Zamparelli v Bristol City Council [2007] EWCA Civ 377

Case No A3/2006/0078

[2007] EWCA Civ 377

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION

(HIS HONOUR JUDGE HAVELOCK-ALLAN QC)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Friday, 30 March 2007

Before

LORD JUSTICE PILL

LADY JUSTICE ARDEN

Between

ZAMPARELLIClaimant/

BRISTOL CITY COUNCILDefendant/ Appellant

(DAR Transcript of

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MR S WORTHINGTON and MR H STEINBERG (instructed by Wansbroughs) appeared for First Defendant/Appellant.

MS S CARR QC and MS H EVANS (instructed by Reynolds Porter and Chamberlain LLP) appeared for Second Defendant/Appellant.

MR A DE FREITAS (instructed by CMP Magill) appeared for Claimant/Respondent.

Judgment

[1]The claim which gives rise to the present hearing is a claim by Michele Zamparelli against the Bristol City Council and Bond Pearce, a firm, seeking damages for breach of contract and/or negligence against the defendants. The first defendant was the claimant’s landlord but prevented him from being able to trade from his premises in accordance with his lease. The second defendant acted as the claimant’s solicitor in respect of all matters connected with those premises but failed to act and/or advise him with due diligence, care or skill. Damages of about £1.5 million are claimed by way of loss of trading profit. The claim also originally made for the loss of capital value is not pursued on the hearing of this appeal.

[2]The judge found for the defendants and dismissed the claim. He gave judgment for the first defendants on a counterclaim in the sum of about £150,000. The claim against the second defendant was that had the claimant been correctly advised that he could have traded lawfully at the premises without further planning permissions being necessary, he would have done so. The premises are at 21-23 Stokes Croft in Bristol. Permission to appeal was refused by the judge, HHJ Havelock-Allan QC sitting as a High Court judge. He stated:

“Decision arrived at on Court’s impression as to credibility of witnesses and facts found. No difficult principle of law involved. Appeal stands no real prospects of success.”

[3]The application was renewed to this court and permission was granted on a consideration of the papers by Neuberger LJ, as he then was, who gave characteristically thorough reasons for doing so. Having referred to the difficulties faced by the claimant he stated at paragraph 2:

“However, having read the very full and detailed skeleton argument provided on behalf of the claimant, I have concluded that it cannot fairly be said that an appeal stands no realistic prospect of success. There are aspects of the Judge’s judgment which may (and I emphasise the word ‘may’) be susceptible to attack, even on an appeal.”

At paragraph 5 Neuberger LJ added:

“However, and this is an important and unusual qualification, because of the potential cost of an appeal, and because of the amount involved, I am prepared to give each of the respondents the opportunity of arguing the grant of permission to appeal should be reconsidered, with a view to the permission being rescinded. I should emphasise that advantage should only be taken of this by a respondent who believes that he has a ‘killer point’ that can be dealt with fairly and quickly. If either respondent takes up this offer, and the application fails, the chances are high that the respondent concerned will be ordered to pay the costs of that application in any event (quite possibly on an indemnity basis). Each respondent has 14 days from the date of receipt of this document within which to apply in writing.”

Neuberger LJ had stated at paragraph 4 that he had considered the question of adjourning the application for an inter partes hearing but, having regard to the “double set of costs”, he thought that was not a course that should be followed.

[4]The defendants did apply to the court and I considered the application sitting with Neuberger LJ at an oral hearing on 7 July 2006. The court made an order, having heard counsel for all three parties, adjourning the application to rescind the grant of permission and stating:

“The parties shall: a. by 4 pm on Friday 21 July 2006 agree the form of a question or questions to be submitted to the trial judge concerning the issue of the claim for loss of trading profit; and b. immediately thereafter submit that question or those questions to the trial judge for his response; and c. if the parties are unable to agree the form of a question or questions, then they shall revert to this court by 4 pm on Friday 28 July 2006 for a determination of the form of those questions.”

[5]The parties made serious efforts to agree questions. What happened in the event was that the court approved questions, two of which were in alternative form to keep open a point which the claimant sought to rely on. The judge considered the questions with care and supplied his answers, headed “Rider to Judgment of 31 October 2005”.

[6]The “killer point” which the defendants claimed to be present was that whatever negligence there had been by the defendants, no damages, on the judge’s findings of fact, resulted from it. Having heard the parties on 7 July, the court considered that the further investigation was justified. The court was puzzled as to why, if what is potentially a point fatal to the appeal was in fact fatal to the appeal, the judge had not dealt with it specifically and in detail as such. The second point was that there were potential inconsistencies in the judge’s findings in different paragraphs.

