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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 >> Landau v Barclays Bank Plc [2004] EWCA Civ 90 (30 January 2004) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/90.html Cite as: [2004] EWCA Civ 90

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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
CHANCERY DIVISION
(MR JUSTICE NEUBERGER)

		Royal Courts of Justice Strand London, WC2
		30th January 2004

LORD JUSTICE PETER GIBSON:
1. I will ask Lord Justice Chadwick to give the first judgment.
2. LORD JUSTICE CHADWICK: This appeal and cross-appeal are from an order made on 8th July 2003 by Neuberger J in proceedings brought by Mr Leser Landau against Barclays Bank Plc. The claim in the proceedings is for an account of monies said to be due under an agreement made between the parties and contained in a letter dated 28th October 1997.

The underlying facts

3. The circumstances in which the agreement of 28th October 1997 was made are not in dispute. The claimant, Mr Landau, was an architect and property developer based in Switzerland. In or before 1989 he acquired a development site at East Quayside, Sandgate, Newcastle upon Tyne. The site was, or became, the subject of a compulsory purchase order made by the local authority. In November 1989 Barclays Bank Plc agreed to advance monies to refinance the purchase of the Sandgate site; to fund a challenge to the compulsory purchase order; and to meet development costs. It did so on the security of the site and on the basis of a valuation report ("the first report") prepared by Grimley JR Eve ("Grimleys"), chartered surveyors and dated 7th November 1989. That report was addressed to the Bank. It valued the site at £5 million.
4. Thereafter, in the years to 1994, the Bank made further advances to Mr Landau; first on the basis of a second report prepared by Grimleys and dated 28th October 1991; and subsequently on the basis of a third report, also prepared by Grimleys, dated 16th July 1993. The second report was addressed to Mr Landau. It valued the site at £7 million. The third report was addressed to the Bank and valued the site at £5.25 million. The total advanced by the Bank to Mr Landau was £2.4 million or thereabouts.
5. In or about 1994 the challenge to the compulsory purchase order failed. In May 1996 Sandgate was acquired by the local authority on payment of compensation assessed by the Lands Tribunal at or about £1.1 million. That sum was paid to the Bank; but it was, of course, substantially less than the amount of the indebtedness which had been secured on the Sandgate site. It was also substantially less than the amount of money which Mr Landau had spent on acquiring and improving the site. After receipt of the compensation monies, the Bank was left with an unsecured debt of some £2 million (after accrued interest); and, in addition to his indebtedness to the Bank, Mr Landau had suffered a substantial loss.
6. On 28th October 1996 the Bank commenced proceedings against Grimleys by the issue of a writ generally endorsed with a claim for breach of contract and negligence in respect of each of the three valuation reports. A statement of claim in those proceedings was served on 23rd December 1997. In those proceedings the Bank contended that the valuations contained in each of the three reports were negligently high, and that, when advancing monies to Mr Landau after the provision of each report, the Bank relied on the valuations contained in it.
7. Following a successful mediation the Bank's proceedings against Grimleys were compromised on terms set out in the schedule to an order dated 19th May 2000 in the Tomlin form. Paragraph 1 of the schedule was in these terms:

"[Grimleys] shall pay to the [Bank] the sum of £1.3 million (inclusive of costs and interest) in full and final settlement of all claims which it has or may have against [Grimleys] arising out of or in relation to the issues pleaded in this action and including (without limitation), any act carried out or omitted to be carried out in connection with The First Valuation, The Second Valuation or The Third Valuation as defined in the pleadings and Statements Of Case herein and any act carried out or omitted to have been carried out at any time in respect of the land known as East Quayside, Sandgate, Newcastle ..."

The three valuations there referred to were the valuations contained in the three reports, dated respectively 7th November 1989, 28th October 1991 and 16th July 1993, upon which the Bank's claims against Grimleys were based.

