The £11.5m claim by Cheshire Building Society (CBS) against Dunlop Haywards (DH) over an alleged commercial mortgage fraud has opened in the High Court.
David Steel J has to decide whether CBS should be granted summary judgment against DH, without the need for a full trial, on the ground that DH has no real prospect of successfully defending the claim.
At the same time, DH is asking the judge to grant its own claim to be indemnified by its former City head Ian McGarry, who was arrested and released without charge by
Despite a continuing investigation by the Serious Fraud Office, no charges have been brought against any party.
CBS’s claim was filed in May, more than a year after it launched a £50,000 investigation into a valuation given by McGarry on commercial premises in Aston,
Goldgrade subsequently defaulted and was discovered to have no substantial assets. CBS alleges that the true market value of the property with vacant possession is now £2m.
In its defence to the claim, DH does not admit the allegations of fraud but does admit that the valuations had been negligent.
Before the hearing began today, the court was told that McGarry, who is still subject to an April 2006 restraint order under the Proceeds of Crime Act 2002, which limits his spending to £250 per week towards ordinary living expenses, would not appear and was not represented at the hearing.
Opening the case for CBS, Sue Carr QC said that DH had accepted that the valuations had been negligent, but not fraudulent, and that its refusal to accept liability to pay anything to CBS was “symptomatic of its approach to the litigation” and one of the reasons why the court should grant CBS’s application.
She said that DH’s defence was a “superficial smokescreen” and “in assessing whether DH has any real prospect of defending this claim, the court must stand back and look at DH’s full exposure to McGarry’s activities in the alleged fraud up until February 2006”.
She said that McGarry’s behaviour in the litigation “shows all the classic signs of an evading fraudster” and is not “remotely consistent with someone ready, willing and able to put forward a defence”.
She added: “We believe that DH believes, after all its investigations, that McGarry is a fraudster.”
As part of its application, CBS is relying upon a July summary judgment application by lender Nationwide against DH. This relates to other allegations, in which a judge ruled that DH was guilty of deceit and of being “reckless” with regards to the truth of property valuations made by McGarry.
That claim was settled on confidential terms before the publication of the judgment, but the details of the judgment were subsequently made public following an application by CBS supported by RICS.
The case continues.
