England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
HIS HONOUR JUDGE LANGAN Q.C.

		Royal Courts of Justice Strand, London, WC2A 2LL
		10 February 2009

Lord Justice Lloyd:

1. In form, this appeal is against the refusal of His Honour Judge Langan Q.C. to set aside a statutory demand served by the Respondent, Pannone LLP, on the Appellant, Mr Guy v Pannone LLP, by an order dated 6 March 2008. I will refer to the Respondent, and also to the previous unlimited partnership Pannone & Partners, as Pannone. In substance, what is at issue is whether Mr Guy has a viable claim in negligence against Pannone. The statutory demand was served in respect of a debt of about £99,000 said to be due by way of professional charges for having acted as solicitors for Mr Guy. He applied for it to be set aside on the basis of his having a substantial cross-claim which exceeded the amount of the debt, namely the firm's liability to him for damages due to their negligence. The judge refused to set it aside, and gave Pannone permission to present a bankruptcy petition. Mr Guy did not obtain a stay of that order, so Pannone did present such a petition on 14 March. In order not to risk being made bankrupt, Mr Guy paid the amount said to be due, by then almost £110,000, on 16 May. As a consequence, on 19 May the petition was dismissed, with costs payable by Mr Guy. It seems to follow that whether or not the statutory demand should have been set aside does not now matter, other than for the purposes of the costs before the judge which Mr Guy was ordered to pay. Mr Evans, Counsel for Mr Guy, suggested that, if the statutory demand ought to have been set aside, the amount which was paid to Pannone to stave off the petition would be repayable. That would raise separate issues which do not, in the event, arise.
2. Before his application was heard, Mr Guy had started proceedings against Pannone to recover damages for professional negligence. Those proceedings have, for the time being, come to an end, on an order being made in favour of Pannone giving judgment under Part 24 of the CPR. Mr Guy has applied for permission to appeal against that order, and that application has been in suspense pending the outcome of this appeal. In effect, this appeal may be a kind of dry run for the appeal in those proceedings.
3. The judge refused permission to appeal to Mr Guy against the refusal to set aside the statutory demand. Lawrence Collins LJ refused permission to appeal on the papers, but Stanley Burnton LJ granted permission, limited, however, to two grounds of appeal.
4. On Mr Guy's account of the facts, which is not in dispute for present purposes, he is a victim of a serious fraudster called Shaid Luqman. He had extensive dealings with Mr Luqman and with his company Lexi Holdings plc ("Lexi") (previously called Pearl Holdings (Europe) Ltd) from which he hoped to derive a substantial benefit. He had a potentially valuable development site at Ten Acre Lane in Manchester. During 2004 he discussed selling this to Lexi for £10 million, but decided not to proceed. However, at some point he signed a blank Land Registry transfer form (TR1). This document came into Mr Luqman's possession and was used to procure the transfer of the Ten Acre Lane site into the name of a company called Ten Acre Ltd, a subsidiary of Lexi, for an expressed consideration of £15 million, no part of which was paid to Mr Guy. Ten Acre Ltd became the registered proprietor of the land in or about August 2004.
5. Barclays Bank plc was the leader of a syndicate of lenders to Lexi. In March 2005 it obtained a legal charge over the Ten Acre Lane site from Ten Acre Ltd to secure the existing indebtedness both of Ten Acre Ltd itself and also of Lexi. This legal charge was executed on 8 March 2005 and registered on 23 March 2005. In other proceedings Barclays Bank has established that its legal charge is not subject to any adverse claim on the part of Mr Guy. Judgment was given in favour of Barclays Bank in the Chancery Division, [2008] EWHC 893 (Ch), and permission to appeal was refused in the Court of Appeal: [2008] EWCA Civ 452.
6. Mr Guy instructed Pannone to act for him in relation to the Ten Acre Lane site early in 2005. The partner in question was Mr Alex Megaw who was also acting for Mr Guy on other matters at the time. There were some relevant discussions between the two men in December 2004 and January and February 2005, but on 28 February 2005 Mr Guy sent a letter to Mr Megaw instructing him to put a caution on the title to the Ten Acre Lane site in favour of Mr Guy. Mr Megaw did not do so until late in March 2005. Mr Guy contends that Mr Megaw was negligent in a number of respects at this stage. Mr Megaw denies this, and says that Mr Guy countermanded the written instructions, and did not reinstate them until 23 March, when they were acted on promptly. Mr Megaw had previously acted for Lexi and Mr Luqman. Mr Guy also argues that Mr Megaw was in breach of duty for not having disclosed to him information which was in his possession from having so acted.
7. The permission to appeal granted to Mr Guy is limited to two grounds: (a) the contention that Pannone should have acted more expeditiously and diligently after they had received written instructions to Mr Guy to register a caution on the land (i.e. after receipt of the letter dated 28 February 2005), and (b) whether they should have advised or acted differently thereafter (i.e. after receipt of that letter) having regard to their knowledge of Mr Luqman or of allegations against him. Stanley Burnton LJ also gave permission to Mr Guy to rely on some evidence which had not been before the judge below, including a witness statement made by Mr Megaw in the negligence proceedings.
8. I will need to go into some detail about the underlying facts, but I will first explain the state of the evidence and some of the documents.

