John Baylis v Syed Ali Haider

Hearing dates: 4,5,6,7 & 8 December 2023

APPROVED JUDGMENT

Introduction

On 12 ^th April 2022 the Claimants issued proceedings against three Defendants – an individual, Mr Syed Ali Haider (“Mr. Haider”); a firm of solicitors with the trading name Edward Marshall Solicitors (“Edward Marshall”); and a commercial lender known as Together Commercial Finance Ltd (“Together”). The claim concerns the sale or purported sale of the property known as 19 Bromstone Road, Broadstairs, Kent CT10 2HJ (“the Property”), of which the Claimants had been registered as joint proprietors (under title number K81240) until the events that give rise to this claim. It is and was their family home. On 9 ^th April 2021 Mr Haider became registered as proprietor of the Property in their place, pursuant to a Land Registry transfer in form TR1, dated 19 ^th December 2019 (“the TR1”). The Claimants seek to set aside the transaction with Mr Haider, on the grounds of non est factum or mistake, and rectify the register pursuant to Sch.4 of the Land Registration Act 2002 (“ LRA 2002”) so as to reinstate themselves as proprietors. They have an alternative claim under the Financial Services and Markets Act 2000 (“FSMA 2000”). Depending on the outcome of their primary claims they also raise issues of unjust enrichment. Edward Marshall, the Second Defendants, were the solicitors retained by Claimants in the impugned transaction. Edward Marshall is a trading name of PG Solicitors, a practice whose principals were a Mr Prince and a Mr Goba. The Claimants seek damages against this firm for negligence and/or breach of fiduciary duty and various accounts. In November 2021 the Solicitors Regulation Authority intervened in the practice, and ultimately some of its partners were struck off on various grounds including offences of dishonesty. The firm no longer exists. Although indemnity insurers initially instructed solicitors, and filed a Defence, they have withdrawn from the proceedings and disclaimed liability. The former partners in the firm have taken no part in these proceedings, although they have been served. The Third Defendant, Together, provided a loan to Mr Haider at the time of his purchase, and it has a Legal Charge (“the Charge”) over the Property as security. The claim against Together is for alteration of the register under Sch.4 LRA 2002, consequential upon relief being granted against Mr Haider.

I heard this case over a period of 5 days. The Claimants were represented by Mr Barnaby Hope, Mr Haider by Mr George Symes, and Together by Mr John Beresford, all of Counsel. As I have mentioned, the Second Defendants have not participated in the proceedings since the withdrawal of the indemnity insurers' solicitors in March 2023. No partner in the firm has given a witness statement. I heard oral evidence from Mr Baylis, Ms Kreuder, Mr Haider, a Ms Toni Armstrong, a former employee of Edward Marshall 1, and Mr Graham Eldred, an insolvency consultant, who had been retained by the Claimants in 2019. All the witnesses apart from Mr Eldred had made witness statements, on which they were cross-examined. Mr Eldred had declined to provide a statement and was the subject of a witness summons issued by Together. In the absence of a witness statement, Mr Beresford examined him in chief, and he was then cross-examined by Mr Hope and Mr Symes, in that order.

The evidence in this case includes a substantial number of documents, largely in the form of emails, which were generated as the transaction progressed. Although the documentation is not comprehensive, it does provide an invaluable real time

