Dattani and Patel vs Ferns Solicitors

The High Court considered an appeal against two strike-out orders regarding claims of breach of constructive trust and dishonest assistance in the context of solicitor conduct during a property transaction. The court allowed the appeal concerning dishonest assistance, emphasizing the need for a trial to explore the solicitor's knowledge and potential dishonesty.

TLDR:

• The case involved allegations against Ferns Solicitors for mishandling sale proceeds in light of a charging order.
• The court examined whether the solicitor's actions constituted dishonest assistance or breach of a constructive trust.
• The appeal was granted for the dishonest assistance claim, requiring further factual examination at trial.
• The constructive trust claim was dismissed unless dishonesty could be proven.

Background: The appellants, Dattani and Patel, challenged the actions of Ferns Solicitors, who acted for Mr. and Mrs. Rasheed in a property sale. The appellants argued that Ferns improperly transferred sale proceeds to Mrs. Rasheed, ignoring an interim charging order on Mr. Rasheed's interest. This led to claims of breach of constructive trust and dishonest assistance against Ferns.

Legal Issues: The primary legal questions were whether Ferns' actions constituted a breach of constructive trust or dishonest assistance. The court analyzed whether Ferns had actual or blind-eye knowledge of the charging order and whether their actions were objectively dishonest, referencing key cases such as Carl Zeiss Stiftung v Herbert Smith & Co and Royal Brunei Airlines v Tan.

Judgment Summary: The court upheld the appeal regarding the dishonest assistance claim, finding that the issue of Ferns' knowledge and potential dishonesty required a trial. However, the constructive trust claim was dismissed unless dishonesty could be demonstrated. The court emphasized the necessity of examining the solicitor's state of mind and actions at trial.

Practical Implications: This case highlights the importance of solicitors' awareness of their clients' obligations and the potential for liability in mishandling funds subject to equitable interests. Legal practitioners must ensure thorough due diligence in property transactions, especially when restrictions or charging orders are involved.

Expert Commentary: Legal scholars note the case underscores the evolving standards of solicitor accountability in property transactions, particularly regarding third-party interests and equitable obligations.