Edenwest Ltd v CMS Cameron McKenna (A Firm)

By an Application Notice dated 11 August 2011 the Defendant seeks (primarily) an Order for summary judgment under CPR Part 24; alternatively, it seeks an Order striking out the Particulars of Claim under CPR Part 3.4 or under the inherent jurisdiction of the Court (in each case as to the whole or part of the claim). The Defendant contends that the Claimant has no real prospect of succeeding on the claim (which alleges professional negligence); and that the Particulars of Claim disclose no reasonable grounds for bringing the claim and constitute an abuse of process.

The basis of the application is the Defendant’s contention that the Claimant has not demonstrated any relationship between itself and the Defendant such as to give rise to a duty of care in either contract or tort. More particularly, the Defendant contends that (1) it was never retained by or on behalf of the Claimant, and in acting as solicitors to its administrative receivers it never became so: and that therefore there can be no sustainable claim in contract; and (2) that the common law does not impose upon an adviser to administrative receivers a duty of care owed to the company (the Claimant): so that there can be no claim in tort either.

The Claimant, on the other hand, contends that (1) a retainer between it and the Defendant to advise on certain aspects of an intended receivership sale of the Claimant’s assets was established, ratified or novated immediately upon the appointment of administrative receivers with a view to effecting that sale, so that accordingly it has a contractual claim; and that (2) in advising on the merits of the Claims (as defined in paragraph 17 below) and their value the Defendant came under a duty owed to the Claimant to exercise reasonable skill and care in the course of the alleged retainer.

The case raises interesting issues as to the nature of the relationship and obligations between a company, its administrative receivers and those advising in the context of such a receivership, especially in the context of (as there was in this case) a “pre-packed” administrative receivership. The focus is sharper on the position of the advisers since the Claimant cannot pursue a claim against the administrative receivers (“the Receivers”) and its only remaining potential claim is against their solicitors: for in this case, the Claimant released the Receivers from any claims it might have in relation to the administrative receivership long ago (in 2007).

The approach of the Court in adjudicating an application summarily to dispose of proceedings by way of summary judgment or to strike out the whole or any part of a claim (whether under the rules or the inherent jurisdiction of the Court) is well established. In each case the exercise of jurisdiction is discretionary: each case must be approached individually, and with a view to fulfilling the overriding objective of dealing with cases justly. Just adjudication includes stopping cases which have no reasonable prospect of success at trial before great expense is incurred, and before the Court’s resources are further expended to no useful purpose.

In the context of CPR 3.4(2) and the inherent jurisdiction to strike out claims the focus is on the pleadings, and in particular, whether on analysis they disclose any reasonable grounds for sustaining the claim. In the context of CPR 24.2 the principal question is a slightly broader one: whether the party against whom the application for summary judgment is brought has any real prospect of succeeding on the claim or issue identified. In the latter context the Court must seek to determine whether at trial the prospects of success are so remote as to make the claim not fit to proceed at all.

Put shortly, the question is whether the claims as pleaded should be permitted to proceed, or whether a trial would be a waste of time and money. In determining that, the Court must not seek to assess the likelihood of success by conducting a mini-trial on the documents without discovery and without oral evidence: that is not the object of the powers of summary adjudication or striking out, which are designed to deal with cases that are simply not fit for trial at all.

All the above principles and guidance are set out in Three Rivers DC and Others v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 (especially at paras. 87 to 98) and Swain v Hillman [2001] 1 All ER 91 (per Lord Woolf MR, especially at pages 92 to 94). I have sought to bear them well in mind, especially given that this case has already been extensively pleaded (the statements of case so far stretch beyond 100 pages), and any dispute as to whether a duty of care existed is inherently fact-sensitive. Where there are substantive disputed issues of fact, it is not appropriate that I should speculate how eventually any such issue might be decided; save as regards facts which are common ground or on which there is no sensible controversy or which are inherently entirely implausible, I must in testing the viability of the claim take the facts to be as pleaded by the Claimant to be established.

For present purposes, the following facts are not disputed.

In 2003 the Claimant was carrying on business as a wholesale distributor of perfumes and similar products from premises at Stonefield Way, South Ruislip, Middlesex.

The Claimant was owned and controlled by members of the Thakrar family. More precisely the shareholders were Nayan Thakrar (45%), his father Ramnik Thakrar (50%) and his mother Manjula Thakrar (5%), and each of them was a director.

Habib Bank AG Zurich (“Habib”) were the Claimant’s bankers. They held a debenture dated 30 May 1995 granted by the Claimant, and a legal charge over the Claimant’s premises. Under the terms of the debenture and charge the Claimant was required to insure such premises either in the joint names of the Claimant and Habib or with the interests of Habib being required to be endorsed on the policies; and the charge extended expressly to monies payable under insurances in respect of such premises.

On the night of 7/8 August 2003 a serious fire occurred at the Claimant’s premises. The premises were substantially destroyed, and stock and equipment was destroyed or damaged. The Claimant estimates its losses as exceeding £15 million.

The Claimant had, on the face of it, insurance cover in place (the limits on the various sections of which totalled £9,645,000) under two policies, one with Norwich Union (“NU”) and the other with Royal and Sun Alliance (“RSA”).

The Claimant had acted and placed those insurances through insurance brokers (“the Brokers”).

In October and November 2003 NU and RSA repudiated the policies on the grounds of non-disclosure of material facts and/or misrepresentation. The Claimant blamed the Brokers for any inaccuracies in the insurance proposals on which the insurers relied.

Accordingly, the Claimant’s assets included claims for damages against the Brokers and against the insurers, NU and RSA (together, “the Claims”). It is the Defendant’s advice in relation to the Claims, and in particular its alleged failure to provide some mechanism to extract more value from them, which is alleged to have been deficient and negligent.

Further to the loss of its premises and stock and equipment without insurance cover the Claimant fell into substantial financial difficulty. By the end of 2003, the Claimant owed Habib over £4m. The Claimant was also indebted to two other secured creditors, Stenham Heller Trade Finance Ltd (“Stenham”) and GMAC Commercial Finance Plc (“GMAC”).

I have not understood it to be disputed that the Claims were comprised in the property charged to Habib; but I understand from a letter from the Defendant to KPMG dated 29 September 2004 that the interest of Stenham was also noted on the insurance policies and accordingly Stenham would have been entitled to part of any proceeds of the Claims.

The Claimant took advice from the firm of Shoosmiths, and obtained an Opinion from counsel, Clive Blackwood of Lamb Chambers (“Mr Blackwood’s Advice”) concerning the merits of Claims against NU, RSA and the Brokers. Put very shortly, the gist of Mr Blackwood’s Advice was that the prospects of recovery against NU and RSA (the insurers) were poor, but that there was an arguable case against the Brokers which justified further investigation, although there were likely to be problems in establishing causation. A copy of Mr Blackwood’s Advice was sent to Habib on 9 January 2004 under cover of a letter from Shoosmiths which warned that any assessment of the Claims was “subject to extensive further investigations” and that “this is no doubt going to be a very costly exercise for [the Claimant] for which they will need funds.”.

Turning to other charged assets. On about 22 March 2004 Matthews & Goodman were engaged by Habib to prepare a valuation of Edenwest’s land and premises. Their report of 19 April 2004 advised a value of £1.6m.

