Glatt v Sinclair

This is an appeal against the order of Kenneth Parker J made on 4 November 2010 whereby he dismissed the appellant’s application for permission to continue an action for breach of duty against the respondent, a receiver appointed by the court pursuant to the Criminal Justice Act 1988.

The appellant also appeals against the decision of Kenneth Parker J that the respondent’s costs of the application should be paid as an expense of the receivership.

The respondent was appointed by order of Morison J dated 15 February 2001 upon the application of the Commissioners of Customs and Excise. Paragraph 3 of that order conferred upon the respondent the power of sale of the assets of the appellant over which he was appointed.

On 23 November 2001, Ouseley J authorised the sale of a number of properties owned by the appellant, including 107 Station Road, Hendon NW4 (“the Property”).

Thereafter the respondent instructed SHM Smith Hodgkinson Europe Limited (“Smith Hodgkinson”) to provide a valuation of the Property. Smith Hodgkinson, who are experienced and reputable valuers, duly inspected the Property and, by letter dated 7 December 2001, reported that it had an open market value of £330,000. They then instructed a local selling agent called Moreland Estates Limited (“Moreland”) who, by e-mail dated 30 January 2002, reported that they had received a number of offers, one of £317,000, another of £318,000 and a third of £330,000. A sale was agreed with the highest bidder and completion took place on 18 April 2002.

On 10 May 2002, the respondent instructed Colleys, the specialist valuation and surveying service of the Halifax Group, to confirm the value of the Property. By letter of 15 May 2002, Colleys explained that they had inspected the Property on 28 February 2002 to advise a lending institution as to their opinion of its open market value for mortgage purposes. They recorded that it was their understanding that the respondent now required them to confirm that their valuation was fair and reasonable, taking into account all relevant matters. They concluded that, assuming vacant possession and taking into account the condition of the Property and the state of the market, the value of the Property as at 28 February was £330,000.

Meanwhile, on 18 April 2002, the date of completion, the Property was advertised for re-sale by the purchaser through another selling agent, Douglas Martin, at £445,000. Sales particulars were prepared showing an asking price of £449,950. A sale was rapidly agreed at £455,000 and the Property was withdrawn from the market. Completion took place on 1 August 2002.

The appellant contends that no satisfactory explanation has ever been offered for the difference between the price at which the Property was sold by the respondent and the price at which it was sold on by the purchaser. In this connection, the appellant also points to a letter from a Mr Landes of a company called Family Homes UK Limited dated 12 September 2002. In that letter, Mr Landes stated that the appellant and his wife purchased the Property through him in 1998 and he estimated its value as at April 2002 at £440,000.

The appellant also relies on material which is said to suggest that the purchaser was in fact connected with Moreland and that the competitive offers said by Moreland to have been received by them were bogus. This material, to which I must return, comprises letters dated 25 September 2002 and 9 January 2003 from a company called Grimstons Associates Limited (“Grimstons”) which carries on business providing investigative services, and a draft affidavit, apparently prepared in 2003, of a Mr Jonathan Chatfield, who is described as the managing director of Grimstons.

In all these circumstances, the appellant submits that a claim against the respondent for breach of duty has a realistic prospect of success and that the judge fell into error in failing to so find.

There is no dispute between the parties as to the test for the grant of permission and I am satisfied that the judge properly directed himself in referring to the following guidance given by Jonathan Parker LJ in McGowan v Chadwick [2001] EWCA Civ 1758 at [78]:

“As to the approach which the court should take on such an application, it is a matter for the court’s discretion whether or not to give permission, and accordingly no hard and fast rules can be laid down as to the requirements which a prospective claimant must meet or as to the manner in which he brings forward his application. What can, in my judgment, safely be said is that permission will not be granted unless the applicant satisfies the court that his claim is a genuine one, in the sense that the allegations which he seeks to make are such as to call for an answer from the receiver. On the one hand, the receiver must not be subjected to vexatious or harassing claims; on the other hand, as Nevill J observed, the court must see that justice is done.”

As for the duties of a receiver, this too is largely a matter of common ground, as it was before the judge. In circumstances such as those arising in these proceedings, a receiver is under a duty to those interested in the property over which he is appointed to act in good faith and to take reasonable steps to obtain a proper price: see for example, Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 (PC) at page 315 C-D; Medforth v Blake [2000] Ch 86 (CA) at page 98 C-D. In this context “proper price” means the best price reasonably obtainable at the time, as Pill LJ explained in Mortgage Express v Trevor Mardner [2004] EWCA Civ 1859 at paragraphs [5] to [9].