[7]The defendants’ case in relation to the transaction was that the claimant was fronting for other men, lending his name to their proposed businesses. It is submitted that the money which was put up for the improvement of the premises had been put up by someone else, Mr Vicary. It was further submitted that the claimant is a property developer and not a businessman. His interest in the lease was to sell it at a later stage at a profit. He obtained, though the judge found by virtue of a fraudulent document, a three-year rent-free period which the defendants submitted was consistent with the claimant’s position in these transactions.

[8]The judgment was long, carefully expressed and detailed. I refer to several of the findings which form the basis for the present application to rescind. At paragraph 99

the judge stated:

“The evidence on this issue [that is the issue of who commissioned and paid for the refurbishment works] was convoluted and unconvincing. I accept that Mr Zamparelli had acquired the lease because he thought the premises had a potential as a night club. But I am not persuaded that it was a club which he himself intended to establish and operate. Mr Zamparelli has never run a night club before (although he started his working life as a night club doorman). His business was property investment.”

Having given reasons for that,

the judge stated at the end of the same paragraph:

“The plan for Club Zero was Mr Vicary’s. The under-18s night club was his project. The plan for an adult night club was not settled when the lease was completed. I think it unlikely that Mr Zamparelli was going to run it. I do not think that it was necessarily going to be his business”

. At paragraph 105

the judge found:

“It is not fanciful to suppose that Mr Zamparelli was fronting for Mr Morley and/or Mr Vicary and/or First Commercial Direct.”

At paragraph 111 [I am not reading the entire paragraphs]:

“Mr Zamparelli was primarily a property investor: but I do not think that in the summer or autumn of 1999 he had contemplated selling the lease quite so soon. He had wanted to see its capital value increase by the running of a successful night club at the premises, even if that part of the enterprise was not to be his own.”

At paragraph 116 the judge was considering what steps the claimant should have taken to mitigate his loss if breaches of duty were established:

“The planning issue would then have been resolved in his favour, as it eventually was resolved in April 2002. Making all due allowance for informal approaches to the Council before lodging the application and for the time which would have elapsed in the processing of the application, I am confident that the issue could and should have been resolved by the end of May 2000. It follows that in my judgment Mr Zamparelli could and should have avoided any loss which he claims to have suffered after June 2000.”

At paragraph 124: “I find that Mr Zamparelli decided to complete the lease because he was anxious to start trading, and because he was prepared to assume the risk of sorting out the planning and licensing problems after the lease was executed”.

[9]I do not propose to read the rider to the judgment in full. If I may say so, it was drafted with considerable care and substantial, conscientious thought has plainly gone into it. Having considered the transcript of the July hearing

the judge stated at paragraph 3:

“There is some validity in the Court of Appeal’s observation that, because quantum had to be adjourned for later resolution, I did not have in the forefront of my mind at the trial that the claimant still needed to prove for the purposes of liability that if there had been no negligence he would have derived profits, or share of profits, from running a night club at the premises.”

The judge said, very understandably in my view:

“Even if it had been [a killer point] I doubt I would have short-circuited any judgment, given the gravity of the allegations made against Mr Collinson, the fact that Mr Kilgour was being accused of professional negligence, and the fact that the claimant was acting in person.”

The judge rightly thought that the allegations of negligence against the representatives of both defendants should be considered in detail. At paragraph 4:

“Whilst the focus of the arguments at trial may have deflected my attention from the significance of the ‘manner of trading’ point, it remains the case that the burden of proof rested on the claimant to persuade me that, if there had been no negligence, he would have obtained planning consent or a certificate of lawful use either before or after concluding the lease and would then have operated a night club from the premises, either himself or with others or using managers, and that he would have derived from that enterprise some or all of the profits. Further, the claimant needed to satisfy me that this was his intention at all material times.”

[10]Having stated that by way of background, the judge considered the specific questions, the first being whether the court had been intending to find that the appellant had failed to prove on the grounds of probability that he was acting on his own behalf rather than fronting for others. The judge found:

“The answer is ‘Yes’ so far as concerns the period up to completion of the lease. I was not persuaded that the claimant was acting on his own behalf, rather than on behalf of others, in acquiring the lease or in expending money on refurbishment of the property.”

[11]The finding made in the first sentence of paragraph 105 is not a finding that the claimant has spent some money of his own. The judge stated that he had not expressly addressed the period after the conclusion of the lease in paragraph 105:

“I was dealing with the claimant’s argument on causation that, already by 22 October 1999, he was financially committed by expenditure of his own money to proceed with completing the lease.”

