Royal Courts of Justice
Strand
London WC2
Tuesday, 14th October 2003
B E F O R E:
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Antony
Zacaroli (instructed by Nelson and Co) appeared on behalf of the claimant
The defendant appeared in person
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1. In this action the Law Society seeks to recover from the defendant, Mr Haider, amounts paid out of the client account of Dixon and Co to him or for his benefit but to which he was not entitled. Dixon and Co was a solicitors practice carried on by Miss Anne Dixon as sole principal. In March 2002 the Law Society exercised its powers under section 35 of the Solicitors Act 1974 to intervene in the practice. This intervention resulted from events which were to a substantial extent caused by a tragedy in Miss Dixon's personal life.
2. In accordance with the provisions of the Solicitors Act and under delegated authority the Professional Regulation Adjudication Panel of the Office for the Supervision of Solicitors resolved that all sums held by or on behalf of Miss Dixon or her firm in connection with her practice or with any trust of which she is or was formally a trustee and the right to receive such monies, whether or not they were received by the person holding them before or after the resolution, were vested in the Society. The Society is therefore entitled to bring this claim.
3. The claim is essentially that sums were paid out of Dixon and Co's client account to Mr Haider or for his benefit at a time when there were either no sums or insufficient sums in the client account standing to his credit. A solicitor's client account is a trust account so that the effect of these payments, if made as alleged, was to pay to Mr Haider sums which belonged to other clients of Dixon and Co. The total amount of the alleged overpayments is £250,107.48, made in the second half of 2001 and in January and February 2002. The Law Society also claims to trace some of the payments into Mr Haider's interest in two properties.
4. Mr Haider has defended the claim on the basis that certain payments out of the client account made at various times and shown as made to him or for his benefit either were not made to him or for his benefit or were not made with his authority. If those payments out of the client account are excluded in the account between him and Dixon and Co the effect is to increase the funds standing to his credit in the client account and to extinguish or reduce the amount which may be claimed against him.
5. When the proceedings were issued by the Law Society in August 2002 Mr Haider put in issue a total of 44 payments made out of the client account, but since then the number of disputed payments has been very substantially reduced so that at the start of the trial there were only five payments still in issue. As will appear, the largest of those ceased to be in dispute in the course of Mr Haider's submissions to me.
6. Mr Haider also brought part 20 claims and a counterclaim against Dixon and Co, Dixon Emberton, another firm in which Miss Dixon was involved, and the Law Society. The claims against the latter two had been settled or abandoned before the trial started but the claim against Dixon and Co remained.
7. At the start of the hearing Mr Haider, appearing in person, made an application to me for an adjournment of the trial. He had been represented by solicitors and counsel until 29 September this year when his solicitors, Landau and Scanlan, came off the record. He told me that he was unable to put his solicitors in funds for two reasons: first, in unrelated proceedings, brought by the Association of British Travel Agents and another, a freezing order had been made against him on 29 July 2003 which restrained him from disposing of assets up to a value of £1.7 million.
8. The order was subject to the usual exception that he could spend a reasonable sum on legal advice and representation. While that exception may be restricted to advice and representation in the proceedings in which the order was obtained so that an application would be required to widen the exception, the need to fund legal advice and representation for the defence of other proceedings is likely to provide a substantial basis for such an application.
9. Mr Haider told me that he did apply to Mr Justice Hart for an order enabling him to sell a car expected to realise £10,000 to £12,000 so as to be able to pay his solicitors in this action. The application was either refused or not pursued, I am not sure which.
10. The second difficulty, Mr Haider told me, was that the Law Society had registered cautions on two properties owned entirely or jointly by him. There was correspondence with Landau and Scanlan in August 2003 in which they sought to persuade the Law Society to lift its caution so that the properties could be sold or used to raise funds for his defence. Agreement could not be reached and although Landau and Scanlan threatened proceedings to lift the caution no application was made.
11. Mr Haider applied to me for an adjournment until such time as he settles his dispute with ABTA so that he can release his assets and obtain funding for his defence in this case. The Law Society and Dixon and Co opposed the application, relying in particular on three factors. First, the proceedings had been on foot for some time and the trial window fixed in February this year, and not only had Mr Haider been involved in the preparation of his defence by Landau and Scanlan, who served his witness statement dated 22 August 2003 on his behalf, but the Law Society solicitors had written to Mr Haider on 1 October with an index for the trial bundle and an offer of assistance in relation to any of the documents. Mr Haider had not responded to this offer.
12. Secondly, as a result of the reduction in the number of disputed items there was no defence to the claim for some £100,000 paid out to him or for his benefit from the client account and it was suggested that there was little substance in his defence to the rest of the claim.
