Civil practice and procedure – Fraudulent misrepresentation – Joint tortfeasors – Appellant resisting claim for specific performance of contract for sale of land on ground that vendors making fraudulent misrepresentation as to suitability of site for development – Action settled – Appellant bringing further action against vendors’ agents for fraudulent or negligent misrepresentation – Claim struck out – Whether settlement precluding claim against agents as joint tortfeasors with vendors – Whether claim an abuse of process – Appeal dismissed
In September 2007, the appellant property developer exchanged contracts on the purchase for £4.2m of a disused fire station in Dunkirk, Nottingham, and an adjoining piece of land, from the Nottingham fire authority and the city council respectively. The first and second respondents, two firms of chartered surveyors, had marketed the properties on the joint instructions of the council and the fire authority; each firm conducted the matter through a partner in the firm, respectively the third and fourth respondents. In the marketing information that the respondents had sent to the appellant, they had expressed the view that the most appropriate use of the site would be for keyworker or student accommodation, with space for 600 bedrooms on the fire station site alone. The appellant planned a development of student accommodation.
The appellant later refused to complete on the sales, citing planning problems that stood in the way of any development of student accommodation on the land. In its defence to a claim for specific performance brought by the council and the fire authority, it contended that it was entitled to set aside the sale contracts for fraudulent misrepresentation by the respondents as to the suitability of the sites for student accommodation. It also advanced a counterclaim for more than £30m in damages for loss of profit.
A trial was commenced at which the third and fourth respondents gave evidence. Ultimately, the action was settled with the council agreeing to pay £2.7m to the appellant in full and final settlement of all existing or potential claims against them or the fire authority.
The appellant subsequently brought further proceedings in which it claimed damages from the respondents for fraudulent misrepresentation in connection with the aborted purchase of the property. In the court below, that claim was struck out on the grounds that: (i) as the agents of the fire authority and the council, the respondents were joint tortfeasors with those parties such that the settlement in the earlier action precluded any claim against them; and (ii) the claim was an abuse of process since it should have been brought with the earlier claim, or at least made the subject of an application for case management directions in that claim: see [2013] EWHC 25 (Ch); [2013] PLSCS 17. The appellant appealed.
Held: The appeal was dismissed.
(1) The original position at common law was that a judgment against one or more joint tortfeasors, or a settlement by which the claimant released one or more of them, generally had the effect of releasing the other joint tortfeasors. Although that rule had been abolished by statute in relation to judgments, in respect of which the position was now governed by section 3 of the Civil Liability (Contribution) Act 1978, the common law rule remained in full force and effect in relation to compromises. One exception to that rule was where the agreement for the release of one or more joint tortfeasors contained a reservation, either express or implied, of the claimant’s right to sue the others. The original theory behind that exception was that, while there was only a single cause of action in the case of joint tortfeasors, a settlement with one or more under which, for good consideration, the claimant covenanted not to sue them left the cause of action intact, so that all joint tortfeasors outside the benefit of the covenant remained vulnerable to further proceedings: Duck v Mayeu [1892] 2 QB 511 considered. That exception remained notwithstanding that its logic had been criticised as a “trap for the unwary” and a “juridical relic”. In determining whether any particular compromise agreement contained an implied reservation of the claimant’s right to sue other joint tortfeasors, the general law as to the implication of terms applied. The proposed implication had to be shown to be strictly necessary if the reasonable expectations of the parties were not to be defeated: Watts v Aldington [1999] L&TR 578 applied.
In the instant case, the judge had properly characterised the parties as joint, rather than concurrent, tortfeasors. A single misrepresentation was alleged and the appellant’s case in its first claim had depended entirely on establishing that the fire authority and the council were liable for that misrepresentation by the respondents. The judge had correctly concluded that the settlement agreement, read against the relevant background matrix of fact, contained no implied term reserving the right to sue the respondents. The intention of the parties had to be ascertained from the meaning of the agreement that they had made, objectively ascertained, read against the relevant background: Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988 applied. The cardinal aspect of the contextual background was the fact that the fire authority, the council and the respondents were, on the appellant’s case, all joint rather than concurrent tortfeasors, with the established legal consequence that a release of one or more of them effected a release of all of them. In that context, it was irrelevant that the settlement agreement contained no indemnity or covenant by which the council and the fire authority sought to protect themselves from being sued for contribution by the respondents. Since the ordinary effect of a settlement by the claimant against one or more joint tortfeasors was, without more, to prohibit any proceedings by the claimant against the others; no indemnity or express covenant to that effect was required: Heaton v AXA Equity & Law Assurance Society plc [2002] UKHL 15; [2002] 2 AC 329 applied. The undoubted legal consequence of the express terms of the settlement agreement was to release the respondents. There was no reason why a reservation of the right to sue the respondents should be implied.
(2) There were no grounds for interfering with the judge’s decision that the claim against the respondents was an abuse of process. Although the claim was not being pursued against persons who were defendants to the earlier claim, the judge had been entitled to consider that factor to be overridden by the almost complete overlap between the issues in the two claims, the need for them to be litigated again over many weeks at a second trial and, in particular, the consequential oppression of the third and fourth respondents in being required to defend their careers and professional reputations from the most serious allegations not once, but twice. He had not omitted any relevant considerations or taken into account irrelevant considerations. Nor was his conclusion on that aspect of the abuse allegation perverse or plainly wrong; it was the right conclusion in a case where the dispute between all the potential parties cried out for determination at a single trial. The judge had been entitled to find that the appellant had been in a position to join the respondents as defendants to the claim against the council and fire authority in time to retain the allocated trial date, and to regard the appellant’s failure to apply to court in the first claim for case management directions in accordance with guidelines laid down in earlier cases as contributing to his finding that the second claim was an abuse: Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748; [2007] PLSCS 244 and Stuart v Goldberg Linde (a firm) [2008] EWCA Civ 2; [2008] 1 WLR 823 applied. The conduct of civil proceedings was a process in which the stakeholders included not merely the parties but also other litigants waiting for their cases to be tried and the public at large, who had an interest in the efficient and economic conduct of litigation. A failure by the appellant to follow guidelines laid down as mandatory future conduct in two successive reported decisions of the Court of Appeal were relevant matters pointing to a conclusion that the second claim was an abuse of the process of civil litigation.
Paul Chaisty QC and Wilson Horne (instructed by Knights Solicitors LLP, of Newcastle-under-Lyme) appeared for the appellant; Christopher Smith QC and Rupert Higgins (instructed by Gateley LLP) appeared for the first respondent and (instructed by DWF Fishburns) for the second respondent; Patrick Lawrence QC and Jamie Smith (instructed by DAC Beachcroft LLP, of Leeds) appeared for the third and fourth respondents.
Sally Dobson, barrister