A Yorkshire law firm which went into liquidation three years ago has seen off an attempt by former clients to prove that partners deliberately concealed incriminating documents on a failed property deal.
Yorkshire firm Brooke North sought summary judgment in the High Court last month after a claim of professional negligence was lodged by two developers of a hotel in Manchester.
The claimants, Bala and Maria Chandra and their company BPC Hotels, alleged that partners in the law firm conspired to destroy or remove documents that indicated they had given negligent advice. The alleged removal had happened between 2000 and 2003.
But Mr Justice Edwards-Stuart found no evidence to substantiate claims of a cover-up and made summary judgment for the law firm, which went into liquidation in 2012.
The judge said: ‘When considering whether, on the balance of probability, two solicitors conspired together to remove the traces of the knowledge that was available to them, cogent evidence will be required.
‘I can see no prospect whatever of there being such evidence in this case. The new claims are in my view hopeless: they must be stopped in their tracks, and stopped now.’
The claimants had obtained £10.65m funding from Royal Bank of Scotland to develop the project and engaged Costain Ltd as the main contractor. Following a letter of intent, the building contract was concluded in 2001 with a contract price of £10.6m.
Under the terms of the finance agreement, RBS provided £300,000 overdraft facilities to assist BPC with cashflow.
In July 2001, a deed of warranty was completed by Costain, BPC and RBS, setting out that the bank would step in as employer under the building contract if Costain terminated the contract.
In an unusual step, this obligation was mandatory, rather than an option open to the bank. The Chandras alleged they were wrongly advised to agree this deed of warranty.
In the event, RBS asserted that BPC was in breach of the Costain contract in 2003 and demanded £11.9m payment – putting BPC into receivership when they could not meet that demand. RBS subsequently brought proceedings to repossess the Chandras’ home after a £4m claim for losses.
The claimants alleged they were told by a law firm partner identified as Mr Lopeman that RBS would be obliged to complete the development if BPC ran out of funds. They now said the deed of warranty was a ‘one-sided document that offered no benefit whatsoever to BPC’.
Chandra said he was only aware that documents were removed prior to May 2003 when he read Brooke North’s witness statements on an existing claim against the firm in September last year.
In evidence relating to the claim, Brooke North accepted that there ‘do appear to be gaps’ in its papers, but said one file had been sent to a law firm acting for the Chandras personally.
Edwards-Stuart, sitting in the Technology and Construction Court (pictured), said the question to resolve was whether there was any real prospect of showing the firm had given negligent advice and that the partners knew their advice was negligent and initiated a cover-up.
An internal memo dated November 2000 did not provide the ‘slightest indication’ of any awareness of inadequate conduct, the judge said. He concluded that the allegations had no material to support them.
‘There is not a single allegation made by the claimants in the particulars of claim in relation to deliberate concealment that can be categorised as anything but wishful thinking,’ he said. ‘They do not establish anything approaching a case with a realistic prospect of success.’
The judge added that Chandra was really asking for the opportunity to question the law firm partners, but he noted that after 15 years this cross-examination was unlikely to make any difference.