CFC 26 Ltd v Brown Shipley & Co Ltd & Ors

This case arises out of the sale of an underlease (“the Underlease”) of Sofia House, 204 Great Portland Street, London W1W 5NP (“Sofia House”). In broad terms, the Underlease is said to have been sold for very much less than its full market value as a result of a “corrupt agreement” between four of the defendants and negligence and/or negligent misstatement and malicious prosecution on the part of the fifth. The defendants, however, seek to have the proceedings dismissed summarily or struck out (as well as other relief in the alternative).

Before the events relevant to the proceedings, Sofia House was the subject of a long lease (999 years from 6 July 1916) held by the third and fourth defendants, respectively Concord W1 204 GPS Limited and Concord 204 GPS Limited (together, “Concord”), and the Underlease (for 125 years from 12 December 1985). It had also been the subject of a grant of planning permission for redevelopment dated 31 August 2006.

Just short of three years later, in a letter dated 27 August 2009, a Mr Ryan Fitzgerald expressed the view that works at Sofia House had commenced. Mr Fitzgerald is described in the particulars of claim as the “Building Control Surveyor” of the fifth defendant, Westminster City Council (“the Council”). The Council’s defence speaks of Mr Fitzgerald having been employed by Shore Engineering Limited.

In the following year, in an email of 12 August 2010, a Ms Kirsten Chohan, a solicitor employed by the Council, said that she accepted that development at Sofia House had begun within the statutory period. According to the Council, however, Ms Chohan’s email did not amount to a Certificate of Lawfulness of Existing Use or Development (or “CLEUD”) within the meaning of the Town and Country Planning Act 1990 and had no formal or binding status.

On 20 August 2012, the Underlease was acquired by SHG-SH20 Limited (“SHG”), which had been incorporated for the purpose of buying and developing the property. In August 2012 and January 2013, SHG entered into loan facilities with KBL European Private Bankers SA (“KBL”, which has been treated as the second defendant), and a subsidiary of KBL, Brown Shipley & Co Limited (“Brown Shipley”), which is the first defendant. Mr Din Hessam (“Sam”) Yeganeh (“Mr Yeganeh”), who is the ultimate beneficial owner of SHG, guaranteed at least some of the lending.

On 3 June 2013, the Council presented a winding-up petition against SHG based on alleged non-payment of business rates in the sum of £177,953.86. On 18 July, the Council served an enforcement notice for the removal of hoardings outside Sofia House. According to the particulars of claim, the notice stated:

“It would appear that there are no current or imminent works on site which have the benefit of planning permission.”

SHG does not appear to have exercised its right to appeal the notice.

On 2 October 2013, Concord forfeited the Underlease and brought possession proceedings. Later that month, KBL and Brown Shipley (together, “the Banks”) served demands on both SHG and Mr Yeganeh. Brown Shipley also, on 25 October, appointed two individuals from Colliers International, Mr Ross Freese and Mr Jonathan Cookson (“the Receivers”), as Law of Property Act 1925 receivers.

In February 2014, the Receivers agreed a consent order to secure relief from forfeiture and dispose of the possession proceedings. The winding-up petition against SHG had already been dismissed, in December 2013, following a payment into Court pending resolution of planning and rating disputes.

SHG apparently submitted an application for a CLEUD during 2014. The particulars of claim say this on the subject:

“on 3^rd June 2014 SHG submitted an application for a … CLEUD …, relying upon implementation of the 2006 planning permission. The CLEUD was eventually granted by the Council on 23^rd January 2015 ….”

In June 2014, the Receivers placed Sofia House on the market. On 7 October, the Receivers informed Concord and Longridge Developments Limited (“Longridge”), each of which had expressed interest in buying Sofia House, that they were imposing a deadline of 12 noon on 13 October for confirmation that they were ready to exchange contracts. The letter stated that the Receivers would exchange with whichever purchaser gave its confirmation by the deadline and that, if more than one did, they would accept the highest offer.

On 10 October 2014, Mr Yeganeh applied for an injunction to restrain the Receivers from selling Sofia House. A witness statement that Mr Yeganeh made on 10 October in support of the application explained that he was making the application “for myself and on behalf of [SHG]” and contained this:

“It cannot be right that the Receivers can sell the property without ensuring that full value is achieved from the 2006 Permission. To do so would be negligent and would cause huge losses to [SHG]. We have requested many times that the Receivers await the outcome of the [CLEUD] application but they have refused to do so. As guarantor to [SHG] I cannot stand back and allow a sale at an undervalue.”

The application came before Sales J on 13 October 2014 and again on 15 October, when he dismissed it. Mr Yeganeh was represented by Mr Michael Booth QC.

In the course of his judgment, Sales J said (in paragraph 8):

“[E]xtensive marketing efforts were made on behalf of the receivers to value and market the property. The receivers obtained, as I am satisfied, appropriate advice on the valuation of the property, both on the basis of an extant planning permission and on the basis of no planning permission but with hope value based upon the current policies of Westminster City Council in relation to conversion of offices to residential use. I am also satisfied, on the evidence, that the marketing of the property was at a price and on terms which the receivers were perfectly entitled to adopt in light of the advice that they had received and the situation which existed.”

Having further noted that it was “clear on the authorities …, and on the evidence, that there was no duty upon the receivers to wait for clarification of the position in relation to the application for the certificate of existing use”, Sales J arrived at these conclusions:

“21.

Accordingly, I dismiss this application on the basis that, in my view, there is no serious issue to be tried that the receivers are acting in breach of duty in seeking to press on with their marketing campaign in respect of the property, which has now reached the stage of a contract race between two identified bidders.

22.

Even if there were a serious issue to be tried for the purposes of the American Cyanamid test, I would refuse the present application on the balance of convenience.

23.

If it transpired that the Claimant did have any valid claim against the receivers with respect to the marketing of the property, I consider that the value of that claim would be reasonably ascertainable in the usual way by reference to expert evidence of property values in the relevant area, and by reference to evidence of what has emerged from the marketing campaign which the receivers have in fact carried out.”

