Practice and procedure – Breach of trust – Sale of property – Summary judgment – Claimants issuing proceedings concerning alleged breaches of trust in relation to purchase of property – Claimant applying for summary judgment – Whether defendant having real prospect of successfully defending claim – Whether other reason why claim for breach of trust be permitted to go to trial – Application granted
In early 2015, the first claimant and the second defendant agreed jointly to acquire a property, with each of them contributing 50% of the purchase price. The agreement was not recorded in writing. An employee of the second defendant introduced the first defendant to act as the solicitor in relation to the transaction.
In February and April 2015, the first claimant’s company (APL) paid a total of £5,171,705 to the first defendant’s client account as the claimants’ 50 per cent contribution to the purchase price. The monies were paid in two tranches: £500,000 on 13 February 2015 (the deposit monies), and £4,671,705 on 8 April 2015 (the completion monies). Those monies were held by the first defendant on trust.
The first defendant subsequently paid the deposit monies to fund the deposit payable in respect of an exchange of contracts. That payment was made in the name of the second defendant’s investment vehicle (KGL), as nominee for the joint venture between the first claimant or APL and KGL. The first defendant later paid the completion monies out to the solicitors for the vendor on behalf of the third defendant (DDL), an off-the-shelf company acquired by C (a consultant employed by the first defendant) in order to purchase the property. KGL became the sole registered shareholder and the second defendant became the sole director of DDL. Through that company, the second defendant borrowed substantial sums against the property to fund his share of the completion monies. DDL then defaulted on the loans. The property was repossessed and sold, all proceeds of sale being paid to the lenders.
The claimants brought proceedings alleging breach of trust by the first defendant, through C. They contended that C had given express commitments that the first defendant would only pay the monies out when authorised to do so by the claimants. Those commitments gave rise to Quistclose trusts which conferred upon the first defendant the power to apply the monies, on the claimants’ order, to acquire the property for the joint and equal benefit of the claimants and the second defendant/KGL.
The claimants applied for summary judgment under CPR Part 24. The second and third defendants were not parties to the application.
Held: The application was granted.
(1) On an application for summary judgment, the court had to consider whether the defendant had a realistic, as opposed to a fanciful, prospect of success. A realistic claim was one that carried some degree of conviction and was more than merely arguable. In reaching its conclusion, the court was not to conduct a mini trial. That did not mean that the court had to take at face value and without analysis everything that a party says in its statements before the court. In some cases, it might be clear there was no real substance in factual assertions made, particularly if contradicted by contemporaneous documents. The court had to take into account not only the evidence actually placed before it but also the evidence that could reasonably be expected to be available at trial. The court should hesitate about making a final decision where reasonable grounds existed for believing that a full investigation into the facts of the case would add to or alter the evidence and so affect the outcome of the case. If the application gave rise to a short point of law or construction and the court was satisfied it had before it all the evidence necessary for its proper determination, it had to grasp the nettle and decide it: European Union and Anor v The Syrian Arab Republic [2018] EWHC 1712 (Comm) applied.
(2) C had transferred the deposit money to the vendors’ solicitors without taking any steps to ensure that it would be used for the joint and equal benefit of the claimants and the second defendant/KGL. He had not done what he had undertaken to do and ought to have done. That had been a clear breach of trust: Target Holdings Ltd v Redferns (a firm) [1996] 1 AC 421, Twinsectra Ltd v Yardley [2002] 2 AC 163; [2002] PLSCS 203, Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1, Bellis v Challinor [2015] EWCA Civ 59; [2015] PLSCS 44 and AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] EGLR 34 considered.
(3) It was clear from the correspondence that C had been well aware of his firm’s duty to protect the claimants’ interests in relation to the completion money and the property. The payment of the completion monies to the first defendant was impressed with a trust to the effect that they would be used for the joint and equal benefit of the claimants on the one hand and the second defendant/KGL on the other and that the claimants’ interest would be fully protected. The trust was, not unsurprisingly, similar to that in relation to the deposit monies. The completion monies were paid over to the vendors on 17 April 2015 in clear breach of trust, with no steps being taken to ensure that the claimants’ interest was properly protected. It followed that the first defendant had no real prospect of successfully defending the claim against it. There was no other reason why the claim for breach of trust should be permitted to go trial.
Andrew Hunter QC and Daniel Saoul (instructed by Schofield Sweeney) appeared for the claimants; Clare Stanley QC (instructed by RPC) appeared for the first defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Levack and another v Philip Ross & Co
