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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Hughmans (A Firm) v Dunhill [2017] EWCA Civ 97 (08 March 2017) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2017/97.html Cite as: [2017] EWCA Civ 97

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE ARNOLD
HC2014000516

		Royal Courts of Justice Strand, London, WC2A 2LL
		08/03/2017

Sir Terence Etherton MR, Sir Ernest Ryder SPT and Lady Justice Macur:

1. These are proceedings by the firm of solicitors Hughmans against Alexandra Dunhill for payment of fees amounting to £179,666.68 and interest. Ms Dunhill has counterclaimed for, among other things, damages for negligence in breach of the contract of retainer and in breach of duty of care, damages for misrepresentation, and compensation for breach of fiduciary duty.
2. Ms Dunhill has applied to amend her Defence and Counterclaim by, among other things, adding as a counterclaimant her son W, who is 16 years of age and who she intends to represent as his litigation friend. It is common ground that she is also able to advance any claims against Hughmans that her adult children, Natasha and Piers, may have and which they have assigned to her.
3. This is an appeal by Ms Dunhill against the order of Mr Justice Arnold dated 11 May 2015 which, among other things, gave summary judgment for £187,593.26 (including interest) on Hughmans' claim, dismissed Ms Dunhill's application for summary judgment on seven issues relevant to the Defence and Counterclaim, gave summary judgment for Hughmans dismissing the counterclaim, and dismissed Ms Dunhill's application to amend the Defence and Counterclaim.
4. This is a short form judgment: Deutsche Trustee Company Ltd v Cheyne Capital Management (UK) LLP [2016] EWCA Civ 743, BS (Congo) SSHD [2017] EWCA Civ 53.
5. The facts, and the issues in the court below, are fully set out in the lengthy and detailed judgment of the Judge: [2015] EWHC 716 (Ch).
6. We allow the appeal against the Judge's order insofar as it gave summary judgment in favour of Hughmans on the Claim and the Counterclaim and refused Ms Dunhill's application to amend the Defence and Counterclaim. We dismiss the appeal against the Judge's order dismissing Ms Dunhill's application for summary judgment.

