RSM Bentley Jennison (A Firm) & Ors v Ayton [2015] EWCA Civ 1120

Case No A2/2014/0997[2015] EWCA Civ 1120
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Queen's Bench Division
His Honour Judge Robert Owen QC
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/11/2015
Before
LORD DYSON(Master of the Rolls)LORD JUSTICE UNDERHILLDAME JANET SMITH
Between
RSM BENTLEY JENNISON (A FIRM) AND OTHERSAppellantsAYTONRespondent
Ian Croxford QC (instructed by Clyde & Co LLP) for AppellantsCharles Douthwaite (instructed by Bolt Burdon Kemp) for RespondentHearing Hearing date: 6 October 2015
JudgmentLord Justice Underhill :
[1]The nature of the issue raised by this appeal requires me to say very little about the underlying claim. On 19 December 2009 the Claimant (the Respondent before us) made an investment of £150,000 in what he understood to be an oil transaction. All or some of the Defendants (the Appellants) – I need not distinguish between them for present purposes – acted as intermediaries. He says that the transaction was in fact a sham and that he only recovered £50,000 from his investment. He says that representations made by the Defendants to induce him to make the investment were fraudulent or negligent.[2]On 4 October 2011 the Claimant’s solicitors, Bolt Burdon Kemp (“BBK”), sent a pre-action protocol letter to “RSM Tenon” (for present purposes I can treat that as being all the Defendants) giving notice of a claim against them. The letter called on them “to compensate [the Claimant] for his loss of £100,025 plus interest and his legal costs”. The £100,000 represented the lost investment and the £25 a CHAPS fee associated with it.[3]On 26 April 2012, the Defendants’ solicitors, Clyde & Co, wrote to BBK as follows:
“We refer to your Letter of Claim dated 4 October 2011. We enclose a cheque in the sum of £103,576.56, which has been made out to your client. This amount represents the amount claimed by your client plus interest calculated at the Bank of England base rate plus 1% from 19 December 2009 to 30 April 2012. This payment is made for commercial reasons and as gesture of goodwill to your client, and is accordingly made without any admission of liability on RSM Tenon’s part.”
[4]BBK declined to accept that offer, and returned the cheque, on the basis that it represented “inadequate compensation to our client”. They did not specify in what respect it was inadequate, but they told Clyde & Co on the telephone that the Claimant wanted a payment in respect of his legal costs. It is fair to say that those costs may have been quite extensive since the pre-action protocol letter went into a good deal of detail.[5]On 20 September 2012 the Claimant commenced proceedings against the Defendants in the High Court. The “brief details of claim” on the Claim Form claimed damages on the basis of a variety of causes of action, together with equitable or statutory interest. The value of the claim was said to be “in excess of £100,000 and not exceeding £150,000”.[6]The facts relied on in the Particulars of Claim and the loss said to have been incurred were the same as stated in the pre-action protocol letter save that, in addition to the £100,025 initially claimed, there were further claims pleaded, at paragraphs 33 and 35 respectively, in respect of:(a) various incidental expenses amounting to £1,587.50 – “the paragraph 33 claim”; and(b) an amount estimated at “approximately £37,000” said to have been lost on a hire purchase transaction for a car which the Claimant says he entered into in April 2010 on the faith of assurances from the Defendants that repayment of the investment and part of the profits was imminent – “the paragraph 35 claim”. The prayer for relief is simply for “(1) damages and (2) equitable interest or interest pursuant to section 35A of the Supreme Court Act 1981”.[7]The Defence was served on 5 November 2012. Paragraphs 3-6 read as follows:
“3. On or about 26 April 2012 in response to that claim, whilst denying liability, the Defendants tendered by way of a good and valuable cheque the sum of £103,576.57, being the principal sum of £100,025.00 plus interest thereon in full and final settlement of the Claimant’s claim as then advanced. The Defendants remain willing to pay such sum and accordingly have paid it into Court as required by CPR Pt 37.2. In the premises the Defendants are entitled to and do rely upon the defence of tender before claim in respect of that part of the claim made herein. 4. Further, had the Claimant advanced his claim for the sums now set out in Paragraph 33 of the Particulars of Claim then, notwithstanding that the Defendants would have denied liability, they would have tendered a sum sufficient to include those sums and interest thereon also and if not accepted would also now have paid it into Court, pursuant to CPR 37.2. Accordingly such defence of tender before claim would also have obtained in respect of that part of the Claimant’s claim herein. 5. For the reasons pleaded at Paragraph 37 herein the allegations in Paragraph 35 of the Particulars of Claim disclose no reasonable cause of action and should be struck out. 6. In the premises of Paragraphs 1-4 herein the claims now made herein which are additional to those advanced in the said Protocol are a colourable attempt to deprive the Defendants of a defence of tender before claim, and this action is an abuse of process in that its primary purpose is to advance the claim for costs of this action to the advantage of the Claimant’s solicitors and ATE insurers.”
