Paragon Finance Plc v D B Thakerar & Co (A Firm), Court of Appeal - Civil Division, July 21, 1998, [1999] 1 ALL ER 400,[1998] EWCA Civ 1249

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Paragon Finance Plc v D B Thakerar & Co (A Firm), Court of Appeal - Civil Division, July 21, 1998, [1999] 1 ALL ER 400,[1998] EWCA Civ 1249

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

Royal Courts of Justice

Strand

London W2A 2LL

Tuesday 21st July 1998

B e f o r e

LORD JUSTICE MILLETT

LORD JUSTICE PILL

LORD JUSTICE MAY

ON APPEAL FROM THE CHANCERY DIVISION CHANI 97/1275/3

(MR JUSTICE CHADWICK)

PARAGON FINANCE PLC Appellant

v.

D.B. THAKERAR & CO (A FIRM) Respondent

ON APPEAL FROM THE CHANCERY DIVISION CHANI 97/1560/3

(MR JUSTICE LLOYD)

THIMBLEBY & CO (A FIRM) Appellant

v.

PARAGON FINANCE PLC AND ANOTHER Respondents

(Handed down transcript of

Smith Bernal Reporting Limited, 180 Fleet Street

London EC4A 2HD Tel: 0171 421 4040

Official Shorthand Writers to the Court)

MR CHRISTOPHER PARKER (instructed by Messrs Hamlin Slowe, London W1A 4SQ) appeared on behalf of the Paragon Finance Plc.

MR EDWARD BANNISTER QC and MR THOMAS DUMONT (instructed by Messrs Browne Jacobson, Nottingham) appeared on behalf of the two firms.

J U D G M E N T

(As approved by the court)

©Crown Copyright

LORD JUSTICE MILLETT: These two conjoined appeals arise out of what is alleged to have been a series of mortgage frauds in relation to the purchase of flats at Vogans Mill in Docklands in the latter part of 1990. The Plaintiffs are the mortgage lenders. The Defendants are the solicitors who acted for the Plaintiffs as well as for the borrowers. In one action the Defendants are Thimbleby & Co.; in the other Thakerar & Co. Thimbleby & Co. acted in the purchase and mortgage of 7 flats; Thakerar & Co. in the purchase and mortgage of 5 flats. None of the borrowers went into occupation of the property or made any payments under their mortgages. Each of the borrowers made immediate default, following which the Plaintiffs recovered possession and eventually realised their security by resale at a substantial loss.

It was an express term of the Defendants' retainer in every case that they should advise the Plaintiffs:

(i) of any matters likely to affect the value of the property being purchased of which the Plaintiffs should be aware;

(ii) of any reduction in the purchase price for whatever reason or of a sub-sale of which the Defendants became aware; and

(iii) of any information suggesting that the property was not being purchased as the borrower's principal residence for the sole continuing occupation of the borrower and the borrower's family.

The vendor of each of the flats was Rosehaugh Co-Partnership Developments Ltd. ("Rosehaugh"). The Defendants' client, however, (if he or she existed at all) was not purchasing the property directly from Rosehaugh but from an intermediate third party ("the sub-vendor") by way of sub-purchase at a price far in excess of the amount payable to Rosehaugh. Moreover the amount of the mortgage advance which the Defendants' client was obtaining from the Plaintiffs was also substantially in excess of the price payable by the sub-vendor to Rosehaugh.

In each of the transactions in which Thimbleby & Co. acted, the sub-vendor was a Mr. Shefket or a company alleged to belong to or to be controlled by him; in each of the transactions in which Thakerar & Co. acted, the sub-vendor was Belgravia Estates Ltd. The Defendants were aware that their ostensible clients were sub-purchasers who had applied fo...

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