The background – bankruptcy and the attempts to refinance July to October 2019

On 14 ^th September 2017 Mr Baylis was made the subject of a bankruptcy order in the Canterbury County Court. His liabilities were in the region of £162,151, the greater part being sums owed to HMRC by way of tax, interest and penalties. His principal asset was his half share in the Property. Mr Baylis's trustee in bankruptcy, Ms Adelle Firestone (“the Trustee”), was appointed on 26 ^th June 2018. On 29 ^th October 2018 she made an application to the Canterbury County Court, to which the Claimants were Respondents, for a declaration as to her interest in the Property. By Order dated 29 ^th January 2019 it was declared that as Mr Baylis's trustee she was entitled to 50% of the beneficial interest in the Property. By para. 1 of the order it was ordered that unless Mr Baylis paid his debts in full by 29 ^th April 2019, the Property would be sold forthwith, without further reference to the Court. By para.2 the Claimants were ordered to deliver vacant possession of the Property no later than 20 ^th May 2019. The Trustee was to have conduct of the sale. In the event, Mr Baylis did not pay his debts by the due date, and the Claimants failed to deliver vacant possession. Accordingly, on 13 ^th June 2019 the Trustee applied to the Court for a warrant of possession, and a notice of appointment with a bailiff was issued with a date of eviction of 11 ^th July 2019.

The possession order and imminent eviction seems to have induced Mr Baylis to try and raise funds to discharge his liabilities. According to his evidence, by researching on the internet he became aware of a company called London Property Investments (UK) Ltd (“LPI”), trading as “LPI Emergency Finance”. As the trading name suggests, LPI advertised itself as arranging finance with third-party lenders to assist financially distressed individuals (such as undischarged bankrupts). A meeting was arranged at an hotel in London between the Claimants and a Mr Stevens of LPI. At the same time and place as the meeting with Mr Stevens of LPI, another individual introduced himself to the Claimants. This was Mr Graham Eldred, an FCA-regulated insolvency consultant. An insolvency consultant is not the same as an Insolvency Practitioner. The consultant acts for the bankrupt, negotiates with the trustee with a view to reaching a settlement and ultimately obtaining an annulment or discharge of the bankruptcy. Mr Eldred told them that he had been asked by Edward Marshall to join the meeting to see if he could offer any assistance to Mr Baylis in connection with his bankruptcy. The Claimants thought that the meeting took place in late June, but the email from Mr Stevens to Mr Eldred dated 8 ^th July suggest that the meeting took place on 9 ^th July, which is the date given on the documents referred to below. Incidentally, although Mr Eldred was at pains to stress in his oral evidence that he had no involvement with the funding exercise, the fact that he was in communication with Mr Stevens prior to the meeting in July 2019 suggests otherwise.

Crucially, by no later than 9 ^th July 2019 the Claimants had signed a number of documents in favour of LPI. First, an “ Irrevocable Fee Agreement”, being an agreement to pay LPI's fees, and second a “ Restriction Entry Consent”, being an agreement that LPI could enter a restriction against the title to the Property to secure payment of the agreed fees. They also signed a document described as “ Emergency Funding and Property Fee Sale Agreement”, whereby the Claimants agreed to pay (a) all outstanding fees owed to LPI whether or not they proceeded with the funders introduced by LPI, and (b) an agreement that “should I/we ever need to sell our above named property after LPI have been appointed …. I/we accept and agree that I/we are still fully liable to pay LPI the fully irrevocable fee of 5% plus VAT of the sale contract price.” On or around the same date the Claimants also signed a document authorising Edward Marshall to act on their behalf in the proposed transaction. At the meeting, it appears that Mr Stevens informed the Claimants that LPI would be able to arrange third party funding to allow Mr Baylis to pay off his bankruptcy debts in full. On this occasion, and certainly no later than 9 ^th July 2019, Mr Baylis signed two more documents. First, an agreement to retain Mr Eldred as his consultant, and to pay his fees, and secondly an “ Authority to Act”, whereby he confirmed that “ Graham Eldred has my/or full authority to act on my/our behalf.”

On 8 ^th July Mr Eldred wrote to the Trustee, introducing himself, and informing her that he was due to meet Mr Baylis “ tomorrow afternoon”. He also enclosed “ the Authority to Act supplied to LPI FINANCE” and asks that they could have a discussion “ with a view to deferring the repossession listed for Thursday…”. On 9 ^th July he further wrote to the Trustee: “Further to our conversation yesterday I have now met the debtor and his partner (Authority...