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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Greenridge Luton One Ltd & Anor v Kempton Investments Ltd  EWHC 91 (Ch) (22 January 2016)
Cite as:  EWHC 91 (Ch)
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7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
B e f o r e :
| GREENRIDGE LUTON ONE LIMITED
GREENRIDGE LUTON TWO LIMITED
|- and -
|KEMPTON INVESTMENTS LIMITED
Mr Mark Warwick QC and Miss Camilla Chorfi (instructed by Philip Ross) for the Defendant
Hearing dates: 22, 23, 26, 27 and 28 October 2015
Crown Copyright ©
Mr Justice Newey :
"The Tribunal was satisfied that in transferring monies from the Mr D and Mr A ledgers for the benefit of AT Ltd [Mr Bains] had acted dishonestly by the standards of reasonable and honest people. Further, the Tribunal was satisfied to the required standard that in making the transfers, which he knew were unauthorised loans at the relevant time, [Mr Bains] knew that what he was doing was dishonest by the standards of reasonable and honest people. His use of other client money was grossly reckless … but the Tribunal was not satisfied to the required standard that he had been dishonest in that regard. The Tribunal was, however, satisfied to the highest standard that [Mr Bains] had been dishonest in relation to his use of money belonging to the Mr D and Mr A estates."
Mr Bains appealed that finding, but his appeal was dismissed by Holman J on 18 February 2015.
"It is important therefore that we have a clear and rational approach to the management of the fund including a review of relevant contribution rate and the times which would rationally be charged to the fund. We are also anxious to ensure that there is no double counting of the management fees charged as part of the service charge. It would be perfectly possible under the existing arrangements for a fee to be paid when the money is collected and then again when it is spent.
Pending a formal response from you dealing with our concerns and bearing in mind the current level of the Fund we will not be making any further quarterly payments that reflect this element of the charge. This withholding is in accordance with the findings in Concorde Graphics v. Andromeda (1982) and reflects the fact of a formal dispute between your client and our tenant company. In terms of actual amount this means that we will be reducing the quarterly service charge payment by £109,900.
One further point of detail which I would also like to draw to your attention is the unsatisfactory failure to provide annual budgets in time for review and discussion prior to any liability arising. This extends into the annual reconciliation which is not presented in a manner that is consistent with the presentation of the budget nor does it provide adequate detail to enable a proper review to be carried out of the expenditure incurred. We believe that this is both a reasonable and necessary requirement for compliance with the 'good estate management' covenant on the part of your client in dealing with the service charge …."
"It obviously costs our clients a considerable amount of money and time dealing with queries in the first place and to have to repeat them every few years is most frustrating, time-consuming and expensive. Our clients do not understand what it is that you are hoping to gain by revisiting the same issues on multiple occasions. They have, in the past, tried to accommodate those requests without sounding too disgruntled. However it seems that you are now, once again, threatening to withhold monies properly due to our clients and, with the benefit of hindsight and our explanations, we trust that you will agree that it is quite an outrageous threat so far as our clients are concerned. For the avoidance of doubt, please be under no misapprehension, if any money is withheld then our clients will reluctantly take appropriate measures to enforce their legal rights without any delay and that may be very embarrassing indeed for TUI and its staff at Wigmore Place"
"We shall be grateful for your early confirmation that you accept the matter is now closed and that the service charge will be paid on time so that our clients do not have to start considering preparation for enforcement action."
"Presumably these monies have been withheld because of your misconceived position regarding the operation of the sinking fund.
Your misreading of the figures and the amounts does not transform the situation into a legal 'dispute'. Were that the case, any tenant could at any time simply query a figure and claim a 'dispute'.
We have, of course, provided a detailed explanation to assist you, and so there can be no doubt.
The withholding of these monies constitutes a serious breach of the tenant's covenants under the terms of the leases under which TUI [occupies] premises at Wigmore Place. Unless this breach is rectified immediately, our clients will, as we have previously advised you, be forced to take appropriate action. This will be most embarrassing and it really is the last thing that our clients wish to do."
"The matter is in dispute by virtue of the decision in Concorde Graphics v. Andromeda Investments, and that prevents your client from levying distress."
Mr Bains, in turn, told Mr Smith on 5 July that he disagreed with his interpretation of the Concorde Graphics case and reserved the "right to distrain". He also said:
"TUI has not through your firm or through Ian or through anyone else particularised with any clarity what it claims is in dispute and so the landlord is not able to provide any further assistance or clarification."
Mr Smith replied on 8 July:
"You're the first solicitor to put that interpretation on it, but you're free to have your own opinion."