i) On 23 June 2006 Mr Guy applied in the Harrogate County Court to set aside the statutory demand, which was dated 26 May 2006, and had been served in June, making an affidavit in support of his application. He then made a witness statement dated 13 November 2006. Mr Megaw made a witness statement in answer dated 24 November 2006. Mr Guy responded with a witness statement dated 1 December 2006, and another dated 5 February 2007.

ii) On 17 September 2007 Mr Guy issued proceedings against Pannone in negligence, in the Manchester District Registry of the Chancery Division. The Particulars of Claim, verified by a statement of truth by Mr Guy, are dated 3 October 2007. The Defence and Counterclaim is dated 1 November 2007. Pannone applied for judgment under Part 24, or for the claim to be struck out. In support of that application Mr Megaw made a witness statement dated 27 February 2008, to which many documents from Pannone's files are exhibited. The hearing before Judge Langan of the application to set aside the statutory demand came a week later on 6 March 2008. The judge did not allow Counsel for Pannone to refer to Mr Megaw's recent witness statement in the negligence claim, but it is before us, at Mr Guy's request, by virtue of Stanley Burnton LJ's order. At the time of the hearing of this appeal no answering witness statement from Mr Guy had been put before this court. However, afterwards Mr Guy's solicitors supplied the court with a copy of a witness statement made by him in answer on 14 March 2008. It seemed to us that it would be right to take account of its contents, and Pannone did not disagree, on being given the opportunity to comment on it. (We have not, however, taken into account another document supplied to us at that stage which seemed to be put forward as being an exhibit (or part of it) to the witness statement. We were told by Pannone that it had not in fact been exhibited to the witness statement, and it does not correspond to the description within the witness statement of the contents of the exhibit to that witness statement. Because of the disputed status of the document it would be inappropriate to allow it to be referred to at this late stage.) In December 2007 Mr Guy had applied for permission to amend his Particulars of Claim, and we have the amended as well as the original version. He did not obtain permission to amend, though it seems that, on the application for judgment in favour of Pannone, his alternative version of the statement of case was considered before judgment was given for Pannone.

9. The voluminous papers in the appeal bundles include all the evidence on the application to set aside the statutory demand and much of the documentation in the negligence claim. We were also referred to a statement of case in a claim brought by Lexi (by its administrators) against Pannone, and a judgment of Briggs J in a claim by Lexi against two sisters of Mr Luqman, [2008] EWHC 1639 (Ch).
10. Mr Megaw had acted for Lexi on the instructions of Mr Luqman in proceedings in 2004. Lexi's auditors had been Horwath Clark Whitehill ("HCW"). HCW resigned as auditors in January 2004 and proposed to issue a statement as to the circumstances in which they ceased to act, under section 394 of the Companies Act 1985. The story is conveniently summarised by Briggs J in his judgment just mentioned, at paragraphs 103 to 112, as follows (omitting irrelevant material):

"103. … The relevant information is to be found in HCW's Statement of Circumstances connected with their resignation, dated 29^th January 2004, treating it as admissible hearsay evidence which has not been challenged by anyone other than Shaid himself (as I shall describe in due course). His challenge may safely be rejected, as has every other aspect of his wholly unsuccessful attempt to justify his conduct.

104. The Statement of Circumstances stated that Lexi had, at Shaid's direction, sought to register itself for VAT, with the stated intention of making a taxable supply by undertaking a residential property development, so as to obtain a basis for reclaiming input taxes, otherwise unavailable to a company engaged merely in the provision of bridging loans. For that purpose Shaid had informed HCW that Lexi was in the process of demolishing and rebuilding a property known as 27 Willoughby Road, but he initially supplied builder's invoices evidencing only a refurbishment rather than a rebuilding. On it being pointed out by HCW that refurbishment rather than new building was insufficient for VAT purposes, Shaid then stated that the invoice must have been made out incorrectly, and undertook to provide a correct replacement invoice. In the meantime, in December 2003 HCW prudently inspected the exterior of 27 Willoughby Road and discovered that there was no evidence of the building having been demolished or rebuilt. Thereafter on 15^th January 2004 HCW were supplied with an invoice for £830,000 odd dated 4^th June 2003 apparently for the demolition and rebuilding of 27 Willoughby Road, together with apparently relevant architect's drawings of the intended new building.

