Coatman & Anor, R (on the application of) v Council for Licensed Conveyancers [2012] EWHC 1648 (Admin)

Case No CO/10217/2010[2012] EWHC 1648 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Manchester Civil Justice Centre
1 Bridge Street West,
Venue ManchesterDate 22/06/2012
M60 9DJ
Before
MR JUSTICE KING
Between
QUEEN ON THE APPLICATION OF NIGEL COATMAN AND ANDREW GOLUBClaimantCOUNCIL FOR LICENSED CONVEYANCERSDefendant
Mr Andrew Thomas QC (instructed by JMW Solicitors LLP) for ClaimantsMr Hodge Malek QC and Mr Rupert Allen (instructed by Reynolds Porter Chamberlain LLP) for DefendantHearing Hearing dates: 19 and 20 January 2012
Judgment
[1]This is a challenge by way of judicial review to the decisions made by the defendant’s Licensing and Practice Committee (‘the Committee’) at a meeting on the 29th of June 2010, communicated to each of the claimants by way of a Notice of Determination sent under cover of letter dated 21 July 2010, refusing their individual applications for a grant to be paid to them from the defendant’s compensation fund. In the case of the first claimant there were 3 separate claims forms. In the case of the second claimant there was one.[2]By their applications, each claimant claimed to have lost substantial sums of money (in the case of the first claimant just over £2 million; in the case of the second just over £300,000) arising from payments made between February 2005 and August 2009 to McKenna and Co, a firm of Licensed Conveyancers regulated by the defendant and its business manager Mr Malcolm McKenna although not himself a licensed conveyancer. The payments were solicited by Mr McKenna purportedly acting with the authority of the firm whose sole proprietor was Mr McKenna’s wife, Mrs Lynne McKenna, on the basis that they were to provide secured bridging loans to clients for whom the firm was acting in the purchase of property.[3]The Factual Background in the Detailed Statement of Grounds states at paragraph 8 that the loans were solicited ‘on behalf of customers of McKenna and Co. At all material times Mr McKenna claimed to be acting on behalf of the practice and said that the loans were required in connection with conveyancing transactions performed by the practice’. It further states at paragraph 9 that ‘at all times Mr McKenna told the claimants that the loans either had been or would be secured by way of charges over the properties which McKenna & Co’s customers were buying’. I did not understand from the submissions made on behalf of the defendant before me, that any issue was being taken with these particular facts for the purposes of this judicial review and they are in any event reflected in the Agreed Statement of Facts, referred to below.[4]Mr McKenna committed suicide in September 2009. The firm have been unable to account for what happened to the claimants’ payments. All the indications are that security does not exist and the claimants have been the victim of fraud. The defendant formally intervened and took control of the practice in January 2010. The claims set out a factual account of the claimants’ dealings with Mr McKenna and McKenna and Co and attached supporting documents.[5]In the case of the claims made by the first claimant, these relate to some 20 loan transactions the details of which are set out in a composite schedule prepared on the claimant’s behalf, one of which was a loan to Mr McKenna himself to be secured on property belonging to himself and his wife. That schedule discloses how the succeeding loans over the years were funded in part by ‘new money’ from the claimant (in respect of 9 loans, jointly with a Mr Boydell) and in part from ‘rolled over’ repayments on earlier loans. The total amount outstanding on the loans is put by the claimant as at the date the firm ceased trading at £2,059,456. The total claim on the compensation fund exceeds that sum. Mr Malek QC in a helpful schedule (analysing in the case of each loan, the amount of the loan, the new funds introduced by the claimant, the amount rolled over from a previous loan, the amount repaid to the claimant, the amount rolled over to subsequent loans, the agreed annual interest rate, including penalties) demonstrated that the net loss in terms of new funds less amount repaid was some £1,772,296 and explained that the claim on the fund was as high as it was because the first claimant sought compensation for interest and penalties which he claimed were due under the purported loan agreements and because he did not give credit for the amounts actually repaid.[6]In the case of the second claimant, the claim on the Fund was in respect of 3 ‘bridge loans’ with a total loss claimed of some £300,175 plus interest, of which the bulk (£240,893) comprised the proceeds of sale of his and his wife’s house which they had sold through McKenna and Co and which Mr McKenna had suggested they should reinvest in the bridging loan scheme.[7]The defendant rejected the applications on a preliminary ground that on the facts relied upon by the claimants in their applications, the claims did not as a matter of law fall within the compensation scheme established under the material Compensation Fund Rules and required no further investigation. Those rules were made under the material provisions of the Administration of Justice Act 1985, namely section 21(2) and following subsections.[8]The decision of the Committee was not in other words based upon its exercise of a discretion which it undoubtedly had as regards the making of a grant in respect of an eligible claim, but rather a decision which went to its jurisdiction. It decided it had no power to make any grant. That the defendant could not make a grant out of the Compensation Fund unless the claim fell within its defined scope is not in dispute. See R v Law Society, ex parte Mortgage Express (1997) 2 All ER 348, 359-60.[9]The conclusions of the Determination in each case, set out in section 6, were for all practical purposes identical. Paragraph 6.1 of each Determination reads as follows: “In considering the application, the Committee made no determination (since in view of its substantive determination it was not necessary to do so) whether sufficient information had been produced to satisfy it as to the source of the funds remitted; whether the funds claimed had been provided, as asserted and, if so, how they had been applied; or, the nature of the representations made to the Claimant”.[10]In other words it is common ground that (to quote paragraph 2 of the defendant’s Detailed Grounds for Contesting the Claim) that ‘the Defendant rejected the Claimants’ claims for a grant from the Fund …. on the basis that, taken at their highest, the claims could not as a matter of law satisfy the eligibility requirements for a grant from the Fund. The claims were therefore rejected without making or purporting to make any finding of fact.’ The emphasis is the emphasis of this court.[11]In these circumstances this court has been asked to approach this claim on the assumption that the facts relied upon by the claimants in their applications for compensation are correct and for this purpose there is an Agreed Statement of Facts. The case accordingly turns upon how in law the statutory scheme is to be properly interpreted and its application to those agreed facts.[12]Further in these circumstances the claimants have not asked this court to consider grounds 1 to 3 of the claim (lack of investigation; failure to disclose evidence; failure to take material facts into account), the claim before me being confined to grounds 4- 7 which in the round assert that the Committee in rejecting the claims for lack of eligibility, misdirected themselves in law and/or acted irrationally. Their respective headlines are as follows : ground 4 (misdirection of law (scope of the compensation scheme); ground 5 (misdirection of law (meaning of ‘interests in land’)); ground 6 (irrational conclusions/ conclusions not based on evidence); ground 7 (failure to consider material facts , namely the failure to account).