The pleading goes on to respond to the substance of the claim, but I need give no details here.[8]I should at this stage spell out the effect of those paragraphs of the Defence:(1) At paragraph 3 the Defendants plead the long-established common law defence of “tender before action” (now, in the terminology of the Civil Procedure Rules, “tender before claim”) as regards the sum of £100,025. Rule 37.2 requires a defendant asserting such a claim to pay into court the amount said to have been tendered, and the Defendants plead that they have done so.(2) Paragraphs 4-6 are a response to the fact that the Claimant had pleaded the two additional items of loss identified at para. 6 above. The Defendants’ broad point is, as pleaded at paragraph 6, that the addition of those items was a mere device to avoid the consequence of them having tendered the full amount claimed in the pre-action protocol letter and was accordingly an abuse. More specifically, however, they plead (paragraph 4) that they would have tendered the additional £1,587.50 if it had been included in the original claim and (paragraph 5) that the paragraph 35 claim was hopeless.[9]Consistently with those contentions, the Defendants on 18 February 2013 issued an application seeking an order that the claim be struck out, or that summary judgment be given against the Claimant, in whole or in part. The application was supported by a witness statement from a partner in Clyde & Co., Mr Roberts, which exhibited the correspondence in relation to the pre-action protocol letter and advanced the contentions pleaded at paragraphs 3-6 of the Defence.[10]That application was heard by Master Eastman on 11 October 2013. The arguments before him can be sufficiently summarised as follows:(1) Tender before claim. Mr Ian Croxford QC for the Defendants submitted that they had an unarguable defence of tender in respect of the £100,025, as pleaded at paragraph 4 of the Defence. Mr Charles Douthwaite for the Claimant contended that that defence was as a matter of law only available where the claim was for a liquidated sum. Mr Croxford acknowledged that that was the case at common law, but he said that the position had been changed by the Civil Procedure Rules so that the defence was now also available as an answer to a claim for damages.(2) Paragraphs 33 and 35. Mr Croxford advanced the points summarised at para. 8 (2) above. For reasons which will appear, I need not set out Mr Douthwaite’s response.[11]The Master dismissed the application. He accepted Mr Douthwaite’s submission that the defence of tender before claim was not available in the case of a claim for unliquidated damages and held that the position had not been altered by the Civil Procedure Rules. He also said that there was room for argument about the calculation of interest incorporated in the tender. He declined to strike out paragraphs 33 and 35 of the Particulars of Claim (though he described the paragraph 35 claim as only “distantly arguable”).[12]The Defendants appealed. The appeal was heard by His Honour Judge Robert Owen QC, sitting as a High Court Judge, on 6 March 2014. He dismissed the appeal on essentially the same grounds as the Master.[13]The Defendants sought permission to appeal to this Court on four grounds. Fulford LJ gave permission only on ground (1), namely (to summarise) that the Judge was wrong to hold that the defence of tender before claim was unavailable in law. Grounds (2)-(4), on which he refused permission, related to the Master’s observations about interest and to his decision on paragraphs 33 and 35 of the Particulars of Claim. The only issue before us is thus whether the defence of tender is available in the case of a claim for an unliquidated sum.[14]I start with the common law position. That is in truth beyond doubt. In Davys v Richardson (1888) 21 QBD 202 this Court was concerned with the circumstances in which, under Order XXII rule 5 of the then Rules, a “payment into court … made with a defence setting up a tender of the sum paid” could be taken out of court by the plaintiff. One of the issues was whether the payment into court made in that case fell within the terms of the rule. It was held that it did not because the claim in the action was one for unliquidated damages (in fact, for wrongful dismissal). Lindley LJ said, at p. 205:
“I am of opinion that the law remains as it was before the Judicature Acts, and that you cannot now, as you could not then, set up a defence of tender in answer to a claim for unliquidated damages.”
Likewise, Lopes LJ said, at p. 206:
“[Order XXII rule 5] refers to the old plea of tender, which could not be pleaded to an action for unliquidated damages ...”
