Glatt v Sinclair

Factual and Procedural Background

An appeal was brought against the order of Judge Parker dated 4 November 2010, which dismissed the Appellant's application for permission to continue an action alleging breach of duty against the Respondent, a court-appointed receiver under the Criminal Justice Act 1988. The appeal also challenged the decision that the Respondent's costs for the application be paid as an expense of the receivership.

The Respondent was appointed by an order dated 15 February 2001, granting power to sell assets of the Appellant. In November 2001, the sale of several properties, including one located at 107 Station Road, Hendon NW4 ("the Property"), was authorized. The Respondent instructed an independent valuer, Smith Hodgkinson, who valued the Property at £330,000 in December 2001. Subsequently, a local agent, Moreland Estates Limited, reported multiple offers, with the highest matching the valuation. The sale completed on 18 April 2002.

Shortly after, the purchaser re-advertised and sold the Property at a significantly higher price (£455,000) by August 2002. The Appellant questioned the discrepancy in sale prices, citing a letter from a local agent, Landes, estimating the Property's value at £440,000 in April 2002, and suggesting possible collusion between the purchaser and Moreland, supported by investigative reports and a draft affidavit. The Appellant contended that these facts indicated a realistic prospect of success for a breach of duty claim against the Respondent.

Legal Issues Presented

1. Whether the Appellant's claim for breach of duty against the court-appointed receiver had a realistic prospect of success sufficient to grant permission to continue the action.
2. Whether the Respondent breached duties to act in good faith and take reasonable steps to obtain the best price reasonably obtainable for the Property.
3. Whether the Respondent could rely on valuations and the actions of appointed agents without personal liability.
4. Whether serious allegations of fraud and collusion with the selling agent justified permission to amend the particulars of claim despite limitation periods.
5. Whether the costs of the Respondent in resisting the application should be paid from the receivership assets.

Arguments of the Parties

Appellant's Arguments

• The Respondent failed to provide a satisfactory explanation for the large difference between the sale price and the subsequent resale price of the Property.
• The valuation by Smith Hodgkinson was inadequate, lacking local market knowledge and comparable evidence, and the corroborating Colleys report was not a true open market valuation.
• The letter from Mr Landes, a competent local agent involved in the original purchase, supported a higher valuation and should not have been dismissed.
• The Respondent did not take sufficient steps to market the Property properly, failing to obtain advice on marketing strategy, asking price, or advertising, and did not disclose relevant marketing documents.
• There was evidence suggesting the purchaser was connected to the selling agent Moreland, with other purported offers being bogus, raising serious allegations of fraud.
• The judge erred in rejecting the evidence supporting these allegations and pre-empting the trial judge's role in weighing such evidence.
• The Respondent should not be allowed to escape liability merely by delegating to agents; this principle applies to court-appointed receivers as it does to mortgagees and their receivers.
• The proposed amendments to the particulars of claim, though raising new allegations of intentional wrongdoing, should be permitted.

Respondent's Arguments

• The valuations by Smith Hodgkinson and Colleys were reputable, independent, and not manifestly flawed; the Respondent was entitled to rely on them.
• The Respondent took reasonable steps given the pressing need for funds and acted within his discretion in instructing agents and accepting an offer matching the valuation.
• The allegations of collusion were unsupported by credible evidence; the draft affidavit and letters were insufficient after many years to justify permission.
• The Respondent distinguished his position from mortgagee-appointed receivers, arguing that as a court-appointed receiver he is more akin to a trustee and not liable for agents' defaults absent personal failure.
• The new allegations in the proposed amendments constituted new causes of action requiring a different factual enquiry and were barred by limitation.
• The judge's costs order was appropriate given the refusal of permission, and the Respondent's costs should be paid from receivership assets.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the evidence and legal principles concerning the duties of a court-appointed receiver. It acknowledged that the valuations by Smith Hodgkinson and Colleys were reputable and corroborated, and that the Respondent was entitled to rely on them absent manifest flaws. The letter from Landes was rightly discounted due to lack of evidential weight.

However, the court found the Respondent’s marketing efforts insufficiently evidenced and inadequately scrutinized. There was no clear evidence of a considered marketing strategy, appropriate advertising, or assessment of offers beyond accepting one matching the valuation. The rapid acceptance of an offer amid other pending bids and an imminent second advertisement suggested a failure to take reasonable steps to obtain the best price reasonably obtainable.

Regarding the serious allegations of collusion and sham offers, the court found the evidence supporting these claims to be tenuous and insufficient after many years, justifying the original judge's refusal to grant permission on this ground. The court also recognized a legal distinction in liability between mortgagee-appointed receivers and court-appointed receivers, noting the latter's similarity to trustees with limited personal liability for agents’ acts, but declined to make a final ruling on this complex issue.

The court further held that proposed amendments introducing new allegations of intentional wrongdoing constituted new causes of action, which were time-barred and unrelated to the original claims.

Concerning costs, the court concluded that since permission to proceed should have been granted, the earlier costs order must be set aside.

Holding and Implications

The court ALLOWED THE APPEAL and granted the Appellant permission to continue the claim for breach of duty against the Respondent to the extent explained in the judgment.

The Appellant was directed to amend the particulars of claim accordingly. The court set aside the prior costs order requiring payment of the Respondent’s costs from the receivership assets.

The decision does not establish new legal precedent but clarifies that the threshold for granting permission to continue a claim against a court-appointed receiver is low if the claim is genuine and not vexatious. It also emphasizes the necessity for a receiver to take reasonable and demonstrable steps in marketing assets to obtain the best price reasonably obtainable.