Shea: Novel argument
The High Court has comprehensively rejected a law firm’s application for summary judgment in a negligence claim brought on the basis that it was not a successor practice.
Caroline Shea KC, sitting as a deputy High Court judge, not only rejected arguments by Broadfield that the claimants had “no real prospect of succeeding”, but ordered that if Broadfields was successful on appeal, its predecessor firm Pitmans could take Broadfield’s place.
Pitmans merged with Bircham Dyson Bell (BDB) in 2018 to form BDB Pitmans, which rebranded as Broadfield in December 2024. Pitmans is now known as Adcamp, following its dissolution and return to the register of companies.
Judge Shea said the claimants, an individual and a company, want to bring a negligence action over Pitmans’ failure to put in place a binding development agreement prior to exchange of contracts on the sale of two properties in Ascot, Berkshire.
They alleged that they sold the properties at an undervalue on the basis that they would receive ‘overage’. Instead, the developers went into administration, and the administrators sold the development free of the overage rights.
In the initial stages of the negligence claim – which pleaded that Broadfield had assumed the liabilities of Pitmans by novation – neither Broadfield nor its solicitors, City firm Kennedys, distinguished it from Pitmans or disputed the express assertion that Broadfield had acceded to Pitmans’ liabilities.
But Broadfield then sought summary judgment on the basis that the claimants had no realistic prospect of establishing this.
The judge recounted: “Broadfield does not dispute that the merger agreement contained promises from Broadfield to Pitmans that Broadfield would assume liability for claims arising out of Pitmans’ acts or omissions prior to the merger.
“As between Broadfield and Pitmans, Broadfield is now liable for Pitmans’ actions under the retainer. It is however hotly contested that this establishes any element of a novation, much less one that the claimants have consented to, whether expressly or by conduct.”
The question was whether the claimants could give consent to novation at a point later than the transfer of liabilities. This was a “novel” argument, said Judge Shea, “but that by itself does not mean that it is hopeless or even fanciful”.
She said the claimant’s position on novation was “reasonably arguable” and they had “(and by more than a slim margin) a realistic prospect of success”.
The judge also found that the claimants’ arguments on estoppel – that Broadfield was estopped from saying it was not liable for their claim against Pitmans, having made representations in its accounts and also to the claimants – could also not “be dealt with at the summary stage”, save for the arguments relating to promissory estoppel.
The claimants had “a realistic possibility of succeeding” on estoppel by representation or convention.
Nor did she grant the law firm summary judgment on the “rarely used doctrine” of acknowledgement where, in this case, the buyer had “acknowledged” that it had agreed to pay a certain amount to the seller.
On substitution, Judge Shea said that under CPR 19.6(2), the court could add or substitute a party if the relevant limitation period was current when the proceedings were started.
“In these circumstances I will make an interim declaration granting permission for the substitution of Pitmans for Broadfield in the event it transpires that liability for Pitmans’ acts and omissions was not transferred to Broadfield, or that Broadfield is not estopped from denying that it was transferred, or that liability was not transferred to Broadfield under the doctrine of acknowledgment.”
She dismissed Broadfield’s application for summary judgment, “save in respect of the claim based on promissory estoppel”.
In a subsequent ruling on the consequentials, Judge Shea granted Broadfield permission to appeal on the substitution issue.
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