Gladman Commercial Properties v Fisher Hargreaves Proctor & Ors

GCP is an unlimited company in the Gladman Group of companies founded by David Gladman. Another company in the Gladman Group is Gladman Developments Ltd (“GDL”). When bidding for the Properties, GDL described the Gladman Group as follows:

“Today we are the largest speculative property developer in the UK developing in locations from Bangor to Bedford, Livingston to Bristol. The Gladman Group’s turnover in 2004-5 was £150 million.”

The First Defendant (“FHP”) was at the material times a firm of chartered surveyors. The business is now carried on by a company. The Third Defendant (“Mr Hargreaves”) is and was at all material times a chartered surveyor and a partner, and latterly a director, of FHP. Prior to August 2004 the Fourth Defendant (“Mr Bishop”) was a chartered surveyor employed by FHP. From August 2004 to June 2011 Mr Bishop was a partner in the Second Defendant (“HEB”), another firm of chartered surveyors. Since June 2011 he has been a salaried partner, and latterly a director, of FHP.

The Fire Authority has six members nominated by the Council and 12 members nominated by Nottinghamshire County Council. The members are all councillors of the respective councils.

As indicated above, this litigation concerns two properties. The larger of the two is a disused fire station in Dunkirk, Nortingham which at all material times was owned by the Fire Authority (“the Fire Station”). The smaller of the two is an adjoining piece of land which at all material times was owned by the Council (“the Council Land”). The Properties are close to both Nottingham University and the Queens’ Medical Centre.

On 22 July 2004 the Council approved a document entitled “Building Balanced Communities – Supplementary Planning Document for the development of family housing and student housing” (“the SPD”) for use as interim planning guidance. The author of the SPD was Adrian Jones, who was the Council’s Director of Planning and Transport responsible for Development Control from 2002 to 2008.

In December 2005 a revised draft of the SPD was produced by the Council’s Development Control Committee. This was approved by the Council on 9 January 2006 and on 17 January 2006 the Council’s Executive Board resolved that the SPD be adopted as part of the Nottingham Local Framework.

After a successful challenge to the family housing element, and an unsuccessful challenge to the student housing element, the SPD was re-issued in March 2007.

It is GCP’s case, as it was in the First Action, that the effect of the SPD was to apply a presumption against the development of new purpose built student accommodation in areas such as those where the Properties are located (“the Presumption”).

In October 2003 the Fire Authority instructed FHP, in the person of Mr Bishop, to explore the possible sale of the Fire Station and another fire station in Beeston.

In February 2004 Henry Mein Partnership (“HMP”), a firm of architects, prepared a preliminary feasibility study with regard to the Fire Station on behalf of the Fire Authority. This recorded the results of initial planning enquiries made of Alison Dudley of the Council Planning Department, which related to noise issues, and of discussions with Paul Bolton of the Council’s Highway Design Unit regarding access and parking issues. The conclusion stated:

“The Planning Department have informally indicated that subject to conforming to [Planning Policy Guidance PPG.24 Planning and Noise] the old fire station site could be suitable for residential development in the form of student or key worker accommodation.

…

An initial feasibility indicates that subject to the various constraints being addressed a development in the region of 400 bed spaces would be achievable over a 6 to 7 storey development.”

On 23 April 2004 HMP wrote to Mr Bishop at FHP enclosing a rough sketch indicating that “43 one bedroom apartments of approximately 55 square metres each and 54 two bedroom apartments of approximately 70 square metres each”, i.e. a total of 97 apartments, could be built on the Fire Station site.

On 19 May 2004 Mr Bishop wrote to Henry Davidson Developments to try and interest them in the Fire Station (and the Beeston fire station). In this letter he said that “My clients Architects have already undertaken an initial Feasibility Study identifying that in order of: 450 student apartments could be created, subject to planning or alternatively 99 private apartments could be created.”

On 17 June 2004 Mr Bishop wrote to Rizvan Shafiq of the Council, with a copy to Edward Pratt of the Fire Authority, saying that from the feasibility study “we can achieve up to: 450 student apartments or alternatively 99 Private Apartments subject to planning”. He went on to enquire whether the Council would be prepared to sell the Council Land and enter into a joint marketing program. It appears that the Council did not agree to this proposal at that stage.

On 9 May 2005 there was a meeting of the Council’s planning officers, including Ms Dudley, at which one of the items discussed was a proposal for a mixed use residential and commercial development at the Fire Station site prepared by Franklin Ellis Architects on behalf of the Metropolitan Housing Trust.

On 11 May 2005 Mr Bishop (by then at HEB) wrote to Ian McFee of the Council’s Planning Department, with a copy to Mr Pratt, enclosing the HMP feasibility study of February 2004 and stating:

“I note that the policy towards student accommodation has now changed, but in fairness I generally see this site being marketed for either private or keyworker accommodation and would welcome your comment in this regard.”

On 15 July 2005 Mr McFee wrote to Mr Bishop saying that the Fire Station site was “completely unsuitable for any large scale residential development” because of “intractable” access issues. Mr McFee added:

“As things stand at present it is difficult to see to what use the site could be put, other than its present one.”

On 1 August 2005 there was a meeting between Mr Hargreaves and Mr Bishop on the one hand and Ms Dudley and Mr Jones on the other hand. Minutes of the meeting were prepared by Mr Hargreaves which stated:

“DGH suggested student accommodation as this would minimise the amount of car parking.

Apparently the site is in the ward of Councillor Trimble, who is very much anti-student and as such this will create problems.

In an ‘off the record’ comment Adrian Jones and Alison Dudley both agreed that a student development on this site was the most appropriate.

…

Adrian Jones in an ‘off the record’ comment suggested that the Chief Fire Officer should bring pressure to bear through their political contacts to help secure Planning Consent on this site.”

Ms Dudley made a manuscript note of the meeting which stated:

“Agreed that given access/traffic problems any development would need to be a low generator of vehicles therefore managed student accommodation best use but likely to be unacceptable to local residents and Ward members (ie Cllr Trimble). Only other possible use and probably preferred by use but not by Fire Service is small Industrial Units … Key worker accommodation would generate too much traffic.”

On 4 August 2005 Mr Hargreaves wrote to Mr Pratt enclosing a copy of his minutes of the meeting of 1 August 2005 and proposing that he and Mr Bishop speak to the Council to try to reach an agreement to sell the Council Land together with the Fire Station.

On 15 August 2005 Mr Bishop sent Neil Timms of the Fire Authority an email, with copies to Mr Pratt and Mr Hargreaves, reporting that Keyhaven Developments Ltd (“Keyhaven”), which had made an unconditional offer of £3.5 million for the Fire Station in May 2005, was proposing to proceed to exchange of contracts within 4 weeks. He commented:

“Quite frankly, and having discussed this issue with David, you have nothing to lose, as if they fail to exchange then we will still press on with resolving the issues in order to effect a sale. Due to our meeting with the planners last week, we are of the opinion however that as a consequence of the sites only real suitability as student accommodation, we feel that it is unlikely that an offer much in excess of this will be achieved once the issues have been resolved.”

On 15 September 2005 the District Valuer produced a report on the Fire Station valuing the freehold interest with vacant possession at £3 million. Under the heading “Planning” the author stated:

“I understand discussions have been conducted with the Local Planning Authority that have concluded that the only type of planning application in respect of the subject property that would attract the necessary permissions would be that for redevelopment of the site as multi storey student accommodation structures with minimal on site vehicular access/parking. It is also understood no other form of use or redevelopment would be allowed on the site in its present geographical form.”

At some point in September 2005 Mr Bishop and Mr Timms met Cllrs Trimble and Griggs to discuss use of the Fire Station site for student accommodation. It does not appear that there was any minute or note of this meeting.

On 1 December 2005 Mr Hargreaves prepared a draft letter for the purpose of marketing the Fire Station to potential buyers.

On 6 March 2006 Mr Bishop wrote to Barry Horne of the Council, with copies to three other Council officers and Messrs Pratt and Timms of the Fire Authority, proposing on behalf of the Fire Authority that the Council Land be marketed with the Fire Station. In the course of the letter, he stated:

“I have met with Adrian Jones who advises that the most appropriate use for the site would be student accommodation albeit naturally advised that there may be some resistance.”

On 10 April 2006 the Council agreed to sell the Council Land. Later that month it was agreed that the Fire Authority and the Council would jointly instruct both FHP and HEB to market the Properties as one, with the proceeds of sale being split 70/30 between the Fire Authority and the Council. Mr Hargeaves had conduct on behalf of FHP and Mr Bishop on behalf of HEB.

On 24 April 2006 Mr Bishop wrote to Mr Shafiq at the Council, with copies to Mr Pratt and Mr Timms at the Fire Authority, to confirm HEB’s instructions to market the Council Land for a fee of 0.75% (the same fee agreed with the Fire Authority). He enclosed a draft of the letter which he intended to circulate to interested parties and asked for confirmation that Mr Shafiq was happy with its contents. He also enclosed a copy of HEB’s Terms of Engagement which he asked Mr Shafiq to sign and return.

On 18 May 2006 Mr Hargreaves wrote to Mr Bishop recording a meeting with Mr Jones and Rob Percival of the Council’s Planning Department. The letter stated:

“The members of the Committee will strongly resist an apartment scheme on the site and are generally hostile to additional students within this area.

…

Adrian Jones, however, did state that his views haven’t changed since the last meeting in that the most appropriate use would probably be student accommodation providing there was no impact on the residents in the immediate vicinity.

…

It is clear that if it was a private sector developer selling the site and seeking planning consent for student accommodation, there would be little or no chance of securing it.

…

We will undoubtedly have our work cut out and a significant amount of lobbying from the Chief Fire Officer and other members of the Committee will be required behind the scenes.”

On 26 May 2006 Mr Bishop wrote to Mr Pratt and Mr Timms with an update on the Fire Station and other matters. In this letter he said:

“As you will both appreciate, planning permission for student accommodation will not be straightforward and accordingly I would be grateful if you could give some thought as to commencing any lobbying that you are able to with the Committee Members, making them aware of the wider picture.”

On 26 June 2006 Mr Bishop sent an email to Mr Timms and Mr Pratt of the Fire Authority stating:

“We really need your political input now in lobbying the City for Student Accommodation, as any interest shown in the site will be deterred when they make their planning enquiries.”

On 19 July 2006 Mr Hargreaves produced a further draft marketing letter containing the wording which GCP complains about. On 20 July 2006 Mr Bishop sent a copy of this to Mr Shafiq.

