B e f o r e :
LORD JUSTICE TOMLINSON
LORD JUSTICE RYDER
|| Mr David Frost
||- and -
||Wake Smith and Tofields Solicitors
(Transcript of the Handed Down Judgment of
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George Spalton (instructed by Irwin Mitchell Llp) for the Appellant
Rupert Higgins (instructed by Reynolds Colman Bradley Llp) for the Respondent
Hearing date : 1 May 2013
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Lord Justice Tomlinson :
- This appeal relates to the outcome of a mediation which took place as long ago as 18 November 2003. The action out of which the appeal arises was not brought until 28 October 2009. The mediation concerned a long-running, wide-ranging and acrimonious dispute between two brothers, the Appellant David Frost and his brother Ron, over the conduct and ultimately the division of their shared property and business interests. The irony is that the mediator performed a small miracle in producing an agreement in principle which ultimately matured into a perfected agreement pursuant to which the brothers were able to disentangle their interests, albeit they are still now in dispute over some of the tax implications of the terms upon which they severed their business relationship. So this unhappy story ultimately bears testimony to the ability of a skilled mediator to resolve even the most apparently intractable dispute attended by the inevitable animosity of a fractured family relationship. It is however immediately concerned with the question whether the Appellant's solicitor was in breach of duty in failing to render into a legally enforceable form the agreement to which the parties came in the course of the mediation on 18 November 2003. Mr George Spalton for the Appellant said that the appeal concerned the failure of the solicitor to ensure that the mediation ended in a binding agreement. The short answer to these questions, however posed, given by the judge below, His Honour Judge Moore in the Sheffield County Court, was effectively that the solicitor owed no such duty. The mediation had resulted in an agreement in principle which was not, without more, sufficiently certain and complete in its terms to be legally enforceable. The solicitor could not without the parties' further agreement conjure finality from their provisional agreement.
- The Appellant and his brother Ron had by 2003 been in business together for about 20 years. Their business was in property development and management conducted in part through the medium of Advance Property Development Limited ("Advance") of which the brothers were the sole directors. Advance was the registered proprietor of many of the properties in which the brothers had beneficial interests, but not all of them. Their father and younger brother were registered proprietors of, and enjoyed a beneficial interest in, two of the properties. There were various charges over the properties. Most of the properties were the subject of tenancy agreements. The judge described the apparent differences between the legal and beneficial titles as making the overall property portfolio "a conveyancer's nightmare." The brothers also each had an interest in a damp-proofing company called Sentinel Specialist Services Limited. Although the witness statement of Mr David Frost contains contradictory accounts (at paragraphs 59 and 63) it seems that they may have thought that they owned 30% each, with the remaining 40% held by Ricky Ford and Chris Pryor in equal shares of 20% each.
- By 2003 the brothers' business interests had become extensive, inextricably interwoven, complex and opaque. Their personal and their business relationship had broken down such that Ron was, in David's view, paralysing the activities of Advance by refusing to carry out the actions required of him as a director. Their differences were aired in acrimonious correspondence. It was plain that what was needed was a parting of the ways but the brothers were incapable on their own of agreeing a way forward. They were wholly unable to agree upon an effective division of their interests.
- In May 2003 David Frost instructed the Respondent firm of solicitors to act for him in relation to the dispute with his brother. We were not shown the letter of retainer. We were told that it was in general and standard form and that its terms are irrelevant to the issues for decision save only to the extent that the retainer contains no limitation upon its scope. Mr Mark Serby, a partner in the Respondent firm and at that time head of the litigation department, had sole conduct of the matter. Mr Serby qualified as a solicitor in 1990 and had four years experience in the City of London before moving on, ultimately to Sheffield in 1997. I shall hereafter refer solely to the actions of Mr Serby rather than of the firm, recognising of course that he was at all times acting for and on behalf of the firm.
- On 9 July 2003 Mr Serby wrote to Mr Ron Frost proposing a "mediation" at which "you and your advisor meet with our client and his advisor to try to resolve the outstanding differences" as an alternative to an application to the court for the compulsory liquidation of Advance. Ron's solicitors Messrs DLA came onto the scene. They pointed out that what was proposed was more in the nature of a "without prejudice" meeting than a formal mediation and proposed the latter route. To this Mr Serby agreed on 21 July 2003. As time went on so the proposed procedure assumed greater formality, with the preparation of position statements and so forth.