Also on 8 July, Mr Spann wrote:
"I have seen your response to Bob which does nothing to resolve the dispute that has been clearly identified to you. And please stop issuing threats about distraint when we all know that your client is in the process of trying to dispose of his interest and that would be the last thing to facilitate a smooth transfer as it would absolutely highlight that there is a dispute in process.
Confining yourself to the detail requested would be far more productive and much more in your clients interest."
"I thought you finished in good terms with him on the phone?"
"Unfortunately there is one further point that has occurred to me in the interim. That is if the sinking fund is being held as you advise for undertaking the Eaton House and Lift projects which are fully provided for in the 2013 budget why is there not an allowance of at least say £500K from the fund towards those costs with an equivalent fall in the budget for the year?"
Mr Bains forwarded the email to Mr Aksler the next day with the explanation:
"I decided not to send it to you yesterday evening as I thought you would worry unnecessarily!"
"Not as yet, I was admitted to hospital that evening for the rest of the week and am just getting back up to speed again. However Bob said all along that Ian was dealing with the sinking fund and all those queries were dealt with quite some time ago."
"I have still not heard from you and as this is most uncharacteristic of you I do hope all is well.
Could you please confirm the position as soon as possible."
"I gather you were in touch with Lorraine earlier this week about resolution of payment or our retention from the quarterly service charge payment. This I think you are aware originated from the fact that we had not been supplied with any information on the current year's budget and in particular the provision for capital works and the potential utilisation of the retained Sinking Fund. I think I can say that those issues have now been defined satisfactorily with your help and I do not think that that is any further issue on that front.
However I have discussed the matter of the retention with our Head of Property and he is of the view that until all matters that LSH sought clarification upon in Bob Smith's email of 16th July we will continue to retain the sum of £80K from the quarterly service charge payment."
"I am appalled that after all this delay and after all these promises by Ian, he has come back moving the goalposts. This is not acceptable and will not be tolerated by my clients. This is clearly a case of TUI trying to interfere with my clients propose sale and my clients will hold TUI fully responsible for all the consequences of their unlawful action."
"It's now 5 weeks since I sent you my email of 16th. July, and things have gone very quiet.
Are you working through the questions and intend to send me a reply soon, or are you now refusing to deal with the matter any further."
Mr Bains replied:
"Despite oral and written promises from Ian Spann, the monies that were wrongly and unilaterally withheld but were promised to be released have still not been released. Your clients are consequently in breach of the terms of their leases.
I wrote to Lorraine Bridges about the situation last week and so may I suggest that you liaise with her in the first instance."
Mr Smith responded:
"At the risk of repeating myself, by virtue of the Concorde principle, a tenant is entitled to withhold money where a legitimate dispute is in progress. The trouble caused is well within the relevant parameters.
Irrespective of that, it doesn't prevent you answering my legitimately raised questions, so I'll welcome the necessary questions without any further delay."
"Are you intending to respond to my questions? Seems a shame to have to operate the arbitration clause and get a third party to deal with this, when I'd hoped we could resolve it between the two of us."
Miss Bains replied on 3 October:
"Mr Bains has taken a lot of time off work and was back in hospital in mid July. He has left Blackstones at the end of September. I can see from his computer that he had prepared a reply to your enquiries and I am enclosing a copy of it herewith. I think he was waiting for some enclosures referred to in his reply before he sent it but they have been received and so I am enclosing those as well.
Our clients state that TUI have held back their contribution to the sinking fund once again from the September quarter and this is not acceptable. Our clients rights are reserved and they are now considering their options.
I understand that TUI are aware that our clients have exchanged contracts for the sale of the property. In the circumstances our clients will now take action without further delay for the continuing breach of covenant."
Mr Smith's response of 7 October included this:
"As I pointed out to Rana, by virtue of the Concorde Principle, my clients are fully justified to withhold payment while this major dispute is underway."
In a further email of 8 October, Mr Smith said that the information with which he had been supplied was helpful but that there was still information missing. Miss Bains replied on 9 October, "We will see what further information there is," but said too:
"We do not agree that there is any dispute or that there has been a dispute. If you claim there is a dispute then as previously requested, you must particularise it."
Mr Smith wrote back on 14 October:
"As for the dispute, take a look at the old correspondence. Our grievances, doubts, concerns etc. are all laid out."
"It appears that after some months of your firm failing to respond to requests for information from Mr Smith, you eventually sent some information to him on 3 October 2013. Mr Smith responded on 7 October and again on 8 October seeking further information. On 10 October 2013, we understand that Rana Bains (who you stated in your e-mail of 3 October had left Blackstones) telephoned Lorraine Bridges of our client and stated that if the withheld service charge was not paid immediately, bailiffs would be sent to the Property.
