Dattani & Anr v Rasheed & Ors 12 February 2024
On 9 February 2024, Master McQuail gave oral judgment in Dattani & Anr v Rasheed & Ors on the Third Defendant’s application for strike out and/or summary judgment. The Third Defendant was the conveyancing solicitor on the sale of a house owned by the First and Second Defendants. The title to that house had on it a restriction in standard form K referring to an interim charging order granted to the Claimants, dated 10 years earlier, over any share the First Defendant had in the house. At completion, once the registered mortgages had been paid from the proceeds of sale, the Third Defendants sent the remaining money to the Second Defendant on their instructions.
The Claimants’ claim against the First and Second Defendants is that they must account as constructive trustees to the Claimants for the First Defendant’s share of the proceeds of sale. What the Claimants say is that they have a proprietary interest in the First Defendant’s share, by reason of the charging order (a potential issue for trial).
As against the Third Defendant, the Claimants pleaded two cases, both based on the assertion that the Third Defendant knew of the charging order simply because the restriction was on. The title. The first was simply that in paying the proceeds of sale to the Second Defendant with knowledge of the charging order made the conveyancing solicitor a constructive trustee too, even if he was not dishonest. The second was a case that the conveyancing solicitor was liable in dishonest assistance of the breach of trust alleged against the property owners. The dishonesty alleged was simply that because of the form K restriction, the conveyancing solicitor had actual knowledge of the Claimants’ interest, or deliberately chose not to confirm their suspicion that there was such an interest by making enquiries of the Claimants, at the address in the restriction.
Master McQuail agreed with the Third Defendant that neither case was good in law, and neither disclosed reasonable grounds for a claim against the firm. It is well-established law, as set out in Lewin at para 42.117, that an agent, as a conveyancing solicitor is, “who acts on the instruction of the trustees in applying trust money inconsistently with the trust, will not, so long as he acts honestly, be liable as a constructive trustee.”
As for the dishonest assistance case, the principles of what is required for the knowledge aspect of the liability are likewise well-established. Knowledge of a Form K restriction referring to an interim charging order is not knowledge that as at the date the solicitor looks at the title, there is a charging order which was made final, that has not been discharged, and that any sums remain due. Nor is the form K restriction enough itself to raise a suspicion that the conveyancing solicitor would be dishonest not to investigate. No duty to investigate had been pleaded, and for blind-eye knowledge of the form required for dishonest assistance there must be a firmly grounded suspicion and a conscious decision to refrain from investigating. No such case was raised on the Claimants’ pleading.
* This was an oral judgment, and we aim to publish a transcript when we have it available.
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