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||Neutral Citation Number:  EWHC 96 (Ch)
||Case No: 3LS92474
IN THE HIGH COURT OF JUSTICE
LEEDS DISTRICT REGISTRY
||The Court House
Leeds LS1 3BG
||22 January 2016
B e f o r e :
His Honour Judge Saffman sitting as a Judge of the High Court
|| MANSION ESTATES LTD
||- and -
||(1) HAYRE & CO (A FIRM)
Mr N Mason (instructed by Atkinson and Firth) for the Claimant
Mr R Chapman (instructed by Ozon Solicitors) for the Defendant
Hearing date: 10,11,12 and 13 November 2015
Circulated in Draft to Parties: 3 December 2015
Handed Down: 22 January 2016
HTML VERSION OF JUDGMENT
Crown Copyright ©
- In late 2006 the Claimant, Mansion Estates Limited, through its director Mr Raj Khan retained Mr Baljinder Hayre, the Principal of the Defendant firm of solicitors, Hayre & Co to act on its behalf in the purchase of land at 60 to 64 Toller Lane Bradford. It is the Claimant's case that at the same time Mr Hayre was instructed to act in the subsale of part of that land, namely 60 Toller Lane, to a Mr Narwar Khan. Although Mr Hayre accepts that he was instructed to act in the subsale, he does not accept that it was in 2006 that he received those instructions. He says they were received in October 2007. It does not appear to be in dispute that it was the intention of the Claimant to redevelop at least part of the site following acquisition.
- The Claimant alleges that the Defendant discharged its retainer in respect of the subsale negligently and/or in breach of its contract of retainer and that it has suffered loss thereby. This has been referred to in the hearing as the "Land Claim".
- In addition, it is alleged that in respect of the purchase of the whole site, Mr Hayre discharged his retainer negligently and/or in breach of contract because the advice that he gave to the Claimant in respect of the amount of Stamp Duty Land Tax (SDLT) that was payable was negligently wrong with the result that the Claimant paid more SDLT that was appropriate. This is described as the SDLT Claim.
The Land Claim.
- It is alleged that the terms upon which the subsale was completed and the extent of the land included in the subsale ;
a. precluded the Claimant from vehicular access to its retained land from the north because a strip of land that provided access from the north was wrongly transferred to Mr Narwar Khan
b. rendered inaccessible an area of the retained land to the south of 60 Toller Lane (the Car Park) because the transfer to Mr Narwar Khan included the entrance to the Car Park
c. restricted vehicular access from the southern to the northern part of the retained land because the transfer of 60 Toller Lane included a section of a private roadway that extended through the whole site from south to north. No rights of way were reserved for the retained land with the result that vehicular access cannot be gained from Toller Lane (which is on the southern boundary of the retained land) to the northernmost part of the retained land.
- Although this is not immediately clear from the Particulars of Claim, the Claimant, for whom Mr Nicholas Mason of counsel appears, argues that the retained land has been predominantly blighted because Mr Hayre negligently attached the wrong plan to the TP1 by which 60 Toller Lane was transferred to Narwar Khan. It is alleged that he failed to attach the plan that had been given to him by Raj Khan and which Raj Khan had signed and which is at F220 of the bundle and by which the entrance to the Car Park and the road that runs north/south remains in the retained land. It is asserted by the Claimant that had the correct plan been attached to the TP1 the retained land would not have been encumbered by the blight set out in paragraphs 4b and 4c above.
- As for the problems caused to the land as described in paragraph 4a above, it is the Claimant's position that the Defendant failed to advise it that the terms of the subsale would create this problem.
- The Defendant is represented by Mr Richard Chapman of counsel. His position is that the plan attached to the TP1 was the plan that Raj Khan gave Mr Hayre and that he recognised that a transfer to Narwar Khan of the land delineated in that plan would cause the blight referred to and that Raj Khan was advised accordingly and instructed Mr Hayre to proceed notwithstanding. The plan that he says he was given by Raj Khan is at E132 and places within the title to be transferred by the subsale the entrance to the car park and half of the road running north/south in so far as it abuts the garden of 60 Toller Lane
- Raj Khan denies that he received any such advice. It is the Claimant's case that such advice would not have been necessary (save to the extent that Raj Khan's plan created a difficulty with regard to access to the North (as described in paragraph 4a above)). Further the Claimant argues that if such advice was necessary, because the plan given to Mr Hayre did blight the retained land in the way described, then that advice was not given. Raj Khan asserts that had he been apprised of situation he would have instructed the Defendant to ensure that the subsale did not include any land that limited the use to which the Claimant intended to put the retained land (and Mr Narwar Khan should simply have been granted rights of way across such land) or, at the very least, rights of way should have been reserved over those parts of the land transferred to Mr Narwar Khan to enable the Claimant and its successors in title to have full use and enjoyment of the retained land.
- Mr Hayre relies upon an attendance note of a meeting on 2 November 2007 in which he records that he pointed out the problems that would be caused to the retained land by the terms of the subsale, a letter of the same date in which he reiterated those concerns and an attendance note dated 5 November 2007 recording a telephone call from Raj Khan in which he instructed Mr Hayre to proceed with the subsale on those terms in any event.
- The Claimant concedes that if the Court finds that Mr Hayre was given the plan that Mr Hayre says he was given and he gave the advice that he says that he gave and which is recorded in the file notes and letter then the Claimant cannot succeed in respect of the land claim. Its position is that Mr Hayre did not give the advice that he asserts he gave and that the letter and attendance notes that he produces in support of his contention that he did, have been fabricated.
- The issue to be determined therefore reduced to its fundamentals is which plan Mr Hayre was given and whether the Claimant has established that it was not told that the terms of the subsale blighted the retained land.
- For the sake of completeness I record that in the defence the Defendant denies that its retainer extended as far as the Claimant asserts.
- In an action relating to solicitor's negligence the question of the parameters of the retainer are always crucial. In the recent case of Minkin v Lesley Landsberg  EWCA Civ 1152 the retainer is described as the starting point in every case. However, the extent of the retainer in the context of this case is not in issue. The very nature of the Defendant's case is that Mr Hayre gave the advice that the Claimant asserts should have been given as to the effect of the plan at E132 which was attached to the TP1. That implies that the Defendant accepts that the terms of its retainer obliged it to do so.
- Even if such an implication cannot be drawn then Credit Lyonnais SA v Russell Jones and Walker  EWHC (Ch) 1310 is authority for the proposition that it is implicit in the retainer that a solicitor will proffer advice which is reasonably incidental to the work being carried out. I am satisfied that the retainer of a solicitor instructed to act in a conveyancing transaction extends to advising a client of matters regarding the title that may blight or limit the reasonably foreseeable use or enjoyment of the property. Further, I am satisfied that the retainer extends to ensuring that only the correct amount of STLD is paid. In my view both are incidental to the conveyancing process and, perhaps unsurprisingly, Mr Chapman did not suggest to the contrary.
- Both the Claimant and the Defendant have instructed experts to consider the diminution in the value of the retained land as a result of these conceded restrictions on its use and enjoyment and, subject to liability, the parties have agreed that that amounts to £211,500.
- By its original Particulars of Claim in addition to diminution in value the Claimant claimed for loss of profit on the basis that the limitation on the use and enjoyment of the retained land caused by the terms of the subsale precluded the Claimant from undertaking the development it had in mind. That claim was put at £1,900,000 but is not now pursued.
- The Claimant does however pursue a claim for £48,000 in respect of wasted expenditure incurred by the Claimant in connection with the potential development of the retained land. The principle that such a head of claim is recoverable in this case, where there is no extant claim for loss of profit and no evidence that any development scheme was more than speculative, is not accepted by the Defendant save to the extent that the expenditure relates to that incurred in seeking to cure the problems created by the alleged negligence, which are agreed at £470. That is the agreed cost incurred in an unsuccessful approach to Mr Narwar Khan and his family to see if they were prepared to agree to some form of derogation from his title which would have the effect of eliminating the restrictions on the retained land caused by the subsale. Mr Mason, while not formally abandoning this head of claim, recognises that he has difficulty in sustaining it save to the extent of the £470 cost of cure that Mr Chapman concedes, subject to liability.
The SDLT Claim
- The Claimant's position is that the purchase of the whole site and the subsale of 60 Toller Lane was simultaneous.
- The effect of s45 Finance Act 2003 is that in circumstances where completion or substantial performance of both the contract of purchase of the whole site by A and of subsale of part of the site by A to B occur at the same time then A is only responsible for Stamp Duty Land Tax on the consideration paid for the whole site less the proportion of that consideration which is referable to the land that is the subject matter of the subsale. B is responsible for the SDLT on the part he purchases. Despite what is set out in Mr Chapman's skeleton argument he now accepts that in this case the proportion of the consideration referable to 60 Toller Lane is what Mr Narwar Khan paid for it.
- The whole site was purchased for £1.7million. 60 Toller Lane was sold for £450,000. The Claimant contends that the SDLT payable therefore was that payable in respect of a transaction worth £1.25m, namely £50,000. In fact the Defendant obtained from the Claimant £68,000 to cover SDLT and subsequently paid that to HMRC. This was the duty in respect of a purchase of £1.7 million. An overpayment is not recoverable from HMRC if a claim is made for the repayment more than 4 years after payment had been made. The Claimant seeks to recover therefore the excess payment of £18,000.