On 7 August 2006 Mr Bishop on behalf of HEB sent Mr Gladman and Mr Hargreaves on behalf of FHP sent Simon Turner of GDL letters in virtually identical terms marketing the Properties. The letters were headed “Student/Keyworker Development Site” and contained the following key passages:

“DEVELOPMENT OPPORTUNITY

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

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

600 bedrooms

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

…

PRICE

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

£4,000,000

(Four Million Pounds)

on a subject to planning basis.”

On 12 September 2006 Mr Timms sent Mr Pratt an email saying:

“The problem with planning at Dunkirk it seems is that Clr Trimble is pressuring City Planners not to grant permission for student accommodation. This is reducing the value of the site significantly and so we are looking to ‘get the arm on him’. I think this is better done through his City Council colleagues and therefore I am going to approach Members directly. If this fails I may involve the Chief.”

On 12 October 2006 Mr Hargreaves on behalf of FHP wrote to Mr Turner of GDL referring to GDL’s enquiry in respect of the Property “which is appropriate, subject to planning, for the development of student accommodation, key worker accommodation or apartments.” Mr Hargreaves invited GDL to submit sealed bids on either of two bases, namely unconditional or conditional “subject to planning”. On 16 October 2006 Mr Bishop on behalf of HEB wrote to Mr Gladman in the same terms.

On 16 June 2006 James Firth of Wilson Mason and Partners, a firm of architects, sent an email to Mr McFee and Mr Percival recording what had been discussed at a meeting earlier that day. This included the following:

“RP raised the issue of ‘Building Balanced Communities’ and that this site would fall within the ‘Family Home’ type of residential development, not multi-occupancy apartments nor student accommodation, as they both contravene current development standards as set out by NCC.”

On 24 July 2006 Edward Cade of Moorfield Group sent Mr Bishop an email requesting any indicative drawings that Mr Bishop’s clients had prepared. Mr Bishop replied the same day, saying “We never actually had a scheme drawn, but I will send you what I have”.

On 31 July 2006 Mr Cade sent another email saying that even sketches would be gratefully received. It does not appear that Mr Bishop sent Mr Cade the HMP documents (see paragraphs 12 and 13 above). Rather, he replied the same day:

“We didn’t commission the architect to undertake one, I just instructed him to let me know what the most appropriate use was for the site after he had met with the planners and what could be achieved on site in terms of unit numbers. This was specifically for the fire station site and not the council land as at that time we were going to market without them. Its probably best if you ring … Tim Pearson … He is very helpful… ”

On 3 October 2006 Stuart Horne of FHP forwarded to Mr Hargreaves an email which in turn forwarded an email from Peter Race of Race Cottam architects dated 26 September 2006 (“the Peter Race email”). The Peter Race email said:

“I did manage to have a conversation with the planners for the Dunkirk site last Friday. As you might have expected, his view was a bit different to the picture presented in the Agent’s blurb …

USE – Although he acknowledged that ‘key worker’ usage seemed a logical use for the site, he was emphatic in saying that student use would not be acceptable. Apparently, there are big political problems in the area with it becoming a student ghetto. Any talk of student use would be a complete no-no.”

On 17 October 2006 Paul Gillespie of Keyhaven wrote to Mr Bishop withdrawing Keyhaven’s interest in the light of a report from RPS Planning dated 10 October 2006, a copy of which was enclosed. In the report Helen Binns of RPS discussed the SPD of March 2006 in some detail, saying that the Council’s guidance was “very contradictory”. She also reported a discussion with Mr Percival, in which he had advised that it was “very unlikely” that the Council officers would recommend the approval of a scheme for student accommodation or that Council members would go against a recommendation not to approve such a scheme. Her conclusion was as follows:

“In summary we consider that gaining planning permission for student accommodation on this site will be extremely difficult, although not impossible and the key will be obtaining Members support for the scheme. Ultimately, you may wish/need to take the matter to appeal, however the chances of success are by no means certain and at best are likely to be 50:50, assuming that all other detailed matters have been resolved. This may however be your only chance if gaining political support does not prove possible.”

Despite what he had said in his letter dated 17 October 2006, on 22 October 2006 Mr Gillespie wrote to Mr Bishop again, offering the sum of £5 million for the Properties subject to planning.

On 24 October 2006 Robert Bancroft of Hadfield Cawkwell Davidson architects, acting on behalf of a developer called UNITE, sent an email to Mr Percival asking for the latter’s views on a 6-9 storey student accommodation scheme for the Properties. Mr Percival spoke to Mr Bancroft by telephone on 25 October 2006. Mr Percival made a note of his advice which included the phrase “No to students”. Mr Percival stated in his first witness statement in the First Action that this was “overly simplified”.

Mr Turner gave evidence in his witness statement in the First Action that in September 2006 he telephoned the Council’s Planning Department and spoke to an unidentified woman. On his account Mr Turner told her that Gladman Group wanted to develop the Properties for student accommodation, and he did not receive a negative response. Nor was any reference made to the SPD. It does not appear that a documentary record was made of this conversation.

On 19 October 2006 Mr Turner contacted Matthew Hubbard of Antony Aspbury Associates Ltd (“AAA”), Town Planning and Development Consultants, about the Properties. Mr Turner sent Mr Hubbard an email the same day. Mr Hubbard replied on 23 October 2006:

“I am aware of the site in question, and its surroundings, although I have not made a specific site visit following the receipt of your email and information.

I fully agree that the intended use of the site would be the best solution in this location bearing in mind the proximity of the QMC and the edge of the University campus, both just to the north of the site. The site is within a residential area (including the nurses accommodation to the north) although there is a recreational playing field to the south and beyond that, industrial premises. The adjacent roundabout and fly-over form a physical separation between the site and the residential accommodation to the west.

From my initial appraisal of your proposal I would flag up to 4 fundamental concerns, in terms of scale, impact, access and car parking. I have broken these down as follows:

…

I am not wanting to sound negative at the onset about this proposal, I am merely flagging-up issues which will be raised by the City Council Planners if we furthered negotiations based on the initial scheme. I must say that, based on the size of the site and the comments made above, the Fisher Hargreaves Proctor document does seem very ambitious in suggesting that the site could accommodate a 600 bedroom development on the fire station alone!

…

I have not been with this Practice long but I do feel that my Development Control background puts me in a good position to view proposals from a Planning Officers perspective and pre-empt any major issues at an early stage. It is difficult to give you an accurate idea of our likely fees for assisting you with any proposal as it is open at present as to the type of application (outline or full) and the amount of input that you would have as a company in the submission of the application. Suggesting that the application was for full planning permission and that you required our services in pre-application negotiations with the planners, the preparation of a Supporting Statement and the required design and Access Statement, the submission of the application and discussions with the planners during the course of the application, I would estimate our professional fees to be in the region £6000 to £8000 (+ VAT, mileage, etc).”

Mr Hubbard stated in his witness statement in the First Action that at the time of sending this email he did not know about the SPD, since he had only been working in Nottingham for about four weeks, although he had since learned that AAA were among the consultees who had received a draft of the SPD.

On 25 October 2006 Mr Turner of GDL wrote to Mr Bishop to make two offers for the Property. The first was an unconditional offer of £6 million. The second was a conditional offer of £9 million subject to planning permission being secured for not less than 450 units. Enclosed with the letter was a 15 page document containing details about the Gladman Group, its proposed partners (The Harris Partnership, architects, and AAA) and the development it proposed. So far as the proposed development was concerned, the document stated at page 13:

“If selected we propose to develop a mixed student/key worker accommodation scheme as illustrated on the sketch scheme. This initial sketch scheme illustrates some 566 units split across three buildings. This development of three buildings will particularly lend the scheme to occupation by both students and key workers, allowing for a degree of separation.

To date we have taken very broad soundings from planners about the nature and scale of development. This has served to confirm the broad acceptability of the proposed use and scale of our development. However, given the nature of the use and its potential political sensitivity it has not been possible to hold detailed discussions with the City Council at this stage. Our confidence in this site and our ability to negotiate planning permission on complex and politically sensitive sites is demonstrated by our willing [sic] to submit an unconditional offer.”

On 27 October 2006 the sealed bids were opened at a meeting attended by Messrs Bishop, Hargreaves, Shafiq and Timms and by another representative of the Council, Peter Taylor. There were 10 conditional bids and three unconditional bids. GDL’s offers were the highest both on the conditional and unconditional bases. Its unconditional offer was £1.5 million higher than the next highest unconditional offer.

On 31 October 2006 Mr Hargreaves and Mr Bishop wrote to Messrs Shafiq and Taylor at the Council, and on 1 November 2006 they wrote to Messrs Pratt and Timms at the Fire Authority, reporting on the bids received and recommending that GDL’s unconditional offer of £6 million be pursued. The letter to the Fire Authority stated:

“PLANNING RISK

You are aware that Nottingham City Council’s Planning Department have been advising proposed purchasers that they do not want to see a student accommodation scheme developed on this site. They have advised, however, that ‘key worker accommodation’ would probably be acceptable. It is fair to say, therefore, that securing planning consent in accordance with the various conditions attached to the various bids will be far from straightforward and will, therefore, have a significant amount of risk attached to it.”

The letter went on to say that accepting GDL’s unconditional offer would remove this planning risk.

On 8 December 2006 Mr Timms prepared a report for the Chief Fire Officer seeking approval of the acceptance of GDL’s unconditional offer. This stated that GDL’s proposed development “is not likely to meet with approval of the City Council from a planning perspective and therefore the City Officers will be nervous about accepting a conditional offer”.

On 13 December 2006 Mr Bishop sent Mr Shafiq an email concerning GDL’s offer in which he said:

“I really don’t think that is appropriate to start advising them on planning issues when they are buying on an unconditional basis – this can be done at a later stage.”

Later in December 2006, the Fire Authority and the Council accepted GDL’s unconditional offer which at that stage was still subject to contract.

On 24 April 2007 Mr Bishop sent Mr Shafiq and Mr Pratt an email, with copies to Fiona Polley of Browne Jacobson LLP, the solicitors instructed on behalf of the Fire Authority, and Mr Timms, saying:

“Gladman have just called to advise that they are still waiting for answers to their enquiries. We really do need to get on with this as they are now getting concerned and to remind everyone that this deal is too good to be true.”

