Zoya Ltd v Sheikh Nasir Ahmed (trading as Property Mart) (No 2)
| Jurisdiction | England & Wales |
| Judge | Mr. William Trower |
| Judgment Date | 07 October 2016 |
| Neutral Citation | [2016] EWHC 2249 (Ch) |
| Docket Number | Claim No HC-2014-001703 |
| Court | Chancery Division |
| Date | 07 October 2016 |
and
and
[2016] EWHC 2249 (Ch)
Mr. William Trower QC
(sitting as a Deputy Judge of the High Court)
Claim No HC-2014-001703
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Court of Justice
Strand, London, WC2A 2LL
Mr Daniel Burton (instructed by Penningtons Manches LLP) for the Defendant
Mr Alex Cunliffe (instructed by LPC Law Ltd) for the Third Party
Ms Chantelle Staynings (instructed by Alpha Rocks Solicitors) for the Fourth Party
Hearing date: 20 September 2016
JUDGMENT APPROVED
Mr. William Trower QC:
On 28 July 2016, I handed down a written judgment ( [2016] EWHC 1981 (Ch) "the July Judgment") on the trial of two preliminary issues, directed to be tried by order of Master Matthews dated 10 August 2015. Those issues were "whether John Adewale Haastrup is legally entitled to the shares in the Claimant and whether he has validly been appointed as director of the Claimant", My conclusion on each of these issues was in the negative. In this judgment I shall use the abbreviations that I used in the July Judgment.
At the hand down hearing, Mr Ahmed sought an order striking out the proceedings as an abuse of process. I indicated that this was an order I intended to make unless, at a disposal hearing to be listed for the purposes of determining questions of costs, Zoya appeared through the agency of its validly appointed director or directors and applied to ratify the issue of the proceedings and continue the claim.
Mr Ahmed also sought orders for costs against John Haastrup and Alpha Rocks Solicitors (the "Solicitors"). The relief was sought against John Haastrup as the controller of the proceedings. It was sought against the Solicitors on two alternative bases. The first was in exercise of the summary jurisdiction against solicitors who are in breach of their warranty of authority. The second was under the jurisdiction to make a wasted costs order under section 51(6) of the Senior Courts Act 1981 (the "1981 Act"). I directed that John Haastrup and the Solicitors be joined to the proceedings as Third Party and Fourth Party respectively, in each case for the purposes of costs only.
At the disposal hearing, which was held on 20 September, nobody appeared for Zoya, and I made an order striking out the claim form and the particulars of claim as an abuse of process. I gave a short ex tempore judgment on why I considered that this is a case which justified a strike out, rather than a stay. In short summary, I applied what I understood to be the appropriate principles as explained by Toulson LJ in Adams v. Ford [2012] 1 WLR 3211 (paragraphs 31, 32 and 39) to which my attention had been drawn by Mr Burton at the hearing at which I handed down the July Judgment.
I also gave further directions for the payment of monies out of court to Mr Ahmed and made a third party costs order against John Haastrup, such costs to be paid on the indemnity basis. The grounds on which I did so were that John Haastrup was responsible for procuring the proceedings to be issued and continued in Zoya's name without authority to do so, and thereafter was the individual who controlled the proceedings, which would have been for his own benefit if they had been successful. The interests of justice plainly demanded that the proceedings so procured be struck out as an abuse of process. I was satisfied that the proceedings were "exceptional" in the sense used in the authorities and that it was just for an order that John Haastrup, being the person who procured their commencement and continuation as an abuse of process, should be responsible for the costs of doing so.
In making the order against John Haastrup, I dealt with one issue which is relevant also to the claim against the Solicitors. I rejected a submission that costs could not be recovered from him because Mr Ahmed's defence was being funded by Gloria Haastrup, which meant that there was a breach of the indemnity principle. The submission was founded on an admission as to the source of funding made by Mr Ahmed in his oral evidence at the trial of the preliminary issues.
The reason I rejected that submission is because the statements of costs which have been put in by Mr Ahmed's solicitors, Penningtons Manches, are both certified by a partner of that firm as not exceeding the costs which Mr Ahmed is liable to pay in respect of the work which the statement covers. This certificate was then confirmed in a witness statement made by Mr Ahmed. In my judgment there is no inconsistency between this evidence and the oral evidence which Mr Ahmed gave at the trial. There are no grounds for concluding that Mr Ahmed is not in fact liable to Pennington Manches for the full amount of the costs, even though he has a separate arrangement with Gloria Haastrup that she will fund their payment.