It is clearly inappropriate for bailiffs to be sent to the property when the service charge is in dispute …."
Replying on 14 October, Miss Bains said that her father had contacted Ms Bridges "in his personal capacity as an adviser to Provewell", that Wright Hassall were "misinformed regarding a dispute" and that no arrangements had been made for bailiffs to attend Wigmore Place. In their response, Wright Hassall said:
"… [I]t seems to us that service charge has been demanded and our client does not accept on the information available to it that the service charge should be paid. We consider this to be a dispute. Indeed a dispute has been referred to on at least 3 occasions in emails from LSH to yourselves …."
"It has been [our] clients view for some time now that TUI have been deliberately trying to raise thoughtless 'enquiries' with a view to creating the impression that there is a dispute with the Landlord so that they can influence the sale of the property by our client"
"Our clients gained the very clear impression from the nature of the enquiries and Mr Bains' conversations with both Ms Bridges and Mr Spann that these enquiries were in fact being raised with the ulterior motive of adversing influencing our clients sale. Mr Bains has mentioned this to Ms Bridges on three occasions."
"It has now been sometime since we last heard from you. Have you received your clients further instructions and are there any enquiries outstanding?
Is there any reason why the sinking fund contribution should remain outstanding? Could you please let me have your justification for the same as my clients are once again reconsidering the position."
The exchanges concluded with an email in which Mr Smith referred to there being "Still far more outstanding than has been seen" and other matters being with his client.
"… I am enclosing the further enquiries (about 50 pages!) which I have completed on your behalf as requested.
Could you kindly read through the replies and check that they are correct. (I am sure you will)
There are a few points that I will run through with you in the morning and I will need Kempton's VAT number."
i) Towards the beginning, in a section headed "Interpretation", CPSE.1 stated:"5. In replying to each of these enquiries and any supplemental enquiries, the Seller acknowledges that it is required to provide the Buyer with copies of all documents and correspondence and to supply all details relevant to the replies, whether or not specifically requested to do so.6. The Seller confirms that pending exchange of contracts or, where there is no prior contract, pending completion of the Transaction, it will notify the Buyer on becoming aware of anything which may cause any reply that it has given to these or any supplemental enquiries to be incorrect";
ii) The reply "None" was given in answer to enquiry 28 in CPSE.1, which read:"Except where details have already been given elsewhere in replies to these enquiries, please give details of any disputes, claims, actions, demands or complaints that are currently outstanding, likely or have arisen in the past and that:(a) relate to the Property or to any rights enjoyed with the Property or to which the Property is subject; or(b) affect the Property but relate to property near the Property or any rights enjoyed by such neighbouring property or to which such neighbouring property is subject";
iii) Enquiry 10.6 in CPSE.2 asked:"In respect of service charge arrears at any Let Unit please:(a) tell us what sums are currently due but are unpaid; and(b) provide a schedule of all service charge arrears over the past three years".The reply was:"There are no arrears. The tenants pay regularly and the landlord has never had to take any action for recovery";
iv) Enquiry 10.8 in CPSE.2 asked:"Except as already disclosed, have there been any complaints or disputes relating to the service charge?".The reply was:"There have been no complaints or disputes as such. From time to time TUI have raised queries on mainly historic issues. TUI have recently raised further enquiries";
v) Enquiry 14 in CPSE.2 asked:"Except as already disclosed in replies to CPSE.1, please give details of:(a) any disputes or complaints in relation to any current Tenancy, whether or not resolved; and(b) any breaches or alleged breaches of covenant relating to any Tenancy, including details of any waiver whether express or implied".The reply was:"None so far as the seller is aware".
"Please clarify what 'further enquiries' TUI have raised and what the nature of the historic ones were – CPSE2 reply 10.8 refers".
"Insurance information – Shulem [Aksler] … will be able to supply this
Rental payment records for the last three years – the tenants have been rarely, if ever late but Shulem will be able to confirm the precise dates."
Mr Bains did not separately address Freeth Cartwright's request for "Service charge accounts for the last 3 years". As regards the point raised on the reply to question 10.8 in CPSE.2, Mr Bains said:
"the tenants are entitled to raise enquiries on the service charge, within six months after the landlord has supplied a certificate of expenditure from its accountants. On two occasions in the past, TUI have made some enquiries of a general nature relating to the information that was supplied. They were satisfied on each occasion. More recently, as part of an internal audit, they instructed a third party to raise enquiries and these were satisfactorily dealt with. Subsequently, TUI became aware of the proposed sale and raised some additional enquiries. These are being dealt with and no difficulties are anticipated. It is believed by the managing agents that the enquiries have been raised by TUI with a view to slowing down the proposed sale by the landlord."