After setting out the general principles to which I have referred, Kenneth Parker J turned to consider the application of those principles to the facts established by the evidence before him. In doing so, he properly had regard to the draft amended particulars of claim which set forth the case which the appellant sought to advance.

The judge began by considering the appointment of Smith Hodgkinson. At paragraph [12], he explained that he had no reason to doubt that, in writing their report dated 7 December 2001, they were expressing their true belief that the open market value of the Property was £330,000. It is clear the judge had well in mind that Smith Hodgkinson were expressing this opinion against the background of a court appointed receivership and the need to state what they regarded as the likely best price available in the market.

At paragraph [13], the judge referred to the corroboration of the Smith Hodgkinson valuation by Colleys. He considered the appellant’s submission that the Colleys’ valuation was obtained for lending purposes and did not therefore reflect the full market value of the Property. However, the judge rejected that submission because, first, Colleys clearly stated that the open market value was £330,000, and second, in any event, the purpose of the corroborating report was to provide a cross-check of the valuation provided by Smith Hodgkinson and, even allowing for the fact that Colleys’ valuation was to a lender, it showed that Smith Hodgkinson’s valuation was not out of line with current market values.

In all these circumstances the judge concluded, at paragraph [14], there was no basis for believing that the receiver relied upon a valuation that was manifestly flawed. He rejected the letter from Sidney Landes as having any probative value for the reasons advanced by the respondent, namely it did not contain Mr Landes’ qualifications and there was no suggestion that Mr Landes ever went to see the Property, even from the outside. Indeed Mr Landes referred to the Property as being a semi-detached house when in fact it is detached.

At paragraph [15], the judge explained that Smith Hodgkinson then appointed Moreland and neither the receiver nor Smith Hodgkinson had any reason to believe that they were other than competent and honest estate agents.

The judge then turned to the draft amended particulars of claim. At paragraph [16], he observed that they consisted mainly of what he termed nit-picking criticisms about the way the respondent went about the sale. All of these were matters which the judge felt lay within the fair and reasonable discretion of the respondent and could not show that he proceeded in an unreasonable way.

Finally, at paragraphs [17] to [19], the judge turned to what he plainly considered to be a matter of greater substance, the allegation that Moreland had a connection with the buyer and that the other offers for the Property were a sham. The judge ultimately rejected this as a reason for giving permission for two reasons: first, the allegation was of an extremely serious nature, effectively amounting to fraud, and yet was backed up by no more than the two letters in 2002 and 2003 and the draft affidavit of Mr Chatfield. The judge considered that this was simply not good enough. Second, there was absolutely no reason to suppose that the receiver or Smith Hodgkinson had any reason to believe or were possessed of any information which should have put them on notice of the matters alleged.

For all these reasons, the judge concluded that the claim had no realistic prospect of success, that it was doomed to fail and that it should not be allowed to proceed. He therefore refused to grant permission.

The appellant contends that the judge fell into error for a number of reasons. They fall into three groups which I will consider in turn. But before doing so I must address an application by the appellant for permission to adduce further evidence.

On 18 October 2011, the appellant issued an application for permission to adduce further evidence consisting of (i) a witness statement of Mr Cohen, a Registered Valuer for the Royal Institute of Chartered Surveyors, who had been instructed to carry out a retrospective valuation of the Property, (ii) a witness statement of Mr Mark Spragg, the appellant’s former solicitor, who sought to explain why Mr Chatfield’s draft affidavit was never sworn, and (iii) a report of an investigator called Mr Kiely who is said to have repeated the investigations carried out by Mr Chatfield. We heard the application at the outset of the appeal and it was refused. We indicated that we would give our reasons in due course. My reasons are these.

It is well established that special grounds must be shown to justify the introduction of fresh evidence on appeal. The matter must be considered in the light of the overriding objective but, in general, special grounds will not be shown unless the requirements set out in Ladd v Marshall [1954] 1 WLR 1489 are satisfied. That is certainly not the case here. These proceedings have been in contemplation by the appellant for a very long time and all of the evidence which he seeks permission to introduce could have been obtained without any difficulty for use before the judge.

