Chief Land Registrar v Caffrey & Company

JurisdictionEngland & Wales
JudgeMaster Matthews
Judgment Date03 February 2016
Neutral Citation[2016] EWHC 161 (Ch)
CourtChancery Division
Docket NumberCase No: HC-2015000656
Date03 February 2016

[2016] EWHC 161 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Master Matthews

Case No: HC-2015000656

Between:
Chief Land Registrar
Claimant
and
Caffrey & Co
Defendant

Nicholas Trompeter (instructed by the Treasury Solicitor) for the Claimant

The Defendant did not appear and was not represented

Hearing dates: 2 November 2015

Master Matthews

Introduction

1

This is my judgment on the Claimant's application by notice dated 22 June 2015 for judgment against the Defendant in default of filing an acknowledgment of service, with damages to be assessed. The claim was begun by claim form issued on 25 February 2015, with particulars of claim attached.

2

In summary the allegations made in the claim are as follows. The Defendant was a firm of solicitors retained by Mr William and Mrs Evelyn Turner to act for them in the discharge of a mortgage over their registered property in favour of a bank, DB UK Bank Ltd. The bank was the victim of a fraud, and the mortgage ought never to have been discharged. The bank was indemnified by the Claimant under the statutory scheme in the Land Registration Act 2002. By statute, the Claimant thereupon became entitled to exercise any cause of action which the bank could have exercised if the indemnity had not been paid.

3

The Claimant says in this claim that, if no indemnity had been paid, the bank would have been entitled to exercise a cause of action in negligence against the Defendant, arising out of the Defendant's failure to verify facts and matters where it had assumed a duty to the bank to do so. In addition, the Claimant says that he is entitled to bring a claim in his own right for misrepresentations made by the Defendant in submitting documents to the Land Registry.

Procedure

4

On 2 June 2015 Deputy Master Cousins ordered that service of the claim form and particulars of claim on the Defendant could be effected by service on Mr Aurang Khattak, a partner in the Defendant, by "first-class pre-paid post" addressed to a particular address. A first attempt to serve the proceedings by post pursuant to that order failed, as the envelope was returned through the post on 27 July 2015 for insufficiency of postage. This was of course after the four-month period for service had expired.

5

On 3 August 2015 I was therefore asked to and did extend the time for service of the claim form to 25 September 2015. The claim form and particulars of claim were finally served in accordance with the order of Deputy Master Cousins by letter dated 14 September 2015. By virtue of CPR rr 6.14, 6.26 and 7.5(1), service was deemed to have taken place on 16 September 2015, and a certificate of service to that effect was filed at court. By virtue of CPR r 10.3(1), the Defendant had until 30 September 2015 to file an acknowledgment of service. No such acknowledgement has ever been filed.

6

The notice of application for judgment in default of acknowledgment of service had been issued as early as 22 June 2015, anticipating that the first attempt at service by post would be successful. That application was for a 30 minute hearing on 10 July, but it was adjourned on that day (when the Claimant was represented by a solicitor, Mr Turek) because I considered that the case raised a point of law which required an hour's appointment rather than 30 minutes. Since the service envelope was subsequently returned through the post on 27 July, that was in some ways fortuitous.

7

On 14 September the application was relisted for 2 November 2015, but for some reason again only for 30 minutes. Nevertheless I heard it on that day. This time Mr Nicholas Trompeter of counsel appeared for the Claimant. A certificate of service of the application notice (as well as other documents) on the Defendant was filed at court on 27 October 2015. However, the Defendant did not appear and was not represented. Because there was only limited time, I invited Mr Trompeter to supplement his oral submissions with written ones, and he supplied me with these by email on 5 November. I am grateful to him, and to his solicitor Mr Turek.

8

By CPR r 12.11(1), "Where the claimant makes an application for a default judgment, judgment shall be such judgment as it appears to the court that the claimant is entitled to on his statement of case." Mr Trompeter submits that, since the Claimant has pleaded relevant material facts in his statements of case to support the two distinct causes of action summarised in paragraph 3 above, the Claimant must be entitled to the relief which he seeks on the basis of the statement of case alone, with nothing more required by way of substantive legal analysis or explanation.