"The contract provides for a very significant retention (£600,000) out of the service charge and for 15 months after completion. I do not follow the reasoning for this not least as the Seller has produced audited service charge accounts until 2011 (we need the audited accounts for 2012 and management accounts for 2013 as well as all supporting documents, contracts, etc)."
Later that day, "Simon Walter Scott" sent Mr Simmons some service charge documents for 2010-2012 and a schedule showing amounts due and paid by TUI in respect of rent and service charge from September 2011 to March 2013. Mr Simmons responded by asking, "Can you confirm the June 2013 collection details?"
"My clients do not understand why your clients are reluctant to commit to providing a preliminary statement showing the sums paid by the tenants and also the sums expended by your clients through the service charge. The amendments made … is not acceptable …. Can you please, in any event, arrange for an up to date set of management accounts to be provided for the service charge for the total sums received during this year from the individual tenants, the total expended and the sums standing to the sinking fund/reserve fund …."
In his response, Mr Connick said that Kempton "will now agree to prepare a preliminary set of management accounts and produce them prior to completion". Mr Polden, however, pressed in another email of 10 September for "an up to date statement of the service charge account, showing the reserve/sinking fund as well as the position for the individual tenants".
i) Clause 3.1 provided for the conditions in Part 1 of the Standard Commercial Property Conditions (Second Edition) ("the Conditions") to be incorporated in so far as not inconsistent with, modified or excluded by other clauses in the Contract;
ii) Clause 8.1 stated that the "Seller" (i.e. Kempton) would sell the property free from incumbrances apart from, other things, "any matters, other than the Charge [i.e. a charge appearing in the charges register], disclosed or which would have been disclosed by the searches and enquiries which a prudent buyer would have made before entering into this contract";
iii) Clause 8.3 provided:"The Seller has made full disclosure of the matters referred to in clause 8.1 and the Buyer (in acknowledgment of such disclosure) will not raise any enquiry, objection, requisition or claim in respect of any of them";
iv) Clause 12.6 provided:"In the event that the Buyer fails to complete the Seller agrees that its rights shall be limited to the forfeiture of the Deposit but not to seek damages and/or specific performance against the Buyer";
v) Clauses 15 and 16 dealt with service charges. Among other things, clause 15.1 stated that Kempton was to supply the claimants not less than three days before completion with a preliminary statement "covering any period for which service charge and similar accounts have not been prepared as at completion or for which there is expenditure by the Seller by way of service charge or other recoverable expenses which is recoverable from the occupiers under the Occupational Leases but which has not been fully recovered on a final basis in accordance with the Occupational Leases". Under clause 15.3, if "Advance Payments" (defined by clause 15.2 to mean "all sums received by the Seller under the Occupational Leases as advance payments for service charge or other similar recoverable expenses") exceeded the expenses incurred by or on behalf of Kempton, the excess was to be paid to Greenridge. Clause 16.4 provided for Kempton to assign to the claimants all its rights to the "Arrears", i.e. "sums (excluding any service charge or other similar recoverable expenses …) payable to the Seller under the Occupational Leases on or before completion but which are not received three working days before completion";
vi) Clause 18.2 provided:"The Buyer acknowledges that in entering into this contract it does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently) other than those:(a) set out in this contract; or(b) contained in any writing and provided to the Buyer by the Seller's or on behalf of the Seller"; and
vii) Clause 18.3 stated that nothing in clause 18 was to limit or exclude any liability for fraud.
"9.1 Errors and omissions
9.1.1 If any plan or statement in the contract, or in the negotiations leading to it, is or was misleading or inaccurate due to an error or omission, the remedies available are as follows.
9.1.2 When there is a material difference between the description or value of the property as represented and as it is, the buyer is entitled to damages.
9.1.3 An error or omission only entitles the buyer to rescind the contract:
(a) where the error or omission results from fraud or recklessness, or
(b) where the buyer would be obliged, to its prejudice, to accept property differing substantially (in quantity, quality or tenure) from that which the error or omission had led it to expect".
"Insurance information – current schedule to follow
Rental payment records for the last three years – to follow but rental payments are up-to-date and rarely, if ever, late"
"the tenants are entitled to raise enquiries on the service charge, within six months after the landlord has supplied a certificate of expenditure from its accountants. On two occasions in the past, TUI have made some enquiries of a general nature relating to the information that was supplied. They were satisfied on each occasion. More recently, as part of an internal audit, they instructed a third party to raise enquiries and these were satisfactorily dealt with. Subsequently, TUI became aware of the proposed sale and raised some additional enquiries. These are being dealt with and no difficulties are anticipated."