It is common ground that on about 29 March 2004 the Defendant was retained by Habib. In about May and/or early June 2004, Habib and the Defendant (with the knowledge and support of the other charge holders) turned to consider the possibility of appointing administrative receivers in respect of the Claimant under its debenture, with a view to them effecting a sale of the business and assets (including the Claims).

Mr Treharne of KPMG was identified as a possible administrative receiver. It was envisaged he would be jointly appointed with another partner (in the event this was Mr Myles Halley) in KPMG in due course. KPMG was a major client of the Defendant. But only individuals may be administrative receivers: so it was the individuals who instructed the Defendant; and any retainer must have been with and through them.

In the course of considering the option of appointing administrative receivers with a view to a sale of the Claimant’s assets including the Claims, Habib and KPMG themselves took advice from the Defendant as to the merits of the Claims. Mr Blackwood’s Advice was provided to the Defendant. The Defendant’s advice was comprised in a Report as to the merits of the Claims (“the Report”, dated 6^th May 2004 and addressed to Habib, but then shared with KPMG), a Summary Letter (“the Summary Letter”, dated 18^th June 2004 and addressed to KPMG) and an e-mail advice sent to KPMG (“the E-mail Advice”).

In its Report and Summary Letter the Defendant made clear that it regarded the documentation and information provided to be inadequate to enable it to provide a definitive view. Subject to that caveat, the gist of the advice given was to the effect that the Defendant considered that there was an arguable but extremely difficult case against NU; that it was very pessimistic about the possibility of recovery against RSA; that although there was an arguable claim against the Brokers, which might be worth pursuing with a view to a negotiated settlement, there would be difficulties in establishing causation; and that in the round the Claims would be “speculative”.

The Claimant pleads, and for the purposes of this application I shall take it to be the case, that both the Report and the Summary Letter were (to quote from the Reply) “provided to KPMG personnel as prospective and actual Receivers of the Claimant and for their use and reliance in that capacity.”

The E-mail Advice focused on the duties the administrative receivers would (if and when appointed) personally owe in respect of any sale of charged assets by the Claimant, and included advice as to a number of possibilities that such administrative receivers should or might consider in seeking to establish the proper value of the Claims in the context of such a sale.

It is common ground that what was contemplated, and indeed subsequently actioned, was a ‘pre-packaged’ administrative receivership and sale.

A ‘pre-pack’ receivership sale is not without its critics and problems (see, for example, In re Kayley Vending Ltd [2009] EWHC 904 (Ch)); but it is a common procedure. It connotes that all material arrangements (including for the proposed sale) are prepared and substantially in place before the actual appointment of the administrative receivers, and then put into effect immediately after it. In other words, all the work is done before appointment, and the sale is pre-ordained. As Leading Counsel for the Claimant, Mr Nicholas Davidson QC, described it; it telescopes into a brief period the steps that a conventional receivership would comprise. The real preparation will have been done prior to the receivership.

In early May 2004 Imperial Pharmaceuticals Ltd (“Imperial”) made an offer for the Claimant’s business and assets of £3.8m on a going concern basis and free of all liabilities. It was by now clear that the Claimant was insolvent and could not continue to trade.

At the time of this offers Imperial was a company in which members of the Thakrar family had previously had an interest. In particular, prior to about 11 October 2000/31 January 2001 Mrs Usha Sharma and Mr Ramnik Thakrar each held 500 shares, and Mrs Sharma and Mr Nayan Thakrar were directors. At the time of the offer Mrs Sharma was the sole owner and Mr Nayan Thakrar had ceased to be a director. However, an agreement was reached between the Thakrar family and the Sharma family that if the sale proceeded Mrs Sharma would transfer 325 of her 500 shares to Manisha Thakrar, the wife of Mr Nayan Thakrar. This share transfer duly took place on about 13 August 2004, the date of the receivership sale.

It appears (and I do not understand it to be disputed) that Imperial was in much the same line of business as the Claimant, and had permitted the Claimant to use premises owned by Imperial after the destruction of its own: indeed, there had already in effect been a partial going concern transfer of the Claimant’s business to Imperial.

The price offered by Imperial in the proposed receivership sale was apportioned between (1) land, (2) licences, intellectual property and trademarks, (3) stock (4) the claims against the Brokers and (5) goodwill. The offer was revised twice, with certain slightly different apportionments: but in each version the apportionment for assignment of the Claims remained constant at £100,000.

In every version of the offer, the Claims were described as apparently having no value: in his witness statement dated 30 September 2011 Mr Thakrar states that £100,000 was a nominal figure. He explains that it was simply the product of the way the overall agreed price of £3.8 million was apportioned and suggests that Habib preferred the value to be attributed to the Claims to be lower rather than high since (as noted above) Stenham had a claim to a secured interest in the proceeds of sale of the Claims. I need not and could not at this stage resolve whether any of that is so; however, it strikes me as likely that what was important was the overall sale price, rather than the individual values of the various assets to be sold. (That in turn does raise the question whether the Claimant’s contention that any sale should have been subject to “clawback” arrangements in respect of the Claims (see paragraph 48 below) is realistic: but I need not answer that question either.)

Once the terms of the proposed sale to Imperial had been agreed, the pre-pack plan was implemented with the knowledge and consent also of the other charge holders.

On 10 August 2004, the three then shareholders of the Claimant, namely, Nayan Thakrar, Ramnik Thakrar and Manjula Thakrar resolved by Ordinary Resolution that:

“in accordance with section 320(1) of the Companies Act 1985 the sale by [the Claimant] to [Imperial], a company in which Mr Nayan Thakrar, director of [the Claimant] is interested by virtue of being a director and shareholder, of the freehold property situated at Stonefield Way (Land and Premises), Ruislip, Middlesex as well as [the Claimant’s] goodwill, intellectual property and other assets included in the proposed asset sale agreement for the sum of £3.8 million be approved.”

Also on 10 August 2004, a meeting of the Board of Directors of the Claimant resolved to request that Habib appoint receivers of their choice to the Claimant under the terms of the debenture dated 30 May 1995, and on the same date a letter inviting Habib to appoint receivers was duly sent to Habib.

On 12 or 13 August 2004 the Receivers were appointed administrative receivers of Edenwest by Habib, pursuant to Habib’s powers under the debenture of 30 May 1995.

On 13 August 2004, thus on the day of the Receivers’ appointment or the day following, a Receivership Sale of Assets Agreement was entered into between (1) the Claimant, acting by its receivers, (2) the Receivers, and (3) Imperial. By that agreement the Claimant agreed to sell assets, including the Claims, to Imperial for a total consideration of £3,802,203. In accordance with the offers referred to above, the price apportioned to the Claims was £100,000.

The Receivers were personally parties to the agreement: it seems that they were so because of its express provision (in clause 21) stipulating that they should incur

“no personal liability under, or by virtue of, this agreement, nor in relation to any related matter or claim howsoever, whenever, and wherever arising, and whether such claim be formulated in contract or tort or both or by reference to any other remedy or right, and in whatever jurisdiction or forum.”

Also on the same date (13 August 2004) a Deed of Assignment was entered into between the Claimant, the Receivers and Imperial to effect the absolute assignment in law of the Claims which had been agreed. The Deed of Assignment provided (by clause 4) that the Receivers should not incur any personal liability under or by virtue of the agreement and expressly stated that the Receivers were joined as a separate party only for the purpose of receiving the benefit of that clause 4.