13. Thirdly, there would be significant prejudice to the Law Society from any adjournment because there was no chance of recovering in full their proprietary claim and any increase in costs would reduce the amount of the claim which they were likely to recover.
14. I rejected Mr Haider's application not only because of the factors pressed by the Law Society and Dixon and Co but also because his application would result in an adjournment for an indefinite and quite probably protracted period. There was certainly no material before me to suggest that the claim brought against him by ABTA would be quickly resolved and the freezing order lifted.
15. From the way in which Mr Haider made his application he appeared to be an intelligent, quick thinking and fluent man. This was borne out by his conduct of his defence. As will appear, the facts were confined to a few matters and he seemed well able to deal with them. There were no difficult questions of law and he received assistance on substantive and procedural issues as and when required. I was satisfied that a fair trial was possible and that in the event the trial was fair.
16. The evidence in the case comprised witness statements from Miss Dixon, Mr Keith Hobbs, her bookkeeper during the relevant period, and Mr Haider, each of whom was cross-examined. Much of the detail of the payments in and out of Dixon and Co's client account, including detail of the disputed payments, was contained in the firm's ledgers and banking documentation. Miss Dixon and Mr Hobbs were able to give evidence explaining the ledgers and the way in which they were maintained.
17. Two ledgers are relevant to the issues before the court. The first, headed "Remortgage, 5 Riverside, Wraysbury", details transactions between 11 December 2000 when the property at 5 Riverside was remortgaged to 31 May 2001. Its first entry is a credit of £304,000 received from Cheltenham and Gloucester Building Society and it then details a large number of payments, some of which are not connected with the property.
18. The second, headed "Sale, 12 Wyton Mews", covers a period from 24 June 2001 to 1 February 2003. Miss Dixon instructed Mr Hobbs to record all of Mr Haider's transactions on the Wyton Mews ledger whether or not they related to that property. Although no doubt irregular, this has made it easy to follow the overall balance on Mr Haider's client account.
19. Mr Haider had been a client of Dixon and Co from the early days of the firm, which was established by Miss Dixon in 1995. She said that he was not a major client but the firm acted for him in a number of property transactions as well as some litigation and his divorce. Payments were regularly made into and out of the firm's client account on his behalf.
20. In the latter half of 2001 payments were made to Mr Haider or for his benefit out of the firm's client account when no or insufficient amounts were standing to his credit in that account. The precise moment at which this occurred depends on resolution of the disputed items, but it is now clear that at least £99,787.20 was paid out of the client account in this way. Mr Haider has no defence to a claim for repayment of this amount and does not suggest that there is any.
21. The disputed items are not in all cases payments made when Mr Haider was overdrawn as regards the client account, but if they are excluded from the running account with Mr Haider the effect is to delay the date from which the account was overdrawn as regards him and to reduce the amount which may be claimed from him.
22. The largest relevant payment was a gross amount of £151,892.28, which remained in dispute until Mr Haider's oral submissions. This payment, debited to his ledger on 6 July 2001, related to the purchase of a property for his former wife as part of their divorce settlement under which he was obliged to pay £75,000. Until the hearing Mr Haider challenged this payment on the basis that he had authorised a payment of not more than £75,000. The confusion arises because only subsequently, on 14 September 2001, was the mortgage advance of £93,800 credited to his ledger account resulting in an overall net payment of £58,092.28. Mr Haider now accepts that this net payment was duly made with his authority.
23. Two disputed payments appear on the ledger for 5 Riverside. The first, on 11 December 2000, is recorded as a transfer of £28,000 to either Travel Resource Group or Travel Research Group, it is difficult to know which. There is no doubt that this payment was made by Dixon and Co. A bank transaction slip is in evidence and shows the payment as made to Travel Research Group, as does the bank statement for the relevant period.
24. Neither Mr Haider nor Miss Dixon have any recollection of this payment, but Miss Dixon's evidence is that she would only have made this payment at Mr Haider's request. The payment was made before the personal difficulties which later beset Miss Dixon. It is clear that over an extended period Dixon and Co made a considerable number of miscellaneous payments on Mr Haider's behalf and almost all of them as shown in the ledger accounts are accepted by Mr Haider as authorised by him.
25. Moreover, some months later, in October 2001, Mr Haider became a director of Travel Resource Group PLC and his brother-in-law became a director on 24 January 2001. Mr Haider said in cross -examination that he had dealings with Travel Resource Group when his brother-in-law became a director but not before. Payments to and from Travel Resource Group are recorded on 6 September 2001 and 21 January 2002 and accepted by Mr Haider. It is, in my judgment, far more likely than not that Mr Haider authorised this payment and I so find.
