Court rejects summary judgment bid in £6m solicitor fraud case

Taymouth Castle: £6m claim

The High Court has thrown out as an abuse of process an application for summary judgment brought by victims of a solicitor’s fraud suing his firm’s insurer for £6m.

Mrs Justice Moulder said allowing the application would be to give the claimants a “second bite of the cherry” following a decision last October to allow insurer Axis Specialty Europe to amend its defence.

Axis initially claimed that the appointment of the other partner of London firm Jirehouse was a sham but David Railton QC, sitting as a deputy High Court judge, gave it permission to argue alternatively that the partner condoned the actions of Stephen Jones.

In August 2019, Mr Jones was jailed for 14 months after being found guilty on four counts of contempt of court for breaching undertakings given to the court about missing client money.

He provided legal and tax planning services through London law firm Jirehouse, which acted for American property developer Discovery Land Company on its planned $14m (£10m) acquisition of historic Taymouth Castle, where Queen Victoria and Prince Albert stayed on their honeymoon.

It wired the money to the client account of Jirehouse Trustees, one of three law firms using the Jirehouse name. All three were shut down by the Solicitors Regulation Authority in May 2019.

The money was meant to stay there until the deal completed but the High Court in 2019 found that Mr Jones actually lent the money immediately upon receipt to two borrowers, whose identities were still unknown and who have not repaid it.

Further, Jirehouse placed a charge on the castle in favour of a lender as security for a loan facility, from which £4.9m was drawn down.

Discovery and two other claimants are seeking just under £6m from Axis, which provided the primary layer of indemnity insurance to Jirehouse, under the Third Parties (Rights against Insurers) Act 2010. The trial is set for July.

It was common ground that the three underlying claims arose out of Mr Jones’s dishonesty.

Having digested Mr Railton’s ruling, the claimants issued their application for summary judgment over the amendments he approved.

Moulder J said that, “as well as the public interest in discouraging a ‘second bite at the cherry’, there is the private interest in the defendant not being vexed twice”, increasing costs and disrupting Axis’s preparation for trial.

She held that the construction of the clause, and the relevant authorities, had clearly been considered by the claimants before the October hearing and that “having considered the point, the claimants conceded that the amendments were arguable”.

Even if this was a case where a point could have been taken at the hearing but was not, there had been no significant or material change of circumstances since then.

The judge concluded: “In my view to permit the claimants to bring this application obstructs the efficacy of the judicial process by undermining the finality of the interlocutory decision.

“It is no answer in my view to say that the issue of construction will have to be dealt with at trial or that a decision may assist settlement.

“To accept such a submission would be allow every ‘second bite of the cherry’ irrespective of whether there has been any material change of circumstances or new fact arising and such an approach would be contrary to the Court of Appeal decision in Koza.

“The court has already considered the very issue of whether the amendments have a real prospect of success and the defendant is entitled to proceed now to trial on that case as amended.”

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