Barclays Bank Plc v Kalamohan & Anor

This is an unusual case, not least because the defence has been conducted by a McKenzie friend, Mr Brian Chambers, to whom I granted rights of audience for the purpose on the first day of the trial. I am aware of the authorities on the matter of permission under the Courts and Legal Services Act 1990 s. 27 and the review contained in Munby J’s decision inRe N (20 August 2008).

In short, it seemed to me that this was an exceptional case. Vos J had refused an adjournment of the trial while the defendants obtained legal representation; the claim is framed in deliberate fraud; the defendants’ first language is Tamil and their English is far from perfect. Realistically they would have been incapable of conducting a proper defence to the very serious charges levelled against them.

There was no renewed application for an adjournment before me but in the circumstances it seemed that I ought of my own motion to consider whether an adjournment was required in the interests of justice. However, again for reasons I gave at the time, I agreed with the view taken by Vos J that the trial ought to proceed.

In those circumstances there was no proper alternative but to allow Mr Chambers, who had already prepared the case in some detail, to conduct the advocacy on the defendants’ behalf. I obtained some encouragement from the fact that much of the claimant’s evidence of fact was uncontroversial so that (save in one respect: the evidence of Mr Kumar to which I shall refer) there was not a major conflict of factual evidence between witnesses on each side requiring expert cross-examination by the defendants. The Bank’s case is largely one of inferences to be drawn from the documents and as a result of cross examination of the defendants’ witnesses. The defendants were legally represented at the time the pleadings were prepared and served and also at the time that the principal witness statements were sworn. I also drew comfort from Mr Chambers’ assurances that he was not being remunerated for his advocacy. He is not part of the Sri Lankan community and does not speak Tamil but was nevertheless acting as a friend of the defendants.

It transpired that his approach was proper and he took all such points as appeared to be available to the defendants. Mr Levey, the claimant’s counsel, also endeavoured to assist him and the Court as far as possible. I permitted Mr Kalamohan himself to examine witnesses with the aid of an interpreter on all the occasions where he wished to do so.

At the start of the trial I gave a short judgment of my reasons why I let the trial proceed and allowed Mr Chambers to speak on behalf of the defendants. However it is right to mention the difficulties experienced by the defendants again in this judgment because of the very serious adverse findings that I am about to make.

The claimant, Barclays Bank plc (“the Bank”) claims a restitutionary remedy for payments made by mistake in relation to a sum credited to the bank account of a Mr Alamaigan Thangarajah on or about 29^th November 2005. In addition, the Bank claims damages against the defendants for fraudulent misrepresentations made by the First Defendant Mr Kalamohan in relation to loans made to Mr Alamaigan and a Mr Jacob Joseph Jesuthas. The second defendant, Mr Kalamohan’s wife, appeared briefly in court on the first day as a matter of courtesy but has taken no part in the trial. While it is not alleged that she took an active part in Mr Kalamohan’s fraudulent schemes, relief is also claimed against her in relation both to the mistaken payments and to the Jesuthas transaction.

The Bank says that the evidence shows a conspiracy between Mr Kalamohan, Mr Alamaigan, Mr Jesuthas and many others to defraud the Bank through the making of false loan applications. However the pleaded case is a narrower one centring on two transactions, a loan to Mr Alamaigan and a loan to Mr Jesuthas for the purchase or alleged purchase of Costcutter premises and businesses from Mr Kalamohan and Mrs Kalamohan respectively.

I say “or alleged purchase” because I find it impossible to determine the extent of any genuine sale in either case. Solicitors acted and documents were prepared and executed but it is not apparent what money changed hands as the true consideration for the transactions. Further the Costcutter franchises were never assigned to the purchasers and Mr Kalamohan did not seek or obtain any release of his liability to Costcutter under the franchise agreements.

Finance for the purchases was obtained under the Small Firm Loan Guarantee Scheme (“SFLGS”). The scheme was devised to promote and encourage small businesses. It was backed by the then Department of Trade and Industry in the form of a guarantee of 75% of the sums advanced and it involved a substantial repayment holiday at the start of the term to enable the borrower to get the business up and running. In the absence of security, the Bank required confirmation that the borrower was investing a substantial sum of his own money in the business.

The claimant alleges that Mr Kalamohan deliberately provided false proofs of such investment in each case in the form of sham receipts for payment for stock. After drawdown, the borrowers enjoyed a capital repayment holiday of some months under the terms of their loans but then immediately defaulted. The businesses ceased to trade or otherwise failed and no repayments at all were made to the Bank. The Bank’s case is that these were not genuine applications. The object was to raise money from the Bank on the faith of false representations without any intention that the money would be repaid.

In 2005, Mr Kalamohan held a number of Costcutter franchises, running several Costcutter and other grocery businesses from premises which he owned or leased. His principal place of business was a Costcutter store in St Luke’s Road Old Windsor (“St Luke’s Road”). In March 2005, Mr Kalamohan was first introduced to the Bank with a view to obtaining a loan for the purchase of a Costcutter business in Toddington, Bedfordshire. The introducer was an introductions agency, Forward Consultants Limited (“Forward”), a company which was to all intents and purposes owned by a Mr Kumarapalan (known as Mr Kumar). That loan was not in the event pursued, although in July 2005 the defendants obtained a Flexible Business Loan of £472,000 from the Bank.

