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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Welburn v Dibb Lupton Broomhead [2002] EWCA Civ 1601 (24 October 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1601.html Cite as: [2002] EWCA Civ 1601

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
LEEDS DISTRICT REGISTRY
(HIS HONOUR JUDGE MCGONIGAL
(sitting as a deputy High Court judge))

		Royal Courts of Justice Strand London, WC2 Thursday, 24th October 2002

1. LORD JUSTICE ALDOUS: I invite Lord Justice Dyson to give the first judgment.
2. LORD JUSTICE DYSON: In the late 1980s Mr Welburn was in business as a civil engineer. In December 1987, he entered into a subcontract with Stepney Contractors Ltd ("SCL") for the laying of concrete foundations at a site in Scarborough. A dispute arose as to whether the concrete was in accordance with the subcontract specification. Mr Welburn contended that the concrete conformed to the specification, and that SCL was not entitled to withhold payments from him. On 21st April 1988, he instructed Dibb Lupton Broomhead ("DLB") to act as his solicitors in connection with the dispute. On 9th May 1988, SCL determined the subcontract, and Mr Welburn left the site. He instructed DLB to refer the dispute to arbitration. This they duly did.
3. The arbitration was started in June 1988. It was decided that the arbitrator should determine a number of preliminary issues. On 25th January 1989, the arbitrator published his interim award. He held that the concrete was in accordance with the specification. On 16th February 1989, SCL issued a notice of motion to appeal against the interim award. This was not heard until 6th December 1991, and was dismissed by a judgment of His Honour Judge Fox Andrews QC on 14th January 1992.
4. SCL went into liquidation in January 1993. In the present proceedings it is common ground that by that date there was no realistic prospect of Mr Welburn recovering any sums from SCL.
5. Mr Welburn had himself been in financial difficulties for some time. On 26th October 1988, he had entered into an individual voluntary arrangement ("IVA") with his creditors. It will be necessary to refer to this in more detail later. Suffice it to say that the judge decided that the IVA effected an equitable assignment of all of Mr Welburn's assets to the supervisor, including in particular his claim against SCL, and that its effect was to constitute the supervisor as trustee of those assets for the benefit of the creditors who were party to the IVA. The IVA was terminated in March 1999.
6. In December 1997, Mr Welburn issued proceedings against DLB claiming damages for breach of contract and/or negligence in their conduct of the claim against SCL. In his amended Statement of Claim, Mr Welburn accepts that DLB pursued the arbitration efficiently and with due care until the publication of the interim award in January 1989. His pleaded case is that they were in breach of contract and/or negligent in failing to enforce the interim award, allowing SCL to delay the prosecution of its appeal, refusing to negotiate with SCL, and after the dismissal of SCL's appeal in January 1992, failing to pursue the arbitration claim in order to obtain an award in favour of Mr Welburn before SCL went into liquidation in January 1993. At paragraph 9 of the amended Statement of Claim, Mr Welburn pleads his case on loss as follows:

"9. By reason of the breaches of duty set out above, the Claimant has suffered loss and damage in that:

PARTICULARS

(1) The loss to Mr Welburn comprises primarily the failure of Dibb Luptons to recover the monies to which he was entitled from Stepney Contractors Ltd.

It will be contended that this should have been capable of recovery from 3 months following the dismissal of Stepney's Appeal, ie 14th April 1992, to allow for time to quantify and enforce the award.

(2) The amount capable of recovery would have been not less than the amounts conceded as owing by Stepney. A copy of their Schedule dated October 1988 is attached marked 'B'. This sets out the amounts claimed as totalling £88,599.71 with £49,701.42 certified, ie leaving a disputed balance of, £38,898.29. This amount should have been recovered.

(3) In addition it can be seen that Mr Welburn is conceded as having a claim for

(a) remeasure £6,071.10

(b) condemned work £11,912.23

(c) work he was prevented from executing by reason of being dismissed as a sub-contractor £20,914.96

We would claim the profit element in this work and we are pursuing enquiries as to the relevant rate of profit.

Items (a) and (b) above are claimed in full.

(4) Mr Welburn's claim had been quantified at a higher level by his own Quantity Surveyor, Mr Gillbank, as totalling £114,409.69 (if retention is included) which, deducting the £24,395.89 paid left a claim of £90,013.80.

