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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Glatt, R (on the application of) v Sinclair [2010] EWHC 3082 (Admin) (04 November 2010) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2010/3082.html Cite as: [2011] Lloyd's Rep FC 140, [2010] EWHC 3082 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2A 2LL
		4th November 2010

1. MR JUSTICE KENNETH PARKER: This is an application by Louis Glatt for permission to proceed with an existing action against the respondent, Mr Heath Sinclair, a court appointed receiver under the Criminal Justice Act 1988, for negligence or breach of duty arising out of the sale by the respondent of the property known as 107 Station Road, Hendon NW4, ("the property").
2. The background is as follows. On 12th February 2001, the applicant was convicted of conspiracy to contravene section 93 of the Criminal Justice Act 1988 in laundering the proceeds of the criminal conduct of a named third party. On 15th February 2001, the respondent was appointed receiver and manager of the respondent's assets. On 25th November 2001, there was an order permitting the respondent to sell the property. On 15th January 2002, the property was marketed through Moreland Estate Agents. On 3rd or 15th April 2002 (the date is not of great materiality), the exchange of contracts for sale of the property was for £330,000. On 15th April 2002, it appears that the prospective purchasers apparently placed an advert for publication on 18th April to sell the property at £445,000. On 18th April 2002, completion of sale of the property took place. That sale is the impugned transaction in these proceedings. On 18th April 2002, the initial purchasers marketed the property for sale at £445,000.
3. The applicant alleges that the initial purchasers then agreed in May 2002 to sell the property for £455,000. The applicant alleges that the sale of the property was then completed for £455,000 on August 2002.
4. On 18th October 2002, Munby J, as he then was, ordered that litigation concerning the applicant be reserved to himself. However, he has subsequently released this matter to the Administrative Court generally.
5. On 27th April 2006, the respondent was discharged as receiver and manager and on 1st April 2008 the applicant issued his claim form in the present action in the Queen's Bench Division. It was not, however, until 5th September 2008 that the permission application was first issued. By that time the limitation period in respect of the proposed action had lapsed.
6. 26th January 2009 was the date listed for the first hearing of this permission application. After the court indicated on that occasion some concern on the merits of the application, the applicant sought an adjournment of the application. The learned judge, Sir George Newman, made clear that in his view the only basis on which permission could be granted would be in the event that the applicant was able to provide prima facie evidence of bad faith on the part of the respondent.

The legal test for permission

7. The claim was issued before the limitation period expired. However, as the respondent was a court appointed receiver, the court's permission is required for the claim to proceed. The court has a discretion whether to allow the claim to proceed: see McGowan v Chadwick and Grant [2002] EWCA Civ 1758 per Jonathan Parker LJ:

"As to the approach which the court should take to 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."

The duties of the receiver

8. There appears to have been some earlier issue between the parties as to the precise scope of the respondent's duties. There is now largely, as I apprehend, common ground. In summary, Mr Zelin for Mr Glatt submitted that the duty of good faith imposed on the respondent means that, in deciding whether and when to exercise a power, the receiver must act honestly and for a proper purpose and he is not constrained by the fact that his choice may occasion loss to one or other of the persons interested in the property or its proceeds. But in the execution of that decision the receiver must show due diligence, that is take reasonable care.
9. Both parties referred to Lightman v Moss, the Law of Administrators and Receivers of Companies (4th edition) at paragraph 10-039 and that paragraph reads as follows, under the rubric "The content of the duty of care":

"A mortgagee or receiver is only to be adjudged negligent if he has acted as no mortgagee or receiver of ordinary competence acting with ordinary care and (where appropriate) on competent advice would act. In deciding whether he has fallen short of his duty, the facts must be looked at broadly and he will not be adjudged to be in default unless he is plainly on the wrong side of the line. Thus, if two or more alternative courses of action are available, there is no negligence if the course taken might have commended itself to a competent mortgagee or receiver, even though subsequent events show that it was in fact the 'wrong' course. However, the receiver or mortgagee would not escape liability simply by showing some other receivers or mortgagees would have acted as he has. Rather, the receiver or mortgagee must have acted consistently with a practice that is respectable, responsible and reasonable, and which has a logical basis."

I gratefully adopt that as an accurate and succinct statement of the law. The relevant question then on this application is: Is there any realistic prospect of the applicant showing that the respondent was plainly on the wrong side of the line?