It is unnecessary to go into detail about the pre-Judicature Act position referred to by Lindley and Lopes LJJ: what they say is, albeit succinct, unequivocal. But the curious can find it expounded by Wilde CJ, with some fine examples of law French, in Dixon v Clarke (1848) 5 CB 365, at p. 376.[15]That position was re-affirmed by this Court in comparatively recent times, but with a refinement which bears on the present case, in John Laing Construction Ltd v Dastur [1987] 1 WLR 686. The case arose out of a road traffic accident in which the plaintiffs’ vehicle was damaged. They wrote to the defendant claiming a fixed amount of £137.85 (representing £132.50 cost of repair and £5 loss of use) and offering to settle for that amount, plus costs in the sum of £28.80. The defendant’s insurers sent a cheque for £137.85. That was rejected by the plaintiffs, who wanted their costs. They issued proceedings claiming “damage and loss” quantified in the sum of £137.50, together with interest under the County Courts Act in a quantified sum. The defendant did not explicitly plead a defence of tender but he paid into court the full £137.85 plus the claimed amount of interest; and the case proceeded on the basis that he should be treated as having advanced a plea of tender. The County Court judge rejected the defence on the basis that the original tender did not include interest. Parker LJ, with whom Bingham LJ agreed, disapproved that reasoning, on grounds into which I need not go, but continued (at p. 690H):
“The plaintiffs, however, seek to uphold the judgment on the simple ground that the claim is one for unliquidated damages and that in such cases the defence of tender is not available at all.”
He recorded that the defendant accepted that, other things being equal, that was so, referring to Davys v Richardson, but that it was his case that the position was altered by Order 1, rule 10 of the County Court Rules, which read:
“A claim in an action for the cost of repairs executed to a vehicle or to any property in, on or abutting a highway in consequence of damage which it is alleged to have sustained in an accident due to the defendant's negligence shall, unless the court otherwise orders, be treated as a liquidated demand for the purposes of these rules.”
It was the defendant’s case that that meant that the defence of tender was available in respect of the claim of £137.85. Parker LJ rejected that argument. He pointed out that part of the sum in question was for loss of use, but he continued (p. 691 C-D):
“Even if the claim were solely for cost of repairs the rule would not in my view be of any avail. In the first place the rule ends with the words 'shall, unless the court otherwise orders, be treated as a liquidated demand for the purposes of these rules'. The defence of tender is a common law substantive defence to which the rules … other than Ord. 9, r. 12 [being the rule requiring payment in of the sum tendered] have nothing to do. They cannot in any event amend the substantive law. Moreover the rule itself gives the court a discretion and a discretion to allow or disallow a substantive common law defence available to a defendant is not, even if intra vires, within the contemplation of the rule. If a tender is made which is bad at common law it cannot in my view thereafter be made good by a provision which states merely that, for the purposes of the rules and unless the court otherwise orders, the claim shall be treated as a liquidated demand.”
[16]In Smith v Springer [1987] 1 WLR 1720 Sir John Donaldson MR observed, at p. 1726 B-D:
“I have some sympathy with insurance companies who are prepared to settle in full, but who do not wish also to have to meet legal expenses as the price of avoiding litigation. I apprehend that Ord. 1, r. 10 of the County Court Rules … was addressed to this problem and was intended to make the defence of tender available to motor insurers. The decision of this court in John Laing Construction Ltd. v. Dastur … shows that it does not achieve this result, at least where the claim is wider than for the cost of repairs, and it may be that the County Court Rules Committee would wish to look at this rule again with a view to its amendment.”
[17]The question then is whether, as Mr Croxford contends, the common law position has been altered by the Civil Procedure Rules. The provision that he relies on is the definition of the phrase “defence of tender before claim” in the glossary to the Rules. The definition reads:
“A defence that, before the claimant started proceedings, the defendant unconditionally offered to the claimant the amount due or, if no specified amount is claimed, an amount sufficient to satisfy the claim.”
The phrase so defined appears in the body of the Rules only in Part 36, which is concerned with offers to settle (see rule 36.16 (3) (a)), and Part 37, which is concerned with payments into court (see rules 37.2 (2) – the equivalent of the older rule referred to in Davys and – and 37.3, and the associated practice direction). It does not appear in Part 16, which concerns the contents of “statements of case”.[18]The definition in the glossary would appear to represent a deliberate attempt by those responsible for the drafting of the Civil Procedure Rules to expand the scope of the defence of tender before action so as to cover claims for unliquidated damages, though it seems a decidedly oblique way of doing so. The introductory commentary to Part 16 in the White Book (para. 16.0.1) identifies one of the differences from the old Rules of the Supreme Court as being that:
“The defence of tender before action (which has been renamed tender before claim) is available in response to claims for damages as well as debts.”