If the award had been enforced then Mr Welburn had the prospect of adding to the sum set out in paragraphs 2 and 3 above. The difference (£90,013.80 - [£38,898.29 + £6,071.10 + £11,912.23 = £56,881.62] being £33,132.18).

(5) Interest accrues upon the sums which could have been recovered at the rate of 10% simple per annum.

(6) In relation to the IVA, it was envisaged that this would be completed in 2 years, ie by 26.8.90. Instead, legal fees, disbursements and expenses continued to be incurred. Copies of the Supervisors Abstract of Receipts and Payments are attached for the periods 26.8.90 - 25.2.91 and 26.2.91 - 25.8.92 marked 'C'.

(7) Finally, it has proved impossible for the Claimant to resume his business which was the whole idea behind the IVA. A claim will be made for the loss of opportunity to earn this livelihood. In the first 5 months of 1986 he made net profit of £38,000 on a turnover of £230,000."

7. By their defence, DLB deny that they acted in breach of contract or negligently. They allege that their client was the supervisor under the IVA, and not Mr Welburn, and that any failure to prosecute the claim was attributable to the Supervisor's failure to give them instructions and by lack of funds. They also plead that no loss was caused by their alleged negligence, and that, if any loss was caused, it was suffered by the creditors under the IVA and not by Mr Welburn.
8. The court decided to order a number of preliminary issues to be tried. They were in these terms:

"1. Who held the claim against Stepney after the inception of the Claimant's IVA and on what terms was it held?

2. Whether any of the losses that the Claimant alleges he has suffered as set out in paragraph 9 sub-paragraphs (1) to (6) of the Amended Statement of Claim amounts to a real loss suffered by the Claimant which is recoverable in law.

3. Whether the losses alleged in sub-paragraph 9(6), or any of them, are capable in law of being losses caused by the negligent delays of the Defendant alleged in the Amended Statement of Claim and, if so, which."

The issues were ordered to be tried on the assumption that the facts pleaded at paragraphs 1-8 of the Amended Statement of Claim were true. It is unnecessary to refer to these.

9. On 14th September 2001 in the Technology and Construction Court at Leeds, His Honour Judge McGonigal handed down his reserved judgment. He held as follows: (i) after the inception of the IVA, the claim against SCL was held beneficially by the supervisor as trustee for the creditors on the terms of the IVA, Mr Welburn retaining no more than the bare legal title to the claim which he held as bare trustee for the supervisor; (ii) none of the losses pleaded at paragraphs 9(1)-(5) amounted to real losses suffered by Mr Welburn recoverable by him in law, and (iii) the loss pleaded at paragraph 9(6) was not capable in law of being a loss caused by the alleged negligent delays of DLB. Accordingly, the judge ordered that Mr Welburn's claim to have suffered the losses pleaded at paragraph 9(1)-(6) be dismissed.
10. Having dealt with the preliminary issues in this way, the judge went on to consider DLB's application to strike out paragraph 9(7) of the Amended Statement of Claim on the grounds that Mr Welburn had failed to comply with orders made on 28th June and 13th August 2001 to supply further information. The judge granted the application and struck out the subparagraph. The effect of his two decisions of 14th September, therefore, was that Mr Welburn's claim was dismissed in its entirety. He now appeals against the decisions on the first two preliminary issues, as well as the decision to strike out paragraph 9(7).

The IVA

11. So far as is material, the IVA provided as follows:

"12. ...

Re: Clive Richard Welburn

Proposal to creditors for a Voluntary Arrangement in satisfaction of debts

1. Introduction

I, Clive Richard Welburn of 26 High Street, Cloughton, Scarborough, North Yorkshire make the following proposal to my creditors for a voluntary arrangement in satisfaction of my debts. I am insolvent and wish to make a voluntary distribution of my property between my creditors and to enable them to obtain bad debt relief in respect of value added tax charged to me. I consider that this voluntary arrangement would be quicker and cheaper than the only other alternative available to me namely, bankruptcy proceedings.

2. ...

3.

(a) ...

