Nationwide Building Society (Plaintiff) v Thimbleby & Company
| Jurisdiction | England & Wales |
| Judgment Date | 01 March 1999 |
| Judgment citation (vLex) | [1999] EWHC J0301-8 |
| Docket Number | CH 1995 N No. 727 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 01 March 1999 |
[1999] EWHC J0301-8
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon. Mr Justice Blackburne
CH 1995 N No. 727
Michael Driscoll QC, Timothy Higginson and Ian Gatt instructed by Dibb Lupton Alsop for the Plaintiff
Nicholas Davidson QC, and Francis Bacon instructed by Browne Jacobson for Christie
This is the official judgment of the court and I direct that no further note or transcript be made.
Hearing date: 11 February 1999 to 16 February 1999
The Hon Mr Justice Blackburne
Introduction
This action involves thirteen separate claims against Thimbleby and Co which, at the time of the matters with which they deal, was a two partner firm of solicitors, based in Horncastle, Lincolnshire. The firm has since been dissolved. It is another part of the managed litigation involving claims by the plaintiff society ('the Society') against various firms of solicitors alleging negligence or worse in the conduct of mortgage transactions on the Society's behalf over the period 1988 to 1993. Although all thirteen claims are made in a single action, for convenience each claim has been the subject of separate points of claim and defence and has proceeded in accordance with the managed trial procedure which I described in section A2 of my judgment in Nationwide Building Society v Balmer Radmore & Ors. (2 February 1998) . The claims call into question the conduct, and in particular the honesty, of a Mr Nicholas Francis Butcher, one of the two partners in the firm: Mr Butcher acted for the Society and each of the borrowers in the thirteen transactions.
Because of a series of admissions made by the other (innocent) partner in the former firm, a Mr Christie, I have, in the event, been concerned only with one issue, which is whether, under the Law Reform (Contributory Negligence) Act 1945 ("the 1945 Act") , contributory negligence is available as a defence in an action for damages for deceit. I am merely concerned with whether, under the 1945 Act, the power to reduce damages exists. I am not concerned with how, in the light of what happened in each of the thirteen claims, the power, if I find that it exists, should be exercised.
Setting the scene
It is first necessary to set the scene. The thirteen transactions span a relatively short period of time. The loan applications to the Society were made on various dates between approximately mid-July 1990 and late November 1990. Completion occurred on various dates between early August 1990 and early January 1991. All but two relate to purchases of 125 year leasehold flats forming part of the New Caledonian Wharf Development in London SE16; the other two relate to the purchase of 125 year leasehold flats in the Burrells Wharf Development in London E14. Most, but not all, of the applications were made to the Society's Holloway Branch. In each case the transaction proceeded by way of sub-sale between Rosehaugh Co-Partnership Developments Limited (in the case of the eleven New Caledonian Wharf leases) and Halifax Building Society as mortgagee of Kentish Homes Limited (in the case of the two Burrells Wharf leases) as lessor/vendor, one Sendjer Shefket as intermediate purchaser, and the borrower client of Thimbleby & Co as lessee/sub-purchaser.
The thirteen transactions had the following, among other, features in common, which I have taken from a summary prepared by Mr Driscoll QC and Mr Higginson who appeared for the Society.
1. Butcher was the solicitor in every transaction.
2. Each borrower was a first-time buyer in the sense that he stated in his application to the Society that he was living either with a family or in rented accommodation.
3. Each borrower was purchasing his lease by way of a sub-sale from Sendjer Shefket.
4. Completion of Shefket's purchase and sub-sale was simultaneous in every case.
5. In each transaction, Shefket was seemingly making a profit on his sub-sale of between 30% (or so) and 50% (or so) .
6. The only money which passed through Butcher's account in relation to each transaction was the money advanced by the Society.
7. From that money Butcher deducted his own fees and his estimate of the costs and necessary disbursements in relation to the particular transaction before transferring the balance to the solicitors acting for Shefket.
8. The money transferred by Butcher to Shefket's solicitors out of the money paid to him by the Society was always an odd amount, and insufficient to meet the price which Butcher represented to the Society was the price which the borrower was paying for the lease of the flat in question.