It is perhaps worth noting that the response omitted the sentence which followed in Mr Bains' draft ("It is believed by the managing agents that the enquiries have been raised by TUI with a view to slowing down the proposed sale by the landlord") (see paragraph 30 above).
"Please ask your clients to extend the Schedule of payments apparently made by TUI from and including 29th September 2011 to 25th March 2013 so that it covers the payments due in June and September this year".
In a similar vein, Mr Polden said in a 16 October email to Mr Connick:
"Also, can you provide an up to date schedule that details the rent for each/all of the occupational leases and sub-leases and also the on-account service charge that is demanded pursuant to those documents".
"A schedule of rent and on account service charge levels (quarterly figures) is attached. I trust this was the information you were asking for."
The schedule in question showed the rent and service charge demanded, not that paid. It did not therefore reveal the fact that TUI had withheld money.
"The Property has been owned since the early 1990's by a family which, in the opinion of the Manager, has neglected to properly manage the asset and has not maintained a professional relationship with the occupiers, leaving significant opportunity for the Manager to improve the asset and make it more institutionally desirable."
"We understand from [Greenridge] that there is currently circa £800,000 in the service charge sinking fund and this should cover the cost of these works."
"that too only appears in the year end figures. The last I saw of it, at year end 12/11, it stood at £626,655, and I was specifically told that this was to deal with the cooling towers, lift refurbishment, and common parts refurbishment. From what I've seen since these costs were put through, but without any being taken from the sinking fund. On top of that, the year end figures for 12/09 show that £60,435 was taken out of the sinking fund. It doesn't however, appear anywhere in the year end figures themselves, and I've been given no explanation as to where it went, so that's another £60,435 we'd like back."
"Further to Bob's e-mail and our telephone conversation this issue has the potential to effect the value of the property by the total value of the claim.
On the special assumption that the service charge issue is settled we are of the opinion that the value of the premises is in the region of £16,445,000. However, if it is proved that TUI have a case and are entitled to withhold service charge and sinking fund payments the value of the property could reduce to circa £11,880,000.
The above figure is a domesday scenario however at this stage we have nothing more concrete to rely on in terms of a tangible number to get the dispute settled. I have reported to Santander on the basis of the special assumption at this stage and recommended that this issue is investigated by their legal advisors."
"Notwithstanding the above we are aware that there is currently a major dispute between the vendor and the major tenant in the building TUI Northern Europe Limited and they are no longer making Service Charge payments or contributing to the sinking fund. The total value of the money currently in dispute is circa £3,600,000 although this is just TUI's share and should Peverel also dispute the service charge the total figure could rise to in excess of £4,500,000.
We understand from the borrower that they have taken legal advice and are of the opinion that TUI will be forced to pay the outstanding money as otherwise they will be in breach of their lease.
We would strongly recommend that this position is verified by your legal advisors prior to draw down as this issue has the potential to have a detrimental effect on the value of the premises."
[Having referred to an email of 5 July 2013] "I did feel at the time that TUI were doing this with a view to spoiling my clients potential sale. I felt so strongly that I mentioned it to my clients and I also mentioned it to Lorraine Bridges, who assured me that this was not correct and soon as the queries relating to the sinking fund were dealt with, the retention that they had made would be released";
"I spoke to Lorraine Bridges again and I mentioned that as we had done everything that had been required of the landlord/managing agents and we were not aware of any outstanding matters, there could be no dispute as we had never been given any particulars of the dispute …. The tenant had simply raised queries which we had answered or were in the process of answering. Lorraine however seemed more interested in the position of the purchaser of the property and asked numerous searching questions about the purchaser. I informed her that I had become aware that my clients had exchanged contracts but I was not dealing with that. I formed the opinion and I told her at the time, that TUI was trying to jeopardise my clients sale. She denied this. She indicated in no uncertain terms that they were not happy with Greenridge for some reason …. She said she would find out what was outstanding and holding up the release of the retention but instead it seems she asked her lawyers to write asking the landlord not to take action against them";
"To date we have not received any particulars of any dispute and consequently I believe there is no 'dispute'. They have only raised enquiries and my clients have answered those. There has been no complaint of any over expenditure or wrongful expenditure or any complaint of that kind which could perhaps have constituted a dispute. No one has been able to particularise any dispute.
I understand that TUI have been paying all their rent and service charge as normal. They have however withheld relatively small sums of money in respect of further sinking fund contributions and as a result, I understand the managing agents have prudently made adjustments to the plans for future expenditure, but there is still a substantial sums of money in the sinking fund which I would expect that the seller will account for to the purchaser in the usual way upon completion of the sale";
"Despite Lorraine Bridges assertion to the contrary, I also have absolutely no doubt that the real reason for TUI retaining these sums of money is to try and spoil my clients sale to Greenridge. That is why both Bob Smith and Ian Spann were left in embarrassing situations by TUI, and despite all the various oral and written invitations for TUI to provide details of any alleged 'dispute' they have not done so."