[13]As will be seen, the critical issue in this case is whether as a matter of law based on those facts the claimants’ claims were ineligible under the scheme, as found by the Committee who in effect decided that any losses suffered by the claimants arose solely from unregulated activity of Mr McKenna, and/or the firm, namely the arranging of bridging finance for clients and the drawing up of loan documentation, outside the ambit of the scheme, and had no connection with the McKenna practice as licensed conveyancers, albeit the loans were purportedly to finance property transactions which the firm were purportedly undertaking on behalf of clients and further albeit that the claimants were told that security by way of legal charge over the relevant property would be provided; or whether the claimants’ claims, taking their cases at their highest, do, as the claimants assert they do, qualify under Rule 13(a) and/or (b) of the Fund Rules (mirroring the provisions of section 21(2) of the AJA 1985), being in relation to losses arising ‘ in connection with’ ‘the practices or purported practices’ of McKenna and Co and its employees ‘as licensed conveyancers’ or in consequence of the failure on the part of McKenna and Co as licensed conveyancers to account for money ‘received by them in connection with their practices (or purported practices) as licensed conveyancers’. The significance of the emphasis will become clear when I turn to the detail of the Committee’s determination in the context of the statutory provisions.[14]I record in this context the submission of Mr Malek QC on behalf of the defendant that the claimants are seeking to challenge the decision of a specialised regulator, acting through its Committee, in relation to the scope of its regulatory responsibilities and the statutory compensation scheme which it operates and as such the court should be slow to reject the defendant’s considered views as to the meaning of the phrase ‘practice (or purported practice) as a licensed conveyancer’ and whether on the facts asserted by the claimants what Mr McKenna was doing or purporting to do fell within the practice or purported practice of licensed conveyancers. I was referred to the professional experience of those who made up this particular committee.[15]Reliance was placed on a number of authorities demonstrating the primacy which a court should give to the professional judgment of those who have been entrusted with the operation of the regulatory scheme of their particular profession, on matters which fall peculiarly within their professional judgment. See for example the decisions of the Court of Appeal in R v Securities and Futures Authority, ex parte Panton (unreported 20 June 1984); Giles v Law Society11 October 1985, unreported. My attention was drawn in particular to the observations of Beatson J in the Queen (on the application of ABS Planning Ltd and others) v Financial Services Compensation Scheme Ltd [2011] EWHC 18 (Admin) where at paragraph 62 he referred to the fact that the question entrusted to the defendant in that case involved a number of complex financial and transactional issues that depended on a number of criteria of a technical and regulatory nature; that the caution of a judicial review court when dealing with complex economic issues was because such issues were often both technical and open textured and ‘because the primary decision maker is likely to have developed an expertise on those issues’. Beatson J. then continued in these terms in a passage strongly relied on for present purposes by Mr Malek :
‘In such cases even where the question at issue is a jurisdictional question, “if the criteria are so imprecise that different decision – makers, each acting rationally, might reach different conclusions when applying it to the facts of a given case” it has been said that the court “is entitled to substitute its own opinion for that of a person to whom the decision has been entrusted only, if the decision is so aberrant that it cannot be classed as rational’: see R v Monoplolies and Mergers Commisson ,ex parte South Yorkshire Transport[1993] 1 WLR 23,32 per Lord Mustill.’
[16]So urges Mr Malek, where there is more than one way to characterise ‘what has been going on’, the court should pay respect to how the experts have characterised matters and here those experts, the defendant’s Committee ‘with their knowledge and expertise in dealing with conveyancing practice’, had recognised that what was being run by Mr McKenna was a bridging loan scheme which fell outside the scope of a licensed conveyancing practice. Licensed conveyancers are not bankers or deposit takers and are not in the business of making and arranging loans. Likewise the defendant does not regulate banking or deposit taking.[17]I would accept this need for caution but would observe at once that what is essentially in issue in this case is not so much whether Mr McKenna was going about soliciting and brokering loans and if he was, whether such activity fell outside the regulatory scheme (as to which this court has no difficulty in accepting the conclusions of the defendant) but whether the defendant was correct in law on the agreed facts in rejecting the claimants’ claim that on those facts, the claimed losses were in consequence of other activity which is regulated. As I understood the submissions of the defendant it is not in dispute for the purposes of this judicial review (and this is again reflected in the Agreed Statement of Facts, and see too paragraph 3 of the defendant’s detailed grounds for contesting the claim) that the express purpose of the loan payments (other than the loan known as B20 which was to Mr McKenna personally) was to pay for property transactions in which McKenna and Co, as licensed conveyancers were purportedly engaged, performing the conveyancing on behalf of their clients. One of the principal complaints of the claimants in this case is that the Committee considered only the initial soliciting of the loan and did not go on to consider what further role the licensed conveyancer had played or purported to play in the transaction. This is a matter to which I shall return.[18]I attach as an appendix to this judgment, the Statement of Agreed Facts. For present purposes I would highlight the following facts upon which this judgment must proceed, namely: 1. Mrs Lynne McKenna was a registered licensed conveyancer and sole proprietor of McKenna and Co. Mr Malcolm McKenna was employed by McKenna and Co as ‘Business Manager’ …but was not himself a licensed conveyancer . 2. At all relevant times McKenna and Co was a licensed conveyancing practice and was regulated by the defendant… 3. Further, at all relevant times, Mr Malcolm McKenna acted with the actual or apparent authority of McKenna and Co and/or Mrs McKenna… 9. …All correspondence relating to the bridging loans was written by Mr McKenna in the name of ‘McKenna and Co Licensed Conveyancers’ or ‘McKenna and Co, Property Lawyers’ 10. With the exception of Mr Coatman’s B20 loan to Mr and Mrs McKenna personally, in respect of each of these transactions: (a). Mr McKenna told Mr Coatman and Mr Golub that the money would be used to provide short term bridging finance to a client (or clients) of McKenna and Co in connection with transactions relating to land. (b). Mr McKenna told Mr Coatman and Mr Golub that McKenna and Co would ensure that the loans were fully secured by way of legal charge over the relevant client’s property (or properties). He advised that the security would be valid and effective security for the loans. (c). with the further exception of Mr Coatman’s transaction B21, in each case McKenna and Co provided Mr Coatman and Mr Golub with a receipt stating that the monies had been or would be used for a purported client of McKenna and Co. B21 occurred shortly before Mr McKenna’s death and no receipt was issued. (d). in each case Mr McKenna told Mr Coatman and Mr Golub that McKenna and Co had in fact executed security by way of a legal charge over the relevant property (or properties). The claimants did not receive any other evidence that security had been put in place in respect of any of the loans . (e). in relation to Mr Coatman’s transaction B11, however, Mr McKenna provided a specimen copy of a draft legal charge purportedly between a client and McKenna and Co (but not Mr Coatman). 11. Mr Coatman’s loan B20 was made to Mr McKenna personally. Mr McKenna said he would arrange security by way of legal charge over the property which he and Mrs McKenna owned at Heathfield Farm, Wilmslow. The payment in respect of the loan transaction was paid into a joint account held in the name of Mr and Mrs McKenna. A draft agreement was provided which was signed by Mr McKenna as borrower. The draft agreement was not signed by Mr Coatman as ‘lender’. Mr McKenna later said that the charge had in fact been executed. 12. Neither Mr Coatman nor Mr Golub would have entered into any of the transactions but for the agreement that valid security would be provided.