The order made by Sales J provided for SHG to be joined as the Second Applicant, for the application to be dismissed, and for Mr Yeganeh to pay £21,949.50 in respect of the Receivers’ costs and £17,918 in respect of the costs of the Banks, which were named as the Third and Fourth Respondents. Nothing has in fact been paid.

The claim form formally initiating the proceedings (“the 2014 Claim”) had been issued on 14 October 2014. This specified Mr Yeganeh as the claimant and gave the Receivers and Banks as the defendants. The claim form stated:

“The first defendants [i.e. the Receivers] are not marketing the property properly whether as regards to its physical description or its existing or likely planning status and propose an imminent sale at a substantial undervalue to the substantial detriment of [SHG] and hence the guarantor. The second defendants [i.e. the Banks] are joined for the purpose of making any necessary representations in relation to injunctive relief as a result of the order of the Honourable Mr Justice Sales of 13 October 2014.”

On 13 October 2014, the Council presented a further petition for the winding-up of SHG. This petition is still extant. I was told that it has recently been adjourned to April of next year.

On 21 October 2014, the Receivers exchanged contracts for the sale of the Underlease to Concord for £15 million. Completion took place on 21 November.

On 14 November 2014, pursuant to an order giving them permission to do so, the Banks served a counterclaim even though no particulars of claim had been served on them. At the beginning of December, the defendants to the 2014 Claim issued an application for the claim to be struck out by reason of failure to serve particulars of claim, for judgment in default on the Banks’ counterclaim and for security for costs.

In response to this application, Mr Yeganeh produced drafts of an amended claim form and particulars of claim. As revised, the claim form included this:

“The Third and Fourth Defendants [i.e. the Banks] procured and/or induced the First and Second Defendants [i.e. the Receivers] directly and/or indirectly and unjustifiably to breach their duties/equitable obligations to the Claimants [i.e. Mr Yeganeh and SHG]. The property was sold on 21 November 2014 at a significant undervalue.”

The draft particulars of claim, which were evidently prepared by Ms Olivia Chaffin-Laird of counsel, alleged, among other things, that the Receivers, acting on the instructions of the Banks or with their approval, “specifically failed to exercise reasonable skill and care in the preparation of the marketing material which was inaccurate and misleading and/or in their marketing of the Property and/or further in securing the best price obtainable and/or such price that would be sufficient to discharge the sums due and sold the Property at an undervalue”. In the next paragraphs, the draft particulars of claim alleged:

“67.

At all material times [Brown Shipley] and/or KBL acted with the [Receivers] to conspire with, encourage and/or facilitate the transaction at an undervalue with the effect there was a shortfall in the security. For the avoidance of doubt it is averred [Brown Shipley] and/or KBL knowingly and/or intentionally procured and/or induced the [Receivers] to act in breach of their duties/equitable obligations to the Claimants ….

68.

By procuring and/or inducing the [Receivers] to so act, interfering directly and/or indirectly and unjustifiably, [Brown Shipley] and/or KBL together with the [Receivers] interfered unlawfully in the sale of the Property.”

Mr Yeganeh made a witness statement dated 4 December 2014 in support of an intended application for permission to amend the claim form. This included the following:

“On 8 October 2014 I was informed by an employee of [Brown Shipley] that Concord … offered to purchase the Property for £15,000,000.”

A further witness statement that Mr Yeganeh signed on 19 January 2015 included these remarks:

“On 8 October 2014 I was informed by Ravi Sidhoo @KBL & BSC that Concord … offered to purchase the Property for £15,000,000”

and

“The claim against the banks is for misrepresentation at the outset and subsequently improper behaviour with the effect receivers were appointed unnecessarily and inappropriately …. Further, the property was sold at an undervalue.”

The defendants’ application came before Birss J on 19 January 2015. Mr Yeganeh was initially represented by Ms Chaffin-Laird, but she had withdrawn by the time the hearing resumed after lunch. That left Mr Yeganeh, who was not himself present, without any formal representation, but a Mr Michael Dalton, a “solicitor/consultant” who assisted Mr Yeganeh, remained in Court and handed up Mr Yeganeh’s 19 January witness statement.

The order Birss J made provided for the claim form to be struck out, for judgment for KBL on the counterclaim to be entered against Mr Yeganeh for sums totalling £1,071,094.61, for Mr Yeganeh to pay the defendants’ costs of the claim and counterclaim and, more specifically, for Mr Yeganeh to pay the defendants’ costs of their application by 2 February 2015, assessed in the case of the Receivers at £12,000 and in the case of the Banks at £16,000. Mr Yeganeh has, however, made no payment in respect of either the judgment debt or costs.

In the course of his judgment, Birss J said this:

“Procedurally the position is really quite straightforward. No Particulars of Claim have been served in time and no application for an extension of time is before me. Turning to the merits, I will look at whether there is any good reason why Particulars of Claim were not served in good time …. No doubt it is complex but that alone cannot excuse the delays. The other aspect of the explanation for the delays relates to illness …. I am … not satisfied that whatever illness Mr Yeganeh has suffered … is sufficiently serious to justify the failure to serve the Particulars of Claim or the failure to apply now for leave to serve the Particulars of Claim out of time ….

… I will assume in Mr Yeganeh’s favour that he has some arguable Claim or arguable Defence to the Counterclaim. Nevertheless, and regrettable though it is, it seems to me that there is no alternative that has any air of justice about it other than to give judgment in default on the counterclaim and to strike out these proceedings for failure to serve the Particulars of Claim.”

By an application notice dated 10 February 2015, Mr Yeganeh sought an order for the applications that had been before Birss J to be re-listed and relief from sanctions. Two days later, SHG issued proceedings of its own against the Receivers and Banks (“the 2015 Claim”). The brief details of claim given in the claim form included:

“as against the 3^rd and 4^th Defendants [i.e. the Banks] and each of them (2) damages for interference with the 1^st and 2^nd Defendants [i.e. the Receivers] duties as Law of Property Act receivers; and as against the 1^st, 2^nd 3^rd and 4^th Defendants and each of them (3) damages for Conspiracy”.

The particulars of claim, which were drafted by Mr Mark Watson-Gandy of counsel, alleged, among other things, as follows:

“67.

The First and Second Defendants acted heedless of their duties as agent for and on behalf of SHG but instead acted on [Brown Shipley] and/or KBL’s instructions and at their behest.

