Surveyors: Procedure – strike out – abuse of process – fraudulent misrepresentations
Gladman Commercial Properties
In Gladman Commercial Properties v (1) Fisher Hargreaves Proctor, (2) HEB Chartered Surveyors, (3) David Hargreaves, (4) Jonathan Bishop (2013) the Court of Appeal unanimously upheld a decision to strike out a £33 million claim for fraudulent and/or negligent misrepresentation on the grounds of abuse of the court's process.
DWF Fishburns acted for the successful first-defendant surveyors in this important case which considered whether a settlement with two joint, rather than concurrent, tortfeasors in previous proceedings released a further joint tortfeasor from liability (despite that defendant not being a party to the initial proceedings).
The Claimant, a property developer, agreed to buy a former fire station site in Nottingham from the local Council and Fire Authority for £6 million. The property was advertised as suitable for a student/key worker development. The Claimant paid a deposit but subsequently discovered that the site was in an area in which the Council's planning policy did not support student accommodation. The Claimant declined to complete the purchase and the Fire Authority issued a claim against the Claimant for specific performance. The Claimant brought a counterclaim for fraudulent misrepresentation against the Fire Authority and also the Council seeking losses in excess of £30 million. The first action was eventually settled in September 2011, with the Council paying damages to the Claimant. The settlement agreement had stated that it was in full and final settlement of all and any existing or potential claims of any nature, whether or not contemplated, that the Claimant had against the other parties.
In May 2012, the Claimant issued a second action against the Agents, two firms of chartered surveyors, who had advertised the site for sale, claiming losses in excess of £30 million. The Claimant had sent a letter to the Agents one week before they were due to give evidence in the first action stating that if they lost the claim, they would sue them/their practices for £30million. The Agents gave evidence in the first action and were vigorously cross examined over a period of several days.
The Agents applied to strike out/obtain summary judgment upon the second action on the basis that the September 2011 Settlement Agreement in the first action would also apply to them as joint tortfeasors with the Council and Fire Authority. Whilst the Settlement Agreement did not expressly mention the name of the Agents it was expressed to be in full and final settlement of all claims between the Claimant, the Fire Authority and the Council.
The Court at First Instance found that the Agents were joint tortfeasors with the Council and Fire Authority who had been sued by the Claimant in the first proceedings. At common law, where there is a joint cause of action against two or more persons, a settlement of the claim against one of them will operate as a discharged liability against all. The September 2011 Settlement Agreement which had released the parties from liability, had therefore also released the Agents, even though the Agents had not been a party to the first proceedings. The Court also found that the second action was an abuse of process and should be struck out.
The Claimant obtained permission from the Court of Appeal to Appeal.
Court of Appeal decision
The Court of Appeal heard the matter on 28 and 29 October 2013. The Lord Justices unanimously dismissed all appeal grounds and upheld the previous Court's decision, namely that:
- The Agents were joint tortfeasors with their principals and the Settlement Agreement therefore released them from any liability.
- To bring a second action in this way was an abuse of process, particularly in light of the cross examination of the Agents as witnesses in the first action.
- The Particulars of Claim did not sufficiently set out the causative link between the Agent's actions and the alleged losses claimed.
Lessons to be learnt?
This decision serves as a helpful reminder for solicitors and counsel (and their Insurers) as to the importance of trying to ensure that Settlement Agreements accurately reflect the intentions of all of the parties and are as clearly worded as possible. In this case it was clear that the Council and Fire Authority also intended that the Agents should be protected by the Settlement Agreement; and the fact that the parties were joint, as opposed to concurrent, tortfeasors was paramount.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.