The assignment of Mr Landau's claims to the Bank

8. In the meantime, on 27th October 1997, Mr Landau had agreed to assign to the Bank whatever claims against Grimleys he might have as addressee of the report dated 28th October 1991 ("the second report"). The assignment which he executed on that day contained the following recitals:

"2. ... On the basis of the statements made and the conclusions reached in the Report by Grimleys, the Bank, as the Customer acknowledges, advanced further sums to the Customer in connection with the proposed development both by way of capital and interest which would not have been advanced had the Report valued Sandgate with sufficient care.

3. The Customer and the Bank agree that Grimleys failed to exercise any or any sufficient skill and care in the preparation of the Report by reason of which both the Bank and the Customer contemplate issuing proceedings against Grimleys for recovery of damages.

4. The Bank has agreed to give time and indulgence in relation to the repayment of the Debt in consideration of which the Customer has agreed to assign in equity all rights and remedies presently vested in him (a) in his capacity as addressee of the Report and/or (b) as having paid Grimleys' fee for preparing the Report."

In that context "the Report" is the second report, "the Customer" is Mr Landau, and "the Debt" is Mr Landau's indebtedness to the Bank.

9. In the operative clauses of the assignment Mr Landau appointed the Bank his attorney to give an effectual discharge "for all liabilities on the part of Grimleys arising out of or in relation to the rights, remedies and interests [arising out of or in relation to this Report]"; and covenanted that he would not take any proceedings of any nature against Grimleys "in connection with or arising out of ... the terms of the Report" unless and until written notice had been given to him by the Bank that it had elected "not to issue proceedings nor proceed with the claims by reference to the Report".

The side letter of 28th October 1997

10. On the following day, 28th October 1997 the Bank wrote a side letter to Mr Landau, in the following terms:

"Further to our discussion on Tuesday 4 March 1997, and the correspondence which has since been exchanged between our respective solicitors, I am writing to confirm that in consideration for and conditional upon your entering into an equitable assignment in the terms of the attached draft in relation to your rights and remedies in respect of the valuation report prepared by Grimleys on 28 October 1991 ('the Report'):

1. The Bank covenants with you not to issue proceedings for recovery of your liabilities on the accounts [identifying them] save that this covenant will not apply to the first £50,000 of those liabilities (however calculated) and the Bank's rights and remedies against Grimleys are expressly reserved to the extent that the indebtedness on those accounts constitutes damages properly recoverable from them.

2. as soon as reasonably practicable following the receipt of final damages from Grimleys arising out of or in connection with any claim which the Bank might bring against them by reference to the Report, we will pay you a sum equivalent of 30% of the net recoveries (that is the sum recovered less costs, disbursements and - if applicable - tax); and

3. subject to the Bank's absolute and unfettered discretion and on the basis, in particular, that the recoveries referred to at clause 2 above are sufficient for this purpose, we may also then write off the residual balance of £50,000 of your indebtedness to us.

The Bank will use its reasonable endeavours to pursue the claims by reference to the Report and, on the assumption that you are not at the relevant times directly involved in the litigation, will report upon progress to you on a quarterly basis.

Should the Bank elect at its absolute discretion not to proceed with the claims by reference only to the Report, then we will give you written notice to that effect and, following service of such notice, you will be entitled to call for a re-assignment to you of all your rights and remedies referable to the 28 October 1991 report which are the subject of the equitable assignment referred to in the opening paragraph above."

It has been common ground that the draft assignment referred to in the first paragraph of that side letter was the assignment which Mr Landau had executed on the previous day.

