Professional negligence – Solicitor – Caution on title – Respondent solicitor serving statutory demand for professional charges – Appellant seeking to set aside demand on basis of cross-claim exceeding amount of debt – Whether judge right to conclude that appellant having no arguable cross-claim for negligence – Appeal dismissed
The appellant owned a development site in Manchester. In 2004, he discussed the sale of the site for £10m with L and his company (Lexi) but decided not to proceed. At some point, however, he had signed a blank Land Registry transfer form (TR1). The form came into L’s possession and was used to the transfer the site into the name of a subsidiary of Lexi for an expressed consideration of £15m. The appellant received no part of that sum. In 2004, the subsidiary became the registered proprietor of the site.
The appellant alleged that he had been deprived of the ownership of the site by the actions of a fraudster and instructed the respondent solicitor to act for him. In March 2005, a bank registered a legal charge over the site to secure the indebtedness of Lexi and its subsidiary. The appellant claimed that the respondent had been negligent in that, inter alia, it had failed to follow his written instructions of February 2005 to place a caution on the title to the site to protect his interests. The respondent denied the allegation, contending that the appellant had countermanded his written instructions, which were not reinstated until March, when the necessary steps were taken to protect his interests. The appellant made no comment regarding the essence of that account of events. The appellant also argued that the respondent had been in breach of duty by not disclosing certain information that was in its possession, having previously acted for L and Lexi.
The respondent subsequently served a statutory demand on the appellant in respect of a debt of approximately £99,000 said to be due by way of professional charges. The appellant applied for it to be set aside on the basis of his substantial cross-claim agaisnt the respondent, which exceeded the amount of the debt for damages for negligence. The judge refused to set aside the demand but granted permission to appeal limited to whether: (i) the respondent should have acted more expeditiously and diligently after it had received written instructions from the appellant to register a caution on the land; and (ii) the respondent had acted in breach of duty in failing to disclose relevant information concerning an alleged fraudster.
Held: The appeal was dismissed.
(1) The judge had correctly rejected the application to set aside the statutory demand on the basis that the appellant’s claim against the respondent in negligence had not been shown to be arguable with any realistic prospect of success. Although the appellant had instructed the respondent to protect his interest in the site by a suitable registration, his evidence did not permit the court to conclude that he had a viable answer to the contention that he had orally withdrawn those instructions.
On an application to set aside a statutory demand, the onus was on the debtor to show why the statutory demand should not stand. If the creditor put forward a detailed account of the facts that was inconsistent with that of the debtor and that, if true, would show that the debtor did not have the cross-claim upon which he relied, then the court was entitled to take account of the debtor’s response, even if it was one of silence. The court might not be able to conclude that there was a serious factual dispute without some detailed evidence from the debtor showing what facts were in dispute.
(2) It was impossible to conclude that the respondent’s failure to disclose information in its possession concerning the alleged fraudster was arguably a breach of duty or, if it had been, had caused any loss to the appellant. The appellant knew that he had not entered into a contract for the sale of the land executed any transfer of the land to anyone. Accordingly, it must have been clear to him, by the time he first instructed the respondent, that he had been tricked and defrauded and who was responsible. It was no more than a matter of speculation as to what, if any, added significance the appellant might have attached to the information in question, especially in the absence of any evidence from the appellant on the point.
William Evans (instructed by Bridgehouse Partners LLP) appeared for the appellant; Paul Parker (instructed by Pannone LLP, of Manchester) appeared for the respondent.
Eileen O’Grady, barrister