- It does not appear that the Defendant denies that its retainer extended to ensuring that SDLT was minimised. It is argued that £68,000 was the correct amount and therefore the minimum payable. The Defendant's position is that the purchase and subsale were actually not simultaneous. The purchase was completed on 9 November 2007 and the subsale on 9 April 2008 since it was only by then that HSBC (who had provided funds to the Claimant to finance the purchase of the whole site on the basis that the whole site, including 60 Toler Lane, was charged to them) released 60 Toller Lane from its security.
- It is important to record that Mr Hayre of the Defendant firm acted for both the Claimant in the sale of 60 Toller Lane.and Mr Narwar Khan in his purchase. This inevitably gave rise to discussion during the hearing about conflict of interest but, leaving that on one side, for the purpose of the SDLT claim Mr Hayre accepted that if a separate solicitor had been instructed then the completion could have been structured to take advantage of the s45 concession but that he did not tell the Claimant that.
- I heard from Mr Raj Khan a director of the Claimant Company and, on behalf of the Defendant, from Mr Hayre. Both have of course also filed witness statements. In addition the Claimant's solicitors have filed a witness statement of Asif Khan. He is the son of Narwar Khan and seems to have represented his father in the initial stages of this transaction. He has not given oral evidence, apparently a witness summons could not be served on him, and so his evidence is accorded only hearsay status to which the Defendant argues there should be attached no weight or at best minimal weight.
Evidence relating to the land claim
- I shall hereafter refer to the various Messrs Khan by their first names to avoid prolixity, no disrespect is intended. I should make it clear that Raj is not related to Asif or Narwar.
- At first blush one might think that events predating the meeting on 2 November are of little relevance, the claim after all hinges on whether there was a meeting that day, what plan was handed over and what was said at it. However, it is necessary to refer to earlier events to assist in the determination of whether in fact the advice that Mr Hayre says he gave on 2 November (and which is recorded in his attendance note and the subsequent letter of that date) was given or whether the attendance notes of 2 and 5 November and the letter of the 2 November are, as the Claimant alleges, fabricated.
- It is the position of the Claimant that earlier attendance notes are demonstrably false and that it is against that background that the critical attendance notes must be judged. Mr Mason argues that that falsity fatally undermines the veracity of Mr Hayre's evidence and the credence that can be placed on his attendance notes of the alleged critical meeting at which, he says, that he gave the advice that would, if actually given, provide a complete defence to the Land Claim.
- Raj's evidence is that he was approached by Asif, his bank manager in about December 2006. He was told by Asif that Narwar had agreed to buy the whole of the site predominantly because the Khan family wanted to convert the buildings at 60 Toller Lane into a large multi generational family house. Narwar had instructed the Defendant to act in the purchase and Mr Hayre had written a client care letter to Narwar confirming those instructions on 11 December 2006.
- The Khan family ultimately decided however that they could not afford to buy the whole site. Hence Asif's approach to Raj to see if he wanted to avail himself of this investment opportunity on the basis that if he was interested and did buy the land, he would transfer 60 Toller Lane to Narwar for market value.
- Raj was shown various documents, in particular a letter from Bradford Metropolitan District Council dated 6 April 2006 which made him think that planning for a significant and profitable development would not be a problem. Asif assured him that funding from HSBC, for whom he worked, would be forthcoming to assist in the purchase. Raj indicated therefore that he was indeed interested through the vehicle of his company, the Claimant. Asif persuaded him to use Mr Hayre for the transaction rather than the Claimant's usual solicitors because Mr Hayre had already been instructed and was familiar with the paperwork.
- Raj's evidence was that he was content with the deal that had been negotiated by the Khan family with the vendors. He saw no reason to approach the vendors or their agents to attempt to renegotiate. He had done some costings based on his view as to the development potential and was prepared simply to agree to the Claimant standing in the shoes of the Khan family.
- Mr Chapman endeavoured to raise the suspicion that the Claimant was prepared simply to stand in the shoes of the Khan family without any attempt to renegotiate because either the Claimant was somehow a nominee of the Khan family or the Khan family was somehow a nominee of the Claimant. There was no evidence to that effect or what would be achieved by such an arrangement. In any event, it seems to me that if they were hand in glove to that extent it is difficult to see why it has proved impossible to reach an agreement to free the retained land from its limitations. In addition I note that the funding for the purchase of the whole site required Raj to give a personal guarantee for in excess of £1m. It is hard to believe that a mere nominee would expose himself in this way.
- Raj says that he saw Mr Hayre on 18 December 2006 and gave him instructions to act for the Claimant in the purchase and the subsale of 60 Toller Lane to Narwar. His evidence is that he had a face to face meeting with Mr Hayre that day, accompanied by Asif. As to whether even Raj says that the contract was discussed then it seems to me that there is some confusion in his evidence. In paragraph 11 of his witness statement he gives the impression that the contract was discussed then, whereas at paragraph 12 he implies that it was gone through on a subsequent occasion which, at paragraph 14, he suggests was in late January. Contracts were actually exchanged on 29 January 2007.
- It is however right to say that on the evidence of Mr Hayre he had the contract for the purchase of the whole site in his possession at this time because it had been sent to him by the vendor's solicitors, Messrs Gordons in his capacity as solicitor for Narwar and on his own evidence he tells Raj as much in the second paragraph of the attendance note of 18 December.
- Mr Hayre says that there was no meeting on 18 December, there was merely a telephone call from Narwar to Mr Hayre to the effect that Narwar was not proceeding with the purchase but that the Claimant would proceed in his stead and that its director, Raj Khan, would be contacting Mr Hayre and a further telephone call from Raj to Mr Hayre to confirm that the Claimant was going to purchase in Narwar's stead. It is Mr Hayre's evidence that in the course of this call arrangements were made for a meeting on 4 January for the purpose of going through the contract.
- Mr Hayre has produced attendance notes of his calls with Narwar and Raj. The Claimant challenges the veracity of both. In particular, he asserts that the attendance note of his involvement with Mr Hayre on 18 December is fabricated in the sense that it speaks of a telephone call rather than a meeting and it fails to record a substantive discussion about the purchase. Further, it fails to record that it was made clear to Mr Hayre at that meeting that there was to be a subsale to Narwar of 60 Toller Lane. It is the evidence of Mr Hayre that he was not told of the subsale until October 2007.
- Let me deal first with the note recording Mr Hayre's conversion with Narwar. Even Mr Hayre accepts that the note is not entirely accurate because actually his conversation was with both Asif and Narwar. Mr Hayre had insisted that he received his instructions from Asif while Narwar was present and could confirm to Mr Hayre that he agreed with what Asif was telling him (Mr Hayre). The note is also inaccurate because it bears the client reference number 20261. Narwar's client reference was 20372. Mr Hayre's explanation for the appearance on this attendance note of an apparently random client reference number is that it will have been the number for another client whose reference had inadvertently been left in the attendance note template. If that is so, it is odd however that all the other rows on the template have been filled in correctly. Mr Mason relies on these discrepancies in support of his contention that this attendance note is unreliable.
- As for the note of the conversation with Raj, that confirms that Raj indicated that the Claimant would take over the purchase and that Mr Hayre makes it clear that he would have to have a meeting with Raj to "run through" the contract papers because of "the complexity of the matter". The attendance note records that he made an appointment to see Raj on 4 January 2007 at 10.00.
- Mr Hayre has produced an attendance note of the meeting that he says took place on 4 January and which was of course referred to in his earlier telephone attendance note of 18 December. It will be remembered that the meeting was for the purpose of "running through the contract because of the complexity of the matter". Raj accepts that there may have been a meeting at around this time (in addition to that on the 18 December) but this note too he says is wholly inaccurate. In it Mr Hayre said that he produced a copy of the contract and pointed out, amongst other things, the terms in it relating to the payment of deposit. He records that he also asked Raj to check the site plan. Raj says that this did not occur on the 4 January. He has no recollection of any discussion about the contract that day. He is clear that Mr Hayre has "manipulated" his file note presumably in an endeavour to give the impression that the Claimant wanted to proceed with this purchase at all costs and despite any advice that the terms may blight the land.