The appellant submits that the judge ought to have found there was at least an arguable case that the respondent ought not to have relied upon the Smith Hodgkinson valuation. In this regard, the appellant points to the sale of the Property for £330,000 on 18 April 2002, its immediate re-marketing at £445,000, the preparation of sales particulars showing an asking price of £449,950 and its ultimate sale at £455,000, that is to say with an uplift of £125,000, and contends these raise questions which have never been properly answered. Moreover, he says Smith Hodgkinson were not local agents with direct knowledge of local market conditions and their valuation was given for loan security purposes and contained no reference to comparable evidence.

The appellant also contends the judge should not have placed any reliance upon the Colleys report of 10 May 2002 because it was not and did not purport to be an open market valuation. Further, by that time the Property had been on the market for some weeks at about £450,000.

Finally, in this regard, the appellant contends the judge should not have dismissed the letter written by Mr Landes for the following reasons. There was no reason to suggest that Mr Landes was not a competent estate agent with knowledge of the local market and this is supported by the fact that he was apparently the agent through whom the appellant and his wife bought the Property. Further, the views expressed by Mr Landes are consistent with what actually happened. There is, continues the appellant, no suggestion that the sale at £455,000 was not a genuine open market sale at arms length and, as such, it represents the best evidence of the value of the Property in April 2002.

I accept that there is before the court no coherent or convincing explanation as to how the Property came to be re-marketed and re-sold within such a short space of time with an uplift of nearly 38%. There was some suggestion by the respondent that the Property was in an uninhabitable and dangerous state when valued by Smith Hodgkinson in December 2001 but had been refurbished or redeveloped by the time of its re-sale in August 2002. But these are not matters which have been established in evidence, they form no part of the reasoning of the judge and I do not believe it would be right for this court to attach any weight to them now. Accordingly I believe the issue of the uplift is a serious matter and it is one to which I must return in the next section of this judgment.

In my judgment the uplift does not, however, directly answer the question whether the judge erred in failing to find that the appellant had genuine grounds for contending that the respondent failed to act in good faith and to take reasonable steps to obtain a proper price for the Property in instructing Smith Hodgkinson and relying upon the advice they gave.

In this regard, I believe the following matters are material. First, Smith Hodgkinson are, and were, reputable independent valuers with a nationwide business. Second, it is correct to say that, by their letter dated 7 December 2001, Smith Hodgkinson explained that they had inspected the Property in order to advise the respondent of its current value for loan and security purposes. However, they then proceeded to provide what they described as the open market value of the Property which they estimated at £330,000 as at 30 November 2001. This was defined in the report as being the best price at which the Property could be sold, assuming a willing seller and a reasonable period of proper marketing. It is apparent from the report that the inspection was carried out by Mr Patrick Whitby, a Corporate Member of the Royal Institution of Chartered Surveyors and that he had knowledge of the particular market for the Property and the skills and understanding to undertake the valuation competently. It is clear that he inspected the inside and the outside of the Property and formed the view that it would benefit from a degree of refurbishment and redecoration. He also considered the area in which the Property is located, observing that it remained popular and sales were being readily achieved despite a small downturn in prices.

In all these circumstances, I have formed the view that the respondent cannot be criticised for instructing Smith Hodgkinson or for relying on their report and proceeding to instruct selling agents. I do not believe the respondent had any reason to suppose that the valuation that Smith Hodgkinson provided was inaccurate as of its date, and the judge was right to so hold.

As for the Colleys report, this was relied upon by the judge as corroboration of the opinion expressed by Smith Hodgkinson. Despite the criticisms advanced by the appellant, I believe the judge was entitled to place reliance upon the Colleys report to the limited extent that he did. As the respondent explained in his evidence in response to the application, he did not ask Colleys to value the Property for mortgage purposes. He simply instructed Colleys to value the Property in the light of concerns which the appellant had by that time expressed about the sale price. It is apparent from the letter written by Colleys on 15 May 2002 that they had indeed inspected the Property on 28 February 2002 in order to advise a lending institution as to its value for mortgage purposes. However, they clearly stated in their letter that they also believed the open market value of the Property to be £330,000. I therefore agree with the judge that there is no basis for believing that the respondent relied upon a valuation that was manifestly flawed.

As for the letter from Mr Landes, this was dated 12 September 2002, some time after the completion of the sale. The judge did not consider this letter to have evidential weight for the reasons which he gave and, in my judgment, he was entitled to reach that conclusion.