Hughmans' application for summary judgment

7. The Defence and Counterclaim run to 58 pages and 130 paragraphs. The proposed amended Defence and Counterclaim run to 72 pages and 147 paragraphs. The hearing before the Judge lasted more than three and a half days. The appeal before us lasted one and a half days. The Judge's judgment is a model of clarity and conscientiousness and he correctly cited the applicable principles summarised by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. Contrary to those principles, however, he conducted a mini-trial in reaching conclusions on matters central to the success of the Defence and Counterclaim, which have a real prospect of success if allowed to proceed to a trial following disclosure and with the opportunity for oral evidence, including cross-examination.
8. The Judge rejected (at [210]) Hughmans' contention that their retainer was limited to acting for Ms Dunhill on, and advising her in relation to, an application to vary the 2003 Consent Orders for spousal maintenance and periodical payments for the benefit of the children. He concluded that Hughmans' retainer extended, at the very least, to acting for Ms Dunhill on, and advising her in relation to, Mr Turner's cross-application, and that it is arguable that the retainer extended to advising Ms Dunhill in relation to the financial aspects of her matrimonial affairs. There is no cross-appeal in relation to those conclusions.
9. The Judge concluded (at [211]) that it is arguable that the scope of Hughmans' retainer extended to advising Ms Dunhill as to the possibility of making an application to set aside the 2003 Consent Orders for non-disclosure by Mr Turner. There is no cross-appeal in relation to that conclusion.
10. The Judge concluded (at [223]) that Ms Dunhill has an arguable case that Hughmans acted in breach of duty in failing properly to investigate Mr Turner's non-disclosure of assets in 2003. He said that Ms Dunhill had demonstrated that Hughmans could have obtained more evidence than it did, including, in particular, further Land Registry searches and valuations of the Welsh Properties. He concluded that it is arguable that, at the very least, Hughmans ought to have advised Ms Dunhill as to the possibility of obtaining such further evidence. There is no cross-appeal in relation to those findings and conclusions.
11. The Judge concluded (at [214]) that it is "obviously unsustainable" that the children were parties to the retainer; (at [215]) that the Family Procedure Rules did not required the children to be separately represented on the variation application whether they were minors or adults; and (at [217]) that there is "no basis for contending" that Hughmans assumed any responsibility to the children. In the light of those conclusions, the Judge did not address anywhere the rights of the children and whether, and if so how and to what extent, they may have been disadvantaged by the actions or omissions of Mr Black.
12. The Judge was wrong to conclude that there was not a real prospect that, at a trial, a court would find that Hughmans owed duties to advise the children or at least to advise Ms Dunhill about their rights. The extent of a retainer and the existence of a duty of care is acutely fact dependent. The starting point for the application for Ms Dunhill's ancillary relief and of Mr Turner's cross application was the Second 2003 Consent Order. It was that order which contained the settlement, including the provision for a fund for school fees. By his cross-application Mr Turner was seeking variation of the arrangements for payment of school fees under the First 2003 Consent Order. That itself raised issues as to what had happened to the settled funds in which the children had an interest under the Second 2003 Consent Order.
13. Furthermore, Ms Dunhill's own financial position, which was in issue in the ancillary relief proceedings, was inevitably affected by the children's financial position.
14. Mr Black knew that the children were not represented by any other firm of solicitors because, if they had been, he would have been told that. He did not, despite all the above, advise Ms Dunhill that Hughmans would not and could not represent any of the children. He did not advise her or them that they ought to be separately represented. He did not advise Ms Dunhill or any of the children what rights the children had, which might be relevant to the ancillary relief being claimed by Ms Dunhill or Mr Turner.
15. Those considerations are sufficient to justify the extent of the retainer being left for determination at a trial.
16. The Judge was wrong to conclude (at [239] to [249]) that, even if Ms Dunhill has a real prospect of establishing a breach of duty on the part of Hughmans, she has no real prospect of establishing that such a breach of duty caused her loss and damage because her pleaded case is "incoherent" and "more fundamentally" her case has "failed properly to address the outcome of the 2013 Family Proceedings as evidenced by the 2014 Consent Order".
17. Before us, on the issue of causation and loss and damage, Mr Steven Gee QC articulated the three "counterfactuals" set out in his skeleton argument (viz. on the assumption that Hughmans had not been negligent). They can conveniently be reduced to the following two. The first is that Mr Turner would have compromised on terms which would have enabled Ms Dunhill to remain in 71 Eaton Terrace and Mr Turner would have restored the periodical payments to £7,000 per month. The second is that the hearing before DJ Berry would have produced a result much more favourable to Ms Dunhill and the children because the integrity of the 2003 Consent Orders as a starting point would have been undermined, as would Mr Turner's credibility and the court's perception of his generosity in paying greater periodical payments than were required under the 2003 Consent Orders, and the Form E and witness statements would have correctly identified at least a significant share of the beneficial interest in 71 Eaton Terrace as trust property; and so the probability is that the maintenance payments to Ms Dunhill would not have been terminated by DJ Berry, and Mr Turner would have been required to pay more to Ms Dunhill.