105. HCW then faced Shaid with the fruits of their research, only to be told that there had been a mistake, and that the building which had been demolished was 32 Willoughby Road. HCW then inspected 32 Willoughby Road, which appeared to be a Victorian building with no evidence of recent demolition or reconstruction. Despite this Shaid then produced a letter from the builders purporting to state that their earlier invoice wrongly misdescribed the subject matter of their activities at 27 Willoughby Road. These exchanges took place in December 2003 and January 2004, and were followed by Shaid presenting HCW with a letter from Lexi dismissing them as auditors with effect from 26^th January 2003. Their Statement concluded as follows:

"In the light of the circumstances described above, we do not believe we have received satisfactory explanations of the questions that we raised with the company. We, therefore, believe we have not received the information and explanations we were entitled to under section 389A(1) CA 1985 and in particular information and explanations which would have reasonably have been required from the officers of the company for the performance of our duties as auditors. Accordingly, we have resigned from our position as auditors of the company on 29^th January 2004.

We wish to bring the above matters to the attention of members and creditors of the company."

106. Although politely phrased, the Statement of Circumstances shows that HCW had caught out Shaid in the commission of an attempted VAT fraud, and that he had upon their inquiry attempted to cover his tracks, either by procuring self-serving letters from builders in cahoots with him or, more simply, by fabricating those letters.

107. …

108. HCW's Statement of Circumstances did not however come to the attention of any of Lexi's creditors, or even of its directors other than Shaid himself, before November 2004. …

109. Shaid achieved this remarkable cover-up of HCW's resignation statement by an application under section 394(6) of the Companies Act 1985, pursuant to which:

"If the court is satisfied that the auditor is using the statement to secure needless publicity for defamatory matter-

(a) it shall direct that copies of the statement need not be sent out, …"

110. Shaid's case was (necessarily) that the contents of the Statement of Circumstances were untrue. To make that case good he made a witness statement and produced further documents. The proceedings were not finally determined until 27^th October 2004, before HH Judge Howarth, sitting as a deputy High Court Judge in the Manchester District Registry. By that time, having successfully gagged HCW while negotiating a doubling of Lexi's loan facility, and the syndication of its loans, Shaid had caused Lexi to abandon the claim, and the issue before Judge Howarth was whether HCW, as defendant, should obtain an order for indemnity costs, in relation to which Lexi was not represented, nor Shaid present at the hearing, although both the court documents and HCW's evidence and skeleton argument had been duly served.

111. After hearing submissions from counsel for HCW, and thoroughly reading the documents, Judge Howarth made an order for indemnity costs, upon the basis that Lexi's claim under section 394(6) was, from start to finish, an abuse of process. He said this:

"It seems to me that these proceedings were as clear an abuse of the process of this court as it would be possible to find. This case is a very much stronger case than Jarvis v. Price Waterhouse Cooper was. Whatever may or may not be the case with Jarvis, it was not a case of dishonesty, and certainly not a case where fraudulent documents were being created, was certainly not a case where there was any form of perjury. It seems to me that this is as clear a case involving those as any I have come across for a long time. In the circumstances I have no hesitation in awarding indemnity costs."

He continued:

"I have invited a representative of the Crown Prosecution Service to sit in the back of this court. It seems to me that there are a number of criminal offences which a judge, in exercising his public duty, simply cannot turn a blind eye to. I am proposing to pass over to the Crown Prosecution Service the two bundles of documents that have been lodged. It may be that they will in due course think it right to bring proceedings for a number of criminal offences, including perjury against Mr Luqman."

112. Freed from the gag constituted by the existence of those proceedings, HCW reported to Barclays on 12^th November by letter, including both a copy of their Statement of Circumstances and a copy of the transcript of the proceedings before Judge Howarth, including his judgment. …"

