A firm of solicitors that was ordered to pay more than £1m to pay off a developer client’s mortgage to facilitate the sale of nine affordable housing plots has won its High Court bid to recover the money.
Lewison J ordered Howard McPherson to repay all of the loss suffered by Willmett Solicitors, which went into administration in December 2009, after finding that there was a strong case that McPherson was “in effective control” of Guernsey-based developer Elegant Homes, which went into voluntary liquidation in March.
Mann J ordered Willmett to pay £1.35m to enforce a solicitor’s undertaking given by Elegant Homes (
It claimed that Elegant had a contractual liability to transfer the plots to TVHA free of encumbrances, but that it had refused to meet its liability to pay off its mortgage debt in respect of the site to Bank of Scotland.
TVHA sued Willmett for breach of the undertaking and Elegant for breach of contract, while Willmett counterclaimed against Elegant for an indemnity as well as launching a Part 20 claim against McPherson.
Willmett sought to make McPherson contribute, under the Civil Liability (Contribution) Act 1978, claiming that he was the directing mind of Elegant and had induced or procured it to breach its contract with TVHA.
Backing that claim, Lewison J said that by claiming in his witness statement that he was merely a building contractor with Elegant, McPherson had given a “deliberately misleading impression”.
He continued: “There is, in my judgment, a strong case for McPherson to answer that he was in effective control of Elegant. In my judgment, the inevitable inference is that Elegant did whatever McPherson decided it should do, even though he was outside the formal governance structure of that company.”
He ruled that McPherson had conspired with Elegant to “injure Willmett by unlawful means” or induced or procured a breach by Elegant of Willmett’s retainer.
McPherson had denied Willmett’s claims, arguing that he was not a shareholder in Elegant and that his interest in the company came about because its share capital belonged beneficially to a company wholly owned by his pension fund.
He claimed that he had not controlled Elegant or made decisions on its behalf.
Thames Valley Housing Association Ltd and another v Elegant (Guernsey) Ltd and others Chancery Court (Lewison J) 24 May 2011.
The claimants did not appear and were not represented; the first defendant did not appear and was not represented; David Halpern QC (instructed by Barlow Lyde & Gilbert LLP) appeared for the second defendant; Nicholas Stewart QC (instructed by Ahmud & Co Solicitors) appeared for the third party Part 20 defendant.