(b) There is no equity available to realize in respect of my dwelling-house 26 High Street, Cloughton, which is rented accommodation. It is proposed that the same should be excluded from this proposal. Otherwise, apart from those items of household clothing, bedding, equipment and furniture necessary to satisfy the domestic needs of myself and my family, my entire estate is included within this proposal. No Third Party property or guarantees are to be included in addition thereto.

(c) It is proposed that the claims of preferential creditors will be dealt with in accordance with the rules upon distribution in bankruptcy.

(d) ...

(e) ...

(f) it is proposed to deal with all other liabilities by distributing the funds held by the supervisor of the proposed arrangement by way of a single dividend in full and final settlement. VAT bad debt relief will be available to those creditors whose claims include value added tax. The appendix Statement of Affairs indicates that the final distribution may amount to about 50p in the pound, although this estimate must be read subject to paragraph (k) below.

(g) The arrangement is not expected to exceed 24 months duration.

(h) The amount proposed to be paid to the nominee by way of remuneration is £2,000 and his expenses are estimated at £750. It is proposed that the supervisor of the arrangement should be remunerated in accordance with the scale of charges and expenses ordinarily charged by his firm in bankruptcy business.

(i) It is proposed that the funds held for the purposes of the arrangement should be banked by the supervisor in an account to be opened with a bank of his choice and any funds held by the supervisor pending distribution to creditors may be placed upon deposit or invested in recognised securities for the benefit of the estate. If at the termination of the arrangement there are any funds remaining undistributed, they shall remain credited to the supervisor's account and be paid to such persons as the Court may direct upon the application of any interested party.

(j) ...

(k) The major asset of my estate is the benefit of a claim for work done and materials supplied against Stepney Contractors Limited. That claim is being pursued by way of arbitration and solicitors have been instructed by me. The supervisor will oversee the progress of this arbitration and I will provide all necessary assistance. I have already provided my solicitors with money on account of their costs but, to the extent that these may prove insufficient, the legal costs will be funded out of the other assets included within this proposal.

(l) Otherwise, the proposed functions of the supervisor are to agree creditors' claims and realize the claims and assets, bank and distribute the funds to be included in the arrangement. The supervisor is to keep such records of his receipts and payments and of his acts and dealings as are required by law. It is also intended that he shall deal with creditors' claims in respect of VAT bad debt relief."

The first issue: was the claim held by the supervisor on trust for the creditors?

12. On behalf of Mr Welburn, Mr Hirst's primary submission is that the IVA created no more than a binding contract between Mr Welburn as debtor and his creditors. He refers to a number of authorities and suggests that generally an IVA creates a contract and not a trust. For example, Johnson v Davies [1998] 2 All ER 649, 665D-G; Raja v Rubin [1999] 3 WLR 606, 612G, 614H; and Davis v Martin-Sklan [1995] 2 BCLC 483, 487G-H. He also submits that the judge was wrong to rely on the decision in Re Bradley-Hole [1995] 1 WLR 1097, where Rimer J held that the IVA in that case constituted the supervisor as trustee of all the bankrupt's assets that were the subject of the voluntary arrangement. Mr Hirst submits that Bradley-Hole should be treated as limited to its own facts or even treated with caution. It was, he says, decided on its own special facts which included that there was a conflict between the creditors who were party to the IVA and a subsequent trustee in bankruptcy; and that the bankruptcy was petitioned by a new creditor who was unaffected by the IVA. He also makes the point that the conclusion that a trust was created sits uncomfortably with the fact that some creditors may not be bound by the arrangement.
13. Mr Hurst's alternative submission is that, if the IVA created a trust, the trustee was Mr Welburn himself and not the supervisor. But as Lord Justice Aldous pointed out in argument, if the IVA did create a trust, there could be no doubt that the beneficiaries were the creditors. Accordingly, the alternative submission does not advance Mr Welburn's case. I shall consider, therefore, whether the IVA did in fact create a trust.
14. As the judge pointed out, section 253(2) of the Insolvency Act 1986 provides that a proposal by a debtor to his creditors for a composition in satisfaction of his debts or a scheme of arrangement of his affairs must provide for "some person ("the nominee") to act in relation to the voluntary arrangement either as trustee or otherwise for the purpose of supervising its implementation." This makes it clear that the nominee and supervisor may or may not be a trustee. Whether he is a trustee will depend on the intention of the parties, and that is established by an examination of the language of the IVA itself. I completely reject the submission that normally an IVA creates no more than a contract, and does not give rise to a trust. The authorities cited by Mr Hirst do not support such a sweeping proposition, which would in any event be contrary to the expectation engendered by section 235(2) of the Act. It is true that there is reference in some of the cases to CVAs and IVAs having "contractual force". But it does not follow that these decisions are authority for the proposition that CVAs and IVAs cannot create trusts. Contracts and trusts are not necessarily mutually exclusive, and there is nothing in the passages relied on by Mr Hirst to suggest that they are. We were referred to the recent case of Shierson v Tomlinson [2002] EWCA Civ 404, [2002] 3 All ER 474. In that case, it was common ground that, since the CVA provided for monies and other assets to be paid to or transferred or held for the benefit of the CVA creditors, a trust was created of these monies and assets for the benefit of the creditors. The court agreed that this was a correct analysis of the effect of the CVA (see paragraphs 28-30 of the judgment of the court which was given by Peter Gibson LJ), notwithstanding that the CVA was described as operating "as a form of statutory contract" (see paragraph 4).
15. The judge dealt with the trust issue at paragraphs 16 to 18 of his judgment in these terms:

"16. In considering who held the claim against Stepney after the inception of the VA it is appropriate to start by analysing the position of the Supervisor who came on the scene as a result of the IVA. It is clear from the terms of the IVA that any monies realised from Mr Welburn's assets, including monies realised from the Stepney claim, were to be paid to the Supervisor for ultimate distribution to Mr Welburn's creditors in accordance with the terms of the IVA after payment of the Supervisor's fees and any expenses (see sub-paragraph (l) quoted in paragraph 12 above). It is clear from sub-paragraph (k) quoted in paragraph 12 above that the costs of pursuing the claim against Stepney are to be provided by the Supervisor from monies raised from the rest of Mr Welburn's assets. It is clear from sub-paragraph (l) that it is part of the Supervisor's function 'to realise the claims and assets' and there is, in my view, no reason to exclude the Stepney claim from 'the claims'. Indeed the words 'the claims and assets' in sub-paragraph (l) was one of the modifications made by Mr Welburn on 26 October 1988 when the meeting took place to approve the proposed arrangement. Mr Hirst for Mr Welburn pointed to the phrase in sub-paragraph (k) that 'the supervisor will oversee the progress of this [Stepney] arbitration and I [Mr Welburn] will provide all necessary assistance' and the use of the word 'otherwise' at the start of sub-paragraph (l). He argued that this indicated that the Stepney claim was to be treated differently from the other claims. It seems to me odd that if, as Mr Hirst contends, Mr Welburn was to continue to pursue the claim himself, he simply agrees to provide all necessary assistance. That phrase suggests to me a lower degree of involvement in the pursuit of the claim than is indicated by the reference to the supervisor overseeing the progress of the arbitration. Moreover the Supervisor was clearly responsible for paying the costs of pursuing the arbitration and it must, therefore, have been the intention of the parties that he should have the necessary control of the arbitration to make sure that the monies collected for that purpose from Mr Welburn's other assets were spent properly. I conclude, therefore that the intention of the parties was that the claim against Stepney should be transferred to the Supervisor after the inception of Mr Welburn's IVA and that the proposal constituted an equitable assignment of that claim."

17. In re Leisure Study Group Harman J said (p68):-

'A person who holds property not for his own beneficial interest but for the benefit of others is normally and properly described as a trustee for those other persons who are normally to be considered to be beneficiaries of his.'

In that case the supervisor held money in a bank account. In this case the Supervisor was required to collect in assets and pursue claims. These assets were being collected and the claims pursued for the benefit of Mr Welburn's creditors, not for Mr Welburn personally unless there was a surplus. Looking at the arrangement as a whole it is clear that the creditors were asked to rely on the Supervisor, rather than on Mr Welburn, to get in the assets and pay them a dividend.