68.

Further or alternatively, the First and Second Defendants, acting on the instructions of and/or with the approval of [Brown Shipley] and KBL, failed to exercise reasonable skill and care in the preparation of the marketing material which was inaccurate and misleading and/or in their marketing of the Property and/or further in securing the best price obtainable and/or such price that would be sufficient to discharge the sums due and sold the Property at an undervalue ….

69.

Further or alternatively, between October 2014 and November 2014 the 1^st and 2^nd and 3^rd and 4^th Defendants and each of them wrongfully and with intent to injure SHG and / or cause loss to SHG conspired and combined together to injure SHG by unlawful means namely by depriving it of the benefit of its equity of redemption in the said Property by causing it to be sold at an undervalue to Concord in breach of the 1^st and 2^nd Defendant’s duty to SHG ….

70.

Further or alternatively, in or about October 2014 to November 2014 [Brown Shipley] and / or KBL, by their servants or agents wrongfully and without the consent of SHG (and acting for their own benefit and ends and without lawful justification) induced, procured or facilitated the 1^st and 2^nd Defendants to breach their equitable duty …, notwithstanding SHG’s economic interest in the said Property selling for its true market value.

71.

At all material times, [Brown Shipley] and / or KBL well knew of the 1^st and 2^nd Defendant’s receivership and their equitable duties to SHG as receivers alternatively well knew of the 1^st and 2^nd Defendant’s receivership and were recklessly indifferent to the 1^st and 2^nd Defendant’s equitable duties to SHG ….”

On 6 March 2015, Master Teverson heard an application by the Receivers and Banks for an extension of time in which to serve defences to the 2015 Claim. Master Teverson acceded to the application and ordered SHG to pay 50% of the defendants’ costs of the application and to make a payment on account of £2,000 (which was done).

In May 2015, the Receivers and Banks issued applications in the 2015 Claim for security for costs. The applications came before Mr David Halpern QC, sitting as a Deputy High Court Judge, on 7 July, together with the application in the 2014 Claim for the matters dealt with by Birss J to be reopened. On 15 July, Mr Halpern dismissed the latter application, ordered Mr Yeganeh to pay the defendants’ costs on the indemnity basis (summarily assessed at £20,000 in the case of the Receivers and £25,000 in the case of the Banks) and recorded that he considered the application to be totally without merit. As regards the 2015 Claim, Mr Halpern ordered SHG to give security of £174,500 to the Receivers and £225,000 to the Banks. If the sums in question were not paid by 14 September, the proceedings were to be struck out with costs. Further, SHG was required to pay £5,000 to the Receivers and £4,000 to the Banks in respect of the costs of the security applications.

In the course of his judgment, Mr Halpern said the following about the application for the matters before Birss J to be re-listed:

“29.

As regards the merits, I am entirely satisfied that there is no real prospect of the court reaching a conclusion which is any more favourable to Mr Yeganeh than the conclusion reached by Birss J ….

31.

I was taken to the evidence which amply justified Sales J’s conclusion that there was no real prospect of challenging the sale for £15 million. I cannot imagine any judge reaching a different conclusion on this evidence ….

32.

The matter does not end with the underlying merits (or lack of merits) of the substantive challenge to the Receivers’ exercise of their power of sale. By the time the case came before Birss J, [SHG] was in serious breach of procedural orders and needed relief from sanction. Mr Watson-Gandy [i.e. counsel then appearing for Mr Yeganeh and SHG] placed reliance on the fact that the Mitchell test was in force at the time of Birss J’s judgment and that this deprived Mr Yeganeh of the more liberal test enshrined in Denton. If the facts had been different, it might have been necessary for me to decide whether a change in the law justifies a re-hearing under rule 23.11. However I am entirely satisfied that the result would have been exactly the same if the court had applied Denton:

32.1

The failure to serve [particulars of claim] for nearly 3 months was serious and significant, given that the [defendants’ solicitors] were chasing and had threatened applications to strike out, and that Mr Yeganeh gave repeated promises which were not fulfilled. The failure is even more serious when one considers the allegations of conspiracy.

32.2

As is clear from my recital of the facts, there was no good reason for the breach.

32.3

Mr Yeganeh’s conduct was contrary to almost every aspect of the Overriding Objective. Further, Mr Dalton recognised the need for an application for relief from sanction but he failed to make any such application before Birss J.

33.

I therefore dismiss this application. The proceedings remain struck out. If it had been necessary to do so, I would have acceded to the Defendants’ application to strike out.”

When considering the applications for security for costs, Mr Halpern said this:

“Mr Boardman [who was then, as before me, appearing for the Banks] takes particular exception to paragraph 69 of the [particulars of claim], which alleges that the Receivers acted on the instructions of the Bank. No particulars have been given of this allegation, which is fundamental to [SHG’s] claim that the Banks conspired with the Receivers. [SHG’s] claim appears to suffer from many of the weaknesses to which I have referred in connection with Mr Yeganeh’s personal claim, but there is no application before me to strike it out and accordingly I say nothing more about the merits of the claim, save that in the exercise of the court’s discretion this is clearly an appropriate case for security for costs.”

Earlier in his judgment, Mr Halpern had said this:

“I have set out above some of the internal inconsistencies in [Mr Yeganeh’s] account and the assertions which are simply not credible. I am satisfied that I cannot accept anything that Mr Yeganeh says unless it is corroborated by independent evidence or is inherently probable.”

Mr Yeganeh and SHG sought to appeal Mr Halpern’s orders, but without success. On 26 November 2015, Patten LJ refused to grant permission to appeal and characterised the applications for permission as totally without merit.

The costs orders that Mr Halpern made remain unsatisfied and SHG also failed to provide the security for costs that Mr Halpern had directed. The 2015 Claim was therefore struck out.

The present proceedings (“the 2016 Claim”) were issued on 25 February 2016 on the footing that SHG and Mr Yeganeh had on 15 February assigned their claims against the defendants to the existing claimant, CFC 26 Limited (“CFC”), another company ultimately owned by Mr Yeganeh. CFC is said to have acquired SHG’s single issued share from a further associated company, York Properties Holdings Limited, in August 2015. The defendants comprise the Banks, Concord and the Council. The Receivers are not parties.