These proceedings

11. Mr Landau had no part in the negotiations which led to the compromise of the Bank's claims against Grimleys in May 2000; but, in a letter dated 30th June 2000 from the Bank's former solicitors, he was informed that mediation had been successful. He sought particulars of the terms; so that he could be advised whether anything was due to him under paragraph 2 of the side letter. The Bank declined to provide those particulars, on the grounds that the schedule to the Tomlin order contained a confidentiality clause. But the Bank asserted that monies payable under the compromise were referable only to the first Grimleys' report, dated 7th November 1989; and were not referable to the second report, which, alone, was the subject of the side letter. On that basis it was denied that anything was due to Mr Landau under the side letter.
12. Mr Landau commenced proceedings for pre-action disclosure. In the course of those proceedings he obtained sight of the Tomlin order of 19th May 2000. That led to his application, in these proceedings, for summary judgment for an account of sums due to him "as his 30% share of the net recoveries made by the [Bank] from Grimleys" pursuant to that order. He sought, also, summary judgment, by way of damages for breach of the reporting obligation in the side letter, for an amount equal to the costs which he had incurred in obtaining disclosure of the Tomlin order.
13. That application came before Master Bowles. On 10th April 2003 he dismissed the claim for an account based on a 30% share of all the net recoveries made by the Bank from Grimleys under the Tomlin order. But the Master directed that an account be taken of the sums due to the claimant "as his 30% share of the net recoveries ... arising out of or attributable to [the second Grimleys' report]"; and he ordered that, for that purpose, all necessary further inquiries be made. The effect of that direction was that it would be necessary for the court to determine what part (if any) of the £1.3 million payable by Grimleys under the Tomlin order arose out of or was attributable to the second report. The Master gave summary judgment for damages for breach of the reporting obligation under the side letter.
14. Mr Landau appealed to the judge. Neuberger J held that the Master had been right in his conclusion that Mr Landau was not entitled to succeed on his claim for 30% of the whole £1.3 million paid under the Tomlin order (less costs) but was entitled to recover such proportion of that sum as was properly referable to the Bank's claim in relation to the second report (less an appropriate proportion of the costs); although he reached that view for reasons which differed in some respects from those which had attracted the Master. The judge went on to consider what he described as "the second main point": whether Mr Landau was right in his contention (advanced before the judge for the first time) that the proportion of the £1.3 million of which he was entitled to a share was one-third, or whether (as the Master had concluded) that proportion could only be determined after a further inquiry. On that second point the judge accepted Mr Landau's contention. His order of 8th July 2003 contains a declaration that Mr Landau is entitled to judgment for £130,000 less one-third of the Bank's total costs in its proceedings against Grimleys. £130,000 is, of course, one-third of 30% of £1.3 million.
15. The judge adjourned the application for an interim payment to enable the parties to agree the amount, including, inter alia, the amount of the costs in the Grimleys proceedings. On 29th July 2003 the parties consented to an interim payment order in the sum of £97,893.93. It appears from the schedule to that order, in which the calculations leading to that figure are set out, that it was agreed that the costs and disbursements incurred by the Bank in obtaining recovery in the Grimleys proceedings did not exceed £119,702.26; so the amount of the net recoveries from Grimleys under the Tomlin order was not less than £1,180,297.74. It is that sum which Mr Landau says is the sum in which he is entitled to a 30% share.
16. The Bank obtained the permission of this Court (Jonathan Parker LJ) to appeal from the order of the judge on the ground that the judge had been wrong to decide the second point as he did. Permission was granted on the basis that an appeal on that point would raise an issue of some general importance as to the extent to which, consistently with its overriding objective, the court can, in effect, decline to adjudicate on issues arising in satellite litigation. The Bank's appeal prompted a cross-appeal on behalf of Mr Landau from the judge's refusal to order an account on the basis of his claim for 30% of the whole £1.3 million paid under the Tomlin order (less costs). Permission to cross-appeal was also granted by this Court. The issues on the appeal and the cross-appeal are closely interlinked; and it would, I think, have been unsatisfactory to determine the appeal on the second point without considering whether the judge was correct on the first point. And, if the judge was wrong on the first point, the second point does not arise.

The first issue

17. I turn, therefore, first to the issue raised by the claimant's cross-appeal: whether the judge was correct to hold that the entitlement, under the side letter, was to share only in that proportion of the recovery from Grimleys as was properly referable to the Bank's claim in relation to the second report (less an appropriate proportion of the costs); and that there was no entitlement to a 30% share in the whole of the £1.3 million payable under the Tomlin order.
18. The judge identified two distinct arguments in the submissions advanced on behalf of Mr Landau:

"... The first ... is that, because the Bank's 'claim' against Grimleys was based in part on the second Report, the payment of £1.3m constituted 'final damages from Grimleys ... in connection with [a] claim which the Bank [brought] by reference to the [second] Report'. The second way in which Mr Landau puts his argument is that, as the £1.3m damages did not distinguish between the three Reports, it was paid in its entirety 'in connection with' the second Report, albeit that it was also paid in connection with the other two Reports."

