Law Society v Shah

JurisdictionEngland & Wales
Judgment Date30 November 2007
Neutral Citation[2007] EWHC 2841 (Ch)
Docket NumberCase No: HC 06C00487 and others CaseNos: 8656, 53 and 14 of 2001
CourtChancery Division
Date30 November 2007
Between:
The Law Society of England and Wales
and Others
Claimants
and
Dixit Shah
and Others
Defendants
and
And In Bankruptcy In The Matter of Zaheeda Parveen Aziz, Marcus Rex Graziani, Raymond Sion David Barda (Discharged Bankrupts) and In The Matter of The Insolvency Act 1986
Between:
The Law Society of England and Wales
Applicant
and
(1) The Official Receiver / James Earp
(As Trustees In Bankruptcy of The Estate of Zaheda Parveen Aziz and Marcus Rex Graziani)/raymond Sion David Barda
(2) St Paul Travelers Insurance Company Limited
(On Behalf of The Law Society's Assigned Risks Pool 2000/2001)
Respondents

[2007] EWHC 2841 (Ch)

Before :

Between:

Case No: HC 06C00487 and others CaseNos: 8656, 53 and 14 of 2001

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand. London. WC2A 2LL

HTML VERSION OF JUDGMENT

Hearing dates: 13th, 14th and 15th November 2007

The Hon. Mr Justice Floyd:

Introduction

1

This case raises a question of some importance in relation to the rights of injured third parties to claim on the insurance of a bankrupt wrongdoer under the Third Parties (Rights against Insurers) Act 1930 when the wrongdoer has obtained his discharge from bankruptcy.

2

Between November 1998 and mid-2000 Dixit Shah acquired a number of firms of solicitors (or sole practitioners' practices). Following these acquisitions it is alleged that the firms traded in an association of firms under the name “the BJ Brandon Group”. On 22 nd September 2000 the Office for the Supervision of Solicitors (”.he OSS”. now known as the Solicitors Regulation Authority) intervened on each of the firms. The Law Society alleges that the OSS discovered that a total of around £12.5 million had been misappropriated from the client accounts of the firms by Mr Shah. Shortly after the intervention it appears that Mr Shah left the jurisdiction.

3

The Law Society maintains a fund under section 36 of the Solicitors Act 1974 (”.he 1974 Act”. from which payments by way of compensation can be made, to victims of misappropriation by solicitors. This fund has made payments to clients of the firms of solicitors who were victims of the alleged misappropriation by Mr Shah. As at November 2006 it had made payments of around £12.5 million.

4

By sections 36(4)-(6) of the 1974 Act the Law Society is subrogated to the rights and remedies of the victims in relation to the acts or defaults in respect of which payments have been made by the fund. So the Law Society has the rights of the victims, and can pursue those rights against the alleged wrongdoers, for what they are worth.

5

The Law Society has accordingly, at various dates from 30 th August 2005, issued 12 sets of proceedings by way of claim form (”.he Main Proceedings”.. The Claimants are the Law Society and the injured parties. The Defendants to these proceedings are alleged to have been partners in one or more of the firms prior to or following the acquisition. In each case the list of Defendants includes, but is by no means limited to, Mr Shah. The Law Society has made clear that it makes no allegation of dishonesty in any of the proceedings against any of the non-Shah Defendants.

6

It is not necessary to rehearse in any detail the nature of the claims made in the Main Proceedings against the non-Shah Defendants. They are in essence claims that the partners in question were in breach of contract or fiduciary duties or duties as trustees or duties of care, by failing to notify the clients of the acquisition by Mr Shah, failing to account to the clients for their monies, failing to obtain their consent to the transfer of their contracts of retainer and failing adequately to protect their interests.

7

Three of the Defendants in the Main Proceedings are discharged bankrupts. They are Raymond Barda, Marcus Graziani and Zaheda Aziz (”.he Discharged Bankrupts”.. There are 8 actions (out of the total of 12) in which one or other of them is a Defendant. They were made bankrupt on various dates between February 2001 and January 2002. They were discharged from bankruptcy under section 281 of the Insolvency Act 1986 (”.he 1986 Act”. on various dates between February 2004 and May 2005. In the Main proceedings, the Discharged Bankrupts plead their discharge from bankruptcy as a complete defence to the actions. Raymond Barda is a defendant in only one set of proceedings, which has been referred to as “the Barda Proceedings”.

8

The Law Society now concedes that the effect of the discharge from bankruptcy is that they cannot succeed in the Main Proceedings against the Discharged Bankrupts. To that extent, it is accepted by the Law Society that the application by the Discharged Bankrupts to strike out the proceedings in their current form as against them succeeds.

9

Since 1976, solicitors have been required by law to take out and maintain Professional Indemnity insurance. None of the Discharged Bankrupts had the benefit of such compulsory insurance. In such circumstances, cover for such firms is provided by the Law Society's “Assigned Risks Pool”. That cover is underwritten by all qualifying insurers who provide cover for firms who insure through commercial providers. St Paul Travelers Insurance Company Limited acts on behalf of the qualifying insurers subscribing to the Law Society's Assigned Risks Pool in the relevant year, which is 2000/2001. I will refer them as “the Insurers”. On these applications, the Insurers and the Discharged Bankrupts were represented by the same solicitors and counsel. No point is taken on the fact that the insurance cover for the acts and defaults of the Discharged Bankrupts arises in this particular way.