When the claim was issued, CFC had Imran Khan & Partners as its solicitors. By the end of April 2016, however, Imran Khan & Partners had been succeeded by Gordon Dadds LLP.

As served, the particulars of claim include the following as regards the Banks and Concord:

“9.

On a date or dates of which SHG is unable to give particulars save that it was between about July 2013 and September 2014, KBL and/or [Brown Shipley] entered into a corrupt agreement with Concord under which they would procure a sale of Sofia House to Concord at a price as low as possible consistent with recovery of their investment, in return for payment of a secret commission by Concord to KBL and/or [Brown Shipley] and/or individual members of staff at those banks.

10.

Such agreement was in breach of the duties owed by KBL and [Brown Shipley] to SHG, including their duty to act in good faith towards SHG, to have regard to the interests of SHG and anyone else with an interest in the equity of redemption (including Mr Yeganeh) and to obtain the best price reasonably obtainable. Further or alternatively insofar as KBL and/or [Brown Shipley] involved itself in the arrangements for the sale of Sofia House, it came under a duty to exercise due care to SHG in respect of the timing and manner in which the sale is conducted and to act honestly fairly and professionally in relation to the sale ….

13.

After this [i.e. the appointment of the Receivers] took place, Mr Yeganeh had a number of discussions with Mr Ravi Sidhoo, a member of staff at [Brown Shipley] and Head of the Bank’s Global South Asian Business. Mr Sidhoo informed Mr Yeganeh that he believed there was collusion between individuals at [Brown Shipley] and Concord, that certain individuals at Brown Shipley stood to gain directly from a swift sale of Sofia House to Concord and that those individuals intended to ensure sale of the property to Concord quickly and at any price ….

17.

The letter [imposing a deadline of potential purchasers] was written on the instructions of, or alternatively with the encouragement and/or agreement of, [Brown Shipley] and/or KBL pursuant to their corrupt agreement with Concord. The intention of [Brown Shipley] and/or KBL was that the short period allowed would make it impossible for any buyer other than Concord to carry out the necessary due diligence so as to be ready for exchange by the deadline. The letter was a further breach by KBL and/or [Brown Shipley] of their duty to SHG including their duty to SHG to act in good faith ….

20.

On 21^st October 2014 the Receivers exchanged contracts with Concord at a price of £15 million, the lowest of the 3 offers received by them. Such sale was a further breach by [Brown Shipley] and/or KBL of its aforesaid duties to SHG and Mr Yeganeh in that they acted in bad faith in pursuance of a corrupt agreement with Concord, paid no regard to the interests of SHG or Mr Yeganeh, did not care about the price realised provided that it covered their investment and failed to make any attempt to realise the best available price for the property inter alia by waiting a further two to four weeks for Longridge to be ready to exchange.

21.

Further by entering into the said corrupt agreement Concord became liable to SHG and/or Mr Yeganeh for inducement of [Brown Shipley] and/or KBL to breach their aforesaid duties to Mr Yeganeh and SHG. Further or in the further alternative the said corrupt agreement and consequent sale at undervalue amounted to an unlawful conspiracy between [Brown Shipley] and/or KBL and Concord.”

As for the Council, it is alleged to be liable for malicious prosecution and negligence and/or negligent misstatement. The allegations are explained further in paragraph 49 below.

In April 2016, the Banks issued an application for the claim against them to be struck out and/or for summary judgment to be given in their favour. The Banks further asked for security for costs and for the claim to be stayed pending “payment of previous Costs Orders and Judgment and security for costs”. In the following month, Concord and the Council issued applications seeking similar relief in their favour, save that there is no request for a stay pending compliance with orders in the earlier proceedings, to which Concord and the Council were not parties.

The defendants each put in evidence in support of their applications. The Council also served a defence, which, however, was stated to be without prejudice to the Council’s entitlement to have the claim struck out.

On 29 July 2016, Deputy Master Lloyd made an order which required CFC to file and serve any evidence in response by 12 September. No evidence having been forthcoming, on 21 September Master Bowles debarred CFC from serving evidence unless it did so by 4 pm on 23 September. Shortly before 4 pm on 23 September, Mr Yeganeh sent the other parties’ solicitors an email containing a link to a Microsoft Cloud file where there were to be found witness statements of a Mr Masood Rashid (a director of CFC), a Mr Maximilian Blackburne (the other director of CFC and the director of SHG), and a Mr Arnold Anandan (a partner in CFC’s accountants). During the evening of 10 October, the defendants were supplied with witness statements of Mr Yeganeh dated 23 September (a version of which had apparently been placed on the Microsoft Cloud file by 26 September, but which none of the parties had been able to open), 7 October and 10 October. I ruled against admitting these three witness statements.

It is to be noted that:

At the hearing before me, the defendants maintained that the assignment to CFC by SHG and Mr Yeganeh of their claims was invalid. On the morning of the second day of the hearing, Mr Hugo Page QC, who appeared for CFC and SHG with Mr Adam Chichester-Clark, told me that it was no longer contended that the assignment was effective but that SHG was applying to be joined to the proceedings as claimant. I must therefore approach the applications made by the defendants on the assumption that SHG would be the claimant in the proceedings.

I was supplied with draft amended particulars of claim in which SHG was shown as claimant. The draft also provided for the words “and also email correspondence” to be inserted after “number of discussions” in paragraph 13 and for the addition of a new paragraph 13A in these terms:

“The best particulars of conversations between Mr Yeganeh and Mr Sidhoo that SHG is currently able to provide are as follows:

(1)

By email dated 23^rd December 2013 Mr Sidhoo informed Mr Yeganeh ‘I am concerned with people in the Bank re Concord. There are direct contacts! Meet you tonight’;

(2)

Mr Yeganeh retains a transcript of a telephone conversation with Mr Sidhoo which took place on 25^th October 2014. In that conversation Mr Yeganeh referred to collusion between ‘Concord and this lot’ (ie the bank) and Mr Sidhoo replied that he did not want to talk about that, and that ‘We know what happened. You know what happened. I know what happened. So we know it. What’s the point of discussing it again and again’ Mr Yeganeh said ‘I made you a promise I would not bring anything up. It’s now a year. I want you to be out of the bank. … Mr Sidhoo said ‘I didn’t keep my mouth shut did I? I didn’t keep my mouth shut. … If I had kept my mouth shut I wouldn’t have been in any problems … I have said something: I have to stand by it. My decision to inform you… it was my personal decision’.”

