Levack & Anor v Philip Ross & Co (a firm) & Anor

On an application for summary judgment, the court must decide whether the defence has a realistic, rather than fanciful, prospect of success. It must avoid a mini-trial, while examining contemporaneous documents and rejecting assertions that have no real substance. Where a short legal or construction issue can be decided on the evidence available, the court should decide it.

Trust terms governing money paid to solicitors may be established from the parties’ correspondence and commercial context. An authorisation to release funds for a transaction does not necessarily permit payment in a manner inconsistent with express assurances protecting the payer’s beneficial interest. Payment contrary to those terms is a breach of trust. In the circumstances considered, equitable compensation, rather than reconstitution of the trust fund, was the appropriate remedy.

The Claimants sought summary judgment under CPR Part 24 against the First Defendant for £5,171,705, alleging breaches of trust in relation to money paid into the firm’s client account for the acquisition of a property.

The money comprised deposit and completion funds contributed by the Claimants to a proposed 50/50 joint venture. The Claimants alleged that the firm undertook to release the funds only for an acquisition in which their interests were protected. The First Defendant disputed the trust terms, alleged that the payments were authorised, and relied on causation and quantum arguments.

The court had to determine whether the defence had a realistic prospect of success on the trust terms, breach, and equitable compensation.

1. Summary judgment. The principles summarised in The European Union and Anor v The Syrian Arab Republic [2018] EWHC 1712 (Comm) applied. The court considered whether the defence had a realistic prospect of success, without conducting a mini-trial. The test was one of reality rather than probability, consistent with Three Rivers v Bank of England (No.3) [2003] 2 AC 1. The court could examine documentary evidence and decide a short construction issue where the evidence was sufficient.

2. Trust terms. The contemporaneous correspondence showed that the Deposit Monies and Completion Monies were held on trust for use for the joint and equal benefit of the Claimants and Mr Moeller/Katalina Global Limited. In relation to the Completion Monies, the trust also required the Claimants’ interest to be fully protected. The references to completion in the later emails had to be read in the context of the earlier assurances.

3. Breach. The First Defendant released the Deposit Monies without ensuring that the Claimants’ interest was protected. It likewise released the Completion Monies to acquire the property through a company controlled by Mr Moeller, without taking steps to protect the Claimants’ interest. Those payments were clear breaches of trust. The First Defendant had no realistic prospect of establishing otherwise.

4. Causation and remedy. The relevant counterfactual was what Mr Levack would have done if informed of the true position before transferring the Completion Monies. It was unrealistic to suppose that he would have invested approximately £5 million without a legal interest or protection while the asset was immediately encumbered for Mr Moeller’s benefit. Equitable compensation was the appropriate remedy, rather than reconstitution of the trust fund, in accordance with Target Holdings Ltd v Redferns (a firm) [1996] 1 AC 421 (HL) and AIB Group (UK) v Mark Redler & Co Solicitors [2015] AC 1503 (SC).

5. The First Defendant had no real prospect of successfully defending the claim, and there was no compelling reason for a trial. Declaratory relief was appropriate for both Claimants, with monetary judgment in favour of APL, subject to the final order.