Thursday, 26 January 2012

Glatt v Sinclair [2011] EWCA Civ 1317: flogged senseless

Bankruptcy.  A status that is sadly increasingly common in these increasingly straitened times.  You lose control over what you have.  Someone else comes in and takes control, and does their best to pay off your creditors.  Without sentimentality.
You are reliant on them making sure that they get as much in as possible.  You don’t want to see the precious heirlooms sold for a song and stopping you from keeping hold  of some other stuff once the creditors are satisfied.  Question is, what can you do if you think the trustee in bankruptcy is short-changing you?
You sue for breach of duty.   That’s what Mr Glatt did in similar circumstances – the taxman had put in a receiver over his property, and the receiver started flogging everything off.  One of the things Mr Glatt had was some property in Hendon.  Swish.  The receiver got a valuation of the property from proper valuers.  They reckoned a third of a million.  The receiver had an offer for that and duly sold it.  The purchaser, that very same day, put it up for re-sale.  At nearly half a million.  Within four months the purchaser flogged it off for a sweet £125k profit.
Mr Glatt was seriously dischuffed at this; the receiver, he said, had done him out of a six figure.  The receiver pointed to the valuation it had received.  The test was behaving in good faith, and taking reasonable steps to receive a proper price – one that was the best price reasonably obtainable.  The receiver had done so; he had gone to a building society rather than some hand-in-glove-with-developer cowboy and pitched the price appropriately.  Indeed he had turned down a couple of offers for well below.  The purchaser just got lucky.  The third of a mil was the best price reasonably obtainable.
Mr Glatt duly sued, almost on a res ipsa loquitur basis; the property sold for over four hundred k, so selling it for three hundred was self-evidently rubbish.  The receiver asked the court to kick out the claim on a summary judgment basis, i.e. it had no chance of success and there was no reason to wait for trial.  The application succeeded.   The receiver had done everything a competent receiver should have done; get a proper valuation, put it up for sale through a proper estate agent and got the market price.  Mr Glatt appealed.
Mr Glatt had an advantage on appeal.  As it was from summary judgment, evidence had not been heard; the judge was content to consider that the legal case was so strong, no evidence was necessary.  As soon as you bring evidence into summary judgment applications, the court is going to think a trial is necessary so a trial judge can look at the witnesses.  So would not allow the application.  Mr Glatt therefore could win by showing that witness evidence would make a difference.
So the Court of Appeal looked at the legal case being put forward and sought to see whether there were any areas where witness evidence may have been useful.  Choosing a bona fide agent?  That was taken for granted, no need there.  Reliance on valuation?  Seemingly OK.
The area on which the court alighted was the marketing.  What was done to sell it?  An advert in a local rag that generated three offers.  The last of which was then increased pretty sharpish.  Suggests that the property was in some serious demand.  Yet the receiver accepted the last, increased, offer.  OK, it matched the valuation; but maybe that valuation was now out of date?
The court wanted therefore to look at the advert.  How much was the property on offer for?  What had the estate agent done to bump up the price?  With three offers from one advert, did they wait for a second advert to generate more offers?  Had anyone gone back to the lower offerors and told them that they were well short?  The court did not know any of these details.  The advert had not been offered in evidence.  These were all questions the court thought needed answering before the receiver’s actions could be judged pukka.  For which witnesses would be needed. Ergo, the matter should go to trial.  The appeal succeeded.
Mr Glatt’s claim may well fail.  There may be very good reasons why the property went up by a third in four months.  But the court’s message is that that has to be tested out.  Summary judgment is a difficult thing to nail, you’re saying  no amount of persuasion will turn a bad case into a runner.  This one is not a bad case legally – there is something there in law, a full trial is needed to see if there’s the scaffold of evidence to support it.