Home Information Cases Interleasing (UK) Ltd v Nicolas Melvyn Morris (2002)

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Interleasing (UK) Ltd v Nicolas Melvyn Morris (2002)

Summary

Counsel's opinion complied with the provisions of a share purchase agreement. The opinion could only be considered at face value for those purposes and it was not open to the defendant to go behind it and challenge the legal or factual basis on which it was given.

Facts

Applications arising out of an agreement ('the agreement') between the claimant ('C') and defendant ('D') for the sale of shares by D to C. The agreement provided for a retention of part of the purchase price by C to secure until trial any claim by C for breach of warranty on D's part. To qualify, a claim had to be a "good claim", which the agreement defined as a claim certified by way of C obtaining a recent, written counsel's opinion, from a barrister of at least ten years' call, to the effect that C had a bona-fide claim that had a reasonable prospect of success and containing an estimate of quantum. The estimated quantum, plus interest and estimated legal costs, would be retained in a deposit account pending trial. C notified D of its claim that D was in breach of a warranty in that it had overvalued the company whose shares were being purchased by C by wrongly including goodwill in the net asset valuation, when the goodwill had in fact been written off by the company's auditors. C obtained counsel's opinion on the claim, which stated that there was no reason to doubt the bona fides of the claim and that it had a reasonable chance of success, and estimating the quantum and legal costs. D applied: (i) under CPR 31.12(2) and/or 31.19(5) for specific disclosure of C's instructions to counsel; and (ii) under CPR Part 24 for summary judgment on D's CPR Part 20 counterclaim for release of the retention. C applied for a striking out of those parts of D's counterclaim challenging the status of counsel's opinion on the grounds that the instructions to counsel were erroneous or incomplete.

Held

(1) It was not open to D or the court to question the cogency of reasoning or the legal or factual basis of counsel's opinion. (2) D's argument that there was an implied term in the agreement that the opinion should be based on true and complete facts failed, as the meaning of the agreement was quite plain from its wording. (3) It was only open to D to question whether, on its face, the opinion satisfied the conditions in the agreement, and no more. (4) It was expected that experienced counsel and instructing solicitors, subject to professional standards, would only seek the security of the retention of monies where there was a proper and substantial claim. (5) The full facts were inevitably uncertain until trial and it was not open to D to go behind the opinion and question the facts or instructions on which it was based. (6) The opinion stood as a form of certificate under the agreement to filter out improper warranty claims, which was its whole purpose. (7) C's application for striking out of D's counterclaim to the extent that it challenged the status of the opinion was allowed. (8) D's application for disclosure of the instructions to counsel was dismissed. The instructions were not a relevant document for the purposes of deciding whether the opinion disclosed a "good claim" as defined in the agreement. (9) Had the court upheld D's argument as to the existence of an implied term, it would have held that C had waived its legal privilege in the instructions by disclosure of, and reliance on, the opinion. (10) The opinion, on its face, met the conditions in the agreement. (11) Counsel was entitled to form a view on the prospects of success of the claim. (12) Counsel was not required by the agreement to independently investigate the core elements of the claim as put to her by instructing solicitors. D's understandable dissatisfaction with the opinion did not prevent it being a valid certificate for the purposes of the agreement and the retention. (13) The fact that it did not explicitly state that the claim was bona fide did not invalidate it as it was clear and unambiguous from the content of the opinion that counsel was satisfied that the claim was proper. (14) The opinion was valid for the purposes of the agreement and the retention would continue, subject to a release by C of the amount in excess of the quantum of the claim.

Order accordingly.

Chancery Division
Lightman J
Judgment date
11 June 2002
References

[2002] 2 Lloyd’s Rep 563

Practice areas