10

Recognising that it has no prospect now of succeeding in its subrogated claim against the Discharged Bankrupts, the Law Society wishes to take advantage of the Third Parties (Rights against Insurers) Act 1930 (”.he 1930 Act”.. The 1930 Act provides so far as material

”.1) Where under any contract of insurance a person (hereinafter referred to as the insured) is insured against liabilities which he may incur, then-

(a) in the event of the insured becoming bankrupt…

if, either before or after that event, any such liability as aforesaid is incurred by the insured, his rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred.

(2) Where the estate of any person falls to be administered in accordance with an order under section 421 of the Insolvency Act 1986, then, if any debt provable in bankruptcy …. is owing by the deceased in respect of a liability against which he was insured under a contract of insurance as being a liability to a third party, the deceased debtor's rights against the insurer under the contract in respect of that liability shall, notwithstanding anything in any such order, be transferred to and vest in the person to whom the debt is owing.

(4) Upon a transfer under subsection (I) or subsection (2) of this section, the insurer shall…be under the same liability to the third party as he would have been to the insured…“

11

The central issue between the parties on these applications is whether it is possible for the Law Society to claim payment from the Insurers under the 1930 Act in respect of their claims against Messrs Barda, Graziani and Aziz after those individuals have not only been made bankrupt but have also been discharged.

The Applications before the Court

12

The following applications are before the court:

(a) an application by the Law Society in proceedings HC06CO3205 (”.he Barda Proceedings”. to re-amend its Part 7 Claim Form and its Amended Particulars of Claim: (”.he Amendment Application”.. The parties to the Amendment Application are the Law Society and other Claimants in the Barda Proceedings as applicants, and the Defendants in the Barda Proceedings as Respondents. The Amendment Application seeks permission for the Law Society to amend its Claim Form and Particulars so as to seek a Declaration at trial that the Discharged Bankrupts were liable to the Claimants in a sum to be determined at trial prior to their discharge from bankruptcy.

(b) applications issued by the Discharged Bankrupts to strike-out the proceedings brought by the Law Society against them under CPR Part 3; alternatively to enter summary judgment in their favour in such proceedings under CPR Part 24; and (in the case of the Barda Proceedings) for a Declaration that the amendments proposed to be made by the Law Society if it is successful in the Amendment Application do not give the Law Society rights against the insurers of the Defendants in the Barda Proceedings under the Third Parties (Rights against Insurers) Act 1930(”.he Strike-Out Applications”., and

(c) originating Applications issued by the Law Society in the bankruptcies of each of 3 discharged bankrupts for detailed relief designed to enable, through the proof of debt procedure in bankruptcy, a determination of the Law Society's claim (”.he Bankruptcy Applications”.:

Liability Insurance

13

Insurance for liability to third parties could in principle take a number of different forms. At one extreme the insurer could agree to indemnify the insured only when the insured has been found liable to pay and in fact paid the third party's claim. Examples of contracts...

To continue reading

Request your trial
11 cases
  • John Doyle Construction Ltd ((in Liquidation)) v Erith Contractors Ltd
    • United Kingdom
    • Court of Appeal (Civil Division)
    • October 7, 2021
    ...Financial Services Compensation Scheme Ltd v Larnell (Insurances) Ltd [2006] QB 808 at [11]; Re BCCI (No 6) [1994] 1 BCLC 450; Law Society v Shah [2007] EWHC 2841 (Ch), [2008] Bus LR 1742. Alternatively, it may permit separate proceedings to be taken (either in court or by arbitration) t......
  • Alison Donnelly Against The Royal Bank Of Scotland Plc
    • United Kingdom
    • Sheriff Court
    • February 11, 2016
    ...& Ors v Bank of Credit and Commerce International [1993] Ch 425; Young v Accountant in Bankruptcy 2010 SLT (Sh Ct) 37; Law Society v Shah [2009] Ch 223; R (British Bankers Association (“BBA”)) v Financial Services Authority (“FSA”) & Anr [2011] Bus LR 1531; McBryde, Bankruptcy (2nd ed), par......
  • John Glare Against Clydesdale Bank Plc
    • United Kingdom
    • Court of Session
    • December 31, 2015
    ...Luminar Lava Ignite Ltd v Mama Group 2010 SC 310; Farstad Supply AS v Enverico 2013 SC 302; the Compensation Act 1592; Law Society v Shah [2009] Ch 223; Michael Marcus Young v Accountant in Bankruptcy 2010 SLT (Sh Ct) 37; Inveresk plc v Tullis Russell Papermakers Ltd 2010 SC(UKSC) 106; High......
  • Lim Lye Hiang v Official Assignee
    • Singapore
    • Court of Appeal (Singapore)
    • November 2, 2011
    ...Chi Leung Karl v Commissioner of Estate Duty [1988] 1 WLR 1035 (refd) Landau (a bankrupt) , Re [1998] Ch 223 (refd) Law Society v Shah [2009] Ch 223 (refd) Pegler v Dale (1975) 6 ALR 62 (folld) Rose, Re; Trustee of the Property of E T Rose v Rose [1904] 2 Ch 348 (folld) Siah Ooi Choe, Re; e......
  • Request a trial to view additional results
1 provisions
  • Fla. Stat. § 435.04 [Effective Until 7/1/2024] Level 2 Screening Standards
    • United States
    • Florida Statutes 2023 Edition Title XXXI. Labor Chapter 435. Employment Screening
    • January 1, 2023
    ...ch. 2004 - 267; s. 4, ch. 2005 - 119; s. 111, ch. 2006 - 120; s. 90, ch. 2006 - 197; s. 110, ch. 2007 - 5; s. 3, ch. 2007 - 112; s. 66, ch. 2009 - 223; s. 6, ch. 2010 - 31; s. 38, ch. 2010 - 114; s. 10, ch. 2012 - 73.Note: This section is set out more than once due to postponed, multiple, o......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT