A legal battle over valuations for three mortgages that formed part of portfolios bought for more than £200m in 2008 and 2009 is to reach trial next year.
Webb Resolutions, part of the group that acquired the legal title to the two portfolios once owned by the UK’s former largest centralised mortgage lender GMAC, is suing JV Ltd, trading as Shepherd Chartered Surveyors alleging negligence.
The chartered surveyors, defending the action, claim that the two mortgage sale agreements (MSAs) are void for champerty and that Webb is guilty of “investment contributory negligence” in its decision to acquire the two portfolios. The first of two trials in the action is due to begin in March 2014.
In a preliminary ruling, Stuart Smith J rejected an application by Shepherd for specific disclosure in the action, and ruled that Webb was not at this stage entitled to apply to strike out key parts of Shepherd’s defence.
The judge said that GMAC ceased lending in 2008 and was subsequently acquired by Fortress Investment Group. Webb’s group purchased the portfolios by two MSAs, the first of 632 mortgages in May 2008 for £56.7m and the second of 3000 mortgages in June 2009 for £159.2m. Webb Resolutions ultimately became legal title owner of the two portfolios, with Webb SARL holding the beneficial title.
In respect of each of the three mortgages at issue in this action, Webb claims that it acquired the right to sue under the MSAs and that Shepherd negligently overstated the value of a domestic property.
The trial has been split into two, with assignment issues – including whether Webb is entitled to bring the claim – to be decided first, then lending issues – including the contributory negligence defence – at a later hearing.
Shepherd alleged defects in the disclosure process, and sought specific disclosure of four categories of documents it claimed were vital for completion of its expert evidence.
The judge said that its “prime target” was information about the prices allocated to individual mortgage loans within the two portfolios, to support a contention that they were purchased at a discount that forms as essential plank of its defence.
Meanwhile, after the deadline for expert evidence passed, Webb sought to apply to strike out Shepherd’s defences of champerty and contributory negligence.
Refusing the disclosure application, he said that Webb did not have the documents at issue in its control. It had requested them from GMAC but had not received them.
He found that it is would be “wrong in principle” to entertain an application by Webb to strike out parts of the defence at this stage, but gave Shepherd 14 days to file its expert evidence to avoid being debarred from calling expert evidence at the first trial.
Criticising the chartered surveyors, he said: “The defendant’s pursuit of additional disclosure as outlined in this judgment is an object lesson in how modern litigation should not be conducted.”
He said it was not acceptable that Shepherd waited until the day upon which expert reports were due to be served before raising the request for further disclosure, never sought an extension of time for expert evidence, displayed no sense of urgency and pressed ahead with its disclosure application despite full and clear explanations from Webb’s solicitors.
He added: “While it is indicative of the spirit in which this action appears to have been conducted, it is in my judgment regrettable that clear statements by one reputable firm of solicitors to another have not been accepted at face value in circumstances where there has been no sensible reason to doubt them.”
Webb Resolutions Ltd v JV Ltd t/a Shepherd Chartered Surveyors Technology & Construction (Stuart Smith J) 15 November 2013
Siobán Healy QC (instructed by Rosling King) for the Claimant
Andrew Walker QC and Richard Fowler (instructed by Reynolds Porter Chamberlain) for the Defendant
