Police: Records showed claimant went by two names
A law firm should not have refused to hand over £330,000 from the sale of a house in South London for nearly four years despite having “reasonable grounds for suspicion” initially over the seller’s identity, the High Court has ruled.
The seller had two names and turned out to have a criminal record.
Master Teverson said there was “genuine surprise and dismay” on the part of their former client – the claimant in the action – when central London firm Bloomsbury Law Solicitors refused to release the money in December 2018, more than three years after the sale.
There had been a host of other hold-ups since completion in June 2015, and the judge said Bloomsbury now wanted an explanation from claimant Francis Lawrence Little, who also known as Frank Turner, as to why “his signature was different on every document he signed”.
His solicitors, Howard Kennedy, wrote back, saying “they viewed the position very dimly and considered it was a further attempt to prolong the period of time before releasing the funds with a view to improving the interest position on the final costs certificate”.
Following completion in June 2015, Bloomsbury held over £330,000 in its client account – the £350,000 sale price of the house less costs.
Though Mr Little had shown the lawyer handling the conveyancing at Bloomsbury documents that he was also known as Frank Turner, supervising partner Jamil Ahmud “became suspicious that the claimant might not be the true owner of the property and had no right to sell it”, the court recounted.
Mr Ahmud was also concerned about the accounts into which the proceeds were to be paid, while enquiries with the mortgage lender showed that the date of birth recorded for Mr Turner did not match the one Mr Little had given the law firm. The mortgage was paid by a third party too.
Mr Little instructed Howard Kennedy, which wrote to the Solicitors Regulation Authority in 2016 suggesting that it intervene in Bloomsbury because client money was in danger.
However, after an investigation, the regulator found no evidence of misconduct and said it would not take any further action.
Mr Little also served a winding-up petition on Bloomsbury in July 2016, which was dismissed with indemnity costs, and Master Teverson described this as an “inappropriate course of action”.
Bloomsbury then reported the matter to the police and the National Fraud Intelligence Bureau, and made a suspicious activity report.
Also in 2016, Howard Kennedy provided a copy of Mr Little’s record of convictions as maintained on the Police National Register to show he was also known to the police as Frank Turner.
There was a hiatus until 2018, when Howard Kennedy provided further evidence that their client was Frank Turner and entitled to the proceeds of sale, but Bloomsbury argued that it was under a “professional duty” not to be “duped by your client”.
On 30 November 2018, Howard Kennedy invited Bloomsbury to settle the final costs certificate from the proceeds of sale, but the latter said it could only do this once it was fully satisfied that the claimant was entitled to the proceeds.
Shortly after Bloomsbury filed another suspicious activity report in March 2019, the claimant issued a part 8 claim seeking a declaration that, among other things, the sale proceeds should be paid to him.
Bloomsbury responded by transferring £258,000, having made deductions mainly for the costs awarded for the bankruptcy petition plus interest.
Master Teverton said it was accepted that the defendant had “reasonable grounds for suspicion and concern” in the months following completion.
“It is in my view arguable that following the dismissal of the winding-up petition, the defendant should have applied to the court for directions on the basis that it continued to have reasonable doubts concerning the entitlement of the claimant to the balance of the proceeds. By then, the proceeds had been retained for over a year.
“By the end of November 2018, over two years later, it was in my judgment no longer appropriate for the defendant to continue to investigate the matter… The time for investigation had come to an end.”
The master said that Bloomsbury should either have paid over the balance to the claimant or apply to the court for directions.
“That time frame is one which in my judgment gives considerable latitude to the defendant and takes account of the history of the matter and no doubt the soreness felt by the defendant in having to resist the winding-up petition.”
Master Teverton concluded that the defendant was entitled to charge interest on costs awarded to it for defending the petition at 8% until 1 December 2018, but not to deduct a further sum of over £15,000.
Bloomsbury was ordered to pay interest on the sale proceeds of £330,000 at the base rate from completion to April 2019.
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