19. The judge rejected the first of those arguments at paragraph 19 of his judgment:

"In my judgment, the first argument raised by Mr Landau involves misconstruing the word 'claim', giving too much weight to the words 'in connection with', and giving too little weight to the words 'by reference to the [second] Report', in paragraph 2 of the Letter. Further, it is an interpretation of the Letter which is less commercially likely than that advanced by the Bank."

He explained that, in his view, the word "claim" in paragraph 2 of the side letter meant "cause of action", rather than "proceedings". He took the view that the words "in connection with" added nothing to the words "arising out of". He said this, at paragraph 21:

"In my opinion, the words 'arising out of or in connection with' represent a 'belt and braces' approach to drafting, of a sort familiar to lawyers. In many, probably most, cases where such expressions are used, it is therefore not helpful to seek to give different meanings to each expression either side of the 'or'."

And he went on, at paragraph 22, to say this:

"In any event, the words 'in connection with', however wide a meaning they may justify, cannot escape the effect of the limiting words 'by reference to the [second] Report'. Whatever damages might have been recovered by the Bank from Grimleys, it seems to me that these latter words were included to make it clear that it was only those damages which were in some way attributable to the second Report which should be the subject of ... the 'sharing arrangement' between the Bank and Mr Landau."

20. The judge addressed the second argument at paragraphs 29 and 30 of his judgment:

"29. ... This contention rests on the proposition that the £1.3m is, in effect, referable to each of the Reports, because the terms of the 2000 Order expressly make it clear that the £1.3m relates to each of the three Reports. There is nothing in the Letter which indicates that the 'final damages' referred to in paragraph 2 need be solely 'by reference to the [second] Report', and, therefore, runs the argument, the fact that the £1.3m can properly be attributed to each of the three Reports does not call into question the contention that it can properly be attributed to the second Report. The contention derives a degree of support from the relative width of the words 'arising out of or in connection with', which I have already discussed. It also derives some support from the fact that, if it is rejected, there could be obvious practical difficulties in establishing what proportion of the £1.3m is fairly attributable to the second Report, again a point which has been discussed above.

30. Despite the force of this argument, I have come to the conclusion that it cannot be said that the whole of the £1.3m represented 'final damages' which fall within paragraph 2 of the Letter. Given my view that, as a matter of construction, that paragraph is limited to damages which are recovered on a claim which is referable to the second Report, it appears to me that it would be inconsistent with that construction, and with the commercial purpose which supports that construction, if the whole of the £1.3m recovered under the agreement the Bank reached with Grimleys, reflected in the Order, was treated as damages recovered by the Bank 'arising out of or in connection with any claim... by reference to the [second] Report'."

