Striking out action — Third party proceedings — Shopping centre development — Firm of surveyors employed to check and authorise claims for development costs paid to developers — “Notional interest” claimed and paid — Claim for return of interest — Claim settled — Damages claimed against surveyors — Third party proceedings issued by surveyors against developers — Proceedings struck out at first instance — Appeal against striking out allowed
The appeal was by the defendant (“HPM&R”) against an order striking out its third party claims against the developers and dismissing the proceedings against them in a case which arose out of the development of Castle Mall Shopping Centre, Norwich. The developers had entered into an agreement with the plaintiff for development of the mall on land to be leased to the plaintiff and subleased to the developers, who had entered into a financing agreement whereby the plaintiff was to bear 54/68ths of the development costs as they arose in the course of development. The sums were to be paid on proper evidence of expenditure by the developers. The plaintiff engaged HPM&R as adviser, inter alia, to check and authorise the claims for payment, as well as retaining the services of its own surveyor. Each claim contained sums for “notional interest” between December 1989 up until June 1992 and, in all, £6.7m was paid out.
Litigation between the plaintiff and the developers was settled with the plaintiff abandoning its claim for the return of the notional interest and the developers giving up most of their interest in the development. The plaintiff then issued proceedings against HPM&R claiming damages for the allegedly wrongly paid interest. HPM&R admitted that the interest should not have been paid, but, inter alia, denied negligence or breach of contract. It issued third party proceedings claiming contribution under the Civil Liability (Contribution) Act 1978 against the developers and their project managers. The judge struck out the whole of third party proceedings against the developers, leaving the claim against the project managers, a subsidiary of the developers. The developers maintained, inter alia, that the interest was part of the development costs as defined by the agreement. However, if it were paid on a mistaken construction of the agreements, that was a mistake of law not fact.
Held The appeal against striking out was allowed.
1. In dealing with the main issues, at the present stage the question was only whether the third party claim disclosed a reasonable cause of action.
2. If looked at on the evidence before the judge, the issue that the mistake was one of fact was at least arguable, as the pleadings clearly asserted. Further, the rule that money paid under a mistake of law was irrecoverable could be on the turn.
3. HPM&R submitted that the notional interest was severable from the remainder of the sum, which was undoubtedly development costs, and therefore paid for no consideration. The concepts were not so clearly in the plaintiff’s favour for the court to state that that contention was unarguable.
4. With regard to contribution under the 1978 Act, it was difficult to imagine a broader formulation of entitlement to contribution. It clearly spanned a variety of causes of action, forms of damage and remedies, the last of which were gathered together under the umbrella of “compensation”.
5. The difference between asking for a particular sum of money back or for an equivalent sum for damage suffered because of withholding it was immaterial in the statutory context which dealt with “compensation” for “damage”.
Colin Ross-Munro QC and Monica Carss-Frisk (instructed by Forsyte Saunders Kerman) appeared for HPM&R; Michael Harvey QC and Andrew Phillips (instructed by Cameron Markby Hewitt) appeared for the developers.