Mr Christopher Boardman, who appeared for the Banks, argued that the claim against them should be struck out, or that summary judgment should be given in their favour, on more than one basis. In particular, he submitted that (a) the claim is barred by the principle of res judicata, (b) the claim discloses no reasonable cause of action and has no real prospect of success, (c) the claim is to be seen as an abuse of process and (d) there has been repeated disregard of Court rules and orders.

Concord not having been involved in the 2014 Claim or the 2015 Claim, some of the contentions developed by Mr Boardman (for example, the res judicata point) are not available to it. Like, however, Mr Boardman, Mr Tony Beswetherick, who appeared for Concord, argued that the claim against his clients discloses no reasonable cause of action and has no real prospect of success.

Does then the claim disclose a reasonable cause of action with a real prospect of success against the Banks and/or Concord? This must turn on the viability of the allegations of a “corrupt agreement” between the Banks and Concord. That apart, there could be no sufficient basis for complaint against the Banks, let alone Concord. On the basis of the evidence before him, Sales J found that the Underlease was marketed “at a price and on terms which the receivers were perfectly entitled to adopt” and that there was “no serious issue to be tried that the receivers [were] acting in breach of duty in seeking to press on with their marketing campaign”. For his part, Mr Halpern, having been referred to additional materials, considered that the evidence “amply justified Sales J’s conclusion that there was no real prospect of challenging the sale for £15 million” and said that he could not imagine any judge reaching a different view on the evidence. According to Mr Page, the introduction of the “corrupt agreement” allegations means that the claim now being put forward is quite different from that with which Sales J was concerned. Mr Page did not, however, attempt to suggest that Sales J and Mr Halpern were wrong to form the opinions they did on the basis of the evidence before them or, to put matters differently, that there would be a sufficient basis for SHG to pursue a claim against the Banks and Concord but for the “corrupt agreement” allegations.

Mr Page stressed that, when considering whether a claim should be left to proceed to trial, the Court should not attempt to conduct a “mini-trial” (see Swain v Hillman [2001] 1 All ER 91, at 95). The Court ought not, he said, to discount Mr Yeganeh’s account of what he was told by Mr Sidhoo unless it is to be regarded as wholly incredible (compare Long v Farrer & Co [2004] EWHC 1774 (Ch), at paragraphs 57-61) and should recognise that, provided that there are proper grounds for pleading it, SHG is entitled to try to prove its case by cross-examination of the defendants’ witnesses (compare Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1, especially at paragraphs 136 and 145-148).

In contrast, Mr Boardman and Mr Beswetherick pointed out that the Court need not “take at face value and without analysis everything that a claimant says in his statements before the court” and that it can sometimes “be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents” (see Mellor v Partridge [2013] EWCA Civ 477, at paragraph 3). They also referred to the need for allegations of dishonesty to be properly particularised.

In the end, I have concluded that SHG has no real prospect of succeeding on the claim it wishes to pursue against the Banks and Concord. My reasons include these:

In all the circumstances, I shall dismiss the claim as against the Banks and Concord.

SHG’s case against the Council has two elements. The Council is said to be liable, first, for malicious prosecution of the enforcement notice that the Council served on 18 July 2013 (see paragraph 6 above) and, secondly, for negligence and/or negligent misstatement in connection with the issue of the enforcement notice and the Council’s refusal “until January 2015 … to acknowledge the validity of the 2006 planning permission”. With regard to the former, the particulars of claim state (in paragraph 26):

“On 18^th July 2013 the Council issued an Enforcement Notice for removal of hoardings outside Sofia House. The Notice stated that ‘It would appear that there are no current or imminent works on site which have the benefit of planning permission’. Not only was the issue of the notice without reasonable and probable cause since there was in fact a valid planning permission, but it was also malicious. In relation to malice, the Claimant relies upon the fact that the Council was aware that the planning permission had been implemented and so was aware that there was no reasonable or probable cause for the Notice.”

As for negligence and/or negligent misstatement, the particulars of claim say this (at paragraph 30):

“Further or alternatively there was sufficient proximity between the Council and SHG as holder of the benefit of the Council’s 2006 planning permission to give rise to a duty of care in the Council. There is no legal or public policy reason why the Council should not be held liable for the consequences of negligently issuing the enforcement notice and thereafter until January 2015 refusing to acknowledge the validity of the 2006 planning permission. In the premises the Council is liable to SHG for negligence and/or negligent misstatement.”

Taking first the allegation of negligence and/or negligent misstatement, Mr Andrew Warnock QC, who appeared for the Council, submitted that the Council did not owe a relevant duty of care and, hence, that the claim is hopeless. Enforcement notices and CLEUDs are provided for by Part VII of the Town and Country Planning Act 1990. Part VII is concerned, Mr Warnock said, with the enforcement of planning requirements for the benefit of the public at large. The legislation gives someone who objects to the service of an enforcement notice a remedy by way of an appeal pursuant to section 174 of the 1990 Act, and planning authorities are also susceptible to judicial review. It is not possible, according to Mr Warnock, for anyone to bring a claim for either breach of statutory duty or common law negligence.

The sheet-anchor of Mr Warnock’s case is the decision of the Court of Appeal in Lam v Brennan and Borough of Torbay [1997] PIQR P488. In that case, the claimants complained that a local authority had been negligent in granting the planning permission that had led to certain harmful processes being carried out on premises nearby and then in failing to take enforcement proceedings. The claim was struck out. Potter LJ, giving the judgment of the Court, observed (at P502) that counsel for the claimants had been “right to abandon any averment of breach of statutory duty as giving rise to a cause of action in the [claimants]” and also “right to abandon the contention that any breach of common law duty could be demonstrated in relation to the original grant of planning permission”. The Court further considered (at P502) that counsel for the claimants “was right not to press his argument that the [local authority] were in breach of a parallel common law duty in granting planning permission … without proper inquiry”. Having noted the policy and functions of the planning system, Potter LJ said (at P503):

“Against that background, and given the discretionary nature of the power conferred to grant or refuse planning permission under section 29 of the [Town and Country Planning Act 1971], it seems to us clear that the policy of the Act conferring that power is not such as to create a duty of care at common law which would make the public authority liable to pay compensation for foreseeable loss caused by the exercise or non-exercise of that power.”

