Case Law

The Case of John Grimes Partnership Limited V Gubbins

In a contract in which one the parties fails to fulfill their obligation due to a mistake they are absolutely liable for any unintended consequences that may arise. Quintessentially, the case John Grimes Partnership Limited V Gubbins [1] the ruling was such that the court of Appeal held a construction engineer liable for losses caused due to his delay in completion of a construction project. In a contract, the pact between two parties is ideally limited to the mutual agreements assented to by both parties, however unforeseen prospects and consequent shortcoming are considered a breach of the contract. Ideally, the decision by the Court of Appeal in John Grimes Partnership Limited V Gubbins formed a basis for claims against experts in which compensation for losses are requested due to the fall in property value in the market. The claimants have outright incentive to pursue their claims within the jurisdiction of the contract with the other party involved in the contract.

The losses incurred to fall in property value and recoverable and the Court of Appeal emphasized the SAAMCO [2] in which the distinction was given pertaining to SAAMCO concern with liability due to negligence in valuation hence different from the losses incurred due to fall in property value as a result of a breach of the contract by one party. At present, the current state of law implies that a breach of contract translates to liability of the party that broke the contract. However, the party may not be liable for all the losses caused by the breach mainly because some of them maybe too remote. The question of what losses can be recovered is solely dependent on the agreements of the parties involved. The initial agreement between the parties is the primary reference of what can be recovered or otherwise not.

In case there is no explicit statement of the consequences for a breach of the contract with specific reference to loss and forms of loss which either party agreed to; then the law is referenced in implying potential liability to compensate for the losses incurred. In actual fact, the party in breach of the contract is held responsible for there is an implied implicit agreement accepting responsibility for the type of loss that can be verified and reasonably anticipated during the period of the contract for it not to be considered unlikely to occur in case the contract is broken (Macmillan, 2011).

Nevertheless, in case there is evidence in a certain case in which the nature of the contract as well as the commercial background or some unique circumstance relevant to the contract which may render the implied assumption of liability inappropriate for a type of loss then the party in breach of the contract is excused from legal responsibility. This case law is evident in the case of Hadley V Baxendale and The Heron II [3]. In the case of John Grimes Partnership Limited V Gubbins, the Court of Appeal supported the characteristic predictability test and referenced The Archilleas and SAAMCO which are appropriate examples in which special circumstances relevant to the contract hence the test of there being a reasonable foreseeable liability for a particular loss before contracting (Macmillan, 2011).

Consequently, this case law is significantly influential in decisions pertaining to property related cases in which contract negligence by professionals. Therefore, a claim of professional negligence in contract is subject to the test of reasonable predictability of a negative impact due to a breach of the contract. In this case, the professional negligence on the part of John Grimes Partnership Limited, the party is absolutely liable for losses due to the delay which they caused in the completion of the construction project. The law is interpreted such that, the claim against the negligent party renders them guilty of consequent losses since their breach of contract rendered the project vulnerable to external factors, fall in market value of the property.

The negligence is a direct cause of the explicit risk that came about due to the event in the recent past despite of the fact that the professional had no control or influence on these events. The court of Appeal cited the lack of records of similar cases with characteristics of special circumstances in the contract in which breach of the contract resulted in losses. However, the Court of Appeal noted that the unique nature of this case may be attributed to the non-volatility of property market in which change in prices must have occurred over a long period of time in this case a long delay by the contractor (Walkermorris et al., 2013).

The facts of the case which the Appeal Court had to consider in determining the case were whether a developer of land whose house construction project was delayed by the fault of a consulting engineer to execute his duties that he had been contracted to fulfill by a specified date could recover his losses that he suffered due to a depreciation of market value of the development that occurred during the duration of the delay. At first, the trial judge found that there was actual oral agreement between the parties pertaining to the completion of the work and strictly on ,March 2007 in which the deadline was missed and caused a fifteen months delay as a consequence of the engineer breach of the contract.