The Statutory Scheme

[19]I turn to the detail of the statutory scheme for compensation under which the Determinations under challenge were made.[20]The defendant is the regulatory body for licensed conveyancers in England and Wales, being the statutory body established under section 13(1) of the Administration of Justice Act 1985 as part of the statutory scheme for licensed conveyancing created under Part II of the Act which relaxes to the extent provided, the statutory restrictions (under section 22(1) of the Solicitors Act 1974) upon the provision of conveyancing services by persons not qualified as solicitors. I accept the defendant’s submission that the object of these statutory provisions was to liberalise the market for the provision of certain legal services relating to conveyancing that had previously almost exclusively been provided by solicitors.[21]The defendant’s statutory powers of regulation arising under Part II of the Act are defined by reference to ‘practice as a licensed conveyancer’ and in turn to the statutorily defined concept of ‘conveyancing services’. Section 11(2) of the Act provides that ‘references in this Part to practising as a licensed conveyancer are references to providing, as the holder of a licence in force under the Act, conveyancing services in accordance with the licence’. (Unless otherwise indicated, any emphasis in the extracts from the statutory provisions, and those of the compensation rules, is the emphasis of the court).[22]‘Conveyancing Services’ for these purposes are defined in section 11(3). It is a relatively narrow definition:
“(3) references in this Part to conveyancing services are references to the preparation of transfers, conveyances, contracts and other documents in connection with, and other services ancillary to, the disposition or acquisition of estates or interests in land”
[23]Mr Malek on behalf of the defendant emphasised to me the evidence of Mr Simon Blandy, the defendant’s Director of Policy and Standards, that the defendant, by reason of its statutory origin, only has regulatory functions in respect of licensed conveyancers; that it has no representative functions, and that its regulatory powers and duties are definednarrowly by reference to these statutorily defined concepts of ‘practice as a licensed conveyancer’ and the provision of ‘conveyancing services’ (together with two other reserved activities, probate and administration of oaths, neither of which is presently relevant). Thus although the defendant has similar functions to the Solicitors Regulation Authority (the ‘SRA’) (as opposed to the Law Society) it does not, unlike the SRA, regulate the conduct of practitioners under its watch generally and does not for example extend its regulatory function to non reserved activities or private conduct which might bring the profession into disrepute. To quote paragraph 21 of Mr Blandy’s evidence:
“Licensed conveyancers can and do provide other services which do not fall within the definition of conveyancing services, probate or the administration of oaths, but the defendant does not regulate those other services. Indeed under the Licensed Conveyancers’ Conduct Rules 2009 (‘the 2009 Conduct Rules’) licensed conveyancers are required to inform their clients when they are undertaking activities outside the Defendant’s regulatory scope (see rules 4.4.3 and 4.4.5 of the 2009 Conduct Rules).”
[24]Further, by reference to the statutory definitions, Mr Malek highlights that the core activity that constitutes ‘conveyancing services’, regulated by the defendants, is the preparation of documents in connection with the disposition or acquisition of estates or interests in land and hence the narrowness of this core activity should inform the interpretation of a service ‘ancillary’ to the disposition or acquisition of such estates or interests. Reference is made by the defendant to the definition of ‘ancillary’ in the New Shorter English dictionary as meaning ‘subservient, subordinate, auxillary, providing support’, in support of the proposition that only services which are a ‘necessary and subordinate adjunct’ to the disposition or acquisition of interests in land can fall within the concept of an ‘ancillary service’ for the purposes of the statutory scheme.[25]On this basis it is said that it would be quite impossible to bring within the scheme, services which a licensed practitioner might choose to provide for a client, such as the arrangement of bridging loan finance, or estate agent services such as the provision of sales particulars, but which have insufficient close connection with the core activity. The court was cautioned against upholding any submission which would bring a wide range of services within the scheme merely because in some general sense they relate to or assist in the transfer of interests in land since this would have the unwelcome consequence that such services would become subject to regulation by the defendant when that cannot have been the statutory intention, and would extend legal privilege to the activity under section 33 of the 1985 Act and would further make it an offence under section 35 to carry it on without a licence .[26]I would accept these submissions in principle but with the caveat that it does not follow from the narrowness of the statutory definition of conveyancing services, that an activity or transaction which originally falls outside the regulatory scheme may not subsequently give rise to an activity or transaction which does. For example, the receipt by a licensed conveyancer from its client’s lender, such as building society, of monies to be paid on to the vendor, on behalf of the client purchaser of property, must in my judgment be a service ancillary to the disposition or acquisition of an estate or interest in land and it cannot matter that the loan was originally brokered through the unregulated brokering activities of the licensed conveyancer. In ordinary conveyancing transactions monies will be passed not through the lay parties but through the conveyancers. The defendant’s own accounts rules (Accounts Rules 2008) expressly contemplate the receipt by a licensed conveyancer qua licensed conveyancer, of monies in such circumstances in that they provide for the regulation of ‘Client Monies’ defined as ‘any money held or received for a Client by a Licensed Conveyancer incidental to the provision of services regulated by the Council’. Again this is a matter to which I shall return.

