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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Khan v Woodhead Sharpes Ltd [2023] EWHC 159 (Ch) (31 January 2023) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2023/159.html Cite as: [2023] EWHC 159 (Ch) |
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BUSINESS AND PROPERTY COURTS IN LEEDS
PROPERTY, TRUSTS & PROBATE LIST (ChD)
Oxford Row LEEDS LS1 3BG |
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B e f o r e :
____________________
| MR AQEEL KHAN |
Claimant |
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| - and - |
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| WOODHEAD SHARPES LIMITED |
Defendant |
____________________
Mr Bowmer of 4 New Square Chambers (instructed by DWF Law LLP) for the Defendant
Hearing date(s): 13th January 2023 (argument), 31st January 2023 (judgment)
____________________
Crown Copyright ©
District Judge Royle:
Background
a) Third witness statement of Grant Robertson Walker, a solicitor at DWF Law LLP, for Woodhead, dated 16th September 2022.
b) Second witness statement of Adrian Charles Green, a solicitor at Stachiw Bashir Green, for Mr Khan, dated 30th November 2022.
c) Second witness statement of Mr Khan, dated 30th November 2022.
d) Fourth witness statement of Grant Robertson Walker, dated 22nd December 2022, made in response to (b) and (c) above.
a) Supplemental expert report of Bruce Collinson, dated 30th November 2022, a valuation expert surveyor instructed on behalf of Mr Khan.
b) The updated expert valuation report of Nigel Tapp, dated 2nd December 2022, a valuation expert surveyor instructed on behalf of Woodhead.
c) A joint statement of the two surveyors dated 21st December 2022, following meetings between the experts on 1st November 2022 and 15th December 2022.
d) The trial witness statement of Mr Khan, dated 28th November 2022.
| Property Address | Title no. | Registration date |
Lender |
| 6/6A Rawson Place, Bradford BS1 3QQ |
WYK150932 | 29.12.09 | HSBC |
| 37 Lidget Place, Bradford BD7 2LP | WYK44930 | 07.03.11 | HSBC |
| 178 Easterly Road, Leeds LS8 3AD | WYK255262 | 18.04.11 | Lloyds |
| 1392 Leeds Road, Bradford BD3 7AE | WYK280013 | 05.10.11 | HSBC |
| 1394 Leeds Road, Bradford BD3 7AE | WYK732623 | 05.10.11 | HSBC |
4. The Defendant [i.e. Mr Khan] must not:-
…
(2) in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales.
…
6. The prohibition includes the following assets in particular:-
…
(g) the property known as 6 and 6a, Rawson Place, Bradford, BD11 3QQ …
(h) the property known as 37 Lidget Place, Bradford BD7 2LP …
(i) the property known as 178 Easterley Road, Bradford, LS8 3AD …
(j) the property known as 1392, Leeds Road, Bradford, BD3 7AE …
(k) the property known as 1394, Leeds Road, Bradford, BD3 7AE …
a) Payment of the mortgage for that property;
b) Payment of service charges in respect of that property;
c) Payment of ground rent in respect of that property;
d) Payment for repairs in accordance with 15(3)(h) (which I take to be a typographical error for 17(3)(h));
e) Payment of the agent's fees set at 10% (plus VAT) of the rental income;
f) Payment of any surplus to a bank account in the name of A A Khan Property.
a) Causing or permitting to be transferred £15,791.99 from Woodhead's rent account on or about 8th October 2013.
b) Causing or permitting to be transferred £38,307.23 from Woodhead's rent account between 6th January 2014 and 29th January 2014.
c) Causing or permitting to be transferred £20,115.69 in rental income from Woodhead's rent account to a Mr A. Ishaq on or after 16th October 2013.
d) Causing or permitting to be transferred a total of £239,859.26 to Roadside Property Management Limited between 13th December 2013 and 21st November 2014.
e) Failing to make arrangements for the rental income (totalling £2,934) received by MAK Homes in relation to 37 to be transferred to Mr Brearley (the operator of Woodhead).
a) 1392 – appointed 10th February 2016 (p.181); sale 5th April 2016 for £1.2m.
b) 1394 – appointed 7th March 2016 (p.287); sale by Mr Khan (see below) for £370,000 in 2019.
c) 178 – appointed 12th January 2015 (p.182); sale 7th March 2016 for £640,000.
d) 6/6A – appointed 10th June 2014 (p.186); sale 10th October 2015 for £147,000.
e) 37 – appointed 10th June 2014 (p.186); sale 6th May 2015 for £31,000.
a) First, 1394 was not sold by HSBC or its receivers but by Mr Khan himself.
b) Second, 1394 was sold at a price which Mr Khan maintained at the time was more than a fair price.
The ambit of the claim
a) The rental income which fell due from the tenanted properties exceeded the monthly mortgage payments by £3,400.08 per calendar month.
b) The Restraint Order.
c) That there was a retainer between Mr Khan and Woodhead giving rise to duties in both contract and tort in relation to the management of the properties, upon their appointment following the variation to the Restraint Order.
d) That there were, implied into the retainer, terms requiring Woodhead to exercise reasonable care and skill in (i) letting and management, (ii) collection of rents, and (iii) securing new tenants, (iv) payment of the mortgages in a timely fashion, and comply with the Restraint Order.
e) That Woodhead negligently failed to collect the rents or pay the mortgages.
f) That at the Crown Court hearing before HHJ Kearl QC on 5th November 2014, it was demonstrated that Woodhead had collected sufficient rents to pay the mortgages, but had failed to do so.
g) That Woodhead failed to visit or speak to the tenants at 37 and/or 1394;
h) That Woodhead 'held on to' £200,000 of rental income collected from the properties which, if not used to pay the mortgages, should have been paid out to the A A Khan Property account referred to above.
i) That Mr Khan does not know what rents Woodhead did or did not collect because, he says, the information has not been provided by them.
j) That Woodhead failed to market 6/6A (which he has said elsewhere was used as his business base), Unit 2 & Unit 3 at 178, leading to lost rental income of £6,583 per calendar month.
k) That the negligent failures of Woodhead caused the banks to take possession of the properties and sold them in a 'forced distressed sale' below open market value. That allegation is made in respect of all five properties. The aggregate loss claimed is £2,552,000.
l) Particulars of negligence and/or breach of contract which appear to me simply to rehearse the alleged duties, rather than to plead specific acts or omissions.
a) It is expressly pleaded at paragraph 15 of the APoC that the Claimant has no specific details of what rent was or was not collected by Woodhead.
b) The plea of causation of loss at paragraph 17 of the APoC expressly refers to the loss of value, not loss of rent. A similar theme is seen in the second sub-paragraph of paragraph 22 of the APoC.
c) The loss claimed in relation to each property is said, in the aggregate, to be £2,552,000 (see paragraph 20 of the APoC), which is the same figure as for the loss of value claimed on sale, and does not include lost rent.
d) The 'Details of Loss and Damage' at paragraph 22 of the APoC refer to a 'combined equity' in the properties at open market value, and goes on to refer to loss of equity, not rent.
The application in summary
a) That the APoC does not comply with DJ Geddes's order, is wholly inadequate and unsupported by evidence.
b) Mr Khan's claims (in respect of 37 and 1394) are transparently false.
c) The scope of duty relied upon by Mr Khan is misconceived.
d) Mr Khan's case on causation is ill-conceived and fanciful.
e) In any event, the whole claim is barred by illegality.
The legal principles as regards strike out and summary judgment
a) I must be satisfied that the claim has a "realistic" as opposed to "fanciful" prospect of success. In other words, it must carry some degree of conviction and must be more than merely arguable.
b) It is not the function of the court at this stage to conduct a mini-trial.
c) On the other hand, I am not required to take everything the parties say at face value. If it is clear that there is no substance in any particular assertion, for example if it is contradicted by contemporaneous documents, then I am entitled to reject it.
d) I must take into account the evidence placed before me and also have regard to the evidence that can reasonably be expected to be available at trial. In particular, if there are reasonable grounds for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge, so as to affect the outcome of the case, the court should be hesitant about granting summary judgment.
e) Conversely, in appropriate cases the court can and should determine short points of law or construction if it has before it all the evidence necessary for a proper determination and the parties have had adequate time to address it in argument. If a case is bad in law it does not have real prospect of success.
"A claim does not have [a real prospect of success] where (a) it is possible to say with confidence that the factual basis for the claim is fanciful because it is entirely without substance; (b) the claimant does not have material to support at least a prima facie case that the allegations are correct; and/or (c) the claim[ant] has pleaded insufficient facts in support of their claim to entitle the Court to draw the necessary inferences."
"However, and importantly, the court ought to carry out a critical examination of the available material and is not bound to accept the mere say-so of anybody; where it is clear that a factual case is self-contradictory or inherently incredible or where it is contradicted by the contemporaneous documents, the court, after careful consideration of the evidence that is currently before it and having regard to the nature of such further evidence as might reasonably be expected to be available at trial, is entitled to reject that case even on a summary basis. The court will not be dissuaded from giving judgment by mere Micawberism. Where the claim turns on a point of law that can properly be determined on the available evidence, the court is entitled to go ahead and determine it …"
a) The complexity of litigation is not a reason to refuse summary judgment.
b) A claim must be properly particularised – see Maranello at [20] quoting Kawasaki Kisen Kaisha v James Kemball Ltd.
c) If a defendant is entitled to summary judgment, then the claim discloses no reasonable grounds for being brought and should be struck out: see Begum v Maran (UK) Ltd [2021] EWCA Civ 326 at [21], approving Global Asset at [27].
The detailed arguments
Material change of circumstances and delay
a) First, there has been a complete replacement statement of case on behalf of Mr Khan in response to the Judge's order on that occasion.
b) Second, however, it seems to me that that statement of case is not materially different as respects the five properties which remain in issue when compared to the original.
c) There is clearly an impact of the evidence given by Mr Khan in the possession proceedings as to the realism of his case on the value of 1394.
d) There was an order of DJ Geddes which had not been made when the earlier strike out application was issued, and which plainly imposes requirements on the APoC which are the subject of part of the application with which I am dealing.
Fanciful scope of duty and/or scope of causation
4 In summary, our view is that (i) the scope of duty question should be located within a general conceptual framework in the law of the tort of negligence; (ii) the scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the purpose for which the advice is being given (in the context of this judgment, we use the expression "purpose of the duty" in this sense);…
13 In our respectful opinion, the scope of duty question can and should be approached in a more straightforward way than is suggested by Lord Leggatt JSC. In our view, the scope of the duty of care assumed by a professional adviser is governed by the purpose of the duty, judged on an objective basis by reference to the reason why the advice is being given (and, as is often the position, including in the present case, paid for).
a) In light of Woodhead's appointment in the context of the variation to the Restraint Order, I consider that their duty extended to paying the mortgage sums with the amounts they had in hand. It is more than merely arguable that they had sufficient in hand and, for whatever reason, did not discharge the mortgage instalments.
b) It is more than merely arguable to suggest that a reasonably foreseeable consequence of a failure to do so would be that the lenders would seek to enforce their security in one way or another. That is not, however, the same as saying that Mr Khan's pleaded case that the non-payment directly caused the sales is more than merely arguable.
c) As regards that latter suggestion, I do not consider there to be real prospects of showing that Woodhead's arguable failure to pay the mortgage instalments caused the sale, which is Mr Khan's pleaded case. It is further pleaded that that sale was in a distressed fashion. However, what plainly happened on the material before me is that the banks appointed receivers and, apparently later, took a decision to sell. There is no evidence before me which suggests that the latter was an inevitable, or even foreseeable consequence of the former.
d) That said, in light of the expert evidence, I would have been persuaded that it was more than fanciful to argue that, if causation had been established, then there would be a potentially recoverable differential between a sale in distressed circumstances and a more voluntary sale. That would only apply, on the expert evidence, to domestic rather than industrial or commercial properties.
e) In light of the terms of the Restraint Order, the contractual obligations which arose between Mr Khan and Woodhead, and the amount of money Woodhead are argued to have held (argued, I should add, by Mr Khan or on his behalf), I consider it to be more than merely arguable that the potential cause of the lenders' actions in appointing receivers was Woodhead rather than Mr Khan. For the reasons I have given, that is insufficient: the change of position when the banks (or the receivers) took steps to sell plainly came later – and the basis for that change is (i) not how Mr Khan's case is framed and (ii) entirely unknown and without evidence, save perhaps in relation to 1394 – which was in any event apparently sold by Mr Khan not the bank (see below).
f) In light of Mr Khan's guilty pleas to the various criminal contempt counts in relation to diversion of funds from Woodhead which were put to him, totalling around £300,000, I agree with Mr Bowmer that (in effect) it may well be said that Mr Khan had failed to mitigate his loss: I cannot see that there are real prospects of avoiding a conclusion that he could have either (a) discharged the mortgage instalments himself so as to stave off the banks, or (b) returned the money to Woodhead for onward payment.
g) However, I agree with Mr Bowmer's basic proposition that it is likely that any equity in the properties which remained in Mr Khan's hands when the Confiscation Order was made in 2017 would be likely to have been sought to be recovered by the POCU. Any suggestion to the effect of what the POCU would have been likely to do with proceeds received thereafter is, in my judgment, speculation.
a) I consider that Mr Khan's claim that the failure to pay the mortgage payments resulted in a distressed sale has no real prospect of success given the intervening appointment of receivers (about whose activity and decision making little or nothing seems to be in evidence), and likewise in relation to the banks' decision-making and reasoning, and
b) I have already reached the conclusion that the allegations of failure to collect rents and failure to market properties have no real prospect of succeeding either
I will grant summary judgment on the claim.
'Transparently false and scurrilous pleading'
Illegality
Non-compliance with the order of DJ Geddes
".. all of the elements of his cause of action for breach of contract and/or negligence in respect of [the properties] including discretely in relation to each property (a) the facts alleged to constitute the alleged breach of contract/breach of duty; (b) the facts alleged as to causation and how the alleged breaches have allegedly caused loss and damage; and (c) the loss and damage claimed and the amount thereof."
CPR r.16.4(1)(a) requires that a particulars of claim must include "a concise statement of the facts on which the claimant relies". Thus, where the particulars of claim contain an allegation of breach of contract and/or negligence, it must be pleaded in such a way as to allow the defendant to know the case that it has to meet. The pleading needs to set out clearly what it is that the defendant failed to do that it should have done, and/or what the defendant did that it should not have done, what would have happened but for those acts or omissions, and the loss that eventuated. Those are "the facts" relied on in support of the allegation, and are required in order that proper witness statements (and if necessary an expert's report)can be obtained by both sides which address the specific allegations made.
"Performance
16. Paragraph 10 is denied. It is averred that the claimant failed to perform
to the contractual standard and is in breach of the QS Contracts and the PM
Contracts.
Particulars of Breach of the QS Contracts
16.1 Failing adequately or at all to identify or determine the defendant's initial requirements and subsequently develop the full brief.
16.2 Failing adequately or at all to advise on feasibility and procurement.
16.3 Failing adequately or at all to establish the defendant's order of priorities for quality, time and cost.
16.4 Failing to prepare adequate and/or accurate initial budget estimates.
16.5 Failing to prepare or develop a proper and/or accurate preliminary cost plan.
…
Particulars of Breach of the PM Contracts
16.13 Failing to select or appoint appropriate consultants.
16.14 Failing adequately or at all to co-ordinate and review the progress of design work.
16.15 Failing adequately or at all to facilitate communications between the defendant and the Consultants.
Mr Coplin's principal criticism of the allegations of professional negligence at [16] is that they read as if the pleader had simply taken each relevant contract term and then added the words "failing to" or "failing adequately or at all to" as a prefix to each obligation, thus turning the obligation into a breach of professional negligence. In his submissions on behalf of CCD, Mr Winser candidly accepted that that is precisely what he had done. By way of mitigation, Mr Winser said that, in drafting the proposed amendments, he had been hampered by the absence of any expert advice as to whether—and if so how—Pantelli had been negligent or otherwise acted in breach of contract.
The Defendant is liable for the Claimant's loss and damage pursuant to the Defendant's negligence and or breach of contract in that the Defendant failed to adequately or at all [sic];
Particulars of Breach of Contract and or Negligence
a. Exercise the reasonable care and skill to be expected in an experienced Estate agent specialising in the letting and management of commercial and residential properties;
b. Comply with the terms of the [Restraint Order];
c. Collect rents from the Tenants of the properties or a reasonable amount of those rents;
d. Pay the mortgages upon those properties;
e. Secure new tenants, where applicable, for any of the properties should the properties be or become vacant;
f. Ensure the mortgage payments relating to the properties were paid accurately, fully, and in a timely manner;
g. Apply the rents collected from a property for the payment of the mortgage for that property with any surplus to be paid into … [the A A Khan Property account];
h. Provide a summary of income rent and outgoing expenditure to the Proceeds of Crims Unit ("POCU") on a monthly basis within 14 days after the end of each month.
14. So far as [Mr Khan] is aware and believes the Defendant failed to, at least, visit or speak to, or collect rental income from the Tenants of [37] and [1394] contrary to paragraph 17(4)(f) of the [Restraint Order] and held on to rental income collected from properties subject to the Court Order to a value of over £200,000 which, if not used to pay mortgage payments, should have been transferred to [the A A Khan Property account].
15. The Claimant does not have specific details of what rent the Defendant did or did not collect or what payments they did or did not make to HSBC or Lloyds Banks [sic] PLC because the Defendant acted contrary to their duties and did not provide a monthly summary of incoming rent and expenditure contrary to paragraph 17(5) of the [Restraint Order].
16. Further, the Defendant failed to market and or let and or sell the following empty properties [6/6A] at a monthly rent of around £2,000, and Unit 2 [178] at a potential income of around £10,000 per year and Unit 3 [178] at a potential income of around £45,000 per year generating extra monthly income of around £79,000 per annum.
Conclusion
a) There would be summary judgment on claims for failing to rent out unoccupied properties, as not being said to cause any loss.
b) Likewise in relation to failure to collect rents, on the basis of the evidence relied upon by Mr Khan himself.
c) In my judgment, there is no pleaded claim for lost rental income.
d) There would be summary judgment in relation to any claim resting on the sale of 1394 by HSBC.
e) All claims resting on the sale of properties by the banks are struck out for failing to comply with DJ Geddes's order.