On 15 May 2007 Ms Polley sent an email to Mr Pratt, with a copy to Mr Bishop, reporting that she had received a letter from GDL saying that they wished to proceed with a planning application as soon as possible and proposing an 18 month lock out agreement. Mr Bishop replied the same day, with copies to Mr Pratt and Mr Timms, saying:

“I am not happy with this. It is imperative that we sell the site on an unconditional basis now. By offering a lock-out they are making it conditional and planning is extremely political … ”

On 22 May 2007 Mr Bishop sent a further email to Ms Polley with copies to Mr Pratt, Mr Timms and Frank Swan of the Fire Authority and Rizvan Shafiq of the Council saying that he had just spoken to GDL. He continued:

“Bearing in mind that we really need to exchange on this site before they submit their planning application (after all it is an unconditional deal), can we all please aim for an exchange within 2 weeks. … If we leave it much longer then I am conscious that they will appreciate the complexities of planning on this site and potentially lose interest at the level for which we have agreed.”

On 19 September 2007 GCP exchanged contracts with the Fire Authority to purchase the Fire Station for £4.2 million and with the Council to purchase the Council Land for £1.8 million (“the Contracts”). GCP paid deposits of £420,000 and £180,000 respectively under the Contracts.

On 2 October 2007 Dean Fisher of GCP wrote to Mr Percival enclosing GCP’s proposal for the redevelopment of the Properties. On 23 October 2007 Mr Percival sent Mr Fisher an email referring to the SPD and explaining that there was potential for a scheme for student accommodation to receive local and political opposition. He also highlighted a number of other issues with the proposed scheme. It is GCP’s case that this is the first time it became aware of the SPD.

Between 1 November 2007 and 27 June 2008 there were a series of meetings and other communications between representatives of GCP, Colliers CRE and The Harris Partnership on the one hand and Mr Percival and another Council planning officer on the other hand.

On 30 July 2008 Marc Hourigan of Colliers CRE acting on behalf of GCP sent Mr Percival a pre-application planning submission consisting of three lever arch files of documents. On 12 August 2008 Mr Percival telephoned Mr Hourigan and said that the scale, height and mass of the proposed development were too great. On 13 August 2008 Mr Hourigan reported the telephone conversation in a letter to Mr Turner. This letter stated that, in relation to the principle of development, senior officers were open to the idea of student accommodation on the site notwithstanding the difficult policy position and local resistance.

On 30 October 2008 Mr Horne wrote to GCP stating that developing student accommodation on the Properties would be problematic as planning policy did not support student accommodation at that location.

GCP never submitted a formal planning application in respect of the Properties.

On 29 January 2009 the Fire Authority served a notice to complete on GCP. The Council followed suit a couple of days later. GCP declined to complete the Contracts, however.

On 19 May 2009 the Fire Authority commenced the First Action against GCP for specific performance of the Contract in respect of the Fire Station. Given the nature of the Defendants’ present applications, it is necessary to set out the events of the First Action in some detail.

On 30 July 2009 GCP served a Defence and a Counterclaim/Part 20 Claim against both the Fire Authority and the Council. In its Defence GCP claimed that it was entitled to rescind the contract on the ground of fraudulent misrepresentation as set out in its Counterclaim/Part 20 Claim. In the Counterclaim/Part 20 Claim GCP set out at paragraphs 14-23 its case with regard to the Council’s planning policy which I have summarised in paragraphs 7-10 above. In paragraph 24 it alleged that the Fire Authority and the Council jointly marketed the Properties for sale through agents jointly instructed by them, namely FHP and HEB. In paragraphs 25 and 26 it set out the key passages from the letter dated 7 August 2006 which I have quoted in paragraph 33 above.

In paragraphs 27-29 GCP pleaded its case on misrepresentation as follows:

“27.

It is averred that the said sales particulars were understood by Gladman to mean, and such understanding was reasonably held by Gladman in the circumstances, that:

(i)

the most suitable use of the Property and Adjoining Property [i.e. the Fire Station and the Council Land] was for a development including purpose built student or keyworker accommodation; and

(ii)

the Property alone could accommodate a development of 600 bedrooms for key workers or students (‘the Express Misrepresentation’).

28.

Further, it is averred that by reason of the contents of the said sales particulars, the Fire Authority and the Council made the implied representation to Gladman that they had reasonable grounds for their stated belief that the most suitable use of the Property and Adjoining Property was for a development including purpose built student or key worker accommodation, and the Property alone

could accommodate a development of 600 bedrooms for key workers or students (‘the Implied Misrepresentation’).

29.

The Express Misrepresentation and/or the Implied Misrepresentation were false in that:

(i)

the Property and Adjoining Property were not suitable for redevelopment for purpose built student accommodation in the light of the terms and application of the Presumption to the Property and the Adjoining Property; and

(ii)

by reason of a feasibility study carried out in or about February 2004 in relation to the Property (and not the Adjoining Property) on behalf of the Fire Authority by Henry Mein Partnership Architects, the said architects concluded that, ‘…subject to various constraints being addressed a development in the region of 400 bed spaces would be achievable over a 6 to 7 storey development.’.”

In paragraph 31 GCP alleged that it was induced to enter into the contracts by the Express and/or Implied Misrepresentation. In paragraphs 32-35 GCP alleged that the Council and the Fire Authority both knew about the SPD and hence the Presumption. In paragraph 36 GCP alleged that the Council and the Fire Authority made the Express and/or Implied Misrepresentation fraudulently, knowing them to be untrue or not caring whether they were true or false. In particulars to paragraph 36, GCP alleged that the Council and the Fire Authority authorised HEB and FHP to make the Express Misrepresentation and hence made the Implied Misrepresentation. In paragraph 40 GCP claimed damages for “lost opportunities that [GCP] could have pursued had it not entered into” the Contracts.

The Fire Authority served a Reply and Defence to Counterclaim denying any misrepresentation, let alone a fraudulent one. The Council served a Defence and Counterclaim in which it denied any misrepresentation, let alone a fraudulent one, and sought specific performance of the contract relating to the Council Land.

In its Defence the Council denied that the SPD gave rise to a presumption against the development of new purpose built student accommodation on the Properties in any and all circumstances. It averred that at all material times “the view of the planning officers of the Council has been that this site could be an appropriate location for student accommodation”. The Council denied that the letters dated 7 August 2006 bore the meanings attributed to them by GCP and alleged that any representation conveyed was one of opinion. It averred that GCP had negligently failed to make any approaches to the planning officers of the Council prior to entering into the Contracts. The Council denied acting fraudulently.

On 26 November 2009 an order was made for the issues of liability to be tried as preliminary issues. Whether before or after this, at some point GCP served on a without prejudice basis a draft expert’s report from Hugh Matthew-Jones FCA, a partner in PKF (UK) LLP, quantifying the losses claimed by GCP.

On 8 February 2010 the parties gave disclosure.

On 1 October 2010 witness statements were exchanged. The Fire Authority served witness statements from Messrs Timms, Hargreaves and Bishop. It did not serve a statement from Mr Pratt (who had retired in 2009). The Council served witness statements from Ms Dudley, Mr Percival, Mr Shafiq and a number of councillors. It did not serve any statement from Mr Jones (who had left the Council’s employment in 2008) or from Cllr Trimble. GCP served statements from Mr Gladman, Mr Turner and Mr Hubbard among others.

The witness statements of Mr Hargreaves and Mr Bishop were prepared by the solicitors acting for the Fire Authority, Browne Jacobson. A few days before the statements were served, solicitors instructed by FHP’s professional indemnity insurers, namely Fishburns LLP, and solicitors instructed by HEB’s insurers, namely DAC Beachcroft LLP, were instructed to review Mr Hagreaves’ and Mr Bishop’s draft statements respectively. Since they did not have conduct of the litigation, and given the late stage at which they became involved, it will inevitably have been difficult for them to give comprehensive advice as to what matters should be covered in the statements.

In her witness statement Ms Dudley said that, during the meeting on 9 May 2005, the SPD was “in the forefront of our minds … yet it was agreed that the site was most suitable for student accommodation” (paragraph 8). She also said that during the meeting on 1 August 2005 “Adrian and I advised that … managed student accommodation would be the best use” (paragraph 16). She remained of the view that “the most suitable use for the site was for a development of student accommodation or small industrial units” (paragraph 24). She expressed the view that the SPD did not rule out a student development and that it would not be impossible to persuade the local community to accept such a scheme (paragraphs 24-25).

Both Mr Bishop and Mr Timms gave accounts of the meeting with Messrs Trimble and Griggs in September 2005 in their witness statements, although both misdated it to September 2006. Mr Timms said that his recollection was that Cllr Trimble “said something along the lines of ‘I have no doubt that planning will be given for students but I have to oppose it simply to represent my constituents’” (paragraph 14). Mr Bishop give a similar, but not identical, account (paragraph 15).

In his witness statement Mr Gladman stated in paragraph 51 that he and his colleagues had formed the “unpalatable opinion” that “Officers acting for the City Council and the Fire Authority, as well as the Sales Agents, knew about the SPD before the Site was put to the market” in late 2008. In paragraphs 53-61 he gave evidence as to his reactions when he read the documents disclosed by the Fire Authority and the Council in the proceedings. For present purposes the following passages are particularly pertinent:

“53.

… What I read left me wild with anger, as it was now clear beyond any shred of doubt that numerous Officers, employees and Agents at both Authorities had been repeatedly advised by the City Council’s planning officers … about the planning policy problem and its effect upon the value of the sites. …

55.

One area of the documents disclosed which particularly incensed me was the creative language generated and refined over time by Jonathan Bishop, who was an Agent for both Authorities. He drew on various iterations to describe a site as suitable for Student Accommodation when he was fully aware that this was untrue (see his letter of 11 May 2005 to Ian McFee …

…

58.

… The District Valuer, when he valued the Fire Authority’s site at £3 million, has been as much the victim of a fraudulent misrepresentation as we were. He was, I believe, misled by Messrs Pratt and Bishop.

…

61.

I was particularly incensed at some of the disclosed e-mails in the few months just before we exchanged contracts on the purchases. The several employees (and the Agents) involved seemed to confirm that they knew we did not know about the SPD problem, confirmed that they knew, and that they should try and exchange as soon as possible before we perhaps found out and therefore change [sic] our mind. I think it is summed up in 2 e-mails from Jonathan Bishop dated 24 April 2007 and 22 May 2007 …”

On 26 November 2010 GCP served a Request for Further Information on the Fire Authority. On 6 December 2010 the Fire Authority served its Reply to that Request.

On 12 January 2011 the Fire Authority gave supplemental disclosure following a search of Mr Hargreaves’ and Mr Bishop’s email accounts as had been requested by GCP on 16 November 2010. Among the documents disclosed were (i) the emails between Mr Cade and Mr Bishop (see paragraphs 36 and 37 above) and (ii) the chain of emails which included the Peter Race email (see paragraph 39 above).

