Failed development investors’ clash with solicitors heading for appeal

A ruling that solicitors firm Juliet Bellis & Co holds more than £2m on trust for 19 investors in an abandoned development project near a Surrey airport is to come under challenge by the end of the year. The Court of Appeal is to hear the dispute between the firm and the investors in the Albemarle Fairoaks scheme on 15/16 December. In February 2013, Hildyard J ruled that a payment out of the £2.28m invested from the firm’s client account to special-purpose vehicle Albemarle Fairoaks Ltd (AFL), which later went into administration after the scheme was abandoned, constituted a breach of trust for which the firm is liable. The solicitors had argued that the monies were not subject to any escrow conditions or any form of trust and that payment out was not wrongful in any way. But, while the judge found that the monies were not held subject to contractual escrow terms and were not subject to a classical Quistclose trust – where the payment and receipt of money was expressly stipulated or acknowledged to be for a defined and exclusive purpose – he went on to find that the monies were held on a resulting trust. Having become a trustee for the claimants upon receipt of the monies into her firm’s client account, he said that Mrs Bellis and her firm could not, in all the circumstances, foreclose the beneficiaries’ interests without the most unequivoval instructions or complete certainty that they had directed payment to AFL on conditions that had unequivocably been met. The judge rejected an additional claim by the investors against Geoffrey Egan, a chartered surveyor employed by Erinaceous Commercial Services who introduced the investors to the Albemarle Fairoaks scheme, as well as a part 20 claim by the solicitors for an indemnity from Mr Egan. In an earlier judgment in the case in 2011, in which he refused to strike out the investors claims, the judge said that the sophisticated investors had invested previously in property investment opportunities offered to them under the brand name Albemarle through property investment advisers Egan Lawson Ltd, and were sent a teaser e–mail advertising this opportunity to invest in development land near Fairoaks Airport, Chobham. The investors remitted funds to the Juliet Bellis client account to invest in AFL, the corporate vehicle set up to handle the development. However, insufficient funds were raised to pursue the scheme. It was abandoned, leaving part of a bridging loan outstanding, and AFL went into administration in April 2008. Egan Lawson was bought by Erinaceous Commercial Services in 2006. Challinors and others v Juliet Bellis & Co