21. The judge recognised, correctly, that the side letter had to be construed in the light of the facts known to the parties at the time. He approached the matter on the basis -- as he must have thought to be common ground -- that both the Bank and Mr Landau knew, on 28th October 1997, that the Bank was pursuing, or was intending to pursue, claims against Grimleys founded on the contention that, in making advances to him, it had relied on each of the three reports and that each of the three reports contained negligent advice. In argument before us counsel for the Bank appeared to suggest that the judge had been wrong to assume that that was common ground. It could not be disputed that the Bank's claims, made in the writ issued in October 1996, were founded on reliance on each of the three reports; but, it was said, there was no evidence that Mr Landau had seen that writ and no assumption as to Mr Landau's knowledge should be made on an application for summary judgment.
22. For my part, I think that the judge was right to approach the matter on the basis that both parties to the side letter knew that the Bank was relying, against Grimleys, on all three reports. It cannot be said -- as the Bank accepted -- that Mr Landau did not know that there were three reports. The provision of reports was required as a term of the facility or facilities under which the Bank was making advances. Nor, in the circumstances that Mr Landau clearly did know -- from the recitals in the assignment which he had executed on 27th October 1997 -- that the Bank was alleging negligence in relation to the second report, is it realistic to suppose that he did not appreciate that the same allegation was being made in relation to the first and third reports. The reason why the assignment and the side letter were, in terms, confined to the second report was that the second report -- unlike the first and third reports -- had been addressed to Mr Landau, rather than to the Bank. But, although I think that the judge was correct to approach the matter as he did, I am not persuaded that the argument that the side letter should be construed in the manner for which the Bank contends is any the stronger if it is assumed that Mr Landau did not know of the Bank's intention to rely on the first and third reports as well as on the second.
23. Construction of the side letter in the light of the facts known to the parties at the time -- or, to put the point more broadly, with regard to "all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract" (per Lord Hoffmann in Investors' Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912) -- requires consideration of the objective or commercial purpose of the transaction into which the parties entered. In the present case, the following factors are of relevance: (i) in order to recover any damages on its claim against Grimleys the Bank had to establish that it had suffered loss by lending to Mr Landau; (ii) it was necessary, therefore, for the Bank to establish, against Grimleys, that the shortfall after receipt of the proceeds of its security on the Sandgate site was not recoverable from its debtor; (iii) in that context, the extent to which Mr Landau had his own claim against Grimleys in relation to the second report was plainly relevant; (iv) existence of that claim (which was not co-extensive with the Bank's claim) made it difficult for the Bank to assert that Mr Landau was or would be without assets to satisfy the debt which he owed; and (v) Grimleys would be understandably reluctant to compromise the Bank's claim on the basis that Mr Landau had no assets to satisfy the debt if there remained a risk that they would be faced with his claim against them. It must have been obvious, in October 1997, that the Bank had a real commercial interest -- not limited to the technical question of title to sue -- in acquiring control of Mr Landau's claim against Grimleys; and that, by ceding control of his claim to the Bank, Mr Landau was giving up whatever value that claim might have to him -- a value which would include, but might exceed, the amount of his indebtedness to the Bank. The assignment and the side letter must be seen in that context.
24. Seen in that context, the assignment and the side letter served the Bank's commercial purpose by giving to the Bank control over Mr Landau's claim against Grimleys. That enabled the Bank to deal with Grimleys on the basis that it could release or compromise Mr Landau's claim as well as its own; and so provide Grimleys with the opportunity to free themselves from all potential liability in respect of the three reports. But there was, of course, a price to pay for what Mr Landau was giving up. He was giving up "all his rights, remedies and interests arising out of or in relation to the [second] Report" -- see the first operative clause of the assignment. Prima facie, if his claim in relation to the second report was well founded, those rights and remedies included damages in respect of the loss which he had suffered by proceeding with the development in reliance on the report; and so included the further indebtedness which he had incurred to the Bank after receipt of the second report as well as his own further investment in the project from other sources.