I also dealt with Mr Ahmed's application against the Solicitors for a wasted costs order, but refused that relief. I gave a short judgment at the hearing, but will reiterate those reasons here, as they have some bearing on the issue with which this judgment is primarily concerned.
The wasted costs jurisdiction is discretionary, but requires Mr Ahmed to prove that the costs incurred by him were incurred as a result of an improper, unreasonable or negligent act or omission on the part of the Solicitors (section 51(7) of the 1981 Act). Two categories of conduct were relied on.
The first was the filing of a witness statement made by John Haastrup on the eve of the trial containing (in paragraph 12) what counsel instructed by Mr Ahmed (Mr Daniel Burton) described as inflammatory, false and irrelevant allegations. The second was what Mr Burton described as the Solicitors' unreasonable conduct in accepting instructions to act on behalf of Zoya on the basis of wholly inadequate information as to his authority to give those instructions.
So far as the witness statement is concerned it is my view that the evidence was wholly irrelevant to the issues before the court, was insufficiently substantiated and was expressed in unnecessarily tendentious terms. I am also satisfied that the Solicitors should not have permitted that evidence to be adduced, because it was obviously irrelevant and was not adduced in a manner which could possibly have assisted the court. However, I am not satisfied that this means that any act or omission of the Solicitors did in fact cause any additional costs to be incurred, and consider that it is most improbable that it did. For that reason I concluded that the first category of conduct did not justify the relief sought.
So far as the second category of conduct is concerned, Mr Ahmed relied on the Solicitors' failure to make proper enquiries as to the authority of John Haastrup to give instructions in the name of Zoya as conduct which could be shown to be improper, unreasonable or negligent such as to satisfy the requirements of section 51(7)(a) of the 1981 Act.
I confess that I hesitated on this point, In the end, however, I was not satisfied that the Solicitors' reliance on the instructions which they received from John Haastrup, combined with the documentation that he produced, including most particularly a copy of the Certificate (as described in paragraph 35 of the July Judgment) and a Letter of Authority dated 21 July 2014, was sufficiently clearly conduct that amounted to an improper, unreasonable or negligent act within the meaning of section 51 (7)(a). I was also concerned by the fact that a partner in the Solicitors, Mrs Isi Inyang, gave evidence that John Haastrup had refused to waive privilege in relation to the instructions he gave them regarding his authority to act for Zoya. This is a fault-based jurisdiction, and in the context of the summary approach that I am invited to take, I do not consider that Mr Ahmed has established with sufficient clarity that the Solicitors were guilty of conduct, which justifies the grant of the relief sought.
I now turn to the point on which I reserved judgment at the disposal hearing. It is said by Mr Burton that, because I have concluded that John Haastrup was not a validly appointed director of Zoya (and not entitled to its shares), he lacked locus to authorise the Solicitors to issue proceedings in Zoya's name, with the result that they were issued without authority. I agree that this is the consequence of the findings that I made, and indeed those findings were also the basis on which I struck out the proceedings as an abuse.
Mr Burton then submitted that, by issuing the proceedings in the name of Zoya, the Solicitors warranted to Mr Ahmed that they had authority to act on behalf of Zoya, when, as is now established, they had no such authority. He submitted that their want of authority amounted to a breach of the warranty, which has caused Mr Ahmed loss and damage in the amount of his legal costs of the claim.
He also submitted that, because liability is strict, the Solicitors are liable notwithstanding the state of their knowledge as to their authority, and that this is a straightforward case in which I should apply the basic principle explained by Warrington J. in Richmond v Branson & Son [1914] 1 Ch 968, 974 as follows:
"If a solicitor is acting without authority in an action brought by a plaintiff who is not alleged to be of unsound mind, either the plaintiff or the defendant is entitled to have that action summarily stayed, and to an order that the solicitor should pay the costs of the action as between solicitor and client."
Mr Burton also showed me the decision of HHJ Toulmin QC in Warner v. Merriman White [2008] EWHC 1129 (Ch) as an example of a case in which the jurisdiction has been exercised, although I think that it is fair...
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