Arlington House Ltd & Ors v Torbay Care Trust Pt Hd [2013] EWHC 4466 (QB)

[2013] EWHC 4466 (QB)Case No TLQ/12/0389
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Venue The Royal Courts of JusticeDate Friday, 12 April 2013
Strand
London WC2A 2LL
Before
HIS HONOUR JUDGE SEYMOUR
Between
ARLINGTON HOUSE LTD & ORSRespondentTORBAY CARE TRUST PT HDAppellant
Digital Transcript of Wordwave International Ltd (a Merrill Corporation Company)8th Floor, 165 Fleet Street, London, EC4A 2DYTel No: 020 7421 4036  Fax No: 020 7404 1424Web: www.merrillcorp.com/mls Email: courtcontracts@merrillcorp.com(Official Shorthand Writers to the Court)
MS M WHEELER (instructed by Michelmores LLP) appeared for Defendant
Judgment

JUDGE SEYMOUR:

[1]The claimants in this action, who are a limited liability company, Arlington House Limited, Mrs Caroline Susan Clerk and Mr Alexander Mann, were formally the operators of a care home in Torquay called Arlington House. The defendant is Torbay Care Trust. Torbay Care Trust, as I understand it, is an organisation which includes representatives of Torbay Council and the National Health Service, and one of the functions of the defendant is to organise and pay for care for elderly people whose circumstances, in particular whose health, necessitate the provision of care by persons other than themselves.[2]The claimants entered into an agreement called an “Agreement for the Provision of a Care Home Service” with the defendant. The agreement in the form in which it is put before me appears not to have been dated, but that is not material I think for present purposes. The agreement in question was in the nature of an umbrella agreement and it envisaged that, amongst other things, individual care contracts would be entered into in relation to any persons who the defendant desired should be accommodated at Arlington House. The individual care contracts, as I understand it, incorporated the terms of the umbrella agreement. The umbrella agreement included, at clause 25.3.2, this:
“Notwithstanding part (d) 24.1 and 24.2 above or any other provisions hereof including part (d) 26, if it shall appear to the service purchaser in the reasonable exercise of his discretion that a default or the continuation of a default in the performance of the service provider’s obligations under this agreement presents a sufficiently immediate and significant risk to the person, health or wellbeing of a service user, then the service purchaser shall be entitled forthwith or upon such notice as shall to the service purchaser seem appropriate to terminate any or all individual care contracts and/or this agreement.”
[3]The expression “service purchaser” was defined for the purposes of the umbrella agreement as the defendant. The expression “service provider” was defined for the purposes of the umbrella agreement as the claimant and the “service user” was a person whom it was intended should be accommodated at Arlington House.[4]In very brief summary, what happened giving rise to the commencement of this action was that on or about 26 January 2010 a district nurse visited Arlington House and formed the view that one or more of the residents was not being properly cared for. That nurse reported that information to a manager and that set in train a series of events which led ultimately, on 16 March 2010, to the defendant giving notice terminating both the individual service contracts for the residents funded by Torbay Care Trust and, in addition, terminating the umbrella agreement, referred to in the letter as the Care Home Services Agreement. itself.[5]In this action the claimants complained that termination of the relevant agreement, which was expressly pursuant to clause 25.3.2 of the umbrella agreement, was not justified. Plainly, as it seems to me, a number of questions arise in relation to whether termination was justified under clause 25.3.2. While it is clear that the defendant had a wide margin of appreciation under that provision, the power to exercise the right of termination was not without any limitations whatsoever.[6]In particular, the defendant, as it seemed to me, had to exercise a reasonable discretion, that is to say the decision to terminate had to be reasonable in the light of all of the relevant circumstances. The relevant circumstances include that the termination provision relied upon was said to justify termination only if there was a sufficiently immediate and significant risk to the person, health or wellbeing of a service user to merit that course. Moreover, the defendant had a discretion as to whether to give notice of termination with immediate effect or whether to give a longer notice of termination, and, as it seems to me on proper construction of clause 25.3.2, the decision whether to terminate the relevant agreements forthwith or by notice was again one which had to be taken reasonably by the defendant.[7]The way in which the claims were put in the particulars of claim in this action, which was commenced, I think, in May 2011 and the particulars of claim were served, I think, on 14 November 2011, was this and I start to read at paragraph 28, which appears under the rubric, “(d) Breach of the TCT Agreement by TCT” (the TCT Agreement is a reference to what I have called the umbrella agreement and TCT is a reference to the defendant):
“In the premises, TCT actions in removing the TCT residents and/or in purporting to terminate the TCT agreement and the individual care contracts constituted a breach of the terms of the TCT agreement as set out in section (b) above.”
[8]In particular (for present purposes I think I need not read the details of the particular matters of complaint) at paragraph 29 it was pleaded that:
“by reason of the above breach, Arlington House has suffered loss and damage as set out in section (h) below.”
