Cherrilow Ltd v Osmond Solicitors Ltd & Anor

This is a curious case. Cherrilow Limited launched these CPR Part 8 proceedings on 12 May 2011 against Osmonds Solicitors Limited (which had formerly acted for it in connection with a property purchase) and Mr Richard Butler-Creagh (also a former client of Osmonds). This was effectively satellite litigation connected with two other actions, which were tried before me over the last three weeks of July, and in respect of which I handed down my judgment on 6 October: [2011] EWHC 2525 (QB). That contains a more detailed history of the circumstances in which Cherrilow exchanged contracts for the purchase of Fawley Court in December 2008 and the role played by Mr Butler-Creagh in the weeks leading up to that transaction.

The immediate purpose of these Part 8 proceedings was to enable Cherrilow to obtain the solicitor’s files with a view to fulfilling its disclosure obligations in the claim it had recently brought against Mr Butler-Creagh for fraudulent misrepresentation. Disclosure was due to take place on 20 May of this year. Osmonds had unfortunately refused to provide the files to enable Cherrilow to comply with its obligations. Osmonds claimed to have a lien over the files in respect of allegedly unpaid fees. It was also suggested that Mr Butler-Creagh owned the files or part of them and/or that some of the content was covered by legal professional privilege. Hence the need for the present claim.

These proceedings seem to have been unnecessary and they have wasted a great deal of money.

Osmonds had originally been acting for Mr Butler-Creagh, between June and October 2008, in connection with a successful bid he had made for the purchase of Fawley Court from the Marian Fathers. As I held in my earlier judgment, however, he had not the means to complete the transaction himself and was hoping to persuade a third party to do so with a view to earning a significant “turn” for himself as a middle man. On 19 October 2008, Ms Hersham viewed the property with Mr Butler-Creagh and shortly thereafter it became apparent that a corporate vehicle would be created for the purpose of acquiring Fawley Court. Cherrilow was accordingly incorporated on 3 December 2008 and, a week later, exchanged contracts with the Marian Fathers to acquire the property. In the meantime, Mr Butler-Creagh communicated with Ms Hersham and made various representations to her on the understanding that they would be passed on to whatever corporate vehicle eventually materialised as the prospective purchaser.

Ms Hersham, and in due course Cherrilow, were informed that it was necessary for Osmonds to act on the purchaser’s behalf as solicitors in the conveyancing transaction. This suited Mr Butler-Creagh and Osmonds, of course, but there was in fact no reason why Osmonds had to be used. Meanwhile, as recorded in my earlier judgment, Osmonds and Mr Butler-Creagh were planning to present Ms Hersham with a contract whereby she would agree to pay Mr Butler-Creagh £5m to enable her, or Cherrilow, to “step into his shoes” as the person who claimed to have the benefit of an exclusive right to purchase Fawley Court. That was in fact untrue. It is quite obvious that Osmonds, from the very outset of its relationship with Ms Hersham, was bedevilled by a massive conflict of interest. For a long time, however, Ms Hersham and Cherrilow were kept in the dark.

Nevertheless, in due course, on 11 March 2009 Osmonds rendered an account to Cherrilow to cover all the work done in relation to Fawley Court both before and after Ms Hersham came on the scene. It thus included the work done for Mr Butler-Creagh from 27 June 2008, including the drafting of the contracts originally intended to hoodwink Ms Hersham. (In fact, she did not become aware of them until much later.) Cherrilow paid the bill and, submits Mr Auld QC, for that reason alone it is entitled to the contents of the file.

In these circumstances, it is not surprising that Osmonds now, finally, has acknowledged that Cherrilow is entitled to the file. Mr Osmond no longer pursues his earlier claims that he was entitled to a lien and that it contained privileged material which Cherrilow was not entitled to see. Mr Butler-Creagh’s position, however, has remained somewhat obscure.

Had there been a genuine reason for Mr Butler-Creagh to claim privilege in respect of any of the documents contained in the file, notwithstanding the fact that Cherrilow had paid all Mr Osmond’s fees, no doubt the matter could have been dealt with by extracting the document(s) and resolving any dispute on an individual basis.

Mr Auld submits, on the other hand, that the true reason for the delay and obfuscation, and indeed for the need to issue the Part 8 proceedings in the first place, was that Mr Osmond and/or Mr Butler-Creagh wished to conceal how they had been planning to exploit Ms Hersham behind her back. Mr Auld referred to paragraph [24] of the earlier judgment, which quoted from the important Osmonds memorandum of 15 October 2008. This appeared to show (and no alternative explanation was ever offered) that Mr Butler-Creagh had been hoping lure prospective purchasers by pretending that he had an option himself and that it was intended to procure some such person to commit himself, or herself, to the transaction before the truth was discovered. It may well be that Mr Auld’s suspicions are well founded, wholly or in part.

There could never have been validity in Mr Osmond’s claim that some of the documents in the file should not be disclosed for reasons of legal privilege, since privilege was clearly waived in his own witness statement put forward in August 2010 with a view to supporting Mr Butler-Creagh’s claim against Ms Hersham for a fee of £5m. There has been no suggestion that he lacked authority to do so. Indeed, it is possible that there had been waiver even earlier by reason of the release of some of the file contents (e.g. a draft deed of indemnity on 23 April 2010).