At paragraph 8:

“However (with the possible exception of the evidence referred to in paragraph 60 of the judgment, as to which see paragraph 13 below) I cannot recollect any evidence being adduced by the claimant of subsequent transactions which would have supported a positive finding in his favour that, at some point, after the completion of the lease, he came to be acting for his own benefit (e.g. because he repaid monies borrowed from others or had bought them out).”

[12]Question (2) is the important one in the present context: Whether the judge was intending to find that the appellant had failed to prove on a balance of probabilities that he would have opened a night club as his own business in November 1999 after completion of the lease. The alternative question was in the same form save that it included the expression “entitlement [both legal and beneficial] to the profits”. Paragraph 10:

“The answer to both questions is ‘Yes’. I was not persuaded that the claimant intended to open a nightclub which would be his business, whether run by managers on his behalf or by himself personally. By ‘his business’ I mean a business to all of the profits of which the claimant would be legally and beneficially entitled. As already stated, the question of a joint venture of profit sharing deal with others (unnamed) was never mooted at the trial.”

[13]Question (3) is whether the court was intending to find that the claimant would have started trading his own night club business as soon as he could after completion of the lease. Again the alternative form appears:

“have started trading a nightclub business in respect of which he had an entitlement [both legal and beneficial] to the profits?”

At paragraph 12:

“With one qualification, the answer to both questions is ‘No’. I was intending to find that Mr Zamparelli was anxious ‘that trading should start’, i.e. that the premises should start earning money. The third sentence of paragraph 124 (and the ninth sentence of paragraph 133) should be read alongside other references in the judgment to the claimant being anxious to get trading as soon as possible. I was not intending in any of those paragraphs to find that the claimant was anxious to start up ‘his own’ nightclub business i.e. one in respect of which he had an entitlement, both legal and beneficial, to the profits. I specifically addressed that issue in paragraph 99 and was not persuaded by the claimant’s argument that the business would be his own. Paragraph 13 I read in full: “The qualification is that it is right to say that there is a temporal aspect to the conclusions in paragraphs 99 and 105 in the judgment (and in paragraph 124 for that matter). The focus in those paragraphs was on the position as it stood prior to and immediately after the lease was completed. I was not persuaded by the evidence that at that point in time the night club business which the claimant was anxious to start was going to be his own night club business. However the claimant gave evidence that a year later, in October 2000, he had two ‘associates’, Mr Macanaspie and Mr Boulton, lined up as potential night club managers (paragraph 60). In fairness to the claimant, I do not believe that I revisited the ‘manner of trading’ point in the light of that evidence. Had I done so I suppose the possible conclusion might have been that, although the evidence does not justify finding that the claimant planned to run his own night club business from the outset, by October 2000 he had come to realise that the only way of seizing the initiative and resolving the impasse was if he did try to do just that, and made licence applications for a business of his own.”

[14]The further question, question (4): If the Court was not intending to make a finding on these issues (those are the issues stated in the earlier questions) is it now in a position to do so? Paragraph 14:

“This question does not arise in respect of issues 2(a) and 2(b) above. It arises in respect of issues 3(a) and (b) only to the extent indicated in paragraph 13 above. I would welcome guidance from the parties as to whether the qualification in paragraph 13 has any relevance, and if so what relevance, to the claimant’s prospects of success on appeal, and whether or how far it affects any proposed appeal against Cartwrights (whose retainer had ended by October 2000). If the parties wish me to revisit any of the findings or the conclusions in the judgment and make further findings in the light of the evidence referred to in paragraph 60, I should like to know, and to be reminded (with short submissions if necessary) of the evidence regarding the involvement of Mr Macanaspie and Mr Boulton.”

[15]In his submissions on behalf of the claimant, Mr de Freitas does make points upon the contents of the original paragraphs under consideration. He refers to the use of the expression: “Operated a night club from the premises either himself or with others” and the expression: “He would have derived from that enterprise some or all of the profits”.

[16]I need not refer to other matters of detail. In my judgment there is no prospect of founding an appeal on such points as that in the light of the further answers given by the judge in explanation of his judgment.

[17]The judge has dealt with the points which had been primarily concerning the court at the 7 July hearing. He explained why the causation issue was dealt with in the way it was. He gave answers strongly in the defendants’ favour on the question which concerned the members of the court in July, which was whether, notwithstanding a finding that the claimant would not have the sole profits from the venture, there could be read into his findings in the judgment, in the paragraphs to which I referred, an intended finding that at any rate a share of the profits were intended to be due to the claimant, whether the project was his alone, or his in cooperation with others.

