London Allied Holdings Ltd. v Lee & Ors

In this case the Claimant, London Allied Holdings (“LAH”), claims various heads of relief arising out of the payment on 15 December 2006 of £1 million to the first Defendant, Anthony Lee (“Mr Lee”), pursuant to what LAH claims was a fraudulent scam.

The bare facts of the case are, on any footing, remarkable.

LAH is a Nevis registered company. It is the parent of a group of companies carrying on the business of property investment and development.

LAH claims that the £1 million was paid to Mr Lee pursuant to negotiations and as part of an agreement between LAH, on the one hand, and Mr. Lee and the Second Defendant, Patrick Dolan (“Mr. Dolan”), on the other hand, for the sale by Mr Lee and Mr Dolan of the Ritz Hotel, London (“the Ritz), to LAH for £250 million.

On 18 December 2006, Mr Lee paid €644,370 to Mr Dolan, out of the £1 million.

Mr Lee has described himself, in his evidence in this case, as a property trader. Prior to 2002 he was an HGV driver. Following an unsuccessful venture carrying on a road haulage and plant hire business, Mr Lee was made bankrupt on his own petition on 23 January 2006. At that time he was unemployed and dependent on state benefits. In a report by the Official Receiver dated 5 December 2006, that is to say 10 days before Mr Lee was paid the £1 million, Mr Lee was said to have no assets and liabilities of £113,189.00. Although Mr Lee and Mr Dolan alleged in their joint Defence that they have since 2001 carried on business together on “the facilitation of property acquisition”, Mr Lee has never completed any property acquisition since 2001, and has never received any commission in respect of any property transaction other than the £1 million which is the subject of these proceedings.

Mr Dolan, who is 65 years of age, was until 2000 a contracts manager for a construction company. He has said in his evidence in this case that he then became involved in speculative property acquisitions. He too has never completed any property acquisition since 2001, and has not received any commission in respect of property transactions other than the €644,730 paid to him by Mr Lee out of the £1 million.

LAH claims that it is entitled to be repaid the £1 million by Mr. Lee pursuant to a contractual obligation, or on the ground of a total failure of consideration, or in restitution or as a constructive trustee. It also claims damages against Mr. Lee, in respect of the payment of the £1 million and its non-return, for breach of contract, for fraudulent or negligent misrepresentation or pursuant to the Misrepresentation Act 1967 s.2, and for conspiracy to defraud.

LAH claims that a Land Rover car was purchased by Mr. Lee on 18 December 2006 with €80,617 derived from the £1 million, and that it is held on constructive trust for LAH by Mr Lee or his partner, the Fourth Defendant, Jennifer Hodgson.

LAH claims that Mr. Dolan is liable to LAH in damages for conspiracy to defraud, and for the torts committed by Mr. Lee on the basis that they were joint torts. LAH further claims that Mr. Dolan is liable in contract, and generally on the basis that he was Mr. Lee’s partner or Mr. Lee was acting as his agent. It is further claimed that Mr. Dolan is liable to LAH as a constructive trustee, and in restitution.

On 29 March 2007 Mr. Dolan paid to his wife, Maragret (“Mrs. Dolan”), the Third Defendant, €431,313.68 from the money paid to him by Mr Lee on 18 December 2006. LAH claims to be entitled to trace that sum into her hands.

LAH claims that it is entitled to be subrogated to the rights of Barclays Bank plc (“Barclays’”) under a mortgage of Mr and Mrs Dolan’s house (“Barclays’ charge”) which was discharged by Mrs Dolan by the payment of €46,185.94 out of the money transferred to her on 29 March 2007.

LAH claims to be entitled to recover from Mr Dolan a Mercedes car purchased on 5 January 2007 for €63,418.35 out of the €644,730 transferred by Mr Lee to Mr Dolan.

It is relevant to mention some unusual features of the course of these proceedings, including the trial.

The Claim Form was issued against Mr Lee alone on 9 March 2007.

On the same date LAH applied for a freezing order against Mr Lee.

Four affidavits were sworn by Mr Terence Collins, of LAH, and Mr Sakis Tombolis, of Beachcroft LLP (“Beachcroft”), LAH’s solicitors, in support of that application. Two affidavits were sworn by Mr Lee, and another by his former solicitor, Mr Conn Farrell, of Farrell Martin & Nee, in opposition.

The application came before Mr Justice Lindsay on 20 March 2007. Mr Lee gave an undertaking not to dissipate or dispose of the sum of approximately €392,000 standing to the credit of a specified account in his name, being the identifiable remains of £1 million paid by LAH. Mr Justice Lindsay ordered that there be a speedy trial, and gave directions, including directions for the exchange of witness statements by 4.30pm on 2 July 2007, and for the trial to commence on 16 July 2007 with an estimate of 3-5 days.

On 29 March 2007 LAH applied to join Mr Dolan as Second Defendant. That application was supported by the 5th affidavit of Mr Collins. By order of Mr Justice Kitchen on 4 April 2007 Mr Dolan was joined as Second Defendant. Mr Dolan subsequently served his 1^st affidavit in compliance with the order of Mr Justice Kitchen. An injunction was granted against Mr Dolan restraining him from disposing of, dissipating or otherwise dealing with the €644,730 received by him from Mr Lee.

A Defence was served on behalf of both Mr Lee and Mr Dolan on 8 May 2007. The Defence was endorsed with a statement of truth by Mr Jonathan Cripwell, a partner in Denison Till, who were then retained as solicitors for Mr Lee and Mr Dolan.

A Reply was served on behalf of LAH on 15 May 2007.

On 18 May 2007 Mr Lee and Mr Dolan applied for security for costs and to be permitted to draw down money from their bank accounts for legal costs. That application was supported by, among others, the 3^rd affidavit of Mr Lee and the 2^nd affidavit of Mr Dolan.

That application was never progressed; and on 28 June 2007 LAH’s solicitor was informed on the telephone by Mr Cripwell that it was no longer being pursued.

On 20 June 2007 the Third and Fourth Defendants were joined to the proceedings, and permission was given to re-amend the Particulars of Claim. Mr Justice Rimer ordered that the Defendants’ amended Defence be served by 4.00pm on 27 June 2007.

An amended Claim Form and re-amended Particulars of Claim (“the RAPC”) were served on 21 June 2007. No amended Defence has ever been served. Accordingly the only Defence served is that which was prepared and served on 8 May 2007 on behalf of Mr Lee and Mr Dolan.

Dennison Till came off the record as the solicitors for Mr Lee and Mr Dolan on 2 July 2007. The Defendants have been unrepresented since that time.

LAH served its witness evidence on 3 July 2007. No witness statements have been served on behalf of any of the Defendants.

On 10 July 2007 Mr Lee and Mr Dolan applied for the trial to be adjourned on the ground that Mr Dolan was not medically fit to attend the trial. That application was ordered by Mr Justice Briggs on 20 July 2007 to be adjourned to the trial Judge.

The trial was listed to commence on Monday 23 July 2007 at 2.00pm. None of the Defendants appeared at that time, but Mr Lee sent a fax to the Court stating that he was unable to attend court that day due to disruption in the train service. I adjourned the commencement of the trial until the following morning.

Mr Lee was the only Defendant who appeared on Tuesday 24 July 2007. He made submissions in support of the application to adjourn. That application was opposed by Mr Anthony Trace Q.C, who appeared with Mr Thomas Grant, for LAH. I dismissed the application.

Three witnesses gave evidence for LAH on that day. They were Mr Collins, Ms Karen Maguire, and Mr Peter Turner. Mr Collins and Ms Maguire were cross-examined by Mr Lee. He did not wish to cross-examine Mr Turner.

On the following day, Wednesday 25 July 2007, a message was sent by Mr Lee to the court that he did not feel in a position to continue to represent himself in the absence of Mr Dolan, and that fact, together with the inability to take money from his bank account to obtain legal representation, had led him to decide not to appear in court to defend himself.

Accordingly, the trial continued without any of the Defendants present. I heard further evidence on behalf of LAH, and then submissions on their behalf from both Mr Trace and Mr Grant. I reserved my judgment on Friday 27 July 2007.

As will be apparent from what I have said, LAH’s witnesses gave oral testimony and were available for cross-examination. Only two of those witnesses were, however, cross-examined by Mr Lee. None of the Defendants gave oral evidence, but there are before the court the 3 affidavits of Mr Lee, the 2 affidavits of Mr Dolan, and the affidavit of Mr Farrell sworn for the purpose of interlocutory proceedings. None of those deponents were available for cross-examination at the trial. Further, as I have said, the only Defence which has been served on behalf of the Defendants is the Defence that was prepared and served on behalf of Mr Lee and Mr Dolan.

The following is a summary of LAH’s allegations of fact.

In January 2006 Mr Lee met Ms Maguire, a director of a company called Property–Source.Com Limited (“Property-Source”). Ms Maguire acted for clients wishing to purchase property. Mr Lee was introduced to Ms Maguire as a source of off-market hotel property deals.

In early 2006 Mr Dolan approached Mr Christian Sweeting to enquire whether he knew of any large hotels in London that were or might be for sale. Mr Sweeting is a member of the Royal Institution of Chartered Surveyors, and is the company secretary of London & Central European Investments Ltd (“LACEIL”), a property investment and development company. Mr Sweeting made enquiries of a contact of his, who was close to Sir David and Sir Frederick Barclay (“the Barclays”), who owned the Ritz through their company The Ritz Hotel (London) Ltd, and enquired whether he thought the Barclays would be willing to sell the Ritz. Mr Sweeting was informed that the Ritz might be for sale but only at the right price. Mr Sweeting’s contact was of the view that any offer put forward would have to be in the region of £450 million to £600 million. Mr Sweeting was informed that, if the Barclays were interested in selling the Ritz, they would demand complete transparency in respect of the purchaser and the utmost discretion.

Mr Sweeting met Mr Dolan and conveyed that information to him. Mr Sweeting informed Mr Dolan that, through Mr Sweeting’s contact, there was an opportunity for Mr Dolan to put forward a proposal to the Barclays, but there was no guarantee that the Barclays would accept or even consider the proposal. In order not to jeopardise Mr Sweeting’s relations with his contact by acting inappropriately or prematurely, Mr Sweeting informed Mr Dolan that he was not willing to put forward any offer without full details of the purchasing party and a deposit of £30 million lodged with LACEIL’s solicitors, Memery Crystal. The £30 million deposit represented a sum equivalent to a potential 5% deposit and would be specifically earmarked for the transaction.

Mr Dolan passed that information to Mr Lee.

In June 2006 Mr Lee telephoned Ms Maguire, and informed her that he had “access to a contract to purchase the Ritz” at a price of £200 million and that he believed that the Ritz could be sold for £250 million. Ms Maguire agreed with Mr Lee that she would attempt to introduce a buyer at £250 million, and that the £50 million difference would be split between Mr Lee, Ms Maguire and the purchaser, with Ms Maguire receiving a commission from the purchaser. Mr Lee informed Ms Maguire that he had access to the Barclays, the owners of the Ritz, with whom he said he had a business relationship. He said that he had a number of meetings with the Barclays, and that he had the working papers to purchase the Ritz as a result of an earlier deal which had fallen through.

On 7^th July 2006 Mr Collins, who was one of the founders of LAH, and the company secretary of one of its subsidiaries, was introduced to Ms Maguire. Ms Maguire informed Mr Collins that she acted for purchasers of property, and that she had access to a contract for a purchase of the Ritz, provided proof of funds could be demonstrated. She told Mr Collins that she was in contact with a third party intermediary, Mr Lee, who was a business associate of the Barclays and who claimed to have a contract to purchase the Ritz at a price of £200 million. She said that the onward price would be £250 million, and the £50 million would be split between Mr Lee, LAH and Ms Maguire.

On the same day, Mr Collins received a confidentiality agreement from Ms Maguire, which he signed and returned.

From early on Mr Collins gave the deal the code name “Project Notting Hill”.

After the meeting on 7^th July 2006 Mr Collins was informed that Mr Lee’s solicitor was Mr Farrell.

On about 11 July 2006 Mr Farrell telephoned Mr Collins and stated that Mr Lee had an exclusive oral agreement with the Barclays for a 6 month window in which to buy and sell the Ritz. He said that proof of funding was therefore required immediately to obtain the contract. Mr Farrell confirmed the structure of the deal as described by Ms Maguire, that is that Mr Lee was buying at £200 million and would sell to LAH for £250 million, with the £50 million being split.