In summary, and despite the discrepancy between the sale and re-sale price achieved for the Property, I do not accept that the appellant has a realistic prospect of establishing that Smith Hodgkinson’s valuation was inadequate or inaccurate as at 30 November 2001. Moreover, the appellant has shown absolutely no basis for a contention that the respondent should not have relied upon Smith Hodgkinson’s report in proceeding to instruct selling agents.

The second group of alleged errors concern the failure by the respondent to take proper steps to market the Property. In particular, the appellant contends that the taking of reasonable steps to obtain a proper price generally involves taking advice as to how the property in issue should be marketed, advice as to the appropriate asking price, advice as to how and when the property should be advertised and thereafter properly exposing the property to the market through advertisements. In this case, the appellant continues, there is no evidence that any sales particulars for the Property were ever prepared; nor is there any evidence that any advice was taken as to an appropriate asking price or selling strategy. The appellant pointed to letters sent by his solicitors to the respondent’s solicitors over the course of summer 2002 requesting further information as to how the Property was marketed. These met with a response from the respondent’s solicitors by letter dated 30 August 2002 that details of the advertisements and offers for the Property could not be provided because the agent was on holiday. By a further letter dated 18 September 2002 the respondent’s solicitors explained that, while they were still attempting to obtain copies of the advertisements, the sales agent was not in a position to provide them as their files were currently undergoing an audit.

More recently, the respondent has simply said there is no evidence that the Property was not marketed. This, argues the appellant, is not a stance he is entitled to adopt. If the action were to proceed it would not be good enough for the respondent simply to put the appellant to proof. He would have to plead any positive case he intended to advance and he would have to give standard disclosure of documents in his control, which would include the papers held by Moreland. An absence of documents recording any such advice or evidence of marketing activity would provide a basis for inviting the trial judge to draw an inference adverse to the respondent.

The respondent submits that all of his actions must be seen in context. The order of Ouseley J dated 23 November 2001 gave the respondent power immediately to sell the Property and other assets in order to meet the legal aid contributions required of the appellant and in order to meet the respondent’s reasonable costs. They were very substantial indeed and, in the case of legal aid order contributions, amounted to in excess of £330,000, and, in the case of the receivership costs and expenses, in excess of £396,000. The respondent maintains that in these circumstances there was a pressing need for additional funds to come into the receivership. The respondent continues that he then approached Smith Hodgkinson for their opinion as to the open market value of the Property and, having obtained it, instructed Moreland to market it. This they proceeded to do on a precise date at present unknown, but probably on or about 15 January 2002. In all these circumstances the respondent contends that the judge properly described the appellant’s criticisms as nit-picking.

In my judgment, the epithet nit-picking, though pithy, is not fair. There is no evidence that the respondent took any steps to ascertain the state of the market and whether it was rising or even falling. Nor is there any suggestion that the respondent ever discussed a marketing strategy with Moreland; considered what would be an appropriate asking price; ascertained whether or not sales particulars should be produced or what form they should take; considered how long and in what manner the Property should be advertised or any other aspect of the sales strategy to be adopted.

The respondent says that the Property was in fact advertised on two occasions, first, on 24 January 2002 in the Hendon and Finchley Times and second, on 1 February 2002 in the Hampstead and Highgate Express, colloquially known as the Ham and High. But before the second advertisement had been published, Moreland reported to Smith Hodgkinson by e-mail dated 30 January 2002 that offers had been received from a number of prospective purchasers. The first was a Mr Kyriacou. He apparently made an offer on 25 January of £315,000 which was increased on 28 January to £317,000. The second was a Mr Patel who offered £318,000 on 29 January and subsequently increased that offer to £322,000. The third was a Mr Jeyaselvan Anandasivam (“Mr Anandasivam”) who initially offered £320,000 but apparently rapidly increased that offer to £330,000. It would seem that, based upon this report, the respondent accepted the offer from Mr Anandasivam.

The rapid acceptance of the offer from Mr Anandasivam also causes me some concern. True it is that it met the valuation given by Smith Hodgkinson as of 30 November 2001. However, the initial marketing of the Property on 24 January 2002 had generated three substantial offers in a very short space of time. There was therefore every reason to suppose that the forthcoming advertisement in the Ham and High would also generate a good deal of interest. Faced as the respondent was with three good offers and a prospect of further offers from the further advertisement, it is, I think, at least arguable that it would have been reasonable to see what, if any, further offers were forthcoming; to assess in the light of the offers whether or not the market was rising; to consider in the light of all these matters whether the Property was being marketed at the correct price; and to review how the marketing strategy should be taken forward.

