<iframe src="//www.googletagmanager.com/ns.html?id=GTM-PJMJX5" height="0" width="0" style="display:none;visibility:hidden"></iframe>

Scottish Widows Plc v Stewart, Court of Appeal - Civil Division, July 14, 2006, [2006] EWCA Civ 999

Issuing Organization:Civil Division
Actores:Scottish Widows Plc v Stewart
Resolution Date:July 14, 2006

Neutral Citation Number: [2006] EWCA Civ 999

Case No: A2/2005/1470



ON APPEAL FROM Queens Bench Division

His Honour Judge Eccles QC


Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 14/07/2006

Before :





- - - - - - - - - - - - - - - - - - - - -

Between :

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

Jonathan Seitler QC and David Holland (instructed by Speechly Bircham, Solicitors) for the Appellant

Peter Crampin QC and Ulick Staunton (instructed by Rich Bailey, Solicitors) for the Respondent

Hearing dates : 27th June 2006

- - - - - - - - - - - - - - - - - - - - -

JudgmentLord Justice Waller :

1. This is an appeal from the judgment of His Honour Judge Eccles QC sitting as Deputy High Court Judge handed down on 22nd June 2005. He awarded the respondent (RS) as assignee of a company, Chandler Stewart Limited, damages for breaches by Scottish Widows plc (Scottish Widows) of covenants in a lease. The damages, which RS as assignee claimed, reflected loss of profits from a business of repairing high performance motor cars caused by the installation of speed bumps in the roadway by Scottish Widows. The speed bumps prevented safe access to the business by the owners of the low slung motor cars.

2. Chandler Stewart Limited was 100% owned by the respondent (RS) and the judge held that until June 2001 it carried on the business. He held however that from June 2001 a different company Chandler Stewart (Croydon) Limited carried on the business at the premises, the business having been assigned by Chandler Stewart Limited (to which I shall now refer as the first company), to Chandler Stewart (Croydon) (Limited), (the second company), by that date. Since the speed bumps were installed in October 2001, the judge recognised that any damage to the business was damage suffered by the second company. However the judge held that at some date in 2002, the second company had assigned the business back to the first company (the company changing its name to that of the second company), alternatively that there existed a contract under which the second company had agreed to assign the business back, and that in the result there was an equitable assignment of the second company's cause of action to the first company enabling (as the judge found) RS to have title to sue as assignee from the first company.

3. By their appeal Scottish Widows attack the judge's finding that there was any reassignment or any contract to reassign.

4. RS seeks to uphold the judge's finding on reassignment or contract to reassign. RS' stance at the trial had been primarily that there had been no effective assignment from the first company to the second company in June 2001; it was the judge who suggested the reassignment point. Indeed there is still no pleading asserting reassignment or a contract to reassign. By his respondent's notice RS sought again to attack the original assignment but this time on grounds which had not been pleaded or argued before the judge, i.e. that the assignment was ultra vires the first company. By an amendment to that respondent's notice RS sought to take a further point in the alternative, again not pleaded or argued in the court below, to the effect that the first company was entitled as the lessee to sue for the losses suffered by the member of the same group of companies that happened to run the business, the second company.

5. Further points were taken in the respondents notice by way of cross appeal. Two of the points sought to increase the award of damages and would only arise if RS upheld in the Court of Appeal an entitlement to an award of damages. A third related to the judge's decision to award RS only two thirds of his costs which again would only arise if the award of damages was upheld. A fourth related to a claim made by Scottish Widows under the lease against RS personally (the re-letting point) which would arise in any event, and is the subject of the separate judgment of Lloyd LJ..

6. Although Lord Justice Jacob had granted permission to cross appeal, and to amend the respondent's notice by permission dated 25th January 2006, it was common ground that Scottish Widows were entitled to take objection to RS being entitled to raise in the Court of Appeal points not raised in the court below. Accordingly Mr Jonathan Seitler QC having opened Scottish Widows appeal seeking to overturn the judge's reassignment finding, Mr Crampin QC took as his first task the onus of persuading us that RS should be entitled to take points not argued in the court below. We completed argument on that aspect first. We ruled that it could not be open to RS to take the new points stating that we would give our full reasons when giving our final judgment in writing.

7. It then seemed sensible to complete Scottish Widows' appeal, and if possible announce a decision because if Scottish Widows were successful certain points in the respondent's notice would no longer be live. This we did and announced our decision that the appeal succeeded for reasons which would be given in writing.

8. This left the fourth point in the respondent's notice, the re-letting point, which was argued and on which we did not rule reserving our decision to be communicated in writing.

9. This judgment accordingly provides (1) my reasons for not allowing points to be taken in the Court of Appeal which were not taken in the court below; and (2) my reasons for allowing Scottish Widows' appeal; and (3) my agreement with the decision of Lloyd LJ on the re-letting point. In order to deal with all points it is necessary to set out in more detail the facts. They are set out very fully in the judge's judgment. There is no challenge to his findings, and on important issues I shall quote from his judgment; otherwise a summary will suffice.

The facts

10. Following an apprenticeship, and working with a company specialising in the body repair of cars, RS became an expert in repairing high performance cars. He decided to set up his own business. A company called Chandler Stewart Limited, the first company, was set up. He was controller and a director of that company. It started trading on 8th October 1998 from premises known as Unit 2 on the Beddington Cross Industrial Estate, owned at that time by Croydon Land (No 2) Limited; a lease was formally executed on 10th November 1998. On the same date a supplemental rent deposit deed was executed.

11. The permitted user under the lease was as ``a vehicle bodywork repair centre for the repair of high performance and/or prestige cars . . . .'' (clause 1); the first company had the ``right at all times to enter and exit from [Unit 2] over the road and footpaths on the common parts'' i.e. the road on the Beddington Estate outside Unit 2. Scottish Widows acquired the reversion to the lease in October 1999.

12. The first company had a succession of book keepers, the first of whom prepared a VAT return for the first quarter resulting in £8,586.14 being reclaimed from Customs and Excise. No further VAT return was ever put in, and ultimately a firm of accountants, Chantrey Vellacott, who were engaged in 2002, had to attempt to regularise that position.

13. At this early stage RS engaged Messrs Dyer & Co to act as the first company's accountants. Mr Neil Dyer dealt with the affairs of the first company and Mr Simon Dyer his brother in fact became General Manager of the first company itself. Accounts for the year ending 31st October 1999 were prepared and filed at Companies House, but no further statutory accounts were ever filed.

14. Substantial sums in VAT became outstanding; PAYE payments fell substantially into arrears, and the judge records ``it is far from clear that proper PAYE returns were sent in''.

15. In 2000 RS arranged with Porsche to start a separate business in Tonbridge. For that purpose a company called Chandler Stewart (Tonbridge) Limited (CSTL) was set up. RS' case at trial was that his intention was to incorporate CSTL to run the business in Tonbridge and simply to change the name of the first company to Chandler Stewart (Croydon). On any view on 19th December 2000 two companies in addition to the first company were incorporated, CSTL is the second company. It is furthermore not in dispute before the Court of Appeal that as from 1st June 2001 CSTL and the second company carried on business. CSTL carried on business in Tonbridge. The second company carried on the business previously carried on by the first company, with the first company dormant, but owing money to Customs and Excise. The steps taken to transfer the assets and the business from the first to the second company are set out in a memorandum dated 1st June 2001 from Mrs Orla Morris, and the books of the respective companies reflected those steps.

16. The agents for Scottish Widows asked Simon Dyer whether the change from Chandler Stewart to Chandler Stewart (Croydon) was simply a name change, or whether what was being requested was an assignment, and despite pressing for an answer never received one.

17. Over the weekend of 6th/7th October 2001, the speed bumps were installed. Protests were immediate from solicitors writing on behalf of the ``lessee''. Correspondence as to whether Scottish Widows were in breach of covenant ensued. Solicitors acting for the first company, the lessee, maintained that serious loss of business was being caused by the speed bumps; no indication was given that it was other than the lessee that was suffering the losses. The dispute was ultimately to lead to rent being withheld.

18. In December 2001 there was change of accountants, and on 6th December 2001 Chantrey Vellacott wrote to (it seems) the second company with their formal letter of engagement. Kay Grimes, who became Mrs O'Reilly, dealt with RS on behalf of Chantrey Vellacott. She and her audit team soon discovered that as the judge put it ``there...

To continue reading