The merits of the application

10. The applicant alleges firstly that this is a case almost of res ipsa loquitur. It appears that within a short period of the impugned transaction the property was sold for substantially a higher price, £440,000 or thereabouts, as I have already indicated. This was evidenced by an entry in the Land Registry that, notwithstanding the very lengthy nature of these proceedings, emerged only at the hearing before me. However, notwithstanding that evidence, in my view res ipsa loquitur can have no application in the present context. On authority, it is well established that the receiver is not guaranteeing that he will obtain the market price. The question is simply whether he took reasonable steps with a view to obtaining that price.
11. I turn then to investigate what happened here.
12. In the context of the pressures of a receivership under the Act, the receiver appointed an expert firm of chartered surveyors to value the property, Smith Hodgkinson. I see no basis at all for any suggestion that Smith Hodgkinson were other than experienced and expert valuers, competent to discharge their duties, and, having considered the report, I do not see any basis for suggesting that it was other than a competent and well based report. That report, dated 7th December 2001, stated in terms that the "open market value" of the property as at 30th November 2001 was £330,000. There is criticism that the letter of the 7th December refers to "value for loan security purposes", and paragraph 1.1 of the report refers to insolvency purposes. However, I have no reason at all to doubt that Smith Hodgkinson was stating its view of what the firm truly believed was the open market value of the property, against the background of a court appointed receivership, and they were well aware of the need in that context to state what they regarded as the likely best price available in the market. This criticism, therefore, has little, if any, force.
13. Furthermore, that valuation was subsequently corroborated by another expert valuation, this time by a firm, Colleys, on 15th May 2002. Colleys had inspected the property on 28th February 2002 to advise a lending institution as to the open market value of the property for mortgage purposes. The receiver asked Colleys whether they stood by that valuation as fair and reasonable. They did so, making a report of the relevant factors that might affect value. The applicant seeks to discount that corroboration, saying that the valuation was obtained for lending purposes and therefore lower than the full market value. However, first, Colleys again were clearly stating that the open market value was £330,000, and in any event the whole purpose of the corroborating report was to cross-check that the valuation by Smith Hodgkinson was not out of line with what the property was likely to realise on open market sale. Even allowing for the fact that Colleys' valuation was to a lender, their report does not show at all that Smith Hodgkinson's valuation was plainly out of line with current market values.
14. There is, therefore, simply no basis for believing that the receiver relied upon a valuation that was manifestly flawed. To the extent that the applicant relies on the letter from Sidney Landes, I reject that as proper evidence for the reasons set out at paragraph 16.6 of the receiver's witness statement for these proceedings.
15. In turn, Smith Hodgkinson, the expert valuer, appointed an estate agent, Moreland, to market the property. Again, there is no basis for suspecting that either the receiver or Smith Hodgkinson believed that Moreland Estate Agents was other than a competent and honest estate agent. The receiver believes that Moreland did advertise the property locally and I have not seen evidence to the contrary.
16. I have considered the amended particulars of claim. They consist mainly of what in my view are nitpicking criticisms of the manner in which the receiver went about the sale. For example, the receiver is challenged about the timing of the sale. The receiver is challenged about not instructing more than one selling agent and not instructing agents in Hendon. These matters, such as timing and the precise terms of any agency agreement, plainly lay within the fair and reasonable discretion of the receiver in this case and cannot, in the absence of material - which is here singularly absent - showing that the proceeded in a wholly unreasonable manner, in my judgment found any claim for negligence against the receiver. It is said also that the receiver did not establish the condition of the property. But that was one of the very purposes of obtaining the valuation from the expert.
17. Only one matter initially caused some concern to me. There was some material in the bundle that tended to suggest that the buyer on the impugned transaction might have had some connection with Moreland Estate Agents and that alleged offers for the property (there were two in question) might have been bogus, giving ground for belief that Moreland Estate Agents, who had a duty to get the best price, were involved knowingly with a purchaser who bought at an undervalue.