"The only driver we had at the time was to come to the bottom of it and try and elicit the information from the property managers that would allow us to make a decision."
Greenridge's case in brief outline
i) Were untrue representations made to Greenridge in the negotiations leading up to the Contract or in the Contract itself?
ii) Was Greenridge induced to enter into the Contract by any such misrepresentations?
iii) Are any such misrepresentations attributable to fraud or recklessness?
iv) Would Greenridge, had it had to complete, have been obliged, to its prejudice, to accept property differing substantially (in quantity, quality or tenure) from that which any errors or omissions had led it to expect?
v) If Greenridge was not entitled to rescind the Contract, should its deposit nevertheless be returned pursuant to section 49(2) of the LPA?
vi) Is Greenridge entitled to damages for breach of warranty and/or misrepresentation?
Issue (i): Were untrue representations made?
Issue (ii): Reliance
"[O]f course we are reliant upon the CPSEs, Mr Warwick. We'd be a fool not to be. They are a very important document but, as I said to you, we seek counsel from our lawyers who will advise us on the contents and tell us what we should be careful about."
"In the replies to CPSEs, the Defendant had stated that there were no disputes and no arrears of rent, both of which were untrue. We had relied on the representations in those replies to CPSEs and the information provided in the pre-contract stage and therefore had not pursued the matter of payment of service charge contributions further (as we were not aware that there was any issue in that respect)."
Issue (iii): Fraud/recklessness
The meaning of "fraud" and "recklessness"
"fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief."
"The question is not whether the defendant in any given case honestly believed the representation to be true in the sense assigned to it by the court on an objective consideration of its truth or falsity, but whether he honestly believed the representation to be true in the sense in which he understood it albeit erroneously when it was made."
Aggregation of knowledge
"I cannot myself see how a principal can be held liable for fraud when there has been no element of fraud either on the part of himself or on the part of any one for whose acts he is responsible."
"Difficulties may arise in a claim against a company which can only speak or act through its agents or officers, but if an officer of a company writes and represents that which is untrue when many other officers of the company know the true facts, it may well be found that he made the representation without belief in its truth, or that he made it recklessly, careless whether it was true or false. That must depend on the evidence."
The standard of proof
"The civil standard of proof always means more likely than not. The only higher degree of probability required by the law is the criminal standard. But ... some things are inherently more likely than others. It would need more cogent evidence to satisfy one that the creature seen walking in Regent's Park was more likely than not to have been a lioness than to be satisfied to the same standard of probability that it was an Alsatian. On this basis, cogent evidence is generally required to satisfy a civil tribunal that a person has been fraudulent or behaved in some other reprehensible manner. But the question is always whether the tribunal thinks it more probable than not."
"… there is no logical or necessary connection between seriousness and probability. Some seriously harmful behaviour, such as murder, is sufficiently rare to be inherently improbable in most circumstances. Even then there are circumstances, such as a body with its throat cut and no weapon to hand, where it is not at all improbable. Other seriously harmful behaviour, such as alcohol or drug abuse, is regrettably all too common and not at all improbable. Nor are serious allegations made in a vacuum. Consider the famous example of the animal seen in Regent's Park. If it is seen outside the zoo on a stretch of greensward regularly used for walking dogs, then of course it is more likely to be a dog than a lion. If it is seen in the zoo next to the lions' enclosure when the door is open, then it may well be more likely to be a lion than a dog."
"I prepared those replies in March, okay. They were absolutely accurate at that time. I did not have control as to when they were going to be sent out, to whom, so there is no way I would be responsible for those, absolutely not."
In any case, Mr Warwick argued, Mr Bains did not consider there to be a "dispute" with TUI.
"I asked [Mr Bains] at the time: do we have a dispute? Do we not have a dispute? He said a dispute means that they identify what the dispute is or they tell you that this amount that was spent is not correct, either you should not have spent it at all or it should not be so much. That is not what TUI are saying. So there was nothing. Just because they wanted to call it a dispute, Mr Bains explained it is not a dispute."