18. Like Harman J in re Leisure Study Group Ltd it appears to me that prima facie that the Supervisor in the case of Mr Welburn's IVA was asked to act in relation to the voluntary arrangement as a trustee. His job was to realise Mr Welburn's assets, including the claim against Stepney and to distribute the nett realisation to the creditors in accordance with the terms of the IVA. He was clearly in a fiduciary position and I have no doubt that he was a trustee. It seems to me to be difficult to fit the Supervisor in to Mr Hirst's suggested analysis of the arrangement as simply a contractual one between Mr Welburn and his creditors."

16. Although we did not call on Mr Holtum to make oral submissions, I have found his skeleton argument very helpful. I agree with him that the judge was right to follow the approach of Rimer J in In Re Bradley-Hole. In both cases, the primary role of the supervisor was to realise the debtor's assets and enable payments to be made to the creditors. In neither case was it expressly declared that the supervisor held the assets on trust, although the monies realised were to be held for the benefit of the creditors. The same was true in a number of other cases, including Shierson. In every case the question whether, and if so which of the assets that are subject to the IVA or CVA are held by the supervisor on trust for the creditors depends on the wording of the instrument that creates the arrangement.
17. Mr Hirst submits that, whatever the position may have been in relation to the other assets, the beneficial interest in the claim against SCL remained vested in Mr Welburn. In particular, he emphasises paragraph 3(k) of the IVA and the words "solicitors have been instructed by me ... the supervisor will oversee the progress of the claim". He also draws attention to the word "otherwise" which appears at the beginning of paragraph 3(l). He submits that the use of the word "oversee" is incompatible with the notion that the supervisor was the proprietor of the claim. He points out that the meaning of "to oversee" is "to watch" or "to survey". In other words, the role of the supervisor in relation to the claim was to keep an eye on the way in which it was prosecuted on behalf of Mr Welburn. The word "otherwise" in paragraph 3(l) indicates that it was intended that in relation to all Mr Welburn's assets other than the claim, the supervisor's role was to be quite different. In relation to these assets, his role was (as paragraph 3(l) makes clear), to realise the assets and distribute them to the creditors.
18. I cannot accept Mr Hirst's submissions. As Mr Holtum points out, the assets "included within the IVA" were, with immaterial exceptions, Mr Welburn's "entire estate" (see paragraph-3(b)). The major asset of the estate was recognised by the parties to the IVA as being the benefit of the claim against SCL (see paragraph 3(k)). The IVA was to deal with liabilities "by distributing the funds held by the Supervisor" to the creditors (paragraph 3(f)) with the funds held for the purpose of the arrangement being banked by the supervisor pending such distribution "for the benefit of the estate" (see paragraph 3(l)). All of this points strongly to the conclusion that the IVA created a trust of Mr Welburn's estate including the claim against SCL and its proceeds.
19. As regards the points made by Mr Hirst in relation to paragraph 3(k) and (l), it was clearly intended that DLB were to have the conduct of the proceedings against SCL, with the supervisor giving them instructions. The legal costs in excess of those previously paid by Mr Welburn on account were to be funded out of the other assets included within the proposal. "Overseeing" the progress of the arbitration did not mean that the supervisor had some kind of secondary role. As the judge pointed out, if, as Mr Hirst contends, Mr Welburn was to continue to pursue the claim for himself, why should the proposal refer to his provided "all necessary assistance"? The word "assistance" suggests that his role was to be subordinate to that of the supervisor. Since the supervisor was to be responsible for paying the costs of pursuing the arbitration, it must have been the intention of the parties that he should have the necessary control of the arbitration. The word "otherwise" in paragraph 3(l) simply does not bear the weight for which Mr Hirst contends. Paragraph 3(k) makes specific provision for dealing with the claim: this was sensible since there was an arbitration on foot. Paragraph 3(l) makes general provision for dealing with the other assets, where no litigation was on foot or in prospect. The word "otherwise" has no greater significance than that. Standing back from the detail of the proposal, one may ask: why should the parties have intended to draw the distinction that Mr Hirst seeks to draw? It was acknowledged by the parties to the IVA that the final distribution might amount to about 50p in the pound. It was conceded on behalf of Mr Welburn that even if the claim had been met by SCL, there would have been no surplus in the IVA. The claim was acknowledged to be the major asset of the estate. Why should the creditors have been willing to agree to exclude the major asset of Mr Welburn's estate from the trust created by the IVA? It seems to me that it makes no commercial sense that they should have done so.
20. I do not accept the submission of Mr Hirst that there is any reason to apply the approach adopted in In Re Bradley-Hole only to cases where there is a conflict between the interests of the creditors who are bound by the IVA and the interests of a subsequent trustee in bankruptcy. Nor should there be anything in the nature of a presumption against construing an IVA as creating a trust. The possible exclusion of some creditors from the assets of the trust is inherent in the possibilities of the statutory scheme for IVAs. In my judgment, the court should not be slow to find that an IVA has created a trust. In Shierson v Tomlinson, this court decided that a CVA continued notwithstanding the subsequent liquidation of the company. It was common ground that the CVA created a trust of the assets held by the supervisor. In deciding that the CVA did continue, Peter Gibson LJ said (at paragraph 50):