A proposed confidentiality agreement in respect of the Ritz, to which Mr Farrell, Mr Lee, Mr Dolan and Mr Sweeting were shown as parties, was sent by Mr Farrell to Mr Sweeting on 17 July 2007. The document was attached to an e-mail from Mr Farrell, in which he said that he was sending the agreement on behalf of Mr Dolan, and he requested that Mr Sweeting sign and return it. Mr Sweeting did not do so.

There were numerous communications by letter, e-mail and telephone between Mr Collins, Ms Maguire, Mr Lee and Mr Farrell in July and August 2006 concerning funding of the purchase by LAH. Mr Collins understood from what he was told that Mr Lee had an oral contract with the Barclays to purchase at £200 million which would crystalise into a written contract on proof of funds being provided, whereupon Mr Lee would provide a contract to sell the Ritz to LAH.

Mr Collins had a telephone conversation with Mr Farrell on 4 August 2006 in which Mr Farrell said that time was pressing, and, if proof of funding was not provided, Mr Farrell would be instructed to issue contracts to another purchaser. Mr Collins made a contemporaneous note of the conversation which reads, in part:

“Project Notting Hill…Spoke on two occasions with Conn Farrell and twice with Karen Maguire. To understand exactly what was need[ed] for proof of funds. CF confirmed that he had contracts for the hotel but needed proof of funds. I advised we had several sources[s] and would get a letter asap. He advised that we needed to provide letter before end of August as it was imperative that contracts be issued during Sept. I said I would confirm asap re funds.”

Mr Collins understood the reference to Mr Farrell “having contracts” as being a reference to contracts which had been drawn up on an earlier abortive sale of the Ritz, reflecting what Mr Lee had told Ms Maguire in June 2006.

Thereafter, on 10 August 200, Mr Farrell wrote to Mr Collins as follows:

“Further to our recent telephone conversation I confirm that on receipt of:

1.

Satisfactory proof of funding from all funding sources for the purchase price of £250million;

2.

A satisfactory corporate offer.

I am instructed to issue contracts for the sale of the above property to London Allied plc.”

After Mr Collins received that letter he telephoned Mr Farrell on 10 August 2006 to confirm that Mr Farrell and his client “could deliver the contract”, Mr Farrell replied: “I wouldn’t write to you unless I had the contract”.

In a letter to Mr Collins dated 24 August 2006 Mr Heron of Bank of Scotland (“BoS”) said that BoS would be interested in providing financial support for the proposed purchase of the Ritz by LAH for £250 million. That letter was forwarded to Mr Farrell. Mr Farrell telephoned Mr Collins on 29 August 2006 to state that he was satisfied with the “proof of funds” provided, and that a formal offer should immediately be sent over so that contracts could be issued.

Mr Collins then sent a letter dated 29 August 2006 in which he confirmed that he had board approval to acquire the freehold interest and business of the Ritz for £250 million, and that funding from BoS had been agreed.

In August 2006 LAH instructed Beachcroft as its solicitors in respect of the prospective deal. Mr Tombolis, an associate solicitor in the firm, had day to day responsibility for the matter. Mr Collins so informed Mr Farrell by letter dated 29 August 2006.

Mr Collins was now expecting to receive a contract and associated paperwork. He spoke to Ms Maguire, Mr Lee and Mr Farrell on numerous occasions in September and October 2006 seeking to push the deal forward. Mr Lee claimed that the contracts were with his lawyers ready to send over.

Meanwhile, in September 2006, Mr Lee informed Ms Maguire that he was flying to Gibraltar for a meeting with the Barclays. Mr Farrell confirmed to Ms Maguire that he would be accompanying Mr Lee on this trip. Ms Maguire sent Mr Collins an e-mail on 13 September 2006 headed “Project Notting Hill & Yellow Submarine”, in which she stated (in relation to Notting Hill):

“I have now spoken to [Mr Lee] and he informs me that he has agreed with the vendors to delay his visit to the island until next week because of the severity of his partner’s condition. He is confident of his ability to proceed to legals next week and asks us to be patient”.

On 18 October 2006 Mr Tombolis spoke to Mr Farrell for the first time. Mr Farrell confirmed that he acted for Mr Lee and that the purchase of the Ritz and the subsequent sale to LAH were proceeding. Mr Farrell told Mr Tombolis at about this time that the papers were being assembled. Mr Farrell told Mr Tombolis that he or Berwin Leighton Paisner (“BLP”), who were also acting on the transaction for Mr Lee, would shortly be in a position to send the complete due diligence pack, and that there were 27 boxes of papers.

On 30 October 2006 Mr Farrell sent Mr Collins an e-mail saying that he was advised that his clients had accepted a higher offer for the Ritz. Mr Lee told Ms Maguire that Mr Farrell had sent that e-mail without instructions, but that there was indeed another party willing to pay an additional £2 million. He assured Ms Maguire, however, that he had given his word that the contract for the sale of the Ritz would be going to Mr Collins. In fact, it was a lie that the e-mail was sent by Mr Farrell without instructions. Mr Lee was aware of it, and authorised it. Mr Lee told Ms Maguire that the delay in issuing contracts was due to the illness of his partner.

Mr Lee and Mr Dolan have always refused to identify the other potential purchaser on the ground of “commercial sensitivity”.

Mr Tombolis had a number of conversations with Ms Maguire in November 2006. She informed him that Mr Lee had a contract to purchase the Ritz from the Barclays and that Mr Lee knew them well.

On 1 November 2006 Mr Collins spoke to Mr Farrell, who confirmed that he was holding the contract from the Barclays to Mr Lee and that he was instructed by his client to send contracts to LAH. Mr Collins also spoke to Mr Lee on that day. Mr Lee confirmed that there was nothing to stop the contract being sent, but that he had been advised by Mr Farrell that the proof of funds letter should be refreshed because it was now 2 months old.

Thereafter, throughout November 2006, Mr Lee and Mr Farrell constantly assured Mr Collins that they had all the necessary paperwork apart from some remaining due diligence, and that they were working to send over all the documentation.

On 2 November 2006, for example, Mr Farrell sent an e-mail to Mr Collins saying that he had been advised by his clients that LAH was now proceeding with the purchase of the Ritz, asking Mr Collins to confirm that was the case and to provide the name of the solicitors who would be acting, and stating that, in view of the size of the transaction involved, he would be working with BLP, but would remain the first point of contact.

By way of further example, on 6 November 2006 Mr Collins spoke to Mr Lee on the telephone. Mr Collins summarised his call as follows in a contemporaneous attendance note:

“Spoke twice to Tony Lee who confirmed he had the contract for the Hotel & Casino and was ready to send contracts but first wanted Sakis to confirm that we could proceed…”

Running parallel with the negotiations concerning the Ritz was another property transaction relating to land in St Neots, Cambridgeshire (“St Neots”). Ms Maguire had discussed this deal with Mr Collins in early September 2006. It had been introduced to Ms Maguire by Mr Lee, who knew the owners. St Neots was ultimately sold by the owners to Taylor Woodrow. The consequence was that Mr Lee did not get a £2 million commission, which he was hoping to receive. He blamed Mr Collins for the loss of that commission in circumstances which it is not necessary to elaborate in this judgment.

On 5 December 2006 Mr Lee confirmed in a telephone call to Ms Maguire that he was acting in partnership with Mr Dolan and an un-named Irish partner. This was the first occasion that she had heard of Mr Dolan’s involvement in the proposed Ritz deal. She informed Mr Collins of the fact at a meeting they had later that day.

On 5 December 2006, unknown to Mr Collins and LAH, the Official Receiver issued an application against Mr Lee for a bankruptcy restrictions order based on Mr Lee’s wrongful sale of a mechanical digger which was in his possession subject to a hire purchase agreement.

In a telephone call on 8 December 2006 Mr Lee told Ms Maguire that another party had come on the scene who was willing to pay significantly more than the price agreed with LAH, and that, if Mr Collins wanted to retain exclusivity for the contract for the Ritz, he would have to pay Mr Lee a non-refundable deposit of £1 million. In return, Mr Lee would send over all the Ritz papers and the contract to Mr Collins in January 2007. Ms Maguire reported that to Mr Collins on the telephone on the same day. Once again, Mr Lee and Mr Dolan have always declined to state the identity of the other party for reasons of “commercial sensitivity”.

In a subsequent telephone call with Mr Lee on 8 December 2006, Mr Collins said that he would consider the request for £1 million, but he would need to be sure that, if the £1 million was paid, contracts would be sent over, and, if the contracts were not sent over, the £1 million would be returned. Mr Lee gave that confirmation.

In a telephone conversation between Mr Lee and Mr Collins on 10 December 2006, Mr Lee said that the £1 million had to be paid by Friday 15 December 2006, failing which LAH would be out of the deal and Mr Lee would proceed to sell to the third party, who had been waiting in the wings for several months and was willing to put up a non-refundable deposit of £2 million. Mr Lee repeated that, if the £1 million was provided, then the contract would be issued to LAH; if the contract was not issued, then the £1 million would be returned.

On 12 December 2006 Ms Maguire sent an e-mail to Mr Collins. In it she referred to the “non-refundable deposit” that the vendors of the Ritz, that is to say Mr Lee and Mr Dolan, would be seeking.

On 13 December 2006 Mr Collins sent an e-mail to Sean Collins of Trinity Corporation (“Trinity”), who were property funders and developers and were to provide financial assistance to LAH on the Ritz deal, referring to the £1 million.

Those e-mails, to which I have just referred, described their subject matter as Notting Hill.

Mr Collins decided to try to raise the £1 million. He was put in touch with a Netherlands based businessman and financier, Mr Marcel Boekhoorn.

Mr Collins sent an e-mail on 13 December 2006 to Mr Cees van der Hoeven, one of Mr Boekhoorn’s team. It said, among other things;

“As I explained we are being placed under certain pressure to insure that the deal does not slip away from us. As I mentioned the current owners, for their own secretive reasons have placed the contract for the hotel and the casino with a third party [a reference to Mr Lee] with whom they carry out a number of deals

After a period of negotiation I proved funds to the value of £250 million via [BoS] to enable us to be give the opportunity to obtain a contract.

Our proof of funds enabled our vendor to obtain a contract from the ultimate owners.

….

Our vendor, following advice from his advisors and with the knowledge that we are not the only buyers, many at higher levels, has now insisted that my group make a £1 million payment by close of business Friday [i.e. 15 December]. This I will have to achieve if the deal is to be still available. Then I would receive legal document package at the beginning of January…”

On 14 December 2006 Mr Boekhoorn and various members of his team flew to London to meet Mr Collins and to discuss the Ritz deal.

Mr Collins informed Mr Tombolis that Mr Lee had told Mr Collins that, unless the £1 million was received by the following day, there would be no deal on the Ritz.

At a meeting, which commenced in the late afternoon or early evening of 14 December 2006, attended by Mr Boekhoorn and members of his team, and Mr Collins and Mr Tombolis, Mr Collins and Mr Boekhoorn discussed a possible deal under which Mr Boekhoorn would provide or procure for LAH the £1 million and also £25 million required as a deposit, and LAH would sell the Ritz to one of Mr Boekhoorn’s companies at a price of £258.5 million. It was suggested that Mr Boekhoorn might wish to speak to Ms Maguire to clarify that the payment of £1 million would secure delivery of the contracts and supporting documentation for the purchase of the Ritz.

Ms Maguire, who was then in Verbier on a skiing holiday, was contacted by telephone. She told those at the meeting in London, on speakerphone, that that was her understanding.

Ms Maguire confirmed that understanding in a handwritten fax that she sent from Verbier to Beachcroft’s offices in the early morning of the next day, 15 December 2006. The fax, which is headed “Project Notting Hill”, said:

“Following on from our conversation yesterday evening, I write to confirm that my company has a verbal agreement with Tony Lee to receive the contract and associated paperwork to enable the acquisition of the above. It is our expectation that we will receive the paperwork to enable the acquisition of the above. It is our expectation that we will receive the paperwork in early January 2007 and it is our opinion that Mr Lee will honour his agreement.

On the understanding that £1million stg has passed to Mr Lee by his deadline, I confirm that my company will forward the contract to London Allied.”