There is, as it seems to me, no good reason to reject this evidence or to conclude that Mr Aksler disagreed with the advice he was being given by Mr Bains. I accept, accordingly, that Mr Aksler honestly believed there to be no "dispute" with TUI.
i) Throughout the period between the beginning of July 2013 and 12 September (when contracts were exchanged), Mr Bains will, in my view, have been aware that TUI had not paid its June quarterly payment in full. He referred to the fact that money had been withheld in, for example, emails of 1 July, 5 July and 20 August (paragraphs 9, 10 and 18 above). Given, moreover, his close working relationship with Mr Aksler, Mr Bains would have reckoned that he would have learned from Mr Aksler, if not otherwise, if TUI had made good the shortfall in its June payment. At one point during cross-examination, Mr Bains suggested that he would not necessarily have known "for sure" on 25 July whether TUI had paid, but he would at least have thought it highly likely that it had not done so. Certainly, he could not honestly have said that he believed there to be no arrears;
ii) As mentioned in paragraph 30 above, Mr Bains was asked to address points raised by Freeth Cartwright after they had been supplied with, among other things, the CPSEs. To undertake this exercise, Mr Bains will have needed to know whether the replies to the CPSEs had been changed since first drafted in March: apart from anything else, some of Freeth Cartwright's questions related to the answers given to particular enquiries. At this stage, therefore, Mr Bains can have been in no doubt that the replies to the CPSEs had not been altered in respects relevant to the present proceedings;
iii) In any event, Mr Bains will, I think, have realised that the replies to the CPSEs that had been prepared in March 2013 were unlikely to be changed in important ways without his being consulted. During cross-examination, Mr Bains said that "on a transaction generally [Mr Aksler] will leave [him] to make virtually all the decisions for him". Elsewhere, Mr Bains spoke of Mr Aksler being "totally reliant" on him;
iv) Mr Bains must, I think, have appreciated that both the replies to the CPSEs with which Freeth Cartwright had been supplied and the document that he prepared in response to their enquiries were misleading in what they said (and did not say) about service charge arrears. He will have been aware that the reply to enquiry 10.6 in CPSE.2 had stated that there were "no arrears" of service charge even though that was not in fact the case. He will have known, too, that his document, far from correcting the replies to the CPSEs, made no reference to the fact that TUI was withholding money. It is, moreover, unlikely to be an accident that Mr Bains did not separately address Freeth Cartwright's request for "service charge accounts for the last 3 years";
v) If, as the matters mentioned in the previous sub-paragraph suggest, Mr Bains was prepared to allow Freeth Cartwright (and, hence, Ediston) to be misled about the existence of service charge arrears, it is the less improbable that he should have been complicit in Greenridge being similarly misled;
vi) Although Mr Bains was evidently in hospital during the week of 15 July 2013 (see paragraph 14 above), he said on 8 August that he was "getting back up to speed again" (paragraph 14). Since it includes reference to further enquiries of 1 August, the document in which Mr Bains addressed Freeth Cartwright's queries also indicates his ongoing involvement with matters relating to Wigmore Place, as do, for instance, the emails he sent on 13, 14, 16 and 20 August (paragraphs 15, 17 and 18) and his draft reply to Wright Hassall's 11 October email (paragraph 21);
vii) As an experienced conveyancing solicitor, Mr Bains would have appreciated that any prospective purchaser of Wigmore Place would be supplied with replies to CPSEs. As regards the sale to Greenridge, the emails that Mr Bains sent to Ms Bridges on 13 and 14 August 2013 (paragraph 15 above) strike me as significant. Having failed to respond since mid-July to points that Mr Smith had raised in his letter of 16 July, on 13 August Mr Bains asked to be updated on TUI's position urgently and the very next morning he chased for confirmation as to the position "as soon as possible". The chances are, as it seems to me, that Mr Bains had been told that Kempton had decided on 12 August to proceed with Greenridge and that the latter was asking for "a pack of legal documents". Mindful of the fact that that pack would need to include replies to CPSEs, Mr Bains wanted matters resolved with TUI;
viii) Mr Bains was clearly very much alive to Kempton's obligations to prospective purchasers. His perception was that TUI was trying to interfere with Kempton's sale plans by engineering a situation in which Kempton would have to make embarrassing disclosures to a potential purchaser. Thus, Mr Bains observed in his comments on Freeth Cartwright's questions that enquiries had been "raised by TUI with a view to slowing down the proposed sale by the landlord" (paragraph 30 above), on 16 August 2013 he accused TUI of "trying to interfere with my clients propose sale" (paragraph 17), and his December account of events stressed that he had "absolutely no doubt that the real reason for TUI retaining these sums of money" was "to try and spoil [Kempton's] sale to Greenridge" (paragraph 52). Further, during his oral evidence Mr Bains said that, as he saw things, TUI was trying to produce a situation in which Kempton was obliged to report to the proposed purchaser. He explained:"I thought they would think that these sort of issues, if they created a dispute, a genuine dispute, then that would have to be disclosed and although they didn't say that and, in fact, when I challenged Lorraine Bridges to say, 'That's exactly what you're doing,' she denied it. She said, 'No, no, no, we wouldn't do that,' but … I could understand at the time why they were doing this. I do now understand exactly why they were doing it because they were trying to influence the sale and they did so successfully."