On 14 January 2011 GCP served a draft Amended Defence and Counterclaim. Among other things, the amendments included an amendment to paragraph 24 to identify the agents instructed by the Fire Authority and the Council as “David Hargreaves of Fisher Hargreaves Proctor … and Jonathan Bishop of HEB” and the addition of the following new allegations:

“34D. It is averred that Messrs Bishop and/or Hargreaves had actual knowledge of the existence of the SPD, the Presumption, and the fact that the use of the Property and the Adjoining Property for the purpose of student accommodation was not appropriate at the latest by 16 June 2006, when Jonathan Bishop was copied in on an e-mail sent on that date by James Firth at Wilson Mason Partners to Ian McFee and Rob Percival of the Council. Further, they had actual knowledge of the matters referred to in paragraph 34C above by the end 2004 at the latest, as evidenced by the terms of a letter written by Jonathan Bishop (when he was then employed by FHP) to the Council dated 17 June 2004. Despite such knowledge, the agents drafted the sales particulars containing the Express Misrepresentation, when they knew the same to be false. Further, the agents authority to make such a misrepresentation was wholly within the authority conferred upon them by the Council and the Fire Authority as evidenced by the fact that both the Council and the Fire Authority, when provided with copies of the sales particulars in a draft form for their approval, did not instruct Messrs Bishop and/or Hargreaves to correct the terms of the Express Misrepresentation before the sales particulars were sent out in mail shots.

…

38.

Further or alternatively, by reason of the matters set out in paragraph 34D above, Gladman avers that the Council and the Fire Authority are liable as principals, for the fraudulent misrepresentations made by their agents, Messrs Bishop and Hargreaves, which were made in pursuance of their actual or ostensible authority conferred upon the said agents by the Council and the Fire Authority.”

In addition, the amendments identified a considerable number of documents which GCP relied upon in support of its allegations in addition to those which had been relied upon in the original Defence and Counterclaim/Part 20 Claim (such as the 11 May 2005 letter). In total, the Amended Defence and Counterclaim relied upon 22 documents.

GCP has not revealed precisely when counsel was instructed to settle the amendments to the Defence and Counterclaim/Part 20 claim, but Andrew Davidson, the partner with conduct of both the First Action and these proceedings, has stated in paragraph 27 of his second witness statement that:

“In terms of timing, the amended defence and part 20 counterclaim was produced immediately prior to service in draft on 14 January 2011, and it followed from work carried out immediately prior, in early January 2011.”

It appears from this that the instructions were given prior to receipt of the Fire Authority’s supplemental disclosure on 12 January 2011. That is consistent with the absence of any reference to documents disclosed in the supplemental list, such as the Peter Race email.

On 18 February 2011 GCP formally served its Amended Defence and Counterclaim. The Fire Authority and the Council served consequentially amended statements of case on 23 and 24 February 2011 respectively.

At around the same time, the Fire Authority and the Council served a few supplemental witness statements. These included a very short statement of Mr Pratt for the Fire Authority.

On 1 March 2011 GCP’s solicitors sent letters to Mr Hargreaves and Mr Bishop in the following terms:

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

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

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

On 8 March 2011 the First Action came on for trial before Peter Smith J. At that point, the estimated length of trial was eight days. The first day was taken up with opening submissions. On 9 March Mr Timms gave evidence.

Mr Bishop gave evidence on 10, 11 and 14 March. I shall refer to Mr Bishop’s evidence in the current proceedings about this experience below. At this stage I shall note four points which are evident from the transcript, one specific and three general.

First, Mr Bishop was cross-examined about the references in his letters dated 19 May 2004 and 17 June 2004 to 99 private apartments being feasible (see paragraphs 14 and 15 above). Counsel for GCP pointed out that there was no mention of apartments in the feasibility study produced by HMP in February 2004 (see paragraph 12 above). Counsel put it to Mr Bishop that that was something that he had thought up, rather than the architects, and therefore the letters were misleading (10 March, pages 47-51). As the judge put it, he had “deliberately over-egged” the feasibility study (pages 50-57). For reasons that have not been explained, however, it does not appear that the letter dated 23 April 2004 from HMP which does refer to 97 apartments (see paragraph 13 above) had been disclosed by the Fire Authority or the Council. Certainly, if it was disclosed, it did not make its way into the trial bundle. As a result, Mr Bishop was driven to accept that his letters were misleading in this respect. (He was also questioned about the discrepancy between the 400 student units mentioned in the HMP study and the 450 units mentioned in the letters, but that is a separate point.)

Secondly, Mr Bishop was repeatedly taken to task both by counsel for GCP and by the judge for omissions from his witness statement. For example, on 10 March the following exchanges occurred (pages 24-25):

“MR JUSTICE PETER SMITH: You said that the purpose of the meeting was out of respect to Councillor Trimble for two reasons …. Right?

A.

Yes.

MR JUSTICE PETER SMITH: If I look at your witness statement, you don’t mention that latter reason at all.

A.

Because that was not on my agenda. That was on Mr Timms’ agenda.

MR JUSTICE PETER SMITH: The purpose of your witness statement, your evidence, is to tell me everything. All right? Not selected bits. Because if you leave something out and then want to put it in, I might conclude that you are making it up as you go along.

A.

Yes.

MR JUSTICE PETER SMITH: So why isn’t that in your witness statement? Why didn’t you set out the purposes of the meeting in your statement?

A. When I did my witness statement, I thought it was to do with what I experienced, the facts of my experience at the time. The purpose of explaining to Councillor Ward (sic) about losing a fire station was actually nothing to do with me. That was a political issue between the Fire Service and the public. …”

This led later that day to an objection by counsel for the Fire Authority that this line of questioning was “oppressive” because Mr Bishop’s witness statement had been prepared in accordance with the guidance contained in the Chancery Guide (pages 91-96). This complaint was rejected by the judge (pages 97-103).

Thirdly, a considerable number of questions were asked by the judge. This led to an objection by counsel for the Fire Authority that Mr Bishop was being “cross-examined in stereo” (11 March, page 124). The judge took exception to this (pages 124-135), and ultimately counsel backed down and apologised (pages 136-137).

Fourthly and most importantly, Mr Bishop was accused of fraudulent misrepresentation in his letter dated 7 August 2006. As the judge accurately said to him on 14 March (page 12):

“MR JUSTICE PETER SMITH: You have said a number of times ‘in these hypothetical questions’, and I know where you have picked that up from, but I want you to understand: these questions are not really hypothetical; because you are on trial here, with an allegation of dishonesty against you, that you fraudulently told too good a picture about the potential of this site. Do you understand that?

A. Yes.”

After Mr Bishop, two councillors gave evidence. Mr Hargreaves gave evidence on 14, 15 and 16 March. The four points which I have made about Mr Bishop’s evidence are all almost equally applicable to Mr Hargreaves’ evidence. In relation to the fourth point, for example, the following exchange took place on 16 March (pages 26-27):

“MR JUSTICE PETER SMITH: … The question I asked was: why were your reservations – which is what they clearly were – and which qualified your view, clearly, taking into account everything, why were they not expressed in the sales particulars? This is possibly the most important question you are going to have to answer, because your honesty will turn on your answer. I want to know why.

A. Because in the balance of the credits and debits I thought that the credits were significantly greater than the debits and that the most appropriate use would be that, as I stated in the letter.

MR JUSTICE PETER SMITH: And that you would get permission for that most appropriate use?

A.

Yes.

MR JUSTICE PETER SMITH: Do you see why it is important? I now have your evidence, your answer to the important question as to why you felt the particulars were not fraudulent and still believe them not to be fraudulent. Do you understand? That is why I’ve been pressing you. It is oppressive.

A.

I’m confused, confused on it.

MR JUSTICE PETER SMITH: You might be confused, but I’m not confused, which is the important point. Thank you.”

There are two additional points to note about Mr Hargreaves’ evidence. The first is that, after a short break in middle of the afternoon on 16 March, counsel for the Fire Authority informed the court that Mr Hargreaves had been complaining of double vision and had been taking painkillers (page 162). The witness added that he had a bad headache and had been struggling reading, but having taken the painkillers he was fine (pages 164-165).

The second is that, not long after Mr Hargreaves had started giving evidence on 14 March, the judge made an observation to counsel for the Fire Authority in response to which counsel informed the judge that GCP had intimated a claim for £30 million against Mr Hargreaves and Mr Bishop the week before trial (pages 149-150). That was the first time on which the judge had been informed about this, and even then he was not shown the actual letters dated 1 March 2011. Counsel for the Fire Authority asked Mr Hargreaves about this in re-examination, and Mr Hargreaves said that the claim exceeded the limit on his professional indemnity policy (16 March, pages 176-177). I will return to this point below.

On 14 March Cllr Trimble made a witness statement of behalf of the Council in which he stated that his view of the site was that “it was not necessarily a bad site for student accommodation but that the design needed to be right in order to minimise the impact on local residents” (paragraph 3). This appears to have been admitted without objection. Both Cllr Trimble and Ms Dudley gave evidence on 16 March.

After the conclusion of the evidence on 16 March the judge asked counsel for GCP about the letters to Messrs Hargreaves and Bishop, at which point the judge was shown a copy of one of the letters dated 1 March 2011 for the first time (pages 241-242). The judge immediately observed that he did not see how GCP could claim damages £30 million for fraudulent misrepresentation against Messrs Hargreaves and Bishop, because “your measure of damages for a fraudulent misrepresentation is not as if the representation is true” (pages 242-243). He went on to say (page 245):

“… I shudder to think what Mr Bishop and Mr Hargreaves thought when they received a letter saying that if your clients [i.e. GCP] lost the litigation they would be ruined, because that puts them in a catch 22 situation, because there is a good chance that if the claimants lose the litigation Mr Hargreaves and Mr Bishop will be ruined anyway and therefore you are saying if they win the litigation they would be ruined too.”

There was then a discussion between the judge and counsel for GCP about the fact that GCP’s claim against the Fire Authority and the Council was for fraud, no claim for negligent misstatement having been made, and the potential consequences of that (pages 245-251). The judge suggested that counsel consider an application to amend GCP’s Defence and Counterclaim/Part 20 claim to plead a claim in negligence. Counsel for the Fire Authority made it clear that any such application would be resisted, and the judge observed “I did flag this up at the CMC, but nobody took the hint then” (page 250). If I have understood the position correctly, GCP subsequently launched and then withdrew an application to amend as the judge had suggested.

Mr Pratt gave evidence on 17 March. Mr Percival gave evidence on 17 and 18 March. Mr Shafiq gave evidence on 18 March. At that point the trial was adjourned part-heard.

On 11 April 2011 the trial was resumed. The Council applied to adduce witness statements made shortly beforehand by Mr Jones and by Tim Render, who had been the Council’s Chief Finance Officer in 2006. It appears that there was a cross-application by GCP to adduce supplemental statements made by Mr Turner and another of its witnesses.

