackburn dated 12 June 2014 whereby he gave judgment for the defendant, Eversheds, and ordered the claimant, Mr Smith, to pay Eversheds’ costs together with interest and a payment on account.

The issue in the application before the judge was focussed on what was said in a letter dated 21 December 2000 sent by Eversheds as solicitors in certain proceedings. The facts are summarised both in the judgment of the judge and in the pleadings. Basically, Mr Smith’s claim was that a statement made in the letter was a personal undertaking by Eversheds for which they were, as solicitors, responsible, that, if the counterclaim by Mr Smith against FMS9, the mortgagee in whose name, Eagle Star, the insurer, were suing under rights of subrogation was successful, Eagle Star would honour any counterclaim. In the alternative, in the action Mr Smith contended that if Eversheds did not have authority to make the relevant statement, then Eversheds were acting in breach of their warranty of authority. Alternatively, Mr Smith alleged that the statement constituted an offer of a contract which Mrs Smith, who was the relevant claimant at the time, accepted by suing FMS and recovering judgment against it.

The correspondence is referred to in the relevant paragraphs of the judge’s judgment. I quote the critical paragraphs as follows:

“We also note that you presume throughout your letter that our client intends to ‘avoid liability for any counterclaim awarded to [yourselves] in this action’. If, at trial, the Court is satisfied you have proved your counterclaim and accordingly grants you Judgment on the counterclaim, our client must honour the decision of the Court and certainly does not intend avoiding liability in that scenario, as you maintain.”

On 21 December, the same date, about a couple of hours after Eversheds had faxed Mr and Mrs Smith their letter of 21 December, they sent the following letter by fax:

“... I note the admissions made as to the identity of the other party to the MIG Policy and also that your client Eagle Star accepts liability for any award made by the court to my wife ([sic] the word ‘ourselves’ was of course used in error). We did not ‘presume’ that your client would seek to avoid liability but merely asked did he ‘intend’ to.”

In those circumstances the judge held, first of all, that no undertaking was given by Eversheds itself that Eagle Star would honour any judgment on the Smith counterclaim against FMS. The judge however held that the client referred to in Eversheds’ letter was Eagle Star and not FMS9. As I have said, the judge held that that was not a personal undertaking given by the solicitors, it was no more than a statement.

If, as subsequently emerged was the case, it was a statement made by Eversheds without authority, namely that Eagle Star would honour any counterclaim, the judge held that any claim for damages for breach of warranty of authority was well out of time. The proceedings against Eversheds were issued on 9 September 2013, over 12 years after the alleged undertaking. He also held that any claim for damages for breach of the unilateral contract would likewise be statute barred.

Mr Smith, the applicant, seeks permission to appeal on a number of grounds as set out in his grounds of appeal. Mr Smith, as the history of this unfortunate litigation discloses, has had many, many years of financially very expensive litigation. He claims he has been wrongly turned out of his house and that he, as an ordinary layman with understandably no legal experience, was entitled to assume from what Eversheds said that Eagle Star were accepting liability to pay the counterclaim in circumstances where as I have already said, Eagle Star were not actually the original mortgagee, FMS9, but were exercising subrogation rights as insurer in which case, as is clear, Eagle Star would not have been liable in relation to paying the counterclaim although it may have been obliged to set off any sum arising on the counterclaim against the shortfall liability in respect of which it was suing.

Mr Smith complains that despite the fact that the authority of Reddy v Lachlan (Gunter) Third Party, Lloyd’s Rep PN85823 was cited to the judge, he did not refer to that judgment in his own judgment and failed to answer the question identified by the Court of Appeal in Reddy as being the critical question in a case of this kind, namely, how would the solicitor’s letter reasonably have been understood in the circumstances in which the recipient proceeded? Mr Smith claims that in accordance with the doctrine of precedent, emphasised in many cases but in particular in the House of Lords case of K v London Borough of Lambeth [2006], the judge should have followed the decision in Reddy which clearly, submits Mr Smith, stated the way in which the matter should be approached. Mr Smith says that in addition, the judge failed to have regard to the paragraph 1801 of the then relevant guide to the professional conduct of solicitors in his construction of the statement. Mr Smith submits that the judge could not have arrived at his conclusion had the correct test been applied (namely that it meant simply that Eagle Star would accept the court’s decision if the court succeeded).