Although there was some debate before me as to the scope and intent of these provisions, it is plain, in my view, that they did not purport, and could not have been effective, to exclude the duty in equity they owed to the Claimant or release them from liability for its breach. The provisions were contained in documents signed by the Receivers themselves, acting as agents on behalf of the Claimant. Their effect was simply to ensure that the Receivers incurred no personal liability to the buyer, Imperial, and to give effect to the right recognised by section 44(1)(b) of the Insolvency Act 1986 for a receiver to exclude his personal liability on any contract entered into by him in the carrying out of his functions.

On 3 August 2007 the Receivers vacated office at the instigation of Mr Nayan Thakrar. The Claimant was not placed into liquidation.

By a deed of release made on 20 March 2007, but expressed to take effect on a date thereafter (apparently defined in a deed of assignment of debt and associated security relating to the Claimant, which I have not seen but which I understand was made between Habib and Nayan R Thakrar, Manjula R Thakrar and Ramnik G Thakrar and dated at or about the date of the deed of release), the Claimant and its directors released Habib and the Receivers from any claims which they might have in relation to the administrative receivership. That was open to them to do, and the release and its effectiveness are not disputed, nor the subject of complaint in the proceedings. The consequence of this is that the Claimant’s only potential recourse is against the Defendant.

On 15 June 2007, Imperial, as assignee of the Claims, commenced proceedings against the Brokers. Its claim was for damages in excess of £13,395,000 (“the Claim against the Brokers”). No claim was ever brought against insurers.

The Claim against the Brokers (brought in the Queen’s Bench Division under reference HQ07X02059) was settled in September 2008. A Tomlin Order was made: the scheduled terms of such an order are not open to the public, though in this particular case paragraph 4 expressly enables the court to give permission for their inspection. No permission has been sought and I do not therefore know the settlement figure; but my assumption (based on the fact of these proceedings) is that Imperial received a sum in settlement materially in excess of the £100,000 Imperial had paid for the assignment to it of the Claims.

The Claimant commenced these proceedings against the Defendant on 17 June 2010. This was the last day prior to the 6^th anniversary of 18 June 2004, when the Defendant presented to Mr Treharne its advice as to (amongst other things) the Claim against the Brokers. Particulars of Claim were served on 8 October 2010. The Defence was served on 11 April 2011. A Reply was served on 27 May 2011.

The Claimant’s case may I think be summarised briefly as follows:

The Defendant denies ever having been retained by the Claimant and denies accordingly that it owed any duties to it whether in contract or in tort. It denies having given advice as to the value (as distinct from the merits) of the Claims or as to whether the receivership or sale of the Claimant’s assets should proceed (with or without a clawback provision in respect of any value realised by the Claims). It denies negligence, maintaining that its advice was, having regard to the caveats and reservations it expressed, entirely appropriate. It makes the point that Habib and the Receivers (who, it is common ground, are highly experienced insolvency practitioners) were always well aware of the theoretical possibility of a clawback provision, but the decision whether or not to include one (with the likely concomitant of a reduced headline price) was a commercial one for Habib and the Receivers to weigh and make.

Unsurprisingly, given the stage of the proceedings, formal disclosure has not yet been undertaken. However, I understand that the Receivers have provided all their relevant documentation to the Claimant, which has had the choice of what to put into evidence in its effort to support and maintain these proceedings on foot.

I have already explained the principles on which the Court proceeds in determining whether or not to give summary judgment or strike out a claim in whole or part. I need only add at this point that, in accordance with those principles, it is not, of course, appropriate for me to assess or comment on questions which would arise, and the merits of the case, if there was a contractual or tortious duty of care owed by the Defendant to the Claimant. Those are matters of fact that could not fairly be adjudicated summarily.

The question for me is whether, on the basis of facts which are either common ground or plain and obvious, there is sufficient to support the Claimant’s case that it became a person to whom the Defendant owed duties in contract or tort. If there is not, then the only question is whether a trial is nevertheless warranted; if not, I should grant summary judgment. Otherwise, I need to consider whether the Claimant’s statement of case is defective, and if so whether any part of it should be struck out.

There was no written retainer either between the Claimant and the Defendant or between the Receivers or KPMG and the Defendant.

It was suggested by Mr Harvey on behalf of the Defendant that this lack militates against the Claimant: if the Claimant had been or ever become the client a retainer would have been put in place, whereas the Defendant had acted for so long and so often for KPMG that it had not been its practice to issue retainer letters when new instructions from KPMG came along. I do not accept this suggestion, not least because the Claimant does not assert any direct engagement; its case is that the Defendant was engaged initially by persons in KPMG who became its agents, and the Claimant became a party to the retainer not directly, but through that agency.

As to the apparent lack of any formal retainer between the Defendant and the Receivers, for present purposes I shall take that, and the reason given for its lack, to be so. However, I note that in a document entitled “Managing Risk” dated January 2004 it is stated that written retainer letters were at that time required by the Law Society of England and Wales. I note also in the same document quotation of a “stark warning” from Denning LJ (as he then was):

“If a solicitor does not take the precaution of getting a written retainer, he must take the consequences.”

Those consequences seem to me fairly to include in the present context that it would be for the Defendant to prove any qualification or limit of obligation on which it relies, as indeed the Claimant expressly pleads in its Reply.

That said, it is common ground that, as well as advising Habib, the Defendant also advised the prospective administrative receiver(s) in relation to the proposed pre-pack sale from 8 June 2004 onwards.

The Claimant’s contractual claim is dependent upon establishing that it became a party to a contract of retainer with the Defendant under which the Defendant was required to advise the Claimant with respect to the Claims. Its case is that it did so through the agency of the Receivers. It would also have to establish that the advice of which it complains was given to it and fell within the scope of that retainer.

The questions, therefore, in the context of the Claimant’s contractual claim are (1) whether the Claimant was or became a party to a contract of retainer with the Defendant for any purpose and (2) if so, for what purpose and what was the nature and extent of the retainer. The two questions can be distinguished for purposes of analysis; but they are inextricably linked.

Before further addressing these questions, it is, however, necessary to identify the legal nature of the relationship between Receivers and the company in receivership. That is of immediate and central importance because the Claimant’s case (particularly as regards its claim in contract) is premised on a relationship between the Claimant and the Defendant established through the agency of the Receivers. Thus, it is the Claimant’s case that Messrs Treharne and Halley were, on their appointment by Habib pursuant to the Debenture as administrative receivers, and without prejudice to their other powers as such, deemed to be “the agent of the Company and if and insofar as necessary the attorney of the Company”.

Although that description is commonplace and in the context technically correct it is apt to give a somewhat false impression. The relationship between a receiver and the company in receivership has unusual features.

As clarified by the Court of Appeal in Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997 at 1007, the agency of receivers so appointed is a real one (so that, for example, there is continuity of the rateable occupation of the mortgagor company through the agency of the receivers), but it is subject to some significant and peculiar incidents. These peculiarities reflect the fact that the agency is (per Lightman J at para. 28 ibid.) “primarily a device to protect the mortgagee”, and to insulate it from liability for the receivers’ acts (that also being reflected in the mortgage debenture deed in this case, which expressly provides for the chargor to be solely responsible for the acts and defaults of the receivers appointed). The agency is not a fiction, since it has legal substance, but it is in some ways artificial or contrived.