After detailed negotiations on 15 December 2006 an “Exclusivity Agreement” was finalised and signed by Mr Collins, Mr Boerkhoorn, LAH and one of Mr Boerkhoorn’s companys Apvodedo NV (“Apvodedo”), which was the company which was to pay the £1 million to LAH and which would purchase the Ritz from LAH (“the Exclusivity Agreement”). A confidentiality agreement was also signed by them on that day.

Recital 1.5 of the Exclusivity Agreement recorded that:

“[LAH] and [Apvodedo] acknowledge that [Mr Collins] has come to an understanding with a Mr Tony Lee…that when [Apvodedo] sends £1,000,000 to Mr Lee, Mr Lee (or his advisers) will release the Documentation… to [Mr Collins] or [LAH] to enable [LAH] to proceed with the purchase of the [Ritz] …for £250,000,000 and then for [LAH] and [Apvodedo] to proceed with the [disposal of the Ritz to Apvodedo for £258,500.00]”.

Clause 10.1 of the Exclusivity Agreement recorded that Apvodedo paid Mr Lee £1 million on the day of that Agreement so that Mr Lee would release the documentation to LAH or its advisers.

Clause 10.2 of the Exclusivity Agreement provided that, in the event that LAH had not received by 15 February 2007 a draft agreement entitling Mr Lee (or his associate) to purchase the Ritz and also title documents for the Ritz and a further agreement to sell such interest as was acquired to LAH, then Mr Collins would pay Apvodedo £1 million on 31 March 2007.

During 15 December 2006 Mr Collins spoke to Mr Lee on the telephone. Mr Lee again stated that the contracts would be forthcoming, and, if not, the £1 million would be repaid.

In conversations between Mr Collins, Ms Maguire and Mr Lee in the week 8-15 December 2006 Mr Collins raised the question of security for the return of the £1 million. Mr Lee stated that he and his partners and Ms Maguire were acquiring Flaxby, a golf course in Yorkshire covering a site of about 280 acres with planning permission for a 200 bedroom hotel ("Flaxby”). He said that the deal carried a profit margin of £1.5 million and could be security for the re-payment of the £1 million. That proposed arrangement is reflected in an e-mail from to Mr Collins to Ms Maguire of 12 December 2006. The e-mail is headed “Project Nottinghill” and says, among other things:

“I look forward to hearing from you regarding the security on the Flaxby deal”.

It is also reflected in the e-mail, headed “project nottinghil”, sent by Mr Collins on 13 December 2006 to Sean Collins of Trinity. In that e-mail Mr Collins referred to the Flaxby deal as “collateral”. The e-mail said, among other things:

“Karen and Tony have confirmed that I can have the deal as collateral to cover the £1m, which of course drops away once the papers for “Nottinghill” arrive.

In fact, Flaxby was never purchased by Mr Lee or Ms Maguire or anyone acting on their behalf.

The £1 million was remitted from an ABN AMRO (“ABN”) account held by Apvodedo in the Netherlands to Mr Lee’s Allied Irish Bank (“AIB”) Dublin account no. 2441006 late on Friday 15 December 2006. It is shown as credited as €1,481,920.57 to that account on Monday 18 December 2006. Prior to that credit, the account had a nil balance.

On 15 December 2006 Mr Collins sent by fax to Mr Lee on Mr Collins’ home fax machine a letter from ABM to Mr Tombolis concerning the payment. The handwritten cover letter from Mr Collins said:

“Please find copy of fax confirming payment re introduction for Flaxby Golf Course Harrogate”

LAH claims that on 18 December 2006 Mr Collins read to Mr Lee on the telephone the text of a letter which he sent to Mr Lee on the following day, and which stated:

“Further to our numerous telephone conversations last week you have now received in your Irish bank account the sum of £1 million. As confirmed by you on Friday 15 December 2006 the payment of these funds will now enable you to release the contracts and all supporting paperwork in your possession to our lawyers Beachcroft, whose address you have, during the first working week of January 2007, for the Ritz Hotel and casino.

You further confirmed that the price which we will be purchasing to be £250 million. For the record we have written confirmation of this from Con Farrell…You will shortly be receiving written confirmation from Beachcroft that they are holding an irrevocable bank guarantee from ABN-Amro Brussels for £25 million.

Again for the avoidance of doubt I confirm that the difference between your purchase contract from the Barclays brothers and the £250 million sale price to us will be split 50/50 between us. From our 50% we will be responsible for the introductory commission to Property Source Ltd…”

Mr Lee denies ever receiving that letter.

On 19 December 2006, on Mr Collins’ instructions, Mr Tombolis wrote a letter to Mr Lee, which is headed “Project Notting Hill/Flaxby” in the following terms:

“Further to our various discussions and meeting that took place last week, you now should have received £1m into your account. I believe Terry has already sent you confirmation for ABN Amro evidencing the £1m payment.

I am instructed by my clients that this sum will represent an introduction fee for Flaxby. In accordance with your arrangement with Terry I look forward to receiving draft documentation on Project Notting Hill during the early part of January of next year”.

Mr Collins says that the description in the letter of the £1 million as “an introduction fee for Flaxby” was at Mr Lee’s request. Mr Lee had asked Ms Maguire that the £1 million be described as “an introduction fee for Flaxby” for the “usual tax reasons”.

After receipt of Beachcroft’s letter of 19 December 2006 Mr Lee telephoned Ms Maguire, and asked that it be amended to remove the reference to “Notting Hill”, so that only Flaxby would be mentioned. Ms Maguire relayed that to Mr Collins, who instructed Mr Tombolis on about 10 January 2007 to amend the letter by deleting the second sentence of the second paragraph. Mr Collins told Mr Tombolis that the letter had to be changed for “accounting reasons”. Mr Tombolis sent the amended letter to Ms Maguire, who then requested him to amend the letter further by deleting the reference to Notting Hill in the title and Beachcroft’s file reference, which related to the Ritz.

The further amended letter was sent to Mr Lee on 10 January 2007, although it bore the same date of 19 December 2006 as the original letter. It was now headed simply “Flaxby”, and said:

“Further to our various discussions and meeting that took place last week, you now should have received £1m into your account. I believe Terry has already sent you confirmation from ABN Ambro evidencing the £1m payment.

I am instructed by my clients that this sum will represent an introduction fee for Flaxby.”

On 29 December 2006 ABN issued a bank guarantee for £25 million in relation to Apvodedo, for the purpose of the Ritz project.

Ms Maguire had a meeting with Mr Dolan and Mr Lee on 12 January 2007. This was the first occasion Ms Maguire had met Mr Dolan. Mr Lee and Mr Dolan told Ms Maguire that they had had a meeting with the vendors of the Ritz, which had gone very well, and that they hoped to get the contracts for the sale of the Ritz to Ms Maguire within a week.

On the same day Ms Maguire telephoned Mr Collins and stated that she had had a meeting with Mr Dolan and Mr Lee. She said they had confirmed that BLP were now ready to send over the paperwork, and they had produced a documentary list of properties and businesses that were included in the Ritz deal.

That document was sent to Mr Collins by Ms Maguire on 15 January 2007. The document had no genuine provenance, that is to say it did not come directly or indirectly from the Barclays, or anyone acting on their behalf.

There was a meeting on 25 January 2007 attended by Mr Collins, Ms Maguire, Mr Lee and Mr Dolan. This was the first time that Mr Collins had met Mr Lee and Mr Dolan. Mr Lee told Mr Collins that the Barclays had now informed him that they were selling an enlarged portfolio of buildings accompanying the Ritz, so that the sale price had increased from £250 million to £470 million. Mr Dolan said, at one point, “We’ve got to find out how to deal with the million Tony”. Mr Collins was extremely angry and left the meeting, stating that Mr Lee and Mr Dolan would be “hearing from him”.

On 30 January 2007 Mr Collins wrote a letter to Mr Lee demanding the return of the £1 million. In it, he said, among other things, that Mr Lee had “recently mentioned that you would return the £1 million deposit paid by us". In the absence of a response to that letter, Beachcroft wrote two letters of demand to Mr Lee on 5 and 8 February 2007.

No contracts or paperwork for the sale of the Ritz were ever sent to LAH. Nor was the £1 million returned to LAH.

So far as concerns subsequent dealings with the £1 million credited in euros to Mr Lee’s AIB Dublin account, Mr Lee gave instructions for the transfer of €644,730 to Mr Dolan. That amount was credited to Mr Dolan’s AIB Limerick account no. 935247 21752183 on 19 December 2006.

In June 2007 Mr Lee and Mr Dolan disclosed to LAH’s solicitors a letter dated 18 December 2007 from Mr Dolan to Mr Lee, which had not been mentioned in the affidavits of Mr Lee or Mr Dolan or in the Defence, and which is headed “St Neots and Flaxby Park Projects”. It acknowledged payment to Mr Dolan by Mr Lee of £435,500 “received for professional and consulting fees for work carried out in connection with the above projects”. LAH’s case is that that letter is an invention and bogus.

Among other payments by Mr Lee from the £1 million, he paid €80,691.67 on 19 December 2006 for a Land Rover. Dennison Till, writing on Mr Lee’s behalf, has stated that the car was a gift to the Fourth Defendant.

About £59,000 of the £1 million is retained by Dennison Till, having been sent to them by Mr Lee for distribution to his creditors.

It is not necessary, for the purposes of this judgment, to examine in more detail the other payments made by Mr Lee from the £1 million.

€392,000 remains in Mr Lee’s deposit account, and €7,348.63 remains in his personal account.

So far as concerns the €644,730 credited to Mr Dolan’s account on 19 December 2006, there was a credit of €100 in that account immediately before the transfer. There remains in accounts held by Mr Dolan €365,326.86 derived from the original payment of €644,730.

On 5 January 2007 Mr Dolan paid €63,418.35 to purchase a Mercedes motor car.

On 29 March 2007 Mr Dolan transferred to Mrs Dolan for no consideration his interest in the house which he jointly owned with her, 99 Great North Road, Barnet, Herts, EN4 1AT (“the House”).

Also on 29 March 2007 Mr Dolan transferred to Mrs Dolan €431,313.68, of which €46,185.94 was immediately paid by her to discharge Barclays’ charge on the House.

On 11 April 2007, after an injunction had been obtained from Mr Justice Kitchen against Mr Dolan, the total sums remaining in Mrs Dolan’s accounts were re-transferred to Mr Dolan’s account.

It is not necessary for the purpose of this judgment to describe other payments made by Mr or Mrs Dolan.

LAH claims that, from July 2006, misrepresentations were made by Mr Lee and Mr Dolan to LAH, either directly to Mr Collins or indirectly through Ms Maguire and Mr Farrell, and that those misrepresentations were intended to induce LAH to rely upon them, and did induce LAH to pay £1 million to Mr Lee.

The claim based on those misrepresentations is for deceit, negligent misrepresentation, or under the Misrepresentation Act 1967. LAH’s primary case on misrepresentation is that the representations were made with knowledge that they were untrue or reckless whether they be true or false.

It is claimed that the £1 million, having been procured dishonestly by Mr Lee and Mr Dolan, and under a mistake on the part of LAH, was received by Mr Lee as a constructive trustee.

LAH claims, accordingly, to be entitled to trace the £1 million impressed with that constructive trust into the hands of those who received it or its product, including the Land Rover.

The Fourth Defendant has been joined to the proceedings to ensure, so far as necessary, that any order relating to the Land Rover is binding on her.

LAH’s case is that Mr Dolan received the €644,730 into his account on 19 December 2006 knowing that it was derived from the £1 million and had been procured by Mr Lee fraudulently and had been paid under a mistake. Further, LAH claims, Mr Dolan gave no consideration for the money and received it as a volunteer. LAH alleges that, for either or both of those reasons, Mr Dolan is liable to LAH as constructive trustee on both personal and proprietary claims, including a claim to the Mercedes motor car.

LAH further claims that Mr Lee and Mr Dolan are liable for conspiracy to defaud LAH.

Alternatively, it is LAH’s case that the £1 million was paid to Mr Lee pursuant to an agreement that, in the event that the contract and paperwork for the sale of the Ritz were not sent to LAH, the £1 million would be returned. It is said that Mr Dolan is liable on that agreement either because it was entered into by Mr Lee as his agent, so that he is a party to it as principal, or on the ground that it was entered into by Mr Lee as Mr Dolan’s partner.

LAH also maintains restitutionary claims against Mr Lee and Mr Dolan in respect of the money they received on the ground that the money was paid under a fraudulently induced mistake of fact.