The Compensation Fund

[27]The compensation fund with which these claims are concerned is a fund for individuals who have suffered losses in connection with the practice or purported practice of regulated licensed conveyancers. It was established by the defendant and is maintained by it pursuant to section 21(2) and 21(3) of the 1985 Act and the material Compensation Fund Rules 2009 made thereunder.[28]Section 21(2) provides that the Council shall make rules for the making of grants or other payments for the purpose of relieving or mitigating losses suffered by persons in consequence of – (a) negligence or fraud or other dishonesty on the part of licensed conveyancers, or of employees or associates of them, in connection with their practices (or purported practices) as licensed conveyancers; or (b). failure on the part of licensed conveyancers to account for money received by them in connection with their practices (or purported practices) as licensed conveyancers.[29]Section 21(3) as far as is material provides that for the purpose of enabling such grants or other payments, rules under this section may authorise or require the Council to establish and maintain a fund or funds (see (3)(a)) and under subsection (4) such rules may specify the terms and conditions on which a grant or other payment is to be available and any circumstances in which the right is to be excluded or modified.[30]The terms and conditions applicable to the claimants’ applications were those set out in the Council for Licensed Conveyancers Compensation Fund Rules 2009. The critical provision for present purposes is that of Rule 13 which provides as far as material as follows:
“13. The Council may in its absolute discretion make a grant or other payment for the purpose of relieving or mitigating loss which the Council is satisfied any person has suffered or is likely to suffer in consequence of - (a) the negligence fraud or other dishonesty on the part of a Licensed Conveyancer or any employee, associate (within the meaning of section 39(1) of the 1985 Act) of his in connection with his practice (or purported practice) as a Licensed Conveyancer; (b) the failure on the part of a Licensed Conveyancer to account for money received by him in connection with his practice( or purported practice ) as a Licensed Conveyancer .”
[31]Thus it can be seen that this enabling provision mirrors the terms of section 21(2)(a) and (b) of the 1985 Act and it is common ground that ‘practice as a licensed conveyancer’ has the same meaning as given to it in section 11(2) of the 1985 Act, namely providing as a holder of a licence, conveyancing services as defined in section 11(3) of the Act viz, the ‘preparation of transfers, conveyances, contracts and other documents in connection with, and other services ancillary to, the disposition or acquisition of estates or interests in land’.

Overall effect of the eligibility rules in the context of the Agreed Facts

[32]I would agree with the analysis of Mr Thomas QC on behalf of the claimants that the effect of section 21 (2)(a)(b) of the Act (and that of the mirror 13 (a)(b) provisions in the Rules) is to provide two routes to eligibility; that to qualify under (a), a claimant must establish(i) loss,(ii) in consequence of negligence, fraud, or other dishonesty,(iii) on the part of a licensed conveyancer or an employee or an associate thereof,(iv) in connection with their practice (or purported practice ) as a licensed conveyancer; that to qualify under (b), a claimant must establish (i) loss, (ii) in consequence of a failure to account for monies received, (iii) by a licensed practitioner, (iv) in connection with their practice (or purported practice) as a licensed conveyancer.[33]I would agree with Mr Thomas that on the agreed facts both in relation to route (a) and (b), there can be no issue but that the first three elements must have been established. Thus (i): each claimant has suffered a loss by reference to the payments made to Mr McKenna/McKenna and Co which have not been returned; (ii)(iii): the agreed inference is that Mr McKenna was acting fraudulently and has misappropriated the payments (Agreed Facts paragraph 19); alternatively neither McKenna and Co nor Mrs Lynne McKenna has accounted for these monies (Agreed Facts paragraph 17); McKenna and Co was a regulated firm of Licensed Conveyancers; Mrs McKenna was a registered licensed conveyancer and at all times Mr McKenna was acting with the actual and/or apparent authority of McKenna and Co and/or Mrs McKenna (Agreed Facts paragraphs 1, 2 and 3).[34]Accordingly the critical issue in this case is and was whether in respect of route (a), the claimants could establish that the fraud/dishonesty of Mr McKenna giving rise to their loss was in connection with the McKenna and Co’s practice (or purported practice) as a licensed conveyancer, such practice being defined (section 11(2)) as ‘providing (licensed) conveyancing services’ themselves being defined as ‘the preparation of transfers, conveyances, contracts and other documents in connection with, and other services ancillary to, the disposition or acquisition of estates or interests in land’ (section 11(3). Similarly under route (b) the critical issue is whether the payments received in respect of which there has been a failure to account, was received in connection with the provision or purported provision of conveyancing services as so defined, on the part of McKenna and Co, bearing in mind always that it is an agreed fact that Mr McKenna was at all times acting with the authority or apparent authority of McKenna and Co and/or Mrs McKenna, themselves licensed conveyancers .[35]I agree with Mr Thomas that there is no further requirement that limits compensation to clients of the licensed conveyancer. Under section 21(2), a loss does not have to arise directly from the provision of conveyancing services but only ‘in connection’ withit. As long as an applicant can show that he has suffered a qualifying loss it does not matter what his relationship was vis-a-vis the conveyancer. Furthermore the scope of the compensation scheme is not confined to losses in connection with genuine or actual provision of conveyancing services. It extends to losses arising in connection with the purported provision of conveyancing services.[36]I have already set out my observations on the breadth/narrowness of the definition of ‘conveyancing services’ in the context of submissions made by Mr Malek but would add that I agree with Mr Thomas’ emphasis that i) these are not confined to the actual transfer of interests in land and include services ‘ancillary’ to the disposition or acquisition of estates or interests in land. I repeat my view that these must include the service of receiving monies from a client’s lender on behalf of the client purchaser of property, to be paid on to the vendor, and the safe keeping of those monies pending payment on, and it cannot matter that the loan was originally brokered through the unregulated brokering activities of the licensed conveyancer so long as it was received or, in the context of the compensation scheme, purportedly received for this purpose; and ii) that they are not confined to transfers of outright ownership in land and extend to all manner of dispositions of interests in land, including for present purposes the creation of a charge over land. I agree accordingly that an agreement by anyone apparently acting on behalf of a licensed conveyancer (such as Mr McKenna on behalf of McKenna and Co) to draw up and effect such a charge would be an agreement to provide a licensed conveyancing service, and a loss which can be shown to have arisen in consequence of negligence/fraud/dishonesty in connection with such agreement would be a qualifying loss.[37]Moreover in this context it is essential to have mind on the claimants’ case at its highest what the causative dishonesty (that is causative of loss) was, namely the misappropriation of the funds upon receipt, rather than the entering into the agreement to provide the bridging finance/loan, raising the question in what capacity and for what purpose the money was received or purportedly received by Mr McKenna acting at all times, on the agreed facts, on behalf of McKenna and Co, a firm of licensed conveyancers.[38]In my judgment if the money was received purportedly for a purpose in connection with the provision or purported provision of conveyancing services (as defined) for a third party client of McKenna and Co or in the alternative the provision or purported provision of conveyancing services to the claimants themselves (which is the dual way in which the case is put on behalf of the claimants by Mr Thomas) then it is difficult to see how it can be said other than that the claimants on their respective cases have established a qualifying and hence eligible loss under the compensation rules, whether by reference to route (a) or (b), under section 21(2) (mirrored in Rule 13).

The two bases upon which the claimants claim eligibility

[39]In these circumstances and for the reasons I am about to explain my considered view is that on the Agreed Facts the claimants must each have an eligible claim on either of the two bases which is put forward on their behalf .[40]I take each in turn.[41]This analysis applies to all the loan payments save that relating to the loan made personally to Mr McKenna (B20).[42]On the basis of the agreed facts, the purpose of the loan payments was to provide finance to a third party client of the firm to purchase property whose conveyancing was purportedly being undertaken by McKenna and Co. The monies (which Mr McKenna misappropriated) were received or at least purportedly received by Mr McKenna (acting on the agreed facts with the apparent authority of his employers, the licensed conveyancers, McKenna and Co) for the purpose of paying these monies on behalf of the third party client on to the vendor as part of the conveyancing transaction purportedly being undertaken on behalf of the client and for their safe keeping in the meantime.[43]The receipt of those monies by a licensed conveyancer for that purpose must in my view be part of a service ‘ancillary’ to the ‘disposition or acquisition of an interest in land’ and accordingly such receipt was in itself in purported performance of conveyancing services being provided to the third party client within the meaning set out in section 11(3) of the 1985 Act. There must in my judgment always be an essential connection between the receipt of money by the conveyancer and the transaction he is performing. As Mr Thomas submitted, land and money are the two vital ingredients of routine conveyancing transactions, and the payment of money followed by the execution of transfer are two vital steps to produce the conveyance.[44]I see no answer in law, on the agreed facts, to the claim that in these circumstances the dishonest misappropriation of the monies by Mr McKenna, or the failure to account for these monies by McKenna and Co, which (again on the claimants’ case at its highest) has thereby caused loss to the claimants , was ‘in connection with’ at the very least the purported practice of McKenna and Co as licensed conveyancers, soas to become an eligible loss within both section 21(2) and rule 13.[45]The fact that the monies may not have been paid into a client account of the firm is irrelevant to this analysis as is the fact that there may have been no genuine clients. Once the facts disclose, as on the agreed facts in my judgment they do, that Mr McKenna received the monies in connection with the purported practice of McKenna and Co as licensed conveyancers, that is sufficient to bring the claimed losses arising from the misappropriation of those monies, within the statutory compensation scheme.[46]This said, since the claims were determined, some specific evidence has been disclosed by the defendant relating to one particular transaction (B11) comprising McKenna and Co’s client ledger for a client ‘Proweb Ltd’ relating to a transaction described as ‘Land at Blandford Street’ in which one of the payments made by the first claimant on 31 May 2007 was entered as a credit in the account of the client in relation to this transaction. Mr Thomas relied upon this evidence as showing a genuine connection between the monies received and the conveyancing services offered to McKenna and Co’s clients. However I would accept that the existence of this evidence or even the lack of such evidence, is to nothing in the context of the jurisdictional issue which is before the court. As I have indicated, the defendant did not purport to investigate the claims and the issue is not so much what did happen to the money once received but what purportedly was going to happen to the money once received.[47]I repeat the observations already made at paragraph 26 above. The fact that the loan monies received by Mr McKenna had been solicited by him and the arrangement whereby the claimants agreed to make the loans had been solicited by him as part of a brokering scheme which was in itself an unregulated activity, cannot in my judgment, taking again the claimants’ case at its highest on the agreed facts, alter the character of the capacity in which Mr McKenna acting on behalf of the licensed conveyancers, purportedlyreceived the money, namely as licensed conveyancers purportedly providing the conveyancing service to the third party client, which I have already identified. The monies were not on the claimants’ factual case received by McKenna and Co or Mr McKenna, acting as finance brokers but in their purported capacity as licensed conveyancers, purportedly undertaking a conveyancing transaction on behalf of their client.[48]Again the fact that Mr McKenna was throughout acting fraudulently, even at the point when he solicited the loans, and the claimants themselves through their own solicitor’s witness statement (first w/s of Nigel Hyder paragraph 18) claim to have ‘sustained losses as a result of a fraudulent scheme operated through McKenna and Co’, cannot in my judgment alter the fact that the claimed losses (subject to the caveat in paragraph 49 below) on the factual case at its highest arose not through the claimants entering into the loan arrangements as such but through the dishonest misappropriation of the funds received by Mr McKenna not as broker of the loan but acting on behalf and with the authority or apparent authority of McKenna and Co in their capacity as licensed conveyancers.

Eligible losses on this basis of claim

[49]I should emphasise that on this analysis and on this basis of claim, the eligible losses are in my judgment to be confined to the misappropriated capital sums and would not include any loss of interest or other penalty payments outstanding under the loan agreements purportedly arranged by Mr McKenna since these in themselves were not misappropriated (and there was no failure to account in respect thereof) and were not in themselves part of the monies received in connection with the licensed conveyancing practice for which there has been a failure to account.[50]This analysis and basis of claim applies to all the loan transactions.[51]This basis of claim concentrates upon the agreed facts that in respect of each transaction it was agreed that McKenna and Co would ensure that the loans were fully secured by way of legal charge to be drawn up by McKenna and Co) (Agreed Facts paragraphs 10(b) and 11); that Mr McKenna said that the legal charges would be valid and effective security for the loans (para 10(b)); that after payments had been made Mr McKenna said that McKenna and Co had in fact obtained legal charges over each relevant property or properties (paragraphs 10(b)); that neither the first nor the second clamant would have entered into any of the transactions but for the agreement that valid security would be provided ( paragraph 12).[52]It further concentrates upon the undoubtedly correct proposition in law that the creation of a charge over land is a ‘disposition of an interest in land’ which falls within the statutory definition of ‘conveyancing services’ and hence within the scope of services provided by a licensed conveyancer as part of his practice as a licensed practitioner under the statutory scheme.[53]On this basis I again can see no answer in law and no rational answer on the agreed facts, to an eligible loss being established within the compensation rules on the straightforward basis that McKenna and Co, a firm of licensed conveyancers, not only agreed with the claimants to provide conveyancing services in the form of the preparation of the charges but purportedly did obtain those charges, albeit in truth they had not; that accordingly the claimant’s losses, which in this context flow directly from the dishonest failure to provide the promised effective security by way of charge (the claimants on their case at its highest are left with no means of recovering the monies which they have lent), have arisen in connection with the practice or purported practice of McKenna and Co as licensed practitioners. For these purposes the claimants were in my judgment the clients of McKenna and Co as licensed practitioners.[54]The dishonest failure by McKenna and Co as licensed conveyancers to execute and to obtain the effective charges which they had agreed to provide, was in my judgment on the agreed facts causative of the claimed losses in these cases. If such charges had been created as agreed, the claimants - taking as always their cases at their highest - would have suffered no loss. The fact that Mr McKenna never had any intention to create the charges - assuming this to be so - is again irrelevant. The claimants are entitled to have their claims considered by reference to the purported practice of McKenna and Co. In this context I see nothing in the distinction which the defendant sought to draw between the negligent preparation for a client of a defective charge, in respect of which any losses of a client flowing therefrom would be within the scope of the compensation scheme, and the total failure to provide a charge for a client in the first place. Nor can I see any relevance in the fact that the origin of McKenna and Co agreeing as licensed conveyancers with the claimant lenders to effect this security in the interests of the lenders, lay in their soliciting of the loans as an unregulated loan broker and undertaking in that context to provide effective security. As already indicated, and as observed by Ouseley J in granting leave in this case, an activity or transaction which falls outside the regulatory scheme may on the facts give rise to and takes fulfilment in an activity or transaction which does. The agreed facts in this case disclose such a situation, in my judgment.

Eligible losses on this basis of claim

[55]In contrast to the first basis of claim I consider that the eligible losses on this basis do - on the claimants’ cases at their highest – arguably extend to the loss of interest and penalty payments due under the purported loan transactions since on the agreed facts the promised security which McKenna and Co failed to have executed was purportedly to provide effective security for the loans which would include security for all payments due under the loans. I say ‘arguably’ only, since I accept that this is a question upon which no detailed submissions were made to me and its resolution is unnecessary for the purposes of the relief now being sought by the claimants.

Discretion under the Rules

[56]Before I turn to consider the Determination of the Committee in the light of these conclusions, I should record the emphasis placed by Mr Malek on the absolute nature of the discretion vested in the defendant in deciding whether to make any payment out of the fund. He also drew my attention to other provisions within the rules which enable the defendant before deciding whether to make a grant, to require a claimant to pursue any civil remedy which may be available in respect of the loss (rule 18), and (rule 19) to take into account when deciding whether a claim for a grant should be paid in full reduced or rejected, amongst other things: whether the Claimant has any responsibility for the loss and the assets available to the fund (currently at £4m). These matters cannot be directly relevant to the determination of the present challenge to the defendant’s decision that it had no power to entertain the claimants claims, not being a decision based on discretion. However as the only remedy now sought in the event the challenge succeeds, (despite the breadth of the remedy claimed in the claim form including a direction that a payment be made), is an order requiring the defendant to reconsider the claimants’ applications for grants of compensation, the point properly being made by reference to these rule provisions going to the discretionary nature of any grant, is that even if the claimants succeed in obtaining relief, it by no means would follow that any payment would necessarily be made.[57]However, I should observe that many of Mr Malek’s submissions on that which emerges from any analysis of the available documentation connected with these loans, went in my judgment more to the discretionary stage of the defendant’s task in determining a grant application (such as the claimant’s degree of responsibility for the loss) rather than to the question of eligibility on the agreed facts, which has been in issue before me.[58]For example, Mr Malek referred me to the behaviour of the first claimant in apparently proceeding with the last of his loan payments, itself for a substantial amount of £350,000, notwithstanding his growing concerns for the whereabouts of his earlier payments; and to the apparent fact that the claimants showed little interest in the identity of the McKenna and Co client for whose benefit the money was being provided, that identity rarely being discernible from the documents provided to the claimants by Mr McKenna, and the same being the case in the case of the identity of the property in respect of which any charge was to be created; and to the apparent fact that the claimants showed little interest in obtaining sight of the charges themselves. Mr Malek also stressed what he described as the disproportionately high returns being offered to the claimants for short term loans. He produced an analysis by schedule demonstrating returns of up to 32.5% on most loans with the later ones reaching up to 87%, submitting that the claimants were or ought to have been aware of the risks they were taking but nonetheless had done little or nothing to satisfy themselves of the safety of their monies, being quite prepared to accept the rolling over of their monies upon their purported repayment. At one stage Mr Malek seemed to be suggesting that the claimants had placed reckless and unjustifiable reliance upon the defendant’s compensation scheme in their pursuit of such high returns, for which the scheme was never designed to provide protection.[59]None of these matters however go in my judgment to whether on the agreed facts the claimant’ claims were eligible for a grant out of the compensation fund. They may of course be very relevant to any exercise of discretion once any eligible claims have been the subject of proper investigation and findings of fact made after fair process, but such a stage has never been reached in this case.

The Determination of the Committee

[60]I turn to the basis upon which the defendant’s Committee found the claimants’ claims ineligible as set out in section 6 of the Determination in each case. I have already set out the terms of section 6.1.[61]In the case of the first claimant, the critical paragraphs appear under 6.2 and 6.3 in the following terms. Again, any emphasis is the emphasis of this court. “6.2 The Committee:(a) was not satisfied that such loss as may have been suffered by the Claimant had been suffered by the Claimant as a consequence of the negligence, fraud, or other dishonesty, or failure to account on the part of Malcolm McKenna, whilst an employee with the Practice, any other employee, or of Lynne McKenna trading as McKenna & Co as a licensed conveyancer;(b) was satisfied that Malcolm McKenna had in fact been running a business separate from the licensed conveyancer business in that he had arranged and brokered loans for individuals;(c) without limit to (a), was not satisfied that arranging funds to provide clients with bridging loans ,or otherwise arranging the provision of financial assistance, is part of the practice of a licensed conveyancer. In providing conveyancing services the licensed conveyancer’s role is to assist clients in transferring property from one person to another, as defined in s.11(3) Administration of Justice Act 1985;(d) was not satisfied that the sums remitted to Malcolm McKenna, alternatively Lynne McKenna, alternatively any employee, alternatively the Practice of McKenna and Co, had been paid in connection with the practice of Lynne McKenna trading as McKenna & Co, as licensed conveyancer; and(e) was satisfied that whatever representations may have been made to the Claimant (about which the Committee made no determination) the arranging of bridging finance, alternatively the provision of financial assistance, did not come within the range of activities which could be undertaken in the course of the ‘purported practice’ of a licensed conveyancer; and(f) was satisfied that, as an employee of the Practice, Malcolm McKenna did not have authority and could not hold himself as having authority to assert and to act as if the arranging of bridging finance, alternatively the provision of financial assistance, was within the range of activities which could be undertaken by a licensed conveyancer. 6.3 the Committee noted that the Claimants had stated in the statement accompanying the Claim Form that Malcolm McKenna had explained that the funds would be fully secured by way of legal charges (in the lenders’ favour) for the associated properties. In view of the Committee, reference to the loan being secured did not amount to a conveyancing service within the meaning of s11(3) Administration of Justice Act 1985,and consequently was not a transaction which fell within the practice or purported practice of a licensed conveyancer as required at s.21(2) Administration of Justice Act 1985. In the circumstances of the case, any agreement to secure the loan was an adjunct to the core commercial arrangement by which Malcolm McKenna facilitated the provision of the loan. As part of the agreement to loan the monies, Malcolm McKenna had indicated that the loans would be secured. In view of the Committee that was part of an agreement for the arrangement of the loan, and not a separate function undertaken in his role as an employee of the Practice. The Committee agreed that the securing of a charge could not properly be classed as a service ancillary ‘to the disposition or acquisition of estates or interests in land’ where, as it had determined, the arranging of funds to provide financial assistance were not in themselves conveyancing services.[62]The Determination in respect of the claim by the second claimant was in like terms save that in the opening sentence of paragraph 6.3, the Committee refer to the claimant having stated that Malcolm McKenna had explained to him that ‘the loans were fully secured by first charges on the properties involved’ and in the second sentence the Committee expresses its view that ‘the promise to secure first charges’ did not amount to a conveyancing service within the material statutory provision.[63]I also observe that in this Determination at paragraph 2.1 the Committee noted that the Practice had acted for the second claimant and his wife in several conveyancing transactions from 1998 onwards, but ‘(h)owever no evidence was produced to the Committee that the funds paid by Mr Golub to the Practice, totalling £300,175.00, had been in respect or had related to a conveyancing transaction.’ It further noted ‘the second claimant’s Statement attached to the Claim form stated that the sum claimed had been paid to the Practice for the purpose of providing bridging finance, rather than in relation to conveyancing transactions.’[64]In the case of the first claimant, the Determination similarly noted at paragraph 2.1 that ‘No evidence was produced to the Committee to suggest that McKenna & Co had acted for the Claimants in respect of any conveyancing transactions or that any current conveyancing transactions were taking place when the claimants paid the sums … The Claimant’s Statement attached to the Claim form stated that the money paid was paid for ‘bridging finance’.

The court’s conclusions on the Determination

[65]In my view the basis on which the Committee purported to reject these claims must be held flawed as matter of law having regard to the agreed facts and the terms of the governing statutory provisions. None of the reasoning answers in law or effectively addresses in my judgment either of the two ways in which the claimants put their case to eligibility which, as I have already explained, must in my judgment be made out, again taking the claimants’ cases at their highest.[66]To explain this conclusion, I again take each of these bases in turn.[67]I have already explained how this aspect of the claim is put and my reasons for accepting that on this basis, on the agreed facts, eligibility within the compensatory scheme must have been made out (save in respect of the first claimant’s personal B20 loan to Mr McKenna). The reasoning of the Committee which apparently goes to this aspect of the claim is that set out in (a)(b)(c)(d)(e)(f) of section 6.2 but in my judgment the Committee in fact do not address this aspect at all (save by inference in (d)) and have in effect misdirected themselves as to the scope of the compensatory scheme, as submitted by Mr Thomas. The fatal flaw in my judgement lay in the committee concentrating only upon the initial soliciting and brokering of the loans by Mr McKenna (acting at all time on the agreed facts in the name of McKenna and Co licensed conveyancers and with the apparent authority of this firm of licensed conveyancers) – which I would accept does not fall within the definition of an activity regulated by the defendant – without going on to consider what further role the licensed conveyancer had played or purported to play and in particular at the stage the monies were received by Mr McKenna/McKenna and Co. It is unnecessary for me to repeat the whole of my analysis set out above but it is apparent in my judgment that the Committee has failed to take on board that the losses claimed in these applications - taking the claimants’ cases at their highest - did not flow from the loan arrangements as such but from the dishonest misappropriation of the funds upon receipt by Mr McKenna/McKenna and Co, and the Committee failed to look to the express purpose (on the agreed facts) for which the monies in question were received. Had they done so, they would have been bound in my judgment to have concluded that this was to pay for property transactions in which McKenna and Co were at the very least purportedly performing the conveyancing on behalf of their clients, and on this basis as a matter of law that this was a receipt in connection with, again at the very least, the purported practice of McKenna and Co as licensed practitioners. Hence the claimants’ loss was an eligible loss within section 21(2) (taking the claimants’ cases at their highest) as one being in consequence of dishonesty on the part of licensed practitioners in connection with their purported practice as licensed practitioners .[68]I am bound to say that the finding at 6.2(d) (‘not satisfied that the sums remitted to Malcolm McKenna, alternatively Lynne McKenna, alternatively any employee, alternatively the Practice of McKenna and Co, had been paid in connection with the practice of Lynne McKenna trading as McKenna & Co, as licensed conveyancer’) is one which suggests the Committee have misdirected themselves as to the scope of the eligibility rules under the compensation scheme in that they have overlooked the important words ‘or purported practice’ appearing in the material provisions. Further I would agree with Mr Thomas that it is a finding which is inconsistent with the agreed facts under which the express purpose of the claimants’ payments was to pay for the property transactions in which the firm were purportedly performing the conveyancing for their clients.[69]Moreover the committee’s observations in paragraph 2 of their determinations, that there was ‘no evidence’ that the second claimant’s funds related to a conveyancing transaction, or in respect of the first claimant that there were ‘no current conveyancing transactions’ taking place when the claimants paid the funds, strongly suggest that the Committee misdirected themselves in law as to the scope of the compensation fund scheme in thinking that it was necessary for a claimant to establish that the funds in question related to a conveyancing transaction in which he was the client; further they suggest that the Committee failed to have regard to the fact that the funds were on the agreed facts related to purported conveyancing transactions which McKenna and Co were purportedly performing for third party clients and upon which they were purportedly engaged .[70]Further the Committee failed to give any consideration to the failure of McKenna and Co to account for monies received and the basis upon which those monies had been received. Had they done so then for then reasons I have already set out they would have been bound in my judgment to have concluded that the receipt was in connection with at the very least the purported practice of the firm as licensed conveyancers, and a loss based on this basis was an eligible loss.[71]Again I have already explained why I find on the agreed facts taking the claimants cases at their highest, the eligibility of losses put on this second basis in respect of all the claimants’ loans, must be made out as a matter of law.[72]The Determination of the Committee on this aspect of the claim is to be found in 6.3. Their reasoning again in my judgment is fatally flawed as matter of law having regard to the agreed facts, the terms of section 21(2), and the fact that the creation of a charge is the disposition of an interest in land. The Committee appear to take the view that because any agreement to secure the loan was ‘an adjunct’ to an unregulated activity (‘the core commercial arrangement by which Malcolm McKenna facilitated the loan’; ‘the arranging of funds to provide financial assistance’) and not in the Committee’s view a ‘separate function being undertaken as an employee of the Practice’, then as a matter of principle, the reference to the loan being secured did not amount to a ‘conveyancing service’ within the statutory provision and consequently was not a transaction which could fall within the practice or purported practice of a licensed practitioner for the purposes of the requirements of section 21(2). The Committee say in terms that the securing of a charge in these circumstances could not properly be classed as a service ‘ancillary’ to the disposition or acquisition of estates or interests in land.[73]I agree with Mr Thomas that this part of the Determination must be a misapplication of the definition of ‘conveyancing services’. An agreement to carry out the work necessary to create a legal charge must be within the definition of ‘conveyancing services’ within section 11(3) of the 1985 Act not on the basis of it being an ancillary service but as being in itself in connection with the disposition of an interest. Further I also agree with Mr Thomas that the basis upon which the Committee determined that nonetheless this did not fall within s.11(3) by reference to its being an ‘adjunct’ to another unregulated activity, was and is to introduce a barrier to the provision of a service by a firm of licensed conveyancers being a qualifying conveyancing service within section 11(3), and, hence a barrier to any connected losses being eligible for compensation, which appears nowhere in the statute or the rules.[74]As I have already stated, I can see no relevance in the fact that the origin of McKenna and Co agreeing as licensed conveyancers with the claimant lenders to prepare and have executed this security in the interests of the lenders, and indeed purporting to prepare and effect such security, (which agreement and which purported performance is self evident by reference to the agreed facts), lay in their soliciting of the loans as an unregulated loan broker and undertaking in that context to provide effective security. I repeat my view that an activity or transaction which falls outside the regulatory scope of licensed conveyancing may on the facts give rise to, and take fulfilment in, an activity or transaction which falls inside or purportedly does. The agreed facts in this case disclose such a situation, in my judgment.[75]Generally in my judgment the defendant’s Committee failed to have regard to the dual role which on the agreed facts, and taking the claimants’ cases at their highest, McKenna and Co acting through Mr McKenna, were purportedly performing. One was as an unregulated loan broker arranging bridging loans. The other was as a regulated licensed conveyancer in practice or purported practice as a licensed conveyancer and providing or purporting to provide conveyancing services as defined in the statute. It was in my judgment on the agreed facts and for the reasons I have explained, in connection with that latter role that the claimants’ losses – taking their claims at their highest – arose, not the first.[76]For all these reasons in my judgment the Determination of the defendant’s Committee was and is flawed in law and cannot be allowed to stand. The present challenge succeeds in my judgment on both grounds 4 and 5 relating to misdirection in law and ground 6 - irrationality on the agreed facts. Ground 7 is also made out in my judgment, although in reality it is no more than a particular aspect of these prior grounds concentrating as it does on the failure of the Committee in rejecting these applications in limine to have regard to the agreed facts relating to the failure to account for monies received, on the part of McKenna and Co.

Departure from the Agreed facts

[77]Before concluding this judgment I should stress again that I have approached this claim on the basis of the agreed facts and taking the claimants’ factual cases at their highest. I do so since I have to say some of the submissions forcibly and cogently made by Mr Malek on behalf of the defendant appeared to go outside those agreed facts. For example, Mr Malek sought to argue that on a proper analysis of the available documentation, that there was no arrangement under which the claimants were to enter into an individual loan agreement with an individual client of McKenna and Co; that it was McKenna or McKenna and Co who was going to enter into a separate lender-borrower relationship with the clients, and that the loans made by the claimants were in effect loans to McKenna and Co who was the only entity with whom the claimants had entered a commercial relationship outside any activity regulated by the defendants, and hence any losses can be said to flow only from that unregulated relationship which with the use of rolled over monies had enabled Mr McKenna to run a ‘Ponzi’ type fraud.[78]In this context reliance was placed on the following: the only specimen charge provided by Mr McKenna was that in respect of loan B11, in which the beneficiary of the charge is shown as McKenna and Co; that the receipts sent by Mr McKenna to the first claimant on McKenna and Co headed notepaper on their face were to ‘confirm receipt of loaned funds from yourselves’ and generally (as with receipts to the second claimant) did not identify the client to whom the purported loan would be made; that neither Mr McKenna nor McKenna and Co ever sought or made provision for any fee to themselves in respect of the purported arrangement of the loans or security, although in respect of the second claimant it was agreed that any fee would be deducted from his 9% return; that there were no written loan agreements between the claimants and any third party client of McKenna and Co; that when Mr McKenna purported to repay the loans together with the due interest he never purported to provide a discharge of any charge over the property executed by the purported third party client borrower; that only one of the payments made by the claimants were paid into the firm’s client account, all other payments going into the private accounts in the joint names of Mr and Mrs McKenna or in the sole name of Mr McKenna; that in so far as the purported loans were repaid and/or the claimants received any promised returns, they were paid from accounts held in the name of Mr McKenna and the claimants did not receive any repayments directly from any third party client.[79]This all however goes against the agreed facts in my judgment under which only one loan (first claimant B20) was to Mr McKenna personally, the others being, as far as the claimants were concerned, to individual third party clients of the firm, and even then Mr McKenna said he would arrange security by way of legal charge over the property which he and his wife owned at Heathfield Farm. Moreover in my judgment these submissions sought to rely upon reasoning and inferences of fact which the Committee itself did not adopt. It has always to be remembered that the issue for this court has been the legitimacy of the defendant’s decision that the claimants’ cases taken at their highest were not eligible. The Committee itself expressly disavowed the making of any findings of fact. There is no suggestion in the Committee decision that they were proceeding on that basis that Mr McKenna (save for B20) or his firm was to be the principal borrower.

Final conclusion

[80]For all these reasons this claim succeeds to the following extent. Subject to any submissions of the parties on hand down of this judgment on the form of order, I will make an order quashing the defendant’s decision refusing the claimants’ applications for grants of compensation and will make a further order directing the defendant to reconsider the claimants’ applications in the light of this judgment.