25. It is important, also, to have in mind that the Bank's own claim against Grimleys would, necessarily, be limited in amount to the amount of Mr Landau's liabilities on the accounts described in the first paragraph. The Bank could not recover from Grimleys more than the amount of the loss which it had suffered; and the amount of the loss which it had suffered was limited to its unrecoverable debt from Mr Landau. The second paragraph of the letter of 28th October 1997 can only be explained on the basis (i) that the inclusion of Mr Landau's claim under the second report was thought to enhance the Bank's prospects of claiming the amount of the unrecoverable debt -- which it would write off under the first paragraph -- and (ii) that, by including Mr Landau's claim under the second report, the Bank might recover more than the amount of the unrecoverable debt.
26. It might well have been expected that the additional share, which Mr Landau was to have under paragraph 2 of the side letter should be limited to a share of the excess after satisfaction of his own liabilities to the Bank. But, whatever else paragraph 2 gives him, it is not that; and no-one has contended that it is. Paragraph 2 is plainly intended to give Mr Landau a share in some figure which is not reduced by deduction of the amount of his own liabilities to the Bank. The question is whether he is to share in the total amount which Grimleys have to pay to the Bank in respect of all the claims, including Mr Landau's claim; or whether he is to have a 30% share of such part of the total amount as can be attributed to all the claims under the second report. It may be noted that it is not suggested that Mr Landau as to have a 30% share of such part of the total amount as can be attributed to his own claim under the second report.
27. I find it impossible to accept that a construction which limits Mr Landau to a share of such part of the total amount as can be attributed to all the claims under the second report should be adopted on "commercial" grounds. The purpose of taking the assignment from Mr Landau was not to recover separately on his assigned claims; but to add the benefit of his assigned claims to the Bank's claims, so as to enable the Bank to achieve an overall settlement with Grimleys -- a settlement which, for practical purposes, would have been impossible if Mr Landau's claims had not been included.
28. In those circumstances, it seems to me reasonably plain that what the parties had in mind was that, if the Bank need to rely on claims under the second report, then Mr Landau would receive 30% of the net recoveries against Grimleys without apportionment of those recoveries between the three reports. If, on the other hand, the Bank chose not to rely on the claims in respect of the second report at all, then it would be able to give notice under the final paragraph of the letter; so freeing itself from the obligation under paragraph 2 to share its recoveries and revesting in Mr Landau the ability to claim 100% of whatever he might be able to recover in relation to the second report. It is important to appreciate that, if Mr Landau had a claim against Grimleys under the second report, that claim would materially affect the amount which the Bank could claim from Grimleys in respect of Mr Landau's indebtedness. It would do so, first, because Mr Landau's claim against Grimleys would include an element of that indebtedness; and, secondly, because, so long as Mr Landau had that claim, the Bank would be in great difficulty in treating him as a debtor from whom no recovery could be made in establishing its claims against Grimleys.
29. That that was what the parties had in mind is, I think, made reasonably plain by the language which they used in paragraph 2 of the side letter. The phrase "any claim which the Bank might bring" should not be construed to mean "any cause of action which the Bank might have". The natural meaning is "any proceedings which the Bank might pursue". A fortiori, in circumstances where the Bank had already issued proceedings. The phrase "by reference to the Report" qualifies the "claim" -- or proceedings -- not the damages recovered from Grimleys. The requirement is that the claim -- or proceedings -- should rely on the second report; and that the damages "arise out of or in connection with" the proceedings. There is no requirement that the damages should be limited to those arising out of the second report.
30. The question therefore, as it seems to me, is whether the Tomlin order provides for a payment of damages arising out of or in connection with any claim which the Bank may bring by reference to the report. The answer is that it plainly does. The schedule to the Tomlin order on its face refers to the second report. As I have said, it is not necessary that the damages should arise out of that report. What is necessary is that the damages should be in connection with proceedings brought against Grimleys by reference to the report. That condition is satisfied.
31. For those reasons, I reach a different conclusion from that of the learned judge on the first issue. I would hold that Mr Landau is correct in his contention that the account to which he is entitled is an account based on 30% of the net recoveries under the Tomlin order.