[9]The next heading is “(e) Tortious Interference with Third-Party Contract”. At paragraph 30 What was pleaded was:
“Further or alternatively, TCT acting with knowledge of the individual care contracts, the DCC agreement (that is an agreement with Devon County Council) and the private residents agreement, and with the intention of procuring a breach thereof: (a) persuaded and/or pressurised the TCT residents and/or their families to allow TCT to remove the TCT residents from the home and/or remove the TCT residents from the home without consulting them and/or their families, and thereby caused the TCT residents to breach their respective individual care contracts; (b) persuaded and/or pressurised DCC to issue a serious default notice and to purport to terminate the DCC agreement and the individual service contracts with immediate effect and to allow TCT to remove the DCC residents from the home, and thereby caused DCC to breach the DCC agreement; (c) persuaded and/or pressurised private residents and/or their families to allow TCT to remove the private residents from the home and/or remove the private residents from the home without consulting them and/or their families, and thereby caused the private residents to breach their respective private residents agreements.”
[10]I interpose that, at the material time, Arlington House was appropriately licensed to accommodate, I think, 30 residents but there were actually only 17 residents. Of the 17, I think 6 were the subject of individual care contracts pursuant to the terms of the umbrella agreement, so connected with the defendant, 2 were subject to agreements in relation to Devon County Council and the other residents had made private arrangements with the claimants.[11]Paragraph 31 of the particulars of claim says:
“By reason of TCT’s unjustified interference with the individual care contract, the DCC agreement and the private residents agreement, Arlington House has suffered loss and damage as set out in section (h) below.”
[12]It is right to say that there is no allegation anywhere in the particulars of claim of any particular term of a DCC agreement or a private residents agreement of which it is contended that there had been a breach which was induced by the defendant.[13]After the next heading, “(f) Breach of Duty of Care”, there follows paragraph 32:
“Further or alternatively, TCT owed Arlington House a duty of care to exercise reasonable skill and care in carrying out its powers and functions. In breach of this duty, TCT failed to exercise reasonable skill and care in taking the decision to decommission the home and to remove the residents from the home.”
[14]Again, there were some particulars which I need not read for present purposes. Paragraph 33 was in these terms:
“By reason of TCT’s breach of its duty of care, Arlington House has suffered loss and damage as set out in section (h) below.”
[15]Finally, for present purposes, under the rubric “(g) Damages under the Human Rights Act 1998”, appeared first of all paragraph 34:
“Further or alternatively by reason of the actions and omissions of TCT between January 2010 and March 2011 as set out above, Arlington House has been prevented from carrying out its business as a residential care home and has suffered damage to the goodwill of its business.”
[16]Paragraph 35:
“The actions and omissions of TCT in this period thereby constituted an unjustified interference with the right of Arlington House to peaceful enjoyment of its possessions in breach of article 1 of the First Protocol to the European Convention on Human Rights. TCT’s actions and omissions were consequently unlawful under section 6(1) of the Human Rights Act. This interference continued until March 2011 when TCT finally completed the referral of Mr Mann and Mrs Clerk to the Independent Safeguarding Authority and that referral was dismissed.”
[17]Again, I need not read the rest of paragraph 35. At Paragraph 36 what was pleaded was:
“Arlington House is a victim of this unlawful act and has suffered damage as a result of TCT’s interference with its right to peaceful enjoyment of its possessions as set out in section (h) below.”
[18]Ms Marina Wheeler has appeared on behalf of the defendant on the hearing of the present application. By the present application, put before the court pursuant to an application notice dated 22 March 2013, what the defendant was seeking was this:
“(1) To strike out the claimant’s case set out in paragraphs 32 and 33 of the particulars of claim pursuant to part 3.4.2(a) of the Civil Procedure Rules as disclosing no arguable claim in law; and/or (2) summary judgment pursuant to part 24.2 on the grounds that the claims identified in paragraphs 28 to 36 of the particulars of claim have no real prospect of success and there is no other compelling reason why the case should be disposed of at trial.”