- Notwithstanding this apparent progress there remained concern on the part of Mr David Frost and Mr Serby as to whether Mr Ron Frost would actually turn up and participate on the day. After procrastination on his part as to the fixing of a date a mediation was ultimately agreed for and took place on 18 November 2003. The mediator appointed was a surveyor from East Anglia, Mr Robin Bramley. He was evidently extremely skilled in his task.
- The mediation took place in Mr Serby's offices. For reasons which will become apparent I will hereafter call it "the first mediation." Both Mr David and Mr Ron Frost were accompanied by their wives and Mr Ron Frost's solicitor Mr Giles Searby of DLA was naturally also present. By late in the afternoon it seemed that some form of agreement had emerged. The brothers and their wives then left the building, separately, for a meal, leaving Mr Serby to reduce into writing what had been agreed. It is not entirely clear whether Mr Searby was with him when he carried out this task, although I infer that he was. Mr Serby's secretary had gone home and he wrote out in manuscript the terms of the agreement as he understood them to be. When the parties returned after dinner the two brothers signed each of the three pages of manuscript in the top right hand corner. They also signed and dated a proforma document which was then clipped to the manuscript pages. The form of that document is a signature followed by the words "by [and then the relevant brother's name is written out] who expressly warrants that they have [sic] authority to execute this Agreement upon the terms set out for and on behalf of" but there then follows no express indication on whose behalf the relevant brother has purported to act.
- The terms agreed are of such importance that I reproduce here in an agreed transcription in its entirety Mr Serby's manuscript document as signed by the brothers:-
David - 351 Langsett
Ron - Elm Road
The total borrowings to be divided between the parties and to be secured against the individual properties according to the individual's choice by arrangement with their lenders are
10k balancing payment to account for income and expenditure from freezing of amounts (July) to mediation (Nov 18 '03).
No other loans or balancing payments are to be taken into account in the division of the business.
The total/loans balancing payment of 290k will be shared 50:50 between the parties.
If David can ensure that the bank will accept less than 70k as a payment to discharge the borrowing at 349 Langsett Road then 50% of the different between 70k and the sum paid will be paid to Ron.
In the event that there is a cost in discharging the charge over 341 Middlewood Road the cost will be shared 50:50.
Land at Myers Grove will be transferred into the sole name of Ron. In the event of a sale, transfer or any other dealing for more than
100k 60k over the next 20 years, subject to RRI increases. The first 40k will be transferred to Ron and the proceeds of sale, transfer dealing in excess of 60k balance in excess of 100k the proceeds of sale, transfer dealing in excess of 60k will be divided 60% to Ron and 40% to David.
All figures are net of agreed, reasonable expenses.
On a sale of part these principles will apply pro rata.
Both parties will consult with Hawsons to minimise the tax and stamp duty implications arising out of this settlement and agree that those tax and stamp duty bills are treated as one bill and paid in equal shares by the parties, to include Hawsons' fees.
The parties will prepare finalised accounts for the parts of the business under their control give the freezing of the
accounts bank accounts and will provide those to Hawsons by 17.12.03 who in turn will finalise the books by 17.1.04. The parties will pay in equal shares Hawson's fee.
Sentinel Tenancy Agreement.
David will arrange for Ron will procure that
DLA will review Sentinel's current tenancy agreement at 349 Langsett and, in discussion with Wake Smith, will ensure that it is a modern, commercial "at arms length" lease with a view to avoiding any disagreements between landlord and tenant.
The parties will meet with their solicitors on 7.1.02 to
progress review progress on all these issues.
The parties will meet again for a final meeting to finalise all issues on 15.2.04.
*insert from below
Bank accounts will remain frozen until final settlement on 15.2.04.
*Any disputes arising out of the subject matter of issues settled in this agreement will be referred to the mediator for final mediation.
Management of Properties
Management of the properties will continue as arranged from July to Nov 2003 until final resolution on 15 February 2004."
- There is no doubt that Mr David Frost (and his wife) left the first mediation thinking that an agreement had been reached from which Ron could not resile. Mr Serby said nothing to disabuse them of that. He did not warn them that, as would have been apparent to any competent solicitor had he applied his mind to it, whilst considerable and perhaps unexpected progress had been made, much remained to be done, discussed and agreed before this agreement in principle could mature into an enforceable contract. There are features of the agreement which are obviously indicative of uncertainty and lack of finality such as the failure to define critical terms, the failure accurately to describe the properties, the failure to define or deal with the charges over the properties, the bald reference to "Sentinel business", the treatment of the tax consequences and the provision for review and finalisation meetings. Furthermore, as Mr Serby knew, Advance was the registered owner of several of the properties and it was not party to this agreement which therefore, as one of its many shortcomings, thus failed to satisfy the requirements of the Law of Property (Miscellaneous Provisions) Act 1989. However there were many other difficulties, some of which will have been apparent to Mr Serby, others not, as a result of this lack of detailed knowledge of all the brothers' affairs. Not least amongst these was that the brothers' father and younger brother had interests in two of the properties and that there were third party interests in Sentinel.