I have considerable sympathy with Mr Smith and his experience in these proceedings to date, but the question which I have to ask myself is whether Mr Smith has a real prospect of success on appeal or there is some other compelling reason why permission should be granted. If either those tests are not satisfied, it is of no benefit for permission to be given. I am afraid that in my view, there is no real prospect of success. My reason for that is this; although it is right to say that the judge did not specifically refer to the case of Reddy or expressly articulated the question in the way in which it was articulated in Reddy, nonetheless, reading his judgment in the round, it is clear to me that the judge did approach the matter of construction objectively in the context of all the correspondence. Although he did not expressly refer to the question, he did in fact approach his task of construing the documents on the basis, and in accordance with, the test: viz: how would the solicitors’ letter reasonably have been understood in the circumstances in which the recipient received it. It seems to me that the judge was also well aware and took account of the fact that the Smiths were litigants in person.

The critical issue on the construction of the undertaking is whether the undertaking was one given by the solicitors personally and that they were undertaking themselves, as solicitors, that Eagle Star would honour the counterclaim in circumstances where Eagle Star was clearly under no obligation as an insurer exercising subrogation rights to do so, although, as I have said, they would have had to take it into account, or might have had to take into account, any judgment on the counterclaim in their own claim.

In my judgment there is no reasonable prospect of this court coming to the conclusion that the statement made by Eversheds was a personal undertaking by the solicitors or any other form of contractual promise by Eversheds personally that Eagle Star would pay the counterclaim. The judge’s decision as a matter of construction of the judge is sound. Once that position is reached, it seems to me clear that as a matter of analysis, there is no basis in which Mr Smith could succeed on an appeal.

Likewise, as far as the claim for breach warranty of authority is concerned, which might have had some traction had it been brought at an earlier stage and likewise the breach for damages in relation to a unilateral contract, are whatever the judge held on construction, clearly statute barred. I should also mention that Mr Smith submits there are compelling reasons as to why I should give permission to appeal, irrespective of whether there is a real prospect of success. First of all, he complains, that there are many aspects as to the manner in which Eversheds behaved during the conduct of the litigation. He complains that matters were concealed at various stages and in addition complains that District Judge Singleton was misled by Eversheds because they concealed the fact, as he asserts, that striking off FMS9 from the companies register at a time when it was a defendant to a counterclaim was a serious criminal offence. This was something that the claimant was unaware of at the time, but he says that the defendant as knowledgeable commercial solicitors should not have permitted the striking out of the counterclaim on the basis that FMS9 were still defendants to the counterclaim.

Mr Smith furthermore complains that another compelling reason why permission should be granted, irrespective of the strength of his prospects of success on the substantive points, is that this court has not had sufficient time to consider the matter which is clearly complex, nor indeed had the judge at first instance. I am afraid that I do not consider any of those points provides sufficiently compelling reasons for me to give Mr Smith permission to appeal. As to the last point, both Patten LJ in considering the matter on the papers and I have had the full appeal record and judgment before him. There is a considerable amount of material which I have considered, as I am sure Patten LJ did too.

As far as the allegations against Eversheds are concerned, those matters do not give rise to any reason why the judge was wrong in reaching the conclusion which he did on the construction and effect of the undertaking. As I have said, whilst I have sympathy with Mr Smith’s predicament, I do not think that, in the ultimate analysis, I would be granting him any favours by granting permission to appeal in circumstances where I conclude that there is no real prospect of success.

Accordingly, I dismiss this application.