The conflict that arose among the parties to this contract began with the engineer who sought compensation for unpaid fees amounting to about two thousand eight hundred and ninety three Euros. In response, the developer counterclaimed for fees already paid and the losses incurred due to the engineer’s failure to complete the work by the assented date that caused a reduction in the market value of the housing development and consequent accrued costs in building costs (Walkermorris et al., 2013).

The decision of the Court of Appeal on this case; cited preceding cases that involved losses due to breach of contract with regard to the standard predictability test as indicated in Heron II case law as well as the most recent decision of the House of Lords in the case of Achilleas to substantiate the circumstances in which a particular unique scenario may render the party in breach of contract free from liability due to the remote and nature of the circumstance in which the parties could not have contracted due to reasonable foreseeable loss (Dahlhoff, 2012)..

The court also referred to the decision in the case of Supershield Ltd v Siemens Building Technologies Fe Ltd [5] which it considered a guide with clear expression of the consideration of the reasonable predictability test that it is valid and objective although subject to exceptions in which the contract as well as the commercial background reflected that the test did not indicate the parties’ intentions. Thus, applying this test to the facts in this case the losses incurred due to the fluctuation of prices in the property market were reasonably predictable at the time of the contract hence any delay was surely known to be a risk, thus there was no justified reason to hold the case outside the standard reasonable predictability rule; in which there was no evidence of any agreement or expectation that development market to make it reasonable for assumption of responsibility for this type of loss (Walkermorris et al., 2013).

Therefore, an individual who is a party to a contract can be brought to a hearing for professional claims. Claims are no longer limited to the terms of the contract. Losses incurred due to an individual mistake are equally recoverable. The Appeal Court categorically stated the reality of the loss being a consequence of change in market value did not imply the case was out ruled of being applied to the test of reasonable predictability and neither did the extensive losses incurred in comparison to the amount of professional’s fee.

The Court of Appeal quoted the Lord Hoffman in the Achilleans in which he stated that the concern of whether a given form of loss occurred due to a party’s assumption of contractual responsibility entails the interpretation of the contract to an in-depth level entirely against its commercial background in line with the provision of the law in general. The extent of a defendant’s legal responsibility is thus relative to the facts of the contract and ascertained by the SAAMCO law. Professionals securing claims definitely need to provide adequate evidence in order to exhibit market practice against the assumption of liability for specific types of losses (Macmillan, 2011).

Duress and Misrepresentation

The Case between BNP Paribas S.A and Anchorage Capital Europe LLP & Ors [2013] EWHC 3073 involves a dispute between a bank and a hedge fund in which a handful of instant message communications that allegedly amounted in a binding contract between the parties in implicit terms of contract. The main ground of contention is whether the case should be heard in New York or Luxembourg. This is usually common in cases involving multi million dollars in which the outcome will determine the fate of the money at stake. The parties in the case have applied two different challenge; one regarding the jurisdiction of the English Court-by the second through fourth defendants whilst the claimant application seeks to restrain the second defendant from tracking the proceedings which it has instigated in New York because it is a common ground raising similar issues (Walkermorris et al., 2013).

The claimant BNP Paribas SA, a French public limited corporation headquartered in Paris, but a global service provider in which its London Branch, Financial Credits Trading Desk but not connected with Paris where it has no merchants. The Anchorage group is a registered financial investment services that is operational in New York and duly registered in various jurisdictions as a portfolio holding company. There are individuals within Anchorage group and consequent defendant in this case; the first is Anchorage capital Europe LLP (Anchorage London) which is an English LLP with its headquarters in London. The second defendant Anchorage Capital Group LLC (Anchorage New York), a Delaware corporation that is headquartered in New York registered in the United States. The third defendant is ACMO Sarlo (ACMO) whereas AIO III Sarl (AIO) is the fourth; both are Luxemborg conglomerations. Nevertheless, the four Anchorage entities are generally referred as “Anchorage” (Cartwright, 2012).

This case is based on the subordinate private placement notes circulated by the Anglo Irish bank quoting value of US $ 95 million (the notes). These notes were circulated in accordance with a Note Purchase Agreement dated 28 September 2005. In accordance with the Note Purchase Agreement, the Anglo Irish Bank issued a principal amount of US $ 165 million Subordinated Notes, Series A, payable 29 September 2015 (the A Notes) and US $35 million Subordinated Notes, Series B, payable 29 September 2017 (the B Notes).