Mr Auld accordingly submits that it must have been perceived, at that stage, to be in Mr Butler-Creagh’s interest to waive privilege with a view to disclosing documents from the file (albeit on a selective basis) in order to obtain his £5m. Once privilege was waived, of course, it would not be possible to go into reverse and prevent Cherrilow or Ms Hersham from seeing any other documents in the file that were relevant to the issues in their litigation. Nevertheless, in order to prevent some of the more embarrassing material from seeing the light of day, so says Mr Auld, it became necessary for Mr Osmond and Mr Butler-Creagh to obfuscate. In particular, they managed to withhold the damning note of 15 October 2008 until shortly before the trial. That is telling, since it would be consistent with this delay for them to have used every excuse up to that point to avoid disclosure.

In the light of this background, he argues on behalf of Cherrilow that the Part 8 proceedings were wholly unnecessary, and in any event that they should never have been contested. They should now be disposed of on the basis that both Defendants be made jointly and severally liable in respect of the costs incurred and, what is more, on the indemnity basis.

Agreement was reached with Mr Osmond on 10 October of this year, shortly after the judgment was handed down, whereby Cherrilow should be entitled to the relief claimed and to recover their costs against Osmonds. Unfortunately, however, Mr Osmond later sought to resile from this agreement, by suggesting that he should only be liable for the costs incurred in respect of his claim to a lien – and not those incurred in contesting his claim (presumably made on behalf of Mr Butler-Creagh) that some of the material should not be disclosed on grounds of privilege. There is no reason to draw such a distinction. Indeed, shortly before the hearing took place before me on 5 December 2011, Mr Knight was instructed on behalf of Osmonds and put in a skeleton (which I had not had time to read beforehand) in which it is finally admitted on Mr Osmond’s behalf that he should not have attempted to resile from the October agreement.

As for Mr Butler-Creagh’s position, he provided no reasons and no evidence explaining why the Part 8 proceedings were contested. That is in breach of CPR 8.5(3) and Mr Auld submitted, having regard to the provisions of CPR 8.6(1), that Mr Butler-Creagh should not now be allowed to rely upon late evidence (from his solicitor) putting forward an explanation. I was invited to read it de bene esse and thereafter to rule upon its admission. Having done so, I am not persuaded that justice requires any such indulgence. It provides no adequate explanation in any event.

It is also to be noted that Mr Butler-Creagh’s present stance is that he was all for disclosure in any event. He seeks to blame Cherrilow for having failed to agree to disclosure of the Osmond files on a mutual basis. But this overlooks the earlier waiver by Mr Osmond on Mr Butler-Creagh’s behalf. Thereafter, there can surely have been no valid reason for him to withhold the files. In any event, it was only on 27 May 2011 that Cherrilow itself was given access to those documents dated from 3 December 2008 onwards. Having reviewed them, it waived any privilege three days later. It is thus difficult to see that they are open to criticism. Mr Auld makes the additional point, in relation to the lien claim (now withdrawn), that Mr Butler-Creagh could, on his own case, have demanded at least the June-December documents from Mr Osmond – since he claims to have owned them.

The issue remains fundamentally very straightforward. There is no answer to the Part 8 claim and I cannot see any solid reason why Mr Butler-Creagh, any more than Osmonds, could not have conceded that the files belonged to Cherrilow and that the relief claimed should accordingly be granted.

It was suggested on Mr Butler-Creagh’s behalf that he was confused as to the remedy sought by Cherrilow. The point seems to be taken that there was no reference to a declaration as to ownership in the original claim form, but it actually contains the words that Mr Butler-Creagh claimed to own the files – making it clear that ownership was to be an issue. Moreover, the need for a declaration was referred to at the hearing of the Part 8 proceedings on 16 June of this year. Now, so that the proceedings may finally be resolved and the file delivered to Cherrilow without imposing any condition, the court is invited to make a decision as to ownership. Some cogent explanation is surely required from Mr Butler-Creagh as to why he is supposed to own part of the file, notwithstanding (a) the fact that Cherrilow paid for all the work done by Osmonds and (b) that it was a central part of Mr Butler-Creagh’s case at the trial that Cherrilow was supposed to have “stepped into his shoes”. Yet none has been forthcoming.

Since both privilege and the lien arguments have now gone, I cannot see that there is any basis upon which Mr Butler-Creagh can resist the Cherrilow claim.

In all the circumstances, it seems to be right that Cherrilow should obtain the relief sought and recover its costs.

As to the question of indemnity costs, Mr Auld argues that the history of dishonesty and obfuscation on the part of both Mr Osmond and Mr Butler-Creagh would justify the conclusion that the facts are out of the ordinary run of litigation. I had already come to this conclusion in awarding costs following the judgment of 6 October. I see no basis for treating the costs in relation to the Part 8 claim differently, since the resistance to the relief claimed has been coloured by the same misconduct; that is to say, no convincing explanation has been forthcoming as to why the claim was resisted other than the desire to conceal the conflict of interest and the wrongdoing associated with it.

The relief will therefore be granted and costs awarded on the indemnity basis. I shall not make a summary assessment but will direct an interim payment (subject to any further submissions) in the sum £75,000. I see no reason to distinguish between the Defendants and the liability should therefore be joint and several.