A law firm acting in a property transaction paid out more than £500,000 to vendors in a ‘clear breach of trust’ and has 'no realistic prospect of showing otherwise’ at trial, the High Court has concluded.
In Levack & Anor v Philip Ross & Co (a firm) & Anor the court said there is no compelling reason why the case against London firm Philip Ross & Co should go to trial.
The case, an application for summary judgment by businessman Paul Levack, hinges around a property transaction in which Philip Ross consultant David Connick acted as the solicitor for Levack and another individual, John Moeller. Levack and Moeller agreed to jointly buy a multi-million-pound property (referred to as the Alie Street property).
Levack’s company, APL, paid £5.1m to Philip Ross’s client account (50% of the purchase price). According to the judgment, the monies were paid in two tranches: £500,000 in February 2015 (the deposit monies), and £4.6m in April 2015 (the completion monies).
Philip Ross subsequently paid the deposit monies to fund the deposit. The payment was made in the name of Moeller’s investment vehicle, Katalina Global Limited (KGL).
Connick advised Levack that the contract was held by KGL as nominee for a joint venture between Levack or APL and KGL. Philip Ross later paid the completion monies to the solicitors for the property vendors on behalf of an ‘off-the-shelf company’ called DDL that had been acquired by Connick on behalf of Moeller/KGL.
KGL became the sole registered shareholder and Moeller became the sole director of DDL and, through that company with the assistance of Connick, borrowed substantial sums against the Alie Street property to fund his share of the completion monies. Moeller/DDL then defaulted on these loans. The property was subsequently repossessed by DDL’s lenders and then sold, with all proceeds of sale being paid to the lenders.
The claimants submit that Connick gave express commitments that Philip Ross would only pay the money out when authorised to do so by the claimants and for the purpose of funding the acquisition of the property for the ‘joint and equal benefit of the claimants and Moeller’.
Philip Ross submitted it had a good arguable defence.
But Lionel Percy QC, sitting as a judge in the High Court, rejected this: ‘Connick does not dispute that he transferred the deposit monies to the vendors’ solicitors without taking any steps to ensure that they would be used for the joint and equal benefit of the claimants and Moeller/KGL. Indeed, he simply does not address this important matter in his evidence. Put shortly, Connick did not do what he undertook to do … and what, in all of the circumstances, he should have done. This was, in my judgment, a clear breach of trust.’
He added: ‘The parties should seek to agree an appropriate draft order reflecting my findings. My present view is that it is appropriate for me to give declaratory relief in favour of both claimants and a monetary judgment in favour of APL although the parties have leave to address me on this should they disagree.’
Moeller and DDL were not parties to the application. A spokesperson for Philip Ross & Co said: ’The firm is disappointed by the decision reached by the court and we are considering our position in relation to appealing the judgment.’