The difficulty at this stage is that there is very little information as to what, if anything, was actually done by the respondent or by Smith Hodgkinson on his behalf to ensure that the best price reasonably obtainable was in fact achieved. The asking price has never been disclosed. The advertisements have never been produced and, as I have said, there is no evidence that any sales particulars were ever prepared. Nor is there any evidence as to what steps were taken by the respondent to consider with Smith Hodgkinson or Moreland whether Mr Anandasivam’s offer should be accepted or whether they should reassess the value of the Property and continue to market it, at least for another few weeks.

In all these circumstances I believe there is an issue to be tried as to whether or not the Property was properly marketed and advertised. I am confirmed in this view by the fact that, in April 2002, the Property was re-advertised at a price of nearly £450,000. This again suggests there is at least a real possibility that further exposure of the Property to the market in February 2002 might have led to a reassessment of its value and the best price reasonably obtainable. Accordingly, I have come to the conclusion that in this respect the judge fell into error.

The third group of alleged errors concern the allegation that Moreland sold the Property to a connected person. Here the appellant relies upon the letters from Grimstons and the draft affidavit of Mr Chatfield. He contends that the judge should not have rejected this evidence and that, in doing so, he wrongly pre-empted the function of the trial judge in determining what weight to give to them. The appellant continues that the judge should also have considered what evidence might be available at trial. Moreover, he argues, if the purchaser was connected to Moreland, the burden is on the respondent to show that he exercised sufficient due diligence and took reasonable steps to obtain a proper price.

The respondent submits that the judge was right to reject this evidence for the reasons he gave. He also contends that, had the judge not so decided, he could and should have decided that the draft amended particulars of claim sought to introduce new claims or causes of action that did not arise out of the same or substantially the same facts as the claims already pleaded and the applicable period of limitation had expired.

The assertions contained in the letters and the draft affidavit may be summarised as follows. First, the purchaser of the Property, Mr Anandasivam, lived at 26 Heath Drive, Potters Bar with his father, Mr Sundarampillai Anandasivam, who was company secretary of a company called Safeplan Trade Limited (“Safeplan”).

Second, one of the directors of Safeplan was called Mr Phylix Thevaratnam who was born on 12 November 1952 and is described as an estate agent. A previous director of Moreland was a Mr Phylix Selvadurai who was born on 13 November 1952. Mr Chatfield’s draft affidavit expresses the opinion that Mr Phylix Thevaratnam and Mr Phylix Selvadurai are one and the same person and it may therefore be inferred that Moreland sold the Property to the son of a business associate of one of Moreland’s directors.

Mr Chatfield’s draft affidavit continues that, despite various searches, he has found no evidence of the existence of Mr Kyriacou or Mr Patel at their respective addresses, 106 Hodford Road, London NW11 and 12 Gates Close, Borehamwood. Further, 106 Hodford Road was a property at one time managed by Moreland.

The allegations of breach of duty founded on these various facts and matters are formulated in the particulars to paragraph 16 of the draft amended particulars of claim. Here it said the respondent was in breach of duty in:

“(j)

failing to ensure that the sale was at arms length.

(k)

selling and/or permitting a sale to a person who was connected with Morelands. In support of that allegation the Claimants will rely in particular on the facts that

(i)

the Purchaser’s father was or had been secretary of a company called Safeplan Trade Ltd.

(ii)

the director of Safeplan Trade Ltd was an estate agent and the Claimants have reason to believe that he was a director or Morelands.

(iii)

the Purchaser’s father resided at 26 Heath Drive, Potters Bar (which was also the Purchaser’s address).

(l)

failing to take any or sufficient steps to ensure that the Property was properly marketed. In particular

(i)

the Claimant accepted without question information from Morelands to the effect that lower offers than that which was eventually accepted had been received from a Mr Patel of 12 Gates Close, Borehamwood and a Mr Kyriacou of 106 Hodford Road, London NW11.

(ii)

106 Hodford Road was a property managed by Morelands.

(iii)

Morelands had no record of having let that property to anyone by the name of Kyriacou.

(iv)

The occupier of that property had never received mail addressed to Mr Kyriacou.

(v)

The First Claimant has not found any other evidence to suggest that anyone named Kyriacou has ever lived at 106 Hodford Road.

(iii)

No credit search carried out by or on behalf of the Claimants or either of them or other similar source has provided any evidence of a Mr Patel living at 12 Gates Close, Borehamwood.”