"50. Further, as a matter of policy, in the absence of any provision in the CVA as to what should happen to trust assets on liquidation of the company, the court should prefer a default rule which furthers rather than hinders what might be taken to be the statutory purpose of Part I of the 1986 Act. Parliament plainly intended to encourage companies and creditors to enter into CVAs so as to provide creditors with a means of recovering what they are owed without recourse to the more expensive means provided by winding up or administration, thereby giving many companies the opportunity to continue to trade. If Mr Zacaroli's default rule were to apply, so that trust assets under the CVA which happen not to have been distributed before the liquidation would become available to meet the claims of post-CVA creditors as well as CVA creditors, that would be a disincentive to creditors to agree to a CVA and to keep the CVA in operation."

21. I would accept the submission of Mr Holtum that the same policy considerations apply to IVAs, and favours construing them as creating trusts, rather than merely contractual arrangements. This is because otherwise creditors will have less incentive to agree to enter into IVAs, not least because post-IVA creditors will then be able to claim a share in the assets that are included in the IVA arrangements.
22. In my view, the judge reached the correct conclusion on the first issue and for the correct reasons.

The second issue: were the losses claimed in paragraph 9(1)-(5) recoverable by Mr Welburn as his losses?

23. The judge dealt with this at paragraph 20 of his judgment. He said that, having held that Mr Welburn was not the beneficial owner of the claim against SCL, and not therefore the beneficial owner of any monies recovered from SCL in respect of the claim, it followed that he would not have been entitled to any recovery made as a result of DLB's efforts by April 1992 or thereafter. Accordingly, Mr Welburn had not suffered any loss recoverable at law as a result of any failure on the part of DLB to make such recovery. As he put it:

"As I have held that Mr Welburn was not the beneficial owner of the claim against Stepney and not, therefore, the beneficial owner of any monies recovered from Stepney in respect of that claim it follows that he would not have been entitled to any recovery made as a result of Dibbs efforts by April 1992 or thereafter and that he has not, therefore, suffered any loss recoverable at law as a result of any failure on their part to make such recovery. It was his creditors who were entitled to receive any monies recovered from Stepney as a result of the pursuit of the arbitration claim and, if there was a failure to recover money from Stepney before Stepney went into liquidation, that gave rise to a loss suffered by Mr Welburn's creditors and not by Mr Welburn himself. The answer to the second preliminary issue is, therefore, that the losses claimed in paragraphs 9(1) to 9(5) are not losses recoverable by Mr Welburn."