- The day after the mediation Mr Serby caused to be drawn up in accordance with a proforma supplied by the mediator a slightly more formal document headed "Settlement Agreement." Extensive reference was made to this document at trial, Mr Serby was cross examined on the basis that it contained the parties' agreement arising out of the first mediation, and the judge seems to have assumed that that was indeed the case. Before us however it was common ground that the parties never signed or agreed the terms contained in this document and that we should ignore it. The document contained the following terms:-
1.1 This agreement has been reached by the Parties following mediation.
1.2 The Parties expressly agree that this document accurately reflects their intentions and that in using its form and or content they have not relied upon any person or body other than themselves and or their own retained legal advisors.
1.3 The terms of this Agreement shall be binding upon the Parties upon signature
1.4 The terms of this Agreement shall be in full and final settlement of all claims by each Party upon the other
1.5 The terms of this Agreement shall have immediate effect."
It is apparent to me that the introduction of this document into the trial caused much confusion.
- Within two days Mr Ron Frost was raising problems, first concerning Sentinel, which he pointed out was not owned outright (or possibly not owned at all) by the brothers and in due course over the ownership of the properties. It rapidly became apparent that Mr Ron Frost did not regard himself as bound by the agreement reached at the first mediation. Mr Serby expressed himself as "professionally stunned" by this development. He had trusted his opponent Mr Searby and had thought that Ron was dealing in good faith.
- The cross examination of Mr Serby at trial about what he thought was the status of the agreement reached at the first mediation was bedevilled by reference to the unexecuted subsequent document. Mr Serby's true attitude emerges I think most clearly from a letter he wrote to his opposite number Mr Searby on 21 November 2003, in the light of Ron raising the difficulties to which I have referred. In that letter he wrote:-
"I know you share my view that to some extent the hard work starts now. There are a lot of mechanical and practical issues to be dealt with in order to put in place all the matters that have to be dealt with to enforce the agreed terms of settlement. I have drawn up a "to do list" which I hope you will find helpful. I expect both of our clients and both of us to add to this and as matters progress to be able to tick off items as we go along. Please feel free to add to it or alter it in any way but I think we all need to focus on the large number of matters that need to be dealt with."
- In passing I would also note what is said in the letter about Sentinel, which is of itself indicative that the agreement was of a very provisional nature:-
"You sent me emails yesterday over Sentinel. The Terms of Settlement state that "In addition Ron Frost will have exclusive ownership of the Sentinel business". You have explained to me that in fact all the shares are held by Rick Ford and Chris Prior."
It is also pertinent to note that the quoted form of words from the "Terms of Settlement" does not appear in the agreement signed by the parties, but only in the unexecuted proforma.
- Mr Serby also explained in cross examination, and the judge accepted, that he had not on 18 November given any thought to the question whether the agreement was legally enforceable as it then stood. It had not, as he put it, been in the forefront of either his mind or that of Mr Searby. He thought, in all good faith, that there had been an outbreak of goodwill and common sense and that the brothers would leave the building and start work the following day to implement the terms that they had agreed.
In answer to counsel's question "You thought what you were drafting was an agreement which would be binding on the parties" he answered
"I thought they would do it."
The judge then interjected and asked
"What you are saying is really you thought the parties had bound each other?" To this Mr Serby answered
"Yes. I suppose that's right. Yes. Yes. I thought they'd agreed to do it and that they would get on and do it."
It was at this point that counsel asked
"Did you actually give a thought to whether it was legally enforceable or not, did that enter your head to do?" to which the answer was
"Not at that stage."
- The judge's interjection was unfortunate because it attributed to the witness something which he had not said. In agreeing with the judge's formulation, as witnesses have an understandable tendency to do, Mr Serby did nonetheless qualify his answer, in a manner which became clear in answer to counsel's further question. In short, Mr Serby did not leave the first mediation thinking that the parties had reached a legally enforceable agreement. He did not ask himself whether they had done so. He did consider that the parties would carry through their expressed intention to work towards a final and enforceable solution. Both had given every indication that that was what would occur. He undoubtedly thought that in this regard Ron (and his solicitors) could be trusted to see things through to a successful conclusion.