That statement (which also appears in the current (2007) edition of Bullen, Leake and Jacob (see para. 1-14)) goes back to the first edition of the new-style White Book, in which the editors were closely associated with those responsible for the drafting. However, it is not clear where the idea for the change came from or what the thinking behind it was. We asked Mr Croxford whether there was anything material in Lord Woolf’s Access to Justice report, which was the genesis of the Civil Procedure Rules, but he told us that he had looked and found nothing.[19]Whatever the history, however, I do not believe that the apparently intended change is effective. The authorities to which I have referred to make it clear that the defence of tender is a substantive rule of law and not a matter of procedure. It seems to me right in principle that such a rule cannot be amended by rules of court, which of their nature only regulate practice and procedure. That was in any event decided as a matter of ratio in John Laing. I repeat the key words from the judgment of Parker LJ:
“The defence of tender is a common law substantive defence to which the rules … have nothing to do. They cannot in any event amend the substantive law.”
Although Parker LJ plainly, and understandably, regarded the point as self-evident I have looked at section 75 of the County Courts Act 1984, which is the statutory source of the vires to make Order 1 rule 10 of the County Court Rules. As one would expect, it conferred power to make rules which extended “to all matters of procedure or practice” (sub-section (2)). Likewise, section 1 (1) of the Civil Procedure Act 1997 confers the power to make “rules … governing the practice and procedure to be followed in [the civil courts]”.[20]I should say in passing that it follows that Sir John Donaldson’s concluding observation in Smith v Springer (see para. 16 above) was wrong in as much as it contemplated the possibility that some differently drafted amendment to the County Court Rules might produce the result which Order 1 rule 10 had failed to achieve. It seems that Sir John believed that the problem in John Laing was that the damages claim went wider than a claim for the cost of repairs, to which alone the rule applied; but Parker LJ made it clear that his reasoning did not depend on that circumstance – see the opening sentence in the passage quoted at para. 15 above.[21]That is enough to dispose of Mr Croxford’s submission. But I should point out that, even if it did not face the obstacle discussed above, the terms of the Civil Procedure Rules themselves create a problem for him. Rule 2.2 (2) reads:
“The glossary at the end of these Rules is a guide to the meaning of certain legal expressions used in the Rules, but is not to be taken as giving those expressions any meaning in the Rules which they do not have in the law generally.”
In the law generally the expression “defence of tender before action” means a defence that the defendant has already tendered the (liquidated) sum claimed. It is true that the Rules refer to “defence of tender before claim”; but it is arguable that that purely verbal change is not enough to get round the purpose of rule 2.2 (2) (whatever exactly that may be, which is not wholly clear). But I need not reach a concluded view on this.[22]I accordingly believe that the Master and the Judge were right, and I would dismiss this appeal. I should not be taken to be approving the Claimant’s conduct in claiming damages in a particular amount in the pre-action protocol letter and then, when that sum is offered, bringing proceedings for damages in a larger amount, although I can understand the concern about recovering his pre-action costs which no doubt lay behind that conduct. But the only question before us is whether the Defendants can in those circumstances raise the defence of tender, and for the reasons given I do not believe they can.[23]I would add by way of coda that even if it is desirable to expand the scope of the defence of tender to cover claims for damages, at least in some cases – which I do not regard as self-evident – I do not believe that the approach taken in the glossary to the Civil Procedure Rules is satisfactory. It is one thing if the claimant prior to the issue of proceedings demands damages in a quantified amount and the defendant tenders the amount so claimed. There would then be a reasonable analogy with the case of a debt, since the defendant can plead that he has tendered the very amount asked for (though there would remain a problem if the claim form does not explicitly limit the damages to the pre-claimed amount or – as in this case – positively pleads a larger amount). But the language of the glossary contemplates the defence being available also in a case where the claimant has not quantified his claim (“if no specified amount is claimed”) but where the defendant has offered “an amount sufficient to satisfy the claim”. But who is to say that the offer is sufficient ? The essence of a defence of tender must be that claim and demand can be seen to correspond, so that the resort to proceedings is demonstrably unnecessary: that situation ceases to obtain if the court has to carry out an assessment of the damages in order to decide whether a sufficient tender has indeed been made.

Dame Janet Smith:

[24]I agree.

Lord Dyson MR:

[25]I also agree.