These allegations are of a very serious nature. As I have indicated, the appellant seeks to contend that Moreland sold the Property to the son of a business associate of its directors, and that the offers which it reported to the respondent were not genuine. However, their evidential basis is very flimsy. The allegation of connection depends upon Safeplan which, as the respondent points out, was dissolved in 1993, five years before Moreland was incorporated. Moreover, it depends upon an acceptance that Mr Phylix Thevaratnam and Mr Phylix Selvadurai are one and the same person. As for the allegation that the offers made by Mr Kyriacou and Mr Patel were not genuine, it is notable that the draft affidavit of Mr Chatfield suggests that a family called Patel may have resided at 12 Gates Close until 2002. Hence the appellant’s own evidence indicates that a Mr Patel may indeed have resided at that address in January 2002 when Moreland reported the offer.

The judge was singularly unimpressed. As he said at paragraph [18]:

“If this allegation were to be seriously pursued, that is taken beyond the tenuous connection suggested in those letters, the applicant has had a very long time indeed to develop the material relied on for the very serious allegation advanced. All that has emerged is a draft affidavit from the writer of the letter in 2003 made many years ago and subsequently left to languish. In my judgment, that is simply not good enough in the present context, when the thrust of the allegation is tantamount to an allegation of fraud against the selling agent.”

In my judgment, the approach taken by the judge was entirely correct. This claim was issued on 1 April 2008 and the application for permission to continue with the action was issued on 5 September 2008. The appellant therefore had five years from the date of Mr Chatfield’s draft affidavit in which to gather the further evidence necessary to advance such serious allegations which do, as the judge rightly observed, effectively amount to allegations of fraud. I accept the respondent’s submissions that, given the nature of these allegations, the judge was entitled to expect far more convincing evidence than the unsigned draft affidavit and two letters which he had before him, and the fact that nothing was done to bolster the evidence in the intervening years is extremely telling.

The appellant also attacks the judge’s finding that there was nothing to put the respondent or Smith Hodgkinson on notice of any wrongdoing. Here he submits the judge fell into error as a matter of law because it is no defence for a receiver to say that he engaged agents upon whom he was entitled to rely. That, he argues, is settled law in relation to mortgagees and receivers whom they appoint, and there is no reason why the same approach should not be taken in relation to receivers appointed by the court.

The respondent accepts that a mortgagee exercising a power of sale and a receiver appointed by a mortgagee cannot escape liability merely by saying that they entrusted the sale to apparently competent professionals. In my judgment he is right to do so. In Raja v Austin Gray [2003] BPIR 725 Clarke LJ considered this issue at paragraphs [29] to [35]. He observed that there was no binding authority on the question but, having considered the authorities and, in particular, the obiter observations of Cross LJ in Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 at page 973, concluded that the obligation on a mortgagee or a receiver appointed by a mortgagee to sell at the best price reasonably obtainable is not delegable.

The respondent submits that the position of a court appointed receiver is, however, different. In this connection he relies upon the distinction between mortgagees and mortgagee appointed receivers on the one hand and trustees on the other. Trustees acting within their powers are not automatically responsible for any act or default of their agents, nominees or custodians and are only liable for any personal failure to comply with their duty of care when entering into arrangements with such persons or in keeping such arrangements under review: see, for example, Underhill and Hayton: Law relating to Trusts and Trustees (18^th edn) at paragraph 48.51. Moreover, in Cuckmere, Cross LJ explained at page 973 B-C:

“… the position of a mortgagee is quite different from that of a trustee. A trustee has not, qua trustee, any interest in the trust property, and if an agent employed by him is negligent his right of action against the agent is an asset of the trust. A mortgagee, on the other hand, is not a trustee and if he sues the agent for negligence any damages which he can recover belong to him.”

The respondent submits that in this sense a court appointed receiver is very similar to a trustee. He has no interest in the property; nor does the person who appointed him. There is therefore no reason to apply the full rigour of what is, in effect, a strict liability rule as regards the negligence of agents to a court appointed receiver.

I do not believe the matter is as clear as the respondent contends. I accept that a court appointed receiver has no interest in the property and is, in this sense, similar to a trustee. However, in general he is under the same fiduciary duties and owes the same duties of care as a receiver appointed out of court. Moreover, the receiver may well be in the best position to ascertain the merits of any potential claim against any agent he has appointed. In all the circumstances I have reached the conclusion that this is an issue which would benefit from further argument and since it is not necessary for me to express a final conclusion upon it, I prefer not to do so.

