Mortgage Agency Services Number One Limited (trading as Britannia Commercial Lending) v Cripps Harries LLP.

Posted on 23/10/2016 · Posted in Expert Witness, Financial Litigation

Mortgage company Mortgage Agency Services Number One Limited (‘MASNOL‘) (trading as Britannia Commercial Lending) approached the High Court claiming damages for fraud and conspiracy against defendant firm Cripps Harries LLP, arguing that the firm had deliberately misled them in a matter of lending funds to Dockland property developer and former Olympic gymnast Spencer McGuinness.

Mr McGuinness had borrowed £11.4 million from MASNOL for refinancing a housing project without disclosing that he had already defaulted on a previous loan from West Bromwich Building Society. It was not very long after the drawdown before McGuinness fell into arrears on the MASNOL loan as well, and a sale generated a shortfall.

Miss F, a newly qualified solicitor, and Mrs G, an experienced legal executive of Cripps Harries were instructed to act for McGuinness. In an attempt to cover up the serious shortfall in recovery, the Claimant accused the defendant of misrepresenting outstanding works as snagging when they were more than that, giving misleading answers in preliminary inquiries, and falsely stating that the redemption figure for the loan as £11.1m when in reality it was a figure which included over £350,000 in unsecured borrowings.

An error does not become truth by reason of multiplied propagation, nor does truth become error because nobody sees it.”
Mahatma Gandhi

Mr Justice Mann sitting in the Chancery Division considered the allegations against Ms F as “most serious” and set out an elaborate 100+ pages judgment scrutinising her each and every action.

Questioning the motive of Ms Francis behind the alleged fraud, the Court noted that there was no direct benefit she could have obtained from wilfully misleading the transaction, and neither was Mr. McGuinness that important a client of the defendant so as to justify any special treatment. “The real explanation”, according to the Court, was “the inelegancy of expression in a relatively inexperienced solicitor who was overwhelmed with work and who lacked supervision and support (which she admitted she did).

Acknowledging her limitations, the Court further observed that “a solicitor putting forward something that his client says is true is entitled, if not obliged, to put that matter forward even if he suspects (or even suspects strongly) that it is not true.” Thus even though her inexperienced carelessness may have been wrong, it did not prove bad faith or dishonesty.

Moving on to Mrs G, the Court similarly found a lack of motive and all conspiracy claims failed in view her impeccable service records.

The Court concluded that the “Claimant was anxious to maximise its recovery in what was a fairly disastrous loan” and as a result, it “donned its fraud detection goggles, turned the sensitivity up to high and attributed a dishonest motive to every interesting feature in the landscape.” Ultimately all allegations were held to be baseless, and the claim was dismissed with both Ms F and Mrs G standing entirely exonerated of all charges.

Link: MASNOL v Cripps Harries EWHC Ch [2016] 2483

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