COSTS

Solicitor and client costs - formal deficiencies - assessment of solicitor's bills of costs - compliance

Ilona Szekeres v Alan Smeath & Co: ChD (Mr Justice Pumfrey, Master Rogers, Mr Saroop (costs assessor): 2 August 2005



Although a claim form seeking the detailed assessment of bills of costs issued by a solicitor had contained defects, the claim form as served had been sufficient to commence the proceedings, since its effect had been to convey to the solicitor the message that the client had wanted the bills to be assessed within the statutory period. Accordingly, a costs judge had been in error by refusing to make an order for detailed assessment of the bills for formal deficiencies.


The appellant (S) appealed against a decision refusing an order for detailed assessment of bills delivered to her by the respondent firm of solicitors (C). C had acted for S in various matters, and on 6 August 2004 delivered to her eight bills. On 6 September 2004, S issued assessment proceedings by way of a part 8 claim form (Civil Procedure Rules (CPR) 1998).



In the claim form, S had identified the parties, and under the heading 'Details of claim' had listed the eight bills. S had stated that she disputed the bills on miscellaneous grounds and while the box headed 'Statement of truth' had not been filled in, S had signed her name and inserted her address. C claimed that the claim form contained a number of discrepancies which meant that section 70(i) of the Solicitors Act 1974 had not been satisfied. In particular, C submitted that S had failed to state the question that she wanted the court to decide, had not stated the remedy sought or the legal basis of the claim, had failed to state whether the claim was being made under any enactment, and had not included a statement of truth. Further, C objected that the statement of case failed to comply with part eight of the CPR in that it had failed to state that part 8 applied.


The costs judge held that the application had been made within the one-month time limit in section 70(i) but that for the claim form to be effective to commence proceedings the errors needed to be rectified, which, in the exercise of his discretion, he refused to allow. S argued that the judge had been wrong to dismiss her claim on the grounds of formality.


Philomena Harrison (instructed by Davenport Lyons, London) for the appellant; Philip Brown (instructed by Alan Smeath & Co, Woburn Sands) for the respondent.


Held, the analysis of the position before the judge had proceeded on a false basis. The cause of action was an indefeasible statutory right to have the bills assessed. There was no defence on the merits of the claim. The only defence was that the proceedings were not commenced within the statutory period under section 70(i) of the Act. Accordingly, if the claim form was sufficient to commence the proceedings, they could not be dismissed for formal deficiency. To dismiss the proceedings would have defeated a clear statutory entitlement successfully invoked by S. The correct question therefore was whether the claim form as served was sufficient to commence the proceedings.


The claim form contained a list of the bills, a clear statement that the bills were disputed, together with the grounds on which they were disputed, a proper identification of the parties, and a signature that could only relate to a statement of truth. There were defects in the claim form, but they did not affect the proper interpretation of the document as a whole. The effect of the claim form was to convey to C the message that S wanted the bills to be assessed within the statutory period and had commenced proceedings to do so. Once it was established that the claim form sufficiently identified the claim for it to have been taken to have commenced the proceedings, there was no basis on which the court could decline to put the form into formal order. Accordingly, the claim form as served was sufficient to commence the proceedings and the judge was in error in refusing to make an order for detailed assessment of the bills. Appeal allowed.






EQUITY


Fiduciary duty - fraudulent misrepresentation - liability to account for profits obtained in breach of duty - secret commission - proper claimant - joint venture - allowances - acquisition expenses

(1) Aysha Mohammed Murad (2) Layla Mohammed Murad v (1) Hashim Ibrahim Khalil Al-saraj (2) Westwood Business Inc: CA (Civ Div) (Lords Clarke, Jonathan Parker, and Lady Justice Arden): 29 July 2005


Where a fiduciary had made a profit from inducing the respondents, by his fraudulent representations, to enter into a joint venture to acquire a hotel, the appropriate remedy was that the fiduciary should disgorge all the profits, whether of a revenue or capital nature, subject to any allowances permitted by the court on the taking of the account.


The appellants (S and W) appealed against a decision ((2004) EWHC 1235 (Ch)) that the respondents (M) were entitled to an account of the profits from the sale of a hotel, and M cross-appealed.


W was a company owned by S. S had proposed to M (who were two sisters) that they should together buy a hotel for £4.1 million, S contributing £500,000 to the purchase price, M contributing £1 million, and the balance being borrowed from a bank. M and W entered into an agreement regulating the distribution of the proceeds of sale. The hotel was purchased by a company (D) owned by S and M. The hotel was subsequently sold for a profit of £2 million.


