Law Report: 10 march 1998; Building society's claims would be struck out

West Bromwich Building Society v Mander Hadley & Co; Court of Appeal (Lord Justice Millett, Lord Justice Schiemann and Sir Brian Neill) 27 February 1998

PROTECTIVE writs issued by a building society against solicitors' firms shortly before the expiry of the limitation period, claiming indemnity or contribution in respect of contingent claims which had not been, and might never be, made against the building society would be struck out.

The Court of Appeal allowed the appeal of the defendant firm of solicitors against the dismissal of its application to strike out 382 claims against it by the plaintiff building society unless it served a fully particularised statement of claim in respect of each claim, the judge having instead made an order on the building society's application staying all further proceedings in the claims until the conclusion of certain other lead cases.

Andrew Sutcliffe (Reynolds Porter Chamberlain) for the defendants; Andrew Hochhauser QC and Vernon Flynn (Eversheds, Birmingham) for the building society.

Lord Justice Millett said that in the late 1980s the building society had financed approximately 2,100 home income plans which had been promoted by independent financial advisers and sold to private home owners. The rise in interest rates and collapse in property values in the early 1990s had destroyed the viability of many of the plans, causing loss to a large number of home owners.

The Investors Compensation Scheme, as assignee of claims which had been made by home owners against an insovent financial adviser, had brought proceedings against the building society. In each case the building society had brought claims for indemnity or contribution from the solicitors who had undertaken the conveyancing on its behalf. It had brought 710 fully pleaded claims against 163 firms. Of those, 14 lead cases had been selected and were currently being heard, the remaining cases having been stayed pending their determination.

The appeal concerned a further 47 writs against 382 firms of solicitors, all concerning cases in which the home owners had not to date made or notified any claim against the building society, and might never do so.

The outcome of the lead cases would facilitate the speedy resolution of the other stayed actions where the parties had been identified and the building society's claims fully pleaded, but would not assist the building society in identifying which of the claims with which the appeal was concerned it wished to pursue, nor enable it to plead them.

There was no true comparison between the stayed actions and those with which the present appeal was concerned. From the building society's point of view, the appeal was concerned with the most convenient way of dealing with a number of potential claims. From the point of view of the firms of solicitors, however, there was only one case, namely that which had been brought against it. It had been charged with negligence and was obliged to report the matter to its insurers. It had, however, only been told that it might have been negligent in some unspecified respect; that if so it might have caused loss to a particular client, who might bring a claim against the building society at some time in the future; and that if such a claim were to be successful the building society would claim to be indemnified by the firm.

It was an abuse of the process to bring proceedings when there was no present intention of prosecuting them and when the plaintiff was unaware of any valid basis for its claim. An individual writ would be struck out as a matter of course in such circumstances. Why should it make a difference that there were several hundred of them? It was not for the courts to extend the limitation period in hard cases by permitting writs to be issued at a time when the plaintiff was unaware of any valid basis for the claim. The judge's order would be set aside and the order sought by the defendant substituted.