Potter LJ expressed agreement (at P503) with a passage in which Collins J (the first instance judge) had said:

“The local authority’s duty under the Planning Acts is to control and regulate development in the interests of the inhabitants of the area. It is of course inevitable, particularly where there are major developments, that some people are going to be adversely affected …. There may be more noise as a result. There may be other adverse effects. There may even be nuisances created in some situations. Of course the local authority has to consider the effect on the environment and the adverse effect, if any upon neighbouring occupiers. Those are all proper planning considerations.

[However] … [i]t seems to me that it would be wholly detrimental to the proper process of considering planning applications if the local authority, in addition had to have regard to the private law interests of any persons who might be affected by the grant of permission, and to ask itself in each case whether it had properly had regard to the individual rights of those concerned. If it were potentially liable to actions in negligence in those circumstances, it seems to me that the carrying out of its important functions in the public interest would be likely to be adversely affected.”

Potter LJ went on to say (at P503) that the position was the same as regards “the enforcement functions of the local authority in respect of statutory nuisances”. The relevant statutory provisions were “plainly … for the benefit of the public at large living within the area of the local authority” and there was “neither reason nor necessity in relation to … a landowner aggrieved by the failure of a local authority to take action in respect of a nuisance, to create a right of action in damages based on such failure” (see P504).

Potter LJ further said (at P504-505):

“Nor does it seem to us that the [claimants’] position can be improved by some alternative formulation of his cause of action on the basis of ‘assumption of responsibility’. Where an allegation of ‘assumption of responsibility’ is made against a person or body carrying out a statutory function, there must be something more than the performance (negligent or otherwise) of the statutory function to establish such assumption of responsibility …. Nor do we consider that [counsel for the claimants’] fourth head has any substance. Even assuming that the actions of the [local authority] were so negligent and unreasonable as to amount to irrationality, that does not in itself suffice to create a private right of action in negligence, as opposed to founding the basis of some public law challenge to the exercise of the [local authority’s] powers. The cause of action, if it exists, remains one for breach of duty in the tort of negligence.”

Potter LJ concluded (at P506-507):

“Thus, it seems to us that, despite the further arguments advanced in the appeal, its success remains dependent upon the [claimants] establishing the existence of a common law duty of care owed to them by the [local authority] not to cause them damage as a result of a negligent failure to exercise their discretionary powers, and/or to carry out their duties as to prevent the creation of a nuisance by an adjoining landowner which resulted in injury and damage to them. In our view, no such duty exists and Collins J. was correct in the decision to which he came.”

Mr Warnock submitted that the decision in Lam provides binding authority that a local authority does not owe a duty of care in relation to matters such as those of which SHG complains. That conclusion is further, he said, supported by Harris v Evans [1998] 1 WLR 1285. There, the claimant alleged that negligent advice from an inspector of the Health and Safety Executive had led a local authority to serve improvement notices and, subsequently, a prohibition notice on the claimant in connection with his bungee-jumping business. A claim against the inspector and the Executive was struck out. Scott V-C, with whom Auld and Schiemann LJJ agreed, said (at 1301-1302):

“[T]he question for us … is whether an enforcing authority, in giving advice that leads to the issue of improvement or prohibition notices, owes a duty of care to the owner of the business enterprise in question. In my judgment, subject to one qualification not relevant to the present case, it does not. It is implicit in the [Health and Safety at Work etc. Act] 1974 that improvement notices and prohibition notices may cause economic loss or damage to the business enterprise in question. It would, in my view, be seriously detrimental to the proper discharge by enforcing authorities of their responsibilities in respect of public health and safety if they were to be exposed to potential liability in negligence at the suit of the owners of the businesses adversely affected by their decisions. The Act of 1974 itself provides remedies against errors or excesses on the part of inspectors and enforcing authorities. I would decline to add the possibility of an action in negligence to the statutory remedies.”

One of Mr Page’s responses to Mr Warnock’s submissions was to argue that, in Lam, the Court of Appeal did not decide that a local authority could not be sued for negligence but merely that the legislation in question did not create a new duty. I do not, however, read the Court of Appeal’s judgment in so restricted a way. The Court seems to me to have considered that a local authority did not owe any duty of care in relation to either the grant or refusal of planning permission or performance of its enforcement functions. It agreed with Collins J that a local authority’s carrying out of its responsibilities would probably be adversely affected if it could be liable to actions in negligence and said that the position was the same as regards the authority’s enforcement functions. It concluded by rejecting the existence of a “common law duty of care” not to cause damage as a result of a negligent failure by the authority “to exercise their discretionary powers, and/or to carry out their duties as to prevent the creation of a nuisance by an adjoining landowner”.

Mr Page also relied on developments in the law since Lam and Harris v Evans were decided (in 1997 and 1998 respectively). In this connection, he took me to Barrett v Enfield LBC [2001] 2 AC 550, a 1999 decision in which the House of Lords declined to strike out a claim against a local authority. Lord Hutton took the view that “the fact that the decision which is challenged was made within the ambit of a statutory discretion and is capable of being described as a policy decision is not in itself a reason why it should be held that no claim for negligence can be brought in respect of it” and that it is “only where the decision involves the weighing of competing public interests or is dictated by considerations which the courts are not fitted to assess that the courts will hold that the issue is non-justiciable on the ground that the decision was made in the exercise of a statutory discretion” (see 583). Lord Slynn said (at 571-572):

“Where a statutory power is given to a local authority and damage is caused by what it does pursuant to that power, the ultimate question is whether the particular issue is justiciable or whether the court should accept that it has no role to play. The two tests (discretion and policy/operational) to which I have referred are guides in deciding that question. The greater the element of policy involved, the wider the area of discretion accorded, the more likely it is that the matter is not justiciable so that no action in negligence can be brought. It is true that Lord Reid and Lord Diplock in the Dorset Yacht case accepted that before a claim can be brought in negligence, the plaintiffs must show that the authority is behaving so unreasonably that it is not in truth exercising the real discretion given to it. But the passage I have cited was, as I read it, obiter, since Lord Reid made it clear that the case did not concern such a claim, but rather was a claim that Borstal officers had been negligent when they had disobeyed orders given to them. Moreover, I share Lord Browne-Wilkinson's reluctance to introduce the concepts of administrative law into the law of negligence, as Lord Diplock appears to have done.”

