NRD Property Limited v Ewan & Co LLP [2026] EWHC 574 (Ch)

[2026] EWHC 574 (Ch)

Case No BL-2024-001146

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL

Date 17/03/2026

Before

MASTER KAYE SITTING AS A DEPUTY HIGH COURT JUDGE

Between

NRD PROPERTY LIMITEDClaimant

EWAN & CO LLPDefendant

Alexander Hill-Smith (instructed by Osmond & Osmond) for Claimant

for the Defendant did not appear and was not represented.

Hearing Hearing dates: 23,24,25 February 2026

Approved Judgment

This judgment was handed down remotely at 10.30am on 17 March 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

.............................

MASTER KAYE SITTING AS A DEPUTY HIGH COURT JUDGE

Master Kaye sitting as a Deputy High Court Judge:

[1]This claim concerns the relationship between the Defendant, Ewan & Co LLP, a solicitors’ practice (“the firm”), and the Claimant (“NRD”). NRD say that the firm acted in breach of trust, breach of retainer and breach of undertaking in connection with NRD’s acquisition, development and financing of a development property known as theBed Shop, 21-23 New Road Chatham.

[2]NRD was incorporated on 8 August 2018 as a special purpose vehicle (“SPV”) for the Bed Shop. The name NRD came from the address of the Bed Shop - New Road development. Its sole director and shareholder on incorporation was Paul Smith (PS). He is the current sole director and shareholder of NRD.

[3]PS is a property developer. He has interests in multiple companies some of which were incorporated as SPVs for particular projects. In the events that have occurred the only other companies relevant to the issues I have to determine are: i) Axiomatic Investments Limited was incorporated 19 February 2014. It subsequently changed its name to IDSE Limited on 23 April 2018. It was a general building company. PS was the sole director and shareholder (“Axiomatic”or “IDSE” as appropriate). It is now in liquidation; ii) Hog Contractors Limited (“Hog”) was incorporated on 20 June 2017. PS was the sole director and shareholder. It was an SPV. Everstone Developments Limited (“Everstone”) entered into a JCT contract with Hog on 11 April 2017 pursuant to which Hog was to undertake the building/construction work at Brookhill. Hog subcontracted that work to IDSE. Tina Chopra (“TC”) was a director of Everstone (PS was not a director or shareholder in Everstone). Hog was dissolved on 29 March 2022. Everstone was liquidated in 2021 and subsequently dissolved; iii) Incartus Developments South East Limited was incorporated on 11 December 2013. PS is its sole director and shareholder. Incartus is a building company which is focused on residential development (“Incartus”);

[4]PS was introduced to Naresh Chopra (“NC”), and Vidya Sharma (“VS”) by a business associate in about 2015. PS first met TC who is NC’s wife in about 2016 in relation to Brookhill.

[5]NC is a former solicitor having been struck off the roll as a solicitor for the second time in April 2017. He has a company called Property Finance and Law Limited (“PFL”). It’s registered office was 902 Eastern Avenue Ilford, Essex IG2 7HZ (“902 Eastern Ave”). NC was and remains a director. Everstone’s registered office was 902 Eastern Ave. NC and TC also have other business interests using the 902 Eastern Ave address. NC and TC have a son Aman Chopra (“AC”).

[6]PS understood VS to be a finance broker who was good at sourcing complex or more high-risk funding solutions particularly for development projects. His office was also at 902 Eastern Ave.

[7]Mr Charles Ewan (“Mr Ewan”) was the senior partner and a designated member of the firm. He was both the COLP and the COFA which required him to make sure that there were systems in place to allow his firm to operate effectively and in compliance with the SRA standards and regulations including the Solicitors Accounts Rules (“SAR”). The firm ceased trading in October 2021 save for the purposes of dealing with any outstanding matters. It has not yet been struck off the register or dissolved.

[8]The firm had two offices: 33 York Road Ilford (“the Ilford Office”) and 11 Rosemount Road London NW3 (“the West Hampstead Office”). Mr Ewan says he was based in the Ilford office together with Ms Julia Faul, his PA (“JF”). Mr Madhu Bhajanehatti (“MB”) an associate employed by the firm was also based in the Ilford office. Mr Vijay Kumar (“VK”) was employed by the firm as a paralegal and was based at the West Hampstead Office. Ms Shelja Kaushik (“SK”) also worked as a paralegal from the West Hampstead office. Mr Matthew Elash was a designated member and partner based at the West Hampstead Office.

[9]NRD say that monies intended to be used acquire and fund the Bed Shop which were received into the firm’s client account were either wrongly paid away to third parties without authority and in breach of trust and/or have not been accounted for. They seek accounts and enquiries in relation to those monies together with damages and/or equitable compensation to be assessed by reference to the loss of opportunity in relation to the Bed Shop. In addition, as part of its claim NRD says that the firm gave an undertaking on 28 September 2018 to pay Stamp Duty Land Tax (“SDLT”) in relation to the acquisition of the Bed Shop and have failed to do so. It seeks an order that the firm honour the undertaking and pay the SDLT together with interest and penalties. There is an alternative or further claim in deceit.

[10]The firm primarily defends the claim on the basis that it says the payments it made were authorised by or on behalf of NRD and so the payments could not have made in breach of trust. They further deny that there was an undertaking to pay Stamp Duty Land Tax (“SDLT”). They admit that the firm did not pay the SDLT. Preliminary matters: Adjournment:

Preliminary matters:

[11]This trial was due to commence on 23 February 2026. The firm applied to adjourn the trial after hours on Friday 20 February 2026. The main basis for the application was that the firm had not been able to secure counsel to represent it for the trial. The firm was represented very ably by junior counsel on the adjournment application but she was not otherwise instructed in relation to the claim. I heard the adjournment application on 23 February 2026 and for the reasons I gave I dismissed it.

Representation:

[12]The firm had been represented by Edesia (solicitors funded by its insurers) until the end of January 2026. On 2 February 2026, the firm appointed BA International Solicitors Ltd (“BAIS”) who remain on the court record.

[13]On 24 February 2026, Mr Hines a partner at BAIS attended the trial. He explained that he was there as a matter of professional courtesy. He confirmed that he was not there to represent the firm and was not in attendance on the firm’s instructions. He did not want to and did not seek permission to represent the firm despite being given several opportunities to do so. The trial took place in public; Mr Hines remained throughout.

[14]The firm were plainly aware of the trial having unsuccessfully applied to adjourn it. They had been represented by solicitors throughout, and their defence had been drafted by counsel. Just as Mr Hines could have sought permission to represent the firm so could Mr Ewan had he attended. Neither Mr Ewan nor anyone else attended on behalf of or sought permission to represent the firm. The firm therefore did not attend or appear and were not represented at the trial. The firm’s non-attendance appeared to be a choice. No explanation was provided.

[15]The trial proceeded on the basis that NRD had to prove their claim. They needed to do so on the balance of probabilities.

[16]I have had the benefit of written and oral submissions from Mr Hill-Smith on behalf of NRD which has been represented since 2022 by Osmond & Osmond (“Osmond”). Mr Hill-Smith had no duty to put the firm’s case to his witnesses and it was not for the court to cross examine those witnesses.

Witness evidence:

[17]NRD’s witnesses were PS and Samantha Gummer. Both PS and Ms Gummer had prepared trial witness statements dated 18 July 2025. Both had attended court to give evidence and be cross examined.

[18]They were sworn in and confirmed under oath that their witness statements were true. In addition, they were taken through the documents referred to and relied on in support of their witness evidence. This included documents which they relied on in response to the defence. In this way I was able to form a view of their honesty, truthfulness and reliability as witnesses. I keep in mind as a general point that the events in question took place some years ago and that that can affect the reliability of memory.

[19]Ms Gummer is a qualified and registered accountant. At the relevant time she worked part time for PS and his companies providing internal accountancy/financial and bookkeeping functions. She was not an employee of any of his companies.

[20]She gave her evidence by reference to spreadsheets and other information extracted from the accounts program used by PS and his companies (“QuickBooks”). She explained in clear factual terms the relevant payments and receipts by reference to the supporting documents. Ms Gummer was a straightforward, honest and truthful witness and I have no hesitation in accepting her evidence.

[21]I was also satisfied that whilst PS came across as a little naïve, he was being truthful. He was straightforward in his explanations to the court. He acknowledged that his evidence in the set aside application (see below) was not accurate. The fact that he allowed himself to sign a witness statement which he knew to be untrue has to be taken into account when considering his credibility.

[22]However, whilst there are some oddities about events described by PS, his evidence is corroborated for the most part not only by documentary evidence, but also Ms Gummer’s evidence and the expert evidence. I am satisfied that his evidence was truthful and can be relied upon in support of his claim.

[23]Although it was not necessary to put Mr Ewan’s evidence to PS and Ms Gummer, they inevitably touched on the issues raised in the defence and his evidence when explaining their own evidence. It is helpful to therefore consider Mr Ewan’s witness statement briefly to understand why Mr Hill-Smith’s submissions had been that I should attach little if any weight to it in any event.

[24]Mr Ewan witness statement dated 18 July 2025 did not comply with the provisions of any of CPR 32, CPR PD 32 paragraph 18, the Civil Evidence Act 1995 or PD57AC nor with any recognised rules relating to witness evidence.

[25]Mr Ewan admits he was not the fee earner at the firm undertaking the relevant work on a day to day basis for any of NRD and/or Katrin Properties Limited (“Katrin”) and/or Together Commercial Finance Limited (“TCF”). He says he did not have any direct or indirect oversight of the particular transactions to which this claim relates. He was therefore unable to give direct evidence about the events in question.

[26]Mr Ewan’s witness statement was based on a combination of speculation and double, triple or even more remote hearsay. When setting out the hearsay evidence, Mr Ewan did not identify the individual who was the source of the hearsay nor the individual from whom that individual had sourced the information. Indeed for the most part he was unable to and did not even set out the information at all.

[27]In Punjab National Bank (International) Ltd v Techtrek India Ltd

[2020] EWHC 539 (Ch)

Chief Master Marsh at [19] explained the problem:

“ …where the maker of a statement is relying on evidence provided by a witness who is an officer of, or employed by, an incorporated body, the requirements of paragraph 18 of Practice Direction 32 to provide the source of evidence is not complied with merely by saying that the source is the entity or officers of the entity. If the source of evidence is a person, as opposed the source being documents, the person or persons must be identified and named. A corporate entity cannot experience events and can only operate through the medium of real persons. It follows that the source of evidence must be a named person or persons. A failure to identify the source in a manner that complies with paragraph 18.2 will mean the court has to consider whether to place any weight on the evidence, especially where it touches on a central issue.”

[28]Mr Ewan’s witness statement singularly failed to address this at all. For example:

“having reviewed certain documents from [the firm’s] file …, I cannot see that there was any concern expressed by those individuals who conducted the matters on behalf of [the firm] that they could not accept instructions from [PS] and/or [TC] or from [NC] and/or [VS] who, I came to learn from my enquiries once this claim was made, were understood to be business associates of [TC]/[PS] – and whom were understood to be authorised by [NRD] and/or [TC] and/or [PS] to be permitted to give instructions on [NRD’s] behalf.”

[29]He neither identified the documents from the firm’s file nor the individuals at the firm said to have conduct on the relevant matters. He did not identify of whom he made enquires or what they told him and how or why that resulted in the understanding about the association, authorisation or instructions referred to.

[30]In relation to one of the transactions central to the defence he said:

“I was not personally aware of from whom instructions were issued to effect those payments – though my understanding – based on my review of the background papers, my discussion with NC and/or VS and/or MB and from what I have learned from my solicitors who have investigated this matter – would be that [PS] gave the instructions.”

[31]These examples are not isolated passages. The court would have been able to place little if any weight on Mr Ewan’s witness statement.

[32]On 14 October 2025 Osmond had highlighted the deficiencies in Mr Ewan’s witness statement and put the firm on notice that they intended to invite the court to place no reliance at all on the paragraphs that failed to comply with the rules of evidence and PD57AC. No response was ever received to that letter.

[33]I would add that not a single document disclosed by the firm provided any support for the case theory that any of NC and/or VS and/or TC were authorised by PS to give instructions to MB and/or VK and/or SK on behalf of NRD or that PS had authorised the firm whether it was MB and/or VK and/or SK or even Mr Ewan to accept instructions on behalf of NRD from them. This was only exacerbated by the absence of any retainer letters.

[34]The firm had not advanced any evidence from any of NC, VS or TC nor had they advanced any evidence from VK, MB or SK. On the defendant’s case they are central to the events which underly this claim. The firm had not advanced any evidence from Katrin.

Other proceedings

[35]The evidence available on this claim appears to suggest that NC, TC, VS and AC work closely together on a number of ventures. At least TC appears to instruct the firm in relation to her companies.

[36]None of NC, TC or VS are parties to this claim. None of them have had an opportunity to respond to NRD’s evidence directly nor indeed to the allegations made by the firm. The findings in this judgment will not be binding on those non-parties. I say this in particular because there are other proceedings in which Katrin is pursuing claims against NRD, PS, NC, TC and AC and in respect of which NRD seek an indemnity (“the Katrin proceedings”).

Mr Ewan’s signature on documents:

[37]NRD alleges that PS’s signature has been forged on a number of documents. The relevant documents are: i) A form of legal charge dated 14 November 2018 (“the 14 November Charge”); ii) A form of facility letter allegedly issued by Katrin dated 7 January 2019 (“the 7 January Facility Letter”); iii) A form of facility letter issued by Katrin dated 11 February 2019 (“the Second Facility Letter”); iv) A form of second legal charge in favour of Katrin dated 11 February 2019 (“the Second Charge”); v) A form of personal guarantee in favour of Katrin dated 11 February 2019 (“the February Personal Guarantee”). vi) An irrevocable deed of trust dated 11 February 2019 (“the Irrevocable Trust Deed”)

[38]I will refer to (iii) to (vi) together as the February 2019 documents.

[39]There is also a form of personal guarantee in favour of Katrin in respect of the Second Facility Letter in respect of TC who says that her signature has been forged (“the TC Personal Guarantee”).

[40]Mr Ewan’s signature appears as the witness to PS’s signature on each of the 14 November Charge, the Second Charge and the February Personal Guarantee. The firm admits that Mr Ewan did not witness PS’s signature in person in respect of the 14 November Charge and the February Personal Guarantee. Mr Ewan confirmed in a witness statement dated 1 March 2023 that he had not met PS even though the defence is more equivocal. PS does not believe he has met Mr Ewan.

[41]Mr Ewan had been unable to provide any explanation for how his signature came to be on the documents the subject of this claim particularly in circumstances where he worked at the Ilford Office not West Hampstead Office where the relevant fee earners were based.

[42]It appears therefore that wherever PS’s signature is said to have been witnessed by Mr Ewan, it was not. Any such document would not be properly witnessed or executed and Mr Ewan’s signature affixed to a document says nothing positive about that document’s genuineness. Further and consequently, Mr Ewan would not be able to gainsay PS’s evidence that his signature on a number of documents is a forgery. Mr Ewan, who was the only witness that the firm was proposing to call, would have been unable to give any evidence about the genuineness of the documents. Rather his evidence and the admission go some way to supporting PS/NRD’s position about the lack of genuineness of the 14 November Charge, the 7 January Facility Letter and the February 2019 documents including the forging of PS’s signature.

Expert Evidence:

[43]Permission was given for a single joint handwriting expert, Kathryn Barr, to examine and opine on the likelihood of PS’s signature on the 14 November Charge, the Second Facility Letter and the February Personal Guarantee having been made by other persons i.e. forged.

[44]Ms Barr explained that like many other handwriting experts she uses a verbal scale to express the strength of her findings. She uses a positive and negative scale of Very Strong, Strong, and Limited or Inconclusive where she can express no opinion.

[45]She was asked to opine on whether there was any support for the proposition that PS had signed the three questioned documents. She examined 13 sets of specimen signatures from PS with documents dating from 2015 to 2025 against the questioned signatures. Her conclusion was:

“In my opinion, my findings provide strong support for the proposition that the three questioned documents … were signed by person/s other that [PS]. By this I mean that I consider it unlikely that the questioned signatures were written by [PS].”

[46]Neither party raised any questions in relation to her report nor sought permission to call her for cross examination. I accept her evidence.

[47]Ms Barr’s evidence was consistent with the earlier expert evidence of Margaret Webb. Ms Webb was instructed by solicitors for PS to prepare a CPR 35 compliant report in May 2020 following service of Katrin’s statutory demand based on the February Personal Guarantee. Her report dated 29 May 2020, Ms Webb explains that she too works to a positive and negative scale again using inconclusive where a view cannot be formed either way.

[48]Ms Webb also considered the Second Facility Letter and the February Personal Guarantee. She had fewer sample signatures. She did however conclude that the signatures on the Second Facility Letter were in her opinion “a very poor attempt at copying freehand from a genuine signature” and that there was strong evidence that the signatures were not from PS’s hand. In relation to the signature on the February Personal Guarantee she concluded that it was “totally dissimilar when compared to [PS’s] genuine signature.” And that there was very strong evidence that the signature was not from his hand.

[49]There is one final handwriting expert report which was prepared by Mr Michael Handy in about March 2022 in the context of the set aside application. He was asked to consider the Second Legal Charge, the Second Facility Letter and the February Personal Guarantee. He was provided with a number of specimen signatures but two of those were on the 7 January Facility Letter which PS says were also forged which is likely to have affected his analysis.

[50]He nonetheless concluded that the evidence as to whether or not any two or more signatures had been made by one person was inconclusive. Consequently, Mr Handy explains that PS could neither positively be associated with having made any one of the signatures nor excluded with any degree of certainty.

[51]There is no positive evidence to support a conclusion that PS had signed the documents which were examined and Ms Barr had strongly concluded that the signatures were made by those other than PS. This not only strongly supports PS’s evidence but goes some way to addressing the credibility gap created by his evidence in the set aside application particularly as Ms Webb’s report was sought in May 2020 as soon as he says he appreciated that his signature had been forged and before the set aside application.

Documents:

[52]A primary source of documentation was likely to the firm’s client files and/or its own accounting information. The firm has not disclosed a single document, email, attendance note to support its authorisation and instruction defence. There is no documentary or witness evidence that the third parties whom the firm says were authorised to provide instructions on behalf of NRD/PS were so authorised or that the firm had authority from NRD/PS to accept or act on instructions from them.

[53]The firm has produced not a single document to evidence the assertion that NRD (a newly incorporated SPV at the time) and/or PS had any liability to the third parties to whom monies were dissipated at the time of the dissipation.

[54]The firm has failed to disclose any internal accounting records, client ledgers or any other document to demonstrate the instructions to pay or the internal process for making the payments. They have produced no retainer letters, costs information, invoices, statements of account, or completion statements. It is incredible that if the transactions and documents relied on are genuine the firm has not been able to produce a single document to support of its defence.

[55]The main source of documents has been NRD itself (including NP’s file) and Priority Law (“PL”), the solicitors representing TCF which provided bridging finance for NRD in January 2019 (see below). The TCF documents are particularly telling since they provide correspondence and emails between PL and the firm which were not produced by the firm, and which undermine the defence.

[56]The explanation for the absence of documents was that the firm “has, therefore had access only to the laptop retained by Mr Ewan- where electronic items belonging to other staff members were either not accessible or have been discarded since the firm’s closure several years ago.” If this were the true position in relation to the financial records of the firm and its client files, then it suggests a significant failure on the part of the firm to have complied with the SRA’s Standards and Regulations including the Solicitors Accounts Rules (“SAR”).

[57]The firm only ceased trading in 2021. The SRA’s Standards, Principles and Regulations and in particular the SAR provide guidance about both the retention of financial records generally and approach to financial records when closing a practice. SAR r.29 explains the requirement to retain financial records for 6 years from the date of the last entry on a client matter. That period had not expired when this claim commenced. There are additional provisions relating to the retention of documents relating to for example authorisations.

[58]The explanation given by the firm in any event appears to be undermined by an email exchange between MB and SK in 2019 referring to an NRD drop box file and sub files in relation to TCF which appears to refer to client files which are accessible to more than one fee earner.

[59]Although this claim was not issued until 2024, the dispute had emerged in March 2020. The firm were on notice from at least 5 June 2020. This was before the firm closed for new business in October 2021. In those circumstances one might have expected the firm to have taken steps to ensure all the files and documents electronic or hard copy relating to the matters in issue were preserved. A further concern about the firm’s very limited disclosure is that the underlying searches appeared to have been undertaken by Mr Ewan himself.

[60]The absence of documents would have weighed very heavily against the firm in those circumstances and significantly undermines the defence.

Procedural Background:

[61]The claim was issued on 8 August 2024 and served together with the particulars of claim (“POC”). The factual background is set out below but in summary the POC advanced claims against the firm for: i) an account of the balance of monies received into the firm’s client account from Katrin pursuant to a facility letter executed by NRD on 25 September 2018 (“the First Facility Letter”); ii) damages for breach of the undertaking to pay SDLT and/or an account for the amount retained to pay the SDLT; iii) an account of the sum wrongfully retained and/or paid away by the firm from the sum advanced to NRD by TCF pursuant to the TCF Bridging Agreement; iv) loss and damage arising from a breach of trust and/or breach of contract/retainer and/or breach of duty for failing to discharge the First Facility Letter from the monies received from TCF; v) Damages or equitable compensation to compensate NRD for the loss of profits arising from NRD’s inability to develop the Bed Shop including the loss of profit that would have been made had the Bed Shop been completed arising from the failure to discharge the First Facility Letter and the forging of the signature of PS on the Second Facility Letter, the Second Charge and the February Personal Guarantee and the subsequent fraudulent registration of the Second Charge against the title to the Bed Shop. vi) NRD also plead that the signature on the 14 November Charge was forged. vii) NRD further plead that the signatures on the various documents whether actually signed by PS or on which the signatures were forgeries were not in fact witnessed by Mr Ewan.

[62]The firm’s defence is dated 3 October 2024. In broad terms the firm says that the monies it paid out were paid out on instructions given directly or indirectly by PS/NRD. It therefore denies the claim for breach of trust, retainer or tortious duty on the basis that it was acting in accordance with its instructions.

[63]Whilst the firm admits filing an SDLT return in respect of the Bed Shop and admits that the SDLT has not been paid it pleads that it did not give an undertaking to pay the SDLT and so has not acted in breach of undertaking and did not act in breach of duty.

[64]The firm admits that Mr Ewan did not witness PS signing the 14 November Charge, or the February Personal Guarantee but does not admit that PS’s signature is a forgery.

[65]The firm pleads that the Second Facility Letter, Second Charge and the Second Personal Guarantee were arranged by PS/NRD or those acting on its instructions/authorised by it.

[66]The firm further advances a defence of illegality on the basis that NRD/PS were part of a fraudulent scheme. And finally, it advances an unparticularised allegation of failure to mitigate and raises issues of remoteness in relation to the loss and damage claim.

[67]NRD’s reply was served on 20 November 2024 denies that(i) the payments made to the various third parties were instructed or authorised by NRD;

(ii) the firm was acting on its instructions in relation to the Second Facility Letter;

(iii) PS was involved in or had any knowledge of the fraudulent scheme advanced by the firm.

[68]NRD served a request for further information which was responded to on 7 February 2025 (“the RRFI”). The RRFI did not advance the position in relation to the broad assertions of authorisation/instruction made in the defence.

[69]The CCMC took place on February 2025, and the trial was listed for the week of 23 February 2026.

Factual Background and evidence:

[70]PS was introduced to NC and VS in about 2015 through a business associate with whom he was working on a development project through Incartus. The business associate was using the firm and some of the payments received by Incartus were made from the firm’s client account. PS was therefore aware of the firm from as early as 2015/2016 and his companies had received payments via the firm’s client account from his clients on various building projects.

[71]In about 2016 PS was introduced to Everstone who were going to develop Brookhill. Hog entered into a JCT Contract with Everstone in April 2017. Hog and IDSE (to whom Hog sub-contracted some of the work) both received payments for the building work undertaken for Everstone on Brookhill from the firm’s client account.

[72]PS says that he only ever had a business relationship with NC, TC, AC and VS. He says his companies were involved as the building contractor on development projects for companies related to NC, TC and AC between 2017 and about 2019 and that generally (though not exclusively) the relationship was one of employer/developer and contractor. His companies would raise invoices based on, for example, applications for payment under JCT contracts and receive payments from the relevant employer companies from the firm. He/his companies did not work only for or with NC, PC, AC and VS companies. He/his companies were not clients of the firm until NRD instructed them in relation to the TCF Bridging Agreement (see below).

[73]In 2017 PS met David Tate the owner of the Bed Shop. PS considered that the Bed Shop had the potential to be developed into a number of flats. PS and David Tate agreed terms for the sale and acquisition of the Bed Shop by one of PS’s companies. This was PS’s own project and not one that he was undertaking in conjunction with NC, TC or AC.

[74]Nick Peace (“NP”) of Richards Solicitors, PS/his companies’ longstanding solicitor was instructed to act on the acquisition.

[75]On 27 June 2017 contracts were exchanged using PS’s company Axiomatic to acquire the Bed Shop conditional on obtaining planning permission. The purchase price was £1.05m with a deposit of £50,000 leaving £1m to paid on completion. Mr Tate was represented by Russell & Russell (“Russells”). PS would later complete the acquisition using NRD as the SPV set up for the purpose of the Bed Shop.

[76]PS came under pressure from Mr Tate to complete following Medway Council’s 1 August 2018 decision to grant in principle planning permission subject to a satisfactory s.106 Agreement. Without full planning permission traditional forms of acquisition and development finance were not yet available for the Bed Shop. This made it difficult for PS to fund completion. He had to obtain bridging finance to allow time for him to obtain full unconditional planning permission to support the development finance he would need.

[77]NP was instructed to represent NRD in relation to the bridging finance as well as the acquisition. NP and Russells agreed the documentation for completion including all the usual conveyancing undertakings between buyer and seller to enable completion to run smoothly.

First Facility Letter:

[78]By 2018 PS knew VS and approached him and a number of other contacts to assist him with obtaining bridging finance to enable him to complete the acquisition of the Bed Shop pending receipt of unconditional planning permission.

[79]VS introduced PS to Katrin and its chief executive Mr Kerim Yavuzarslan. In the set aside application Mr Yavuzarslan explained that both VS and VK were individuals who helped to build Katrin’s bridge and lending portfolio with VS at least being paid introducer fees. VS was paid a fee of £12,300 for introducing NRD to Katrin. His invoice to Katrin was dated 1 October 2018. Mr Yavuzarslan/Katrin were in principle prepared to offer terms to NRD.

[80]Katrin were represented by the firm. On 20 September 2018 Katrin issued the draft bridging finance documentation. The disclosure suggests that the documents were prepared by VS who then sent them to Katrin by email dated 21 September 2018 @ 15.08 “2 facility letters attached. Please check and confirm if ok to proceed and we will send to [NP] along with the PG to get signed up.” He then sent an email to PS @ 16.16 in which he said “These are the facilities that have gone to [Katrin]. Please confirm you are happy with them as they go to [NP] from [the firm]. Is the company IDSE???”.

[81]The draft facility letter set out the purpose of the loan at clause 3:

“The loan will be utilized by you for the following purpose:- BRIDGE FINANCE ON 21-23 New Rd, Chatham, ME4 4QJ In the event following completion that we become aware that the loan has been used otherwise than for the purposes stated above, an act of default will be deemed to have arisen and we reserve the right to demand the immediate repayment of the loan together with interest, costs and disbursements then accruing.”

BRIDGE FINANCE ON 21-23 New Rd, Chatham, ME4 4QJ

[82]The terms of the facility provided bridging finance in the sum of £1,254,791.25 (£1.2m net after deducting 2 months interest and the arrangement fee) for the purpose of acquiring the Bed Shop. Katrin’s legal fees and disbursements for the firm were to be deducted from the £1.2m on completion.

[83]PS’s evidence was that prior to NRD’s agreement to enter into the First Facility Letter with Katrin in September 2018 he had not had any direct dealings with the firm. There is no evidence to suggest that he did. This makes the firm’s defence about instructions and authorisation and a course of dealing even more difficult to comprehend. They had never represented PS or his companies and had no previous professional relationship with them (other than to make payments as directed by others (see above)).

[84]The bridging finance was to be secured by way of first legal charge and was repayable at the expiry of 2 months from the date of completion of the loan. PS was not in fact required to provide a personal guarantee. PS explained that the bridging finance was an expensive option and whilst it could be extended for up to 9 months (at a higher rate of interest) he was keen to be able to refinance as soon as possible.

[85]On 25 September 2018, the firm through VK representing Katrin emailed NP @ 15.47 seeking an undertaking from NP to register Katrin’s charge. Notably that email continued “please provide us your bank details as we will request the lender send completion funds direct to your firm.” NP responded @16.59 providing the requested undertaking – “we hereby undertake to register your client’s charge on completion.” and providing bank details. This represented a traditional approach to completion where the buyer’s solicitor has the obligations in relation to registration of title and registration and discharge of charges.

[86]PS signed the First Facility Letter on 25 September 2018. In doing so he/NRD were bound by its terms including as to the use of the funds advanced under it. PS has no recollection of whether he signed a first legal charge at that time. He accepts that there should have been a first legal charge and that Katrin was unlikely to have advanced the bridging finance without it. However, no first legal charge dated 25 September 2018 has ever been produced. PS does not recall if he attended the firm’s offices to sign the First Facility Letter but thinks it is likely that he did so with VS. The issues arising in relation to the First Facility Letter and the associated charge are primarily about what became of the funds advanced under it.

[87]On 26 September 2018 @ 17.24 NP confirmed to Russells that everything had been signed off “yesterday”. Russells provided a VAT invoice, replies to requisitions, their bank account details and confirmation of the amount needed to complete.

[88]An email of 27 September 2018 @ 13.28 between VS and Katrin suggests that Katrin were unhappy with some of the amendments that had been made to the First Facility Letter. It appears amendments may then have been made but PS was not asked to sign any amended First Facility Letter. Once Katrin were happy with the terms of the First Facility Letter they transferred £1.2m to the firm. Upon receipt of the £1.2m the firm held the monies on trust for the purpose set out in the First Facility Letter. As the First Facility Letter had been completed the full amount of £1.2m less only legal fees due to the firm should then have been remitted to NP to enable NP and Russells to effect completion. It had been common ground that the firm then held the £1.2m on trust for the benefit of NRD.

[89]The First Facility Letter sets out in clear terms that the bridging finance was being advanced for the sole purpose of the acquisition of the Bed Shop. If the monies were not used for that purpose an act of default would have arisen. It seems to me that if the firm, as Katrin’s solicitors, were instructed to use the bridging finance other than in accordance with the terms of the First Facility Letter, they would have had a conflict and be bound to tell Katrin.

[90]The firm paid £1m direct to Russells by electronic CHAPS transfer without prior notification to any of NP/NRD/PS or Russells. There has never been an explanation for the firm’s unilateral decision to remit the completion monies to Russells direct. None of NP/NRD/PS, Russells or even Katrin had asked the firm to do so. None of the necessary regulatory/KYC/AML checks were in place between the firm and Russells. All the completion undertakings were in place between NP and Russells and NP and the firm as set out above.

[91]When NP discovered the completion monies had been sent to Russells amongst other things, he raised a concern that Russells might not be prepared to accept the funds and explained that he would not be able to complete until the balance of the bridging finance was paid over to NP. Without it he would not be in funds to meet his obligations and pay the SDLT. The firm did not then and has not since provided a completion statement in relation to the First Facility Letter nor accounted to NRD. What if anything had or should have been deducted from the £1.2m is unknown.

[92]The transfer to Russells caused delay and confusion. Russells, NP and PS scrabbled around trying to sort out the mess including having to rearrange who would do what in relation to completion and seeking to obtain and release various undertakings.

[93]To give effect to the revised arrangements, which included the firm taking on responsibility to complete registration of the title to the Bed Shop at the Land Registry and the submission of the SDLT return, S K emailed NP on behalf of the firm @ 10.05.53 as follows: “We confirm to undertake payment of the Stamp Duty and Land Registry fees on 21-23 New Road otherwise known as the Bed Shop”.

[94]The firm in its defence denies that there was any employee known as Mr Smith Kauchik but says nothing about SK. I am satisfied on the evidence available that SK was an employee/worked for the firm in some capacity and sent the email above on behalf of the firm.

[95]NRD relied on the contents of the email as representing an undertaking to pay the SDLT. Whilst it might be said not to have the same clarity as for example the undertaking given by NP on 25 September 2018, the intention is clear and was confirmed back to the firm in the subsequent email forming part of the same email chain.

[96]On 28 September 2018 @ 10.45 NP responded:

“Based upon the transfer of £1m to [Russell] direct and your undertaking below [the email referred to above] we calculate that the total amount now either paid or to be deducted from the facility is £1,042,455 [£1m completion, £42,000 SDLT and £455 Land Registry fees] leaving a balance payable to ourselves to cover other costs and disbursements and monies to be paid to our client from the net advance of £1,200,000 of £157,545. Please confirm that these monies will be sent to us today so as we can complete the transaction. Clearly our client will be paying interest on the full amount of the loan from the completion date so we require all monies to be paid over today. Upon the above basis we herby undertake to forward to you the title documents within 3 working days of receipt of these from the seller’s solicitors so as you can deal with the registration. Upon this basis please confirm that our previous undertaking to register title and your clients’ charge is no longer applicable.”

[97]At 11.13 SK responded “ We confirm receipt of your email and confirm you are released from your undertakings and we agree to send the monies as listed below. Furthermore the balance of the £1.2m will be released to [PS]. Please proceed with completion.”

[98]The firm does not admit that the emails amounted to an undertaking in the sense of a binding undertaking given on behalf of the firm. It does not otherwise address the clear confirmation and agreement to pay the SDLT and the Land Registry fees from the monies it retained for that purpose (irrespective of whether it amounted to an undertaking) nor does it address the failure to account to NRD for the full balance of the monies received from Katrin.

[99]I am satisfied that by the emails of 28 September 2018, the firm agreed that it would undertake the work to register the title of the Bed Shop and the charges and submit the SDLT return and undertook to pay the Land Registry Fees and SDLT on behalf of NRD from the monies it was to retain for that specific purpose. It therefore assumed responsibility for doing so. The firm did not formalise that arrangement with any retainer letter or otherwise but that does not mean that they did not agree to undertake/carry out the work necessary to complete the registration and to make the SDLT return and the associated payments. And they do not say that they did not accept responsibility for doing so only that the non-payment of the SDLT was not a breach of an undertaking.

[100]The £42,455 was held by the firm for the benefit of NRD from 28 September 2018 to pay the SDLT and the Land Registry fees and SK had confirmed that the firm would do so. It therefore held the £42,455 for that specific purpose. Although it has paid the Land Registry fees it has not paid the SDLT and never explained why not. It has not accounted for the £42,000. It must do so.

[101]But in any event, it appears to me that the exchange between NP and SK gives rise to an undertaking in respect of the £42,000. The firm understood that the usual obligations had been reversed as a consequence of its unilateral remission of £1m to Russells. Rather than NP undertaking to pay the SDLT and Land Registry fees and to register title and charges including Katrin’s charge – the firm through SK was undertaking to do that. SK’s subsequent confirmation that she released NP from his undertaking to register the title and the charge only confirms her understanding of the reversal of the obligations. The final part of the jigsaw was of course NP’s undertaking to forward the title documents to the firm/SK to enable her to complete the registration. For completeness of course, the firm/SK confirmed that the balance less the SDLT and Land Registry fees would be remitted to PS on completion – though why she thought it should be released direct to PS is again unexplained.

[102]An undertaking does not need to include the word undertaking and nor do the terms of an undertaking need to be included in a single document. Even if the terms of an undertaking were considered to be ambiguous it will usually be construed in favour of the recipient not the maker. This is particularly so where it is clear to the maker that the recipient intends to rely on it and the maker does not disabuse the recipient of that understanding.

[103]Here the exchange of emails make it clear that an undertaking had been sought and that NP on behalf of NRD believed that an undertaking had been given and that NP/NRD were relying on it. NRD has the benefit of the undertaking even though it was given to NP since it was given to NP for the benefit of their client NRD.

[104]Following the provision of the undertaking and to avoid any further delays PS confirmed to NP that he should proceed on the basis proposed by SK. At 14.30 on 28 September 2018, NP confirmed to PS that completion had taken place.

[105]Russells sent NP the completion documents in accordance with their undertakings, NP then forwarded them on to the firm in accordance with NP’s undertakings. Those documents included the transfer form TR1 signed by Mr Tate dated 28 September 2018, a DS1 signed by Mr Tate’s charge holder dated 28 September 2018 to cancel the existing registered charge. Russells then efiled and registered the legal charge in relation to the VAT deferral at Companies House.

[106]The firm was now in a position to(i) register the title and charges at the Land Registry;

(ii) submit the SDLT forms to HMRC;

(iii) pay the SDLT and

(iv) register Katrin’s charge at Companies House using the £42,455 to enable it to pay the SDLT and the Land Registry fees.

[107]The firm has never explained why it did not efile a form MR01 to register the Katrin charge at Companies House within the statutory deadline of 21 days. It may be that PS’s recollection is right and he had not been asked to sign one. Once the deadline was missed the charge to secure Katrin’s loan could only be registered if an extension of time were obtained by way of court order. No application to extend time was made and none of NP/PS/NRD/Mr Tate/Russells or Katrin were told that the deadline had been missed.

[108]On 28 September, the firm says that instead of remitting the balance to PS or NP (and in breach of clause 3 of the First Facility Letter) it made two payments said to have been authorised/instructed directly or indirectly by PS/NRD: i) £37,189 was paid to Investpek Limited; and ii) £118,118 was paid to IDSE.

[109]The firm’s bank statement for its client account for 28 September 2018 identifies two payments in those sums on that date with the reference Investpek Limited and IDSE. There is nothing on the bank statement to connect them to the monies received from Katrin and held for the benefit of NRD. No other documents have been disclosed by the firm to explain those payments.

[110]The firm says that the instructions to make the payments were issued by NC and/or VS who were understood to be business associates of TC and PS and to be authorised by NRD to give instructions on its behalf. This understanding was said to be based on the course of dealings and communications at the relevant time. TC was not and had never been a director or shareholder of NRD at the time of the two transfers so could not have authorised anything at all.

[111]The firm says that the instructions were not in writing. The firm does not plead a positive case on oral instructions merely that if they were given orally, they were they were given by PS to MB, VS or NC. This is based on the unsupported assertion of a course of dealings which makes no sense. None of NRD/PS or his companies had ever been a client of the firm and NRD had only been incorporated in August 2018. It is simply not explained how there could have been a course of dealings or understanding with PS/NRD as to whom had authority to provide instructions on his/NRD’s behalf.

[112]The firm was in any event unable to identify which of MB, VS or NC were said to have been given the instructions and/or who at the firm was then instructed. There is no evidence that the firm had any authority to accept instructions from MB/VS or NC on behalf of PS/NRD.

[113]The firm says that the sum of £37,189 was to be paid to Investpek in order to reduce a loan taken out by PS or one of his companies. The firm has not identified which of MB, VS or NC was said to have provided the instruction and nor did it have any recollection or record identifying the company which was said to have taken out a loan, the amount of the loan or any other details.

[114]There was no evidence of(i) any instruction from anyone or to anyone or

(ii) the transfer other than the entry on the bank statement. The firm has not provided its own internal accounting records. The firm has not explained why NRD would be liable to repay a loan to Investpek said to be a liability of PS personally or one of his other companies or what steps they took to square the circle with their obligations to both Katrin and NRD and under the First Facility Letter if they had been instructed to pay away the monies by or on behalf of PS other than for the purpose of the Bed Shop/benefit of NRD.

[115]PS’s evidence was(i) he had not authorised any payment to Investpek and that

(ii) in 2018 neither he, personally, nor any of his companies had received a loan from Investpek. He explains that the only loan he had ever had from Investpek was a personal loan of £200,000 taken out in 2020 which was subsequently repaid.

[116]For the reasons set out above there is not a shred of evidence to support the firm’s position. I accept PS’s evidence and find that he did not authorise the payment to Investpek whether directly or indirectly. I am satisfied that it should not have been made.

[117]In respect of the payment of £118,811 to IDSE, the firm explains that the instruction would have originated from PS and would have been conveyed orally by MB, VS and/or NC on behalf of NRD but that the firm does not recall which of those individuals provided the instruction. The position of the firm is the same as for the Investpek payment above. Again all the same factors apply and there is simply no evidence at all to support the firm’s position.

[118]Further, for this payment PS and Ms Gummer have been able to provide a detailed explanation for the payment supported by documents. A payment of £118,118 was received by ISDE into its HSBC account from the firm. PS explains it was a sum due to IDSE from Everstone in respect of Brookhill on an application for payment under the Brookhill JCT contract. It was an Everstone liability. It should not have been paid from the monies received from Katrin for NRD but rather from Everstone. PS did not authorise a payment from the Katrin monies to IDSE to meet an outstanding sum due from Everstone. IDSE and Hog had received payments related to Brookhill via the firm before so there was no reason to query it.

[119]Ms Gummer explained that she was able to extract/export information from QuickBooks to include compiling spreadsheets or extracting information to enable her to submit VAT returns. Each of PS’s companies had its own bank account so any payments to a particular company would be paid to it not into a general account. Where a company was not an SPV such as IDSE she would work with PS to ensure monies paid into the bank account were attributed to the relevant building project that company was undertaking. She explained that when monies were paid in via the firm, the firm did not provide any payment confirmations or information for any payments it made.

[120]She explained that the £118,811 it had been paid into the IDSE HSBC bank account by the firm on 28 September 2018 with a bank reference of Brookhill. She exhibited a summary of all funds received by IDSE from the firm from April 2018 to May 2020. Each receipt including this one had a bank reference identifying the building project the payment was attributable to. Ms Gummer had separately extracted a schedule of payments received from the firm by IDSE and Hog relating to Brookhill which included the £118,811 payment. She exhibited(i) a copy of the invoice raised by IDSE in respect of the £118,811;

(ii) an extract from QuickBooks showing a list of invoices raised by IDSE for the period April 2018 to March 2019 with her handwritten annotations in relation to VAT; and

(iii) the VAT100 Report for the period 1 July 2018 to 30 September 2018 and accompanying schedule evidencing the inclusion of the £118,811 in the VAT return for ISDE. She confirmed in her witness statement that the £118,811 was reported to HMRC as relating to Brookhill.

[121]I accept PS and Ms Gummer’s uncontroverted evidence on behalf of NRD that the payment of £118,811 was a payment due to IDSE from Everstone in relation to Brookhill. NRD had no liability to IDSE. It would make no sense at all for NRD to pay Everstone’s liability to IDSE. I am satisfied that and find that the payment to IDSE was not authorised or instructed by PS/NRD and should not have been made from the monies held by the firm on NRD’s behalf.

[122]The total balance of the monies held by the firm for the benefit of NRD was £200,000. These two payments total £155,307 and remain outstanding and due to NRD. £155,307 + £42,455 = £197,762 not £200,000. This leaves an unaccounted for difference of £2,238. There has been no explanation from the firm for what became of that balance. No documents or evidence have been advanced to explain what was done with it and/or whether it is still being held for NRD.

[123]Whilst having regard to the terms of the First Facility Letter it is possible that it represents legal fees – that is not the position that has ever been advanced by the firm whether in correspondence or as part of its defence and no documents, invoice, completion statement have been produced. It therefore still forms part of the £200,000 balance for which the firm has to account.

[124]The firm did not pay any part of the balance of the money advanced by the First Facility Letter to NP/PS/NRD for NRD. The firm held the balance on trust for the benefit of NRD either in accordance with the terms of the First Facility Letter or the undertaking and/or agreement set out in SK’s emails of 28 September 2018 @10.05.53 and 11.13 above. PS explained that had chased up payment of the balance, but it was not forthcoming and no explanation was provided. If the payments above were genuine it would have been a simple thing for the firm to have emailed PS and to have reminded him about the transfers said to have been authorised by him. The failure to have done so speaks volumes. The explanation now relied on was first provided in the firm’s defence in October 2024, six years later.

[125]On 10 October 2018 NP asked for confirmation that the SDLT had been paid. There does not appear to have been any response.

[126]The Bed Shop s.106 Agreement was issued on 12 November 2018 and full planning permission was issued on 13 December 2018. This enabled PS to look for less onerous terms on which to further finance the Bed Shop including development finance. VS had been working with NRD/PS to obtain offers of funding to replace the First Facility Letter. By 12 October 2018, Amicus were prepared to offer terms. The firm were instructed to represent NRD. This was the first time that PS had instructed the firm to represent him or one of his companies.

[127]There are very few documents in relation to the Amicus proposal. PS explained that he was told by VS that Amicus would only proceed with a known party. As he was unknown to Amicus, VS proposed that TC become director and shareholder for a period of time to allow the funding to be obtained and that she then step down. PS was keen to obtain alternative funding – the First Facility Letter had already been in place for two months and was about to get more expensive - he went along with the proposal. VS made the application to Amicus on the basis that TC was the owner of NRD. On 14 November 2018 VS emailed PS asking him to change the company director and shareholder for NRD before the Amicus proposal went to the credit committee. This suggests that VS was not himself able to change the information on companies house.

[128]TC became a director and 50% shareholder of NRD from 28 November 2018 to 12 December 2018. At the end of that two-week period the position reverted to PS being the sole director and sole shareholder. This timeline appears broadly consistent with VS’s explanation. PS appears to have confused when this happened suggesting it related to September 2018 but the documents make it clear that it occurred as above. However, it does not show PS in a good light; whether desperate or simply naïve, he was prepared to accept advice from VS that would cause him to mislead a funder. I have taken this into account when considering his credibility overall but as I note above his evidence is largely supported by documents, expert evidence and Ms Gummer. PS explains that Amicus went out of business in early December 2018, so they were no longer an option for development finance.

[129]No doubt prompted by the Amicus application for funding, on 14 November 2018 PS had emailed Mr Ewan and MB asking for confirmation that the application to register NRD’s title had been made as he had been unable to see it on the online portal. 14 November Charge:

[130]Whether in response to PS’s email or otherwise there was considerable activity on the part of the firm on 14 November 2018. There has been no explanation for the existence of the following documents: i) A TR1 identical to the TR1 signed by Mr Tate dated 28 September 2018 including Mr Tate’s signature and the same witness save that it was now dated 14 November 2018 in different handwriting. ii) A DS1 identical to the one signed by Mr Tate’s charge holder dated 28 September 2018 save that as with the TR1 the date was now 14 November 2018 in different handwriting. iii) The 14 November Charge.

[131]The 14 November Charge purports to have been signed by PS but he says it is not his signature; it is a forgery. He does not accept that the 14 November Charge is a genuine document. It purports to have been witnessed by Mr Ewan but as set out above it was not. This means that even if it had been signed by PS it had not been properly executed. The firm denies that PS’s signature was forged.

[132]The firm submitted an API application to register the title of the Bed Shop in the name of NRD on 20 November 2018 and paid the Land Registry fees. The AP1 was also apparently signed by Mr Ewan, but he says that the date on the AP1 is not in his handwriting. It attached the amended TR1, the 14 November Charge, the amended DS1 and an SDLT Certificate. The API wrongly identifies NP as representing Mr Tate the seller and records the firm as representing both Katrin and NRD. The firm has provided no explanation for the existence of the documents dated 14 November 2018.

[133]The Land Registry raised requisitions in relation to the 14 November Charge. The firm responded to the requisitions and made amendments without obtaining any instructions or authorisation to do so.

[134]On 21 November 2018, the MR01 particulars of charge was registered at Companies House relying on the 14 November Charge. The MR01 purports to be signed by Mr Ewan. It does not appear to have been submitted electronically. This was now 53 days after completion.

[135]When the TCF Bridging Agreement was being arranged (see below) PL were sent the 28 September 2018 documents not the 14 November 2018 documents. They appear to exist only in relation to the applications made in November 2018 by the firm. There is no suggestion by the firm that anyone else was involved in the registration in November 2018.

[136]Mr Hill-Smith infers that the redating of the TR1 and DS1 and the date of the 14 November Charge were intended to avoid the consequences of the failure to register the charge within 21 days of 28 September 2018. I agree that is the obvious inference to draw.

[137]Mr Ewan’s evidence is entirely supportive of PS’s own evidence about the lack of genuineness of his signature on the 14 November Charge. This is further supported by the to the expert evidence set out above which concludes there is strong evidence that the 14 November Charge was signed by persons other than PS. It all strongly supports NRD’s claim that the signature on the 14 November Charge was forged.

[138]I am satisfied and find that on the balance of probabilities PS’s signature on the 14 November Charge was forged and was not in any event witnessed by Mr Ewan.

[139]Mr Hill-Smith submits that the modification/falsification of the TR1, DS1 and the 14 November Charge were undertaken by the firm. Whether or not Mr Ewan in fact signed or dated the AP1 himself, the firm admits that it filed the AP1, supported by the 14 November Charge and the modified TR1 and DS1.

[140]There was no need, reason or logic for NRD or PS to be involved in their creation. They like the seller, Mr Tate, and Katrin believed completion had taken place on 28 September 2018 – as it had – and that the firm had undertaken and/or agreed to register the charges and title and pay the SDLT.

[141]At a minimum, a whole suite of documents were manipulated, modified and redated by the firm on 14 November 2018 but that includes the strong evidential support for the forging of PS’s signature on the 14 November Charge. There is no suggestion from the firm that anyone else was involved in relation to these documents. No explanation has ever been provided by the firm which simply makes no admissions.

[142]Mr Hill-Smith submits that it provides strong evidential support that documents were being manipulated by the firm. I agree. I am satisfied and find on the balance of probabilities on the basis of the evidence available that the 14 November documents including the 14 November Charge are not genuine and were created and/or modified from the 28 September 2018 documents by the firm.

[143]Although no legal charge dated September 2018 has ever been produced, NRD accepted that it had agreed to enter into a legal charge in respect of the First Facility Letter. The significance of the 14 November Charge is primarily that it supports NRD’s claim that PS’s signature on later documents was also forged and the firm’s involvement in that process. For convenience I will refer to charge in support of the First Facility Letter in the rest of this judgment as the 14 November Charge.

[144]It provides strong supportive evidence for NRD’s claim that the firm was willing to and involved in the creation and modification of documents with the intention to mislead including the later February 2019 documents. It would have been relatively straightforward, even if embarrassing, to either have the TR1, DS1 and a charge re-executed/executed or to apply to court for an extension of time rather than altering/modifying or falsifying documents.

[145]The firm admits that it submitted the SDLT return to HMRC on 21 November 2018 but also admits that it did not pay the SDLT. The firm does not explain why it did not pay the SDLT or what has become of the £42,000 (see above). There was nothing to put PS/NRD on notice that the SDLT had not been paid.

[146]Registration of the Bed Shop title was completed by the Land Registry on 31 December 2018. NRD was now the proprietor. The 14 November Charge was registered securing the borrowing under the First Facility Letter.

[147]In April 2020 NRD receive a closure notice from HMRC confirming that the SDLT return had been checked. PS discovered that the SDLT remained outstanding when NRD received a demand from HMRC for outstanding SDLT and interest on 3 February 2022 in the sum of £53,148.73. PS says that by February 2022, NRD was not in a position to pay the SDLT for the reasons set out below. It remains outstanding with interest continuing to accrue.

TCF Bridging Agreement:

[148]On 8 November PS approached TCF explaining:

“I need a quick bridge to take out a private equity lender I have, I attached terms of the development facility which would take out your bridge. The building will value up at about £2,200,000.00 and I would like 70% if possible”

[149]On 10 December 2018 Samantha Emery of TCF confirmed that TCF were in principle happy to support the project at 65% of £2.1m.

[150]The firm admit they were instructed/retained to act for NRD in relation to the TCF Bridging Agreement but have not produced any written retainer at all let alone anything that provides any information about what they understood to be the scope of the work they were to undertake. VK had day to day conduct of the work for NRD relating to the TCF Bridging Agreement. No other fee earner appears to have undertaken any of the work until after completion of the refinance.

[151]The firm denied they knew the purpose of the TCF Bridging Agreement. PS/NRD pleaded that the firm were specifically instructed that the TCF Bridging Agreement was to discharge the 14 November Charge which is entirely consistent with the explanation given to TCF about the purpose for which the TCF Bridging Agreement was required. It is clear from the evidence available that PS/NRD did instruct the firm about the purpose for which the TCF Bridging Agreement was required (see below) but had there been any doubt the absence of a retainer letter or documentary evidence about the scope of the retainer would have weighed against the firm.

[152]PL were instructed to represent TCF and wrote to the firm requesting information and documents. They confirmed that the proposed advance gross was to be £1,365,000.

[153]On 17 December 2018 in a response to a request from PL, the firm acting for NRD in relation to the refinance, provided the unconditional undertakings requested by PL for TCF including the following: “(a) That the net advance will be immediately applied by us for the purposes of discharging the existing mortgage(s) registered against the title to the Property/Properties on completion with any balance remaining being remitted to the borrower following deduction of our professional costs and disbursements… (c) to complete and register the lender’s first and only Legal Charge… (j) to mark the charge in favour of Katrin Properties Limited as satisfied at Companies House immediately following redemption” (my emphasis)

[154]The firm could not have given these undertakings without NRD having confirmed its instructions. PS’s evidence was entirely consistent with the undertakings. He said that TCF would only lend on the basis that they had the sole charge over the Bed Shop. His evidence has consistently been that the purpose of the TCF Bridging Agreement was to redeem the 14 November Charge to provide less expensive borrowing whilst he sought development finance. The firm has not explained why the unconditional undertaking given to TCF left any doubt about the purpose of the refinance or what they had undertaken to do on receipt of funds from TCF. Even if NRD/PS had sought to instruct them to do something else, the firm would have been in breach of the unconditional undertakings if they had followed any such instructions.

[155]PL had explained that TCF’s requirements were that “the security documents are signed by your client in your presence and that you witness their signature and complete the solicitor’s certificate.”

[156]PS signed the TCF Bridging Agreement, and the draft fixed and floating charge (“the TCF charges”) on 18 December 2018. His signature was again said to have been witnessed by Mr Ewan. It was not. They had not met. PS explained that when he attended the firm to sign the documents his signature was not witnessed in the sense of someone signing the document immediately after he had signed it but rather it was taken away without any witness signature on it. PS separately executed a personal guarantee in favour of TCF and his signature on that was witnessed by an independent solicitor.

[157]The firm provided certified copies of the TCF Bridging Agreement and the TCF charges and the personal guarantee to PL on 18 December 2018.

[158]On 20 December 2018 VK confirmed to PL that the firm was also instructed by Katrin as outgoing lenders and that the firm was holding a signed DS1 “with regards to the discharge of [the 14 November Charge]” which was said to be attached to the email. In fact, it appears that the DS1 was not attached. No copy of it was found on the PL file and further on 15 January 2019, SK confirmed she was still waiting for a signed DS1 to enable her to proceed with registration. It is clear that the firm understood that it was intended that the TCF Bridging Agreement was to be used to clear the 14 November Charge. And it is also clear that Katrin knew this; they provided a redemption figure of £1,308,630.25 valid until 31 December 2018 on 20 December 2018.

[159]On 19 December 2018, the firm received notification from HMRC that the SDLT was outstanding and interest was accruing. The figure due was £48,771 (£48,750 plus £21 interest). The firm has only retained £42,000. Mr Ewan forwarded the letter to MB on 8 January 2019 who said he would ask PS to send over the balance. There is no evidence that PS was told that the SDLT was outstanding or that the firm were not holding sufficient funds to make the payment. There is nothing to explain what HMRC were told at the time. However, as part of the remedies sought against the firm NRD seeks an order that the firm pay the full amount outstanding in relation to the SDLT and interest. This does not take into account the shortfall between £48,500 and £42,000.

[160]The firm failed to disclose its correspondence with PL which significantly undermines its defence and supports NRD’s claim.

[161]On 2 January 2019 MB confirmed that an up-to-date redemption figure had been sent to PL. PS asked for confirmation of the amount. I have not identified the figure but it will have been an increase on the figure as at 31 December 2018. Everyone was still proceeding on the basis that the TCF Bridging Agreement would be used to redeem the 14 November Charge entirely consistent with PS’s evidence and the documents including the unconditional undertakings.

[162]On 7 January 2019 Samantha Emery confirmed to PS that the refinance had been completed and the funds would be sent at 1.30 pm that day. The net sum of £1,332,147 was received by the firm on 7 January 2019 from TCF and thereafter held in the firm’s client account on trust for the benefit of NRD subject to the terms of the TCF Bridging Agreement and the unconditional undertakings given by the firm to TCF.

[163]Completion took place on 8 January 2019 after VK had confirmed clear solvency searches that morning. The TCF Bridging Agreement was signed and dated by TCF on 7 January 2019. The TCF charges and PL’s invoice for TCF’s legal fees are all dated 8 January 2019. Based on the December 2018 redemption figure the balance of the sums received from TCF would have been about £24,000. This would have allowed for an increase in the redemption figure, some additional costs and expenses such as the firm’s fees but may still have left a small shortfall on the firm’s client account for the benefit of NRD.

[164]The firm did not redeem the 14 November Charge but instead made the payments set out below which it says it made by on or behalf of NRD. The only documentary evidence to support the payments is a transaction list from the firm’s bank showing receipt of the £1,332,147 and the transfer out of the sums set out below. As with the earlier payments there is nothing on the transaction list that in fact connects the payments out to NRD.

[165]On 8 January 2019, £346,665.86 was paid by the firm to Buckles Solicitors LLP of which £285,378.01 was said to have been debited from the TCF funds to pay for the purchase of a property situated at 28 Court Yard, Eltham, London SE9 5QA. The firm say that the instruction was given by NC or VS either directly or via MB.

[166]The firm say they were informed by either NC or VS that PS owed monies to TC connected to the purchase of 28 Court Yard. They say that information was communicated orally during discussions surrounding the payment of Buckles Solicitors LLP.

[167]It is clear from the description that this was not a liability of NRD. Not a single document has been produced to support the pleaded basis for the payment that PS owed money to TC. No explanation is provided as to the legal basis on which monies provided to NRD by TCF to redeem the 14 November Charge could be used to pay any such loan in the face of the unconditional undertaking to redeem the 14 November Charge. There is no explanation as to how NRD’s funds could be used to meet a what is said to be a personal liability as between PS and TC.

[168]The firm has advanced no evidence that NC or VS were authorised by NRD to give instructions on its behalf or that the firm were authorised by NRD/PS to accept instructions from NC or VS on behalf of NRD.

[169]There is no evidence that PS/his companies had any liability to pay Buckles Solicitors LLP, whether in the very specific sum of £285,378.01 or at all. Mr Hill-Smith submits that there must have been a document to support such a specific sum and to plead it. I agree. But there is nothing. The firm’s transaction list simply identifies a single transfer in the sum of £346,655.86. No explanation is provided about the source of the balance of the payment to Buckles Solicitors LLP. There are no client ledgers or internal accounting records or authorisations to evidence either the NRD/PS instructions or how funds were accounted for between clients to enable a single payment to be made. Again having regard to SAR this is surprising.

[170]PS says that he did not authorise the payment of £285,378.01 from the monies received from TCF. His evidence is that the first knowledge he had of 28 Court Yard was when the defence was served. He says that neither he nor his companies had anything to do with that development and no monies were due to TC from him or any of his companies.

[171]On 9 January 2019 £1m was paid to Investpek which was said to be to reduce a loan liability associated with PS. Again, it is said that the instruction to make the transfer was given by NC or VS either directly or via MB as above there is no evidence to support this at all. PS was the sole director of NRD. The firm has produced no evidence that he had authorised the firm to accept instructions from anyone else.

[172]PS says that there was no loan due to Investpek whether from him or any of his companies in 2019 (see above). He did not authorise any payment. He says he knew nothing about it.

[173]I accept PS’s evidence. I am satisfied and find that(i) these were not NRD’s liabilities and

(ii) PS did not authorise or instruct others to authorise the transfers from the firm’s client account to Buckles LLP or Investpek. The monies should not have been paid away.

[174]I am satisfied and find that PS/NRD believed that the TCF Bridging Agreement had been used to redeem the 14 November Charge as intended. There was no reason for PS/NRD to believe otherwise. Subsequent events reinforced and confirmed his understanding.

[175]There is a difference of £46,768.99 between the net sums advanced by the TCF Bridging Agreement and the sums dissipated by the firm. (£1,332,147 -£1m -£285,378.01 = £46,768.99). It should therefore still be in the firm’s client account being held for the benefit of NRD.

[176]On 15 January 2019, MB asked SK to complete the registration of the TCF charges; she explained she was waiting for the DS1 in respect of the 14 November Charge. The email was copied to NC but not to PS/NRD. MB told SK that there was a dropbox file in the name of “Paul Smith NRD Bed Factory” and a sub file named “Together Finance” (see above). There is no explanation for what became of those files.

[177]The TCF charges were registered by efiling them at Companies House on 15 January 2019. An application was made to the Land Registry, and the 14 November Charge was removed and replaced by the TCF charges on 28 January 2019.

[178]Official Copy Entries dated 21 February 2019 show only the TCF charges, the 14 November Charge had been removed. Any check at the Land Registry between January 2019 and January 2020 would not have put PS/NRD on notice of anything unexpected or unusual about the title to the Bed Shop.

[179]On 15 February 2019 PS chased the firm for the SDLT and Land Registry documentation for the VAT office. He was told that the Land Registry was still removing the 14 November Charge and putting on the TCF charges. This was consistent with what PS understood had happened in January 2019 but also untrue. It undermines the firm’s position that PS/NRD knew the TCF Bridging Agreement monies had been used to make the payments set out above. The SDLT remained unpaid.

[180]NRD/PS started to progress work on the Bed Shop over the course of 2019 whilst seeking to obtain a pre-development commitment/let or sale. On 26 March 2019 he received a formal offer from Sage Housing Limited for 32 affordable rented apartments in the sum of £5.929m.

[181]With the help of Ms Gummer, PS prepared a construction program and Build Cost and Cash Flow report to support NRD’s attempts to obtain development finance, he relies on those figures prepared at that time in support of NRD’s claims for loss. By 5 January 2020 PS/NRD had received a subject to contract heads of terms offer for development finance from Zorin Finance for a total loan of £4,132,200 (including redemption of the TCF charges) and on 25 January 2020 PS/NRD received a heads of terms offer for development finance from Paragon in the sum of £4,095,000 (including redemption of the TCF charges).

[182]In the meantime in parallel with the TCF Bridging Agreement there had been other activity which appeared to relate to the funding of the Bed Shop but which was entirely inconsistent with the instructions received by the firm from any of NRD, PS, TCF or even Katrin. 7 January Facility Letter:

[183]The most curious of the documents is a facility letter dated 7 January 2019 which is said to have been signed by PS on 9 January 2019 and said to have been issued by Katrin for £1m plus interest and arrangement fees – a total of £1,090,215.39 - the 7 January Facility Letter. This was exhibited to the set aside application in June 2020. Mr Yavuzarslan explained that he had never seen the 7 January Facility Letter before it was exhibited in the set aside application, and that it made no sense. It was for less than the redemption figure provided by Katrin on or about 7 January 2019, to enable the 14 November Charge to be redeemed from the TCF Bridging Agreement. I agree. Mr Yavuzarslan says it is a fraud. PS agrees. He says he did not see the 7 January Facility Letter until after he was served with a statutory demand on 20 May 2020.

[184]Although there is no expert evidence confirming that PS’s signature on the 7 January Facility Letter is a forgery the circumstantial evidence is very strong and I accept PS’s evidence that he did not sign the 7 January Facility Letter and it was not created/obtained from Katrin or at all on his/NRD’s instructions. Katrin themselves say it is a fraud.

[185]I agree it makes no sense and appears to have no obvious purpose. Even as a fraudulent document – it is not obvious what use it had in 2019. Its use appears to have been to muddy the waters in relation to the set aside application in 2020.

[186]This is a claim against the firm. There is no evidence that they had been involved in the creation of the 7 January Facility Letter. Its relevance is as part of the wider dispute and the overall background around the February 2019 documents.

The February 2019 documents:

[187]As 14 November Charge had not been redeemed the firm must have known that there was now a real risk that Katrin and/or NRD/PS would discover what had happened. For the reasons set out above they knew they had not received instructions from PS/NRD to make the payments and in any event knew they should not have made them.

[188]On 22 January 2019 VS emailed Mr Yavuzarslan in relation to the Bed Shop. VS explained to Mr Yavuzarslan that PS had had a development loan approved for the Bed Shop and asked Mr Yavuzarslan to send through terms for a second charge so that Katrin could be replaced as first charge holder and take a second charge behind the development finance.

[189]By 29 January 2019 Mr Yavuzarslan was in discussions with VK at the firm about providing a further facility to NRD. It is clear that Katrin believed that they were still holding the 14 November Charge over the Bed Shop. They understood that the proposal was that the First Facility Letter would be renewed/extended with the repayment terms extended. NRD would enter into a second facility letter on new terms which would extend the redemption period and be secured by a second charge behind in priority terms the TCF Bridging Agreement.

[190]VK did not tell Mr Yavuzarslan that this was wrong. Mr Yavuzarslan wanted to limit or contain TCF’s ability to extend its borrowing which might risk leaving Katrin with no security for any second charge. On 4 February 2019 VK proposed that the development finance (the TCF Bridging Agreement monies) only be released upon receipt of valid architects certificates in stages. He explained that the TCF Bridging Agreement was for £1.365m and that he would monitor the stage payments. This was untrue. The firm knew that £1.285m of the net sum of £1.332m received by the firm had been dissipated by 9 January 2019. The TCF charges had already been registered at the Land Registry by the firm and the 14 November Charge discharged. VK/the firm had represented both NRD and Katrin in relation to the TCF Bridging Agreement refinance and redemption (see above).

[191]To reassure Mr Yavuzarslan, VK proposed that TC join NRD and provide a personal guarantee. Mr Yavuzarslan proposed that in addition NC and PS provide personal guarantees. He also sought a trust over the shares. On 5 February 2019 Katrin confirmed they would provide a Second Facility Letter and Second Charge to be signed by PS/NRD.

[192]As I have found, PS believed that the TCF Bridging Agreement monies had been used to redeem the 14 November Charge. Any contact with PS would have alerted him to the fact that the 14 November Charge had not been redeemed. The firm has produced not a shred of evidence that PS or NRD knew anything about this proposal or had any involvement in it. PS was not a party to any of the emails. As Mr Hill-Smith submitted this was a fiction. It appears to have been a fiction designed to conceal from Katrin (and consequently NRD) the failure to have redeemed the 14 November Charge and the dissipation of the monies to Buckles LLP and Investpek.

[193]An AP01 Appointment of a Director form was filed electronically on 4 February 2019 appointing TC as a director. She also seems to have been appointed as a 50% shareholder of NRD. PS says that was without his knowledge or his authority. He says that he did not discover this until he was looking to refinance the Bed Shop in 2020. I accept PS’s evidence that he did not know. He believed he was the sole director and shareholder so there would have been no reason for him to check on Companies House.

[194]The firm says that the February 2019 documents were arranged by NRD or its agents. In particular they say the arrangements for the Second Facility Letter were made by PS and/or VS/NC on behalf of PS/TC and associated companies. In the RRFI the firm says it acted on the instructions of NC or VS who directed MB to prepare the documentation for the Second Facility Letter.

[195]Until 22 February 2026 the firm does not appear to have disclosed any documents relating to the February 2019 documents. The documents exhibited to Mr Ewan’s 22 February 2026 witness statement on one reading suggest that the firm considered it was representing Katrin in relation to the February 2019 documents. But in any event, they do not evidence any contact with or instructions from NRD/PS despite having provided such very late additional disclosure.

[196]Mr Hill-Smith submits that Katrin were induced to enter into the February 2019 documents on a false basis. I agree – it is clear that Katrin were misled by the firm as to the position in relation to the 14 November Charge and the TCF Bridging Agreement.

[197]Katrin issued the Second Facility Letter dated 11 February 2019 for a gross sum of £1,533,779 to be secured by the Second Charge. The Second Facility Letter provided a 12-month extension of time to repay the First Facility Letter/14 November Charge but on new terms. It was not new borrowing, and no new monies were advanced. The additional security required by Katrin included the February Personal Guarantees for both PS and TC and an Irrevocable Trust Deed in relation to the shares.

[198]The Second Facility Letter, Second Charge, February Personal Guarantee and Irrevocable Trust Deed are all said to have been signed by PS on 11 February 2019. Mr Ewan’s appears as the witness to PS’s signature on the Second Charge, and the February Personal Guarantee. As set out above Mr Ewan did not witness PS’s signature and admits he did not. VK was alleged to have witnessed both PS and TC’s signatures on the Irrevocable Trust Deed also on 11 February 2019.

[199]The firm says that it was led to believe that the February 2019 documents had been duly executed in part because “NC/VS presented them as completed and did not indicate any irregularities or lack of authority.” It is an unexplained curiosity that the defence and RRFI say that the Feb 2019 documents were provided to the firm already executed since MB was said to have drafted them and both VK and Mr Ewan’s signatures appear on the documents as witnesses. If the firm received “properly executed” documents apparently already witnessed by VK and Mr Ewan on the same day (and noting they were based in different offices some distance apart – Ilford and West Hampstead) one might have thought they would have spotted that the documents could not have been duly or properly executed. And of course even if PS’s signature were genuine on any of the documents the firm knew that Mr Ewan had not witnessed his signature because he had never met him. The firm cannot possibly have understood that the documents had been duly executed at all whether or not based on instructions and representations from NC/VS. They cannot have believed they were genuine. This significantly undermines the firm’s position and substantially supports PS/NRD’s position about the genuineness of the February 2019 documents.

[200]PS says he did not sign any of the February 2019 documents and knew nothing about them until he was served with a statutory demand based on the February Personal Guarantee in May 2020. There is substantial evidence to support his position.

[201]He says that(i) his signature on the Second Facility Letter is a forgery – this is supported by the expert evidence;

(ii) his signature of the Second Charge is a forgery – this is supported by Mr Ewan’s signature appearing as the witness;

(iii) his signature on the February Personal Guarantee is a forgery- this is supported by the expert evidence and Mr Ewan’s confirmation that he did not witness this document in person (i.e. did not witness it at all) and has not met PS;

(iv) his signature on the Irrevocable Trust Deed is a forgery – this document is said to have been signed by both him and TC and said to have been witnessed by VK rather than Mr Ewan. TC says in other proceedings that her signature on the TC Personal Guarantee is a forgery. So far as PS was concerned, he was the sole director and shareholder of NRD. Had he been asked to sign the Irrevocable Trust Deed it would have alerted him to the appointment of TC as both director and shareholder. This adds to the unlikelihood of the February 2019 documents being genuine.

[202]Not all of the February 2019 documents have been examined by the handwriting experts. Ms Barr and Ms Webb both conclude that there is at least strong evidence that someone other than PS signed both the Second Facility Letter and the February Personal Guarantee. Ms Barr had additionally looked at the printed name and date on the Second Facility Letter and February Personal Guarantee. She said that although the samples were limited there was some supporting evidence that the name and date were also written by persons other than PS.

[203]Further support comes from Mr Ewan’s own disavowal of having witnessed PS’s signature in person or indeed having met him. This is strong evidence that Mr Ewan did not witness any of the documents said to have been witnessed by him.

[204]All of the February 2019 documents are said to have been signed and dated on 11 February 2019 and there is strong evidence that those which have been considered by the handwriting experts were not signed by PS.

[205]This all provides strong evidence to support PS’s evidence that the signatures are not his and were forged and that he knew nothing about the February 2019 documents at the time.

[206]There was no logical reason for NRD or PS to have sought out an additional facility from Katrin at that time (see above) and in light of my findings about the wrongful dissipation of the TCF Bridging Agreement monies without PS/NRD’s instructions - no credible explanation for why they would have done – PS says they did not. He/NRD believed the 14 November Charge had been redeemed by the TCF Bridging Agreement as intended and his contact with the firm had not given him any reason to doubt that.

[207]NRD submit that the purpose of the February 2019 documents was to conceal from Katrin that the monies advanced by the TCF Bridging Agreement had not been used to redeem the First Facility Letter and delay when Katrin might demand repayment.

[208]In further support NRD rely on a Redemption Statement dated 11 February 2019 the same date as the February 2019 documents. There was no covering email to identify who created this document or where it came from but it is one of the few documents that the firm itself disclosed. It records a total redemption figure as at 11 February 2019 of £1,320,974. This is entirely consistent with Katrin being led to believe that the Second Facility Letter was genuine and intended to extend the period of the loan. It is also consistent with the firm knowing that the TCF Bridging Agreement monies had not been used to redeem the 14 November Charge on 8 January. It puts the firm at the centre of the arrangements in relation to the February 2019 documents.

[209]On 11 February 2019 @13.32 VS emailed Mr Yavuzarslan as follows:

“ The 2nd charge paperwork has been signed up by the client and [the firm] will send the rest of the paperwork by Weds/Thurs this week/ All the PGS etc. will come in that email from [the firm] but are we ok to complete today? Client is with solicitors now for the independent legal advice paperwork that is being signed.”

[210]This was untrue. The Second Charge was never registered at Companies House and the 14 November Charge was never removed. It was not registered at the Land Registry until 30 January 2020. PS was never asked to go to an independent solicitor to execute the February Personal Guarantee and indeed the signature of the witness on the February Personal Guarantee is Mr Ewan’s (see above). There was nothing to put PS/NRD on notice of any of this. NRD submits that the failure to register the Second Charge was consistent with the documents not being genuine and was part of the concealment of the dissipation of the TCF Bridging Agreement monies.

[211]I accept PS’s evidence which is corroborated and supported by the other evidence available and am satisfied and find that on the balance of probabilities he did not sign any of the February 2019 documents including in particular the Second Facility Letter, the Second Charge and the February Personal Guarantee. The signatures are forgeries. And I further find that he did not instruct or authorise anyone to secure further funding for NRD from Katrin at that time and did not know about the February 2019 documents at the time they were created and had no role in their creation.

[212]I also find on the basis of the evidence available and on the balance of probabilities that the firm through at least MB and VK were involved in the creation of and execution of the February 2019 documents and that their purpose was to conceal the fact or delay discovery of the fact that the 14 November Charge had not been redeemed from the TCF Bridging Agreement. The findings in relation to the firm’s role in relation to the 14 November Charge further supports these findings.

Consequences of the February 2019 documents:

[213]By 25 January 2020 NRD/PS had received heads of terms for development finance from both Zorin and Paragon and was ready to move forward. He says, and I accept, that he did not know about the other events that had occurred in 2019 (see above) which would fatally undermine any attempt to finance the development of the Bed Shop in 2020 – even leaving aside Covid.

[214]On 30 January 2020 the Second Charge was registered at the Land Registry. Although PS did not know that the 14 November Charge had not been redeemed nor that there was a Second Charge the very existence of the Second Charge was a block to PS/NRD being able to obtain any development finance for the Bed Shop. From 30 January 2020 any search at the Land Registry would have identified not only the TCF charges but also the Second Charge as being registered against the title to the Bed Shop.

[215]The existence of the Second Charge registered against the Bed Shop meant that there was now no possibility of obtaining development finance from Zorin or Paragon because they would think there was no equity left to provide them with security. From Katrin’s perspective the Second Charge was genuine and secured the borrowing originally secured by the 14 November Charge even if NRD believed that it had been redeemed. It was not therefore a simple matter of having it removed as having been registered in error. Instead there was a real issue to be determined about what had happened to the TCF Bridging Agreement and why the 14 November Charge had not been redeemed.

[216]The firm admit that the registration of the Second Charge meant that it was less likely that NRD would be able to obtain development finance. They were right to do so. Mr Hill-Smith submits that the existence of the Second Charge registered against the title of the Bed Shop was causative of the damages and losses suffered by NRD in the sense that it meant that it was not possible to obtain development finance.

[217]From a lender’s perspective there were now charges amounting about £3m over the as yet undeveloped Bed Shop with all the development costs (about another £3m) still to be secured. The Sage offer in 2019 had been <£6m. Even with some increase in the value of the Bed Shop since then the figures were marginal. Whilst the existence of the Second Charge may not have been the only reason why obtaining development finance in 2020 might have been more difficult, given Covid, it was clearly a significant factor and on balance likely to have been causative. And whilst the impact of Covid would be likely to have diminished over time the existence of Second Charge would continue to be a bar to being able to offer adequate security to a lender in respect of development finance in 2021 and 2022.

[218]PS explained that without the development finance NRD was not in a position either to develop the site or to maintain the payments to TCF. NRD fell into arrears in respect of the TCF loan.

[219]PS became aware of the Second Charge in about mid-March 2020 and was served with a statutory demand in May 2020 (see below). Despite this PS continued to seek to obtain funding to enable the Bed Shop to be built out and in that context was still seeking to obtain pre-development agreements to support NRD in obtaining development finance.

[220]He explained that he had used a broker to solicit offers which he says were arm’s length. On 12 May 2021 Kentish Homes made a formal offer without prejudice and subject to contract to acquire the Bed Shop at £7.2m. It would still require NRD to be able to develop, construct and deliver the Bed Shop. He says that Medway Housing were also interested but that they did not ultimately make an offer. This evidence supports NRD’s position that notwithstanding Covid, but for the Second Charge (and the failure to redeem the 14 November Charge) it would have been able to develop the Bed Shop successfully and for profit. This therefore supports the submission that the Second Charge was causative.

[221]PS says that had NRD been able to obtain development finance, based on the Kentish Homes offer, NRD would have received £7.2m less sale costs and the development costs/funding costs in about October 2022. NRD was not in fact able to obtain development finance or meet its continuing obligations to TCF.

[222]On 20 June 2022 TCF appointed a receiver. The Bed Shop was put up for sale by auction and sold. The price realised left a shortfall due to TCF of £92,108.29. PS is liable for that shortfall under the personal guarantee he gave to TCF. The receivership ended in January 2023. Again PS/NRD say that if there had not been a Second Charge PS/NRD would have been able to secure development finance and build out the Bed Shop for profit and NRD would have been in a position to maintain the payments to TCF until it was in a position to redeem the TCF charges whether by a refinance with a development funder or at the end of the development.

[223]Whilst Covid would have been likely to have had an impact on when PS/NRD would have been able to secure development funding which may have affected the overall profitability of the Bed Shop on the evidence available including the Kentish Homes offer, I am satisfied on the balance of probabilities and find that PS/NRD would have been able to secure development finance to enable NRD to build out the Bed Shop for profit and maintain the payments to TCF if there had not been a Second Charge (and the 14 November Charge had been redeemed).

[224]Following receipt of the statement of liabilities from HMRC in respect of the SDLT (see above), NRD submitted a complaint to the SRA on 15 February 2022 about the firm’s failure to pay the SDLT in 2018 in breach of an undertaking. The SRA appears to have been progressing the complaint. The most recent email from the SRA dated 29 January 2026 nearly 4 years after the complaint says that a disciplinary notice has been disclosed to Mr Ewan and that they await his response.

The set aside application:

[225]Mr Yavuzarslan emailed the firm and Mr Ewan on 4 March 2020 chasing a response to an earlier email. He appears to have discovered that the TCF loan was paid in a lump sum to NRD and on his understanding without any development intention. The email continues:

“If you have paid to [NRD] is your firm made the payment without any proof of architect valid reports? If you have paid someone else who you paid the funds too? Or have you still got the funds with you. Please confirm How do you intend to resolve Waiting to hear”

[226]The Second Facility Letter extension had now expired. On 16 March 2020 Howard Kennedy sent a letter of demand to both PS and TC on behalf of Katrin demanding immediate repayment under the February Personal Guarantees. PS explains this was when he became aware that Katrin said that the 14 November Charge had not been repaid from the TCF Bridging Agreement in January 2019. At that stage, the amount outstanding was said to be £1,717,235.24.

[227]PS was then served with a statutory demand on 20 May 2020 pursuant to the February Personal Guarantee. The Second Facility Letter and February Personal Guarantee were attached to the statutory demand.

[228]The contemporaneous documents confirm that PS’s immediate reaction upon seeing the Second Facility Letter and the February Personal Guarantee was to say that they had not been signed by him and that he had never seen them before.

[229]PS contacted NC and VS asking for help and telling them he had not signed the February 2019 documents. NC told him that he would deal with it without cost to PS which at the time PS agreed to as NC had told him he would be able to resolve the position. He accepts that with hindsight this was not a good idea.

[230]PS also contacted NP who started to investigate and discovered the Second Charge had been registered. PS instructed solicitors to instruct a handwriting expert/document examiner, Margaret Webb. As set out above she concluded that there was strong/very strong evidence that the Second Facility Letter and February Personal Guarantee had been signed by others. He gave a copy of her report to NC.

[231]NC appears to have ignored Ms Webb’s expert report and instead on 2 June 2020 sent a letter to Howard Kennedy from his own PFL email but said to be from PS which provided a detailed account of events that were simply untrue (see above). It relied on the 7 January Facility Letter and further alleged that the Second Facility Letter and February Personal Guarantee had been signed in front of Mr Ewan under the undue influence of VS without the benefit of independent legal advice. PS says that he was not shown the letter in advance of it being sent and was not provided with a copy after it was sent. This appears to be the first mention of the 7 January Facility Letter.

[232]On 7 June 2020, the application to set aside the statutory demand dated May 2020 (“the set aside application”) was issued on PS’s behalf by NC and accompanied by a witness statement of the same date which largely repeated the contents of the 2 June 2020 letter to Howard Kennedy. PS’s explained that he had queried the witness statement with NC but was told to leave it as it was.

[233]The version of events advanced in the 2 June 2020 letter and the 7 June 2020 witness statement were a fiction. PS should not have signed the witness statement. He did not amend or correct his evidence to provide the explanation he now provides until he instructed Osmond and filed a corrective witness statement in May 2022. Understandably that was treated with some caution by Katrin and the judge in relation to the set aside application. He is fortunate that there is contemporaneous documentary evidence, witness and expert evidence available which supports the version of events he advanced in 2022 and that he advances in this claim. It is also helpful that there is contemporaneous evidence that he immediately raised the issue of forgery and obtained expert evidence which supported it in May 2020.

[234]Covid substantially delayed the progress of the set aside application. I do not know why PS did not exhibit Ms Webb’s report to his corrective statement. Osmond relied on Mr Handy’s report which I have referred to above and which appeared to have limitations given its use of the 7 January 2019 signatures.

[235]Chief ICCJ Briggs handed down judgment on the set aside application on 3 November 2022 setting aside the statutory demand on technical grounds.

[236]In the meantime on 5 June 2020 Howard Kennedy had written to the firm seeking information. Mr Ewan forwarded the letter to VS and NC seeking an urgent response. On 2 July 2020 Howard Kennedy asked the firm to make an application to court to extend time to register the Second Charge at Companies House. This was again forwarded on to VS and NC who were asked to respond urgently. History does not relate what response or explanation, if any, Mr Ewan received.

[237]The firm had raised an unparticularised and unevidenced defence of illegality based on a theory that PS was involved in a fraudulent scheme together with NC,VS and others. Leaving aside the lack of any documents and evidence to support the defence, it would have been for the firm to have advanced it. Further the scheme and illegality defence assumes that PS was involved in the dissipation which for the reasons set out above I have found he was not. The defence also raised an unparticularised allegation of failure to mitigate on the part of NRD. The burden would have been on the firm to particularise and prove the failure to mitigate.

Discussion and conclusions:

[238]I consider the various claims advanced by NRD against the factual background and the findings set out above and in light of those findings can do so quite shortly.

[239]It is trite law that monies held on a solicitor’s client account for the benefit of a client are held on trust for that client (AIB Group (UK) plc v Mark Redler & Co

[2015] AC 1503

) (“AIB v Redler”).

[240]The requirements to safeguard client account money for the benefit of the client and not to pay them away without instructions from that client are enshrined in the SAR (in particular r.21 and r.7). It forms a fundamental part of the Principles and Outcomes based regulation of solicitors. The SAR include a requirement that any breach be remedied promptly including the replacement of monies improperly withdrawn from the client account. That is simply a reflection of general trust principles.

[241]Client account monies may be held as to a general trust or a specific trust if the client provides instructions that the monies so held are to be used for a specific purpose. For example, a sum paid into a client account for the purpose of paying counsel’s fees or an adverse costs order may be said to be held for a specific purpose and characterised as a specific purpose trust. In those circumstances that is the only purpose for which the monies can be used unless the client gives different instructions.

[242]In either case if the firm as trustee commits a breach of trust which causes loss to the trust fund/ the beneficiary of that trust the starting point would be that they would have to reconstitute the fund. As money is fungible any breach of trust that involves the payment away of monies can be remedied by reconstituting/restoring the trust fund for the benefit of the beneficiary in accordance with the purpose of the trust.

[243]Where there has been a breach of trust the remedy is therefore to put the beneficiary in the same position as if the breach had not occurred but that can be broader that simply reconstituting the trust fund at the point at which the trust asset was dissipated even if it is just money. Lord Toulson JSC in AIB v Redler at [64] explained the principle:

“Where there has been a breach of that duty, the basic purpose of any remedy will be either to put the beneficiary in the same position as if the breach had not occurred or to vest in the beneficiary any profit which the trustee may have made by reason of the breach (and which ought therefore properly to be held on behalf of the beneficiary). Placing the beneficiary in the same position as he would have been in but for the breach may involve restoring the value of something lost by the breach or making good financial damage caused by the breach. But a monetary award which reflected neither loss caused nor profit gained by the wrongdoer would be penal.”

[244]Consequently, in assessing the amount of any equitable compensation for breach of trust the losses which are recoverable are limited to those which directly flow from the breach but with hindsight at the date of trial but can include making good the financial damage caused by the breach. When considering the appropriate measure of equitable compensation generally foreseeability is not relevant but there is some element of causation. The object of the remedy is to make good any loss suffered by the breach (see AIB v Redler at [66]).

The First Facility Letter claims:

[245]The firm did not represent NRD in relation to the First Facility Letter – their client was Katrin. However, the sums paid into the firm’s client account from Katrin in relation to the First Facility Letter were for the benefit of NRD. The firm therefore held those monies on (constructive) trust for NRD and is liable to account to NRD for those monies.

[246]The transfer of £1m to Russells without instructions or authority from NRD was strictly in breach of trust for which the firm should account. The firm held the balance of £200,000 on trust for NRD subject only to its entitlement to deduct its legal fees as set out in the First Facility Letter.

[247]For the reasons set out above I have found that the firm was not authorised and did not have instructions from or on behalf of NRD/PS to pay away monies to Investpek or IDSE. It is liable to account to NRD as trustee for those sums.

[248]The firm then retained £42,455 which it also held as part of the £200,000 held on constructive trust for the benefit of NRD. It is accepted that £455 was used to pay the Land Registry fees.

[249]Irrespective of whether there was an enforceable undertaking to pay the SDLT, the firm was holding and knew it was holding the £42,000 for the specific purpose of paying the SDLT and could only use it for that purpose and is liable to account to NRD as trustee in relation to that sum.

[250]It seems to me therefore that under the First Facility Letter the firm held the full £1.2m on constructive trust for the benefit of NRD and must account to NRD for its breach of trust and for compensatory damages by way of equitable compensation in relation to the full sum. That may not make much difference to the overall outcome of the account, enquiry or compensation to be paid given that the firm did send the £1m to Russells but it is strictly the full sum for which it must account and make good any financial damage caused by its actions.

[251]Further in agreeing to register the title and make the SDLT submission and pay the Land Registry fees and SDLT on behalf of NRD, and to retain the £42,455 to enable it to do so the firm had entered into a retainer, however informal, with NRD to undertake that work. It has failed to do so.

The Undertaking

[252]I am satisfied that that agreement between SK on behalf of the firm and NP constituted an undertaking to use the £42,455 for the specific purpose of paying the Land Registry Fees and the SDLT.

[253]However, an LLP is a distinct legal entity and until there is a change in the statutory framework governing LLPs can neither give nor be bound by a solicitors undertaking said to be given on its behalf whether by a solicitor, manager or employee. Such an undertaking is therefore unenforceable under the court’s inherent supervisory jurisdiction in respect of solicitors against the firm, an LLP is not obliged to honour an undertaking so given (Harcus Sinclair LLP and anor v Your Lawyers Ltd

[2021] UKSC 32

[254]This is a claim against an LLP – the firm – it is not a claim against Mr Ewan nor against SK who gave the undertaking. That does not affect the firm’s obligation to account and to pay compensatory damages by way of equitable compensation in respect of the sums it received and held on trust for the benefit of NRD whether generally or for a specific purpose.

The TCF Bridging Agreement claims:

[255]It is common ground that the firm was instructed to act on behalf of NRD/PS in relation to the refinance to TCF between November 2018 and January 2019. PS/NRD became a client of the firm and there was therefore a retainer between the firm and NRD in relation to the refinance. There is no written retainer, but I am satisfied that on the evidence available the purpose of the retainer was to act for NRD in relation to the refinance with TCF and to redeem the 14 November Charge and that the firm knew this (see above).

[256]Whilst TCF were separately represented by PL, the firm did represent Katrin in relation to the redemption of the 14 November Charge. It is clear that Katrin also understood there was an intention to redeem the 14 November Charge and the firm were instructed in relation to the redemption (see above).

[257]The sum of £1.332m was received from TCF and held on trust on the firm’s client account for the benefit of NRD. The firm had obligations not only to its client NRD but as set out above obligations to TCF and Katrin.

[258]For the reasons set out above(i) the TCF Bridging Agreement and the refinance was for the purpose of redeeming the 14 November Charge and the firm knew this;

(ii) PS/NRD did not instruct or authorise the firm to dissipate the funds received from TCF other than in repayment of the 14 November Charge and

(iii) PS/NRD did not instruct or authorise the firm (whether directly or indirectly) to make payments to either Buckles or to Investpek.

[259]In paying the money to Buckles LLP and to Investpek without authority and in failing to remit funds to redeem the 14 November Charge the firm acted in breach of retainer and in breach of trust.

[260]The firm must account to NRD for the sums received from TCF under the TCF Bridging Agreement and pay compensatory damages by way of equitable compensation.

[261]The firm is also liable in damages for breach of retainer to the extent that provides any different measure of damages.

Equitable Compensation: The Second Facility Letter and February Personal Guarantee claims

[262]Mr Hill-Smith submits that the assessment of equitable compensation should include compensation for the loss of the opportunity caused by being unable to develop the Bed Shop and then sell it for profit once developed.

[263]For the reasons and findings set out above when considering the accounts and inquiries and the measure of equitable compensation it seems to me that the court will need to consider how it places NRD in the same position it would have been in but for the breach of trust (AIB v Redler at [64]) and this will include consideration the loss of opportunity to develop the Bed Shop.

Equitable Compensation – non-redemption:

[264]NRD seek an indemnification in respect of their potential liability to Katrin arising out of the claim Katrin is pursuing against NRD, PS and others in respect of the Second Charge. Those proceedings are still at a relatively early stage. Mr Hill-Smith therefore seeks only permission to apply back for an indemnity in respect of any liability that arises in that claim.

[265]NRD submits, and in light of the findings set out above I agree, that there would not be a claim against it if there had been no breach of retainer and/breach of trust and the firm had discharged the 14 November Charge in January 2019. If the firm had discharged the 14 November Charge there would have been no need for and no Second Charge and no claim advanced based on it.

[266]However, I also agree that pending the determination of the Katrin proceedings that it will not be practicably possible to ascertain the full extent/appropriate measure of equitable compensation/loss in financial terms. I will hear further submissions at the consequential hearing as to whether the account and inquiry should still be progressed including the potential liability to Katrin and/or whether it is possible to carve out that aspect of the equitable compensation given the nature of equitable compensation.

Deceit

[267]NRD pleaded a claim in deceit in the alternative. However, that claim was not advanced substantively in oral submissions with Mr Hill-Smith touching on it in passing in relation to remedies in closing.

[268]If the firm caused NRD to suffer loss by deceiving them it would be liable to compensate them for that loss. It involves the making of a representation which is false and which the firm did not know to be true which they intended the other party to the representation to believe and which causes that other party to believe that the representation is true.

[269]The representations relied on as being false were said to have been made by the firm. No individual is identified as having made the representation which is said to be attributable to the firm and it is not said when they were made or to whom.

[270]The representations relied on relate to the February 2019 documents. NRD say that in forging PS’s signature on the February 2019 documents the firm fraudulently represented to Katrin that NRD knew and had agreed the terms of the Second Charge when the firm knew that NRD had not executed the Second Charge. Further that the firm then fraudulently registered at the Land Registry thereby representing to the Land Registry (and Katrin) that NRD had consented to the Second Charge when the firm knew that NRD had not executed the Second Charge. This does not appear to identify any relevant fraudulent representation by an individual within the firm on its behalf to anyone at NRD.

[271]The deceit claim was pleaded in the alternative and not developed in submissions or evidence. I am not satisfied that the NRD has made out its claim in deceit. Summary

[272]For the reasons set out NRD succeeds on its overarching claim for breach of trust against the firm in respect of both the £1.2m advanced by Katrin and wrongly dissipated by the firm on 28 September 2018 and the £1.332m advanced by TCF on 8 January 2019 and wrongly dissipated on 8 and 9 January 2019.

[273]The firm has to account for those sums and will have to pay equitable compensation which will need to be ascertained. I will order an account and inquiry. The firm also acted in breach of retainer in respect of the TCF Bridging Agreement.

[274]In the first instance Mr Hill-Smith seeks an order for payment of the £200,000 in relation to the First Facility Letter and the £1.332m in respect of the TCF Bridging Agreement plus compound interest for the breach of trust with the balance of any equitable compensation to be calculated in due course following an account and inquiry in relation to the quantum of the equitable compensation.

[275]I will hear his further submissions on this and consider at the consequentials hearing whether and if so on what basis it may be appropriate to make what would be in effect an interim order pending the account and inquiry he seeks and whether to give permission to apply in relation to the indemnity sought in respect of the Katrin proceedings.

[276]This judgment will be handed down remotely. There will need to be a consequentials hearing to address directions for an account and inquiry and the form of order. Time to make any application for permission to appeal this judgment will be extended to that consequentials hearing.