One such peculiarity is that the agency is one where the principal, the mortgagor, has no say in the appointment or identity of the receiver(s), and is not entitled to give any instructions to nor dismiss the receiver(s). A second is that there is no contractual duty or duty owed in tort by the receiver to the mortgagor: the duties are equitable only (see Medforth v Blake [2000] Ch 86). Thirdly, that an equitable duty is owed to the mortgagee as well as the mortgagor. Fourthly, the duty owed by the receiver(s) to the mortgagor is not owed to him individually but to him as one of the persons interested in the equity of redemption. Fifthly, the receiver’s primary duty is to realise the assets in the interests of the mortgagee and to try and ensure repayment of the secured debt. Sixthly, “the receiver is not managing the mortgagor’s property for the benefit of the mortgagor, but the security, the property of the mortgagee, for the benefit of the mortgagee” (see Silven Properties at 1008B-C); and the receiver’s powers of management are really ancillary to that duty: ibid, citing Gomba Holdings UK Ltd v Homan [1986] 1 WLR 1301 at 1305 and In re B Johnson & Co (Builders) Ltd [1955] Ch 634 at 661.

Thus, and as again stated in Silven Properties, the reality is that “general agency principles are of limited assistance in identifying the duties owed by the receiver to the mortgagor” (see at 1108D).

Further, the statement that receivers (here, Messrs Treharne and Halley) acted as agents of the mortgagor company (here, the Claimant) might suggest, at first blush, that everything a receiver does, he does on behalf of the company. That may be so in the ordinary course where the act involved is plainly on behalf of the company, as where an administrator instructs solicitors to act on behalf of the company in administration (see, for example, Wright Hassall LLP v Duncan Morris [2012] EWHC 188 (Ch), which was helpfully drawn to my attention by the Claimant after the hearing). But that is not so in every case. Receivers not only have other (non-agency) powers; but also, the fact that they may contract as agent for the company does not mean that every contract made by a receiver is to be treated as a contract with the company. The question in every case is whether the specific contract was one which the receiver intended or must be taken to have made on behalf of the company or on his own behalf (albeit in the exercise of his receivership functions).

Indeed, ordinarily, if a receiver wishes to bind the company to a contract with a third party he will contract in the name of the company, as he is entitled to do as its agent and attorney, so that the company itself becomes a party and he does not. An example is to be found in the Receivership Sale of Assets Agreement, where the first party is defined as “Edenwest Ltd (in administrative receivership)…acting by its receivers Stephen Treharne and Myles Halley.”

The retainer by receivers of solicitors to advise them as to their duties is a case in point: indeed it is the case in point here. If a receiver wishes himself to be advised as to his obligations to his appointor (the debenture-holder) and/or the company in administrative receivership (and especially if there may be a conflict of interests between them), or if he wishes to have a direct right of recourse, he will most usually contract in his own name. Thus, for example, in Bell v Long [2008] 2 BCLC 706 the receivers, in engaging valuers of the company’s property, did so in their personal capacity presumably so as to have a direct claim in the event of undervaluation.

The receiver may also contract in the name of the debenture holder: but no question arises in that context, where there is no doubt that Habib retained the Defendant directly.

In the present case, neither the fact that Messrs Treharne and Halley did become, upon their appointment, agents of the Claimant, nor even the fact that they sought and obtained advice from the Defendant as to the exercise of their powers in binding the Claimant to the contract of sale, necessarily connotes that in so seeking and obtaining that advice they were seeking and obtaining advice on behalf of the Claimant. It is a question of fact (including, of course, inferences from the primary facts) whether as regards a particular issue or area of advice, they were seeking such advice in the exercise of their duties to the mortgagee and/or for their own protection (for example, to ensure that they are fulfilling their duties to the mortgagee and/or the mortgagor), or whether they were obtaining advice on behalf of the Claimant itself.

Given that they owe no duty in contract or tort to the company (see above), and given also that in exercising a power of sale their objective is to realise the security for the best price reasonably obtainable, rather than do what they consider to be in the best interests of the company, they have no duty, and little reason, to seek advice on behalf of the company itself. Of course, it would be very different if the receiver owed to the company (as does an administrator, for example) a duty comparable to that owed to a company by its directors or managers to take reasonable care in dealing with the company’s assets; but he does not: see Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 (PC), at 313H.

For its part, the company can be assured that as regards the only duty the receiver managers owe to it, which is the equitable duty owed to it as a person interested in the equity of redemption to take care to obtain the best price reasonably obtainable (see Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 and Downsview Nominees Ltd), the law imposes a form of strict liability on the receiver manager. The receiver manager’s obligation extends to ensuring that reasonable care is taken by any agent or professional adviser employed by the receiver in the sale and being answerable if they do not (see again Cuckmere at 973 per Cross LJ and Raja v Austin Gray [2003] Lloyd’s Rep PN 126 (CA) per Clarke LJ at paras. 29-36).

Thus, in the ordinary course (and leaving aside the fact that in this case the Claimant released the Receivers) the company (the Claimant here) would have a direct cause of action for any negligent deficiency in the valuation of the assets sold (here the Claim against the Brokers); but that is its recourse (and, where it fails, its remedy).

A corollary of this, as it seems to me, is that, ordinarily at least, an adviser instructed by receivers in their own name, whether before (when they have no choice) or after their appointment (when they could contract in the name of the company), will not, without more, be or become parties to a retainer with the company in receivership upon the appointment of such receivers as its agents.

Putting it another way, bringing the company into a contractual relationship will require some specific act or instruction by its agent(s), and acceptance of the retainer by the adviser: it is not the automatic effect of the receiver or administrative receiver becoming an agent of the company.

If it were otherwise it seems to me that in every case where a solicitor’s firm is instructed by an administrative receiver who (in the ordinary way) is appointed as the company’s agent, the firm would be treated as retained by the company; and I cannot think that is right. It would, for example, make a nonsense of the clear legal distinction between the duties of a receiver and the duties of company management and require the solicitor to serve two masters (the mortgagee and the administrative receiver who owes his primary duty to it on the one hand, and the mortgagor company, on the other hand) who have, or may well have, different objectives.

That there is a likely, or plainly potential, conflict of interest is clear: it is inherent in the fact that the receiver owes a primary duty not to the company (as his principal) but to the debenture holder who appointed him, and in managing (or selling) the company’s property he acts as receiver and manager of that property for the debenture holder, not as manager of the company. The debenture holder is truly his master: and as stated by Lord Templeman in Downsview Nominees Ltd at 313E-F:

“The company is entitled to any surplus of assets remaining after the debenture debt has been discharged, and is entitled to proper accounts. But the whole purpose of the receiver and manager’s appointment would obviously be stultified if the company could claim that a receiver and manager owes it any duty comparable to the duty owed to a company by its own directors or managers.”

A receiver and manager may very well wish to be advised as to his personal position and as to his duties in relation to his true master. He will also almost invariably wish to have recourse if everything goes wrong: that is especially so given his strict liability. There would be no logic in a receiver and manager contracting on behalf of the company for advice which in truth he needs it in his personal capacity.

Further, at least as it seems to me, the conflict of interest, actual or plainly potential, inherent in the context, would not only counter-indicate such a contract: it would preclude the solicitors agreeing a general retainer to act both for the mortgagee and administrative receivers and the company mortgagor, though a more limited retainer to advise on specific issues of common interest where the parties share a common objective might still be permissible.