The Barrett case can be said to have signalled a somewhat greater willingness to entertain the possibility of a duty of care being owed. In Connor v Surrey County Council [2010] EWCA Civ 286, [2011] QB 429, Laws LJ referred (at paragraph 96) to the “more flexible, pragmatic approach which was prominent in Barrett’s case” and remarked (at paragraph 95) that the approach “is more nuanced, less rigid, than that in [X (Minors) v Bedfordshire County Council [1995] 2 AC 633]”.

On the other hand, Lord Scott evidently regarded Harris v Evans as still good law in Jain v Trent Strategic Health Authority [2009] UKHL 4, [2009] 1 AC 853, where, giving a judgment with which Lord Rodger, Baroness Hale, Lord Carswell and Lord Neuberger agreed, he cited the decision (at paragraph 26). Lord Scott took Harris v Evans and other cases in the same line of authority as demonstrating that:

“where action is taken by a state authority under statutory powers designed for the benefit or protection of a particular class of persons, a tortious duty of care will not be held to be owed by the state authority to others whose interests may be adversely affected by an exercise of the statutory power. The reason is that the imposition of such a duty would or might inhibit the exercise of the statutory powers and be potentially adverse to the interests of the class of persons the powers were designed to benefit or protect, thereby putting at risk the achievement of their statutory purpose.”

The more recent decision of the Supreme Court in Michael v Chief Constable of South Wales Police [2015] UKSC 2, [2015] AC 1732 is also noteworthy. In that case, the Supreme Court, by a majority, adhered to the “refusal of the courts to impose a private law duty on the police to exercise reasonable care to safeguard victims or potential victims of crime, except in cases where there has been a representation and reliance”. In the course of his judgment, Lord Toulson, with whom Lords Neuberger, Mance, Reed and Hodge agreed, explained:

“112 In some areas, such as health care and education, public authorities provide services which involve relationships with individual members of the public giving rise to a recognised duty of care no different from that which would be owed by any other entity providing the same service. A hospital and its medical staff owe the same duty to a patient whether they are operating within the National Health Service or the private sector: Roe v Minister of Health [1954] 2 QB 66. A school and its teaching staff owe the same duty to a pupil whether it is a state maintained school or a private school: Woodland v Swimming Teachers Association [2014] AC 537. Educational psychology is a professional service linked to education. An organisation which provides an educational psychology service, and its educational staff, owe the same duty to a pupil whether they are operating in the public or the private sector: X (Minors) v Bedfordshire County Council [1995] 2 AC 633.

113 Besides the provision of such services, which are not peculiarly governmental in their nature, it is a feature of our system of government that many areas of life are subject to forms of state controlled licensing, regulation, inspection, intervention and assistance aimed at protecting the general public from physical or economic harm caused by the activities of other members of society (or sometimes from natural disasters). Licensing of firearms, regulation of financial services, inspections of restaurants, factories and children’s nurseries, and enforcement of building regulations are random examples. To compile a comprehensive list would be virtually impossible, because the systems designed to protect the public from harm of one kind or another are so extensive.

114 It does not follow from the setting up of a protective system from public resources that if it fails to achieve its purpose, through organisational defects or fault on the part of an individual, the public at large should bear the additional burden of compensating a victim for harm caused by the actions of a third party for whose behaviour the state is not responsible. To impose such a burden would be contrary to the ordinary principles of the common law.”

Mr Page suggested that the Jain and Michael cases were dealing with a different type of situation to the present case. Unlike this case, Jain and Michael were both, he said, concerned with “statutory powers designed for the benefit or protection of a particular class of persons”.

It seems to me, however, that I should treat the Lam case as determinative and so strike out the allegation of negligence and/or negligent misstatement. There is no question of the decision having been expressly overruled, and I do not think that I could be justified in taking it to have been overruled impliedly, either. While a “more flexible, pragmatic approach” may have been adopted to questions of negligence in Barrett, it is by no means evident that either Lam or Harris v Evans is inconsistent with subsequent authority. As I have said, the House of Lords appears to have seen Harris v Evans as good law as recently as 2009, and reasoning by which the Court of Appeal explained its views in Lam chimes with that adopted in Jain. Further, the conduct for which the Council is said to be liable for negligence and/or negligent misstatement was of a public (or, to adopt the word Lord Toulson used in paragraph 113 of his judgment in Michael, governmental) nature rather than involving the provision of “services which involve relationships with individual members of the public giving rise to a recognised duty of care no different from that which would be owed by any other entity providing the same service” (to quote from paragraph 112 of Lord Toulson’s judgment). It might also be said that the relevant planning legislation is “designed for the benefit or protection of a particular class of persons” (to quote from Mr Page): as noted above (paragraph 52 above), in Lam Potter LJ said that the provisions in question were “plainly … for the benefit of the public at large living within the area of the local authority”.

I shall, accordingly, strike out the claim for negligence and/or negligent misstatement.

Turning to the allegation of malicious prosecution, the 21^st edition of Clerk & Lindsell on Torts summarised the essentials of the tort of malicious prosecution in these terms (at paragraph 16-09):

“In an action for malicious prosecution the claimant must show first that he was prosecuted by the defendant, that is to say, that the law was set in motion against him by the defendant on a criminal charge; secondly, that the prosecution was determined in his favour; thirdly, that it was without reasonable and probable cause; fourthly, that it was malicious. The onus of proving every one of these is on the claimant. Evidence of malice of whatever degree cannot be invoked to dispense with or diminish the need to establish separately each of the first three elements of the tort.”