LAH claims to be entitled to be subrogated to Barclays’ redeemed charge on the House. The essence of the claim is that LAH’s money has been used to enrich Mr and Mrs Dolan unjustly at LAH’s expense, and subrogation, which would put LAH in Barclays’ position prior to redemption of its charge, would reverse that unjust enrichment.

LAH also seeks in these proceedings declarations from the Court relating to the ownership of the House. It is proposed, however, that I should not give a ruling on that matter at this stage.

The following is a summary of the case of Mr Lee and Mr Dolan based on their Defence and their Reply dated 5 July 2007 to a request for further information as to their Defence (“the RRFI”).

Mr Lee and Mr Dolan claim that the £1 million was paid, not in respect of the purchase of the Ritz or any negotiations in respect of such purchase, but in respect of a prospective property purchase of Flaxby.

They claim that Mr Lee stood to gain a commission of £2 million if he successfully arranged a sale of St Neots, and that, when Mr Lee discovered on about 10 December 2006 that the sale had fallen through, he blamed Mr Collins for that fact. They claim that, on about 10 December 2006, Mr Lee contacted Mr Collins by telephone and informed him that Mr Lee would conduct no more business with Mr Collins or LAH unless LAH compensated him for the commission that he had been unable to make on the sale of St Neots. They say that, in the course of that telephone call, Mr Collins informed Mr Lee that LAH was interested in purchasing Flaxby.

Mr Lee and Mr Dolan claim that Mr Collins, on behalf of LAH, agreed to pay Mr Lee the £1 million as compensation for the commission Mr Lee had been unable to make in respect of the sale of St Neots. They claim that Mr Lee’s agreement to continue to do business with LAH was reflected in Mr Lee’s subsequent introduction of the potential purchase of Flaxby by LAH.

They say that, upon LAH making the payment of £1 million, it was Mr Collins who proposed that the payment should be described as an introductory fee for Flaxby because that was the property in respect of which LAH intended to conduct negotiations with a view to its purchase, whereas St Neots had been sold by then to a third party. Mr Lee, they claim, accepted that suggestion. It is the case of Mr Lee and Mr Dolan that the negotiations in respect of the Ritz were separate and distinct from their dealings with LAH in respect of St Neots and Flaxby, and that they never received any money in respect of the proposed purchase of the Ritz by LAH.

Mr Lee and Mr Dolan deny that they were partners. They assert that they were merely business associates who assisted each other between 2001 and 2006 in respect of property dealings.

They claim that Mr Lee paid Mr Dolan €644,730 out of the £1 million for assistance which Mr Dolan had provided to Mr Lee in connection with the St Neots and Flaxby property deals.

Mr Lee and Mr Dolan deny any dishonesty, fraud or conspiracy.

The Defence contains the following specific allegations about the Ritz negotiations.

Although Mr Lee and Mr Dolan accept that neither of them knows or has ever had business dealings with the Barclays, they say that Mr Lee had an agreement with Mr Sweeting that Mr Sweeting would endeavour to procure the sale of the Ritz to Mr Lee for £200 million, and accordingly Mr Lee had the possibility of acquiring the Ritz through Mr Sweeting for £200 million .

In order to progress Mr Lee’s acquisition and then sale of the Ritz, Mr Lee required proof of funding to the extent of £250 million from LAH.

Mr Lee and Mr Dolan allege that, if Mr Farrell did say that he had contracts for the Ritz, he did so without instructions from Mr Lee. They deny that Mr Lee instructed Mr Farrell to issue contracts to LAH for the sale of the Ritz. They deny that Mr Lee ever asserted that the contracts were with his solicitors and ready to be sent to Beachcroft or that the delay in issuing the contract was due to the illness of Mr Lee’s partner or that they had all the necessary papers relating to the sale apart from some “due diligence”. They deny that Mr Farrell was instructed to say any of those things. They say that Mr Lee never told Ms Maguire he was visiting Gibraltar to finalise the sale with the Barclays.

At all material times, Mr Lee believed that he was in a position to acquire the Ritz and thereafter to sell it to LAH, and he did intend to acquire the Ritz and thereafter sell it to LAH upon receiving satisfactory proof of funding and a satisfactory corporate offer from LAH.

Mr Lee admits that he asked Ms Maguire to inform Mr Collins in December 2006 that another party had come forward and that, if the Ritz were sold to such party, Mr Lee would make an extra £2 million profit, but he denies that he ever asked Ms Maguire to ask for a £1 million non-refundable deposit in respect of the Ritz.

Mr Lee denies that any telephone conversation took place with Mr Lee on 8 December 2006 such as LAH alleges.

Mr Lee agrees that he had a telephone conversation on about 10 December 2006 with Mr Collins, but the contents of that conversation were not as claimed by LAH, but were to the effect that as a result of the fact that Mr Lee had made no commission in respect of St Neots, for which he blamed Mr Collins, he would do no further business with Mr Collins unless he was compensated for such loss of commission; Mr Collins agreed that he would pay Mr Lee £1 million as compensation for the lost commission and also stated that he would ensure that Ms Maguire paid Mr Lee such a sum; and Mr Lee agreed that, if LAH did pay him such sum, he would continue to do business with LAH.

Mr Lee denies that he ever said that, if contracts for the sale of the Ritz were not forthcoming, he would return the £1 million to LAH.

Mr Lee denies that, following his receipt of the £1 million, he told Mr Collins he would give instructions to release the contract for the Ritz to Beachcroft. His case is that Mr Collins informed Mr Lee on the telephone that Mr Collins was obliged to say that the payment of £1 million was made in respect of Flaxby because LAH had not in fact acquired St Neots. Mr Lee admits he did say, in the light of his receipt of the £1 million, that the proposed sale of the Ritz could in all the circumstances proceed to due diligence.

Mr Lee asserts that, having received the £1 million, he then instructed Sprecher Grier Halberstam LLP to act on his behalf in respect of LAH’s proposed acquisition of Flaxby.

Mr Lee and Mr Dolan deny that on 18 December 2006 Mr Collins read a draft letter to Mr Lee on the telephone, or that Mr Lee ever received the letter claimed to have been sent to him by Mr Collins on 19 December 2006. Mr Lee claims that the first time he saw that letter was at the meeting which took place on 25 January 2007.

Mr Lee and Mr Dolan deny that on 12 January 2007 they informed Ms Maguire that contracts for the Ritz could be exchanged at that stage.

Mr Lee and Mr Dolan admit that a meeting took place on 25 January 2007 attended by themselves, Mr Collins and Ms Maguire but they deny that Mr Lee informed Mr Collins that the Barclays had now informed him that they were selling an enlarged portfolio. Mr Lee asserts that he informed Mr Collins that Mr Sweeting, as opposed to the Barclays, had provided the information. Mr Lee and Mr Dolan deny there was any discussion at the meeting about the £1 million.

Mr Lee claims that the letters to him dated 30 January 2007 from Mr Collins, and dated 5 and 8 February 2007 from Beachcroft, were answered by Farrell Martin & Nee in a letter dated 15 February 2007.

Mr Lee and Mr Dolan claim that the extent of the representations made by Mr Lee in relation to the Ritz was that, upon LAH supplying proof of £250 million funding, Mr Lee anticipated that he would be in a position through Mr Sweeting to purchase the Ritz for £200 million and sell it to LAH for £250 million. Mr Lee claims that at all material times he believed that to be true, and those were his intentions.

Mr Lee asserts in the Defence that he agreed orally with Mr Sweeting, whom he believed had the authority to make such an agreement, that the owners of the Ritz would sell it to Mr Lee upon receipt of adequate proof of funding.

If, which Mr Lee and Mr Dolan do not admit, Ms Maguire represented on 5 December 2006 to Mr Collins that Mr Dolan was a partner of Mr Lee in the Ritz deal, then, they claim, she did so without Mr Dolan’s knowledge or instruction.

In the RRFI Mr Lee and Mr Dolan assert that the agreement with Mr Sweeting was that, upon acceptance by Mr Sweeting of proof of funding, the identity of the buyer and a satisfactory offer, then Mr Sweeting would issue a contract for the sale of the Ritz.

As I have said earlier, oral evidence was given at the trial, on behalf of LAH, by Mr Collins, Ms Maguire, Mr Tombolis, Mr Sweeting, and Mr Turner. Mr Turner established LAH with Mr Collins in 2004 and is a director of three subsidiaries of LAH. His role within the LAH group is to identify and acquire property for development and investment.

Mr Collins, Mr Tombolis, Mr Sweeting and Mr Turner made witness statements, and verified on oath at the trial the truth and accuracy of their contents.

Mr Collins also verified at the trial the truth and accuracy of his 6 affidavits made for interlocutory proceedings, as did Mr Tombolis in respect of his affidavit. Ms Maguire verified on oath the truth and accuracy of an affidavit sworn by her in the proceedings on 31 May 2007.

As I have said earlier, no one gave oral evidence at the trial, on behalf of the Defendants, but there were before the court the three affidavits of Mr Lee, the two affidavits of Mr Dolan, and the affidavit of Mr Farrell sworn for the purpose of interlocutory proceedings.

Only Mr Collins and Ms Maguire were cross-examined by Mr Lee. I consider that they were honest and credible witnesses who gave their evidence in a convincing and measured way.

In reaching my conclusions of fact, I take into account the affidavit evidence of Mr Lee, Mr Dolan and Mr Farrell which is before the court.

In forming my conclusions as to the facts, and evaluating the competing weight and credibility of the evidence of LAH’s witnesses, on the one hand, and the affidavits of Mr Lee, Mr Dolan and Mr Farrell, on the other hand, I take into account that none of the Defendants nor Mr Farrell appeared in court to answer the evidence of LAH’s witnesses and to be cross-examined on their own affidavits. I am not aware of any good reasons for the non-attendance of the Defendants. Furthermore, even though, so far as I am aware, Mr Farrell was able to attend to give evidence, he was never called by any of the Defendants to do so. Those circumstances strengthen the weight and credibility of the evidence of LAH’s witnesses where there is a conflict with the affidavit evidence and pleaded case of the Defendants: Wisniewski v Central Manchester Health Authority [1990] PIQR 324; Jaffray v Society of Lloyds [2002] EWCA Civ. 1101 at para [427]; Walker International Holdings Ltd v Republique Populaire du Congo [2005] EWHC 2813 (Comm.) at para [18].

I am quite satisfied that the £1 million was paid in respect of the Ritz deal. The evidence in support of that conclusion is overwelming.

Mr Collins’s evidence (para 53 of his first affidavit) is that he received a telephone call from Ms Maguire on Friday 8 December 2006. She informed him that she had been advised that another party had come forward who was willing to exceed the purchase price by £2 million. She told Mr Collins that, if LAH wished to remain in the deal and to retain exclusivity, LAH would need to pay a £1 million non-refundable deposit to Mr Lee.

Mr Collins says that he spoke with Mr Lee immediately after Ms Maguire’s call and Mr Lee said that LAH obviously knew from Mr Farrell’s e-mail of 30 October 2006 that they had other parties that would pay more.

Mr Collins’s evidence is that Mr Lee said that, on receipt of the £1 million and a £25 million guarantee, LAH would receive the papers.

Mr Collins’s evidence (para 57 of his first affidavit) is that on 10 December 2006 Mr Lee telephoned him and informed him that the payment of the £1 million must be received in Mr Lee’s account by Friday 15 December 2006, failing which LAH would be out of the deal and Mr Lee would proceed with the third party that had been waiting in the wings for several months and who was willing to put up a non-refundable deposit of £2 million.

That evidence is corroborated by the evidence of Ms Maguire. She says (para 22 of her affidavit) that on about 8 December 2006 she received a telephone call from Mr Lee in which he had informed her that another party had come forward to purchase the Ritz and they were willing to pay Mr Lee £5 million to secure the contracts. Mr Lee informed her that he would stick with Mr Collins as he had promised to do so, but, if Mr Collins wished to retain exclusivity of the contracts, a £1 million “up front” payment was required, in return for which Mr Lee would send all the Ritz papers and contracts to Mr Collins in the first week of January. She says that Mr Lee informed her that his Irish partners remained very upset about the loss of commission on the St Neots deal, and in order to appease them he needed £1 million by the end of the week. She says that Mr Lee gave his word that, on payment of the £1 million, the contracts for the Ritz would be provided. She says that she duly relayed that information to Mr Collins.