- Mr Mason asserts that there is clear evidence that a file note to the effect that the contract was run through on the 4 January cannot be accurate. He cites the following;
a. On 21 December 2006 Mr Hayre, as the solicitor acting for the Claimant (not Narwar), had written a letter to Gordons confirming that the draft agreement had been "approved subject to amendments made being incorporated". He stated that he was currently waiting for searches to be returned and he would then be in a position to proceed. Mr Mason questions how an approved contract could be sent to the vendor's solicitors before the alleged meeting on 4 January, especially in circumstances where Mr Hayre had said that, in view of the "complexity of the matter", he wanted to "run through" the contract with Raj. He argues that the fact that the contract was approved as amended by 21 December is wholly inconsistent with Mr Hayre's contention that the contract was not discussed until 4 January and is much more consistent with the notion that it was discussed on 18 December. Mr Hayre says that it is sometimes his practice, especially when under pressure from a vendor to approve draft agreements even without client's instructions. That is highly unusual particularly in a commercial deal such as this which has unusual provisions relating to deposits and completion. Mr Hayre justifies it in this case on the basis that he had been a colleague of the vendor's solicitor, Mr Paul Young and knew what amendments he would and would not accept. That of course may be so but equally important, if not more so, is what terms the Claimant would accept.
b. There is clear evidence that in December the Defendant was coming under significant pressure to exchange contracts for the site. Mr Hayre was obliged to write to the vendor's agents, Hayfield Robinson, on 21 December assuring them that this matter was "very high on our list of priorities". By its final paragraph the letter also gives the clear impression that what is holding up exchange is simply outstanding searches. It states "….our clients position is that they are wanting to proceed with this matter and will be doing so upon receipt of our searches.". Mr Mason asks rhetorically whether it is likely that in those circumstances an appointment to go through a contract that was already in the possession of Mr Hayre would be arranged 17 days after the telephone call of 18 December even taking account of Christmas and New Year breaks. The wording of the letter also suggests that, as at 21 December, the contract terms are agreed.
c. On 3 January Mr Hayre wrote to Gordons with some pre-contract enquiries and in the final paragraph of that letter he states that on receipt of satisfactory replies "we can confirm that we will be in a position to proceed to exchange of contracts by 5 January". How would he know on 3 January that the contractual terms were acceptable to the Claimant if he only intended to run through the contract with Raj on 4 January?
- There is a further matter that Mr Mason argues gives the lie to there having been a meeting to go through the contract on 4 January. The meeting is timed as having started at 10.25 and having lasted 54 minutes (9 billing units of 6 minutes). On the basis of the note therefore the meeting will have concluded at about 11.20. Mr Hayre cannot recall that there were any interruptions during it. At E201 there is a fax that Mr Hayre sent to the vendor's agent thanking him for a letter of 2 January and stating that he proposed 5 January for exchange subject to receipt of some outstanding documentation from the Gordons. The message confirmation report timed that fax as having been sent at 10.39am. This would be at a time when, if the attendance note is accurate, Mr Hayre was in the meeting with Raj. Mr Hayre does not have a secretary, he does his own typing. It does not appear on the face of the fax that it was so urgent that the meeting had to be interrupted to send it. It was a response to a letter sent 2 days earlier. In any event, other correspondence at that time does not suggest that Mr Hayre was under irresistible pressure, at least from Gordons, to exchange.
- Mr Hayre did not assert that he himself did not send this fax. His explanation was that the time on the fax machine was wrong. Initially he said that it was not corrected to account for GMT or BST, giving the impression that it could be an hour out. Later in his evidence he suggested that it bore no relation to the actual time of day and the fax could in reality have been sent in the afternoon. Neither explanation, it has to be said, cast the Defendant in a flattering light. Mr Hayre acknowledged that on occasions the time at which a communication was sent can be of critical importance. In the light of that acknowledgement one would have thought that the clock on his fax machine would bear some relationship to reality.
- Raj asserts that he next saw Mr Hayre on around 26 January. This coincides with an attendance note made by Mr Hayre of a meeting on that date. Raj therefore does not assert that the attendance note records a meeting that did not actually take place, but he does say that the note is inaccurate. It states for example that he was given a file of documentation. He denies that. It also wrongly gives the impression that the Claimant wished to proceed with the purchase at all costs. It is instructive to note that the note refers to the Raj being taken through the contract "once again", suggesting that the 26 January was not the first time that it had been discussed. The significance of this is that it suggests that if the contract was not discussed on 4 January then it is likely to have been discussed on 18 December. The Claimant would argue that is further evidence of the unreliability of Mr Hayre's earlier attendance notes. There is, I think, no other evidence upon which Mr Mason relies to undermine the accuracy of this particular note.
- In any event, as I have said, contracts for the purchase were actually exchanged on 29 January and inevitably, since completion was not to be for some time, activity in connection with this transaction became more sedentary. A deposit of £170,000 was paid split into 2 tranches, half on exchange and half in July 2007.
- I should add that in fact contracts were exchanged before the Claimant had its funding from HSBC in place. Mortgage instruction from HSBC did not materialise until the end of October, shortly before completion. On 31 October HSBC wrote to the Claimant advising that they would offer funding of £1,620,250. On the same date the Claimant received a second letter from HSBC which made no reference to the earlier letter and which is in exactly the same terms save that the funding is reduced by £450,000 (equating to the money receivable by the Claimant on the subsale) to £1,170,250. Mr Hayre received mortgage instructions by a letter dated 30 October 2007 on the basis of funding in the lower amount.
- Whilst Mr Mason does not assert that he can rely on any specific evidence that inevitably leads to the conclusion that the memorandum of 26 January is fabricated he suggests that that is not so of an attendance note of a telephone call between Mr Hayre and Raj 10 October 2007. Mr Hayre asserts that this was the first time that he became aware of the proposed subsale. Of course Raj says that he had been made aware in December 2006.
- The note records that Raj told Mr Hayre that Narwar, to whom the subsale was to be made, was a director of the Claimant company. Raj denies that he asserted any such thing. His evidence was that he did not even know Narwar until 2010 and that Narwar had no association at all with the Claimant. Mr Mason asks what did Raj have to gain by falsely asserting that Narwar was a director? It was a lie that could have been easily exposed simply by a search at Companies House and, furthermore, it was reasonable to assume that, since the Claimant was a new client of the Defendant, such a search had in any event been undertaken by Mr Hayre.
- He argues that later, by a letter of 14 December 2009 Mr Hayre had been threatened by Messrs Atkinson & Firth (the Claimant's solicitors instructed in this litigation) with a referral to the Solicitors Regulatory Authority (SRA) for his failure to furnish his files concerning this transaction to them. It is suggested that a note to the effect that the subsale was to a person connected to the Claimant may have been thought by Mr Hayre to be something that may ameliorate, if not fully then possibly partially, any concern that the SRA may have had about conflict of interest. The suggestion is that this particular note was fabricated with an investigation by the SRA in mind. I come back to this issue of the contention that Mr Hayre was advised that Narwar was a director of the Claimant below and in particular at paragraph 54.
- The telephone attendance note of 10 October records that Mr Hayre arranged a meeting with Raj for the following day and there is a record of such a meeting on that date. Raj contends that there was no meeting that day and that the file note of that meeting is fabricated. It contains specific issues about which he has particular observations;
a. In the context of issues surrounding conflict of interest, it repeats the alleged fabrication that Raj told Mr Hayre that Narwar was a director of the Claimant. Raj asserts that once again that was a fabrication with the SRA in mind in the hope that it may mitigate any concerns that the SRA may have had about his acting for both parties.
b. The note records that Raj threatened to report Mr Hayre to the Law Society "for making the deal fall through and him losing the 2 deposits totalling £170,000". Raj denies that he sought to blackmail Mr Hayre in this way. It is difficult to see what teeth there were to this threat in any event. It is hard to see that the Law Society would have censored Mr Hayre for taking the view that he was unable to act for both parties in this transaction. In any event, in so far as it was a threat, Mr Hayre's note records that he told Raj he would not succumb to blackmail but in fact he still continued to act.
c. The note states "RMK stated that contracts had been exchanged and he could not raise the full monies without the subsale occurring". At this time the Claimant had no funding in place. As I have recorded at paragraph 44, the mortgage offer (and an amendment) only came in on 31 October. The initial offer would have enabled the purchase to have taken place independent of the subsale because the offer was for £1,620,250 on a purchase price of £1.7m in respect of which a deposit of £170,000 had already been paid. It was only by a revised loan offer made that same day of £1,170,250 that the proceeds from the subsale became necessary to complete the purchase of the whole site. It is suggested that the note betrays the fact that it was written subsequently, on a date after the revised mortgage offer was actually made.
d. Whilst the note records that Raj was told in fairly trenchant terms that either the Claimant or Narwar should take separate advice, there is no evidence that, at the same time, Narwar was being told this. Mr Hayre concedes that this was not suggested directly to Narwar until 30 October.
When asked why the distinction had been drawn between the Claimant and Narwar in this connection, Mr Hayre said that it was because on 15 October he had written to Gordons, on the instructions of the Claimant, to enquire whether the vendors would be prepared to transfer 60 Toller Lane direct to Narwar rather than that property being acquired by Narwar by a way of a subpurchase from the Claimant. If the vendors had agreed then the conflict issue would have been resolved. In fact on 18 October Gordons responded in the negative.