26. The second disputed payment shown on the 5 Riverside ledger was a sum of £38,370 paid to Specialist Cars and debited to the ledger account on 4 April 2001. Again, there is no doubt that the payment was made but Mr Haider disputes that it was made for his benefit or with his authority. Mr Haider has no recollection of the payment but Miss Dixon does recall the payment and that it was made at Mr Haider's request. As with the payment to Travel Resource Group, it is one of a number of payments which are accepted as made with Mr Haider's authority and it was again made before the problems in Miss Dixon's practice caused by her personal difficulties. I find that this payment was made with Mr Haider's authority.
27. This deals with all the disputed items except for two smaller items, both for Dixon and Co's profit costs, debited to the Wyton Mews ledger, £889.25 on 22 June 2001 and £6,168.75 on 15 October 2001. No bill for either of these amounts has been found and it seems unlikely that there ever was a bill. Mr Hobbs gave evidence that when copy bills came through to him he would put them in the bill book. There are no bills for these sums in the bill book.
28. Miss Dixon accepted that it was possible that no bills for these sums were issued to Mr Haider because at the relevant time there was, in her words, "an enormous backlog of dictation on tape for my secretary and bills and other office administration were a lower priority than client work."
29. While Mr Haider readily agreed that he expected to pay Miss Dixon for her work, he also expected to receive a bill. While the amounts paid may have been entirely fair, Mr Haider was, in my judgment, entitled to receive a bill before he was obliged to make payment and there is no evidence either that he did so or that he authorised these payments. I therefore hold that they were not properly debited to his ledger in the client account.
30. This is sufficient to deal with the disputed payments with the result that the Law Society has established that there was paid to Mr Haider or for his benefit a total of £243,049.48 when he had no corresponding funds in the client account. He was not entitled to be paid that amount and he must repay it.
31. On 5 February 2002 Mr Haider signed a document in which he confirmed that he was indebted to Dixon and Co in the sum of £274,506.67 as at the end of December 2001 and that he was making arrangements to discharge this indebtedness as quickly as possible. Mr Haider does not dispute that he signed the document but says that he did not read it before doing so and that Miss Dixon did not explain it to him. He says that he trusted her and that he was happy to sign a document put to him by her because he believed that she would not do anything contrary to his interests. He believed that he was helping her and he was not interested in how it helped her.
32. There is no dispute about the circumstances in which he signed the document. He came to the firm's offices at a time when a representative of the Law Society was there and Miss Dixon explained that there were problems with her practice and that the Law Society might soon intervene. Miss Dixon's evidence is that she wrote out the document in Mr Haider's presence, while Mr Haider cannot recall whether that is the case.
33. I have no reason to doubt the account of Miss Dixon, who gave her oral evidence in a credible and straightforward way. I find it very unlikely that Miss Dixon would ask Mr Haider to sign a document without explaining it to him and I accept her evidence that she read it out to him. I also find it in the highest degree unlikely that Mr Haider, who is plainly an intelligent and articulate man, would sign a document such as this without understanding what it said.
34. Accordingly, I find that Mr Haider signed the letter with full knowledge of its contents. I also accept Miss Dixon's evidence that from the time that she became aware that Mr Haider owed a substantial amount to the practice in November 2001 she repeatedly asked him to pay and rejected his offers to transfer properties in lieu of payment.
35. The Law Society claims interest on the amount to be repaid which should, in my judgment, run from 5 February 2002, when Mr Haider signed the acknowledgement and undertook to repay the amount due as quickly as possible. The appropriate rate of interest is special account rate, which has been 6 per cent per annum since 1 February 2002.
36. In addition to the claim for a personal order for payment against Mr Haider, the Law Society seeks to trace certain payments into Mr Haider's interest in two properties. In principle, a tracing remedy is available. The client account was a trust account held by Dixon and Co for the various clients whose funds were credited to it and Mr Haider had no entitlement to receive sums in excess of the funds held by him. He gave no consideration for such excess amounts which he therefore received as a volunteer.
37. The first property in question is the Drive House, 48 London Road, Datchet, Berkshire, which Mr Haider still owns and where he lives. The purchase of the Drive House was completed at the beginning of February 2002. On 19 December 2001, £31,750 was paid from Dixon and Co's client account to the vendor's solicitors. At that time Mr Haider's account with Dixon and Co was overdrawn to the extent of well over £200,000.