24. Mr Hirst challenges this reasoning. He submits as follows. The fact that, as was common ground, the legal title to the claim against SCL was at all times vested in Mr Welburn gave Mr Welburn a sufficient interest to justify an award of damages in his favour against the solicitors. The mere fact that Mr Welburn had not lost his own money does not prevent him from claiming that he has suffered damage. In support of his argument, Mr Hirst relies on Forster v Outred [1982] 1 WLR 86; and Banque de Bruxelles v Eagle Star [1997] AC 191. Mr Hirst says that the position of Mr Welburn was analogous to that of a company in liquidation bringing proceedings in its own name to enforce a cause of action vested in it. No one would suggest that a successful defence to such a claim could be run on the basis of the argument that the company had suffered no loss because it had a duty to account to its creditors for any damages recoverable in its name. Mr Hirst also submits that the judge failed to reflect the fact that, once the IVA was terminated in 1999, it ceased to be a relevant consideration. The arrangement between Mr Welburn and his creditors fell away, and had to be ignored in determining who had suffered what loss as a result of the assumed negligence and/or breach of contract on the part of DLB. Mr Hirst acknowledges that the normal rule is that the date for assessment of damages is the date of breach: see Milliangos v Frank [1976] AC 443, 468. But that rule is subject to many exceptions: see, for example, Dodd Properties v Canterbury City Council [1980] 1 WLR 433, 451A. He relies in particular on Kennedy v Van Emden [1996] PNLR 409, as an example of how damages will be reduced if, although at the time of the breach, there clearly was a loss, a subsequent event occurs which obviates that loss.
25. I would reject the submissions of Mr Hirst substantially for the reasons advanced by Mr Holtum. Forster v Outred is of no relevance. In that case, the defendant's solicitor had failed to advise the plaintiff properly in relation to the grant of a mortgage on her property: had she been properly advised, she would not have granted a mortgage at all. The question was when she first suffered damage. It was held that she suffered damage when she executed the mortgage and encumbered her property with a legal charge, thereby becoming subject to a liability that might mature into financial loss in the future. As Mr Holtum points out, in the present case there was no issue but that the loss of the chance to recover money from SCL was capable of being a real loss. That loss had been suffered by January 1993. The question was: whose loss was it?
26. As for Banque de Bruxelles, the question there was different again. It concerned the scope of the duty of care in the sense of the kinds of loss for which a professional person may be liable. As Mr Holtum points out, no such issue arises here, since there is no dispute that the value of the loss of the chance of recovering money from SCL fell well within the scope of the duty of care owed by DLB to Mr Welburn.
27. Mr Hirst's analogy with the company in liquidation is unhelpful. The liquidation of a company does not assign the company's rights to its creditors or to the liquidator. Rather, it puts control of the company into the hands of the liquidator who is acting for the benefit of the creditors. The company, under the control of the liquidator, thus remains the proper claimant to any damages claimed.
28. I turn under this head to the effect of the termination of the IVA. I can accept that there might be circumstances where the termination would be relevant. Take a simple case not complicated by allegations of solicitors' negligence. Suppose the IVA were terminated without recovery from SCL; and suppose further that at some later date, Mr Welburn were to manage to procure payment of a sum from SCL in respect of his cause of action against it. It seems to me that on those bare facts, the sum would not be held by Mr Welburn on trust for the creditors, since the trust would have come to an end with the termination of the IVA.
29. But that is not this case. Here, the claim against SCL had become worthless by January 1993 at the latest. The position is, therefore, that the chance of recovery from SCL only subsisted between the commencement of the arbitration in 1988 and the insolvency of SCL in January 1993. Throughout this period, the beneficial ownership of the asset represented by the claim was vested in the creditors. They suffered the loss of that asset as a result of the assumed negligence of DLB. If there had been no negligence by DLB, the creditors would have recovered a sum from SCL, but Mr Welburn would have recovered nothing. That is the reality of the situation.
30. In my judgment, Kennedy v Van Emden does not assist Mr Welburn's case. At page 414C Nourse LJ said:

"Damages are to be assessed in the real world. Compensation is a reward for real, not hypothetical, loss."

Schiemann LJ, at page 420C, said:

"In the circumstances of the present cases, the task of the judge on the date of judgment was to award to each plaintiff that sum of money which would on that date put him as near as a money award could do so into the position he would have been on that date had there been no negligence on the part of the solicitor."

31. Applying the approach suggested in these two passages, it seems to me that Mr Welburn has clearly suffered no loss as result of the assumed negligence on the part of DLB in failing to get on with the claim against SCL.