11. Mr Megaw acted for Lexi in the early stages of these proceedings, though not, we were told, after April 2004. In the course of so acting, Mr Megaw became aware of the contents of what I will call the HCW Statement, and of Mr Luqman's instructions about it, which were no doubt given expression in the witness statement which Mr Luqman made in those proceedings, in which he denied the truth of the statements by HCW.
12. Thus, Mr Megaw acted for Lexi, on the instructions of Mr Luqman, in applying to the court and in filing evidence in support of the application aimed at showing that the case was one in which the HCW Statement included defamatory material for which needless publicity would be given by making the statement public, and that the court should therefore direct that the HCW Statement should not be sent out to those who would otherwise receive copies (in particular, to Barclays as debenture holder), with the result that it would also not be sent to the registrar of companies.
13. Returning to the subject of the Ten Acre Lane site, on 26 January 2005 Mr Megaw met Mr Guy with two other men, Dave Brislen and Chris Farley, who were helping him. According to Mr Megaw's notes, the subjects discussed included the Ten Acre Lane site. These notes suggest that Mr Guy knew that the sale of the land had been completed to Ten Acre Ltd at £15 million, but he had not received the money and wanted it. They also record a discussion of a caution, but with a note that this was not to be used while Mr Brislen tried to do a deal with Mr Luqman which might recover money for Mr Guy. Mr Megaw did draft a letter for Mr Guy to send to Lexi, in response to one he had received from them on a different subject, which Mr Guy sent on 4 February. His note had ended: "I to draft for TG to send and they three to meet re tactics". Mace & Jones replied on behalf of Lexi on 9 February. Mr Guy had another meeting with Mr Megaw on 10 February, discussing, among other things, that letter and the Ten Acre Lane site. On 16 February Mr Guy gave a written authority and request to other solicitors, George Davies, to pass any papers held relating to the Ten Acre Lane site to Pannone. On 24 February Mr Megaw opened a file relating to this subject and had a long meeting with Mr Guy. On 28 February, prompted by seeing a letter of that date from Howard & Howard (who, it seems, represented Ten Acre Ltd) to the effect that their client had had a good title to the land "for over a year", Mr Guy gave Mr Megaw the written instruction already mentioned to place a caution on the title. This letter was sent by fax to Mr Megaw at about 17.55 in the afternoon. That is the first moment at which it is relevant, for the purposes of the appeal, to consider what Mr Megaw might have done that he did not do, and what effect it might have had.
14. The reference to a caution was out of date. Since the Land Registration Act 2002, the equivalent step is to register a unilateral notice under section 34(2)(b). However, it was in fact too late for that to be done with any useful effect. On 14 February 2005 a priority search had been conducted on behalf of Barclays, under section 72 of the 2002 Act, with the result that Barclays would have priority for their legal charge so long as it was registered no later than 28 March 2005. Accordingly, even if Mr Megaw had been negligent in not applying for the registration of a unilateral notice promptly after 28 February, any such negligence would not have caused any loss, and would therefore not give rise to a substantial cross-claim for damages.
15. Moreover, as already mentioned, Barclays took their legal charge on 8 March, so there was only a short period of time during which anything could be done (if at all) to protect Mr Guy's possible claim to recover the land from Ten Acre Ltd.
16. In this context it is necessary to consider what the evidence shows as to what passed between Mr Guy and Mr Megaw on this subject at the relevant time.
17. In Mr Guy's affidavit in support of the application to set aside the statutory demand, he mentioned the letter of 28 February, and said that it was not acted on until 29 March, and that if a caution had been registered immediately after 28 February, Ten Acre Ltd would not have been able to charge the land to Barclays. In his witness statement dated 13 November, he did not add significantly to this account of the relevant facts.
18. Mr Megaw's witness statement dated 24 November 2006 put the story in a fuller context. He recorded having received the faxed letter of 28 February late on that day, and having contacted Mr Guy with a view to meeting him in order to discuss these instructions. He said that a meeting was arranged "for the following week" but Mr Guy did not attend, and later explained to Mr Megaw on the telephone that he needed Mr Brislen to be in attendance as well, and that a suitable meeting would be re-arranged for the following week. Mr Megaw's later witness statement, in the negligence claim, went into more detail on this, and exhibited a note dated 4 March 2005, of a telephone conversation with Mr Guy: "Deal DB/SL is still poss on. Hold until he can see me with DB to discuss strategy." In the witness statement he said that this conversation arose because of Mr Guy's failure to attend the meeting first arranged (which would therefore have been during the same week as 28 February, which was a Monday), and that Mr Guy told him during the telephone conversation not to do anything for the time being pending a meeting to be attended by Mr Guy and Mr Brislen as well.
19. That meeting took place on 9 March and was continued on the following day. In his witness statement in the negligence claim Mr Megaw gave more detail than in the earlier witness statement, but the accounts are consistent. He said that the upshot of the meetings, so far as now relevant, was again that he was to do nothing by way of protection on the register, because that might frustrate Mr Brislen's negotiations with Mr Luqman. However, on 23 March, in the course of one of a number of telephone calls that day, Mr Megaw was told that the negotiations had broken down, and that there was no reason to hold off from registering the appropriate notice. Mr Megaw has not produced an attendance note of that conversation, but he has exhibited his billing records. The record for 23 March has a summary of a number of calls; in the course of one of them there is the phrase "Get the caution on now". He saw to it that the necessary steps were taken at once. They resulted in the notice being placed on the register on 29 March, once Barclays' priority period had expired.