Accordingly, as it seems to me, the real question in this case becomes a narrower one than might at first appear (and that which was urged on behalf of the Claimant). It is whether there is a real prospect of the claimant establishing on the facts, against the usual run of things, that Messrs Treharne and Halley took it upon themselves to seek advice on behalf of the company itself on an issue of common interest to Habib and the Claimant (though each would be likely to have a different perspective), and if so whether the Defendant agreed (or should be taken as having agreed) to give it.

That, as it seems to me, raises formidable difficulties for the Claimant in this case. Its case as to the legal process whereby the Defendant became a party to a retainer with the Defendant is not altogether clear: but the gist of paragraph 25 of its Particulars of Claim is that:

“From the point of KPMG’s [sic] appointment as administrative receiver, KPMG [sic] became the agent of the claimant, as disclosed principal, and the Defendant’s client was the Claimant.”

No further explanation is offered by the Claimant in its pleadings as to the legal process whereby a separate retainer was established or one retainer was transmogrified into another, not only in terms of the identity of the client but also in terms of its scope, for not even the Claimant pursued the notion at the hearing that the Claimant became a party to a general retainer, only that it became party to a separate and more limited and discrete retainer to provide advice on the Claim against the Broker “with a view to it becoming possible for the receivers to become comfortable that it was appropriate to assign the claim to Imperial for whatever sum was chosen” (I quote from Mr Davidson QC’s oral submissions to me).

The assumption, or perhaps leap of legal faith, required is that upon and by virtue of their actual appointment the Receivers, now properly acting as the Claimant’s agents, caused the Claimant to become a party to a retainer and restricted its scope in its application to the Claimant so as to avoid any conflict of interests inherent in a broader retainer.

On behalf of the Claimant, Mr Davidson stoutly contended that this assumption was both entirely logical and consistent, not only with principles of agency, but also “normal principles of ratification”.

As to the latter, he contended before me (though this does not seem to me to be discernible from the pleadings) that “on the appointment of [the Receivers], and in proceeding to execute the ‘pre-pack’ plan in reliance on the advice which they had commissioned from the Defendant, the contract with the Defendant was ratified on behalf of the Claimant.” Mr Davidson referred in this context to Articles 13, 17 and 20 of Bowstead and Reynolds on Agency (17^th ed. (2001)) In particular, he relied on the notion of implied ratification summarised in Article 17(3) as follows:

“Ratification will be implied whenever the conduct of the person in whose name or on whose behalf the act or transaction is done or entered into is such as to amount to clear evidence that he adopts or recognises such act or transaction in whole or in part: and may be implied from the mere acquiescence or inactivity of the principal”

As it seems to me, there are at least two fundamental problems for the Claimant in seeking to establish this argument. One is that its premise is that the Claimant was initially intended to be a party to or bound by the act or transaction (the retainer) said to have been ratified; that intention is not pleaded. Another is that ratification ordinarily has retrospective effect: so what would have to be established is that from the outset of the Defendant’s instruction by the Receivers, presumably on 8^th June 2004, the intention was that the Claimant was to be a party to that retainer, or some separate retainer, which is not pleaded either. A third difficulty, more generally, is the apparent assumption that in everything an agent does he intends to bind his principal, which is plainly incorrect. The Claimant faces a steep climb, substantially uncharted in the pleadings, in seeking to establish a result which is, to my mind, counter-intuitive.

I turn to consider the factual basis suggested by the Claimant for its contention that there is a real prospect of it establishing such a limited retainer and its breach at trial if the matter is allowed to proceed.

Some of the facts are already clear, and not disputed. It is common ground that Mr Treharne and his colleagues sought, and the Defendant agreed to provide, advice as to the merits of the Claims.

It is also common ground that in doing so Mr Treharne and his colleagues were acting with a view to becoming administrative receivers and then forthwith implementing, in that capacity, and as agents for the Company, a sale of the Company’s assets (including the Claims). In doing so, and in binding the Claimant to that sale, they would obviously be relying on (inter alia) the Defendant’s advice: as the Defendant must have appreciated.

Returning to the evidence, the commencement of the Defendant’s retainer, initially by Mr Treharne, is recorded in notes made by the Defendant of a meeting between Rita Lowe and David Manson of the Defendant, and Mr Treharne and a Mr James Money of KPMG. These read as follows:

“ST and JM explained that they have come from a meeting with Habib Bank where they had discussed the options open to Habib in appointing a receiver over Edenwest. ST and JM confirmed that Habib were in favour of appointing administrative receivers over Edenwest, and the timescale for this was very short. ST and JM had requested a meeting with CMcK to discuss some of the remaining issues, and to ensure that CMcK would be able to get on with the drafting of sale contract and appointment documentation.”

With regard to the Claim against the Brokers those notes record that:

“ST confirmed that KPMG would be investigating the insurance claims further to ascertain whether £100,000 was a fair price.

ST was of the view that the claim was worth very little. He pointed out that the claim would need significant funding, that it was likely that the directors would need to be fully supportive of the claim for it to get off the ground. ST pointed out that the only offer that was on the table from Imperial was for a sale of the business and assets of Edenwest together with the insurance claims.

It was agreed that CMcK would review the information that was available regarding the insurance claims to provide greater comfort as to whether £100,000 would be an acceptable price. While CMcK could not advise on what a correct value would be, we would focus on the strengths and weaknesses of the claim and the offers currently available.”

The Defendant’s note of a subsequent discussion on 10 June 2004 (which the Claimant says took place at a meeting, but the Defendant pleads was on the telephone) records:

“JM confirmed that he had received the draft contract from Simon Beale and RAL confirmed that we were in the process of reviewing our advice on the insurance claims. JM confirmed that ST had no wish to front the claims. His position was that he did not want to be caught for costs when Habib went off the idea of pursuing the claims. RAL confirmed that we would shortly be providing some further advice on the merits of the insurance claims.”

As to the parties to and scope of the retainer, Mr Treharne states this at paragraph 6 of his witness statement dated 9 August 2011:

“I have been asked to comment on whether I retained the Defendants on behalf of the Claimant in June 2004. The instructions given by me to the Defendants on 8 June were given on my own behalf. I gave the instructions to enable me, and any of my partners who might in due course be appointed with me, to consider and properly carry out my duties if I were appointed receiver of the Claimant. The advice covered the duties which I would owe to the Claimant in respect of any sale of the claims and the possibility that I, and any of my partners appointed jointly with me, might be sued by the Claimant for breach of duty. The advice was thus sought by and given to me, and any of my partners who might be appointed with me, personally. I do not understand how it could be said that the instructions were given by me on behalf of the claimant.”

So what is said by the Claimant in this regard? The only witness statement made on behalf of the Claimant is that of Mr Nayan Thakrar (“Mr Thakrar”) dated 30 September 2011. In section 9 of that Witness Statement, Mr Thakrar addresses (to quote the heading to that section) “Cameron’s contractual relationship with Edenwest”. For present purposes, I think this can be summarised as follows.

First, Mr Thakrar says that “Camerons undertook all of the legal work which would have been undertaken by Edenwest’s solicitors if Edenwest had been selling on its own account”, including (quoting from the Defendant’s bill dated 27^th October 2004)

“reviewing advice prepared by Antony Hobkinson and Neil Winterbourne of this firm for the Bank regarding the insurance claims and considering issues which would be relevant to the Receivers on a sale, for example whether the Receivers could demonstrate that they had obtained a proper price [and] providing a letter of advice to the Receivers in the above regard”.