[18]Essentially the claimant’s present point arises out of paragraph 13. Mr de Freitas submits that no proper consideration was given by the judge to the possibility that even if, as the judge found, the night club would not have been open and operated by the claimant in November 1999, it may have been operated at a profit to him at some later date between then and July 2002. There is a real prospect, it is submitted, that upon a full hearing this court would order a reconsideration of that issue in the High Court. What Mr de Freitas seeks is that quantum “to include any outstanding questions of causation”, can be referred back to the lower court.

[19]Mr de Freitas has realistically accepted that this case has not specifically and clearly been put until the receipt of the rider but he submits that it was, in the pleadings and in correspondence, sufficiently indicated that the judge should have made findings upon it, and should not have confined his express finding to what would have happened late in 1999.

[20]The point was never considered, it is submitted, by the judge and it should have been if the claimant was to have fair trial. The judge himself, it is submitted, in paragraph 13, has accepted that there is an open end here. Mr de Freitas submits that this is an open end which requires that the present permission should be allowed to continue.

[21]The court has heard submissions from Mr Worthington QC for the first defendant and from Miss Carr QC for the second defendant. They submit that the point is a new one and that permission should not be allowed to persist on the basis of it. Reference is made to the precise wording of paragraph 13 of the rider. The language used is tentative:

“I suppose a possible conclusion might have been …”

Further, the judge left open the prospect of parties providing him with assistance as to the significance of the piece of evidence at paragraph 60. I read the opening part:

“For reasons of conflict of interest, Cartwrights were unable to act on the licensing aspect, so Mr Zamparelli instructed Eversheds. He had two associates, Mr Macanaspie and Mr Boulton, lined up to be managers of the club. He took them to the first meeting at Eversheds on 18 October.”

Nowhere else in the judgment are the two gentleman or any other potential managers mentioned.

[22]Reliance is placed on the fact that the claimant has not taken up the judge’s invitation to refer to him the evidence which gave rise to that statement in paragraph 60 of the judgment. At this hearing none of the parties have been in a position to assist the court as to the context in which that evidence appeared or as to whether it was elaborated or explained in any way.

[23]Basing an appeal on paragraph 13, in relation to the potentially fatal point, should be seen in the context of the evidence and the issues as a whole, it is submitted. This was a case where the claimant has been disbelieved on important matters and where he has been found to be the front for a business which has been proposed by and to be run by others. Reliance is placed on the finding that the claimant is a property developer and not a night club operator and that he has never operated a night club at these premises. It is submitted that the claimant has been invited, since the judge supplied his rider, to state in terms what his case is and that has not been done, for example by way of referring to the date from which the loss of profit is claimed, and the circumstances which are capable of giving rise to a business being started at that date rather than at some earlier date when the judge found that the business would not have started. No documents have been disclosed which indicate that there were arrangements made in the course of the year 2000 which altered the position as of November 1999 and which demonstrated or arguably supported a case that the claimant would have commenced business in the premises by operating a night club at a later date, for example October of 2000.

[24]It is submitted that had this case been put forward at the trial there would have been very much fuller investigation of the arrangements by which it was claimed that the business would have started within the period up to June 2000 to the profit of the claimant. The claimant should not have a second opportunity to put forward such a case. The question of the amount of loss, if there were to be a successful finding on causation, is very much in issue, the defendants’ experts saying that no loss would have occurred. Any loss would be on a much smaller scale than contemplated and the claimant faces not only the successful counterclaim against him but also he is bound to have to pay, it is submitted, very substantial additional costs of the proceedings if the matters were to continue having regard to the course which events took previously and the failure specifically to take this point. It is submitted that the court should have regard to the overriding objective of the rules and to find that in any event it is not proportionate that the appeal on this ground should be allowed to continue.

[25]In my judgment it has to be accepted that the present point relied on, which arises from paragraph 13 of the rider, has not hitherto been taken specifically by or on behalf of the claimant. It was not pleaded, it did not appear in the written statement of the claimant in terms, and there are no documents to support it. It was not expressly put forward by him in evidence or in a way in which he could be questioned about it. As to the pleading itself, I would not regard that necessarily as a killer blow on its own because it is possible that the lesser claim put forward, the larger one having been defeated, could be said as a matter of pleading arguably to be within the pleading at paragraph 26 page 96 of bundle A:

“The claimant would have opened his nightclub in November 1999 immediately after completion of the Lease and would have anticipated a trading profit of £11,250 per week on average.”

As against that, the defendants fairly make the point that this was a quite specific pleading referring to November 1999 and supports their submission that the entire case proceeded on an all-or-nothing basis in that respect.