20. In Mr Megaw's witness statement in the statutory demand proceedings, he made it clear, though with somewhat less detail than later, and without the supporting documents being exhibited, that he contended that Mr Guy countermanded his instructions of 28 February as soon as the two men were able to speak to each other thereafter, and that Mr Guy maintained the position that Mr Megaw should not act for the time being until 23 March. Mr Megaw attributed the changed instructions on 23 March to a meeting rather than a telephone call, but otherwise the story is essentially the same.
21. In his witness statement in reply to Mr Megaw, made on 1 December 2006, Mr Guy commented on particular points in paragraphs 20 and 22 of Mr Megaw's witness statement. Paragraph 20 had set out Mr Megaw's account of the events from 28 February into March, including the countermanding of the instructions during a telephone conversation soon after 28 February, and the continued instruction to hold off acting so as not to jeopardise Mr Brislen's negotiations. Paragraph 22 referred to the change of instructions on 23 March and to the reason given for it. In his witness statement in reply Mr Guy took issue with one small detail of paragraph 20, of no relevance for present purposes, but not with any other part of the account given. He said nothing in response to Mr Megaw's account of his having set up a meeting upon receipt of the letter dated 28 February 2005, of Mr Guy not having attended the meeting, of a telephone conversation in which he explained that he needed Mr Brislen to attend as well, of his having told Mr Megaw to hold his hand for the time being as regards a caution, for fear that it might prejudice Mr Brislen's position, of later meetings, and of an eventual change of instructions on 23 March. As for paragraph 22, he represented Mr Megaw as saying that Mr Guy's "first instruction" to place the caution on the register was given on 23 March, but that this was incorrect because of the written instruction on 28 February. However, Mr Megaw did not say that 23 March was the first time on which this instruction had been given, but rather that it had been given on that date as a change from the previous instructions, from 4 March onwards, against such action. Mr Guy did not comment on that aspect of Mr Megaw's evidence.
22. Mr Guy put in a further witness statement in relation to the statutory demand proceedings, made on 5 February 2007. In that witness statement he said at paragraph 9 that he "roundly" disputed Mr Megaw's "vague assertion that I orally countermanded my written instruction". He set out at paragraph 10 what he described as "the sequence of events that actually happened in early 2005", without mentioning anything after his letter dated 28 February other than the execution of the charge in favour of Barclays on 8 March, its registration on 23 March, and the registration of the unilateral notice on 29 March. He continued to preserve silence in relation to Mr Megaw's evidence that a meeting had been arranged and not attended, of a telephone call about the need for any meeting to be attended by Mr Brislen as well, and of later meetings, with consistent instructions to do nothing, until 23^rd March when the instructions were changed. He said at paragraph 11 that if Mr Megaw had acted on his instructions on 1 March 2005, Barclays' priority search would have been revealed. He said he would then have contacted Barclays, or instructed Mr Megaw to do so, "to inform it that I was the true owner of the land", so that either Barclays would not have proceeded with the legal charge until the position was clarified, or if it did take the legal charge it would have been on notice of Mr Guy's claim and interest, and subject to his claim to recover the land.
23. As I have said, Mr Megaw's account of the relevant events was given in more detail, and supported by more documents, in his witness statement in the negligence claim dated 27 February 2008. In Mr Guy's witness statement in answer, made on 14 March 2008, he disputed, in general terms, that the attendance notes were "a correct and true representation of our meetings". However, he did not deal with the story set out by Mr Megaw in detail as to what had happened between the letter dated 28 February 2005 being sent and the discussions on 23 March 2005. This witness statement, therefore, does not take the matter any further than to show that, in however much detail Mr Megaw set out his story, and with whatever supporting material, Mr Guy did not comment on it or offer a different account or explanation of the relevant events.
24. On Mr Guy's behalf, as regards the first of the permitted grounds of appeal, Mr Evans inevitably accepted that, even if Mr Megaw ought to have taken steps to register a unilateral notice upon receiving the letter dated 28 February, it would have done no good in itself, because of Barclays' existing priority. Accordingly, his submission was that Mr Megaw should have searched the register in order to ascertain the correct position, especially as Mr Guy was uncertain as to what had happened to the title. Having made a search of the register, it would have been apparent that a unilateral notice was of no use, but he would have found, first, that Ten Acre Ltd was the registered proprietor, and secondly that Barclays had a priority search, and could be assumed to be intending to take security over the land. Having that information, he should have informed Mr Guy of it. Mr Guy, it is said, would then either have notified Barclays himself of his claim to recover the land, having been deprived of it by fraud and forgery, or he would have instructed Mr Megaw to put Barclays on notice of this. That, he argued, might have put Barclays off from taking the security or, at least, it would have put Mr Guy into a better position to seek rectification of the register as against Barclays.
25. This is not how the breach of duty is formulated in the Particulars of Claim, or in the draft amended version, in the negligence claim. However, Mr Guy now has the benefit of professional advice and representation, and it would not be appropriate to ignore the way in which the case is now sought to be put just because at an earlier stage, when Mr Guy acted in person, he did not articulate it in the same way.
26. Part of the answer given by Mr Parker, Counsel for Pannone, is that there is no reason to suppose that, even if Barclays had been told of Mr Guy's assertion that he had been tricked out of the land by fraud and forgery, they would not have proceeded to take the legal charge. In relation to this point, Judge Langan said:

"Ms Gregory [who had addressed him on points of law] suggested that had Barclays been told prior to the execution of the charge about Mr Luqman's fraud, they might have abstained from taking the charge. That is to my mind speculative. On the contrary, evidence of Mr Luqman's dishonesty might well have made the bank all the more anxious to obtain security for moneys which it had advanced."

27. As regards the possibility of obtaining rectification, Mr Parker, for Pannone, submitted that, absent a unilateral notice, there was nothing that could affect the position of Barclays. That might be too narrow a view. What Mr Evans prays in aid is a passage in my own judgment when refusing permission to appeal to Mr Guy as against Barclays Bank. At paragraph 23 I said this:

"With the greatest of respect to what Judge Langan says there, and I understand perfectly why he took the view that he did, it seems to me that it is necessary to grasp the nettle of what is meant by "mistake". In that respect, while the scope of the phrase "correcting a mistake" is no doubt something that requires to be explored and discussed and developed in the course of future litigation, which will be decided upon the facts and upon the merits of each case, I cannot see that it is arguable that the registration of the charge can be said to have been a mistake, or the result of a mistake, unless at the least Mr Guy can go so far as to show that the bank, the mortgagee, had either actual notice, or what amounts to the same, what is referred to as "Nelsonian" or "blind eye notice", of the defect in the title of the mortgagor, Ten Acre Limited in the present case. I simply cannot see how it could be argued that if the purchaser or chargee knows nothing of the problem underlying the intermediate owner's title, that the registration of the charge or sale to the ultimate purchaser or chargee can be said to be a mistake. That seems to me inconsistent with the structure and terms of the 2002 Act. So the question is whether Mr Guy can show an arguable case, on the evidence, for saying that Barclays Bank had actual notice or was turning a blind eye to matters that it knew, which would if it addressed them properly, have shown it that Ten Acre Limited did not have a good title to the property."