9. The deficiency (i.e. the difference between the amount transferred and the represented price) was never paid by the borrower to Shefket through Butcher.
10. There is no written communication or note of an oral communication between Butcher and the borrower as to the amount of deficiency or as to the date on which or the method by which it was paid or was to be paid by the borrower to Shefket.
11. There is no reliable evidence that the amount of the deficiency was ever paid by the borrower to Shefket and no evidence that the borrower ever even knew prior to completion was the amount was of the deficiency and therefore what his payment was or was to be.
12. The amount of the deficiency was always odd (for example in one case it was �31,203.25) .
13. In the case of every transaction (save for two) the borrower was apparently paying for his flat substantially more than the then market value of that flat and in every case the amount of the Society's advance was substantially more than the price which Shefket was himself paying for the flat.
14. Butcher transferred the amount of the net advance to Shefket's solicitors before even contracts had been exchanged between the borrower and Shefket and before the lease was received by Butcher.
15. Butcher gave to the Society an unqualified report on title even though he had not see any contract between Shefket and the landlord, and never disclosed to the Society any of the following (1) that the borrower was buying by way of sub-sale, (2) that the borrower was apparently paying substantially more than the sub-vendor was paying, (3) that the sub-vendor was paying substantially less than the Society was advancing and (4) that the borrower was being treated as paying an odd but in some cases very large amount to Shefket by way of direct payment, albeit that he, Butcher, had no proof (reasonably acceptable to an honest solicitor) that any such payment was being made.
16. Whenever Butcher's pre-completion estimates of the costs of completing title proved to be too high or too low, so that Butcher had retained either too much or too little out of the Society's advance to pay those costs, he did not seek to pay the excess to, or recover the shortfall, from his borrower client.
17. No repayment by the borrower was ever made to the Society on any of the loans it made to Butcher's clients in the thirteen transactions.
Although, as I am told and accept, Mr Butcher is aware of these proceedings, he has taken no part in them. Indeed, according to the points of claim (and as admitted by Mr Christine) , Mr Butcher pleaded guilty in March 1998 to charges of (1) conspiring to defraud building societies by making false applications for money advances between 1 September 1989 and 31 December 1991 and (2) fraudulently obtaining moneys out of client account. These pleas resulted in Mr Butcher receiving, on 16 March 1998, sentences of imprisonment of 27 months and 30 months respectively. I think I am correct in understanding that these counts did not relate to any transactions involving the Society,.
The admissions
Mr Christie, the innocent partner in the firm, makes a number of admissions in each of the thirteen claims. So far as material, they are as follows:
(a) that the inevitable inference from the admitted facts and the documents disclosed on discovery in these proceedings is that the application was submitted as part of a fraudulent scheme to defraud the Society;
(b) that the inevitable inference from the admitted facts and such discovery is that Mr Butcher knew that the application was fraudulent and that he was knowingly involved in what was a fraudulent scheme to defraud the Society with the result that Mr Butcher was guilty of deceit in that, by continuing to act for both the Society and the borrower, he falsely represented to the Society that he believed that the application was not fraudulent;
(c) that Mr Butcher acted in deliberate breach of the fiduciary duty which he owed to the Society and did so to prefer the interests of his borrower client in each transaction over those of the Society; and
(d) that, subject to questions of contributory negligence, mitigation and the precise quantification of the Society's loss, the firm is liable for the whole of such loss as the Society may prove has been sustained by entering into each of the transactions.
It is in the light of those admissions that the issue as to the availability of the defence of contributory negligence arises. Given my conclusions in relation to lender fault in equity in Nationwide Building Society v Balmer Radmore & Ors (see section B10) and the admission in each of the claims in the action before me that Mr Butcher acted in deliberate breach of the fiduciary duty which he owed to the Society, no reduction in the amount of the compensation to which the Society is entitled through having entered into the thirteen transactions arises in any event. That part of my decision in Nationwide Building Society v Balmer Radmore & Ors is to be the subject of an appeal. If successful, the outcome may well affect the consequences of the admission of a deliberate...
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