It raises the question of why Mr Hayre then waited until 30 October to write a letter to Narwar in which "I strongly suggest that you obtain independent legal advice with regards to this transaction". This is against the background of Mr Hayre having been in receipt, since 4 October, of a notice requiring completion of the purchase of the whole site on 1 November. More importantly however, as at 11 October, Mr Hayre was apparently so concerned about the conflict situation so far as the Claimant was concerned that, on his evidence, he was having very heated discussions with Raj about it. This is so notwithstanding that the problem and the solution to it (a transfer of 60 Toller Lane by the vendor directly to Narwar) was a problem and solution that applied equally to both Narwar and the Claimant. Mr Mason argues that it is incredible that he should adopt a relatively laid back position with regard to Narwar yet a trenchant position with regard to the Claimant.
e. The note makes it clear that Mr Hayre requires Raj's "specific instructions to continue (to act) in the matter". He made clear in his evidence that by "specific" he meant "written". Indeed he repeated that requirement in a letter that he says he wrote to Raj on the same day and which Raj says was never written. Raj points out that no written confirmation was ever furnished to Mr Hayre despite his apparently desperate need for one and yet he continued to act. Raj contends that the fact that Mr Hayre did so is evidence that the issue of conflict simply did not arise and that gives the lie to the attendance note. Further one may wonder why at the meeting on 11 October Mr Hayre did not get Raj to sign there and then an instruction to continue to act.
- As for the letter to Raj of the same date to which I have just referred. It was written to Raj and is marked "Private and Confidential" yet it talks about the need for Narwar to be separately represented. It says in terms "I would highlight the need for Mr N Khan to obtain independent legal advice". It is suggested that this letter is fabricated simply to corroborate the fiction of the meeting of the same date. It is argued that if Mr Hayre was genuinely concerned about Narwar's position he would have written to Narwar. Even if he thought that Narwar was a director of the company then it is incredible that he should write to Raj "privately and confidentially" to point out the imperative for Narwar to consult another solicitor. In addition, despite his apparently consuming need for an authority the letter does not indicate that one was enclosed with the letter, as one might have expected.
- There is a telephone note of 12 October. It purports to record a conversation between Raj and Mr Hayre in which Raj confirms receipt of the letter and says that he wants Mr Hayre to continue to act for both the Claimant and Narwar. The note says, in terms, that Mr Hayre wants that confirmation in writing and records that Raj says that he will supply it "in due course". Raj argues that his assertion that the note is fabricated is supported once again by the fact that nothing in writing was received by Mr Hayre.
- There is a note of a further alleged telephone call on 19 October. The primary purpose seems to have been to tell Raj that the vendors were not prepared to convey 60 Toller Lane direct to Narwar and that that deal must proceed by subsale. Mr Hayre apparently took the opportunity to repeat that he felt that either Narwar or the Claimant should take independent advice and he was given short shrift. It is surprising that he did not apparently take the opportunity of reminding Raj that he was waiting to receive the written confirmation that Raj is recorded in the note of 12 October as having promised him.
- Mr Hayre argues that he felt he had little option but to continue to act for both despite his very strong disinclination to do so and the absence of the written confirmation that he required because he was worried that if he did take a step that resulted in the failure to complete on the completion date and deposits were forfeit then he may face proceedings for the recovery of the lost deposits if not a greater claim even than that. But if, as he asserts, he had only been told on 10 October that there was to be a subsale then his concerns about conflict were entirely proper. Further, he could not be criticised if he refused to act because written consent for him to do so from 2 apparently conflicted clients had not been received.
- Mr Chapman argues that there is surrounding evidence that corroborates the evidence of Mr Hayre that it was only at this point and not in the previous December that he had been told of the subsale to Narwar. He points to the fact that the letter to which I refer at paragraph 48d above written on 15 October was written at a time that coincides with Mr Hayre evidence as to the date he was told of the subsale. There is no doubt that letter was indeed written because the bundle contains Gordons' reply.
- The letter states;
"Our client has requested whether you (sic) client would be willing to transfer the land contained in Title Number WYK 507764 upon completion into our client's directors(sic) name as this is to be occupied by him as his residential dwelling post completion"
In my view this is not inconsistent with the notion that Raj told him in December that the land in this title (60 Toller Lane) was to be transferred to Narwar by subsale. It simply raises the question of whether the same end result can be achieved by a different means. Indeed that was Raj's evidence. However, it is right to note that the letter refers to Narwar, as a director. One can properly ask therefore why Mr Hayre would have said this in a letter in October 2007 unless he had actually been told that Narwar was a director.
- On 18 October Mr Hayre wrote to Raj asking for a plan of the area to be sold to Narwar. Raj does not dispute that but, as I have said, asserts that he gave Mr Hayre the plan at F220 of the bundle and that he signed the plan to confirm its accuracy.
- Raj relies not only on the fact that he signed a plan but also on the fact that the plan that was attached to the TP1 was unsigned. It was suggested to Mr Hayre that it is normal conveyancing practice to have plans signed in circumstances such as this precisely to head off the arguments about which I am concerned. Mr Hayre argued that in 2007 it was not standard to have plans signed. In any event, he says, the signed plan is not HMLR compliant because it is not to scale and has no north point. He argues that he would not have asked Raj to sign such a plan in those circumstances. There is certain illogicality in that. Even if the details on the plan have to be extrapolated onto an HMLR compliant plan by Mr Hayre it would have been useful for him to have in his possession a signed source plan to produce to the client in the event that the client at some future date queried the accuracy of the filed plan.
- I have mentioned that Mortgage instructions were dated 31 October. On the following day Mr Hayre signed the certificate of title confirming that the Claimant's title to the site was clean and marketable. On Mr Hayre's evidence this is before he has received the plan from Raj delineating the extent of the subsale. It is difficult to believe that it is appropriate to sign the certificate until the solicitor is satisfied that the subsale will not adversely affect the use and enjoyment of the retained land. Mr Hayre's explanation is that if it transpired that the retained land was blighted by the extent of the land included in the subsale then the money could have been returned to the bank. That however does not sit well with the fact that, as it turned out, the use and enjoyment of the retained land was blighted by the extent of the land included in the sale, as Mr Hayre well knew (because of course it is at the nub of his defence to this case that he pointed that out to Raj but was told to complete in any event) yet he still completed using the Bank's funds. Leaving all else aside, there is the question of how all this is consistent with Mr Hayre's obligations to the bank by whom he is also instructed. The fact that he did complete in these circumstances may suggest that he was not aware that the Bank's position was prejudiced by the terms of the subsale.
- Returning to the various attendance notes, on 1 November there is a record of a meeting at which Mr Hayre "ran through" the mortgage offer. It is recorded that it started at 10.45 and lasted 30 minutes. Raj is recorded as taking the mortgage documentation away on the basis that he would return them that same day. In his witness statement Raj questions whether that happened that day. He believes it may have been on the 2 November but he appears not to be sure. Indeed, as I have already observed, it is remarkable that details like this can even be vaguely recalled after this length of time.
- I refer next to events of 2 November. Of course the events of 2 November are central to this case. It is upon advice purportedly given on that date that the Defendant bases its defence. The first documents to consider are 2 telephone notes, one at E73 and the other at D73.
- The first telephone attendance note purports to be a call from Mr Hayre to Raj and the latter one from Raj to Mr Hayre. Mr Hayre expresses concern that completion had not taken place on 1 November (which was the contractual date for completion) and points out to Raj that extra costs were now being incurred by the vendors that the Claimant would have to meet. It also records that Raj agreed to attend at the office that day to give Mr Hayre the plan for the subsale and to pick up a completion statement. Interestingly, there is no mention of the mortgage document which, according to the note of 1 November, Raj was meant to have returned on 1 November. Nor does Mr Hayre remind Raj that his written consent to Mr Hayre acting notwithstanding the conflict of interest is still awaited.
- In the second telephone note (D73) there is reference to the fact that the Bank required Raj to sign a guarantee and once again Mr Hayre raises the issue of independent legal advice and recommends again that Raj obtain it. Three points are made on behalf of the Claimant;
a. The latter note ends with the following sentence;
"RMK stated that he would be in town later that day and he would call into the office to sign the same (the guarantee)".
The point is made that Raj had already said that he was coming to the office with the plan and to pick up a statement and that this sentence does not sit well with that and suggests that one or the other has been invented.
b. Mr Hayre was asked why he did not mention the guarantee in the first conversation. He could offer no explanation. Mr Mason suggests that it is unlikely that there were 2 calls and one note is fabricated.
c. If Mr Hayre had not mentioned it in the first telephone call why did he not do so in this conversation that he had been promised the consent letter and where was it?
It is difficult to see why Mr Hayre would go to the trouble of fabricating one or both of these notes because they do not address any questionable conduct from which he might wish to exculpate himself. It is right that they purport to confirm that the plans were not yet in his possession but it is not clear to me that Raj disputes that the plans were delivered on 2 November in any event.
- There are notes of 4 separate steps in the transaction expressed to have been taken face to face on 2 November.
- First, at D74, is a note recording a meeting timed at 11.45 and which took 18 minutes. It records that Raj attended to sign the guarantee but that Mr Hayre was not in a position to allow him to do so because he had not had the chance of reviewing it. It records that Mr Hayre told him that he would not allow Raj to sign the guarantee until Mr Hayre had drafted "a full letter of advice" at which time he would contact Raj. It records that Raj was insistent that he sign the guarantee and indicated that he would return to do so after 3.00 if he had not heard from Mr Hayre by then.
- Mr Mason argues that in terms of timings this note sits uneasily with the telephone message at D73 to which I refer in paragraph 61 above. The meeting took place at 11.45. Mr Hayre said that the phone conversation took place 60 to 90 minutes earlier. It has to be said that it is a remarkable feat of memory to recall such timings 8 years later.
- Furthermore Mr Mason asks rhetorically, why did Raj apparently not take the opportunity to bring in the plans for the subsale when he apparently attended at 11.45 and why did Mr Hayre not give him the completion statement? Both of these had been discussed in the phone call purportedly had earlier that day and recounted in paragraph 60 above.
- Secondly, at page D68 is a note of the second meeting on 2 November timed at 12.00. On the basis that the meeting that started at 11.45 had taken 18 minutes this meeting immediately followed on. It was to consider a debenture to be entered into by the Claimant. When Mr Mason alighted on this note Mr Hayre immediately volunteered that it was misdated. The debenture, he said, was considered on 1 November. The same day as the mortgage. It is troubling in my judgment that such a mistake has been made.
- Further, if both were considered on 1 November then why was that not simply recorded in one attendance note? The meeting on 1 November to consider the mortgage documents commenced at 10.45 and lasted 30 minutes. If only the date of the meeting was wrong but not the time, the meeting to discuss the debenture started at 12.00 on 1 November. In that event what was happening in the 45 minutes between the end of one meeting and the start of the next?
- In addition, at the very least if 2 separate attendance notes were appropriate one would expect them to be written one after the other yet they are in different font size, only one is justified and they bear different client file references.
- Mr Hayre says that he may not have typed them up together. They would have been transcribed from handwritten notes and, albeit those will have been done broadly contemporaneously, the typed notes may not. In any event, Mr Hayre argues that the times on the notes of 11.45 and 12.00 may be inaccurate. He said, rather lamely in my view, that he does not wear a watch. Yet he records the duration of meetings for which he charges the client £12.50 per 6 minutes.
- Thirdly, at D70 there is the attendance note of discussions surrounding the plan that Raj apparently produced on 2 November. The meeting is recorded as having commenced at 16.25 and lasted 36 minutes. This is the pivotal meeting at which either Mr Hayre received the plan that blighted the retained land and gave the advice that absolves him from liability or he did not. I need not set out the contents of the note in detail (although the note itself is very detailed). Mr Mason accepts that the note points up all the problems that beset the retained land as a consequence of the position of the boundaries of 60 Toller Lane.
- Raj says the advice was not given and indeed, on the basis of the plan that he says he produced and signed, would not have been necessary (except in relation to difficulties in access to the North caused by the transfer to Narwar of a strip of land to the North abutting 2 cottages that remained in the retained land). Mr Hayre contends that the advice was given and was necessary because the plan that Raj produced was the plan that ultimately became the filed plan attached to the TP1.
- At A25 there is another copy of this attendance note. This example of the note was exhibited to the defence. It is exceedingly troubling that it is not identical to that at D70. It records that the meeting commenced at 13.25. The description in the subject line is different (at D70 it is "60-64 Toller Lane" at A25 it is "60 Toller Lane"). The client reference differs. It is recorded as a meeting lasting 54 minutes rather than 36 and, perhaps most troubling of all, the body of the note is not identical. Large tracts of both documents are the same but there are additions in the text at A25.
- Mr Hayre's explanation is that one was a draft while the other (at A25) is a perfected version. That cannot explain the differing start times and record of the length of the meeting and Mr Hayre did not even try to offer a meaningful explanation for that save to say that in this connection it is the draft rather than the perfected copy that accurately records the start time. He was also at a loss to explain why, if D70 is only a draft, it was not discarded when the perfected copy was drafted and why he refers to the draft rather than the perfected copy when referring to this document at length in paragraph 29 of his witness statement.
- Fourthly, at D80 there is a note of yet a further attendance on that date. This one is timed to have started at 16.05. This meeting centred on the guarantee and is recorded as having lasted 30 minutes. It will be recalled that the "draft" note about the meeting relating to the plan records that meeting as having commenced at 16.25 – so 10 minutes before this meeting concluded.
- The note also records that after signing the guarantee and asking for a copy, Raj "left with the advice notes given to him by BH". When asked why the note recorded Raj as leaving when in fact apparently all that happened is that the subject matter of the meeting was changed to a discussion about the plan, Mr Hayre said that he was "operating a different memo for the plan". It is not clear to me how that is an explanation for recording somebody as leaving when they did not actually leave.
- The final sentence of this memo is also worthy of comment. It states that "RMK asked that BH invoice him for the work and that he would settle the same accordingly". That is indeed perhaps the sort of remark that a client may make at the end of a meeting. It is less likely to be made simply at the end of a discussion of one of a number of topics.
- At D71 there is a copy letter to Raj dated 2 November which purports to enclose the transfers for signing and which confirms the advice he was given about the plans that day and to ask if Raj wishes to reconsider the terms of the subsale so that it does not blight the retained land. Raj says that this letter is a fabrication and that he was given the transfers (but not the plan) at the meeting on 2 November.
- It is suggested that the letter gives the impression that Mr Hayre is concerned that Raj is not acting in the Claimant's best interests. Mr Mason argues that if Mr Hayre was so concerned about the position he would himself have got Raj to sign the plan that blighted the retained land or alternatively procured his signature to a document which confirmed that he had received advice that what he was about to agree to would blight the Claimant's retained land. Mr Hayre says that he has never requested instructions in writing. His evidence is that Raj was simply not concerned with the fact that the retained land was disadvantaged. If anything needed to be corrected it could be sorted out later between the Claimant and Narwar but the nature of the development that the Claimant had in mind (for which he was sure planning permission would be obtained) would obviate the problems that Mr Hayre had identified.
- It is interesting to note that I have heard no evidence that Narwar, for whom of course Mr Hayre also acted, was advised by Mr Hayre either about the plans or changes to them to his possible detriment. If there was some evidence that there had been some discussions at this time between Narwar and Mr Hayre about the effect of the proposed position of the boundaries of 60 Toller Lane and whether Narwar objected to their being redrawn to address the problems that the proposed boundaries caused to the retained land then that would add weight to Mr Hayre's contention that all these matters were in his mind and that he therefore discussed them with Raj.
- Finally, at D72 there is a memo dated 5 November that purports to record that Raj telephoned Mr Hayre in response to the letter of 2 November and confirmed that, despite the problems allegedly identified, he wanted to proceed. Raj says this is a fabrication.
- There are other factors that the Claimant relies upon to support its contention that there has been wholesale fabrication of letters and memos to support Mr Hayre's contention that Mr Hayre received the plan that was attached ultimately to the TP1 and that he told Raj of the problems that the subsale created for the retained land. I shall deal with those briefly.
- The first such factor is that by his conduct Mr Hayre provided himself with substantial opportunity to produce documents to falsely support his position. He was asked for his file by the Claimant's present solicitors, Atkinson & Firth by letter of 1 October 2009. Photocopies of the contents of the file were not made available for collection until 16 December 2009. Even when they were produced there were significant omissions which are identified in a letter from Atkinson & Firth dated 23 December 2009. Indeed such were the extent of the omissions that their letter of that date made it clear that they thought that it indicated that the Defendant had something to hide.
- Mr Hayre contended that the delay in furnishing the files came about because he had delegated the task of dealing with the request for the files to a junior colleague who wrote to Atkinson & Firth on 6 October purporting to exercise a lien over the files for unpaid fees. In fact there were no fees owed by the Claimant but the Defendant continued to retain the file on the basis that fees owed to them by Raj entitled them to do so. It was only on 23 November that the Defendant abandoned the misconceived notion that a debt due from Raj created a lien over the Claimant's files. Their letter of that date states that they are "collating their files". When asked by Mr Mason, Mr Hayre was unsure what was meant by "collating the files". In so far as it may mean retrieving them from storage he said that can usually be done within days. However, as mentioned, copies of the files were not released for collection until 16 December, after a threat to refer the Defendant's conduct to the SRA.
- The Defendant retained the originals of the files but it is the evidence of Mr Hayre that these were stolen in a burglary between 17 and 20 February 2012. Nothing else was taken, only this file. Indeed Mr Hayre did not realise that the file had been stolen until he was asked for it by his solicitors in 2014 and could not find it. It is difficult to understand why Mr Hayre's first and lasting reaction in failing to find a file (which even he accepts had been languishing on a windowsill since 2009) in a busy solicitor's office must mean that it was stolen in a burglary that had occurred 2 years before but that is his clear evidence. He offers this evidence to cast a dim light on the Claimant and to explain why the original documents cannot be produced. He asserts that he suspects the Claimant of arranging the burglary because Raj will have wanted to conceal the fact that the file reveals that Raj wanted to take advantage of an obvious error that HSBC made when, rather than releasing 60 Toller Lane from their charge on the subsale, they inadvertently released their charge on the whole of the site. In my view it is incredible that a solicitor should jump to that conclusion rather than simply that the file was lost, especially when, even to Mr Hayre's knowledge, any evidence that Raj had wanted to play fast and loose with the Bank had been in the file for over 4 years before the burglary.
- The second factor relates to the appearance of some of the attendance notes when compared to other documents that could have been expected to have been produced at the same time. Examples are D56 and D58. The former is the attendance note of the meeting on 11 October which Raj says did not take place. The note is in justified format and large font. The letter dated the same date is in smaller font and is not justified. Similarly the letters at D71 and D77 both of which were written to Raj on the same day are in a different font and one is addressed to Raj at Cliffield Close and the other at Clifford Close. Indeed this error in the address appears throughout the correspondence at random points and often the erroneous address of Cliffield Close is the address appearing on some correspondence that Raj says was fabricated in 2009 when Mr Hayre was on notice that the Claimant may be investigating his conduct further.
- Finally, with regard to the evidence concerning the Land Claim I repeat what is said at paragraph 21 above, the transfer of the whole site to the Claimant was completed on 9 November 2007 and the transfer to the Claimant is dated with that date. Narwar paid the £450,000 due from him for the subsale the same day and he was given the keys to 60 Toller Lane but the transfer to him, albeit signed by both parties by 9 November, was not dated until 9 April 2008.
- The transfer of part to Narwar contains some quite onerous restrictive covenants including that the property cannot be used for a trade or business nor for any purpose other than a single private dwelling house. In addition no structure, temporary or permanent can be erected on the property and no external structural alterations or additions can be made without the consent of the Claimant.
- It is contended by Mr Chapman that, even if breach of duty is established, the Claimant has failed to establish causation namely that Narwar would have agreed before completion to a redrawing of the boundaries to avoid the limitations on the retained land. Mr Mason argues that the fact that Narwar was prepared to accept these fairly onerous covenants is powerful evidence that he wanted the house and, in those circumstances, would have agreed to modifications in his title if the Claimant had insisted.
- In August 2009 the Claimant received an offer for the retained part for £950,000 which it accepted. The whole site, it will be recalled had been purchased for £1.7 million. If this deal had completed the whole site would have been sold for only £1.4 million, a significant loss. In fact however the deal got nowhere near exchange. Investigations in relation to the title by the proposed buyers revealed the problems about which the Claimant now complains and these were pointed out to the Claimant in a letter of 14 September 2009. It was as a result of the investigations by this potential purchaser that Raj says he first became aware of the difficulties and sought independent legal advice and which caused Atkinson & Firth to make their first request for the Defendant's files on 1 October 2009, within 2 weeks of the letter of 14 September.
- It is Raj's evidence that he approached Asif to see if his father, Narwar would agree to steps intended to cure the blight suffered by the retained land. In the end Raj's evidence is that they were not prepared to do so. A letter of 26 February 2013 to Asif from Atkinson & Firth suggests that initially Narwar may have been amenable and the letter seeks to set up discussions to explore a solution but there was no reply by Asif (or Narwar) to that letter. In the end it seems that Narwar took commercial advantage of the dominant position in which he found himself by negotiating a sale to him of the Car Park for a knock down price of £40,000.
- Asif's witness statement confirms that they were indeed approached with a view to curing at least some of the blight affecting the retained land but that his family "did not wish to give up the rights to the land which had been transferred"
Evidence relating to the SDLT Claim
- I believe that I can deal with the evidence concerning this far more briefly. The Defendant ledger for the transaction shows that the monies transferred to Gordons on completion on 9 November 2007 were made up of mortgage funds from HSBC and the amount received from the subsale. It appears not to be disputed that Narwar got the keys to 60 Toller Lane on 9 November.
- It is right that the TP1 transfer to Narwar is actually dated 9 April 2008 but, as I have said in paragraph 21 above, that was only because it was dated after the receipt from the Bank of the formal release of that property from its charge.
- Mr Hayre felt that he had no alternative but to defer dating the transfer until then. He acknowledged however that if a separate solicitor had been acting in the sale of 60 Toller Lane he could have dated the transfer on the de facto date of completion because he would have obtained a solicitor's undertaking from the seller's solicitors to forward to HSBC sufficient monies to enable them to release 60 Toller Lane from their security and then forward to him the formal evidence of the discharge when received. He felt that in essence it was not appropriate in his capacity as solicitor for the seller to undertake to himself in his capacity as solicitor for the buyer. There was no way therefore that he felt advantage could be taken of the s45 concession.
- Leaving aside whether in fact the fact that Mr Hayre represented both buyer and seller did, in law, preclude the TP1 being dated the 9 November, the fact is that in his oral evidence he accepted that he never advised the Claimant that the fact that it appeared to insist that he continued to act was going to cost them £18,000 more in SDLT than was necessary.
- In any event the s45 concession is available not just on completion but on "substantial performance". It is difficult to believe that substantial performance does not occur when the purchase monies are paid and the purchaser gets the keys.
- In October 2012 after having learnt from his current solicitors that there had been an overpayment of SDLT Raj applied to HMRC for a refund. It was refused. On 13 November HMRC drew attention to Schedule 10 paragraph 34B Finance Act 2003 which provides that any claim for a refund must be made within 4 years of the payment. The application for the refund was rejected as being out of time.
- I have already dealt with the issue of retainer in paragraphs 13 and 14 above.
Burden of Proof
- The burden is on the Claimant to establish breach of duty and causation. Notwithstanding that the Claimant asserts that Mr Hayre has fabricated his defence and that it is accordingly dishonest nonetheless the burden on the Claimant is to establish his case simply on the balance of probabilities.
Standard of Proof
- Re B (Children)  UKHL 35 is a case concerning the application of the Children Act 1989 but it is of great relevance to the issue of what is meant by "the balance of probabilities". The House of Lords in that case had to consider the issue of whether, in those cases where the allegation was serious or the consequences of a finding that the allegations were true might be unusually far reaching, there should be a gloss applied to the concept of balance of probability. In other words whether there is a standard somewhere in between "balance of probability", pure and simple and "beyond reasonable doubt".
- The concept that there was this hybrid was perhaps legitimised by the maxim that "the more serious the allegation the more cogent the evidence had to be to establish it". Their lordships concluded that the standard of proof does not alter merely because of the seriousness of the allegation or the seriousness of the consequences. Neither should make any difference to the standard of proof to be applied in determining the facts. There was no logical or necessary connection between seriousness and probability. The inherent probabilities were simply something to be taken into account in deciding where the truth lay.
- Lady Hale had this to say
"Lord Nicholls' nuanced explanation left room for the nostrum, "the more serious the allegation, the more cogent the evidence needed to prove it", to take hold and be repeated time and time again in fact-finding hearings in care proceedings (see, for example, the argument of counsel for the local authority in Re U (A Child) (Department for Education and Skills intervening)  EWCA Civ 567,  Fam 134, at p 137. It is time for us to loosen its grip and give it its quietus".
- On the issue of inherent probability she went on to remark on the need to look at matters in context and not in a vacuum;
"Some seriously harmful behaviour, such as murder, is sufficiently rare to be inherently improbable in most circumstances. Even then there are circumstances, such as a body with its throat cut and no weapon to hand, where it is not at all improbable. Other seriously harmful behaviour, such as alcohol or drug abuse, is regrettably all too common and not at all improbable. Nor are serious allegations made in a vacuum. Consider the famous example of the animal seen in Regent's Park. If it is seen outside the zoo on a stretch of greensward regularly used for walking dogs, then of course it is more likely to be a dog than a lion. If it is seen in the zoo next to the lions' enclosure when the door is open, then it may well be more likely to be a lion than a dog".
- In the same case Lord Hoffman considered inherent probability
"There is only one rule of law, namely that the occurrence of the fact in issue must be proved to have been more probable than not. Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities. If a child alleges sexual abuse by a parent, it is common sense to start with the assumption that most parents do not abuse their children. But this assumption may be swiftly dispelled by other compelling evidence of the relationship between parent and child or parent and other children. It would be absurd to suggest that the tribunal must in all cases assume that serious conduct is unlikely to have occurred. In many cases, the other evidence will show that it was all too likely. If, for example, it is clear that a child was assaulted by one or other of two people, it would make no sense to start one's reasoning by saying that assaulting children is a serious matter and therefore neither of them is likely to have done so. The fact is that one of them did and the question for the tribunal is simply whether it is more probable that one rather than the other was the perpetrator".
- He went on to say;
"My Lords, I would invite your Lordships fully to approve these observations. I think that the time has come to say, once and for all, that there is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not".
- This was a family law case but the principles quite clearly apply in all aspects of civil law where the standard is the balance of probabilities. That is clear, not least in the observations of Lord Hoffman cited in paragraph 105 above.
- I make these observations because the allegations against Mr Hayre are serious and indeed it is possible that a finding that he did fabricate documents may have serious consequences for him. It led to some brief discussion with Mr Chapman during his final submissions on the standard to be applied but it is right to acknowledge that Mr Chapman did readily concede, as in my view he had to, that I must decide this case on balance without adding any gloss.
- I recognise however that in so doing dishonesty is less probable than honesty. As Lord Nichols put it in Re H
"Fraud is usually less likely than negligence. Deliberate physical injury is usually less likely than accidental physical injury. A step-father is usually less likely to have repeatedly raped and had non-consensual oral sex with his under age stepdaughter than on some occasion to have lost his temper and slapped her. Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.
Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred".