Secondly, Mr Thakrar quotes from various e-mails and notes of advice from the Defendant to the Receivers on the question as to whether £100,000 was an appropriate and acceptable price for the Claims; amongst others he quotes an email of 18^th June 2004 from Simon Beale of the Defendant firm stating “The key question is whether this represents the best price reasonably obtainable…”

Thirdly, Mr Thakrar addresses the suggestion made by Ms Lowe on behalf of the Defendant that “Camerons believed that Edenwest was represented by Shoosmiths.” Mr Thakrar says this:

“…Messrs Shoosmiths were advising Edenwest on their potential claims against insurers and insurance brokers. At no point were Messrs Shoosmiths instructed by Edenwest to advise or act in relation to the receivership sale….

…When Camerons circulated draft sale documentation, the drafts were sent by email to a number of parties at different times, including Messrs Gates and Partners for Imperial, the solicitors for the other secured creditors and KPMG. However, no drafts were ever submitted to Messrs Shoosmiths for their comments or consideration. Messrs Shoosmiths were not involved in the sale process in any way.”

Fourthly, Mr Thakrar contends that if the Defendant considered there to be a conflict of interests to prevent it acting for the Claimant, it should have so advised the Claimant, and told it that if it required legal advice it needed to instruct independent solicitors: and that the fact that the Defendant gave no such warning is a firm indication that at the time it did not perceive there to be any such conflict.

Fifthly, Mr Thakrar analyses the Defendant’s bills and notes that (a) the Receivers and the Defendant together procured the Claimant to pay out of the sale proceeds both pre- and post- appointment costs of the Defendant and KPMG in priority to other creditors and (b) that the VAT treatment adopted was “only possible if the services were provided to Edenwest.”

The last point (on VAT) was trailed but not pursued before me. None of the other points seems to me to establish or even support the case that the Claimant needs to make that a discrete retainer was established and agreed between the Claimant through the agency of the Receivers and the Defendant to advise the Claimant as well as the Receivers as to the appropriateness of the figure of £100,000.

The first of Mr Thakrar’s points may be factually correct, but, at least to my mind, leads nowhere. The Claimant was not selling on its own account: the sale was of property charged to Habib; it was pre-arranged by or through the prospective administrative receivers and implemented after their appointment as actual administrative receivers, acting pursuant to and in discharge of their primary duty to Habib. The fact that the Defendant did in that context what would have been done by solicitors acting for the Claimant if it had been selling on its own account, even if demonstrated, cannot, to my mind, assist the Claimant’s case. The fact is that the sale was always intended to be, and was implemented as, a receivership sale: the fact of pre-planning and pre-packaging does not alter that analysis.

Similarly, Mr Thakrar’s second point, to the effect that the Defendant gave advice to the Receivers whether £100,000 was the best price reasonably obtainable for the Claims, does not assist him either. On the contrary, as it seems to me, the advice concerned, which was sent to Messrs James Money and Steve Treharne at KPMG by e-mail dated 18 June 2004, demonstrates fairly clearly that the Defendant perceived itself to be acting for Habib and the prospective administrative receivers personally, but not the Claimant.

Mr Thakrar’s premise on behalf of the Claimant appears to be that the fact that the Defendant was addressing the question whether £100,000 was the best price reasonably obtainable connotes, or at least fuels the suggestion, that the Defendant was acting for the Claimant. But there is no basis for such a premise. It was a question that had to be addressed on behalf of Habib, and by the Receivers personally in fulfilment of their duties to both Habib and the Claimant. The answers given by the Defendant are to Habib, and the Receivers personally, for their own satisfaction and protection; there is no warrant for the suggestion that they were intended to constitute advice to the Claimant. (I note parenthetically that none of the e-mails relied upon in this context by Mr Thakrar was circulated to anyone at the Claimant.) There is nothing to suggest, and I can see no realistic prospect of it being established, that the advice was in fact intended for the Claimant itself. As it seems to me, the Claimant’s claim is in reality built not on facts, but on a legal premise (that in seeking advice as to the sale the Receivers must have been acting for the Claimant) which is false.

As well as being sent well before the Receivers’ appointment, and thus at a time when there was no agency in place, the e-mail of 18^th June 2004 (a) relays advice originally expressly given to Habib which was being disclosed to the recipients with Habib’s permission, but plainly not for further disclosure to the Claimant; (b) carefully addresses the question as to how best to realise the Claims, given the difficulty in marketing such an asset, primarily from the point of view of Habib, but also with an eye to ensuring proper discharge of the prospective administrative receivers’ personal duties to both Habib and the Claimant; (c) identifies further difficulties and likely expenses of “several hundreds of thousands of pounds” if the Claims were to be pursued by the Claimant (acting by its Receivers); and (d) expressly refers to the Claimants’ advisers in the context of the Claims as being Shoosmiths (and discusses the potential waiver of legal privilege if Shoosmiths were to “share the contents of their files with KPMG as the prospective receivers”).

Neither this e-mail nor any of the other e-mails quoted by Mr Thakrar in his Witness Statement provide any assistance to the Claimant’s case. On the contrary, they support the Defendant’s case that it did not perceive itself as acting for the Claimant, but rather for Habib and the Receivers personally (both before and after their appointment). It will be recalled that the Claimant has already had disclosed to it the Receivers’ files. Even at this stage and for the purposes of summary adjudication I consider that I can properly take into account the fact that the Claimant has had its chance to put forward the best documents from its point of view.

As to Mr Thakrar’s third point, it would be inappropriate for me to try to determine now the dispute as to whether or not Shoosmiths acted for the Claimant in the sale process, and at least for present purposes I must accept his evidence that Shoosmiths were in fact only advising the Claimant on the Claims, at no point were they instructed to advise or act in relation to the receivership sale, and were not involved in the sale process in any way. However, in my view, whilst the plea and its acceptance may be a necessary factual point for the Claimant to establish, it falls far short of carrying the Claimant home.

The point really in issue is whether the Claimant must be treated as having been brought into a contractual relationship, in the form of a limited retainer, through the agency of the Receivers established upon their appointment. Mr Thakrar’s third point must be intended to fortify the rationale of treating such a relationship as established on the basis of the proposition that the Claimant needed its own advice because it was its assets that were being sold.

But that proposition is flawed. Its underlying premise must be that since it is the company’s property that is being sold, a management decision must be being taken on behalf and in the best interests of the company. That is not correct. As previously noted, an administrative receiver appointed by debenture holders (here, Habib) manages and (in the event of a sale) sells the company’s assets, not as manager of the company but as receiver and manager for the debenture holders (see Downsview [supra]). The decision is not one for the board of directors: the decision is not its to make. It is a decision for the Receivers, acting (in effect) as managers on the debenture holder’s behalf. That is why (to quote again from Lord Templeman’s speech in Downsview at 313):

“…his [the administrative receiver’s] power of sale is, in effect, that of a mortgagee, and he therefore commits no breach of duty to the company by a bona fide sale, even though he might have obtained a higher price and even though, from the point of view of the company, as distinct from the debenture holders, the terms might be regarded as disadvantageous.”