18. However, first, this material comes from letters written by an inquiry agent in September 2002 and 9th January 2003. 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.
19. Secondly, there is no material at all to support an allegation that either the receiver or Smith Hodgkinson had any reason to believe or had any information to put them on notice that anyone connected with Moreland Estate Agents was likely to be connected directly or indirectly with the purchaser in the impugned transaction.
20. In summary and conclusion therefore, I find that this claim has no realistic prospect of success, that it is doomed to fail and should not be allowed to proceed. Therefore I refuse to grant permission.
21. MR MITCHELL: My Lord, on the issue of costs, Mr Glatt is subject to a representation order. The receiver would wish obviously to recover his costs incurred in this application and would ask your Lordship to order that, as part of the lien, and this is yet to be resolved, he may be entitled to recover his costs in this application during the enforcement proceedings relating to the lien, otherwise it is a hopeless task.
22. MR JUSTICE KENNETH PARKER: Well, you seem in principle entitled to your costs. What do you say in relation to --
23. MR ZERIN: The problem is that Mr Glatt is legally aided, my Lord, and in principle any contribution that he makes to legal aid would have to be assessed under section 11 of the Access to Justice Act.
24. MR JUSTICE KENNETH PARKER: Yes. Well, I can make an order that you can have your costs subject to section 11 of the Access Justice Act and then the proceedings under the Act can be pursued.
25. MR MITCHELL: Yes. My Lord, I respectfully submit that the order could include, because there is significant value in the lien and the amount of that is subject to litigation later in the year, when there are applications for a detailed assessment --
26. MR JUSTICE KENNETH PARKER: Would you provide me with a very, very short note on that and they will respond?
27. MR MITCHELL: I will.
28. MR ZERIN: My Lord, there is a very short answer to that, and that is --
29. MR JUSTICE KENNETH PARKER: Well, I will see the note and I will see your response. Then I can consider it.
30. MR MITCHELL: I am reminded, I think there is an authority involving one of the other receivers who had a lien over property and then there was some litigation, but I will come to you on it.
31. MR JUSTICE KENNETH PARKER: Yes, there is no obligation on you to respond, but I am giving the opportunity.
32. MR MITCHELL: I will sent it to my learned friend and perhaps we will make sure it is jointly sent in.
33. MR ZERIN: And then, my Lord, I would ask for permission to appeal.
34. MR JUSTICE KENNETH PARKER: Well, this is entirely an assessment on the basis of settled law and I have to be satisfied I have taken into account all relevant factors and disregarded any irrelevant. Of course, I believe I have done that and therefore no point of law arises and, as one of appreciation, there is no good reason for granting permission to appeal and I refuse it.
35. MR ZERIN: My Lord, will you hear submissions further now or do we take it to the Court of Appeal?
36. MR JUSTICE KENNETH PARKER: Sorry?
37. MR ZERIN: My Lord, there is one point that I would address you on on that, if your Lordship were prepared to hear me, otherwise I can take it to the Court of Appeal?
38. MR JUSTICE KENNETH PARKER: Well, what is the point?
39. MR ZERIN: The point was your Lordship said if there was no material to suggest that either Smith Hodgkinson or the receiver had any legal opportunity or notice of anything untoward in Moreland's behaviour, and Moreland's was as much agent of the receiver as Smith Hodgkinson, they are sub-agents, and the liability, in my submission, goes up the line and, to put the matter in that way --
40. MR JUSTICE KENNETH PARKER: Yes. Well, I have already dealt with the primary point on why I am not impressed with that in any event in the full circumstances of this case and in my judgment I was also entitled to say that, so far as the receiver's on own personal position was concerned, he cannot be faulted on that account. So, in my judgment, no point of law arises at all on that.
41. MR ZERIN: My Lord.
42. MR MITCHELL: My Lord, one housekeeping matter, at the beginning of your Lordship's judgment, and it must be because your Lordship was using a chronology that misstated the parties, your Lordship interchanged applicants and respondents. So, before --
43. MR JUSTICE KENNETH PARKER: When I get a transcript, I will check very carefully that I referred to the correct party by the proper names.
44. MR MITCHELL: Thank you.
45. MR ZERIN: My Lord, there is just one other thing, as well in a similar vein. Again, just to make sure that it gets recorded, that the Smith Hodgkinson valuation was dated 7th December but it gave a date as at 30th November. So just a small point.
46. MR JUSTICE KENNETH PARKER: All right. I will make sure that is corrected.
47. Thank you very much for your helpful submissions on both sides.