Practice and procedure – Abuse of process – Strike out – Claimants issuing proceedings against defendants in relation to loss suffered as result of allegedly fraudulent transfers – Defendants applying to strike out claim – Whether defendants showing claim bound to fail – Applications granted
The claimants, a brother and sister, together with their brother (J), were the registered proprietors of a property known as 17 Wilmer Way, Southgate, in north London. In December 2009, the property was transferred into the names of the second claimant and J for no money. The third defendant, which was at that time a firm of solicitors, acted for both the transferors and the transferees. The first defendant and second defendant (now deceased) were directors of the firm.
In July 2010, the title was transferred to third parties for £440,000. The fourth defendant firm of solicitors acted for the transferors. The fifth defendant was a partner in that firm. J died on 18 September 2010. In 2012, the claimants made an application to HM Land Registry, under Schedule 4 of the Land Registration Act 2002, to alter the register to show them as the proprietors of the property in place of the third parties. That application was rejected by the First-tier Tribunal (FTT) acting on behalf of the Land Registrar.
In 2015 the claimants issued proceedings alleging that both transfers had been executed by fraudsters and that neither they nor J had known anything about their execution or the registration of title that followed. They said that neither firm of solicitors had been instructed by them or J, and that the solicitors had been instructed by or on behalf of the fraudsters. The claimants joined the individual directors of the third defendant, as the first and second defendants, the two firms of solicitors as the third and fourth defendants, the fifth defendant who was a partner in the fourth defendant and HM Land Registry as the sixth defendant.
The claimants alleged that the second defendant had been in breach of its duty in relation to the first transfer, resulting in a loss to the first claimant. The first and third defendants applied to strike out the claim pursuant to CPR 3.4(2)(a) or for judgment on the claim against them pursuant to CPR 24.2.
The second claimant had pursued a claim against the fourth and fifth defendants in relation to the second transfer, but that had been struck out as result of the claimants’ failure to comply with an unless order, and the claimants’ application for relief from sanctions was dismissed.
Held: The applications were granted.
(1) An application under CPR 3.4(2)(a) was subject to a stringent test which focused on the statement of case, rather than the claim or an issue. The applicant had to show that the claim or defence was bound to fail.
The first and second defendants were both solicitors who were either directors of or employed by the third defendant firm. Neither was the person who undertook the legal work relating to the first transfer and the claim was not pleaded on the basis of assumed personal liability. The second defendant was no longer alive and a claim could only be made against his estate. In any event, it would face the same difficulty as the claim against the first defendant. It followed that the claim against the first and second defendants was bound to fail because the duty was owed by the third defendant, not the individual defendants.
In any event, there had been a failure to serve the particulars of claim on the first and second defendants within the period provided in CPR 7.4(1) and (2). Even if there was a viable claim against the first and second defendants, the claimants were unable to pursue it.
(2) As regards the claim against the third defendant, the transfer of title to J and the second claimant vested in them the entire legal estate including the equitable interests. However, the registration of the title in their names was capable of being rectified. The first claimant’s entitlement to seek rectification did not give him a proprietary interest. However, as between the three siblings, the trust they had created, that was recognised in the joint ownership of land, subsisted after the transfer from three names into two. The land ceased to be held by the three of them in trust for each other and was then held by J and the second claimant as trustees for the three siblings. The first claimant had both proprietary and personal rights against his siblings by virtue of the trust they had created. A refusal to recognise his interest would have amounted to a breach of trust by them: Swift 1st Ltd v Chief Land Registrar [2015] EGLR 42 and Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] Ch 216; [2002] PLSCS 46 considered.
(3) Whether the position was analysed by reference to the first claimant’s entitlement to obtain an alteration to the register on transfer of the title into the names of J and the second claimant, or by reference to the subsistence of the trust between the three of them, the position remained the same. The first claimant had no claim in light of the manner in which the fraud was carried out save for the nominal costs of altering the register, but that was not a claim he had made. If account was taken of the second transfer. It was not pleaded that third defendant should have foreseen that a second fraud would take place. Such a claim would have been unarguable. It could not be said that it was within the scope of their responsibility to foresee that there would be another fraud. All they were doing was acting on a transfer from three joint owners to two without payment and such a transaction was entirely normal.
(4) Unless the claimants were permitted to amend their particulars of claim, there was no claim as against the Land Registry because the first claimant only claimed loss arising from the first transfer. The claim relating to the second transfer had been struck out. The application lacked any real merit. To grant it would be unfairly prejudicial to the Land Registry and, in any event, the subject of the amendment lacked merit.
Simon Brilliant (instructed by Longmores Solicitors) appeared for the first claimant; David Halpern QC (instructed by Mills & Reeve LLP) appeared for the first and third defendants; Aaron Walder (instructed by the Treasury Solicitor) appeared for the sixth defendant
Eileen O’Grady, barrister
Click here to read a transcript of Bakrania and another v Shah and others