DLA Piper: Claim can go to trial
A major City law firm can continue bringing a case it took on assignment from former clients which could mitigate a possible professional negligence claim, the High Court has ruled.
Master Clark in the Chancery Division rejected an application for summary judgment or to strike out the claim brought by DLA Piper.
She was not satisfied that DLA had no real prospect of showing that the assignment it took was valid and enforceable, or of relying on section 32 of the Limitation Act 1980 to postpone the start of the limitation period.
In arguing that it has a legitimate commercial interest in the underlying claim, an exception to the rule against maintenance, DLA accepted that “it may be liable in negligence” to its former clients for failing to ensure a restriction on land was registered at HM Land Registry.
The defendants characterised this as a “naked” rather than “genuine” interest, saying the assignment gave DLA the power to let its own interests relegate those of the trustees.
“I reject that submission,” said Master Clark. “In my judgment, DLA has a real prospect of showing that its and the trustees’ interests are aligned in the claim…
“[A]ny sums recovered by DLA will reduce the trustees’ loss suffered as a result of the non-registration of the restriction; and accordingly, DLA’s liability if it is found to be responsible for that loss.”
The case concerns a piece of land in Cheshire whose previous owner put it into trust under his will; the beneficiaries were two individuals and 10 charities.
DLA acted on a pro bono basis for the trustees in the sale of the land, which happened in 2013 for £250,000 to an LLP backed by funds from a Cyril Henshaw, to whom they had previously refused to sell. The trustees were not aware of his involvement.
The transfer included overage/clawback provisions in the event of the grant of planning permission and further sale of the land. It also said a restriction must be placed on the Land Register, but this was not done.
In 2015, the land was transferred for £1 to a second LLP set up by Mr Henshaw. The trustees were not told and the effect of the transfer was to defeat their entitlement to overage. It was only in 2018 that the trustees found out their restriction had not been registered.
In 2022, the land, now with planning permission, was sold to a property developer for £10.4m. DLA estimated that, under the original transfer, the trustees would have been entitled to more than £5m by way of overage.
DLA terminated its retainer in 2023 and took the assignment, under which it agreed to hold any damages on bare trust for the trustees.
The claim alleges that the defendants procured the first LLP’s breaches of the transfer and/or conspired to injure the trustees by unlawful means.
The defendants sought the strike-out on the basis that the claim was barred by limitation and the assignment was unenforceable by reason of maintenance and/or champerty.
On limitation, the question was whether it started running at the time of the 2015 transfer or when the trustees became aware of it in 2018.
Much of the discussion before Master Clark was whether the fact the 2015 transfer was registered meant it had not been concealed.
She held: “I am not satisfied that DLA have no real prospect of showing that the act of making information available on a public register is not inconsistent with concealing it, if the claimant is unlikely to search for or become aware of it from that register.”
Having found the exception to maintenance was arguable, the judge went on to find the same for the rule against champerty, which prohibits supporting litigation in return for ‘a division of the spoils’.
She accepted DLA’s submission that the base or profit costs to which it may be entitled were not a division of the spoils for the purposes of the common law rules against champerty, or at least it had a real prospect of arguing they were not.
Finally, Master Clark rejected the argument that DLA had fallen foul of the rule that says a solicitor who has the conduct of litigation may not take an assignment of their client’s cause of action before judgment.
DLA said the trustees were no longer its clients at the time and that, at the date of the assignment – for which the trustees had independent legal advice from Pinsent Masons – no claim had been commenced.
The judge held that the questions of whether the rule applied after termination of the solicitor/client relationship and whether an assignment before a claim was commenced did not fall within the rule should both be determined at trial.
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