The notes of interest in this case are the A Notes. This is because they are not listed on any exchange enterprise and are actually certificated. The Anglo Irish Bank is incorporated in the Republic of Ireland and was nationalized by the Irish Government in 2009. It was later merged with the Irish Nationwide Building Society in 2011 July 1 that had also undergone nationalization to form the Irish Resolution Corporation Limited (IBRC). However, on 7 February 2013 it was reported that IBRC would be shut down rendering the notes herein virtually insignificant.

As for BNPP Paribas there were two binding English Law contracts that were entered. The first case involved an issuance of Notes with an expression of US $50 million on Friday December 7 2012. The second case was a sale of notes worth US $ 45 million on Monday 10 December 2012. The primary case for BNNP Paribas is that the contract executed on Friday with Anchorage New York, whereas the US $ 50 million was concluded with Anchorage London in which BNPP Paribas claims that both Anchorages were proceeding with the transactions as agent of unidentified principals that is, ACMO and AIO, to which the Anchorage had resolved to allocate the Notes. The Anchorage case herein is quite brief in that has no bidding contract with BNP Paribas with regard to the two transaction of the notes on either dates of the aforementioned dates since material terms were under the jurisdiction of the New York and limited to a “Type II preliminary agreement ”.

In this case, the parties involved are under the jurisdiction of the New York Law that limits each parties’ obligation to negotiating final terms in good faith which as a consequent of the parties’ successive conduct they may conclude a binding contract on 14 February 2013 for the first instance or a different one in reference to an existing contract to expressly form a basis for the interpretation of terms of a the terms of agreement under the provision of the New York Law. In this case, the BNP Paribas will get an avenue to give its representations of which it has breached otherwise if no contract is in place it is conclusive that BNP Paribas is in breach of its duty to negotiate in good faith (Walkermorris et al., 2013).

The case law herein provides the situation in which an individual or an entity that has been misrepresented or threaten by legal action under a given scenario may be held accountable and liable for breach of contract due its fault in transacting business. The circumstances under which the issue raised in the case BNP Paribas V Anchorage Capital Europe LLP & Ors lead to the legal conflict in the agreements binding the parties herein. The BNP Paribas in London was contacted by a New York investment firm Fir Tree Partners on October 2012 and inquired on whether PNP Paribas was considering purchasing the Notes herein playing the role of a broker to execute the sale between the Fir Tree Partners and Anchorage London.

The agreement was passed with acceptance by the Anchorage legal for the BNP Paribas to act as principal in the purchase of the notes from the Fir Tree Partners and the on sale of the same. However, the Anchorage stipulated a condition for BNP Paribas on its ability to buy and the sale Notes from Fir Tree Partners and to Anchorage respectively hence making a return. Although Anchorage conducted a diligence duty on the notes, they did not share the information with BNP Paribas who were aware of the diligence duty that Anchorage was carrying out hence rightfully entitled to the assumption that Anchorage would analyze any relevant risks involved.

Although the preliminary contact between the two entities had been mediated by Matt Hartnett of Anchorage London negotiations were later taken over by the Anchorage New York branch. On December 5 2012 Anchorage New York provided Anchorage’s initial offer of the Notes through Scott Goodwin offering to buy the Notes with a quoted value of US 60$ million. Further negotiations, were conducted in the consecutive day regarding the value and quantity of Notes to be sold. This was concluded on 7 December 2012 with a valuation of the illiquid note agreement between the two parties to be executed by Anchorage.

Mr Goodwin and Mr Lett carried the trade via Instant Message communication , which BNP Paribas contend as resulting to a binding contract for the purchase of by Anchorage branch based in New York US $ 50 million of Notes at the agreed price of 62.5 cents on the US dollar. The transaction continued, this time mediated by an affiliate , BNP Paribas Securities Corporation in New York that sent a voice message to Goodwin setting out the price and quantity of Notes in which he confirmed trade (Beale, 2012).