That position was convincingly maintained by both Mr Collins and Ms Maguire in oral evidence in cross-examination.

It is supported by the evidence of Mr Tombolis. He says (para 5 of his affidavit) that in the afternoon of 14 December 2006 Mr Collins confirmed to him that Mr Lee now required £1 million as a “non-refundable deposit” on the Ritz deal to ensure the issuing of contracts and sending of due diligence paperwork. He says that was apparently because another purchaser had come onto the scene; and, if Mr Lee did not receive the payment by 15 December 2006, LAH would be “out of the deal” (or words to that effect). Mr Tombolis further describes in his witness statement the steps that he and others then took in connection with the demand for £1 million, and the preparation of documentation in relation to it.

The position of LAH on the £1 million is also supported by the evidence of Mr Turner. He says, in his witness statement, that he was consulted by Mr Collins on a daily basis as to the progress of the Ritz deal, and to obtain his advice and consent. He says that he was aware the £1 million was to be paid as a deposit, in return for which LAH would receive documentation on the Ritz to allow LAH to carry out due diligence, and that the £1 million was to be raised through Dutch investors. He further says that he was told by Mr Collins on about 12 December 2006 that Mr Lee had demanded a £1 million deposit, and that Mr Collins had agreed with Mr Lee that, if the contractual documentation for the purchase of the Ritz was not provided to LAH by early 2007, the £1 million would be returned to LAH.

That account is also supported by the contemporaneous documents. It is supported by the reference to a “non refundable deposit” in the e-mail from Ms Maguire to Mr Collins on 12 December 2006, and also the e-mail from Mr Collins to Ms Maguire on the same day, which referred both to the £1 million and to security on the Flaxby deal, and also the e-mail from Mr Collins to Sean Collins on 13 December 2006 which referred to the £1 million and the collateral offered by Mr Lee.

Recital 1.5 and Clause 10.1 of the Exclusivity Agreement dated 15 December 2006 explicitly link the £1 million payment to Mr Lee’s agreement to send LAH the documentation for the purchase of the Ritz.

Notably, on 15 December 2006 Ms Maguire sent to Beachcroft the handwritten fax headed “Project Notting Hill”, which I have mentioned in paragraph 80 above and expressly links the £1 million to the Ritz deal.

I accept LAH’s evidence on this matter.

I reject entirely Mr Lee’s explanation for the payment of the £1 million: in particular, that it had any connection with a deal in respect of Flaxby and that it was Mr Collins who suggested that it be described as an introduction fee for Flaxby.

The case of Mr Lee and Mr Dolan on this aspect relies heavily on the 15 December 2006 fax cover note from Mr Collins to Mr Lee “confirming payment re introduction for Flaxby Golf Course Harrogate”, and the final version of the letter dated 19 December 2006 from Mr Tombolis to Mr Lee, which is headed “Flaxby” and states that Mr Tombolis was instructed by his clients that the £1 million “will represent an introduction fee for Flaxby”. I am perfectly satisfied, in view of the evidence of Mr Collins, Ms Maguire and Mr Tombolis, particularly with regard to the original wording of the letter of 19 December 2006 from Mr Tombolis and the amendments made to it, that it was Mr Lee who insisted on the documentation being worded so as to attribute the £1 million to Flaxby.

Ms Maguire’s evidence (para 24 of her affidavit) is that Mr Lee asked her if the £1 million payment in respect of the Ritz could be described in the paperwork as an introduction fee for Flaxby for what he described to her as “the usual reasons”. She says that she understood him to mean tax reasons. In her oral evidence, in cross examination, she said that Mr Lee had telephoned her and asked that for business reasons the £1 million be described as paid as an introduction fee for Flaxby. Her evidence is that she telephoned Mr Collins, and he said he would instruct Mr Tombolis accordingly.

Mr Collins gave evidence, in cross-examination, that Ms Maguire telephoned him to say that Mr Lee wanted the original wording of the letter changed for his tax and business reasons. He understood that Mr Lee was not happy with the reference to project Notting Hill. He said that,if it helped to take out such reference, he was happy to do so.

Mr Tombolis, as I have already said, explains in detail in his affidavit and his witness statement precisely what were his instructions in relation to his original draft of the letter of 19 December 2006 and the successive amendments to it. His evidence is that on 15 December 2006, the same day as the fax cover letter relied upon by Mr Lee and Mr Dolan, he was told by Mr Collins that Mr Lee insisted that the £1 million payment had to be described as referring to Flaxby.

It is to be noted that Mr Lee’s evidence as to the purpose of the £1 million has shifted during the course of these proceedings. In his first affidavit, sworn in response to LAH’s application for a freezing order, Mr Lee said that the £1 million was an introduction for Flaxby. In the Defence, however, it is said that the £1 million was paid as compensation for the commission he was unable to make in respect of St Neots and was paid in consideration of Mr Lee’s agreement to continue to conduct business with LAH.

The written and oral evidence of LAH’s witnesses, which I accept, and the contemporaneous documentation show that, at the time of the 19 December 2006 letter and the payment of the £1 million, LAH knew virtually nothing about Flaxby, other than that it was offered as security for the £1 million payment. The contemporaneous documentation shows that, until a deal in relation to Flaxby was abandoned in February 2007, the arrangements for its acquisition had nothing whatever to do with LAH. Its significance was merely that, under the arrangements for its sale, it was expected to generate a profit of £1.5 million shared between Property-Source, on the one hand, and Mr Lee and Mr Dolan, on the other hand. That is why it was considered to be appropriate as security the £1 million payment by LAH to Mr Lee, but the precise way in which that security would be arranged was never apparently the subject of any careful consideration.

Mr Tombolis’s evidence (para 15 of his affidavit) is that, to his own personal knowledge, the Dutch investors were unaware of the Flaxby deal, let alone any interest in it; and he himself was not instructed by LAH or any other entity in relation to any transaction relating to Flaxby. In paragraph 18 of his witness statement he says:

“I had no detailed knowledge of the Flaxby Park project until I was asked by Mr Collins to make reference to it in my letter of 19 December 2006 to Mr Lee. Furthermore, the Claimant’s negotiations with the Dutch investors which led to the payment of £1 million to Mr Lee, was founded on the premise that £1 million was to be paid as a deposit in respect of the purchase of the Ritz Hotel and Casino. If Mr Lee is correct, it would mean that Mr Collins deliberately misled me, his Bankers, Ms Maguire and the Dutch investors, in order to secure a payment of £1 million – for which he gave a personal guarantee – so that he may pay this over to Mr Lee for a project which might not proceed (i.e Flaxby) and which I am now advised will not proceed. In my view, this is wholly fantastic.”

I find, accordingly, that Mr Lee’s evidence on this central part of his Defence is unbelievable and concocted. His evidence is not based on faulty memory, but, in my judgment, was and is knowingly false.

I find that Mr Lee promised Mr Collins that, if the papers and a contract for the purchase of the Ritz by LAH were not forwarded within a reasonable time after the £1 million was paid, and in any event by the end of January 2007, the £1 million would be repaid. There was a contract to that effect. That promise was made by Mr Lee to Mr Collins in various telephone conversations between them in the week 8-15 December 2006, including, in particular, telephone conversations on 8 and 10 December 2006.

That conclusion is supported by the evidence of Mr Collins, Ms Maguire, Mr Tombolis and Mr Turner. It is also supported by the contemporaneous documentation, including, in particular, the e-mails of 12 December 2006 from Mr Collins to Ms Maguire and 13 December 2006 from Mr Collins to Sean Collins, with regard to the provision of security for the £1 million. Further, Clause 10.2 of the Exclusivity Agreement of 15 December 2006, which provides for Mr Collins to pay Apvodedo £1 million on 31 March 2007 if LAH had not received a draft agreement for the purchase of the Ritz by 15 February 2007, shows that repayment of the £1 million was very much to the forefront of Mr Collin’s mind on 15 December 2006.

Paragraph 48 of the RAPC alleges that Mr Lee made the following representations to LAH that were intended to induce LAH to pay £1 million.

It is alleged in RAPC 48.1:

“Mr Lee represented during the period prior to 29 August 2006, whether by himself or by his agent Mr Farrell, that he had an oral agreement with the Barclays that once adequate proof of funding had been provided by a sub-purchaser the Barclays would enter into a binding contract to sell the Ritz to Mr Lee for £200 million and, in turn, Mr Lee would sell the Ritz to LAH for £250 million”.

I find that Mr Lee did make such a representation. The allegation is supported by the evidence of Mr Collins and Ms Maguire, which I accept, and the contemporaneous documentation.

In her first affidavit (para 5) Ms Maguire says that in June 2006 Mr Lee telephoned her and informed her that “he had access to a contract to purchase the Ritz… at a price of £200 million”. She further says (at para 8) that, at the outset of her dealings with Mr Lee, he led her to believe “he had access to the owners of the Hotel, the Barclays Brothers”. She says (in the same paragraph) that Mr Lee made a number of references to meetings that he had had with the vendors or their representatives. She says (in para 9) that Mr Lee led her to believe that he had a business relationship with the vendors and their representatives that had previously landed him with access and information to buy the Ritz.

In his first affidavit (para 10), Mr Collins says that Ms Maguire, passing on the information that she had been given by Mr Lee, informed Mr Collins on 7 July 2006, at an introductory meeting, that “she had access to a contract for the purchase of major flagship hotel in central London”. She further explained, at the same meeting, that she had made contact with her lawyers, Halliwells in Manchester, with a third party intermediary who claimed to have a contract to buy the Ritz at a price of £200 million, and that the third party intermediary was a business associate of the Barclays (para 11).

In para 15 of his first affidavit, Mr Collins says that Mr Farrell telephoned him on about 11 July 2006 and informed him that Mr Lee “had an exclusive oral agreement with the Barclays for a six month window in which to buy and sell the Ritz”. In para 22 of his first affidavit Mr Collins says that Mr Farrell mentioned in a telephone call on about 4 August 2006 to Mr Collins that Mr Lee and the Barclays were apparently concerned to ensure adequate proof of funding because an earlier deal had gone wrong because the sub-purchaser’s funding proved to be invalid in some way. Mr Collins says that during telephone call Mr Farrell confirmed:

“he had contracts for the Ritz but needed proof of funding, by which I interpreted him to mean that provided that adequate proof of funding was provided then he would be able to use the contracts which had been drawn up for the aborted sale of the Ritz about a year previously, and insert the name of [LAH] as purchaser with all other terms remaining the same, on the basis that the Barclays were willing to sell to Mr Lee if he came up with adequate proof of funding from a sub-purchaser”.

Mr Farrell sent Mr Collins the letter dated 10 August 2006, in which he confirmed that, on receipt of “satisfactory proof of funding from all funding sources for the purchase price of £200 million” and “a satisfactory corporate offer”, he was “instructed to issue contracts for the sale of [the Ritz Hotel] to [LAH]”.

In para 25 of his first affidavit Mr Collins says that he also had a telephone conversation with Mr Farrell on 10 August 2006, during which he asked Mr Farrell’s firm to confirm that he and Mr Lee could produce the contracts as represented. Mr Collins made a short contemporaneous note of that telephone conversation, the substantive part of which reads as follows

“Spoke to Conn Farrell on receipt of his fax and I asked him to confirm he and his client could deliver the contract and he said “I wouldn’t write to you unless I had the contract”.”

Finally, the probability of the representation is reinforced by the case of Mr Lee and Mr Dolan as to Mr Sweeting’s ability and commitment to procure a contract in their favour. So, as I have previously said, in the RRFI Mr Lee and Mr Dolan assert that the agreement with Mr Sweeting was that, upon acceptance by Mr Sweeting of proof of funding, the identity of the buyer and a satisfactory offer, Mr Sweeting would issue a contract.

In para 48.2 of the RAPC LAH alleges that during the period after 29 August 2006 and up to 8 December 2006, Mr Lee represented that, adequate proof of funding having been provided by LAH:

“48.2.A1 Mr Lee and Mr Dolan were in contact with the Barclays and that they were intermediaries on a number of the Barclays’ deals.

48.2.1

The Barclays now intended to and were agreeable to entering into a binding written contract with Mr Lee to sell the Ritz for £200 million.

48.2.1A All the necessary paperwork had been collated apart form some due diligence …

48.2.2

Mr Lee was in a position to, and intended to, send to LAH contracts to purchase the Ritz at £250 million and that the only impendiment to sending those contracts was that the said full due diligence documentation was being collated; and

48.2.3

Mr Lee was intending to and was agreeable to entering into a binding written contract with LAH to sell the Ritz for £250 million.