[19]Ms Wheeler in the course of her submissions drew to my attention a number of documents including minutes of meetings at which decisions were made which were relevant to the eventual decision to terminate the umbrella agreement and the individual care contracts. She submitted that, in the light of that material, and in the light of some expressions of view in the supplementary report of Pat Bailey(?), an expert instructed on behalf of the claimants, there was no real prospect of the claimants satisfying the trial judge that their claim in contract for breach of the umbrella agreement or of an individual contract was justified.[20]It is, I think, unnecessary and unhelpful to go into the material which Ms Wheeler drew my attention because I have come to the firm conclusion that, while the material upon which Ms Wheeler relied certainly, perhaps, provides the defendant with grounds for optimism as to the outcome of the trial, it is not the case that the claimants have no real prospect of success.[21]I have already indicated the issues which seem to me to arise under clause 25.3.2. The trial judge, having heard all of the evidence, will be in a position to reach conclusions as to whether, in all of the circumstances, the defendant acted reasonably in terminating the umbrella agreement and the individual care contracts. It certainly is not the case, as it seems to me, that the claimants have no real prospect of success. It is a matter which it is appropriate should go forward to trial.[22]The trial in fact, as I understand it, is currently anticipated as commencing on, or in a window which commences, on 29 April, that is to say a fortnight from next Monday, so the timing of the application before me is perhaps unusual. It is more customary, where it is contended that claims that are pleaded in the particulars of claim have no real prospect of success or disclose no arguable claim in law, for an application to be made rather more promptly than two weeks effectively before the anticipated trial date.[23]However that may be, I have come to the firm conclusion that it is appropriate to strike out the other elements of claim to which I have referred. Strictly speaking, all that the defendant was seeking to have struck out was what was pleaded in paragraphs 32 and 33, and in relation to the rest what the defendant was seeking was summary judgment. However, for reasons which I shall now briefly explain, it seems to me that actually the other elements of claim ought to be struck out.[24]So far as breach of a duty of care is concerned, what, on analysis, was contended on behalf of the claimants amounted to this: that a duty of care was owed by the defendant to the claimants either not to exercise at all the power in the umbrella agreement in clause 25.3.2 or, perhaps, possibly only to exercise it if the conditions subject to which it could be exercised had been met. Either way, as it seems to me, the alleged duty of care is nonsense.[25]The claimants are entitled, as I have found, to pursue their claim for damages and for breach of the umbrella agreement and the individual care contracts to trial. It is wholly inappropriate in these circumstances to find that there was, in addition, a duty of care of the type of which I have mentioned owed by the defendant to the claimant.[26]The next element which it is convenient to consider is the alleged tortious interference with third-party contracts. Although that is the summary in the rubric introducing paragraphs 30 and 31 of the particulars of claim, it is clear from the introductory words of paragraph 30 that what is complained of is actually inducing breaches of contract. In OBG Ltd v Allan [2008] 1 AC at page 1, the House of Lords had to consider, amongst other things, the elements which need to be pleaded and proved in order to make out a claim to damages for inducing a breach of contract. The leading speech was that of Lord Hoffmann. At paragraph 39, he said this which is presently material:
“To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realise that it will have this effect.”
[27]So in order to make out a cause of action for damages for inducing a breach of contract, it is necessary, first of all, to plead the term of the contract which it is said a third party has been induced to breach. It is then necessary to plead that the party said to have induced the breach was aware of the terms of that particular provision. Then it has to be alleged that the person said to have induced the breach of the contract took steps with the knowledge of that provision in the relevant contract to induce a breach. On the face of it, paragraphs 30 and 31 of the particulars of claim do not include the relevant allegations and consequently, any claim for damages for inducing a breach of contract is not made out on the face of the particulars of claim.[28]The last element which I need to consider is the claim for damages under the Human Rights Act 1998. The act complained of, although summarised as the actions and omissions of TCT between January 2010 and March 2011, really amount to this: giving notice under the umbrella agreement and referring Mr Mann and Mrs Clerk to the Independent Safeguarding Authority. I think one can disregard for present purposes the referral of Mr Mann and Mrs Clerk to the Independent Safeguarding Authority because, ultimately, the Independent Safeguarding Authority’s conclusion was that it was not appropriate to ban Mrs Clerk or Mr Mann from being involved in running care homes. If and insofar as any loss has been suffered as a result of the matters complained of it follows from the termination of the umbrella agreement and the individual care contracts.[29]The relevant provisions of article 1 of the First Protocol to the European Convention on Human Rights are in these terms:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”
[30]The right of a party under a contract to performance of the obligations assumed by the other party is a chose in action. It is not obviously comprehended within the expression “possessions” used in article 1 of the First Protocol. Moreover, it is very difficult to see how, bearing in mind the nature of a chose in action, someone can be deprived of it other than by legislative action, because the means by which the chose in action is enforced is legal proceedings.[31]I rather doubt that on proper construction of article 1 of the First Protocol, choses in action properly fall within the ambit of the expression “possessions”. However, if they did, it is quite plain that by purporting to exercise contractual rights to relieve oneself of one’s obligations under a contract, one is not depriving the other contracting party of any possession. One is simply putting the other contracting party in a position to seek redress, and if and insofar as the claim for damages for breach of contract in this action succeeds, the claimants will not be deprived of a possession because the chose in action will be transmuted into an award of damages in their favour. So for those reasons, I am going to strike out paragraphs 30 to 36 inclusive of the particulars of claim but to dismiss the application for summary judgment in relation to paragraph 28 of the particulars of claim.[32]What I am going to do is to reserve the costs to the trial judge. The principal reasons for doing that are these:(1) that notwithstanding that I have struck out three of the four elements of claim for the reasons which I think emerged during the course of submissions, it is far from clear that the defendant has achieved anything worthwhile because basically what the claimants were seeking to advance were four different ways of achieving the same result, and it is still open to the claimants to achieve that result by the one route which I have permitted to go forward to trial;(2) that notwithstanding the explanation which Ms Wheeler has given me as to the timing of this application, I have already drawn attention to the fact that the timing of this application is unusual, being effectively two weeks before the trial, and what was sought by the application notice, if it had been entirely successful, would have been a technical knockout.[33]So there is an element of concern that perhaps tactical considerations were more significant in the making of this application than Ms Wheeler submits is the case. The trial judge, having had the benefit of hearing all of the evidence and submissions, will be in a much better position to resolve those nagging concerns which I have than I am and so for those reasons, I am going to say that the costs should be reserved to the trial judge.