The second issue

32. In those circumstances, the second issue which the judge addressed does not arise. We have not heard argument upon it, and I reach no conclusion about it. But I should say this. It would seem to me strange if it were consistent with the court's overriding objective to do justice between the parties that -- in a situation in which it was impossible to conclude, without inquiry, that the amount attributable to the second report was not, in fact, nil -- the result should be that Mr Landau was entitled to recover £130,000 on the basis that no inquiry into the facts need be made.
33. SIR MARTIN NOURSE: I agree and do not wish to add anything of my own.
34. LORD JUSTICE PETER GIBSON: I also agree. Differing as we are from the conclusions of the Master and the judge, both of whom gave full and careful judgments, I add a few words of my own.
35. The question posed on the issue raised by Mr Landau in his Respondent's Notice is whether the damages recovered by way of settlement of the claim by the Bank against Grimleys were "damages from Grimleys rising out of or in connection with any claim which the Bank might bring against them by reference to the report". That is a short question of construction, requiring the court to ascertain what objectively was the intention of the parties against the background of facts known to both parties at the time of the side letter.
36. I gratefully adopt what my Lord, Lord Justice Chadwick, has said about the background facts and the aim of the transaction. The claim brought by the Bank against Grimleys was by reference not only to the second report, but also the other two reports; and it is clear from the terms of the schedule to the Tomlin order that the sums paid by Grimleys were in full and final settlement of all claims "arising out of or in relation to" the pleaded issues, and including any act or omission in connection with the three reports. The question therefore boils down to whether the damages arose out of or in connection with a claim of the Bank brought against Grimleys by reference to the second report, within the meaning of the side letter.
37. As a matter of ordinary language, the answer to my mind is plain and it is in the affirmative. The fact that the Bank chose to pursue its claim in negligence by reference also to the other reports, and that the settlement monies were paid in settlement of all the claims, would not seem to me to bring the case outside the scope of paragraph 2.
38. Mr Flynn, for the Bank, supported the reasoning of the judge, which was that (1) "claim" meant "cause of action" rather than "proceedings"; (2) Mr Landau's construction gave too much weight to the words "in connection with" and too little weight to the words "by reference to the Report"; (3) Mr Landau's construction is less commercially likely than that advanced by the Bank. Mr Flynn also sought to find significance in the covenant by the Bank for reasonable endeavours, by reason of the omission of any reference to using reasonable endeavours in respect of claims by reference to the other reports.
39. I do not agree that "claim" in paragraph 2 of the side letter means "cause of action". In paragraph 2 the claim is one which the Bank might "bring" against Grimleys. One does not bring a cause of action. On its ordinary and natural meaning, against the factual background, "claim" is plainly a reference to a claim brought by way of proceedings. The phrase "arising out of or in connection with" is obviously intended to have a wide reach. Lawyers frequently use such composite phrases, a narrower term being followed by a more encompassing term: see the similar phrase in the schedule to the Tomlin order, to which I have already referred.
40. Mr Landau's interpretation does not, in my view, give no meaning at all to the words "by reference to the Report". It is a defining characteristic of the claim. When the judge says, in paragraph 22 and elsewhere, that the words were included to make it clear that Mr Landau's entitlement was to "only those damages which were in some way attributable to the Report", he has transposed "by reference to the Report" to qualify and define the damages, rather than the claim.
41. Given that only a claim brought by reference to the second report is expressly referred to in the side letter, I, for my part, can attach no significance to the fact that the reasonable endeavours covenant is similarly confined to a claim by reference to that report.
42. That brings me to whether the ordinary and natural interpretation of the language used in the side letter should yield to another interpretation said to be more commercially likely. It is of course well established that the court is not bound to give a literal meaning to the words used in a contractual document when that meaning flouts business common sense. But in my judgment it cannot be said that the interpretation advanced by Mr Landau produces an uncommercial result. I gratefully adopt all that my Lord, Lord Justice Chadwick, has said on this point.
43. Accordingly, for these, as well as the reasons given by my Lord, Lord Justice Chadwick, I too would allow this appeal and set aside the order made by the judge, and I agree with the orders suggested by my Lord.
(Discussion as to the form of the order and costs)
44. LORD JUSTICE PETER GIBSON: There are, I think, three matters in dispute. The first relates to the rate of interest from 24th May 2000 until the date of judgment. We think that 8% is too high and we propose to substitute 4.85%, as had been put in the consent order earlier. This will necessitate an alteration in the schedule to the order. We would follow what is put in the schedule, paragraph (g), save that the interest sum will have to be recalculated and the amount reduced. So we make an order for the payment of that sum.
45. The last matter is a request that there should be an interim payment of costs. We accept that the costs should go to detailed assessment. We will not summarily assess the costs. We will direct that an interim payment of £45,000 be made within 21 days.

ORDER: Appeal dismissed; cross-appeal allowed; counsel to lodge a draft minute of order.

(Order not part of approved judgment) ______________________________