In his witness statement Mr Jones said that he agreed with Ms Dudley’s account in her witness statement of the 9 May 2005 and 1 August 2005 meetings (paragraph 3). He also said that the statement attributed to him in Mr Bishop’s minutes of the 1 August 2005 meeting that a student development of the site would be most appropriate was an openly expressed view which was an honest statement of opinion (paragraph 6). Having referred to certain later documents, he went on:

“11.

At all times through the marketing of the site I was confident that planning permission for student accommodation would have received approval because it was clear in my mind that student use was the obvious and best use for the site. I would describe the SPD as a ‘fig leaf’. This is because whatever the guidance said, one would need flexibility in dealing with planning matters in practice. Each application for planning permission must be dealt with on its merits. There was no policy ban on purpose built student accommodation in the location of the Dunkirk Fire Station. I thought that it was very highly likely that an application for planning permission would have been successful provided that the proposed development was well designed and adequately addressed other planning matters such as noise and access issues.

…

16.

At all times during my involvement nothing changed to alter the view I was expressing about the suitability of the site for student accommodation. I was confident that if any developer had pursued a planning application they would have secured the relevant planning consent. It was often the case at that time that taking applications through the DC Committee was difficult because of strongly held views but in practice [sic] relatively few applications were turned down against officer advice and I was ultimately responsible for that advice. …”

During the course of the Council’s application, the judge made numerous comments about the importance of Mr Jones’ evidence to the Council’s and the Fire Authority’s case, and hence the potential impact of the late application to adduce his evidence on the costs position. These comments included the following (pages 16, 18-19, 26, 31, 35):

“It was [obvious] that Mr Jones was going to be a key witness in this case. Any cursory examination of the notes of the meetings would have seen that. Mr Jones’ evidence is the platform for [the Council and the Fire Authority] to say that they had an honest belief because they relied on what Mr Jones said. I can’t imagine a more important witness in this case.

I have to say … that my provisional view of most of the witnesses that were called, particularly the agents, is not a favourable view at the moment. I feel that I have been lied to and misled extensively by the witnesses called by the fire brigade and the authority … That’s why Mr Jones is important, because he is a platform to allow you to say … we could honestly believe, because of what Mr Jones said, that this site had student accommodation prospects. That’s why his evidence is so important.

… It gives you an opportunity to recover everything. Mr Jones, you are confident, will go in the box and he will say: I am an honest man, this is an honest belief. Then in your closing speech, you will say: you are entitled to rely upon that, and therefore however negligent or incompetent our witnesses were however many lies they came and told in front of your Lordship, at the end of the day you can’t ignore the fact that Mr Jones is an honest man and expressed an honest belief to them. That’s the way you are going to close this speech if Mr Jones goes in and that’s unfair to the Defendants because they are finding this out after 10 days of trial. Who knows what the Defendants’ attitude would have been if Mr Jones was put forward as a witness before the trial started?

… before Mr Jones whizzed out of the ether in his deus ex machina [counsel for GCP] was going to submit in his closing speech that … he wasn’t called because you were frightened to call him, which is an inference I would have been quite happy to draw if Mr Jones hadn’t arrived at this trial. But he has arrived. It’s like the 7^th cavalry.

… the key witnesses, particularly the two agents and some of the senior people up the executive chain, I’m quite satisfied that they have lied to me. They have understated the internal effect of the documents; they knew that it was difficult. But if they get home, they will get home on Mr Jones. If Mr Jones is believed as being an honest witness, having an honest belief, that they can rely upon that because that’s what they were told.”

The result of the Council’s application was that the judge admitted Mr Jones’ and Mr Render’s statements on terms that the trial was further adjourned to 9 May 2011.

In the meantime, Mr Gladman made a second witness statement on 24 April 2011 in which he sought to explain why GCP had sent the letters dated 1 March 2011 to Messrs Hargreaves and Bishop. He said that at the time GCP did not know that Messrs Hargreaves and Bishop had received independent legal advice. In those circumstances, “[i]t was only fair and proper that they knew about the amendments in the Amended Defence and Counterclaim and that potentially Gladman might have a claim against them” before they gave evidence (paragraph 10 and see also paragraph 13).

This led to an application by the Fire Authority to recall Mr Timms when the trial resumed on 9 May 2011. During the course of dealing with the application, the judge again pointed out to counsel for GCP that “You’re not going to get loss of profit damages, even if you win the case. … Misrepresentations are not warranties” (page 12). He also said (pages 13-14):

“The principals here are able to pay the damages so you don’t need the extra claim against the surveyors, that’s just something to beat [them] over the head with.”

After this Mr Render gave evidence. On 9 and 10 May Mr Jones gave evidence. Most of the afternoon of 10 May was devoted to settlement discussions, as a result of which Mr Jones’ evidence was not finished.

On 11 May the Council applied to adduce a witness statement of a Mr Allen. The judge did not rule upon that application, but adjourned the trial to 23 May so that the parties could continue the settlement discussions. At that point neither the Fire Authority nor the Council had closed its case and none of GCP’s witnesses had been called, although the trial was on day 13. In the event, the trial was not resumed on 23 May because the settlement negotiations were continuing. If the trial had run its full course, it seems clear that it would have lasted for at least 20 days.

On 30 September 2011 the Settlement Agreement was signed. Clause 1 provided for the Council to pay GCP £2.7 million. Clause 2 provided:

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

Clauses 3, 4 and 5 provided for the Fire Authority and the Council to retain the deposits paid by GCP, but otherwise for the parties to be released from their respective rights and obligations under the Contracts.

On 5 October 2011 Peter Smith J made an order by consent in Tomlin form staying the proceedings upon the terms of the Settlement Agreement.

It is GCP’s case that the net compensation it received under the Settlement was £1.318 million. This figure is arrived by deducting the following sums from the gross figure of £2.7 million: (i) the deposits, (ii) interest on the deposits at 8% per annum totaling approximately £192,000 and (iii) costs of the First Action of approximately £590,000 plus VAT. I do not understand there to be any dispute that £1.318 million would more than cover GCP’s wasted expenditure in taking steps to acquire and develop the Properties.

On 26 October 2011 GCP’s solicitors sent a letter before action to Mr Hargreaves informing Mr Hargreaves that “Gladman is preparing an action against you personally and your Company/Partnership for damages on the ground of fraudulent misrepresentation and negligent misrepresentation in respect of the same matters which you gave evidence about at trial”. The letter went on to suggest that, because of Mr Hargreaves’ knowledge of GCP’s allegations from the First Action, it was not necessary for GCP to send a detailed letter in accordance with the Professional Negligence Pre-Action Protocol. Enclosed with the letter were copies of (i) the letter dated 1 March 2011, (ii) GCP’s skeleton argument for the trial, (ii) the transcript of Mr Hargreaves’ and Mr Bishop’s evidence at trial, (iii) “transcript of Judge’s comments concerning witness evidence at trial”, (iv) some additional transcript pages, (v) the consent order dated 5 October 2011 and Settlement Agreement and (vi) GCP’s Amended Defence and Counterclaim/Part 20 Claim.

On 21 December 2011 GCP’s solicitors sent a letter of claim to FHP’s solicitors.

On 21 May 2012 GCP issued the Claim Form in the present proceedings against the present Defendants together with Messrs Pratt and Timms. The Claim Form was served together with Particulars of Claim on the same day. As noted above, GCP has subsequently served draft Amended Particulars of Claim. Among other things, the amendments remove the claim against Messrs Pratt and Timms, which I was informed by counsel for GCP had been settled. I shall refer to the Particulars of Claim as proposed to be amended.

Paragraphs 1-4 introduce the parties. Paragraphs 5-14 set out GCP’s case with regard to the Council’s planning policy in identical terms to paragraphs 14-23 of GCP’s Amended Defence and Counterclaim/Part 20 Claim in the First Action. Paragraphs 15-18 address the marketing of the properties in virtually identical terms to paragraphs 24-26 of the Amended Defence and Counterclaim/Part 20 Claim, save for the addition (by amendment) of allegations that FHP and HEB owed GCP duties of care to take reasonable steps to ensure the accuracy of the statements of fact and opinion in the 7 August 2006 letters.

Paragraphs 19-21 set out GCP’s case on misrepresentation. These paragraphs are very similar to paragraphs 27-29 of the Amended Defence and Counterclaim/Part 20 Claim, but there are two differences. The first is that the first limb of the alleged Express Misrepresentation is now pleaded in paragraph 19(a) as follows (emphasis added):

“the most appropriate use of the Site in terms of achieving the necessary planning permission was for a development including purpose built student or keyworker accommodation”.

The second is that an additional limb of the alleged Express Misrepresentation has been added as follows:

“the Fire Authority and the Council had considered their own residential apartment and student accommodation scheme for the Site with their architects”.

This is alleged to be false since the Fire Authority and Council had not done this.

Paragraphs 24-31 plead GCP’s claims against the Defendants for fraudulent alternatively negligent misrepresentation. These paragraphs bear considerable similarities to paragraphs 34A-38 of the Amended Defence and Counterclaim/Part 20 Claim, but there are certain differences. The main difference of substance is the inclusion of the alternative plea of negligent misrepresentation, which the amendments clarify is only made against FHP and HEB. Particulars are given both in the statement of case and in a separate accompanying document. The particulars mainly consist of identifying passages from documents disclosed in the First Action upon which GCP rely. A total of 33 documents are relied upon, 11 more than in the Amended Defence and Counterclaim/Part 20 Claim in the First Action. One of the additional documents is the Peter Race email.

Due to the pendency of the Defendants’ present applications, the Defendants have not served Defences. The evidence served and submissions made on behalf of the Defendants have, however, outlined the Defendants’ answers to GCP’s allegations. These may be summarised as follows. First and foremost, the Defendants deny any fraud, as they did in the First Action. They maintain that they acted perfectly honestly. Secondly and more specifically, they respond to the alleged misrepresentations as follows.

In relation to what was paragraph 27(i) of the Amended Defence and Counterclaim/Part 20 Claim and is now paragraph 19(a) of the draft Amended Particulars of Claim, the Defendants point to the change in wording highlighted in paragraph 113 above. The Defendants contend that, even leaving aside the question of what the words “in terms of achieving the necessary planning permission” actually mean, GCP faces two fundamental problems. The first is that the words in the 7 August 2006 letters complained of were a statement of opinion, not fact. The second is that they cannot be read as containing any sort of representation as to the likelihood of bidders obtaining planning permission. The Defendants also contend that that they genuinely believed that the most appropriate use of the Properties was for student/key worker accommodation and had reasonable grounds for that belief.