9

I reject this submission. CPR r 12.11(1) does not leave it to the claimant to identify what relief he is entitled to, and then require the court to award it. It is "such judgment as it appears to the court that the claimant is entitled to on his statement of case" (emphasis supplied). So the court must consider the claimant's statement of case and decide what relief (if any) the factual assertions gives rise to.

10

For example, suppose that A serves proceedings on B, claiming to rescind a contract between them on (and only on) the basis that there was an eclipse of the sun that day. B then fails to acknowledge service. The court considering those allegations would have to assume that they were true, but would not be obliged to assume that an eclipse of the sun was in law a good ground for rescinding a contract.

11

The statement of Warby J in Sloutsker v Romanova [2015] EWHC 2053 (QB) at [84], relied on by Mr Trompeter at para 13 of his skeleton argument for the hearing, does not demonstrate the contrary. In my judgment it was directed at fact-finding. It was a case where there was no doubt as to the relevant principles of law.

Factual allegations

12

So I turn to consider the two causes of action pleaded. In the present case in summary form the allegations made in the statement of case (which, for the purposes of the present application only, I assume to be true) are as follows. The Turners were registered as joint proprietors of Walnut Hill Farm. In 2007 they charged it to the bank as security for a loan. Subsequently they instructed the Defendant to act for them in arranging the discharge of the mortgage.

13

In October 2009 the Turners supplied to the Defendant a Form DS1 purportedly signed on behalf of the bank to discharge the mortgage. In fact it was not so signed. The Turners told the Defendant that the bank was represented by another firm of solicitors, but this was not true either. The Defendant did not contact the bank or the solicitors allegedly instructed by them to verify the DS1 or the instruction of solicitors. Instead it submitted the Form DS1 to the Land Registry together with a Form AP1 to apply to alter the register and delete the charge.

14

The Land Registry raised a requisition requesting evidence that the person signing the DS1 had authority to do so on behalf of the bank. The Turners supplied the Defendant with a purported power of attorney apparently appointing four individuals, including one whose name and signature were on the Form DS1, as the bank's attornies. It was however a fabrication. The Defendant sent a certified copy of the purported power to the Land Registry. The Claimant acted on the application, the copy power and the Form DS1, and removed the mortgage from the title of the property.

15

Subsequently Mr Turner purported to purchase Mrs Turner's share of the property, raising finance to do so from another bank, Santander UK plc, on the security of a charge on the property. He was registered as the sole proprietor. In 2010 Mrs Turner was adjudicated bankrupt. In 2011 DB Bank discovered that its charge had been removed, and applied to alter the register to reinstate it. Santander objected. In 2012 an adjudicator decided that the charge should be reinstated, but ranking after that of Santander. DB Bank then sought and obtained an indemnity from the Claimant.

The causes of action

16

The Claimant firstly asserts that in acting for the Turners in making the application to the Land Registry the Defendant owed a common law duty of care to the bank to take reasonable care and skill to verify that Form DS1 had been properly completed on behalf of the bank, that the other firm of solicitors had been instructed on its behalf, that the power of attorney was genuine, that the bank wished to discharge the charge, and that the property was no longer charged as security for the payment of sums due under the charge. The Claimant further asserts that this duty was breached, causing loss to the bank.

17

The Claimant alternatively asserts that, in making the application for the Turners in the way and using the documents which it did, the Defendant expressly or impliedly represented to the Claimant that it had taken sufficient steps or knew of sufficient facts to satisfy itself that the Form DS1 had been properly executed on behalf of the bank, the other firm of solicitors had been instructed on behalf of the bank, the power of attorney was valid, the bank wished to discharge the charge, and that the property was no longer charged as security for the payment of sums due under the charge.

18

The Claimant further asserts that in all the circumstances the Defendant owed to the Claimant a duty to take reasonable care that the representations were true. In fact they were false, and in reliance on them the Claimant completed the application and discharged the charge, thereby suffering loss.

First cause of action: negligence

19

The first is a claim to be subrogated by statute (Land Registration Act 2002, s 103, Schedule 8, paragraph 10) to the claim of the bank against the Defendant, as the chargors' solicitor, in the tort of negligence, for having assumed a duty...

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