Target Holdings Ltd v Redferns (A Firm) and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE RALPH GIBSON,LORD JUSTICE PETER GIBSON,LORD JUSTICE HIRST |
| Judgment Date | 08 November 1993 |
| Judgment citation (vLex) | [1993] EWCA Civ J1108-7 |
| Docket Number | CHANI 92/1625/B |
| Court | Court of Appeal (Civil Division) |
| Date | 08 November 1993 |
[1993] EWCA Civ J1108-7
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Mr. Justice Warner)
Before: Lord Justice Ralph Gibson Lord Justice Hirst Lord Justice Peter Gibson
CHANI 92/1625/B
MR. A. MANN QC and MR. G. CRAWFORD (Instructed by Wansbroughs, Willey, Hargrove, London, W12 5HA) appeared on behalf of the Appellant
MR. N. PATTEN QC and MR. T. LEECH (Instructed by Messrs Rosling King, London EC4) appeared on behalf of the Respondent
( )
Monday, 8 November 1993
This an appeal by Redferns, a firm of solicitors, who are the first defendants in an action brought by Target Holdings Ltd ("Target"), against the order of Warner J made on 30th November 1992 in Order 14 proceedings. The order made was that Redferns have leave to defend Target's claim against them for breach of trust upon condition that Redferns bring in to court the sum of £1 million on or before 17th December 1992. Upon provision of a guarantee for repayment of the £1 million, if such repayment should be ordered by the court, the sum of £1 million was to be paid to Target as an interim payment. As to the claim by Target against Redferns for damages for professional negligence, there was an order for unconditional leave to defend.
In brief summary, Target's case is that in June 1989 a mortgage fraud was carried out against Target by Mr Ajit Kohli and Mr Babu Musafir in the acquisition by Crowngate Developments Ltd ("Crowngate") of 60/64 Great Hampton Street, Hockley in Birmingham "the properties". Redferns, by Mr Bundy, a senior partner, were instructed by Kohli and Musafir on 12th May 1989 to act in the purchase of the properties. The vendor was Mirage Properties Ltd, ("Mirage").Mirage was to be paid £775,000. The sale was to be effected through a Jersey Company, Panther Ltd, incorporated on the instructions of Kohli and Musafir. Crowngate applied to Target for loans in the amount of £1.694 million for the purchase of the property on the basis of valuations of the properties in the total sum of £2 million, the price which Redferns were told by Mr Kohli was to be paid by Crowngate. In addition to Panther Ltd, there was another intermediate purchaser, namely Kohli & Co Ltd, a company controlled by Mr Kohli. Redferns were also instructed to act for Target.
The valuations were provided by Alexander Stephens & Co Ltd, estate agents of Birmingham, the second defendants. Target has obtained judgment in default against the second defendants who are in liquidation. Little, if anything, will be recovered from them.
Warner J stated the facts on which Target's claims are based. I set out his account substantially in his words:
(i) Until the 30th June 1989 the property was owned by Mirage. Mirage was registered as proprietor of it under two titles, one of which comprised numbers 61/63 Great Hampton Street and part of the other which comprised 60/64. On or about the 15th May 1989, Mirage agreed, subject to contract, to sell the property to Crowngate at the price of £775,000. On that day the draft contract for that sale was sent by Mirage's solicitors, Edge & Ellison of Birmingham, to Redferns. It was received by Redferns on the 17th May. By that time Mr Bundy had put in train the acquisition of Panther through agents in Jersey, Reeds Ltd. Reeds were told that the beneficial owner of Panther would be a Mrs Jasdeep Chadha with an address in New Jersey. On the 24th May 1989 Mr Bundy wrote to Mr Kohli saying that "the vehicle" for the acquisition of the property, namely Panther, was now available to trade.
(ii) On the 9th June 1989 Target received two completed loan application forms signed by Mr Kohli on behalf of Crowngate. One was an application for a loan of £990,000 on the security of 60/63 Great Hampton Street, of which "the estimated value/purchase price" was stated to be £1.2 million. The other was an application for a loan of £704,000, later amended to £716,000, on the security of number 64 Great Hampton Street, of which "the estimated value/purchase price" was stated to be £800,000. In each application, Crowngate was stated to be purchasing the property in question and in each its solicitors were stated to be Redferns, Mr Bundy. In each, a box in which particulars of the vendor were to be given was struck through. The applications referred to, and were accompanied by, valuations dated 9th June 1989 numbers 60/63 Great Hampton Street at £1.2 million and number 64 at £800,000. The valuations were by Alexander Stephens Druce, the second defendants. Those valuations were expressed to be made for Target and are alleged by Target to have been negligent. The way in which the loan applications and the valuations divided the property between 60/63 Great Hampton Street on the one hand, and 64 on the other, did not exactly correspond to the way in which the title to the property was divided on the register. At all events, the loan applications and valuations showed an aggregate estimated value and purchase price £2 million.