In relation to the new allegation in paragraph 19(b) of the draft Amended Particulars of Claim, the Defendants say the representation was true, as shown by the HMP feasibility study and sketch plan for private apartments (see paragraphs 12 and 13 above).

In relation to what was paragraph 27(ii) of the Amended Defence and Counterclaim/Part 20 Claim and is now paragraph 19(c) of the draft Amended Particulars of Claim, the Defendants admit that the 7 August 2006 letters were inaccurate in stating that the Fire Station site alone could accommodate 600 bedrooms for students/keyworkers. The Defendants contend that this was a simple mistake. (An explanation of how this error was made was given by Mr Hargreaves in his witness statement in the First Action.) The Defendants also contend that GCP did not rely upon the representation because its conditional offer was based on 450 units for both Properties and its proposed scheme envisaged 556 (or possibly 566 – both figures are given) bedrooms on the Properties.

The Defendants’ application to strike out GCP’s claim is made under CPR r. 3.4(2)(a) and (b). Paragraph (a) provides that the court may strike out a statement of case if it appears that the statement of case “discloses no reasonable grounds for bringing … the claim”. That will be the case if the statement of case fails to plead necessary facts or does not disclose a legally recognisable claim or is simply incoherent. There is no dispute that for this purpose the court must assume that the facts alleged in the statement of case are true, and that the claim should not be struck out unless it is bound to fail. Paragraph (b) provides that the court may strike out a claim if it is an abuse of process. One basis upon which a claim may be struck out as an abuse of process is the doctrine which originates with Henderson v Henderson (1843) 3 Hare 100. I shall deal with this doctrine below.

There is no dispute about these either.They were conveniently summarised by Lewison J (as he then was) in the context of defendants’ applications in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]:

“As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a ‘realistic’ as opposed to a ‘fanciful’ prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii)

A ‘realistic’ claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8].

iii)

In reaching its conclusion the court must not conduct a ‘mini-trial’: Swain v Hillman.

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10].

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550.

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

This summary was cited with approval by Etherton LJ (as he then was, with whom Sullivan LJ and Wilson LJ, as he then was, agreed) in AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098, [2010] Lloyds Rep IR 301at [24].

The Defendants contend that, assuming that GCP’s claims are well-founded, then the Defendants were joint tortfeasors with the Council and the Fire Authority. On that basis, the Defendants contend that the settlement of GCP’s claims against the Council and the Fire Authority in the Settlement Agreement released the causes of action against all the joint tortfeasors, including the Defendants. GCP disputes both these propositions.

Article 90 of Bowstead & Reynolds on Agency (19^th ed) states, so far as material:

“(2)

A principal is liable for loss or injury caused by the tort of his agent, whether or nor his servant, and if not his servant, whether or nor he can be called an independent contractor, in the following cases:

…

(b)

(semble) in the case of a statement made in the course of representing the principal within the actual or apparent authority of the agent: and for such a statement the principal may be liable notwithstanding that it was made for the benefit of the agent alone and not for that of the principal.

…

(3)

Where a principal and agent are both liable for a wrongful act committed by the agent they are joint tortfeasors.”

Although Article 90(2)(b) is tentatively expressed, there does not appear to be any doubt about the proposition that is relevant to the present case. As the editors go on to say at §8-182 (footnotes omitted):

“Thus it has been held that an estate agent, who is not a servant, may have authority to make representations about a property for which he is seeking a buyer or tenant, so that his principal is liable for their falsity. So also the vendor of land may be liable for false statements wilfully or negligently made by his solicitor in answer to inquiries.”

As for Article 90(3), the same proposition is stated in Clerk & Lindsell on Torts (20^th ed) at §4-04. If authority is needed, it may be found in Jones v Manchester Corp [1952] 2 QB 852 at 869 (Denning LJ).

Counsel for the Defendants submitted that, on GCP’s case both in the First Action and in the present proceedings, the Defendants were indeed joint tortfeasors with the Council and the Fire Authority because:

Counsel for GCP submitted that Mr Hargreaves and Mr Bishop were not joint tortfeasors, because they had acted on behalf of FHP and HEB respectively, whereas FHP and HEB had acted on behalf of the Council and the Fire Authority. This submission is inconsistent with paragraph 38 of GCP’s Amended Defence and Counterclaim/Part 20 Claim in the First Action (see paragraph 77 above), which counsel for GCP described as “unfortunate” and “inaccurate”. Leaving that aside, I do not understand this argument. FHP and HEB could only discharge their functions as agents for the Council and the Fire Authority by acts committed by human beings. The human beings by whom FHP and HEB carried out the acts in question were Mr Hargreaves and Mr Bishop. Mr Hargreaves and Mr Bishop were equally agents, and hence joint tortfeasors, as FHP and HEB.

Counsel for GCP also pointed out that in the present proceedings GCP is advancing an additional cause of action against FHP and HEB, namely negligent misrepresentation. In my judgment that is a point which goes to the scope of the release. The claim for negligent misrepresentation was not merely a claim open to GCP in the First Action, but also one which it contemplated bringing (see paragraph 95 above). If it had brought that claim, the analysis set out in paragraph 127 above would have been equally applicable to it.

Accordingly, I conclude that, on GCP’s case, the Defendants were joint tortfeasors with the Council and the Fire Authority in respect of both GCP’s claim for fraudulent misrepresentation and its claim for negligent misrepresentation.

As Clerk & Lindsell states at §31-16:

“The general rule at common law is that where there is a joint cause of action against two or more persons, a discharge as against one of them operates as a discharge against all. If accord be made with one joint tortfeasor andsatisfaction accepted, or if he be released, all others are discharged”

Foskett, The Law and Practice of Compromise (7^th ed) at §6-41 is to the same effect.

Both Clerk & Lindsell and Foskett cite the rationale for the rule given by A.L. Smith LJ in Duck v Mayeu [1892] 2 QB 511 at 513: “the cause of action, which is one and indivisible, having been released, all persons otherwise liable thereto are consequently released”. In other words, joint tortfeasors are liable in respect of the same tort. Thus joint tortfeasance creates a form of accessory liability for parties who do not personally commit the tortious act. The rule also has the advantage of avoiding a claim for contribution by an unreleased joint tortfeasor against a released tortfeasor if the former is subsequently sued by the claimant who settled with the latter.

Although the rule was trenchantly criticised by Steyn LJ in Watts v Aldington [1999] L&TR 578 at 594-595, it remains the law. It is subject, however to two important qualifications which Steyn LJ noted. Thus it will not apply where either (a) the settlement agreement is construed as a covenant not to sue or (b) there is an express or an implied reservation on the part of the claimant of a right to sue another joint tortfeasor by separate action.

In the present cases, clause 2 of the Settlement Agreement provides that the sum of £2.7 million paid by the Council was “in satisfaction of all claims [by GCP against the Fire Authority and the Council] herein” and “in full and final settlement of all and any existing or potential claims of any nature, whether or not contemplated, that [GCP] has against the other parties”. Counsel for the Defendants submitted that neither of the two qualifications applied to the Settlement Agreement, and accordingly the general rule applied. Furthermore, having regard to the second part of clause 2, it applied not only with regard to GCP’s claims for fraudulent misrepresentation, but also with regard to GCP’s claims for negligent misrepresentation.

I did not understand counsel for GCP to suggest that the Settlement Agreement should be construed as a covenant not to sue the Defendants. In any event, in my view it is clearly not a covenant not to sue. Nor did counsel for GCP suggest that the Settlement Agreement contained any express reservation by GCP of a right to sue the Defendants. Accordingly, the only issue is whether any such reservation is to be implied into the Settlement Agreement.

In Watts v Aldington, the Court of Appeal held that in the circumstances of that case it was implicit in the settlement agreed between Lord Aldington and Mr Watts that Lord Aldington was reserving his right to proceed against Count Tolstoy. In so holding, the Court of Appeal applied general tests for the implication of a contractual term. In particular, Steyn LJ at 596-597 applied the “officious bystander” test.

More recently, Lord Hoffmann delivering the judgment of the Privy Council in Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 adopted a broader approach to this question:

“16.

... The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended. It is the meaning which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed: see Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912–913. It is this objective meaning which is conventionally called the intention of the parties, or the intention of Parliament, or the intention of whatever person or body was or is deemed to have been the author of the instrument.

17.

The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.

18.

In some cases, however, the reasonable addressee would understand the instrument to mean something else. He would consider that the only meaning consistent with the other provisions of the instrument, read against the relevant background, is that something is to happen. The event in question is to affect the rights of the parties. The instrument may not have expressly said so, but this is what it must mean. In such a case, it is said that the court implies a term as to what will happen if the event in question occurs. But the implication of the term is not an addition to the instrument. It only spells out what the instrument means.

19.

The proposition that the implication of a term is an exercise in the construction of the instrument as a whole is not only a matter of logic (since a court has no power to alter what the instrument means) but also well supported by authority. In Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 , 609 Lord Pearson, with whom Lord Guest and Lord Diplock agreed, said:

‘the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvement might be. The court's function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves.’

20.

More recently, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn said: ‘If a term is to be implied, it could only be a term implied from the language of [the instrument] read in its commercial setting.’

21.

It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a court may find helpful in providing an answer - the implied term must ‘go without saying’, it must be ‘necessary to give business efficacy to the contract’ and so on - but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?”

Counsel for GCP submitted that, since this was an application for summary judgment, it was sufficient for GCP to establish that it had a real prospect of successfully contending for the implication into the Settlement Agreement of a reservation of the right to proceed against the Defendants. I accept that “real prospect of success” is the test to be applied. On the other hand, as Lord Hoffmann makes clear, this is essentially an exercise in construction. Furthermore, all the relevant background material is before the court. There is no reason to think that any further admissible evidence bearing upon this question will became available if the matter proceeds to trial.

Counsel for GCP also submitted that the implication of such a term was supported by the following points:

Dealing with these points in turn:

In addition to matters which I have already covered above, counsel for the Defendants relied on the fact that this was not a case (unlike Watts v Aldington) where the Settlement Agreement was with an impecunious party. On the contrary, the Council and the Fire Authority were in a position to pay GCP’s claims in full, if established. Nor (again, unlike Watts v Aldington) was this a case in which the claimant had already, to the knowledge of the party he was settling with, rejected a higher offer from the other party (indeed, the Defendants were not even parties to the First Action).

Taking all of these matters into account, I consider that the correct conclusion is that the Settlement Agreement, read against the background circumstances, is not to be understood as impliedly reserving GCP’s right to sue the Defendants. In my judgment GCP has no real prospect of success on this issue.

This issue only arises if I am wrong on issue 1, so I shall deal with it relatively briefly. If the Defendants, or any of them, are concurrent, rather than joint, tortfeasors, the Defendants contend that, on the true construction of the Settlement Agreement, GCP should be taken to have received full satisfaction for any loss sustained as a result of the torts it alleges. GCP disputes this.

The two main authorities on this issue are Jameson v Central Electricity Generating Board [2000] 1 AC 455and Heaton v AXA Equity and Law Assurance Society plc [2002] 2 AC 329. In Heaton Lord Bingham of Cornhill analysed Jameson and set out the correct approach to construction as follows:

“8.

This conclusion [in Jameson] was reached by a number of steps which included the following.

(1)

Proof of damage is an essential step in establishing a claim in tortious negligence ([2000] 1 AC 455, 472a-c).

(2)

Such a claim is a claim for unliquidated damages (pp 473d, 474a).

(3)

Such a claim is liquidated when either judgment is given for a specific sum or a specific sum is accepted in a compromise agreement (pp 473d, 474b, 474e).

(4)

A judgment on such a claim will ordinarily be taken to fix the full measure of a claimant's loss (pp 473e, 474b).

(5)

A sum accepted in settlement of such a claim may also fix the full measure of a claimant's loss (pp 473e, 474e-f): whether it does so or not depends on the proper construction of the compromise agreement in its context (pp 473b, 476e, 474h).

(6)

On the facts of A's case, the sum accepted from B in settlement was to be taken as representing the full measure of A's loss: it followed that A's claim in tortious negligence was extinguished and he had no claim which could be pursued against C (p 476e).

I do not think the first four of these steps are controversial. The fifth proposition may perhaps have been stated a little too absolutely in Jameson, but as expressed above I do not think it can be challenged. There was clearly room for more than one view, as the division of judicial opinion in Jameson showed, whether the sum accepted in settlement by A was to be taken as representing the full measure of his loss, but if it did the conclusion followed: A could not have proved damage, an essential ingredient, in his action against C, and that was fatal to the widow's Fatal Accidents Act claim against C.

9.

In considering whether a sum accepted under a compromise agreement should be taken to fix the full measure of A's loss, so as to preclude action against C in tort in respect of the same damage, and so as to restrict any action against C in contract in respect of the same damage to a claim for nominal damages, the terms of the settlement agreement between A and B must be the primary focus of attention, and the agreement must be construed in its appropriate factual context. In construing it various significant points must in my opinion be borne clearly in mind:

(1)

The release of one concurrent tortfeasor does not have the effect in law of releasing another concurrent tortfeasor and the release of one contract-breaker does not have the effect in law of releasing a successive contract-breaker.

(2)

An agreement made between A and B will not affect A's rights against C unless either (a) A agrees to forgo or waive rights which he would otherwise enjoy against C, in which case his agreement is enforceable by B, or (b) the agreement falls within that limited class of contracts which either at common law or by virtue of the Contracts (Rights of Third Parties) Act 1999 is enforceable by C as a third party.

(3)

The use of clear and comprehensive language to preclude the pursuit of claims and cross-claims as between A and B has little bearing on the question whether the agreement represents the full measure of A's loss. The more inadequate the compensation agreed to be paid by B, the greater the need for B to protect himself against any possibility of further action by A to obtain a full measure of redress.

(4)

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

(5)

If B, on compromising A's claim, wishes to protect himself against any claim against him by C claiming contribution, he may achieve that end either (a) by obtaining an enforceable undertaking by A not to pursue any claim against C relating to the subject matter of the compromise, or (b) by obtaining an indemnity from A against any liability to which B may become subject relating to the subject matter of the compromise. …”

Both sides relied upon essentially the same arguments with regard to the construction of the Settlement Agreement as they relied upon in the context of issue 1. There is a crucial difference in context, however. If the Defendants are correct that they are joint tortfeasors with the Council and the Fire Authority, then for the reasons explained above, it follows that the Settlement Agreement operates as a release of GCP’s claims against the Defendants unless GCP can establish that it contains an implied term reserving GCP’s right to sue the Defendants. If the Defendants are concurrent tortfeasors, however, the Settlement Agreement does not bar any claim by GCP against the Defendants unless the Defendants can establish that the sum received by GCP under it should be taken to represent the full measure of GCP’s loss.

In this context it seems to me that the factors relied upon by GCP have rather more weight, and most of those relied upon by the Defendants rather less weight, than in the context of issue 1. The main points in the Defendants’ favour, as I see it, are that (a) GCP’s claim in the First Action was for damages for lost opportunities it could have pursued had it not entered into the Contracts (see paragraph 65 above) and (b) clause 2 of the Settlement Agreement states that the sum of £2.7 million is “in satisfaction of” that claim. On the other hand, however, clause 2 does not state that it is in full satisfaction of that claim. It does also refer to “full and final settlement”, but that is not the same thing.

I therefore conclude, if the Defendants are concurrent tortfeasors, the Settlement Agreement is not to be interpreted as meaning that GCP has received full satisfaction for its loss.

Regardless of the resolution of the previous two issues, the Defendants submit that these proceedings should be struck out an abuse of process on Henderson v Henderson grounds.

Although Henderson v Henderson itself was a case of cause of action estoppel, Sir James Wigram V-C's dictain that case subsequently gave rise to a wider rule preventing re-litigation in circumstances not amounting to strict res judicata. This wider rule has come to be regarded as a manifestation of the court's power to prevent an abuse of its own process.The authorities on this wider rule were reviewed by Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2002] 2 AC 1. Lord Bingham concluded at 3l:

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

In Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260, [2008] 1 WLR 748 the outline facts with some simplification were as follows. Aldi had brought proceedings in the Technology and Construction Court in June 2001 against Holmes, the main contractor which had constructed some retail premises for Aldi. Holmes brought Part 20 claims against WSP and Aspinwall, who were sub-contractors for engineering and environmental services. After Holmes had gone into administration, Aldi obtained judgment in May 2003 for £3.31 million. After giving credit for sums paid on account, Aldi sought to recover £1.79 million from Holmes’ excess layer underwriters. Parallel proceedings were brought by B&Q against Holmes in respect of neighbouring premises, and again Holmes claimed against WSP and Aspinwall. Parallel proceedings were also brought by the freeholders of the premises, Grantchester against WSP and Aspinwall. The B&Q and Grantchester actions were compromised during the second week of trial in January 2004. In December 2004 Aldi essentially abandoned its claim against the underwriters. In October 2005 Aldi brought proceedings against WSP and Aspinwall making substantially similar allegations to those which Holmes had previously made against those parties. WSP and Aspinwall applied to have this action struck out as an abuse of process. Jackson J (as he then was) acceded to that application, but the Court of Appeal allowed Aldi’s appeal.

The leading judgment was given by Thomas LJ. Having cited the passage from Johnson which I have quoted above, he cited a passage from the judgment of Clarke LJ (as he then was) in Dexter Ltd v Vlieland-Boddy [2003] EWCA Civ 14 which includes the following paragraphs:

“49.

… (i) Where A has brought an action against B, a later action against B or C may be struck out where the second action is an abuse of process. (ii) A later action against B is much more likely to be held to be an abuse of process than a later action against C. (iii) The burden of establishing abuse of process is on B or C or as the case may be. (iv) It is wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. (v) The question in every case is whether, applying a broad merits based approach, A's conduct is in all the circumstances an abuse of process. (vi) The court will rarely find that the later action is an abuse of process unless the later action involves unjust harassment or oppression of B or C.

50.

Proposition (ii) above seems to me to be of importance because it is one thing to say that A should bring all his claims against B in one action, whereas it is quite another thing to say that he should bring all his claims against B and C (let alone against B, C, D, E, F and G) in one action. There may be many entirely legitimate reasons for a claimant deciding to bring an action against B first and, only later (and if necessary) against others.”

Thomas LJ rejected a submission by counsel for Aldi that a second claim could only amount to an abuse of process if it was against the same defendants as the first claim, saying at [10]:

“… The fact that the defendants to the original action and to this action are different is a powerful factor in the application of the broad-merits based judgment; it does not operate as a bar to the application of the principle. This was plainly the view of Clarke LJ in Dexter’s case [2003] EWCA Civ 14 at [49]-[53] in the passage I have set out with which I agree.”

He also rejected a submission that a distinction was to be drawn between cases in which the first claim had proceeded to judgment and those in which it had been settled.

Thomas LJ went on to conclude that, although Aldi could have brought its claims against WSP and Aspinwall in the original action against Holmes, in the circumstances it was not abusing the process of the court by bringing those claims later. In essence, this was because it had been justifiable for Aldi to seek to recover from Holmes and its insurers first before incurring the extra effort and expense of pursuing WSP and Aspinwill in complex technical litigation. In reaching this conclusion, he took into account the fact that Aldi had put WSP and Aspinwall on notice of its claims, somewhat obliquely in June 2003 and again a little more clearly in September 2003, but no party had made any application to the court during the currency of the Holmes, B&Q or Grantchester actions.

He added:

“29.

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

30.

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

31.

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

Wall and Longmore LJJ both gave short concurring judgements in which they expressly agreed with what Thomas LJ had said at [29]-[31], at [36] and [42] respectively.

Shortly after Aldi, the Court of Appeal allowed another appeal against a finding of abuse of process in Stuart v Goldberg Linde [2008] EWCA Civ 2, [2008] 1 WLR 823. In his concurring judgment Sir Anthony Clarke MR (as he then was) cited the passage from Thomas LJ’s judgment in Aldi I have quoted in paragraph 152 above at [91], and stated that he agreed with those views. He went on at [96]:

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

Sedley LJ added at [77]:

“Secondly, as the Aldi Stores Ltd case again makes clear and as Sir Anthony Clarke MR stresses, a claimant who keeps a second claim against the same defendant up his sleeve while prosecuting the first is at high risk of being held to have abused the court's process. Moreover, putting his cards on the table does not simply mean warning the defendant that another action is or may be in the pipeline. It means making it possible for the court to manage the issues so as to be fair to both sides.”

Counsel for the Defendants submitted that the present proceedings were an abuse of process since they amounted to unjust harassment of the Defendants for two main reasons.