In proceedings by M, the judge held that there had been a fiduciary relationship between S and M in relation to the joint venture to buy the hotel and that S had fraudulently misrepresented that his contribution would be made in cash, when in fact it had been made by setting off obligations owed by the vendor to S. He ordered that S and W should account to M for the entire profit that they had made from the transaction. The appellants submitted that the account of profits should have been limited to the profits obtained by the breach of fiduciary duty on the basis that if the set-off arrangement had been disclosed to M, they would have agreed to go ahead but with a higher profit share, so that the appellants should only be liable for the loss incurred by M as a result of the non-disclosure of the set-off arrangement. The appellants also submitted that the proper claimant in respect of any alleged secret commission paid to S on the acquisition of the hotel was D. M submitted that the judge had erred in holding that the sum of £500,000 should be allowed to S on the account as an expense of the acquisition of the hotel.


Stephen Cogley (instructed by Tarlo Lyons, London) for the appellants; Guy Newey QC, Tom Fyfe (solicitor-advocate) (instructed by Baker & McKenzie, London) for the respondents.


Held (Lord Justice Clarke dissenting on the extent of S's liability to account), S's profit was wholly unauthorised at the time it was made and had so remained. It was only actual consent that obviated the liability to account. It was not enough for the wrongdoer to show that if he had not been fraudulent he could have got the consent of the party to whom he owed the fiduciary duty to allow him to retain the profit - Regal (Hastings) Ltd v Gulliver (1967) 2 AC 134 applied. The fiduciary was liable to account only for profits that he had made within the scope and ambit of the duty that conflicted with his personal interest, but on the judge's findings all the profits that S made from the joint venture fell within that description.


The appropriate remedy was that S should disgorge all the profits, whether of a revenue or capital nature, that he made from inducing M by his fraudulent representations to enter into the hotel venture, subject to any allowances permitted by the court on the taking of the account. Therefore the appeal was dismissed. (Per Lord Justice Clarke dissenting.)


The authorities taken as a whole did not lead to the conclusion that where there was an antecedent arrangement for profit sharing, it would not be open to S to attempt to show that it would be inequitable to order him to account for all the profits.


On the judge's findings, the sum of £500,000 was treated as a cost of the acquisition in its entirety and was accordingly allowed as a deduction from the profits for which S was to account. But that overlooked the fact that some £369,000 was a commission earned by S on the acquisition of the hotel for which he should account as a secret profit.


No objection could be taken to the allowance of the balance of the £500,000 as one of the costs of acquisition. The claim for an account of the £369,000 was unanswerable unless the claim to recover that sum belonged to D and the issue whether that company was the proper claimant in respect of the secret commission should be remitted to the judge on terms that the appellants should join D as a defendant. Therefore, the cross-appeal was allowed to the extent of the £369,000 for the purpose of remitting to the judge for determination the question whether any claim to recover the commission paid to S in respect of the acquisition of the hotel was vested in D or M. Appeal dismissed, cross-appeal allowed.






LANDLORD AND TENANT


Turnover rents - VAT - turnover for purposes of calculating additional rent under lease - gross amount of total sales including VAT - retailers - purchase tax

Debenhams Retail Plc (2) Debenhams Properties Ltd v Sun Alliance and London Assurance Co Ltd: CA (Civ Div) (Lords Justice Mance, Jacob): 20 July 2005


In construing a 1965 lease to determine 'the gross amount of the total sales' for the purposes of calculating turnover rent, VAT was to be regarded as a substitute for purchase tax and as part of the gross amount.


The appellant landlord (S) appealed against the decision ((2004) EWHC 2940 (Ch)) that VAT was not to be included in the tenant's turnover figures for the purpose of calculating turnover rent. The respondent (D) was the tenant from S of department store premises in Swindon. The rent payable was made up of a fixed annual amount and an additional rent calculated as a proportion of turnover, meaning the gross amount of total sales.


The lease had been granted for a term of 99 years less ten days from 1 October 1965. For many years, D had paid rent on the basis that for the purposes of calculating the additional rent, the turnover included VAT. D had applied to the court to determine whether that was so.


John Furber QC (instructed by Walker Morris, Leeds) for the appellant; Jonathan Brock QC (instructed by Maples Teesdale, London) for the respondents.


Held, the words did not have a single, plain and unambiguous meaning. The words were to be construed in their commercial context. The lease had to be construed as of 1965. In 1965, VAT did not exist and it could not have formed part of the thinking of either party. What did exist, however, was purchase tax that was imposed only on wholesalers of goods. What would have mattered to the businessmen negotiating the lease was money. Form would have been a secondary consideration. Purchase tax would have had a significant effect on what was actually paid by way of rent since it was an inbuilt cost to D. In the real world, purchase tax affected ultimate prices, just like VAT. On that basis, the parties would not have regarded a substitute for purchase tax that also affected ultimate prices as excluded by the words 'gross amount of the total sales including services from trade'. As a commercial matter, VAT was included just as purchase tax had been included originally. The fact that purchase tax would not appear in the company accounts was a secondary consideration to the actual money involved. In substance, purchase tax did appear, as part of the price of goods, in the turnover figures, Lynn v Nathanson (1931) 2 DLR 457 and Yates v Yates (1913) 33 NZLR 281 distinguished. Appeal allowed.