I find those that those representations were made by Mr Lee. They are supported by the evidence of Mr Collins, Ms Maguire and Mr Tombolis, which I accept, and contemporaneous documents.

In para 34 of his first affidavit Mr Collins, referring to September and October 2006, says that Mr Lee told him on a number of occasions on the telephone that “the contracts were with his lawyers and ready to send to us”. He refers in the same paragraph to Ms Maguire telling him in September 2006 that Mr Lee had told her that Mr Lee and Mr Farrell had been to Gibraltar to finalise the details of the sale with the Barclays and that the Barclays were satisfied with the proof of funding and were content to sell to Mr Lee on the basis of a sub-sale to LAH.

In para 8 of her affidavit Ms Maguire refers to an occasion in September 2006 when Mr Lee informed her that he was flying to Gibraltar for a meeting with “the vendors” and he intended to return from that meeting with the contract. She says that this was also confirmed to her by Mr Farrell, who informed her that he would be accompanying Mr Lee to Gibraltar to meet the Barclays. She says that meeting was postponed because Mr Lee’s partner was taken ill, but she understood from Mr Lee that it did take place shortly afterwards.

Her evidence is supported by the e-mail from Ms Maguire to Mr Collins dated 13 September 2006 referring to Mr Lee’s intention to visit Gibraltar, the material part of which I have set out in paragraph 56 above.

In para 38 of his first affidavit Mr Collins says that throughout November 2006 he chased Mr Lee, Mr Farrell and Ms Maguire on numerous occasions; and that they assured him by telephone that they had all the necessary paperwork relating to the sale of the Ritz apart from some of the “due diligence [LAH] would be asking for” and that they wished to send all the paperwork over at the same time in order to avoid unnecessary legal costs. As I have said, there is in evidence a hand written attendance note by Mr Collins of a conversation he had with Mr Lee on 6 November 2006, in which Mr Lee is recorded as say that he “was ready to send contracts”.

In para 49 of his first affidavit Mr Collins refers to an occasion in about November 2006 when he was advised by Ms Maguire that Mr Lee had been through all the sale documentation and was finalising the exact papers to be sent to LAH. Mr Collins says he was informed that there were 27 boxes of papers.

In para 6 of his witness statement Mr Tombolis recalls that on one occasion Mr Farrell informed him that he or BLP would shortly be in a position to send him the papers, and Mr Farrell informed him that the papers consisted of 27 boxes of documents, all of which would be sent to him shortly. Mr Tombolis repeats that evidence in para 11 of his witness statement, adding that Mr Farrell gave him the clear impression that either Mr Farrell or BLP would be dealing with the provision of the documentation.

In para 9 of her affidavit Ms Maguire says that on about 5 December 2006 she received a call from Mr Lee, who confirmed that he was acting in partnership with two others, Mr Dolan and an un-named Irish partner. In para 50 of his first affidavit Mr Collins says that he met Ms Maguire at her office on that day and that at that meeting she confirmed that Tony Lee “and his partners” were the intermediaries acting for the sale of a number of the Barclays’ properties. Mr Collins repeats that evidence in para 6 of his fifth affidavit where he says that, at the meeting on 5 December 2006 with Ms Maguire, he was informed by Ms Maguire that Mr Dolan was “Tony Lee’s business partner in the Ritz deal” and that they (i.e Mr Dolan and Mr Lee) were the intermediaries on a number of the Barclays’ properties.

In para 36 of his first affidavit Mr Collins refers to a conversation between himself and Mr Farrell on 1 November 2006. He says that, on that occasion, Mr Farrell confirmed to Mr Collins that he was holding the contract from the Barclays to Mr Lee and was instructed by his client to send the contracts to LAH. Mr Collins explains: “By this I understood that the Barclays had indicated they were satisfied with the proof of funding which had been provided and were now willing to enter into a contract with Mr Lee and that they had issued draft contracts to Mr Lee and that the previous contracts drawn up for the aborted purchase of the Ritz had been amended to reflect that the sub-sale now be from Mr Lee to LAH”.

At para 48.2.3A of the RAPC LAH claims that Mr Lee, having instructed Mr Farrell to send an e-mail on 30 October 2006 stating that Mr Farrell “was advised that [his] clients had accepted another higher offer for [the Ritz] subject to contract”, thereafter informed Ms Maguire that he had not in fact instructed Mr Farrell to write the e-mail.

Both those allegations are true. The e-mail is in evidence. In para 35 of his first affidavit Mr Collins states that, on seeing the e-mail he was contacted by Ms Maguire, who told him that she had spoken to Mr Lee who advised her that Mr Farrell had acted without his instructions on the e-mail. Mr Collins was told by Ms Maguire that Mr Lee had, however, confirmed that there was another party who was apparently prepared to pay an additional £2 million for the contract. Further, the allegations in paras 22 and 48.2.3A of the RAPC are admitted in paras 88 to 92 of the Defence. In particular, it is stated in para 91 of the Defence that Mr Lee permitted Mr Farrell to send the e-mail on his behalf in the hope that, by doing so, he would put pressure on LAH to complete the proposed purchase of the Ritz; and that he informed Ms Maguire that he had not told Mr Farrell to send the e-mail because he feared that, if he informed her that he had permitted Mr Farrell to send it, Ms Maguire would terminate her involvement in the negotiations and that might cause the proposed transactions to fail.

In para 48.2A of the RAPC LAH alleges that Mr Lee represented to Mr Collins on 8 December 2006 (via Miss Maguire) and on 10 December 2006 (directly) that:

“48.2.1

Another purchaser had come on the scene and was willing to pay more for the Ritz; and

48.2A.2 If LAH wished to remain in the deal and to retain exclusivity it would need to pay a £1 million non-refundable deposit to Mr Lee...”

I find that those representations were made.

In para 22 of her first affidavit Ms Maguire says as follows:

“On or about 8 December 2006 I received a call from Mr Lee in which he informed me that another party had come forward to purchase the Ritz and they were willing to pay Mr Lee £5 million to secure the contracts. Mr Lee informed me that he would stick with Mr Collins as he had promised to do so, but if Mr Collins wished to retain exclusivity of the contracts, the £1 million “upfront” payment was required in return for which Mr Lee would send all the Ritz papers and contract to Mr Collins in the first week of January. Mr Lee informed me that his Irish partners remained very upset about the loss of commission on the St Neots deal and in order to appease them he needed the £1 million payment by the end of the week. Mr Lee gave me his word that on payment of the £1 million the contracts would be provided. I duly relayed this to Mr Collins.”

Mr Collins states, in para 53 of his first affidavit, that Ms Maguire told him on the telephone on 8 December 2006 that she had been informed that another party had come forward who was willing to exceed the purchase price by £2 million, and that Mr Lee had told her that, if LAH wished to remain in the deal and to retain exclusivity, it would need to pay a £1 million non-refundable deposit to Mr Lee.

In para 57 of his first affidavit Mr Collins states that on 10 December 2006 Mr Lee telephoned him and informed him that payment of the £1 million must be received in his account by Friday 15 December 2006, failing which LAH would be out of the deal and he would proceed with a third party who had been waiting in the wings for several months, and who was willing to put up a non-refundable deposit of £2 million.

I accept that evidence of Ms Maguire and Mr Collins.

My earlier comments, analysis and findings in relation to the “Flaxby defence” are also relevant here.

In para 48.3 of the RAPC it is alleged that Mr Lee represented during his telephone conversations with Mr Collins on 8, 10 and 15 December 2006:

“that Beachcroft would receive the contracts and papers for the proposed sale of the Ritz immediately after payment of the £1 million deposit and thereby represented that it was his intention, once the £1 million was paid, to send over to LAH those contracts and papers and that he intended to, and was in a position to, sell the Ritz to LAH for £250 million.”

In para 53 of his first affidavit Mr Collins, referring to the telephone conversation with Mr Lee on 8 December 2006, says that Mr Lee stated “that he would find a way of securing our funds but he was insistent that his word was his bond and that he wanted to get the contracts to us immediately and if the contracts were not sent, the £1 million would be returned”.

I have already referred to Mr Collins’s evidence as regard the telephone conversation on 10 December 2006.

In para 62 of his first affidavit Mr Collins states that, throughout the day, he made several telephone calls to Mr Lee. He says that he explained to Mr Lee that, although the payment of £1 million was not coming directly from LAH, LAH was personally guaranteeing the £1 million, and he needed Mr Lee’s assurance that it would be paid back to LAH if the contracts and papers were not provided. Mr Collins’ evidence continues:

“Mr Lee reassured me that he was a man of his word and that the payment would be returned straight away if the contracts were not provided. I told Mr Lee that in the event that contracts were not provided he must be in a position to return the payment without delay – I was not willing to wait for another transaction to complete from which he would reimburse me. Mr Lee assured me that the funds would be immediately available if needed.”

I accept that evidence of Mr Collins.

Finally, in para 48.4 of the RAPC it is alleged that Mr Lee also represented during a telephone conversation with Mr Collins on 10 December 2006 that, if the contracts for the Ritz were not sent, the £1 million deposit would be repaid to LAH.

I find that that representation was made.

Evidence to that effect is contained in para 57 of Mr Collins’s first affidavit. As appears from what I have said earlier, para 62 of Mr Collins’s first affidavit contains evidence to similar effect in relation to telephone conversations between Mr Collins and Mr Lee on 15 December 2006. It was precisely for the purpose of providing security in relation to the £1 million that Flaxby was mentioned.

In my judgment, all those representations were made dishonestly, with knowledge that they were false or not caring whether they were true or false.

Neither Mr Lee nor Mr Dolan had ever had any contact with the Barclays or any representative of theirs, and nor were they ever intermediaries on behalf of the Barclays. The belief of Mr Lee and Mr Dolan as to the possibility of any contract for the sale of the Ritz was based entirely upon what Mr Dolan had been told by Mr Sweeting. It is clear from Mr Sweeting’s witness statement that Mr Sweeting only informed Mr Dolan that Mr Sweeting had been told by another contact, close to the Barclays, that the Ritz might be for sale but at a price which would have to be in the region of £450 million to £600 million. The most Mr Sweeting was able to offer Mr Dolan was an opportunity to put forward a proposal to the Barclays, without any guarantee the Barclays would accept or even consider the proposal. Further, Mr Sweeting informed Mr Dolan that he was not willing to put forward any offer without full details of the purchasing party and a deposit of £30 million lodged with Memery Crystal, the solicitors of LACEIL. At no stage were those conditions ever satisfied, nor did LAH ever offer more than £250 million. There was no prospect of Mr Lee and Mr Dolan acquiring the Ritz for £200 million or selling it on to LAH for £250 million, nor could they possibly have had any grounds for believing that they did have any such prospect. Neither Mr Lee nor Mr Dolan had any contract or agreement of any kind with any other person for the acquisition of the Ritz. The necessary paperwork for the acquisition of the Ritz was never collated by or on behalf of Mr Lee and Mr Dolan.

There is no reason to make any assumption other than that representations by Mr Farrell were repetitions of what he had been told by Mr Lee and Mr Dolan. In that connection, it is relevant to emphasise that Mr Lee has admitted lying to Ms Maguire when he told her that the e-mail sent by Mr Farrell on 30 October 2006, stating that he had been advised by his clients that they had accepted a higher offer for the Ritz, was sent without instructions. That was a deliberate lie, which he has admitted he made for cynical commercial reasons.

I find that no other purchaser had ever approached Mr Lee or Mr Dolan willing to pay more for the purchase of the Ritz. No such person has ever been named, and no documentation of any kind has ever been disclosed in relation to any such purchaser.

Neither Mr Lee nor Mr Dolan ever had any intention of repaying the £1 million. They immediately set about spending the money. Neither of them had any significant assets. Mr Lee was an undischarged bankrupt. Mr Dolan’s only significant asset appears to have been his interest in the House, which he has since purported to put into the sole name of his wife.

If, contrary to my findings, the misrepresentations were not made fraudulently, they were plainly made without reasonable care in circumstances where Mr Lee owed LAH a duty to take reasonable care for the reasons set out in para 51 of the RAPC.

