Adelle Challinor & others v Juliet Bellis & Co & another [25.02.13]

High Court considers whether solicitor should have released investment monies.

The Claimants, a group of 21 investors, paid £2.28 million into Juliet Bellis & Co's client account in connection with a property investment opportunity relating to Fairoaks Airport, which had been advertised by the second defendant, Geoffrey Egan.

No written contract existed between any of the parties. A special purpose vehicle named Albemarle Fairoaks Ltd ("AFL") had acquired the development land. Following a request from Mr Egan, Mrs Bellis paid the monies to AFL before obtaining any security for the Claimants. AFL subsequently went into administration.

The Claimants brought proceedings for breach of trust and/or contract against Bellis claiming the monies were held subject to escrow conditions and/or a form of trust. Their release constituted a breach and, therefore, Bellis was liable to repay them. Bellis argued that the monies had been given by the Claimants for an immediate loan to AFL in order that AFL could repay a loan it had taken out. She also brought a counterclaim against Egan, as he had allegedly told her to release the funds.

Although not of direct relevance to the judgment, the background facts of the case are somewhat unique and quite a family affair. Egan's company had been bought out by Erinaceous Commercial Services Ltd and, as a result, he was employed by them. Bellis was Erinaceous' company secretary, and her firm's office was situated in the same building as Erinaceous. Her sister, Lucy Cummings, was the COO and her husband, Neil Bellis, the CEO of Erinaceous. The nominee shareholder of AFL was Bellis' brother, Nicholas Cummings.

Decision

The High Court found that there was no contract between the Claimants and Bellis and the money was not held on escrow. The Judge concluded that:

"The difficulties that the Claimants had in defining the terms and conditions of the contract reflect the fact that no sufficiently certain agreement can be discerned or inferred."

However, the court rejected Bellis' contention that an immediate loan to AFL was the monies' intended purpose. The use of Bellis' client account showed that the monies were to be retained separately from AFL’s until further instruction or clarification and, as a result, they were subject to a trust.

The court held that Bellis had breached her fiduciary duty as a trustee by releasing the monies:

"Without the most unequivocal instructions from her beneficiaries or complete certainty that they had directed payment to AFL on conditions that had unequivocally been met. Such instructions were never received; and no such certainty was ever achieved."

The court also found that "Egan did not owe any personal duty to the Claimants, nor did he make any actionable misrepresentations to them" and, in terms of Bellis' counterclaim, he did not act outside his remit or obligations. Therefore, this failed.

Comment

When receiving monies, a solicitor must carefully consider the basis on which they are received, and take care that they are only distributed in strict accordance with the instructions of the monies' owner. Where there is ambiguity or uncertainty as to the extent of those instructions, this case reinforces the need to seek clarification and avoid misunderstandings.

Those promoting investment opportunities should also make sure their remit is clearly defined and their position independent, and if providing instructions on behalf of investors they too should ensure they have their client's explicit authority.