28. That passage is not authority for the proposition that, if at the date of a legal charge a chargee does have actual notice that the chargor did not have a good title to the property charged, or has turned a blind eye to matters that it knew, which would, if it addressed them properly, have shown this, then rectification is available as against the chargee. Apart from anything else, Barclays was not represented at that hearing. That is why the judgment cannot be cited, under the Practice Direction (CA: Citation of Authorities) [2001] 1 W.L.R. 1001. It is relevant in this case only as part of the factual history of the case, not as authority. However, Mr Evans can say that it is possible that, if Barclays had been told of the claim of fraud and forgery before 8 March 2005, the outcome of the litigation between himself and Barclays might have been different. Mr Guy may have lost a worthwhile chance of an improved position.
29. In those circumstances it seems to me that the merits or otherwise of the first ground of appeal depend, first, on what force there may be in the contention advanced by Pannone that Mr Guy countermanded his instructions almost as soon as they had been given on 28 February.
30. Mr Evans cited to us well-known passages from Three Rivers District Council v Bank of England, [2003] 2 AC 1, particularly paragraph 95 in Lord Hope's speech, warning the court against conducting a mini-trial without oral evidence or full disclosure of documents. That is not what summary procedures under Part 24 are for. He argues that there is an important factual dispute as to whether Mr Guy told Mr Megaw to hold back from registering the caution. Nevertheless, especially on an application to set aside a statutory demand, where the onus is on the debtor to show why the statutory demand should not stand, if the creditor puts forward a detailed account of the facts which is inconsistent with that of the debtor, and which if true would show that the debtor does not have the cross-claim on which he relies, then the court is entitled to take account of the debtor's response, even if it is one of silence. The court may not be able to conclude that there is a serious factual dispute without some detailed evidence from the debtor which shows what facts are in dispute.
31. It seems to me that it would be wrong to ignore the fact that, in the two witness statements which Mr Guy made after 24 November 2006, to deal with the points made in Mr Megaw's witness statement of that date, and likewise in the witness statement dated 14 March 2008 in answer to Mr Megaw's witness statement in the negligence proceedings, he made no comment about the essence of Mr Megaw's account of what happened after the letter dated 28 February was sent. The nub of that is that the first thing Mr Megaw did was to set up a meeting with Mr Guy to take detailed instructions on the point, which however Mr Guy did not attend, and that when they spoke after that Mr Guy said he needed Mr Brislen to attend the meeting because he was still negotiating with Mr Luqman in the hope of extracting money from the situation, and that Mr Megaw should not register a caution for the time being for that reason, that at the eventual meeting (on 9 and 10 March, though the dates were not given at this stage) the instructions were to hold back from registering a notice, and that this was maintained until 23 March, when the negotiations were said to be failing. Mr Evans submitted that it would be wrong to hold against someone who was at the time a litigant in person his failure to respond to aspects of the other side's evidence. It seems to me that this comment has even less force than it might otherwise have, given that Mr Guy did take issue with one minor point in paragraph 20 of Mr Megaw's witness statement made on 24 November 2006, and misrepresented paragraph 22. It cannot be supposed that Mr Guy failed to read and understand what was being said in these paragraphs, and the assertion was about his own conduct. If he had wished to controvert any of what was said, he had the opportunity then and thereafter. He did not do so in either of his two subsequent witness statements, or in his witness statement in the negligence proceedings in which he was answering a more detailed account of the same events, with supporting documents, and it seems to me that his silence is very telling. Mr Guy's lack of legal representation, even though alleviated somewhat by the assistance of Miss Gregory (who I understand to be legally qualified), may have prevented him from advancing legal propositions in the most cogent way. It did not in any sense disable him from dealing fully with the facts as he knew or believed them to be. I do not see that it could be right to ignore the fact that Mr Guy failed to respond to Mr Megaw's evidence by giving his own account of the facts in the period from 28 February to 23 March in relation to the communications between the two men.
32. For those reasons, as regards the first ground of appeal, I would hold that Judge Langan was right to reject the application to set aside the statutory demand on the basis that Mr Guy's claim against Pannone in negligence is not shown to be arguable with any realistic prospect of success. Although Mr Guy did instruct Pannone to protect his interest in the property by a suitable registration on 28 February, his evidence does not permit the court to conclude that he has a viable answer to the contention that he withdrew those instructions on the first occasion thereafter on which he and Mr Megaw were able to speak about the matter, and that he did not reinstate those instructions until 23 March. I do not accept that any relevant dispute of fact has been shown to exist on the evidence before the court. Regardless, therefore, of whether the instructions given on 28 February could be read as requiring Pannone to do the series of things referred to above (at paragraph [24]) and of whether, by their not being done, Mr Guy lost any worthwhile chance of ending up in a better position than he actually was in, (neither of which is a straightforward proposition) I would dismiss the appeal on that ground. So far as the points argued before the judge are concerned, it seems to me that his decision was correct.
33. The question of conflict between Mr Megaw's duty to Lexi, arising from his having acted previously for that company, and his duty to Mr Guy, on his later instructions, was not argued before Judge Langan, though reference was made to the HCW proceedings and to the fact that Pannone (Mr Megaw) had acted for Lexi in those proceedings, and to paragraph 27 of Mr Guy's Amended Particulars of Claim, in which he referred to Pannone being aware that Mr Luqman "had been involved in a similar fact transaction in 2003 and 2004", meaning the subject matter of the HCW Statement, and in the proceedings about the HCW Statement. We have the transcript of the argument before the judge, from which it can be seen that no argument was presented to him to the effect that Pannone ought to have acted differently towards Mr Guy in 2005 because of what Mr Megaw knew from having acted for Lexi and on Mr Luqman's instructions previously.
34. The only point made in the Particulars of Claim arising from Mr Megaw having acted for Lexi previously was (in the particulars of breach and/or negligence under paragraph 33) that Pannone failed to notify the Law Society adequately of Mr Megaw's previous instructions so as "to enable a true conflict of interest allegation to be assessed". That refers to events later in 2005. In April, Mace & Jones wrote to Pannone stating that, as the latter was a defendant to a professional negligence action brought by Lexi in respect of the conduct of Mr Megaw, Pannone had a conflict of interest in acting for Mr Guy against Lexi. Other solicitors, Messrs Bermans, then complained to the Office for the Supervision of Solicitors (OSS) in May 2005. The OSS informed Pannone of the complaint in August 2005, and in September they told Pannone that the complaint would not be taken further. Any failure on Mr Megaw's part in the course of those events could have no relevance to Mr Guy's possible claim on which he sought to rely in relation to the statutory demand.