i) Mr Aksler is very experienced in property matters. Kempton, whose affairs he manages, has a property portfolio that includes commercial and residential premises in London. He also has extensive property interests of his own. Although Mr Aksler explained that he had had little involvement with selling property and that the premises in which he is interested are residential, he will surely have known that pre-contract enquiries are made in the course of conveyancing transactions. After all, such enquiries are as much a feature of the purchase of residential property as they are a part of the sale of commercial property;
ii) In the context of Wigmore Place in particular, Mr Aksler can be seen to have been consulted about replies to the CPSEs in March 2013 (paragraph 23 above) and to have played a part in relation to information provided to Freeth Cartwright (see paragraphs 29 and 30). He also forwarded the CPSEs, among other things, to Mr Rimmer for onward transmission to Mr Simmons (paragraph 31) and supplied service charge details in response to a request for "Documents referred to in the replies to General, Tenancy and Leasehold CPSE Enquiries" (paragraph 32). While I can see that Mr Aksler may have trusted Mr Bains and Mr Connick to deal with the CPSEs to a considerable extent, I find it very hard to accept that he was unaware that Greenridge was being, or had been, given replies to the CPSEs. I have trouble, too, with Mr Aksler's evidence that he did not know that Freeth Cartwright were raising enquiries;
iii) In evidence, Mr Aksler stressed the extent to which he relied on Mr Bains and Mr Connick in relation to the CPSEs and said that he did not fill out the CPSE forms, check them or know what questions or answers were to be found in them. The evidence also suggests, however, that Mr Bains would speak to him about issues of concern. When sending Mr Aksler draft replies to the CPSEs in March 2013, Mr Bains said that he would run through certain points with Mr Aksler the next day (paragraph 23 above). During cross-examination, Mr Aksler emphasised the fact that Mr Bains kept in close touch with him;
iv) More specifically, there is evidence indicating that Mr Bains spoke to Mr Aksler about the potential implications of TUI's conduct for the sale of Wigmore Place. Mr Bains said in his December 2013 account of events that he had mentioned to his client that he felt that TUI was trying to spoil the sale of Wigmore Place (paragraph 52 above). For his part, Mr Aksler said that he recalled being told that it looked as if TUI wanted to be in control of the sale of Wigmore Place. Such discussions would, as it seems to me, naturally have taken place in the context of a conversation about the implications of the CPSEs. After all, it was Mr Bains' thesis that TUI was trying to produce a situation in which Kempton was obliged to report to the proposed purchaser;
v) Various matters tend to suggest an unwillingness on Mr Aksler's part for Greenridge to be supplied with information from which it could discover that, contrary to the picture given by the replies to the CPSEs, TUI had withheld service charges. When Locke Lord first asked for service charge documents, Mr Aksler sent back figures for 2009-2011 (paragraph 32 above). After Mr Aksler had been pressed for 2013 materials, Mr Simmons was provided with information up to March 2013, and a request for confirmation of the June collection details met with no response (paragraph 32). Mr Bhuptani chased for service charge accounts for the current year at the beginning of September, and Locke Lord sought up-to-date service charge figures on 10 and 11 September, but nothing further had been forthcoming by the time contracts were exchanged, and a schedule that Mr Connick sent to Locke Lord on 17 September stopped at March 2013 (paragraph 32). After being pressed more than once for updated information, Mr Connick supplied a schedule showing sums demanded, not actual payments (paragraphs 43 and 44). In a similar vein, Mr Connick objected for a time to the contract obliging Kempton to provide a statement of the service charge position in advance of completion (paragraph 34);
vi) It is fair to note that Kempton ultimately agreed to the contract providing for a service charge statement to be supplied before completion and, too, that Kempton was prepared to authorise TUI to communicate with Greenridge. It may be, however, that Mr Aksler had come to think that service charge issues could be resolved by Kempton issuing a credit note in favour of TUI.
Issues (iv) and (v): Substantial difference and return of the deposit under section 49(2) of the LPA
Issue (vi): Damages
"When there is a material difference between the description or value of the property as represented and as it is, the buyer is entitled to damages."
Mr Warwick contended that, in the circumstances, a buyer cannot be entitled to any damages unless there is "a material difference between the description or value of the property as represented and as it is"; the Condition creates a gateway through which a buyer must be able to pass if he is to qualify for damages. Further, Condition 9.1.2 serves, Mr Warwick argued, to limit any damages to compensation for the relevant "material difference".