Assessment of Credibility
- It is also right to say something about the assessment of credibility. In his book "The Judge as Juror; the Judicial Determination of Factual Issues, published in Current Legal Problems 38, Bingham J (as he then was) made this observation:
"the main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely from case to case:
a. The consistency of the witness's evidence with what is agreed or clearly shown by other evidence, to have occurred;
b. The internal consistency of the witness's evidence;
c. Consistency with what the witness has said or deposed on other occasions;
d. The credit of the witness in relation to matters not germane to the litigation;
e. The demeanour of the witness.
- In Thornton v NIHE  NIQB 4 Gillen J suggested that the court must pay attention to these factors:
a. The inherent probability or improbability of representations of fact;
b. The presence of independent evidence tending to corroborate or undermine any given statement of fact;
c. The presence of contemporaneous records;
d. The demeanour of witnesses
e. The frailty of the population at large in accurately recollecting and describing events in the distant past
f. Does the witness take refuge in wild speculation or uncorroborated allegations of fabrication?
g. Does the witness have a motive for misleading the court?
- In Mumtaz Properties v Ahmed  EWCA 610 it was recognised that there were many situations in which the court was asked to assess the credibility of witnesses from their oral evidence. That task was not to be carried out merely by reference to the impression that a witness made giving evidence; it was not solely a matter of body language or tone of voice or other factors that might generally be called the "demeanour" of a witness. The judge should consider what other independent evidence was available to support the witness. Such evidence would generally be documentary but could be other oral evidence. Contemporaneous written documentation was of the greatest importance in assessing credibility and could be significant not only where it was present and oral evidence could be checked against it, but also where it might be conspicuous by its absence and inferences drawn.
Conclusions concerning the Land Claim
- Let me make it clear that there are aspects of Raj's evidence with regard to the Land Claim which trouble me. His Particulars of Claim seek damages for loss of profit of £1.9 million because of blight to the retained land when it transpires that in August 2009, before he knew of the problems with the retained site, he had accepted an offer of £950,000 for it. The claim has not been pursued but it seems to me that the fact that it was initially pleaded in a pleading endorsed with a statement of truth, and in such a large sum, does not reflect well on him.
- Secondly, during the course of his evidence he was content to allege that there was some sort of conspiracy between the Defendant and HSBC. He did not mince his words, he was happy to use the word "conspiracy" as his explanation for the bank reducing, in the course of the same day, a mortgage offer from £1,620,250 to £1,170,250. There was no evidence whatsoever to support an allegation of conspiracy save the decidedly tenuous evidence that the reduction equated to the sale price of 60 Toller Lane and Asif worked for the Bank. It was wild speculation that must fall within category f) of Gillen J's list set out in paragraph 110 above.
- Thirdly, in evidence he accepted that some documents that he had initially accused Mr Hayre of fabricating had not actually been fabricated. For example, one of the many documents attached to his witness statement was Mr Hayre's client care letter of 18 December 2006. Raj had written on it that it was fabricated, not least because it has been addressed to Cliffield Close rather than Clifford Close. In fact he accepted that he had received that letter. This falls foul of the second category in Gillen J's list, paragraph f).
- Fourthly, that the Claimant alleged that various innocuous letters had been fabricated even when there was no need to do so. The suggestion was that his approach was scattergun and the allegations were wild and ill considered.
- Fifthly, at F276 there is a plan attached to a planning application which places the southern boundary of 60 Toller Lane in a position similar to that on the plan filed at HMLR. Mr Hayre had nothing to do with this plan. In this plan however the western boundary does not encroach on the central estate road, as it does on the filed plan. Raj's explanation was that he had nothing to do with it either. The planning application was sent in by his agent and he had not been asked to check the plan before its submission. This was, he said, par for the course with this agent who was not competent. My attention was drawn to correspondence from the council purporting to demonstrate that planning applications made by this agent for this, and other sites, were defective in basic respects.
- Sixthly, is it likely that after this length of time Raj will recall when meetings were held and precisely what was said in them? Especially when between 2007 and 2009 he had no cause to mentally file away those recollections because he was not aware of any problem. To his credit however there were occasions when he readily admitted that he could not remember whether he had seen Mr Hayre on specific days put to him in the course of his evidence.
- Mr Chapman also argues that the fundamental allegation is that the documents that were fabricated were fabricated in 2009, essentially 2 years after the event. A finding that that was so would involve a finding that well after the relevant period Mr Hayre has built up a complex web of false documents all intricately linked in a complex process. He asks if that is likely?
- This leads to issues of inherent probability. Is it likely that a solicitor would take steps to fabricate documents to protect himself from a claim for negligence particularly where presumably he is insured? In any event, as Lord Nicholls implied in the extract cited at paragraph 108 above, fraud is, as a general rule, perhaps the least likely of all possible scenarios (dependent of course on the context).
- In addition, some of the documents alleged to have been fabricated actually do fit in with established surrounding circumstances. I have in mind the reference to "our clients director" in the letter to Gordons of 15 October 2007 to which I refer in paragraph 54 above. Mr Chapman argues that this letter is significant not only in that respect but the very fact that it is only in October that Mr Hayre writes to ask about a direct sale by the vendors to Narwar is itself evidence that that was when he must have been told about the sale to Narwar. As I mention in paragraph 54 however, it does not eliminate the possibility that prior to that date the parties only had in mind proceeding by way of subsale.
- I also remind myself of the questions that Mr Chapman poses about the reliance that can be placed on Raj's account of how he behaved when this deal was referred to him by Asif. As I mention at paragraph 31, he simply took it over in a manner akin to a type of quasi novation. I set out Mr Chapman's thoughts on that in paragraph 31. It is perhaps odd, especially that Raj should agree to the Claimant taking over the deal without so much as a valuation but in fact when the site was valued for HSBC by Lambert Smith Hampton in September 2007 it was valued at £1,700,000, precisely what the Claimant paid. It was only shortly after the purchase had been completed that the recession hit and its effect on property values is well recognised and is demonstrated here by the value placed on the retained land by potential buyers in August 2009.
- On the other hand, the evidence of Mr Hayre concerning the Land Claim troubles me even more. I refer to my analysis of the evidence surrounding the various notes and letters about which the Claimant takes issue but in particular to paragraphs 36 to 42, 48 to 52 and 56 to 79. One need only reread those paragraphs to conclude that the integrity of the notes is materially compromised. I remind myself for example that there was one important error in the date recorded for a meeting said to have been held on 2 November but which even Mr Hayre accepted took place on 1 November and explanations that the fax machine showed the wrong time or the recorded times for meetings were unreliable because Mr Hayre does not wear a watch were far from convincing.
- The difference between the attendance note at A25 and that at D70 and which I cover in paragraphs 70 to 73 is also a matter of great concern for which no credible explanation was given. The suggestion that D70 was a draft was not assisted by the fact that it is that note to which Mr Hayre refers at length in his witness statement.
- I was also troubled by the particularity of Mr Hayre's evidence. As I have said, it was a troubling feature of Raj's evidence also but in Mr Hayre's case, more so. He appeared to be able to recall what time meetings took place how long they lasted and what was discussed with the sort of detail one might expect from a witness recounting things that had occurred only recently. He was doing so about events 8 years ago.
- It is also right to strip the competing accounts down to essentials. Is it likely that Raj would furnish Mr Hayre with a plan that obviously put the access to the Car Park in the land to be sold and which gave that land ownership of the central road so far as it abutted the house and gardens to be sold? It was just as easy and considerably more sensible from the point of view of the Claimant to provide a plan along the lines of the one at F220. It is not as if even Mr Hayre alleges that Narwar had much, if anything, in the way of input into the boundaries on the plan.
- If Raj did give Mr Hayre the plan that Mr Hayre said he received, is it likely that he would ignore firm advice that the subsale on the terms of that plan would seriously blight the retained land and cause the Claimant to proceed with the transaction notwithstanding? Is it likely that he was so convinced that he would get the planning permission he needed to render these problems academic? Is it not likely that in that situation, prior to completion he would approach Narwar and arrange for the plan for the subsale to be redrawn or at least discuss with him the prospect of an option to re-purchase enough land to free the retained land from blight if planning permission was not forthcoming? The Claimant was not committed to sell to Narwar, true it is that it transpired that the Claimant needed Narwar's purchase monies to complete the purchase but equally I am satisfied that Narwar was anxious to ensure that his deal went through. The restrictive covenants that he was prepared to enter into in my view demonstrate his keenness to proceed.
- In addition, it has to be said that it seems considerably more likely that Mr Hayre was told of the subsale in December 2006 than that he was told in October 2007. It is common ground that the Khan Family were initially intending to buy the site and that Asif introduced Raj to Mr Hayre. It is equally clear that ultimately Narwar bought 60 Toller Lane as his family house. The clear implication is that he maintained an interest in its acquisition. Otherwise why refer it to the Claimant and introduce the Claimant to his solicitors? And why would Narwar only express an interest in buying 60 Toller Lane 10 months or so after involving the Claimant?
- I have commented on wild accusations by Raj of conspiracy but Mr Hayre is not above similar accusations himself albeit he was a little less direct. Nevertheless it was clear, if only by implication, that he saw Raj as the perpetrator of a burglary at his offices in February 2012 on the scant evidence that the file in respect of this transaction could not be found when it was looked for 2 years later.