It is plain that the representations were made with the intention that LAH should rely upon them, and LAH did indeed rely upon them, in making the £1 million payment. In para 62 of his first witness statement Mr Collins says:

“In agreeing to do the deal with Apvodedo and to agree to the payment of £1 million to a man I had not met I had in mind all the conversations which I had had with Mr Lee and Mr Farrell over the last months. I believed that Mr Lee had an exclusive agreement with the Barclays to buy at £200 million and that he intended - and was able – to sell on to London Allied. I believed that the Barclays were satisfied with the proof of funds which had been provided and the deal was now in the bag. I believed that Mr Lee was an honest man who would make good on his promises.”

I find that there was an agreement between Mr Lee and Mr Dolan to pursue the course of action which was pursued by Mr Lee with LAH, including the misrepresentations that were made by Mr Lee through the agency of Mr Farrell and which were intended to influence LAH, particularly with regard to the payment of the £1 million to Mr Lee in December 2006.

Further I find that Mr Dolan bears responsibility for the misrepresentations made by Mr Lee and Mr Farrell on the grounds that Mr Lee and Mr Dolan were partners, or alternatively that, independent of any partnership, Mr Lee and Mr Farrell were acting as the agents of Mr Dolan.

The evidence shows that Mr Dolan was involved in the proposal to acquire the Ritz from the very beginning of the contact with LAH until the termination of business relations with LAH.

It was Mr Dolan who met Mr Sweeting in early 2006 to enquire about any large hotels in London that might be for sale and to whom Mr Sweeting gave details of an opportunity for an appropriate offer to be forwarded for the acquisition of the Ritz.

It is apparent that, when Mr Farrell was communicating with Mr Collins, he was acting on behalf of both Mr Dolan and Mr Lee. In his e-mail to Mr Sweeting, enclosing the Confidentiality Agreement, Mr Farrell stated expressly that he was acting on behalf of Mr Dolan. According to the terms of the Confidentiality Agreement, both Mr Lee and Mr Dolan (erroneously described in that document, with Mr Farrell, as the disclosing party rather than the receiving party) were interested in purchasing the Ritz. When Mr Farrell wrote to Mr Sweeting on 29 August 2006 with a copy of BoS’s funding letter of 24 August 2006, he wrote under Mr Dolan’s reference. In his e-mail of 30 October 2006, in which Mr Farrell stated that his clients had accepted a higher offer for the Ritz, the reference to his “clients” must have been to both Mr Lee and Mr Dolan. Similarly, in Mr Farrell’s e-mail to Mr Collins on 2 November 2006 the reference to “my clients” was clearly a reference to both Mr Dolan and Mr Lee.

Ms Maguire’s evidence (para 9 of her affidavit), which I accept, is that on about 5 December 2006 she was told by Mr Lee in a telephone call that he was acting in partnership with two others, one of them being Mr Dolan. She says that it was apparent that Mr Lee and Mr Dolan had a close working relationship, and Mr Lee informed her that he worked closely with Mr Dolan and that everything was split equally between Mr Lee, Mr Dolan and their Irish partner.

Mr Collins’s evidence (para 50 of his first affidavit), which I accept, is that, at a meeting with Ms Maguire on 5 December 2006, Ms Maguire confirmed that Mr Lee and his partners were the intermediaries acting for the sale of a number of the Barclays’ properties. That was plainly a reference to Mr Dolan.

Mr Sweeting’s evidence (para 8 of his witness statement), which I accept, is that he had a number of conversations with Mr Dolan about the possibility of putting forward an offer for the purchase of the Ritz during the latter part of 2006 and early 2007. He says that, at one point, Mr Dolan contacted Memery Crystal direct and asked whether they would write to Mr Dolan confirming that Mr Sweeting had a contract to purchase the Ritz. It appears, from what Mr Sweeting was told at that time by Mr Colm Flood of Memery Crystal, that Mr Flood had been in conversation with two partners of BLP who were acting for Mr Dolan and Mr Lee. Indeed, Mr Sweeting never met Mr Lee until he was introduced to Mr Lee in early 2007 by Mr Dolan, when Mr Dolan described Mr Lee as his partner.

Mr Dolan attended the meeting with Ms. Maguire on 12 January 2007 and the meeting with Mr. Collins and Ms. Maguire on 25 January 2007. Ms. Maguire’s evidence (para. 10 of her affidavit), which I accept, is that at the meeting on 12 January 2007, Mr Lee explained to her that the Ritz deal was “really via Mr Dolan’s contacts” and it was “Mr Dolan who had the contact with the vendors or their representatives”; and after 25 January 2007 Mr. Dolan “took over the running of the deal”.

In my judgment, on the basis of that evidence, LAH succeeds in its claim that Mr Lee and Mr Dolan were partners, and Mr Lee and Mr. Farrell were at all relevant times acting as Mr. Dolan’s agents, in relation to the Ritz negotiations and purchase.

Quite apart from any liability as Mr Lee’s partner or principal, I find that Mr Dolan was a party to, and fully aware of, the dishonest procurement of the £1 million payment. In addition to the business relations between them and other matters I have just described, there are the following further points.

Mr Dolan was at all times aware, from his meeting with Mr. Sweeting in early 2006, that any offer for the Ritz to be acceptable to the Barclays would have to be in the region of £450 million to £600 million and that, even then, there was no guarantee that the Barclays would accept or even consider the proposal, and that Mr Sweeting was not even willing to forward any offer without full details of the purchasing party and a deposit of £30 million lodged with LACEI’s solicitors, Memery Crystal.

In both para 157 of the Defence and para 39 of RRFI, it is stated that Mr Dolan was aware of the basis for the £1 million payment.

As I have said earlier in this judgment, I do not accept that there was ever any alternative purchaser for the Ritz as claimed in Mr. Farrell’s e-mail of 30 October 2006. That e-mail was, as I have said, written on behalf of Mr. Dolan as well as Mr. Lee.

In the RRFI it is stated that both Mr Lee and Mr Dolan had lost commission as a consequence of the loss of the sale of St Neots. It is the case of Mr Lee and Mr Dolan that Mr Lee’s agreement to undertake business with Mr Collins and Ms Maguire was conditional upon the payment of £1 million because of the loss of that commission.

The payment of €644,700 was made to Mr Dolan immediately upon receipt into Mr Lee’s account of the £1 million.

I find that the letter dated 18 December 2006 from Mr. Lee to Mr. Dolan, purporting to record payment of the £435,000.00 for professional and consulting fees for work carried out in connection with “St Neots and Flaxby”, is entirely false. It was never mentioned in Mr Lee’s affidavits. It was only disclosed in June 2007. As at the date of the letter, St Neots had already been sold to a third party, not generating any profit for either Mr Lee or Mr Dolan, which indeed was their very complaint in relation to the loss of commission. As for Flaxby, nothing had matured in relation to that project, nor did it ever. It is wholly fanciful, in the circumstances, that Mr Dolan was not fully aware of the false basis upon which, according to the letter dated 18 December 2006, he purported to receive the £435,000.

Ms Maguire’s evidence (para. 10 of her affidavit), which I accept, is that at the meeting on 12 January 2007 Mr Lee and Mr Dolan told her that they had just come from a meeting with the vendors, that the meeting had gone very well, they were extremely pleased, and that they could get the contracts to her within a week. All of those comments were a total falsehood.

At the meeting on 25 January 2007 Mr. Dolan and Mr. Lee handed Ms. Maguire papers concerning the Ritz which were plainly intended to deceive and were wholly false, in the sense that they presented an apparent selling opportunity for the Ritz which had never been seen or approved by the owners of the Ritz or anyone else with authority to provide such information. In short, they were wholly bogus.

Mr Collins’s evidence (para. 75 of his first affidavit) is that, at the meeting on 25 January 2007, Mr Dolan stated to Mr Lee that “we’ve got to find out how to deal with the £1 million Tony”. I accept that evidence, on which he was not challenged in cross-examination by Mr Lee.

Ms Maguire’s evidence (para. 10 of her affidavit), which I accept, is that after 25 January 2007 Mr Dolan gave her various oral guarantees that he could get the contract for the Ritz at a certain price, and he gave the impression that he was well connected to the vendors or their representatives; and, in particular, he referred on a number of occasions to meetings that he had had with “Frederick”. That impression and those representations were entirely false, as he was well aware.

It is significant that, since the proceedings were commenced, there has been no attempt by Mr Dolan to distance himself from Mr Lee, for example by instructing separate solicitors or by putting in a separate Defence.

For all those reasons, I find that Mr Dolan knew of and was a party to Mr Lee’s course of conduct designed to induce LAH to pay £1 million on the basis of false misrepresentations. Further, as Mr Lee’s partner, he bears liability for Mr Lee’s conduct in that regard. Further, Mr Farrell was acting as Mr Dolan’s agent in making the misrepresentations which he did to LAH, on the instructions of, and on the basis of information supplied by, Mr Lee or Mr Dolan.

Mr Lee is liable in damages for fraudulent misrepresentation. I have found that Mr Lee made the misrepresentations alleged in the RAPC knowing they were untrue, intending LAH to rely upon them, with the consequence that LAH did rely upon them in making the £1 million payment to Mr Lee, as a result of which LAH has suffered loss.

Mr Lee is liable in damages for conspiracy to defraud LAH. LAH has suffered loss as a result of the fraudulent misrepresentations of Mr Lee and Mr Dolan pursuant to a combination or agreement between them to injure LAH by those unlawful means. Those are the necessary ingredients of the tort of “unlawful means” conspiracy: Kuwait Oil Tanker Co SAK v Al Bader [2002] 2 All ER (Comm) 271 at paras [107] – [111].

Those heads of tortious relief for damages are, of course, subject to LAH’s property claims based on constructive trust; that is to say, damages are recoverable only to the extent that LAH’s losses are not fully recouped by its claims as equitable owner under a constructive trust. At present, and subject to further submissions, I am not clear what losses would remain after LAH’s proprietary claims and the taking of an account on the basis of a constructive trust.

Mr Lee holds such of the £1 million as has been retained by him and the Land Rover, in so far as it is his vehicle, on constructive trust for LAH. The law concerning constructive trusts is not straightforward. In the absence of legal representations and submissions on behalf of the Defendants, and with the benefit of only limited submissions on behalf of LAH (due entirely to my trial management rather than any lack of willingness or ability to assist the court on the part of Mr. Trace and Mr. Grant), I propose to deal with this head of relief as briefly and simply as possible.

LAH’s objective is to claim a proprietary interest in what remains of the £1 million payment and the identifiable assets in the hands of the Defendants which have been acquired with that money.

LAH faces two initial hurdles. First, LAH cannot trace the £1 million at common law. There can be no tracing at common law if the claimant’s money has been mixed with money belonging to others: El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 at pp. 733j – 734a. The £1 million was paid to Mr Lee through the bank clearing system and so has inevitably been mixed with the funds of others.

Second, it is a prerequisite of the right to trace in equity that there must be a fiduciary relationship which calls the equitable jurisdiction into being: El Ajou at p.733j citing Agip (Africa) Ltd v Jackson [1991] Ch. 547 at 566. In such a case, the victim of a fraud can trace his money into an account where it has been mixed with other money because equity treats the money in such an account as charged with the repayment of the victim’s money. Equity’s power to charge a mixed fund with the repayment of trust money enables the claimant to follow the money not because it is the claimant’s, but because it is derived from a fund which is treated as if it were subject to a charge in the claimant’s favour: El Ajou at p.735j-736a.

Prior to the payment of the £1 million to Mr Lee there was no fiduciary relationship between LAH and Mr Lee. They had a purely commercial, arms length relationship. The question, therefore, is whether the circumstances surrounding the payment to, and retention by, Mr Lee of the £1 million gave rise to a trust of the £1 million in favour of LAH. LAH claims that the £1 million was received by Mr Lee on constructive trust for LAH.

In Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 at p. 714G-715A Lord Browne-Wilkinson described as follows the difference between a “remedial” constructive trust and an “institutional” constructive trust:

“Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past. The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion. A remedial constructive trust, as I understand it, is different. It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court.”

There is considerable debate and uncertainty in English law as to whether the court will ever hold, and if so when, that a remedial constructive trust has arisen. The conventional view is that English law only recognises an institutional constructive trust. Any possibility of a remedial constructive trust was robustly rejected by Nourse LJ in Re Polly Peck International plc (No. 2) [1998] 3 All ER 812 at pp. 830-832; see also Westdeutsche at p. 714F/G.

