Claimant creating and using forged powers of attorney to obtain mortgages to purchase properties – Claimant retaining solicitors to sell properties – Claimant pleading guilty to charges of obtaining mortgages by deception – Whether claimant entitled to require solicitors to account for proceeds of sales – Claim allowed – Appeal dismissed
The claimant, using fictitious names, successfully applied for two mortgages to purchase properties at 1 Churchill Street and 56 Barclay Street, Leicester (the properties). The claimant instructed the defendants, three partners of a firm of solicitors, in connection with the sale of the properties in early 1988. By mid-1988 a criminal investigation into the claimant’s activities was under way, and in September 1988 the police obtained an interlocutory injunction to restrain the claimant from dealing with assets that were the subject of the indictment.
Although the defendants were aware of the injunctive proceedings and the allegation against the claimant, they continued to act for the claimant in relation to the sale of the properties. The sales were completed in August and December 1988, and the proceeds were paid into the defendants’ client account. After deduction of the sums due to discharge the mortgages, the net proceeds of sale of the properties were approximately £13,200 and £8,700. In January 1990 the claimant pleaded guilty to 37 charges relating to obtaining mortgages by deception, including charges over the properties, and was sentenced to 18 months’ imprisonment. No confiscation order was made.
The claimant subsequently issued proceedings against the defendants for the sale proceeds, which remained in their client account. He asserted that he had acquired the freehold of the properties and that he was entitled to the proceeds of sale after the sums due under the mortgages had been discharged. The judge ordered the defendants to account to the claimant for the proceeds. The defendants appealed, contending that the claim should not have succeeded because in order to found his cause of action, the claimant had to rely upon his own unlawful acts and upon the retainer, which was itself made with a corrupt and unlawful purpose.
Held: The appeal was dismissed.
1. If, in the analogous case of Halifax Building Society v Thomas [1996] Ch 217, the property had been sold on the instructions of Mr Thomas as an attorney (or on his own behalf after acknowledging the fraudulent misrepresentation as to his identity and the name in which the property was bought and mortgaged), and the surplus had been held by his solicitors, the result would have been that Mr Thomas had title to the surplus. Accordingly, the case was an authority for the proposition that the claimant was the owner of the properties and was, therefore, beneficially entitled to the net proceeds of sale after the mortgage debt had been discharged. Tinsley v Milligan [1994] 1 AC 340 followed.
2. In order to succeed, the claimant did not have to rely upon illegal acts, as alleged by the defendants, but was only required to prove his proprietary interest in the proceeds of sale. The claimant did not have to rely upon: (i) any part of the conveyancing transactions relating to the purchases or sales of the houses, all of which had been completed; or (ii) the background thereto. It was not for the court to seek or provide solutions through judicial creativity, but for parliament to determine and, if it thought appropriate, to strengthen the statutory provisions for civil confiscation. Accordingly, the claimant was entitled to hold the defendants to account in respect of the proceeds of the sales.
Augustus Ullstein QC and Stuart Hornet (instructed by Philip Ross & Co) appeared for the claimant; Iain Hughes QC and Geraldine Chapman (instructed by Browne Jacobson, of Nottingham) appeared for the defendants.
Thomas Elliott, barrister