Sweetman v Nathan and others

Appellant acquiring loan from third-party bank to finance purchase and resale of land — Appellant and first respondent solicitor deliberately misleading bank as to value of land — Respondent arranging resale to sham company — Bank proceeding against both parties — Appellant bringing negligence claim against first respondent — Whether appellant’s action merely retrial of his defence against bank — Appeal allowed In 1991, the appellant purchased and resold a parcel of land with the aid of loans from a third-party bank. The first respondent acted as his solicitor in the transactions. The appellant deliberately misled the bank as to the purpose of the loans and to the actual value of the land, and kept a substantial amount of the money for himself. The bank made the loans, totalling more than £3m, on the basis of the avowed purchase price and associated proceedings in relation to the original acquisition of the land, and of the sale of the land to a reputable and financially sound business, trading as Darvist. However, the land was actually acquired by a sham company, Darvis. In 1993, the appellant was declared bankrupt, and the bank commenced proceedings on the ground that the appellant had secured the loans by misrepresenting: (i) the nature of the original purchase transaction; and (ii) the identity of the purchasing company. It obtained summary judgment against the appellant, the first respondent and his business partners on the first ground. No judgment has yet been obtained against anyone in respect of the second ground. In 1997, the appellant’s trustee in bankruptcy assigned to him all relevant causes of action in return for a proportion of any recovery that he might make. The appellant commenced proceedings against the respondents for misrepresentation with regard to the purchasing company on the grounds that, inter alia, he had suffered damage by borrowing and paying out moneys on the strength of the first respondent’s assurances, and that the respondents had known, or should have known, that he would do so. The respondents successfully argued that the action was an abuse of process and that the appellant was estopped from proceeding since the subject under litigation had been decided in the previous hearings and appeals. The proceedings were accordingly struck out. The appellant appealed, claiming that no previous issue existed between him and the respondents. Held: The appeal was allowed. In earlier proceedings, the parties to the present action had been defendants, and the court had held that the appellant had obtained part of the loan by a misrepresentation made by the defendants jointly. At that point, no conflict of interest lay between the parties because it was in all their interests to defeat the claim. In the present action, therefore, the appellant was not making any assertions that could be prevented by the doctrine of issue estoppel. In striking out the case, and in considering that it was an abuse of process for the appellant to start the present action against the respondents, the judge had failed to take into account a number of material considerations predicated upon the fact that the appellant could succeed in the present action even if it were accepted that he had obtained the loan fraudulently. The main issue in the claim was not a retrial of the appellant’s defence against the bank’s proceedings for false representation, but a claim that the respondents were negligent. The judge should have given independent consideration to the appellant’s contention that the first respondent had appropriated part of the loan moneys for himself, thereby holding that money on trust for the appellant. Since the origin of the money was irrelevant, the claim did not reply upon the assertion of any facts that had been found against the appellant in the earlier judgment. David Hodge QC and Thomas Grant (instructed by Wason & Co, of Potters Bar) appeared for the appellant; Michael Pooles QC and Matthew Jackson (instructed by Beachcroft Wansbroughs) appeared for the respondents. Vivienne Lane, barrister