18. To be fair to the Judge, those counterfactuals were not presented in that simple and straightforward form. In the absence of their clear formulation as they were before us, it is difficult to extract them from the proposed amended Defence and Counterclaim, which, in relation to causation, loss and damage, present a very lengthy, elaborate, complex and far from straightforward series of allegations.
19. The counterfactuals do, however, have a real prospect of success and, once understood, they can in large measure be found in the proposed amended Defence and Counterclaim. Under the heading "Loss and Damage", in paragraph 122 it is alleged at (7) that Ms Dunhill was entitled to the remedy of having the 2003 Consent Orders dealt with under the non-disclosure jurisdiction; at (9) that Ms Dunhill has lost the chance of favourable outcomes; at (10) that Mr Turner, when faced with such proceedings, would have been anxious to settle them on terms which provided compensation for Ms Dunhill, the settlement and the children and for future periodic payments; at (11) that Hughmans' services resulted in Ms Dunhill losing her maintenance and having to sell 71 Eaton Terrace; and at (12) that Ms Dunhill, as the mother of the children, has been exposed to extra financial and care responsibilities towards them.
20. Paragraph 122 also alleges various direct costs and expenses incurred by Ms Dunhill in consequence of Hughmans' negligence, including, for example, costs in relation to the Imerman documents.
21. Paragraph 142 of the amended Counterclaim alleges several heads of loss and damage suffered by the children as a result of Hughmans' breaches of contract and duties. The allegations include (in (5) to (7)) that the matters of which complaint is made led to the children, Ms Dunhill and the trustees of the settlement entering into the 2014 Consent Order, which involved them giving up rights and the childrens' interest in remainder in Mr Turner's sub-trust becoming valueless.
22. All those allegations of loss and damage have a real prospect of success and many cannot properly be resolved without further inquiry, disclosure of documents and cross-examination.
23. At one point in his submissions, Mr Roger Stewart QC, for Hughmans, sought to argue that, even if Hughmans had done more to investigate the Welsh properties, there is no realistic prospect of persuading a court at trial that it would have made any difference to the outcome of the proceedings before DJ Berry. That is an impossible submission. Ms Dunhill has a real prospect of establishing that Hughmans could and would have discovered that Mr Turner failed to disclose prior to the Second 2003 Consent Order that the Welsh properties had been acquired by him at some £425,000 below their market value. Further investigation may also show that, contrary to Mr Turner's evidence before DJ Berry, the acquisition of the Welsh Properties by Yorkton Properties was not 100 per cent funded with loans and that could have been discovered by Hughmans by, for example, obtaining evidence from the Bank of Scotland or others. It is plainly arguable that, if DJ Berry had known any of those things, the terms of the 2003 Consent Orders would not have been the starting point for the ancillary relief applications (whether or not the 2003 Consent Orders were formally set aside or varied because of Mr Turner's non-disclosure in the 2003 M1 Form), Mr Turner's credibility would have been severely undermined, and his account of his assets and liabilities, his loss making business dealings and his future work plans would have been treated with far greater scepticism.
24. It is entirely understandable that neither Ms Dunhill nor the children can quantify their overall loss and damage at this stage, not least because the possibility of a favourable compromise by Mr Turner turns on an assessment of the loss of a chance.
25. The prospect of success of those counterfactuals is not undermined by the 2014 Consent Order. That Order did not break the chain of causation and it is not alleged by Hughmans that the 2014 Consent Order represented a failure properly to mitigate the loss and damage suffered by Ms Dunhill and the children. Paragraph 142(6) of the amended Counterclaim alleges, as I have said, that the matters of which complaint is made in the Defence and Counterclaim led to the children, Ms Dunhill and the trustees entering into the 2014 Consent Order. It might have been expected that more details would have been pleaded as to why they were compelled to enter into the 2014 Consent Order, which the Judge described (at [167]) as "a disastrous outcome" to the 2013 Family Proceedings for Ms Dunhill. The practical necessity that lay behind the agreement of Ms Dunhill and the children to the 2014 Consent Order is, however, at least to some extent set out in paragraphs 9 to 12 of Ms Dunhill's 4^th witness statement.

Ms Dunhill's application for summary judgment

26. Hughmans do not dispute, and did not dispute before the Judge, the first three of the seven issues on which Ms Dunhill seeks summary judgment, which are set out in paragraph [178] of the judgment. I see no necessity to make a formal declaration in respect of them.
27. Issue (iv) contains an allegation of breach of trust by Mr Turner. He is not a party to these proceedings and has not participated in any way in these summary judgment applications. It is not appropriate to determine such an issue at this stage on a summary judgment application.
28. In relation to both issue (iv) and issue (v) the Judge stated (at [195]) that he was doubtful that it was right to determine them in isolation from the other issues. It is impossible to say that this was outside the range of a proper exercise of judicial discretion.
29. As the Judge said (at [196]), issues (vi) and (vii) are strenuously disputed. They turn on the combined reading and significance of Ms Dunhill's Form E and her witness statement of 6 July 2011. The Judge considered that it was right to leave them to trial. It is impossible to say that his decision was outside the range of a proper exercise of judicial discretion.

Conclusion

30. The appeal against summary judgment for Hughmans on the Claim and on the Defence and Counterclaim and dismissing the application to amend the Defence and Counterclaim is allowed.
31. Ms Dunhill's application for summary judgment is dismissed.