[26]I am confident that the claimant was fully cross-examined. I find it extremely difficult to understand why, when points were taken, for example upon the funding issue, the claimant did not bring up the temporal question in evidence. Moreover, when the question of mitigation was raised, which the judge dealt with at paragraph 116, I find it very difficult to understand why, if there was an issue on a later starting of the business project, it was not raised at that stage. Mr de Freitas accepts that he must succeed on what is an existing ground of appeal, namely that the judge has made a wrong finding in paragraph 116 to put the present case on its feet at all, because if the finding at paragraph 116 stands, then loss after June 2000 cannot be held and claimed and that essentially is what the claim now sought to be put forward is.

[27]The point did not appear specifically in the grounds of appeal. Mr de Freitas seeks to rely on the ground where the paragraph 116 question is considered but in my judgment that rebounds against him because once that point has been challenged, it would appear obvious that the alternative ground now sought to be put forward should be put forward by way of a skeleton argument. It was not raised in the skeleton argument for the July 2006 hearing or -- and it is my recollection which the parties do not dispute -- that the temporal point was not argued at that stage. Mr de Freitas does make the point that the court did not hear arguments in full having decided to take the course it did, but it is surprising that a marker was not put down if this question was in the minds of the claimant and those advising him. It was not put in the questions to the judge which were the subject of careful attention by the parties. Even now it is not put by way of a statement which may or may not have to form part of an amendment to pleadings as to how the case is put, what arrangement is to be put forward, from what date and on what basis the damages are claimed.

[28]One can see why it may have been unattractive for the claimant to have made this case at the hearing. Evidence on this point might well have been inconsistent and cause him further difficulties with the case which he was seeking to put forward in relation to fronting.

[29]Mr de Freitas has attempted to take upon himself blame for matters not having been raised earlier. That is a professionally admirable thing to do, but the court must consider the failure to make the allegations in the context of the case as a whole, the issues which have been raised and the way in which it has been developed and I cannot attribute the failure to put the case to any lack of sufficient care and attention by counsel.

[30]I agree with the submissions of Mr Worthington and Miss Carr that it would not be just to permit the appeal to go forward on this ground and for the permission to survive in the light of the rider which the judge has prepared. I also see considerable force in their arguments upon proportionality, having regard to the course which events have taken. The court must also conduct its own analysis of paragraphs 13 and 14 of the rider. In my judgment, as a conscientious and of course fair-minded judge, the judge did not want to shut out a possibility which arises just out of those few words in paragraph 60 of the judgment:

“He had two associates, Mr Macanaspie and Mr Boulton lined, up to be managers of the club.”

The judge addressed for the benefit of the court and the parties, and did so frankly, the possible implication of the presence of that expression.

[31]This court has had the benefit of more detailed submissions, extending over several hours, on the effect of the paragraph and on the issues generally in the case. This court is in a better position, in my view, than the judge was, when doing his best to answer the questions put to him, to consider the relevance and the importance of that sentence in paragraph 60. I repeat that no party has been able to assist the court with any evidence as to the context in which that evidence was given, as to why it was given or at whose behest. The claimant has had the opportunity to make further enquiries about that and was expressly given by the judge the opportunity to take that point up with him. He has not done so and again I attribute that not to any fault on the counsel’s part but on the possible advantage to the claimant of leaving the matter at large and making the best that can be made of it, in support of a submission that the full court should then remit the matter at a later stage to the judge. In many circumstances I would see the advantage of that but the strand relied on is in my judgment such a frail one that, in the absence of further development of it, the strand does not provide an arguable basis for appeal.

[32]The judge clearly could not remember why he put that sentence in his judgment at paragraph 60, which appears to contradict other paragraphs to which I have referred. It is in my judgment much too slender a thread on which to base a continuation of permission in this case. Having considered the judgment together with the rider and the helpful submissions of counsel, I do not consider that this permission should survive. The issue should not in my judgment be determined on whether the point is a killer point or a near fatal point or some other definition. The costs incurred and the trouble taken have been such that, only if this court were to come to the conclusion at this stage that there is a real prospect of success, the permission should survive. It would be necessary, as Mr de Freitas has to accept, to establish that damage did result from the breaches proved. Even if the breaches of duty were proved, there is in my judgment a fatal flaw in the appellant’s case in that whatever success he may have on other points, there is no real prospect that he could establish, on the basis of the judgment and the rider, that significant damage has resulted from those breaches.

[33]For those reasons I would accede to the defendants’ submission to set aside the grant of permission to appeal.

[34]I agree

Order

Application granted.