- I also remind myself that the hearsay evidence of Asif is supportive of the Claimant in respect of the nature of the first meeting between Mr Hayre and Raj (a face to face meeting on 18 December), and the date when Mr Hayre was advised that 60 Toller Lane was to be sold to Narwar. I accept that this evidence has not been tested by cross examination and the reason for Asif's non attendance is not, on its face, a good one. It was however not suggested that he is evading service or that there was any other good reason why that should be the case. All of which factors detract from its weight. On the other hand it is difficult to see what Asif has to gain by seeking to mislead the court. If any weight at all is afforded to the statement then it adds weight to the Claimant's account.
- I am also troubled that it did take so long for the file to be made available for collection by Atkinson & Firth and that ultimately it took the threat of a reference to the SRA to produce it. The delay would have furnished Mr Hayre with the opportunity to add fictitious notes and letters to the file and the explanation for the delay (namely the misconceived lien to which I refer in paragraph 83) is not convincing.
- I refer to the observations of Mr Chapman on the issue of inherent improbability to which I refer in paragraph 119 above and of course I do not overlook the observations of Lord Nichols in Re H to which I refer at paragraph 108 above. They would suggest that fabrication by Mr Hayre is inherently unlikely but it is clear from the observations of Lady Hale particularly in Re B that the issue of inherent improbability must be considered in context.
- The position of the Claimant is that Mr Hayre is essentially being dishonest. A finding against the Claimant would in essence be a finding that Raj has been dishonest in his evidence. This is not a case where matters can be determined on the basis that one or other party had "misremembered" or otherwise made an innocent error. It is proper to ask whether it is any more likely that Raj would seek to dishonestly mislead the court. True it is that he has something of an incentive because not insubstantial damages are at stake but it is likely too that Mr Hayre would be affected by an adverse outcome in this case. Even though he is no doubt insured, there may well be an excess and an adverse finding may result in an increase in future insurance premiums. In addition there is the reputational damage caused to a professional person in having a finding of negligence made against him or her. On the other hand it is proper to ask oneself in considering the issue as a whole if it is likely that a solicitor would possibly risk his career to avoid a finding of negligence?
- However, in my view it would be wrong to assume that it is inherently more improbable that a professional person will be dishonest than anyone else. If ever such a view validly had traction, I do not think it can do so in the modern world. The fact is that, while the question I pose in the last sentence of paragraph 132 is clearly a valid one, nevertheless, when putting matters into context, the factors which I have described which cast doubt on the integrity of the notes in Mr Hayre's file together with the other factors to which I have referred at length lead me to conclude that the Claimant has surmounted the "inherent improbability" hurdle.
- Finally, I come to consistency and demeanour. Both witnesses would not be swayed from their long established and consistent positions. Both gave their evidence forcefully and unhesitatingly but I have to say that I detected indignation in the demeanour of Raj about the conduct of Mr Hayre which suggested to me that he did genuinely believe that the Claimant had been wronged. That is by no means anything like a determinative factor but it must weigh to some small extent in the scales.
- Taking all matters into account I have concluded that on balance and taking account of how that standard of proof is to be considered in the light of Re B that I prefer the evidence of Raj to that of Mr Hayre and that accordingly the Claimant has discharged the burden upon it of establishing as a fact that Mr Hayre was told of the subsale in December 2006 and that on 2 November 2007 Raj furnished Mr Hayre with the plan signed by him and which is to be found at page F220 of the bundle. I find that the plan was added to the TP1 after it had been signed and that the wrong plan was added. I further find as a fact that Mr Hayre did not advise Raj of the access problems. In reality he would not need to (at least as regards the Car Park and the road) on the basis of the plan that, as a fact, I find that Raj had given him because there were no access problems to that extent.
- It is a sad and highly regrettable finding that the attendance note of 2 November misrepresents the true position as I find it to be and it is not a conclusion that I reach lightly. I have given much thought not only to the matters in Mr Hayre's evidence that have troubled me but also those in the evidence of Raj and which I summarise from paragraph 112 above. I conclude however that those issues do not undermine the compelling factors which count against the Defendant which go to the central issue of what plan was given to Mr Hayre and what advice was given on 2 November.
- This is so notwithstanding the contemporaneous evidence revealed in the letter of 15 October 2007 and to which I refer in paragraph 54 above and which clearly suggests that at the relevant time Mr Hayre thought Narwar was a director of the Claimant. In my view in so far as that may undermine the accuracy of Raj's evidence about what he told Mr Hayre, it is insufficient to undermine the conclusions I have reached as to the integrity of Mr Hayre's documents, for the reasons outlined above. In particular that issue does not directly address the fundamental issue in this case namely whether the wrong plan was attached to the TP1 and whether Mr Hayre did or did not give the advice in November that he says he gave.
- I am satisfied that causation is established in the sense that I am satisfied that had the correct plan been attached by Mr Hayre to the TP1 the retained land would not have been blighted. In so far as it is necessary I find that had Narwar been approached before completion with a view to cooperating in the drawing up of a plan that gave the retained land access to all parts of the retained land that, on balance, he would have agreed to that. I refer to what I have said at paragraph 126 above. In addition one may ask why would he not? Such arrangements would not, it seems to me, have necessarily interfered with the use and enjoyment of his land save that it may have involved the loss of, or rights of way over, a strip of land the width of the entrance to the Car Park.
- As pointed out in paragraph 15 above, the filing of the wrong plan has diminished the value of the land by the agreed sum of £211,500.
- I am not prepared to award anything for wasted expenditure other than the £470 agreed costs of attempted cure. I am not satisfied that the Claimant has established that any expenditure was wasted due to the act of negligence other than this small amount in respect of attempted costs of cure. In the light of the fact that Mr Mason recognised his difficulty in establishing this head of loss in the circumstances of this case and the documentary evidence I do not propose to dwell further on this head.
- Mr Chapman argues that the Claimant has failed to mitigate its loss. The only evidence I have in this connection suggests that the Claimant has tried to do so. There is the evidence of Raj but importantly his oral evidence is supported by the letter from his solicitors to Narwar of 26 February 2013. Further, the Defendant accepts that an effort was made to find a cure for the defect because they have agreed that expenditure of £470 was incurred in that exercise. In addition I remind myself that Asif states in his witness statement, for what it is worth, that he was approached but did not feel the need to cooperate. It is suggested by Mr Chapman that that is strong evidence that he would not have agreed to the plans being redrawn before completion if he had been approached to do so. That seems to me to be a false premise. First, the fundamental point is that the negligence is because the TP1 had the wrong plan attached but in any event the strength of Narwar's position before completion is totally different to the strength of his position after completion. In the latter scenario all the Claimant can do is throw itself on his mercy. In the former Narwar is a potential buyer who does not wish to lose his purchase.
- In his skeleton argument Mr Chapman raises the issue of contributory negligence. In fact he did not pursue it in his final submissions. It is unclear therefore whether it is still pursued. In my view it cannot apply in this case on the facts as I find them. At its most basic I have found that the Claimant gave Mr Hayre one plan and he attached a different plan to the TP1 after the Claimant had executed the TP1.
The SDLT Claim
- I can deal with this very briefly. As I have said, I am satisfied that it falls within a solicitor's retainer to calculate SDLT accurately.
- In this case I have no doubt, for the reasons already expressed that the s45 Concession was available because there had been substantial performance of the contract to purchase the whole site and the sale of part at the same time. I think I need do no more than refer to paragraph 92 above.
- Even if I am wrong, Mr Hayre's evidence was that the deal could have been structured to take advantage of s45 if the subsale had involved one of the parties using a separate solicitor but that he never made this clear to the Claimant. In my view he should have made that clear, especially where the saving is £18,000. I have no doubt that that would have been sufficient incentive to the Claimant to do just that notwithstanding that there may have been pressure to complete. The fact is that completion did not occur until 9 November 2007 but even Mr Hayre accepts that he knew of the subsale by 10 October.
- I accept Raj's evidence that he was not aware that there had been an overpayment until it was too late to recover it and that accordingly it is not appropriate to make any deduction from that amount.
- In light of the above I propose to give judgment to the Claimant for £211,500 plus £470 plus £18,000, a total of £229,970.
I am grateful to counsel for their very able assistance in this matter.
Note 1 Confirmed (for what it is worth bearing in mind its hearsay status) by Asif in his witness statement at paragraph 7 [Back]
Note 2 Mr Hayre’s attendance note of 18 December confirms that as at 18 December he had the contract [Back]
Note 3 The letter describes the client as “Khan” but this is clearly an error. It is common ground that by 21 December the client for the purpose of this purchase was the Claimant. [Back]
Note 4 Rule 3 of The Solicitors Code of Conduct 2007 precludes a solicitor from acting for 2 clients whose interests may conflict unless they have a substantially common interest in relation to the matter and both have given their informed consent in writing to the same solicitor acting. [Back]
Note 5 See paragraph 48 above [Back]
Note 6 See paragraph 49 above [Back]
Note 7 In re H (Minors)(Sexual Abuse: Standard of Proof)  AC 563 [Back]
Note 8 I refer to paragraph 85 above as to the alleged significance of this [Back]
Note 9 See paragraph 66 above [Back]
Note 10 As Raj asserts and which is recorded at paragraph 77 above [Back]
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