Mr Thakrar’s fourth point is essentially by way of counter-attack to the Defendant’s contention that there was a conflict of interests such as to preclude it from accepting a retainer to act for the Claimant whilst acting for the Receivers and Habib. The Defendant relies on this to dispel the notion that it ever agreed a retainer to act for the Claimant. The Claimant contends that a retainer limited to advising on the merits and value of the Claims would have given rise to no such conflict: all parties had common interests in that regard.

Although attractively argued on its behalf, I consider the Claimant’s contention to be unrealistic. It seems to me obvious that in all matters relating to the sale and assignment of the Claims there was always at least the potential for conflict between the interests of Habib and the Claimant. By their nature, legal claims require detailed investigation and development both to assess and to develop their prospects of success and true value. The less the time spent on investigation and development the more uncertain or even speculative is likely to be their realisable value in all but the simplest and most straightforward cases. It is in such circumstances that there is most likelihood of conflict between the interests of a chargee and the chargor; and exactly that tension and potential conflict is indeed one of the principal areas of focus in the email exchanges on which the Claimant purports to rely, especially the Defendant’s email to Messrs Money and Treharne of 18 June 2004. The chargor’s interest is almost certainly to be to investigate and “improve” the claim; the chargee may well be (I would say usually can be expected to be) likely to want to realise any value of the claim as part of a package, without undertaking the expense of investigation and “improvement”, in recognition that “improvement” is itself uncertain, the asset will always be discounted, and may indeed be impossible to sell separately from other assets.

Put shortly, I consider it most unlikely that the same firm could properly have represented all parties, at least without their informed consent (which is not suggested and certainly not pleaded). That does not establish that they did not agree to act; but I accept it is a further factor militating against the Claimant’s case that the Defendant should be treated in law as having accepted through the Receivers a retainer to act for it.

Mr Thakrar’s fifth point, based on the fact that bills were addressed to the Claimant, does not avail him either. In point of fact, the Defendant addressed its invoices to the Receivers. The Receivers were entitled under the terms of the debenture under which they were appointed (by Habib) to be indemnified in respect of such costs by the Claimant. That pursuant to that right of indemnity they obtained payment of such costs by the Claimant does not signify or suggest a contractual relationship between the Claimant and the Defendant.

There is nothing further in the evidence filed on behalf of the Claimant to support the ratification argument advanced on its behalf. It may be that, as Mr Harvey suggested, the argument was adumbrated only shortly before the hearing and was thus not formulated until after the date of Mr Thakrar’s witness statement. However that may be, I have not been shown any evidence to persuade me that the Claimant has any real prospect of surmounting the difficulties I have indicated stand in its way.

More particularly, in my judgment, neither the fact that the Receivers were agents of the Claimant, nor the fact that the transaction related to the charged assets of the Claimant and they implemented the sale without taking further advice and on the basis so far as relevant of the advice already obtained, is sufficient. There is no evidence to support the proposition that the Claimant was initially intended to be a party to the retainer; and the broad scope of the retainer, and the fact that it covered a broad sweep of matters, including the personal liability of the Receivers and matters on which there was likely to be a conflict of interest between Habib and the Claimants, tells against that. Similarly, there is no evidence to suggest that what started as a broad retainer by Habib and KPMG/the Receivers ever was replaced or supplemented by a much narrower retainer by the Claimant through the agency of the Receivers; and that is inherently unlikely also. I can see no realistic prospect of the ratification argument succeeding, even if fully and particularly pleaded.

In summary, in my view, the Claimant’s legal case is unclear; and its factual assertions do not, even if established at trial, disclose any basis for concluding that the discrete retainer relied upon by Mr Davidson in oral argument was either suggested by the Receivers or agreed by the Defendant.

In my judgment, and taking into account (as I believe I should) the fact that the Claimant has already had disclosure from the Receivers and must be assumed to have put forward its best case having regard to the documentation disclosed, the Claimant’s contractual claim has no sufficient prospect of success to merit a trial.

Whether the Defendant arguably owed a separate duty of care in tort

Further or alternatively to its claim in contract the Claimant asserts that the Defendant assumed a responsibility to the Claimant to exercise reasonable skill and care in the course of its retainer by KPMG or Mr Treharne, and was in breach of the duty it thereby owed to the Claimant, causing it reasonably foreseeable loss.

The Defendant contends that the law does not impose such a duty of care on an adviser to administrative receivers, that this was decided by the Court of Appeal in Raja v Austin Gray [2003] Lloyd’s Rep PN 126 (CA), and that the Claimant’s claim in tort against it must inevitably fail.

Clarke LJ (as he then was) described the issue raised in the appeal in Raja v Gray in the following terms (at p127):

“…whether and in what circumstances valuers appointed by administrative receivers of a company owed a duty of care to the owner of properties when the properties are charged to the company as a security for a loan and the valuers are appointed by the receivers for the purposes of valuing those properties.”

In Raja v Gray, the relationship between the late Mr Mohammed Sabir Raja (“Mr Raja”, in whose right his wife brought the claim as administratrix of his estate), and the defendant/appellant, a chartered surveyor, was difficult to describe as proximate. Again quoting Clarke LJ (at p128):

“…the factual situation may be illustrated by this chain: Mr Raja mortgaged the properties to DFL as security for loans to him; DFL granted a debenture to Midland as security for a loan from Midland; Midland appointed receivers pursuant to its powers in the debenture; and the receivers instructed the appellants to value the properties and to assist in their sale. By the terms of the debenture, as is common, the receivers were appointed by Midland but were to act as DFL’s agents. The sales were made by DFL pursuant to its powers under the various charges to which Mr Raja was a party as mortgagor.”

Later in his judgment Clarke LJ (at p133) noted that “there was no close or indeed to my mind really any relationship between the appellants and Mr Raja.”

The matter came forward as an appeal on a preliminary issue. For the purposes of the preliminary issue, it was assumed that the appellants (the chartered surveyors instructed to value the properties) knew (i) that Mr Raja was the owner of the properties, or more accurately was interested in the equity of redemption in the properties; (ii) that they were charged to DFL to secure Mr Raja’s borrowing; (iii) that the receivers were selling the properties to discharge that borrowing; and (iv) that the sale proceeds would directly affect Mr Raja’s interests.

It is a feature of that case that the complainant (Mr Raja) was not a debtor whose assets were subject to the receivership. To quote once more from Clarke LJ’s judgment (at 129):

“The primary debtor, so to speak, is not Mr Raja but DFL. The relevant assets were mortgages over Mr Raja’s properties. If those assets were realised at an undervalue because the properties were sold at too low a price, DFL would have been out of pocket and entitled to compensation from the receivers if it were able to prove want of care. In other words, [Counsel for the Appellant] submits that DFL is the party which one would expect to complain if the properties were sold at too low a price.”

