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In Propeller Ventures Limited v Homes for Students Limited, the High Court in Manchester held on Friday 3 November 2023 that an agent cannot apply for pre-action disclosure in reliance on its principal’s cause of action. The application was made by Propeller Ventures Limited, a property management company managing a block of over 200 student flats in Bolton all held on long leases. The respondent was Homes for Students Limited, which had managed the block on behalf of the previous freeholder. The application was made on the basis that the leaseholders of the flats in the block allegedly had a cause of action against Homes for Students for breach of trust in respect of payments of rent and service charge. Those allegations were strongly denied by Homes for Students, which had acted at all times in accordance with the previous freeholder’s instructions.
Propeller Ventures contended that it had the standing to make the application, since 105 of the leaseholders had signed letters giving it authority to act on their behalf. Rule 31.16 of the CPR provides that an order for pre-action disclosure can only be made where the applicant is likely to be a party to subsequent proceedings involving the respondent. In its evidence, the Applicant contended that the letters of authority were sufficient to give it standing, on the basis that it would be likely to act as the leaseholders’ agent in subsequent litigation. In a skeleton argument, it was contended alternatively that any service charges paid to the Respondent were held on trust for the new freeholder. In the hearing, it was argued that the applicant as the statutory trustee of service charges paid to it by the leaseholders was entitled to sue the old management company in reliance on the existence of that trust. Alternatively, it was argued that the leaseholders could assign their causes of action to the applicant and that the letters of authority were sufficient evidence for the court to infer that such an assignment was likely, so that the applicant was likely to be a party to the subsequent proceedings.
Giving judgment after a full day’s hearing, the Court rejected all of those arguments. It accepted that an agent cannot issue proceedings in its own name in reliance on a cause of action vested in its principal and that the only people likely to be the parties to subsequent proceedings were the leaseholders. On the evidence before the court, there had been no assignment of the causes of action to the applicant, the Court could not speculate about what might happen and could only decide the application on the basis that it was brought. The Applicant could not therefore satisfy the jurisdictional requirement under rule 31.16(3)(b) that it would be likely to be a party to subsequent proceedings and the application was therefore dismissed. The Court ordered the applicant to pay the respondent’s costs on the indemnity basis.
Tom Morris acted for the successful Respondent, instructed by Amy Acres and Carly Fishwick of Eversheds Sutherland LLP.
