CFC 26 Ltd v Brown Shipley & Co Ltd & Ors

The claimant alleged that the first and second defendant banks and Concord had entered into a corrupt agreement to procure sale of an underlease at an undervalue, and that the local planning authority (Westminster City Council) was liable in negligence, negligent misstatement and malicious prosecution in relation to planning/enforcement decisions. The Court concluded that the pleaded allegation of a "corrupt agreement" amounted to an allegation of fraud but that the particulars were insufficiently particularised and the available evidence gave the claimant no real prospect of proving it. The claim against the banks and Concord was dismissed. The Court held that (i) a local authority exercising planning enforcement powers does not owe the private law duties alleged and Lam v Brennan (and related authorities) was determinative; accordingly the negligence / negligent misstatement claim was struck out; and (ii) service of an enforcement notice does not itself amount to the setting of the law in motion by appeal to a judicial authority for the purposes of malicious prosecution, and in any event the pleaded facts did not sustain an allegation of malice. The claim against the Council was struck out.

Background and procedural posture

The dispute concerned the sale by receivers of an underlease of Sofia House following receivership and possession/forfeiture steps. The claimant (CFC, with SHG/Sam Yeganeh connected historically) alleged that the banks and Concord conspired or entered a "corrupt agreement" to secure a sale at an undervalue and that Westminster City Council was liable for negligence, negligent misstatement and malicious prosecution arising from an enforcement notice and its approach to a Certificate of Lawfulness of Existing Use or Development (CLEUD).

Nature of proceedings and relief sought

• The claimant sought damages and other relief for conspiracy, inducement and procuring breach of receivers' duties (against the banks and Concord) and damages for negligence, negligent misstatement and malicious prosecution (against the Council).

Issues framed by the court

• Whether the particulars and evidence disclosed a viable fraud/corrupt agreement claim against the banks and Concord with a real prospect of success.
• Whether the Council owed a private law duty of care for planning/enforcement acts or communications and whether the issue of an enforcement notice could ground a claim for malicious prosecution.
• Whether procedural failings and previous court judgments disposed of or barred the present claims.

Court’s reasoning and conclusions

The Court analysed the fraud allegation and concluded that, as an allegation of dishonesty, it required full particulars which were not given: there was little or no detail as to who said what, when or what secret commission was payable. The limited witness material and the claimant’s failure to particularise or to rely on contemporaneous evidence left the claimant with no real prospect of establishing the alleged corrupt agreement. The Court also relied on the prior decisions of Sales J and Mr Halpern, which had concluded there was no realistic challenge to the sale and criticised the claimant’s conduct and evidence. On the Council, the Court treated Lam v Brennan and similar authority as determinative that planning enforcement functions are public in nature and do not give rise to the private law duties alleged; Barrett and later authorities did not displace Lam in the Court’s view. The Court held that service of an enforcement notice is not the setting in motion of legal process by an appeal to a person clothed with judicial authority for malicious prosecution purposes, and further found an absence of particularised or credible evidence of malice. Procedural default and failures to comply with prior orders were also taken into account.

Subsidiary findings

• The particulars of claim and amended drafts did not supply the necessary particulars for allegations of fraud or malice.
• Previous orders (by Sales J, Birss J and Mr Halpern) and unpaid costs/judgment debts and failure to provide security in earlier proceedings were part of the factual and procedural background and relevant to the Court’s assessment of the present claim.

This was a first instance disposal. The court dismissed the proceedings against the banks (Brown Shipley & Co Limited and KBL European Private Bankers Limited) and Concord, and struck out the claims against Westminster City Council. Rationale: the "corrupt agreement" allegation was insufficiently particularised and had no real prospect of success; planning enforcement acts do not give rise to the private law duties pleaded (Lam v Brennan and related authorities) and service of an enforcement notice does not itself constitute the initiation of proceedings for malicious prosecution; in any event malice and fraud were not sufficiently established by the claimant's evidence.