(iii) On the 15th June 1989, Target approved each loan, knowing nothing of the agreement for sale by Mirage to Crowngate at £775,000. On the 21st June 1989, Target wrote two letters to Mr Bundy, one in respect of each loan, asking him to act for Target in the matter. With each letter Target enclosed copies of the relevant loan application and valuation and of its own mortgage offer and standard mortgage deed. In each mortgage offer, there was mention of "the stated purchase price: £1.2 million" in one case, "£800.000" in the other. In its letters, Target said that it proposed to take a first charge on the property concerned. Those letters were received by Redferns on the 23rd June 1989, and on that day Mr Quinn of Redferns wrote two letters to Target implicitly accepting its instructions and reporting on various points. In particular he mentioned the way in which the title to the property was divided and asked Target to confirm that this would not effect the amount to be borrowed in respect of each part of the property. He did not mention the purchase price of £775,000. In the meantime —Mr Bundy says that it was on the 21st June 1989, Mr Kohli instructed Mr Bundy that Panther, having purchased the property from Mirage for £775,000, was to sell it on to Kohli & Co for £1.25 million and that Kohli & Co was in its turn to sell it on to Crowngate for £2 million.
(iv) On the 28th June 1989 pursuant to a request made by Mr Bundy by fax the previous day, Target transferred to Redfern's client account sums of £885,000 and £640,000 making a total of £1.525 million. Those sums represented the net amount of the two loans after deduction of certain premiums. Target gave no express instructions to Redferns as to the release of those sums.
(v) On the 29th June 1989, Mr Bundy transferred the sum of £1.25 million from Redfern's client account to a banking account in Jersey which had been opened for Panther by Reeds on Mr Bundy's instructions. Mr Bundy saw that sum as representing the price payable by Kohli & Co to Panther and as part of the price of £2 million payable by Crowngate to Kohli & Co.
(vi) On the 30th June 1989, contracts were exchanged between Mirage and Panther for the sale and purchase of the property at the price of £775,000. The contract provided for completion to take place on the same day. In fact the contract had not yet been signed on behalf of Panther, but that matter was covered by a solicitor's undertaking given by Redferns to Edge & Ellison.
(vii) On the 3rd July 1989, Redferns received from Edge & Ellison transfers of the two parts of the property executed by Mirage in favour of Panther. Also on the 3rd July 1989 Mr Bundy paid £240,000 out of Redfern's client account to Kohli & Co. He saw that sum as representing a further part of the £2 million payable by Crowngate to Kohli & Co and as leaving £510,000 so payable. He was told by Mr Kohli on the telephone on the 30th June 1989 that that £510,000 was being paid direct by Crowngate to Kohli & Co and by a letter dated 12th July 1989 Mr Kohli confirmed to him that it had been so paid.
(viii) The payments out of Redfern's client account of £1.25 million on the 29th June and of £240,000 on the 3rd July resulted in there being only £35,000 left of the money provided by Target. That £35,000 was later expended by Mr Bundy on stamp duty and fees.
(ix) On the 30th June 1989 Mr Bundy faxed instructions to Reeds to transfer a sum of £772,787 from Panther's bank account to the account of Edge & Ellison. That was the amount due on completion of the sale by Mirage after adjustments relating to leases of parts of the property. By the same fax, he instructed Reeds to arrange for a number of other payments, totalling £300,000, to be made out of Panther's bank account by way of transfer or of banker's draft to a number of persons, some at least of whom appear from evidence very recently obtained by Target to have been directors of Mirage. Instructions for those payments to be made had been given to Mr Bundy by Mr Kohli and Mr Musafir or one of them. The instructions were complied with by Reeds. Further sums of £80,000 and £85,000 were paid out of Panther's bank account to persons having no obvious connection with the transactions, pursuant to similar instructions faxed by Mr Bundy to Reeds on the 4th and 11th July 1989 respectively.
(x) Contracts for the sales by Panther to Kohli & Co and by Kohli & Co to Crowngate, transfers by Panther to Crowngate in completion of those sales, and mortgages by Crowngate in favour of Target...
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