The striking out of paragraph 9(7)

32. DLB sought further information of this head of loss by asking for "full particulars of the Head of Loss claimed and its causation." On 28th June 2001, Judge McGonigal ordered Mr Welburn to give the information by 19th July. On 19th July, Mr Welburn's solicitors sent DLB's solicitors witness statements in relation to the preliminary issues, and wrote saying that paragraph 85 of Mr Welburn's witness statement contained the further information ordered to be supplied of paragraph 9(7). Paragraph 85 contains no more than a summary statement of Mr Welburn's profits and losses between 1983/4 and 1986/7, and his gross earnings between 1989 and 2000.
33. Unsurprisingly, DLB were not satisfied with this response, nor was the judge. On 13th August, the judge ordered Mr Welburn within seven days to provide by way of a formal pleading the further information requested, fully particularising the head of loss claimed at paragraph 9(7), and the causation thereof. No such formal pleading was served within the seven-day period, or at all. On 5th September, Mr Welburn's solicitors wrote to DLB's solicitors a letter which included the following:

"In relation to the Further and Better Particulars, the position is this, that if you require figures for loss calculated on the weighted average earnings from our client's Civil Engineering business less his actual earnings elsewhere these can be provided. However they would be provided under protest because the Forensic Accountant may object to their being any weighting or he may have different ideas about how the loss should be calculated.

Given the existing albeit suspended directions for the Forensic Accountant it may well be misleading to attempt to provide detailed calculations. However if you still insist upon these being provided we can let you have these on the understanding that they are provisional only."

34. In my judgment, this response simply underlines the fact that nowhere was there to be found any statement by Mr Welburn of the loss that he was claiming under paragraph 9(7). This is not merely a pleading point. It is a point of substance. DLB had no idea as to period over which this head of loss was being claimed, how much was being claimed for each year of that period, or how that sum was calculated.
35. On 14th September, the judge struck out the sub-paragraph. He referred to the failure to comply with the two previous court orders. Counsel then appearing, Mr Stevenson, asked that Mr Welburn be given another chance. The judge then dealt with the matter as follows:

"I asked him [Mr Stevenson] what the claim was, what the logic of it was. On instructions from his solicitors he said that Mr Welburn's case was that but for the solicitors' negligence the arbitration would have yielded enough to satisfy Mr Welburn's creditors in the IVA and provide a surplus for him to start out in business again. When Mr Holtum pointed out that a concession was made by Mr Hirst for Mr Welburn on the 13th August that, having discussed the matter specifically with Mr Welburn, it was conceded that there would have been no surplus in the IVA, Mr Welburn's solicitors then had another idea which was conveyed through Mr Stevenson that Mr Welburn's case is that the creditors in the IVA would have accepted less than their strict entitlement in order to create a surplus. That point was not raised on the 13th August when the concession was made that there would have been no surplus, and in any event there is still no explanation of why any delays in dealing with the arbitration caused creditors, who say in witness statements they were supportive of Mr Welburn, or are creditors who, Mr Welburn says, were supportive of him, why it caused such supportive creditors not to do something that they would otherwise have done, let alone what that something was. ...

Mr Welburn has had two opportunities to plead his case, he has not done so. I conclude that there is no purpose or reason for giving him a further opportunity to do so and I therefore accede to the application that the claim be struck out, which means that the entirety of the action now goes."

36. Mr Hirst submits that the judge should not have struck out this part of the claim. He says that there was sufficient material in the witness statements for it to be clear what was being claimed under this head of loss. He refers in particular to paragraph 85 of Mr Welburn's statement, but for the reasons that I have already given, that does not meet the point. He also refers to the statement of Mr Bower. Mr Bower's company was a supplier to Mr Welburn. Mr Bower apparently had a high regard for Mr Welburn and was willing to support his business. That may be so, but I do not see how that affords any basis for impugning the judge's decision. Mr Welburn had had two opportunities to comply with court orders. He had taken neither of them. Nor did he even have a draft pleading on 14th September. Moreover, it was clear from the exchanges between counsel and the judge that, even at that late stage, there was complete confusion as to what was the basis of this head of loss. In my judgment, the judge was entitled to make the order that he made. This was a case management decision, and he was fully justified in making it.
37. For these reasons, I would dismiss this appeal both on the preliminary issues and on the striking out of paragraph 9(7).
38. LORD JUSTICE ALDOUS: I agree.
ORDER: Appeal dismissed with costs; usual order for costs against the Legal Services Commission; detailed assessment of the appellant's Community Legal Services Funding certificate. (Order not part of approved judgment)