- As time went on Ron raised more and more difficulties. Mr Serby discussed with David Frost what were the options. One was to return to mediation as the agreement had envisaged might be necessary. As an alternative tactic to induce Ron to return to the table to work through the original terms Mr Serby conceived the idea of threatening to apply to the court for an order for specific performance of the agreement. He took advice from counsel, Mr Ian Groom, as to whether that would be possible. Much has been made on this appeal of the terms on which Mr Serby instructed counsel, so I reproduce his instructions below:-
"Counsel is sent herewith:-
1. Copy of Settlement Agreement following Mediation;
[I suspect that this was the version now acknowledged not to have been agreed and signed by the parties, although I have little doubt that appended to it will have been the signature page which in fact properly accompanied the manuscript draft]
2. Letter from Ron Frost dated 17th February 2003 to instructing solicitors.
1. Instructing Solicitors act for David and Catherine Frost who have completed a Mediation with the other party who are Ron Frost and his wife Barbara.
2. The subject matter was the dissolution of a partnership and the division of properties between the parties.
- Ron Frost was represented by DLA who have now sacked him.
4. Counsel will see from the letter of 17th February that Ron Frost wants to undo the settlement and re-negotiate everything.
5. This is a completely unacceptable position. The Mediation was conducted in good faith by an experienced Mediator and there is a binding Mediation Agreement that was agreed at 9.00 p.m. in the evening and signed by all parties.
6. Instructing Solicitors wish to apply for specific performance of that Mediation Agreement and Counsel is instructed to advise on the appropriateness of this step.
7. Counsel is instructed to telephone Mark Serby of Instructing Solicitors.
- Mr Groom advised that specific performance was impossible, broadly for the reasons which I have already adumbrated. Mr Serby apologised to his client for having wasted time going down that route, but it was decided nonetheless to threaten Ron with an application for an order for specific performance. This in fact bore fruit. By now DLA had ceased to represent Ron Frost, but his new solicitors objected that an application for specific performance was premature without first referring the dispute to the mediator as the agreement reached after the first mediation appeared to mandate. I need not take time considering whether the apparent agreement to a further mediation may have been a severable and independently enforceable contract.
- In due course there took place on 24 June 2004 the second mediation, arguably a resumption of the first. On this occasion, and no doubt in the light of experience, both parties prepared very differently indeed Mr Serby on Mr David Frost's behalf took detailed advice from Mr Groom as to how any agreement needed to be structured so as to ensure that it would be enforceable. At the conclusion of the mediation there was drawn up a very detailed agreement. The parties' solicitors had obviously been supplied by their respective clients with very much more information than they possessed at the first mediation. The agreement properly described all the properties, their registered ownerships, their outstanding charges and encumbrances and how these were to be dealt with. It incorporated the National Conditions of Sale and provided a completion date. There was provision for a substantial payment to Advance by Ron Frost on completion of certain transfers. The outstanding leases and tenancies were dealt with. The brothers agreed to cause Advance to do everything necessary to ensure that the documentation necessary to achieve the various transfers was executed. Directorships and bank mandates in respect of five limited companies were dealt with. Sentinel it transpired was indeed wholly owned by Messrs Ford and Prior what Ron was to receive was the benefit of three agreements made by Sentinel with the two brothers. The parties agreed "to take, accept and act upon the advice of Hawsons [chartered accountants] as to how this Agreement may be implemented so as to minimise the Parties' liability to any tax and stamp duty and to pay for such advice by equal contribution." A timetable was set.
- Even this agreement has given rise to problems, although on 31 January 2005
District Judge Fairwood in the Leeds District Registry granted an order of specific performance. We were told that even today the tax consequences of the agreement remain unresolved.
- The judge found that Mr David Frost made no complaint about the service he had received from Mr Serby until a letter before action was sent shortly before these proceedings were launched in October 2009. I do not for my part attach too much weight to this consideration bearing in mind that Mr Frost explained this by saying that he had felt obliged to soldier on with the same representation. I can understand and sympathise with that approach, which may well be born out of a belief that to change horses mid stream would simply serve to complicate matters and to add to the expense. On the other hand I attach similarly little weight to an incident about which Mr David Frost and his wife gave evidence which occurred in 2007. Apparently over a cup of coffee in Sheffield Mr Serby discussed with Mr and Mrs Frost a possible investment in their business ventures which was not, he is alleged to have said, "to be construed as compensation for bad litigation." At the time it seems Mr and Mrs Frost were more interested in a loan than an investment and some correspondence about this ensued. In cross examination of Mrs Frost it was not accepted that Mr Serby had said what was attributed to him. Mr Serby was not himself cross examined on the point. Even if Mr Serby did make the remark concerning "bad litigation" I do not think that it bears much weight. On any showing the aftermath of the first mediation was a disappointment. Mr Serby may have felt some sensitivity, not least because his confidence in Mr Ron Frost could in retrospect be seen to have been somewhat naοve, but what he is alleged to have said falls short of an acceptance of responsibility and is in fact, taken at face value, a denial of responsibility. It carries the matter little further.
- The action when brought complained of negligence by Mr Serby in respect of the drafting of both the first and the second "mediation agreements." No appeal is brought in respect of the dismissal of the claim concerning the second mediation agreement. However it is interesting to note that specific criticism was made by Mr David Frost of the treatment in the second agreement of the tax consequences, it being alleged at paragraph 37 of his Particulars of Claim:-
"For the avoidance of doubt, had the advice of an accountant been obtained before the Second Settlement Agreement was entered into, the Second Settlement Agreement would have set out in clear terms the steps that needed to be taken to achieve completion and the tax consequences of the agreement."
No attempt has ever been made by the Appellant to describe how precisely an agreement should have been drawn up after the first mediation, save to assert (a) that it should have been enforceable and (b) to contrast it unfavourably with the agreement drawn up after the second mediation, that latter agreement being held up as an example of what could have been achieved. Mr Rupert Higgins for the Respondent was entitled therefore to comment that it is now said that Mr Serby should in this respect have drawn up the first agreement in a manner which was both alleged to have been and has in fact proved to be incapable of achieving finality in relation to the tax consequences of the brothers' disengagement.
- Mr Spalton, who did not appear below, emphasised at the outset of the appeal that the complaint against Mr Serby was of his failure to ensure that the first mediation ended in a binding agreement. Likewise in her skeleton argument for the purposes of the appeal Ms Emilie Jones, who did appear at the trial, said "that the nub of the matter is that the Defendants acted for the Claimant in relation to his entry into an agreement purportedly settling the dispute which subsequently proved to be unenforceable" and that the judge's finding that "the production of such an agreement did not amount to negligence" was wrong.
- The particulars of breach of duty were set out as follows in the Particulars of Claim:-
"In the circumstances, the Defendants acted in breach of retainer and/or negligently when drafting the First Mediation Agreement in that they:
(a) failed to confirm the ownership of the various properties before drafting the first mediation agreement;
(b) failed to consider in advance of the first mediation the contractual provisions that would be required to make any settlement enforceable;
(c) failed to draft the first settlement agreement so that it was consistent with the instructions given by the claimant regarding the ownership of Sentinel;
(d) drafted the first settlement agreement so that it was unenforceable;
(e) failed to advise the claimant about the tax consequences of the first settlement agreement;
(f) failed to ensure the attendance of an accountant at the first mediation to advise on the tax consequences of the first settlement agreement;
(g) failed in all the circumstances to act with the skill and care expected of a reasonably competent firm of solicitors with experience in commercial disputes."
- The allegations at sub-paragraphs (e) and (f) fell away in the light of the joint statement of the parties' tax experts which read, so far as relevant:-
"The experts are agreed that if a competent tax advisor had been asked to attend the meetings at which the first mediation and second mediation agreements were signed, they would not have been able to advise on the tax implications of the agreements at those meetings. This is because both agreements raised wide-ranging and complex tax issues which needed careful research and consideration, together with investigation of historical tax matters. These were not issues where broad estimates or assumptions could be made without undermining the value and accuracy of the advice and consequently the reliance that the parties would place on it."
- As the judge in effect observed at paragraph 53 of his judgment, this alone was also sufficient to demonstrate that the allegation of negligence insofar as it concerned the drawing up of the agreement after the first mediation is quite hopeless. That allegation could only succeed if, in addition, Mr Serby was under an obligation to have ensured, prior to the first mediation taking place, that all relevant investigations had been carried out to a point at which the parties would have been able to reach a properly informed, final and concluded agreement as to the tax consequences of their division of assets. Self-evidently, for reasons which I will develop, Mr Serby was not under such an obligation but in any event he could not have ensured that the investigations on Mr Ron Frost's side were suitably advanced. That was wholly outwith his power.
- Sub-paragraph (c) also falls away because as it turned out both brothers were incorrect in their belief, or at any rate their instruction to their solicitors, concerning the ownership of Sentinel.
- Sub-paragraphs (a) and (b) are in my judgment simply unrealistic. It was a minor triumph just to have got Ron to the mediation. The suggestion that Mr Serby should in advance of the mediation have spent Mr David Frost's time and money in immersing himself in this level of detail as to the brothers' interests would not have commended itself to Mr David Frost at the time. Mr David Frost and Mr Serby had no idea whether an agreement might prove possible, let alone what shape it might take. The judge attached importance to the following passage in a letter sent by Mr David Frost to Mr Serby on 18 August 2003 as setting the tone for what followed:-
"In the circumstances, any meeting with Ron must be meaningful and productive otherwise the dispute will drag on and I don't see any reason why we can't sort out a provisional agreement at the meeting using the existing valuations, and make any adjustments, if any, when the new valuations are provided."
Whilst not of course conclusive as to the ambit of Mr Serby's duty, this letter is I think indicative of the approach which was thereafter followed by both Mr David Frost and Mr Serby. It was if I may say so a very sensible approach, as the situation was not one in which an initial meeting was likely to be sufficient to enable the parties to proceed directly to a concluded agreement. They would need an agreement in principle, followed by a process of working out the practical implications and the steps required to give effect to their broad intentions. Mr Serby was not negligent in adopting this approach. He could not practically have adopted any other.
- Leaving on one side for the moment sub-paragraph (g), that leaves sub-paragraph (d) drafted the first settlement agreement so that it was unenforceable. The immediate answer to that allegation is that at the conclusion of the first mediation, or at any rate at the point at which the brothers departed for a meal, the parties had not reached an enforceable agreement. Mr Serby could not record that which had been agreed in a manner which rendered it enforceable. There needed to be introduced further detailed terms to which the parties might or might not give their agreement. It was inconceivable that either of the brothers could or would have been ready to condescend to that level of detail at their first meeting. The consequences of whatever might emerge as the bare bones of an agreement needed to be thought through and bottomed out.
- At the trial Mr David Frost gave evidence to the effect, foreshadowed in part in his witness statement, that at the first mediation he had said to Mr Serby "Will you make sure you tidy this up" to which Mr Serby had replied "Don't worry, I'll make sure there's no wriggle room." The judge's finding about this is unsatisfactory. At paragraph 28 of his judgment he says this:-
"This [the exchange to which I have just referred] is denied by Mr Serby but and it seems to me that it is unlikely on balance of probabilities that it was said like this. It seems to me, and I so find, that there may well have been a conversation about it but that the combination of the two lawyers trusting each other and the brilliance, frankly, of the negotiator (see later) in getting the two brothers to agree topics and to agree to be bound by what they were agreeing with the mediator, that there would have been no need for this conversation."
I do not understand what the judge means by there being no need for this conversation. It may however be explained by his following paragraph:-
"29. However, it is obvious to me, and I so find, that both the defendants and DLA thought they had got a genuine agreement. They each thought "I am satisfied" they thought the mediator had achieved the impossible and got a binding agreement between these two warring brothers and when they all left that night I am satisfied that all four people, all four signatories, that is to say both the brothers and the two solicitors, thought that that was the binding framework. Otherwise, how does it explain the champagne-drinking by Ron and his solicitor?"
This is not the only example I fear of the judge failing to adopt a sufficiently analytical approach. It is redolent of the inappropriate question by the judge to which I referred at paragraph 14 above. Neither Mr Serby nor it would seem Mr Searby addressed their minds to whether they had achieved a binding agreement. What the judge really means is that both the solicitors thought that the framework agreement or agreement in principle brokered by the mediator would in fact be worked out and performed by the brothers. In saying this I do not doubt that Mr David Frost genuinely thought that, if the agreement was not in its final form, nonetheless it represented a framework from which his brother Ron could not depart. In that he was mistaken, albeit quite understandably. None of this however begins to explain what the judge meant by indicating that "there may well have been a conversation about it" i.e. about there being left no wriggle room for Ron.
- At paragraphs 41 and 48 of his judgment the judge returns to the point in setting out Mr Serby's evidence. At paragraph 41 he recites "the claimant did not instruct him to make a binding agreement or one that Ron could not wriggle out of and he, Mr Serby, did not say he would. I have dealt with that already in relation to the claimant's evidence." At paragraph 48 the judge reproduces Mr Serby's evidence to the effect that "I was not instructed to get finality." The judge does not say in terms that he accepted this evidence but on a fair reading of his judgment I think that that is what he intended to convey.
- However that may be, the parties have very sensibly treated the judge as having rejected Mr David Frost's evidence on this point, albeit Mr Spalton points to the opaque manner in which the judge expressed himself. It is however a ground of appeal that the judge was wrong to find as a matter of fact that Mr David Frost's instructions to Mr Serby were not such that Mr Serby was under any obligation to produce a binding agreement if an agreement in substance was reached at the first mediation, and Mr Spalton has submitted on the appeal that the judge's finding is simply unsafe. Principally, it is he says inconsistent with the judge's finding that Mr Serby left the first mediation thinking that a binding agreement had been achieved. It is also, he says, inconsistent with Mr Serby having instructed Mr Groom to the effect that a "binding mediation agreement" had been reached at 9pm in the evening and signed by all parties.
- The answer to this point is again, I am afraid to say, that both the judge and Mr Serby are guilty of a failure properly to analyse the situation and to choose their language appropriately. As I have already pointed out, what the judge really meant to find was that Mr Serby left the first mediation thinking that the agreement would be performed. He had not yet turned his mind to whether, should there be an unexpected problem, it could in fact be enforced. Likewise the whole purpose of Mr Serby seeking advice from Mr Groom was to see if the agreement was capable of being enforced. To tell Mr Groom that the agreement was binding pre-empted the question which he was being asked.
- In my judgment the judge's finding that Mr Serby was not under an obligation to achieve finality at the first mediation was inevitable. Such an obligation would have been impossible to perform. It was impossible from the outset, because Mr Serby could not know how the mediation would develop. It was impossible at the conclusion, because matters had not developed to a point at which the parties had achieved a final agreement. It was not in Mr Serby's power to fill in the gaps. No doubt as Mr Spalton submitted he could have dealt with some of the more basic matters like incorporating the Standard Conditions of Sale to which the parties would probably readily have assented. However that of itself demonstrates that the parties' further consideration and agreement was required, and some of the loose ends could not so easily have been resolved. I think that the thrust of what the judge was saying at paragraph 28 of his judgment is that it is inherently improbable that a competent solicitor would knowingly undertake to achieve what on any showing was an impossibility, and what his experience would have told him is not the likely immediate outcome of the mediation of a very complex multi-faceted dispute. There was of course ample scope for misunderstanding between Mr Frost and Mr Serby and it is to that that the judge perhaps also refers in saying that there may well have been a conversation about wriggle room. The short point at the end of the day however is that Mr Serby simply could not have produced an enforceable agreement when the parties had not themselves made one and were in no position to do so.
- It is no doubt for this reason that the appeal in Mr Spalton's hands expanded in a manner not foreshadowed in the Grounds of Appeal to encompass the suggestion that the judge should have found Mr Serby negligent in his having failed to warn or to advise Mr David Frost that the outcome of the first mediation was not a final and binding agreement from which his brother could not resile. This is a much more plausible complaint, although the damages which might flow from such a complaint, if made good, are of a very different and lesser order to those in fact claimed, the difference in value to Mr David Frost of the first and the second agreements. A failure to warn or to advise in this manner could at best lead only to the recovery of expenditure wasted in attempting to explore the enforceability of the first agreement, if any costs can properly be regarded as "wasted" in that endeavour. However the allegation that Mr Serby was negligent in having failed to warn or to advise Mr Frost that the outcome of the first mediation was not a final and binding agreement is not one which was either pleaded or pursued at trial. Mr Spalton suggested that it was comprised within sub-paragraph (g) of the particulars of breach of duty set out above, but that is no more than a catch-all which fails to put the Defendants on notice that a failure to advise as to the non-binding nature of the agreement at the first mediation is the case they have to meet. Although Mr Spalton asserts that some costs would have been avoided had such advice been given, nowhere is it pleaded what action Mr David Frost would have taken had he received such advice. In his long and detailed witness statement Mr David Frost says nothing on the point, and I am bound to say that the obvious inference which I draw is that matters would have proceeded in much the same way had this been made clear to Mr David Frost on 18 November instead of it having become apparent thereafter as in fact it did.
- It is true that in the Defence the pleader, Mr Higgins, anticipated that the case might thereafter be put explicitly on this basis, although he saw the point as perhaps buried in sub-paragraph (d) rather than in sub-paragraph (g). Following a general denial of the allegations of breach of duty, paragraph 25 (d) of the Defence reads:-
"As to sub-paragraph (d), it is denied (i) that the Defendant drafted the First Settlement Agreement and/or (to the extent that it be the Claimant's case) that (ii) it was a breach of duty to fail to warn the Claimant against leaving the mediation without an agreement which was specifically enforceable."
It was not put to Mr Serby in cross examination that he ought to have advised his client that the outcome of the first mediation was not a legally enforceable agreement. The closest that Miss Jones came to the point was the question:-
"Did you ever talk to David Frost at the time of the first mediation about the fact that what you were drafting would not be something that would be specifically enforceable?"
To which the answer was:-
Miss Jones then moved onto the issue about Sentinel. Had it been suggested to Mr Serby that he had failed in his duty in this regard, I suspect that he would almost certainly have responded by saying that in fact Mr David Frost never expected anything more than an agreement in principle as a result of the first mediation. The trial was in the event concerned with liability only, but the parties had come prepared to deal with damages as well, and it is obvious that the preparations and evidence would have been different had this point been in play. It is too late to raise it now and, as I have already indicated, the damages potentially recoverable on this basis would in any event be very modest, if they are measurable at all, very likely being limited to some part of the cost of taking Mr Groom's advice on enforceability. As I have already pointed out, the tactic of threatening an application for specific performance in fact bore fruit in the shape of the second mediation, Mr Groom's later involvement being directed to the conduct of that mediation.
- For all these reasons I would dismiss this appeal.
- It should be a cause for neither surprise nor dismay that the process of mediation did not in this case at the first session result in an immediately enforceable agreement. Mediation has proved a flexible and immensely valuable process of dispute resolution. No doubt in some situations immediate and binding agreement is possible, whereas in others, of which this was a paradigm, flesh will need to be put upon the bones. It would be regrettable if any decision of this court were to cause practitioners to approach the process of mediation with anything other than maximum flexibility, although I need hardly emphasise that it will be normally be part of a solicitor's duty to advise his client, especially a lay client as opposed to a professional litigator such as a liability insurer, of the nature of the process and of the status of any agreement reached as a result.
- I have not overlooked that the grounds of appeal seek a re-trial. Mr Spalton very realistically recognised that this court is always reluctant to go down that route. Nonetheless, particularly insofar as concerns the question whether Mr Serby had failed in his duty properly to advise his client as to the unenforceable nature of the outcome of the first mediation, Mr Spalton submitted that the case is "ripe for a re-trial." As I have already indicated, the claimant did not make that allegation or come to trial prepared to demonstrate what he would have done had appropriate advice been either necessary or given. I have also concluded that the judge's at times unhappily expressed judgment is nonetheless fairly to be understood in the manner I have set out. There are however aspects of the judge's conduct of the trial which have caused me some concern. On the Friday afternoon before the trial was due to start on the following Monday morning the judge emailed counsel to indicate his view that liability could be dealt with, including giving of judgment, in one day, that "If I have to give a judgment on quantum, that can be done on Tuesday", and that oral evidence was probably unnecessary. At the outset of the trial the judge came perilously close to giving the impression that he had already concluded that the claimant's claim would fail. Having been persuaded to hear evidence, after the first witness had been sworn the judge announced that he was only trying liability "at the moment" adding "I am not sure if I made that clear or not." This in turn led to difficulties in Miss Jones' final submissions when a question arose as to whether questions of causation were being decided. The judge was also I think unwise to deprive himself of the benefit of hearing closing submissions from Mr Higgins in answer to those of Miss Jones. There is sometimes a fine line between robust judicial efficiency and ensuring that a party's case receives, and is seen to receive, appropriate consideration. I fear that for Mr David Frost the trial must have been an unhappy experience. I hope that I have adequately explained why it is however in my view inappropriate to direct that the matter be re-tried. Mr David Frost was able to present his pleaded case and the judge has made sufficiently clear his reasons for rejecting it. Mr David Frost's case as presented to the judge was in fact simply hopeless. There has to be finality in litigation and it would be unfair to the Respondents to permit the case now to be re-argued, nine and a half years after the mediation, on a new and different basis.
Lord Justice Ryder :
- I agree.