The Supreme Court has since decided, by a majority, that the tort extends to civil as well as criminal proceedings: see Willers v Joyce [2016] UKSC 43, [2016] 3 WLR 477. It is the Council’s case, however, that the tort still cannot apply in relation to the mere service of an enforcement notice.

Mr Warnock relied in support of the Council’s case on paragraph 16-11 of Clerk & Lindsell, which states:

“To prosecute is to set the law in motion, and the law is only set in motion by an appeal to some person clothed with judicial authority in regard to the matter in question”.

The service of an enforcement notice, Mr Warnock argued, involves no “appeal to some person clothed with judicial authority”. An enforcement notice must identify the matters that appear to the local authority to constitute a breach of planning control and specify what the authority requires to be done, but it is not of itself a resort to a “person clothed with judicial authority” and it may never lead to a prosecution. In fact, Mr Warnock pointed out, section 172A of the Town and Country Planning Act 1990 allows a local authority to give someone served with an enforcement notice a letter containing an assurance that he is not at risk of being prosecuted.

Mr Page countered that Clerk & Lindsell pre-dates Willers v Joyce and drew my attention to passages in the judgments of Lords Toulson and Clarke in that case which, he contended, indicate that the tort can apply in relation to any kind of legal process. By way of example, he relied on the following quotation from the judgment of the Court in Churchill v Siggers (1854) 3 E & B 929 which Lord Clarke cited in paragraph 64 of Willers:

“To put in force the process of the law maliciously and without any reasonable or probable cause is wrongful ….”

In my view, Mr Warnock is right on this point. While it is now clear that the tort of malicious prosecution can apply without a criminal prosecution, there remains a requirement that the law has been “set in motion by an appeal to some person clothed with judicial authority” and service of an enforcement notice cannot, as it seems to me, suffice for this purpose. I do not see Churchill v Siggers as providing authority to the contrary.

That conclusion is sufficient to dispose of SHG’s claim for malicious prosecution. It is also convenient, however, to address another of Mr Warnock’s submissions: that, on the facts, there is no sufficient basis for the allegation of malice.

Malice, like fraud, must be particularised: see paragraph 10.1 of the Chancery Guide. It has also been said that there should be “anxious scrutiny” of claims for malicious prosecution before they are allowed to proceed. In Carter v Chief Constable of the Cumbria Police [2008] EWHC 1072 (QB), Tugendhat J cited (and applied) a passage from Thacker v Crown Prosecution Service (Court of Appeal, 29 December 1997) in which Judge LJ said:

“Prosecutors or employees of the Crown Prosecution Service are not immune from actions for malicious prosecution. Nevertheless it is essential that before such actions are … allowed to be pursued through the courts, anxious scrutiny should be made of them to ensure that the immunity against actions for negligence … is not circumvented by the pleading device of converting what is in reality no more than allegations of negligence into claims for malicious prosecution.”

In an earlier case, Glinski v McIver [1962] AC 726, Lord Radcliffe said (at 755) in a passage quoted both in Thacker (by Chadwick LJ) and Carter:

“In my opinion, [the issue as to the defendant’s belief or lack of it in the truth of the charge] does not arise unless there is some contested evidence bearing directly upon the defendant's belief at the relevant date, apart from anything that could merely be inferred as to his belief from the strength or weakness of the case before him.”

In the present case, as can be seen from paragraph 49 above, the particulars of claim explain that the claimant relies in support of the allegation of malice on “the fact that the Council was aware that the planning permission had been implemented and so was aware that there was no reasonable or probable cause for the Notice”. Amplifying the basis for this pleading in his skeleton argument, Mr Page said that the claimant relies on these matters in support of its claim that the Council acted maliciously:

“63.1

First, the fact that Notice was issued without reasonable and probable cause ….

63.2

Second, [the Council’s] knowledge that, in fact, planning permission had been and/or was being implemented:

(a)

It is common ground that a building control surveyor acting for [the Council], Mr Ryan Fitzgerald confirmed that, in his opinion, works had been commenced for the purposes of the Building Regulations 2005, following his inspection on 26 August 2009 …. That opinion was communicated to [the Council] in 2010 ….

(b)

It is common ground that a solicitor employed by [the Council], a Ms Chohan, acknowledged that works which had the benefit of planning permission had commenced at the site within the statutory period ….

A further fact which supports the allegation of malice is [the Council’s] decision to commence winding-up proceedings against [SHG] for non-payment of business rates where it knew that the Property should have been removed from the register because it was being redeveloped.”

In its defence, the Council pleads, among other things, that Westminster Magistrates Court had adjudged SHG liable for rates due in the sum of £177,953.86 on 6 March 2013; that the hoardings in respect of which the enforcement notice was served “had been in place for at least three years yet there was no evidence of any works taking place at the site”; and that the notice was served following an investigation by the Council’s enforcement team into complaints about the hoardings from the freehold owner of Sofia House and the Portland Village Association.

As mentioned above (paragraph 39), Mr Blackburne and Mr Rashid refer in their witness statements, not to the Council having been malicious, but to “an unfortunate error on the part of Westminster City Council” and “negligence of Westminster council”. In my view, Mr Blackburne and Mr Rashid were right not to allege malice. The case against the Council is in reality founded on little more than that (according to SHG) the Council served an enforcement notice on the footing that there appeared to be “no current or imminent works on site which have the benefit of planning permission” although (a) (nearly four years earlier) someone working for the Council had expressed the view that works at Sofia House had commenced and (b) (nearly three years earlier) someone else working for the Council had accepted that development at Sofia House had begun within the statutory period. Neither taken individually nor together, even having regard to the contextual matters mentioned by Mr Page, do these alleged facts seem to me to provide a real basis for inferring or alleging malice. They might possibly suggest carelessness on the part of the Council, but no more than that.

In the circumstances, I would have acceded to the Council’s application and struck out the claim for malicious prosecution (as well as that for negligence and/or negligent misrepresentation) even if I had not concluded (as I have) that service of an enforcement notice cannot of itself give rise to such a claim.

Various other issues were addressed during the hearing. In the light, however, of the conclusions I have arrived at above, I do not think I need deal with them.

In my opinion, the claims that SHG wishes to pursue are fatally flawed. I shall dismiss the proceedings as against the Banks and Concord and strike them out as against the Council.