Judge refuses to strike out Topland’s defence to fraud claim

The secretary of state for justice has failed in a bid to strike out elements of the defence to his fraud claims concerning the rent review on London’s main divorce courts. King J ruled that it was not “appropriate or just” to strike out parts of the defence put forward by Topland Group, owner of First Avenue House, 42-49 High Holborn, London WC1, and Andrew Smith, the secretary of state’s agent during rent negotiations The two sets of proceedings, in which the secretary of state sought to recover more than £22.8m for the alleged deceit or fraud in September 2002, are scheduled for a five-week trial starting in January 2012 at the earliest. The proceedings arise out of the allegation that, without the secretary of state’s knowledge, a bribe was paid or was agreed to be paid by way of a “secret commission” by Topland, the then prospective purchaser of First Avenue House, to the agents acting on the secretary of state’s behalf in rent review and lease negotiations. The high court claim issued last year against Topland alleges that Smith, of LSM Professional, entered into an agreement with Topland and its directors Clive Bush and Eddie Zakay to push the rent at First Avenue House significantly above market rent.  The secretary of state says that this enabled Topland, which then bought the property from Standard Life in October 2003, to benefit from the inflated rent roll, and cost the government more than £20m. He applied to strike out the defence advanced by Smith that it was standard practice for a prospective purchaser of property to pay an introduction fee to the agent of a lessee and the similar defence advanced by Topland that this was market practice and that it was usual to do this without the lessee’s consent. However, the judge ruled that the question of whether this was the case was a matter for trial, and granted permission to the defendants to adduce evidence on market practice. Although also a defendant to the action alongside Smith, LSM has entered into a company voluntary arrangement and does not intend to take part in the action. Topland and Smith deny the claim. Secretary of State for Justice v Topland Group plc and others; Secretary of State for Justice v LSM Professional Ltd and another Queen’s Bench Division (King J) 18 April 2011. Simon Browne-Wilkinson QC and Paul Gott (instructed by the Treasury Solicitor) appeared for the claimant; Thomas Beazley QC and Tom Weisselberg (instructed by Harbottle & Lewis LLP) appeared for the defendants to the first action; Paul McGrath (instructed by Peters & Peters LLP) appeared for the second defendant to the second action.