This brings me to the limitation issue raised in the respondent’s notice, and whether the application to amend would have been permissible. There is no dispute that the limitation period for a claim such as this is six years and that this period had expired by the date of the application. Two questions therefore arise for consideration: first, whether paragraphs 16(j), (k) and (l) of the draft amended particulars of claim seek to introduce new claims and second, if they do, whether they arise out of the same facts or substantially the same facts as the claims already made.

In Paragon Finance plc v DB Thakerar [1999] 1 All ER 400 Millett LJ said at 406 C-D:

“In my judgment, it is incontrovertible that an amendment to make a new allegation of intentional wrongdoing by pleading fraud, conspiracy to defraud, fraudulent breach of trust or intentional breach of fiduciary duty where previously no intentional wrongdoing has been alleged constitutes the introduction of a new cause of action.”

In my judgment paragraphs 16(j), (k) and (l) of the draft amended particulars of claim do contain allegations of intentional wrongdoing by Moreland for which the respondent is said to be responsible. These are new allegations which are not foreshadowed in the original particulars of claim and the proposed amendment does therefore constitute the introduction of a new cause of action.

Turning to the second question, the respondent contends that the new allegations introduce a whole new factual enquiry into the honesty and propriety of Moreland. I agree. They would require a full investigation of the alleged connection between Moreland and Mr Anandasivam and whether the offers made by Mr Patel and Mr Kyriacou were genuine. These are not the same facts or substantially the same facts as those from which the present claims arise. As Millett LJ observed in Paragon Finance at page 418:

“In all our jurisprudence there is no sharper dividing line than that which separates cases of fraud and dishonesty from cases of negligence and incompetence.”

Accordingly, I accept the respondent’s submission that if the judge might otherwise have considered the allegations contained in paragraph 16(j), (k) and (l) raised a case which the respondent should answer, he would have been bound to conclude that they could not be added by amendment.

The judge concluded that the respondent’s costs of successfully resisting the appellant’s application for permission could properly be taken from the assets falling within the terms of the receivership which were subject to a lien in his favour. For the reasons I have given, I have reached the conclusion that the judge erred in refusing the appellant’s application for permission. It follows that the costs order he made must be set aside.

I would allow the appeal and give the appellant permission to pursue the claim to the extent I have explained. The appellant must amend his particulars of claim accordingly.

I agree that the appeal should be allowed to the limited extent described in the judgment of Kitchin LJ.

Even though, for the reasons he gives, the Smith Hodgkinson valuation was one on which it was proper for the respondent to rely, so far as it went, it does seem to me that the fact of having that valuation did not necessarily dispense with the need for the respondent to obtain further advice as to the marketing of the property, when the decision was taken that the Property should be sold. At least arguably, it was the duty of the respondent to obtain advice at that stage as to asking price or guide price, as to the appropriate method of selling including advertising and otherwise and, when offers were received, as to whether the best should be accepted there and then or whether to wait in the hope of a better offer. It is striking that Moreland reported the offers received in their email dated 30 January 2002, without offering any advice as to whether this was the best that could be expected. Moreover, according to the respondent, a second advertisement was due to be published a couple of days later, and it seems very odd that it was not thought sensible to await the reaction to that. The facts so far as known might permit the inference that the respondent, having got the Smith Hodgkinson report, was content once an offer had been received which matched the figure in that report. But it could not necessarily be assumed that the best price reasonably obtainable, by the end of January or the beginning of February, was the same as Smith Hodgkinson had advised in November.

I agree with Kitchin LJ for the reasons he has given, on these and the other issues in the appeal.

I agree that this appeal should be allowed for the reasons given by my Lords. Although the case advanced by the receiver has considerable attraction (“We obtained a reputable valuation of the open market price and we achieved that price”) nonetheless there is the concern bolstered by the speed at which the property changed hands for a very significant profit so soon after the sale by the Receivers that they proceeded with unnecessary haste and without sufficiently testing the market to ensure that the price was the best price reasonably obtainable. I can, therefore, accept that the low threshold as it is laid down in McGowan v Chadwick & Grant [2001] EWCA Civ 1758 is met. The claim made by Mr Glatt is genuine, not vexatious. He does raise questions which call for answers from the Receivers. Hence permission should be granted to him to proceed.