38. On 2 February 2002 two further payments were made from the client account to the vendor's solicitors totalling £605,585.81. At that date Mr Haider's account with Dixon and Co was in credit but only to the extent of a little over £355,000. However, it is not open to the Law Society to trace the entire difference between those sums because the total amount paid to the vendor's solicitors included £494,985 received in the client account from the Royal Bank of Scotland as a mortgage advance to be used solely for the purpose of the purchase of the Drive House and therefore impressed with a purpose trust, and it also included a sum of £65,000 received from Mr Haider on an express undertaking by Dixon and Co to hold that amount for Mr Haider and to release it only on completion of the purchase, failing which it was to be returned to Mr Haider.
39. The amount paid on 2 February 2002, which can be said to have come from funds held for other clients of the firm, is therefore £45,600.81. The total amount paid from other clients' funds towards the purchase of the Drive House is therefore £77,350.81. The Law Society is entitled to trace that sum into Mr Haider's interest in the Drive House. It seeks and I shall make an order charging his interest in the property for that sum together with an order for sale.
40. The second tracing exercise arises from the redemption of a mortgage of a property known as 5 Riverside, Wraysbury, Staines, Middlesex. Until October 2001 it was subject to a mortgage in favour of Kensington Mortgage Company to secure £242,403.14. On 15 October 2001 that sum was paid from Dixon and Co's client account in redemption of the mortgage. At that date the credit balance shown in Mr Haider's ledger was £11,146.47 but that must be increased to £18,184.47 by disregarding the debits for profit costs of £889.25 and £6,168.75, which I dealt with earlier in this judgment. It follows that the Law Society, on behalf of the clients whose money was used towards the redemption of the mortgage, could trace into 5 Riverside to the extent of £224,218.67.
41. Mr Haider gave evidence in cross -examination that 5 Riverside was subsequently sold for £440,000. Some £330,000 was required to redeem the mortgage on the property in favour of Cheltenham and Gloucester Building Society, leaving free equity of approximately £110,000. Some £70,000 out of this sum was applied towards the purchase of a property called 39 Regatta Point, which was bought by Mr Haider jointly with his brother Jamil. Jamil did not put any funds of his own into the purchase but is responsible for the mortgage loan. Mr Haider said that he had spent the rest of the £110,000.
42. These facts entitle the Law Society to trace into Mr Haider's interest in 39 Regatta Point to the extent that the proceeds of sale of 5 Riverside were used towards its purchase. Again, the Law Society seeks and I will make an order charging his interest in the property for that sum.
43. It is now necessary to turn to Mr Haider's part 20 claim against Dixon and Co. As pleaded, this contained three elements: the first was a claim for an account of the monies from time to time held for Mr Haider in Dixon and Co's client account. As Mr Haider no longer takes issue with any of the payments out of his funds in the client account except the few which I have now dealt with, it seemed to me, and Mr Haider agreed, that no purpose could now be served by ordering an account.
44. His second claim was expressed in this way in paragraph 21B of his amended defence and part 20 claim:
Further, if, as the Society alleges, Dixon and Co have paid away sums out of the defendant's client account then Dixon and Co were in breach of the terms of their retainer and negligent in so doing. As a result the defendant has suffered loss and damage in that he has incurred the costs and expenses of (a) accounting for the sums received by the defendant, (b) an investigation of what has become of the sums paid by Dixon and Co, and (c) the costs of this case, and the defendant claims damages in the amount of the said costs.
45. I have found that Mr Haider authorised all the payments except the two for costs and that from November 2001 he knew that he was indebted to Dixon and Co and that he formally acknowledged that indebtedness on 5 February 2002. Given these facts and the fact that he had the benefit of the various payments and that costs were incurred only because it was he who had challenged the validity of many of the debits, I can see no basis on which this claim can succeed.
46. His third claim, set out in paragraph 21C, is that Dixon and Co acted for him in the purchase of 41 Springfield Road, which was completed in August 2001, and in the purchase of the Drive House and that they failed in breach of duty to him to date and register the transfers or to call upon him to pay the stamp duty on those purchases. Paragraph 21C goes on to allege loss and damage comprising penalties and interest incurred as a result of the failure to pay stamp duty at the appropriate time.
47. There is no evidence to support this claim. In particular, Mr Haider's witness statement does not address it and no relevant documents have been disclosed by him. It is significant that his witness statement was prepared not while he was acting in person but while Landau and Scanlan were still acting for him and it was sent to the Law Society's solicitors under cover of a letter from them. This claim, therefore, cannot succeed. Accordingly, I dismiss Mr Haider's part 20 claim against Dixon and Co.