The question of whether the trade between the BNP Paribas and Anchorage amounted to a binding contract is apparently clear since the English law is applicable in this case and the Friday as well as the Monday sale and purchase activities involved agreements on the pricing and conditions of acquisition of the Notes by one party and selling them to the other. In additional, the words used in the instant messaging part of the trade have evidence of agreement and due procedure in the transaction.

Thus, confirmation of a binding contract whose characteristic are outlined in the case law, Air Studios (Lyndhurst ) LTD V Lombard North Central Plc [2012] EWHC 3162 (QB). The second and final question is with whom the contract was made. In essence, the primary case f BNP Paribas Is that the Notes sale made on Friday was concluded with Anchorage New York which was preceding as an agent of ACMO herein an undisclosed entity whereas the Monday contract was concluded with Anchorage proceeding as an agent of ACMO AND AIO who were undisclosed principals herein. Therefore, the confirmation of these aspects of the contract enhances its validity and jurisdiction (Wadlow, 2011).

The ‘Veil of Incorporation’

An individual maybe afforded separate legal protection, but this may be overruled by the courts depending on the circumstances and nature of breach of contract or negligence. In the case, The County Homesearch Company (Thames & Chilterns) Ltd V Cowham [2008] EWCA Civ 26 (31 January 2008), Mr Recorder Hollander QC appealed the verdict pertaining to a buying agent’s commission. Mr and Mrs. Cowham who had come across and advertisement by County Home Search (Thames Chiltern) Ltd offering their services of a purchaser’s agent in finding a property. The two were intending to buy a house thus went ahead to seek the services of County Homesearch company wherein Mr Cowham met Mr Le Neve Foster and paid him the registration fees before signing the stipulated Terms and Conditions.

The contract was meant to last six months unless specified otherwise by either party. The contract had a direct expression in clause that Homesearch will work closely with the customer to find a suitable desired property for them to buy whereas the third clause of the contract specified that Homesearch would allocate adequate time and effort o behalf of the client to find a proper property for them. Further, the clause stipulated that the agreement would consider an introduction of the client tot a property if they client does receive the particulars of a property form the company directly or indirectly from an estate agent who is a close contact of the company or from any firm. In additional, the client could be introduced to a property by an individual who the client has ordered to negotiate with the company on their behalf (Puig, 2000).

The contract between the two parties was no effective and the efforts of Mr Le Nee Foster to introduce the Cowham’s to properties that had visited before as well as new ones that they could be interested in went futile. This happened on 12^th July. However, the Cowham’s made their decision not to proceed with the Beel house, on of the properties which they had been introduced to in August 2005. Later on, the Cowham’s visited another property on September. This was a property of interest that they had been introduced to by Mr Le Neve Foster.

After several visit t the property in company of a consultant, MR Robert Clarke the couple realized it was not feasible to proceed with the property since they desired some modifications that apparently became unrealistic due to the sellers’ restriction. Thus, Mr Clarke introduced them to a different property which they would be able to realize some modifications. This property was named Hunter’s Moon and Mr Le Neve Foster had previously introduced them to it but the judge noted that they had not had been interest in it back then (Dahlhoff, 2012).

Mr Clarke affected the contact between the client and the owner of the property which eventually resulted in conclusion of the property purchase. However, both Mr Clarke and the client agreed not to inform Mr Le Neve on this and keep it confidential. Although, Mr Le Neve Foster discovered this and demanded compensation, the court ruled out his claims on the basis that nature of terms in selling contracts are such that a term cannot be implied unless indicate do in the contract.

Although the contract provides for commission the transaction brought about, the agent has to be directly involved in effecting the purchase a condition that this case does not fulfill. In reference to the case law Millar Son & Co v Radford (1993) 19 TLR 575 it is merely sufficient to indicate that the agent’s introduction is the automatic cause of effecting a transaction hence individual responsibility is sought regarding the role of the agent by removal of the company legal entity veil to explore Mr Le Neve Foster herein.

Circumstances in which the protection afforded to members by separate legal personality and the ‘veil of incorporation’ will be removed by the courts (Dahlhoff, 2012).