Secretary of State for Justice v Topland Group Plc & Ors

Strike-out is appropriate only in a plain case where the pleaded facts, even if proved, disclose no legally recognisable defence. It is generally inappropriate where the law is developing or the defence raises a serious factual issue requiring oral evidence.

A pleaded market practice concerning introduction fees may be relevant to whether a payment was secret, whether the alleged briber acted dishonestly, and the discretionary remedy available. It cannot, without more, legitimise a secret commission or create an enforceable contractual entitlement to it. The relevance and weight of the practice are matters for trial.

The Secretary of State brought two related actions concerning an alleged secret 1% commission paid or agreed to be paid by prospective purchasers of First Avenue House to property agents acting for the Secretary of State. The Smith action was brought against the agents and their director. The Topland action was brought against the alleged briber and related companies.

The defendants pleaded that introduction fees were an ordinary feature of the real estate market. The Secretary of State applied to strike out those parts of the defences under CPR rule 3.4(2)(a) and (b), contending that market practice could not answer claims based on fraud by bribery, fiduciary breach or dishonest assistance. The court also considered whether expert evidence on real estate market practice should be admitted.

1. The strike-out applications were dismissed. Under CPR rule 3.4(2)(a), the court should strike out only in a plain case where it is certain that the pleaded facts, even if established, cannot disclose a legally recognisable defence. A statement of case should not be struck out where the relevant law is uncertain or developing, or where a serious factual issue can properly be determined only at trial. The reliance on CPR rule 3.4(2)(b) added nothing in these proceedings.

2. The pleaded market practice was not advanced as a legal usage that automatically defeated the legal consequences of a bribe. Nor was it relied on to establish an enforceable contract for payment of the commission. In that form, the authorities concerning double brokerage and custom would have been relevant. The pleaded practice was instead relied on as circumstantial evidence of the Secretary of State’s actual knowledge and consent, and on the defendants’ state of mind.

3. Whether the commission was secret was a central issue. The court could not say that evidence of a general market practice, combined with proof that the Secretary of State knew that its agent had introduced Topland to the property, could not support an inference of actual knowledge. Knowledge might negate secrecy even where informed consent sufficient to defeat every fiduciary remedy was absent.

4. The market practice was also arguably relevant to dishonest assistance. Dishonesty is judged objectively, but the court applies the objective standard to the conduct of the particular defendant in light of the knowledge and attributes actually possessed. The defendants’ knowledge and understanding of commercial practice could therefore be relevant to whether their conduct was commercially unacceptable.

5. The same matters could affect remedy. A finding that the payment was not a true secret commission might affect recovery of the bribe, while lack of informed consent could still support fiduciary relief. The factual findings could also bear on the discretionary remedy of rescission.

6. Permission was granted for expert evidence on real estate market practice in both actions. The evidence was relevant to pleaded issues, and its likely cost was not disproportionate. Its weight and relevance would be assessed at trial.

This was a first-instance decision of the High Court determining interlocutory applications in two related actions. The judgment does not state any prior appellate decision in the same litigation.