The Court of Appeal found that in the circumstances (1) Mr Raja could not fairly describe himself as an advisee and cannot have expected to rely on the valuations: so it could not possibly be held that the valuers had assumed a responsibility to Mr Raja, however broadly the assumption of responsibility test of tortious liability in White v Jones [1995] 2 AC 207 is described (see per Clarke LJ at para. 39); (2) there was no sufficient proximity between Mr Raja and the valuers to satisfy the second limb of the parallel ‘threefold test’ for such liability in Smith v Eric S Bush [1990] 1 AC 831, 864 (see per Clarke LJ at para 42); (3) as to the third limb of that test, it was not just or reasonable to impose a duty of care on the valuers so that Mr Raja should be afforded a remedy also against them, given that (as the Court of Appeal confirmed) Mr Raja already had a remedy against the receivers for breach of the equitable duty they owed him as a person interested in the equity of redemption, and taking into account further (though Clarke LJ indicated that he did not regard this as a conclusive consideration) that to impose such a duty would place the valuers in a position of conflict of interests (see per Clarke LJ at para. 43).

Mr Harvey QC submits that there is no sufficient basis to distinguish this case, that it is binding on me and that its reasoning precludes the Claimant’s alternative case in tort.

Mr Davidson QC, on the other hand, submits that this case is materially very different from Raja v Gray and thus plainly distinguishable He stresses especially that in this case (1) the party making the claim is the principal of the agent who took the impugned advice, and the Defendant must have known that the agent would proceed to bind the principal on the basis of the advice it had received: the Defendant must be taken to have assumed the task of advising the Receivers and thereby their principal, the Claimant; (2) the principal and the agent (the Receivers) entered into an agreement in advance of their appointment which contractually relieved the Receivers of any legal liability, so that this claim was only ever the Claimant’s only remedy; and (3) the discrete nature of the advice required meant that there was no conflict of interests between (a) the Claimant and (b) the Receivers and their appointor (Habib).

As to (1), I would accept that in this case there was a greater proximity between the Claimant and the Defendant: there is one less link in the chain, the sale was of the Claimant’s own (albeit charged) property, and there was an agency relationship, though of the peculiar kind explained, between the Claimant and the Receivers. Mr Davidson summarised his client’s case by reference to the ‘assumption of liability test’ and the second limb of the ‘three-fold test’ in describing the Claimant as an “advisee”. This usefully conveyed the notion both of proximity and contractual nexus based on a relationship established by virtue of the Receivers’ status as agents of the Claimant.

However, despite the attractive way in which Mr Davidson QC presented the matter, I do not accept that the evidence discloses any sufficient prospect of establishing that the Claimant was an ‘advisee’ in any relevant sense.

First, and as I have previously explained (in the context of my discussion of the Claimant’s contractual claim), the sale was a decision for the Receivers acting in effect on behalf of Habib as mortgagee, rather than for the Claimant, and it was in that role that the Receivers sought and were given advice. Secondly, I accept Mr Harvey QC’s analysis that there is no evidence that the Receivers ever conceived it their duty, nor ever at law were required, to hand on the advice they received from the Defendant as to the viability and value of the Claims. He submitted that what they did with the advice they received was up to them. They did not ask for it nor did they receive it on behalf of the Claimant. They owed no duty to pass it on, especially insofar as it made an assessment as to their course of action (that being a matter on which their primary duty was plainly to Habib and not the Claimant, and on which there would be a likely difference of view and interest between Habib and the Claimant). It is a fallacy to assume that everything that a person who happens to be an agent does is done in the capacity of agent and with the intention and effect of binding his principal.

As to (2), I also accept Mr Harvey QC’s submission that the fact that in this case the Claimant agreed (by clause 21 of the Sale and Purchase Agreement) that the Receivers should not incur personal liability in respect of that agreement (see paragraph 40 above) does not justify and require the imposition of a duty in tort on the Defendant.

First, as previously indicated, it is in my judgment clear that such clause is unlikely to have been intended and cannot have been effective to release the equitable (‘Cuckmere Brick’) duty owed by the Receivers to all those interested in the equity of redemption (including, for example, other chargees). Indeed, as it seems to me, for the Receivers to procure such a release for themselves would be in breach of the very same duty.

Secondly, and for the avoidance of doubt, it does not seem to me that the later release of claims against the Receivers can be used to justify the imposition of a duty of care on the Defendant in circumstances where, but for that release, there would be none. As it seems to me, the question is not whether the remedy against the Receivers continues to subsist; it is whether that was the appropriate cause of action whilst it did so. The Claimant cannot confer upon itself a claim against the Receivers’ advisers by its own act in releasing the Receivers themselves. Its proper complaint was always against the Receivers: it cannot complain of its own act in releasing them from any liability.

As to (3), and the actual or potential conflict of interest, I have already explained why I consider there would have been an actual or potential conflict of interest for the Defendant had it assumed responsibility for advising the Claimant as well as Habib and/or the Receivers. It seems to me obvious, and this is reflected in Raja v Gray, that a duty of care which would or might put the person on whom it is suggested to be imposed in a position where that duty does or may conflict with an existing duty he owes should not ordinarily (if ever) be inferred or imposed.

In short, I consider that, having regard to the legal principles I have sought to describe and explain earlier in this Judgment, the reasoning in Raja v Gray (usefully summarised by Clarke LJ in para. 51 of his judgment) applies so as to preclude a finding of a duty of care in tort in this case. Accordingly, I have concluded that the Claimant cannot maintain its alternative case in tort.

I have considered both separately and together, with reference to CPR 24.2(b) whether, despite my conclusions, there is any other compelling reason why this case should be disposed of at a trial, rather than summarily.

In assessing this I have taken into account that, especially in the context of alleged tortious liability, the result in any given case is fact-sensitive and ultimately a reflection of judgment rather than the application of a principle of law. I have had in mind the warning in the Three Rivers case that complex cases may often more properly be dealt with at trial.

Overall, and bearing in mind the considerable effort already expended on complex pleadings, I have considered carefully whether it would be wiser and more just to await elaboration of all the facts, after disclosure and cross-examination lest nuances suggest (for example) further ways of distinguishing Raja v Austin Gray. More particularly, I have considered whether greater factual detail and enquiry, and cross-examination on the subject, of the nature of the retainer agreed by the Receivers would assist in adjudicating the matter fairly. Mr Davidson urged on me that this was the sort of case where the court is likely to benefit from, and should not deny itself the opportunity of, hearing the witnesses and having a full factual picture before making any final decision; he reminded me of Lord Hoffmann’s admonition that “la vérité est dans la nuance”, and detailed factual nuances may only emerge at trial. His submissions have caused me much pause for thought.

However, I have eventually concluded that the case may, in my judgment, fairly be adjudicated at this early stage, and the overriding objective is best fulfilled by doing so.

In light of that conclusion, I think I need address only briefly the alternative basis for the Defendant’s application, under CPR 3.4(2).

In this context, the Defendant contends that the Claimant has not pleaded any facts or matters to support a case that on 12 or 13 August (or any other date) the Receivers did or said anything to create a contract of retainer between the Claimant and the Defendant.

As previously intimated, the Particulars of Claim do not, in my view, sufficiently explain (a) the scope of the alleged retainer and (b) the legal process by which the retainer was established, and in particular how it came to be proposed and agreed.

If I considered the Claimant’s contractual case to be potentially sustainable I would allow a short time in which to enable the case to be restated with more precision and particularity. But given my conclusion to the contrary this does not arise.

Similarly, if I considered there to be a viable alternative case in tort I would have considered whether a revised pleading might have rescued the Claimant: but again this does not arise.

I have concluded, therefore, that the Claimant cannot establish a duty of care either in contract or in tort and the Defendant is entitled to summary judgment.

I will hear Counsel on the form of order and any other matters arising (including costs) after formally delivering judgment.