35. Mr Guy mentioned one point arising from conflict in his original affidavit in support of the application to set aside the statutory demand. This was that, if Bermans' complaint was justified, and Pannone ought not to have been acting for him in the first place, "it would not be appropriate for them to raise any charges": see paragraph 7(a). He said nothing on the point in his witness statement made on 13 November 2006. Mr Megaw mentioned the point in his witness statement dated 24 November at paragraph 32. It is common ground that Mr Megaw was known to have acted previously for Lexi (on other matters than the HCW proceedings), because it was in that context that Mr Guy had first come across him, and it seems to have been Mr Luqman that had recommended Mr Megaw to Mr Guy. Mr Megaw said in his witness statement that he discussed with Mr Guy the question of a possible conflict of interest when Mr Guy first asked him to act in relation to Lexi. Those first instructions were on a matter not directly related to the Ten Acre Lane site, but arising from one of Mr Guy's many other transactions involving Lexi. He also discussed the matter within his firm. He came to the conclusion that there was no conflict of interest and that he could therefore act for Mr Guy in relation to claims by Lexi against Mr Guy or by Mr Guy against Lexi. He said that he kept Mr Guy fully informed of the complaint by Mace & Jones directly and to the OSS and what happened to it.
36. Mr Guy did not mention this aspect of the matter at all in his later witness statements dated 1 December 2006 or 5 February 2007. He mentioned the point in his Particulars of Claim in October 2007, as I have mentioned, and in similar terms in the draft Amended Particulars of Claim. In neither of those does he articulate a proposition as to what it is said Mr Megaw should have done in January, February or March 2005, because of his prior knowledge of Lexi and Mr Luqman, and the HCW Statement, that he did not do. Nor did Mr Guy give any evidence at any stage as to how he would have acted differently if Mr Megaw had told him of the HCW Statement at any relevant time.
37. Nevertheless, the second ground of appeal is one which is open to Mr Guy to argue, and for Mr Evans to make what he can of it. His argument is that Mr Megaw knew that Mr Luqman had been accused of fraud previously, and knew the details of the HCW Statement, and that, although the allegations had not been proved, they had been made public by Lexi's auditors; having that knowledge, he ought to have told Mr Guy of the accusations against Mr Luqman, and this would have affected Mr Guy in his decisions as to how to proceed vis-à-vis Mr Luqman - in particular it might have led him to be less willing to hold his hand while negotiations were conducted with Mr Luqman. As put in the skeleton argument, the case was that Mr Megaw ought to have advised Mr Guy that his decisions should be taken on the basis that Mr Luqman "may not be trustworthy". If Mr Megaw failed to tell Mr Guy of this because he was inhibited by his duty to his previous client, he should have told him that he could not act for him, and that he ought to take separate advice from another solicitor.
38. As I have mentioned, the terms in which permission to appeal was granted on this point are defined so as to relate to the period after receipt of written instructions to register a caution on 28 February 2005. In the context of this second ground of appeal that is a somewhat artificial time limit, because it might be said that, if Mr Megaw's knowledge of the HCW Statement was relevant to the duty he owed to Mr Guy, then he ought to have disclosed it (or declined to act) as soon as he was first instructed in relation to the Ten Acre Lane site. As already stated, there were discussions between the two men about that site over some period from December 2004, but the first time when Pannone were instructed in any formal way on Mr Guy's behalf in relation to this matter was on 16 February 2005, when George Davies were asked and authorised to hand over their papers relating to the site to Pannone. It could be argued that this was the moment when, if Mr Megaw had relevant knowledge, he should have disclosed it, or if he could not do so, he should have declined to accept the instructions.
39. It is clear from the terms of Stanley Burnton LJ's judgment when he gave permission to appeal (of which we have a transcript) that it was only the possible effect on Mr Megaw as regards "what he did in relation to those instructions", i.e. the letter dated 28 February 2005, that he contemplated as being open to argument on the appeal.
40. It is not altogether easy to assess this point, given that it was not formulated as one of the grounds for setting aside the statutory demand in the first place, and was therefore not in the minds of either party when evidence was being put forward, or when arguments were being addressed to the court. As it seems to me, it cannot be put higher, on Mr Guy's behalf, than that Mr Megaw knew of the allegations in the HCW Statement and ought to have made them known to Mr Guy (who did not know of them) because they might affect his approach to dealing with Mr Luqman in relation to the Ten Acre Lane site.
41. If this were a valid point, it would not matter whether or not Mr Megaw was precluded from disclosing to Mr Guy the fact and content of the HCW Statement. If he should have disclosed it, he did not do so, and the reason why he did not do so would make no difference, whether it was due to an incorrect view of the relevance of the statement, or to a view (correct or not) that he was precluded from mentioning it by reason of his duty to his former client.
42. Accordingly, the question turns on whether the information was relevant to Mr Guy in relation to the matters on which Mr Megaw acted for him and ought to have been passed on to him by Mr Megaw. As to that, it is worth considering what Mr Guy's position and state of mind was in any event, without that knowledge. He said in paragraph 24 of his witness statement dated 13 November 2006 that he "had been working closely with [Lexi] and the Managing Director Shaid Luqman since February 2002", and in paragraph 40 that "I only became aware of the fraudulent transfer of the Ten Acres Site in January 2005", when he was told by Mr Luqman, to his astonishment, that "the transaction had already been completed and that no more money was owing to me". He knew that he had not entered into a contract for the sale of the land, nor had he executed any transfer of the land to anyone. Accordingly it must have been clear to him, by the time he first instructed Mr Megaw about this matter, that he had been tricked and defrauded, and that it was Mr Luqman who had been responsible, directly or indirectly. Given that he had that knowledge already, it seems to me that it can be no more than a matter of speculation as to what, if any, added significance Mr Guy might have attached to the HCW Statement, especially in the absence of any evidence from Mr Guy himself on the point.
43. Since Mr Guy said nothing in the evidence as to his state of mind at the relevant time, as to the significance which the HCW Statement would or might have had for him at that time, or of how it might have affected his conduct vis-à-vis Mr Luqman and Lexi, I find it impossible to conclude that Mr Megaw's failure to disclose to him the fact and nature of the HCW Statement was arguably a breach of duty or, if it had been, that it arguably caused him any loss.
44. It would be all the more difficult for Mr Guy to show any breach of duty or any loss as regards how Mr Megaw should have acted after 28 February 2005, given the very short time in which, if anything could be done to improve his position at all as against Barclays (which is by no means clear), it would have had to have been done.
45. Accordingly, it seems to me that there is no substance in the second ground of appeal any more than there is in the first. The evidence does not justify the assertion that there is an arguable cross-claim, let alone one of sufficiently substantial amount, on this alternative basis. I would therefore dismiss the appeal.

Lord Justice Moore-Bick

46. I agree.

Lord Justice Pill

47. I also agree.