On the other hand in Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at p. 479H the Court of Appeal (Slade, Stocker and Bingham LJJ) said that they were satisfied that there is a good arguable case that circumstances may arise in which the court would be prepared to impose a remedial constructive trust; and Lord Browne-Wilkinson in Westdeutsche at p. 716G considered that the remedial constructive trust might be a suitable basis for developing proprietary restitutionary remedies, for example against a defendant who knowingly retains property of which the plaintiff has been unjustly deprived. The possibility of such a proprietary remedy was also left open by the Privy Counsel in Re Goldcorp Exchange Ltd [1995] 1 AC 74 at p. 104.

Arguments against the remedial constructive trust, and the existence of an institutional constructive trust in particular circumstances, are often generated by concerns about the introduction of equitable relief into commercial transactions and the possibility of upsetting the rights of third parties, including creditors, who have acquired interests in the relevant fund or property since the date of the transaction alleged to give rise to the constructive trust: see eg, Lord Browne-Wilkinson in Westdeutsche at pp. 704A – 705B, and Lord Millett (then Sir Peter Millett) (extra judicially) in “Restitution and Constructive Trusts” (1998) 114 LQR, 399.

The position is further complicated by the loose and imprecise use of the term “constructive trust” in the decided cases: Lord Millett op cit. 399-408; Graham Virgo, The Principles of the Law of Restitution (2^nd ed) pp. 605-607.

Lord Millett’s thesis was that “the development of a coherent doctrine of proprietary restitution for subtractive unjust enrichment is impossible unless it is based on the resulting trust as traditionally understood”: op cit at 410. As Lord Millett himself recognised, however, that view is at odds with Lord Browne-Wilkinson’s view in Westdeutsche that the remedial constructive trust, rather than the resulting trust, may be a suitable basis for developing a proprietary restitutionary remedy. Lord Millett’s analysis seems to be similar to the later thinking of Professor Peter Birks that a distinction must be drawn between restitution for “subtractive” unjust enrichment (which Professor Birks called a “not-wrong”), such as payment under a mistake, and restitution for a wrong, such as a tort or breach of duty. Professor Birk’s thesis was that, in relation to the former, there is very little scope for what he called “discretionary remedialism”: Peter Birks “Rights, Wrongs and Remedies” (2000) 20(1) Oxford Journal of Legal Studies 1. The present case, it can be said, exhibits features of both subtractive unjust enrichment (mistaken payment) and wrongdoing (fraudulent misrepresentation). It seems clear, however, that in relation to arguments about the appropriateness of a remedial constructive trust, the present case is to be regarded as a case about wrongdoing rather than subtractive unjust enrichment.

LAH puts its case for a constructive trust in a number of different ways.

Reliance is placed on the statement of Lord Browne-Wilkinson in Westdeutsche at p. 716C/D that “when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity”.

That passage has been the subject of considerable academic criticism, and some judicial dissent. In Shalson v Russo [2005] Ch. 281 at para [110] Rimer J said that he did not find that passage in Westdeutsche an easy one, and he respectfully regarded the authorities cited by Lord Browne-Wilkinson as providing less than full support for it. For the reasons I shall give later, I believe that there are other and more conventional grounds for finding there is a constructive trust in the present case. Accordingly, I do not consider it necessary or desirable for me to endorse or, for that matter, dissent from Lord Browne-Wilkinson’s observation in Westdeutsche that I have mentioned.

LAH contends, alternatively, that a constructive trust of the £1 million arose on receipt by Mr. Lee because it was paid by mistake of LAH induced by the fraudulent misrepresentations of Mr Lee and Mr Dolan, and it was at all times against conscience of them to retain any part of that payment.

That was the approach taken by Lord Browne-Wilkinson in Westdeutsche to explain and support the decision of Mr Justice Goulding in Chase Manhattan Bank NA v Israel- British Bank (London) Ltd [1981] Ch. 105. In that case, Chase Manhattan, a New York bank, had by mistake paid the same sum twice to the credit of the defendant, a London Bank. Shortly afterwards, the defendant bank went into insolvent liquidation. The question was whether Chase Manhattan had a proprietary claim to the assets of the defendant bank to recover the second payment.

Lord Browne-Wilkinson disagreed with the view of Mr Justice Goulding that, where money is paid under a mistake, the receipt of such money without more constitutes the recipient a trustee since the payer retains an equitable property in the money and the conscience of the recipient is subjected to a fiduciary duty to respect the payer’s proprietary right. Lord Browne-Wilkinson’s criticism was that he could not understand how the recipient’s conscience can be affected if, at the time, he is not aware of any mistake.

On the other hand, Lord Browne-Wilkinson said (at p. 715 B/C) that it may well be a proper foundation for the decision in Chase Manhattan that the money was retained by the recipient bank after it learned of the mistake. That analysis, however, is also not without its difficulties, so far as concerns an institutional constructive trust: see, for example, William Swadling “Property and Conscience” (1998) 12(4) Trust Law International 228; Lord Millett op cit at 412-413.

It was, nevertheless, followed and applied in Re Farepak Food and Gifts Ltd [2006] EWHC 3272 (Ch) by Mr Justice Mann at para [40]. That decision was given under great pressure of time and with less opportunity for legal submission, research and consideration than Mr Justice Mann would have liked. In all the circumstances, and particularly in the absence of detailed submissions on behalf of the Defendants, I do not consider it is desirable for me to express a view on this line of argument by LAH.

I would add, at this point, that LAH did not develop before me any argument that I should declare, by way of relief, a discretionary remedial constructive trust of the kind described by Lord Browne-Wilkinson in Westdesutsche. The critical features of such a trust are judicial discretion and retrospectivity. It seems fair to assume that Lord Browne-Wilkinson’s description was based on the US and the Canadian model. Under that model, in a case of unjust enrichment, and irrespective of any fiduciary relationship, the Court has a discretion to grant relief by way of constructive trust if it concludes that other proprietary and personal remedies are inadequate; and if the Court does so, the constructive trust will be deemed to have arisen at the time when the duty to make restitution arose rather than when the duty is enforced. Although that model has found favour in varying degrees in New Zealand and Australia, it has, as I have said earlier, received a generally hostile reception in England. In particular, it has been regarded as offending settled principles of English property law and the need for certainty in commercial transactions. Among its strongest critics have been Lord Millett and Professor Birks. The latter took particular exception to the “strong” discretion conferred on Judges and referred disapprovingly to “building a new model of the law in which the dominant taxonomy is a taxonomy of remedies, to be applied in the court’s discretion in an instance-specific manner according to criteria of appropriateness". He described this as “a nighmare trying to be a noble dream”, and perceived it as “rightlessness implicit in discretionary remedialism”: op cit.

An equity lawyer might observe that such language is overly emphatic, having regard, for example, to the strong discretion in the Court to decide upon the appropriate form of relief for proprietary estoppel, including whether it should be personal or proprietary and whether it should be to protect the claimant’s expectations or compensate for reliance loss. Moreover, there is no English authority, including Polly Peck International plc (No. 2) (in which Mummery LJ, with whom Potter LJ agreed, concentrated on the fact of insolvency), which is binding authority against the remedial constructive trust in principle. Nevertheless, it seems realistic to assume that an English Court will be very slow indeed to adopt the US and Canadian model. On the other hand, there still seems scope for real debate about a model more suited to English jurisprudence, borrowing from proprietary estoppel: namely, a constructive trust by way of discretionary restitutionary relief, the right to which is a mere equity prior to judgment, but which will have priority over the intervening rights of third parties on established principles, such as those relating to notice, volunteers and the unconscionability (on the facts) of a claim by the third party to priority. It is not appropriate to consider this further here, if only because such relief would not improve LAH’s position beyond the next and final way in which LAH put its case on constructive trust, to which I now turn.

The last way in which LAH puts its case on constructive trust proceeds on the footing that the fraudulent misrepresentations of Mr Lee and Mr Dolan made the transfer of the £1 million voidable. LAH is on much more firm and conventional ground with this submission.

There is no doubt that a transaction induced by fraud is voidable and, subject to equitable considerations, may be rescinded. The effect is to restore retrospectively to the claimant the equitable title to the property, at least to the extent necessary to support an equitable tracing claim: see, eg, El Ajou at p. 734d; Shalson at para [120] – [127]. In El Ajou at p. 734e Mr Justice Millett described this trust as “not some new model remedial constructive trust, but an old-fashioned institutional resulting trust”. Others, however, have preferred to describe it as a constructive trust: Papamichael v National Westminster Bank [2003] 1 Lloyd’s Rep. 341; Sarah Worthington “The Proprietary Consequences of Rescission” [2002] 10 RLR 28, 37-38. For present purposes, this difference in nomenclature makes no difference.

I must deal with three potential complications to this last formulation of LAH’s claim to a constructive trust. First, the £1 million payment was credited to an account of Mr Lee in the Republic of Ireland. There is no evidence before the court, however, that Irish law is different to English law in this area. Further, it appears, on the admissible evidence, that all the Defendants are resident within the jurisdiction of the English court and so amenable to its personal equitable jurisdiction.

Second, I am not aware of any third party interests which preclude rescission and a consequential constructive trust in the present case. Mr Lee was bankrupt at the time the £1 million was paid to him, but there is no evidence that his trustee in bankruptcy ever claimed any part of that payment as after-acquired property pursuant to the Insolvency Act 1986 s.307.

Third, the relief claimed by LAH includes enforcement or damages for breach of a contract for the return of the £1 million. Mr Trace urged upon me that LAH’s preference is for proprietary relief under a constructive trust rather than relief by way of enforcement or damages for breach of any contract for the return of the £1 million. The contractual claim is, in the circumstances, properly to be interpreted as an alternative claim intended to be advanced only if, and to the extent that, the relief under a constructive trust is held not to be available. Accordingly, there has been no unequivocal affirmation of any contractual arrangement for payment and re-payment of the £1 million. In those circumstances, I consider it proper to treat the transfer of the £1 million to Mr Lee as having been rescinded by LAH by the issue and service of the proceedings at the latest.

For those reasons I hold that Mr Lee holds on trust for LAH such of the £1 million as is retained by him. He similarly holds on trust for LAH all his interest in the Land Rover, which was purchased with money derived from the £1 million.

Mr Dolan is liable for damages for fraudulent misrepresentations made by him directly, and indirectly through Mr Lee as his partner or agent and through Mr Farrell as his agent.

Mr Dolan is also liable for conspiracy to defraud, for the same reasons as Mr Lee.

Again, those claims to damages are subject to LAH’s claims as equitable owner under a constructive trust.

Mr Dolan holds on constructive trust for LAH such of the €644,730 as has been retained by him. He received that amount in the full knowledge that it was derived from the £1 million payment to Mr Lee as a result of the fraudulent misrepresentations of Mr Lee and Mr Dolan. There is no doubt in those circumstances that LAH is entitled to trace into Mr Dolan’s hands such of the £1 million as was paid to him. As I have said, the fact that €644,730 were mixed with €100 already standing to the credit of Mr. Dolan’s account does not preclude a constructive trust. LAH can trace into Mr. Dolan’s hands in equity by way of a notional charge on the mixed fund.

Mr Dolan holds the Mercedes car on constructive trust for LAH since it was purchased out of the mixed fund.

LAH is entitled to be subrogated to Barclays’ charge. The money used to pay Barclays was derived from Mr Dolan’s bank account into which the €644,730 was transferred. LAH is entitled to trace into the hands of Mrs Dolan, who provided no consideration for the payment to her and was a volunteer. Neither Mr Dolan nor she can be heard in equity to say that Barclays’ charge no longer exists for the purpose of subrogation, since that would result in their unjust enrichment with the proceeds of Mr Dolan’s fraud. They are precluded from asserting that they spent the money of LAH, their principal as equitable owner under the constructive trust, otherwise than for LAH’s benefit; so they are precluded from denying that they have preserved the charge for LAH’s benefit: Boscawen v Bajwa [1996] 1 WLR 328 at p. 339F-H.

As requested by LAH, I shall not determine at this stage any question as to the validity of the transfer of Mr Dolan’s legal and beneficial interest in the House to Mrs Dolan.

If and in so far as Ms Hodgson has any interest in the Land Rover, she holds it on trust for LAH. She acquired it without consideration and as a volunteer, and can be in no better position than Mr Lee. Although she may not be personally liable to account for breach of trust, she must deliver to LAH the trust property she holds.