The first main reason is the present proceedings are essentially a repetition of GCP’s claims in the First Action. Indeed, the issues in the present claims are a subset of those in the First Action, since there is no issue as the scope of the Defendants’ authority and hence whether the Council and the Fire Authority were liable for any deceit by the Defendants. Not only could GCP’s present claims have been brought in the First Action, they should have been. Joining the Defendants to the First Action would have added relatively little to the duration or cost. The First Action had proceeded as far as day 13 of trial before it was settled, and in the light of that experience it is likely that the present proceedings would take 20-30 days to try. There is no justification for such re-litigation with all the attendant anxiety and expense. In particular, GCP’s conduct exposes the Defendants to double jeopardy with respect to the allegation that they made fraudulent misrepresentations in the letters dated 7 August 2006. Mr Bishop and Mr Hargreaves have already faced that charge in the First Action, in which they were both subjected to hostile and prolonged cross-examination, and repeated adverse judicial interventions and comments, but in which they were not represented. It would be grossly unfair to make them go through that process all over again. Furthermore, it is highly likely that the Defendants will make claims for contribution against the Council, and possibly the Fire Authority, thus involving them in re-litigation as well. Yet further, all of the other witnesses will also be dragged in again, including for example Mr Jones.

In support of the point about double jeopardy, counsel for the Defendants relied in particular upon the evidence of Mr Bishop in his witness statement in support of the Defendants’ application. In that statement Mr Bishop says this:

“15.

I tried to ensure that everything that was said in my witness statement [in the First Action] was true. I did not appreciate that I might be criticised for failing to deal with particular documents or events.

16.

I was told that I might be in the witness box for 2 hours or so. As it was, I was in the box for the best part of 3 days. It was one of the worst experiences of my life. I felt that no-one in Court was standing up for me. No-one seemed to understand that the letters were not prepared nor were they intended to provide re-assurance to the Claimant or other bidders as to the planning position. I was constantly being taken to task because of supposed gaps in my witness statement, though any gaps were not my responsibility. I was constantly accused of lying when I was telling the truth. Nobody seemed to understand or wish to understand how the surveying profession works which was extremely frustrating and draining.

17.

I felt as if I was under fire from two different directions. I thought that I would be asked questions by a barrister for the Claimant, and that the judge would listen to my answers. This is not the way it turned out. I felt as though I was on trial. For much of the time I was trying to deal with questions from the judge which were phrased and expressed in a way that suggested to me that he had decided that I had acted dishonestly. I was sometimes interrupted mid-answer. I found it very difficult indeed to get across my evidence as to what occurred and as to what was in my mind.

…

19.

The whole experience was very damaging. I have lost confidence. I am now terrified of saying anything in an email or other document which could be twisted and misinterpreted and used against me. My reputation in and around Nottingham has been affected.

20.

Every time I receive an email from my solicitor about the case, I find it impossible to concentrate on anything else until I have answered the email. The case is on my mind the whole time.

21.

I am now facing the prospect of undergoing the same experience again. If this action went to trial, I imagine that I would have to give evidence. I find it more or less unbearable to contemplate the prospect of having to give evidence again about the relevant events. If the Claimant wanted to sue me and my firm, it should have been done so in the action in which it pursued the Council and Fire Authority in which I would have had one of my own lawyers. I know that the court will make up its mind about this, but it seems to me to be completely unfair that the Claimant can take its compensation from the Council and the Fire Authority, and then come after me and Mr Hargreaves and our employers in further proceedings in which we will have to give evidence for a second time.”

Mr Hargreaves has not made a witness statement in support of the present application, but it may readily be inferred that his evidence would be similar to that of Mr Bishop. In addition, in the case of Mr Hargreaves, FHP’s insurers have reserved their position regarding cover in view of the allegation of deceit. Accordingly, he has had to instruct separate solicitors.

There are two specific points arising out of this evidence which it is convenient to deal with immediately. The first is that counsel for GCP submitted that, to the extent that the Defendants were complaining about the interventions and comments made by Peter Smith J during the course of the trial of the First Action, that was not something that could be blamed on GCP. I accept that submission. The second is that counsel for the Defendants pointed out that, since both Mr Bishop and Mr Hargreaves had both been cross-examined about all the material documents and events during the trial of the First Action, any trial of these proceedings would inevitably involve comparisons between their evidence in this action and their evidence in the First Action. That in turn would involve a significant exercise of reconstruction to establish the precise context in which the earlier evidence had been given. Counsel for GCP sought to meet this by offering an undertaking on the part of GCP not to seek to rely upon the transcripts of the first trial. While this goes a considerable way to avoiding the need for reconstruction of the events of the First Action, I am not convinced that it would wholly avoid that need. In any event, it does not address the basic double jeopardy point, nor the distress of Mr Bishop and Mr Hargreaves at the prospect of being cross-examined twice on the same matters.

The second main reason relied on by counsel for the Defendants is that GCP failed to adhere to the guidance given by the Court of Appeal in the Aldi and Stuart cases. GCP did not notify the Defendants of its claims against them until 1 March 2011, a bare week before trial, and did not raise the matter with the court at all. By the time the Defendants received the letters dated 1 March 2011, it was too late for the Defendants themselves to raise the matter with the court. Peter Smith J was only informed about the letters on 14 March 2011, and then only by counsel for the Fire Authority (see paragraph 92 above). He was not actually shown the letters by counsel for GCP until he requested this on 16 March 2011 (see paragraph 94 above).

The principal submission made by counsel for GCP was the Council and Fire Authority had maintained what he described as a “wall of silence” during the First Action. As a result, it was not until very shortly before the trial of the First Action that GCP was in a position to formulate claims for fraudulent misrepresentation against the Defendants. On that basis, he submitted that GCP was not in a position to join the Defendants to the First Action in time for trial. Instead, GCP had done the right thing by warning the Defendants of its claims in the letters dated 1 March 2011. Indeed, it was only during cross-examination of the Council’s and Fire Authority’s witnesses at trial that GCP had succeeded in breaking down the “wall of silence” and so had begun to learn the truth about what had happened with regard to the Properties. Accordingly, it was entirely legitimate for GCP to bring the present proceedings.

I do not accept this submission. As counsel for GCP acknowledged, Mr Gladman explicitly alleged deceit against Mr Bishop and Mr Hargreaves in his witness statement made on 1 October 2010 (see paragraph 74 above). It would not have been proper for GCP’s solicitors to serve such a witness statement on behalf of GCP unless they were satisfied that Mr Gladman had grounds for making that allegation. In any event, it is clear that by that date GCP had all the materials which formed the basis for counsel’s instructions to settle the Amended Defence and Counterclaim/Part 20 Claim alleging fraudulent misrepresentation by Mr Bishop and Mr Hargreaves which was served in draft on 14 January 2011 (see paragraphs 77 and 79 above). There is no reason why that statement of case could not have been produced by 1 October 2010 at the latest. If it had been, it would have been perfectly possible for GCP to join the Defendants to the First Action without jeopardising the existing trial date.

Even as it was, once GCP had served the draft Amended Defence and Counterclaim/Part 20 Claim, it was incumbent on it to seek the court’s directions if it wanted to leave open the possibility of a claim against the Defendants. It might still have been possible for the Defendants to be joined in time for the existing trial. Even if it was not, the court might well have required the parties to make an election as to whether or not the trial should be adjourned to enable the Defendants to be joined. By 1 March 2011 it was almost certainly too late for the court to deal with the position by making case management directions, but GCP did not alert the court to the situation anyway.

Upon analysis, the “wall of silence” argument amounts to saying that, prior to trial, the Council and the Fire Authority and their witnesses had failed to provide answers to the matters relied upon by GCP, and in particular had failed to explain documents regarded by GCP as supporting GCP’s case. But that does not assist GCP, because in absence of such explanations, GCP was entitled to have, and plainly did have, confidence in the merits of its case. In any event, I do not see that this excuses GCP’s failure either to join the Defendants to the First Action or to make an application to the court for directions.

In my judgment, these proceedings do amount to unjust harassment of the Defendants, and therefore an abuse of process, for the reasons given by counsel for the Defendants which I have summarised above. I shall therefore strike them out.

The Defendants’ application to strike out the Particulars of Claim under CPR r. 3.4(2)(a) was only pursued on a narrow ground. This is that GCP had failed to plead a sustainable claim to damages, and in particular had failed to plead a coherent case on causation.

In paragraph 33 of the draft Amended Particulars of Claim, GCP pleaded its claim to damages as follows:

“Gladman seeks damages in the sum of between £301,000,000 to [sic] £39,000,000 for the opportunities it has lost to develop other student accommodation schemes and in due course it will seek permission to call PKF to give forensic accountancy evidence. As matters stand, Gladman estimates that but for the conduct of the Defendant [sic], it would have developed a total of 6 student accommodation schemes”

Counsel for GCP submitted that this was an adequate plea of causation and loss, alternatively that it was when taken together with a report by Mr Matthew-Jones dated 15 November 2012 which GCP has served. As I made clear at the hearing, I do not accept that paragraph 33 constitutes an adequate statement of GCP’s case that the misrepresentations caused it to lose the sums claimed. Nor do I accept that a failure by GCP properly to plead the basic facts it relies upon can be remedied by referring to an expert’s report.

Furthermore, as I also made clear at the hearing, I do not consider that Mr Mathew-Jones’ report makes GCP’s case clear, particularly with regard to causation. Mr Mathew-Jones states in his report:

“2.21

In view of the dispute between Gladman and the Fire Authority and the City Council, Gladman had to make provision in October 2007 to sterilise £6 million plus extensive legal costs, should the dispute not be settled in their favour in an eventual Court ruling. I am instructed that Gladman ensured that £7 million was kept sterilised for this eventuality.

2.22

In view of the above and as Gladman were required to earmark £7 million of funds to settle the dispute with the vendors of the Fire Station site in the event of a negative outcome, Gladman have had inadequate funds available to pursue their strategy of investing in student accommodation development and sale. Thus, almost all of Gladman’s intended investment in student accommodation sites was sterilised by this one dispute.”

It is far from clear from the report, however, what GCP actually did so as to “sterilise” or “earmark” £7 million. Counsel for GCP told me on instructions that this did not mean that GCP had put this sum on deposit, but rather that GCP had refrained from borrowing as much as it would otherwise have done under a revolving credit facility which it had. Even then, it was not clear to me how GCP said that the misrepresentations had caused it not to borrow £7 million or how that failure to borrow had lead to the losses described in Mr Mathew-Jones’ report.

Accordingly, counsel for GCP agreed that GCP would serve a further statement of case setting out its case on these matters following the hearing. On 10 January 2013 GCP duly served a document entitled “Further Particulars on the Issues of Causation and Loss” running to 18 paragraphs.

At the time of writing this judgment the Defendants have not yet stated whether or not they accept that this document adequately particularises GCP’s case on these issues. If they do not, I will if necessary hear further argument on this issue after the judgment has been handed down.

For the reasons given above, I conclude: