[2007] EWHC 940 (Ch)

The claimant and his wife were directors of a company which owned a hotel. They borrowed funds against the security of the hotel from Humberclyde. Following the repossession of the hotel by Humberclyde, they brought a claim against Humberclyde and their accountants and auditors, Robson Rhodes, alleging that it had been the result of an unlawful conspiracy between Humberclyde and Robson Rhodes. The claimant’s company was wound up and the liquidator was ordered to assign the company’s actions to the claimants on terms that they would pay the liquidator 40% of any damages they recovered. Humberclyde appealed against this order.

The appeal was successful. In concluding that the company’s claims had no value, the Court of Appeal relied upon a valuation of the hotel adduced in evidence by Humberclyde on the appeal. In their judgment, the court noted that the claimant could have obtained evidence in reply. As he was legally represented, the inference was that the failure to do so resulted from incompetence on the part of his lawyers. The claimant subsequently sued his solicitors in negligence.

The court held that the claimant’s solicitor should have asked leading counsel to advise on the question of evidence in reply months rather than days before the appeal. This was not a decision he could make himself. However, leading counsel agreed with the solicitor that it was unlikely that the Court of Appeal would admit Humberclyde’s additional evidence and would have advised the claimants not to put forward evidence in reply even had he been instructed earlier. What had happened at the appeal was entirely unexpected – the Court of Appeal refused to admit the additional evidence save for the one valuation report upon which their decision turned. The claimant was entitled to nominal damages for breach of contract.