Over the course of a year or so, Mr Kalamohan sold, or apparently sold, a number of his Costcutter businesses to other members of the Sri Lankan community in London. All the purchasers were introduced to the Bank by Forward with a view to obtaining finance. Mr Kumar says that Mr Kalamohan introduced those people to Forward and Mr Kumar produced a list of such introductions. With one or two exceptions Mr Kalamohan denies this and alleges that Mr Kumar made the introductions on his own initiative.

Mr Kalamohan’s case is that he was entirely innocent of fraud and that the frauds were committed by Forward without his knowledge or participation.

On 10^th March 2005, Mr Alamaigan, who had been negotiating with Mr Kalamohan since the previous September for the purchase of a Costcutter shop at Fullers Slade, Milton Keynes, was introduced to the Ruislip branch of the Bank by Forward for the purpose of financing the purchase. On 15^th March 2005 Mr Alamaigan applied to the Bank for a loan under the SFLGS.

On 18^th March 2005 the loan was sanctioned by the Bank subject to a number of matters including evidence that Mr Alamaigan had a cash stake of £115,000 in the business.

In August 2005 the Bank received the following three documents during the loan process, namely:

It is not disputed that in reliance on those documents the Bank approved the loan application and paid the sum of £139,363.50 to Joseph and White, the solicitors acting for Mr Alamaigan. Mr Alamaigan was due to make his first capital repayment in December 2005 but failed to do so. Again, it is undisputed that the Bank made demand for the full sum outstanding in January 2006 but that nothing has been paid.

On 17^th June 2005 Forward introduced Mr Jesuthas to the Bank for the purpose of financing the purchase from Mr Kalamohan of a Costcutter shop at 99 Stomp Road, Burnham.

On 15^th July 2005 The Bank sanctioned a SFLGS loan of £200,000 to Mr Jesuthas subject to evidence that he had a cash stake of £160,000 in the business and a facility letter was provided on 21^st July.

Again as part of the loan process, the Bank received the following documents:

Again, it is not disputed that in reliance on those documents the Bank approved the loan application and paid the sum of £200,000 to Joseph and White, on that occasion acting for Mr Jesuthas. Again, after the loan was drawn down and after the repayment holiday, Mr Jesuthas defaulted on the loan.

What is disputed in the case of both loans is (a) that the statements in the receipts about payment for stock were false, (b) that Mr Kalamohan knew or intended that the Bank was to rely on them for the purposes of making the loans and (c) that Mr Kalamohan was aware that any of the documents had been sent to the Bank in support of the loan applications.

On 29^th November 2005 the Bank made what is known as a ‘fat finger’ mistake. The Bank intended to credit the sum of £2,053.58 to Mr Alamaigan’s account but instead the decimal point was misplaced and the credit was for £205,358. By the time the Bank discovered its mistake Mr Alamaigan had removed all the moneys from the account. In particular he procured two bankers’ drafts from the Bank. One, in the sum of £126,743.66, was paid directly into Mr Kalamohan’s account at the Bank. The other, in the sum of £63,000, was paid to a firm of solicitors, K Ravi, who were acting on behalf of the defendants on the purchase of two residential properties (one in the name of each defendant) to be used towards the purchase price.

It does not now appear to be disputed, and in any event I find as a fact, that if the Bank had realised (a) that the funds standing to the credit of Mr Alamaigan’s account had been credited to his account by mistake and (b) that Mr Alamaigan was not entitled to those funds, it would not have issued the bankers’ drafts to Mr Alamaigan.

As a result of the Bank’s mistake it instituted an inquiry which led to the discovery that there were several apparently related transactions all involving Mr Kalamohan. The Bank issued proceedings in February 2006 for the recovery of the mistaken payments from Mr Kalamohan on the basis of unjust enrichment.

Mr Kalamohan’s defence under this head is that the money he received by way of banker’s drafts represented the repayment of money owed to him in respect of unpaid stock on the sale of Fullers Slade and Stomp Road. It might be thought that this defence sits somewhat uneasily with the receipts for payment of those moneys signed by Mr Kalamohan. However Mr Kalamohan justifies this discrepancy by saying that he did not know that the receipts would be deployed in support of loan applications.

Standard disclosure was given on 7^th July 2006 and a two day trial was fixed for 7^th and 8^th February 2007. However, on 1^st February 2007 Mr Kalamohan disclosed a large number of additional documents (“the February 2007 disclosure”) without any explanation for the lateness in production. He was not in a position to exchange witness statements until 5^th February 2007. The trial was vacated by consent. Having reviewed the new documents and the witness statement the Bank obtained permission to join Mrs Kalamohan to the claim and amend so as to add a claim in damages for fraudulent (alternatively negligent) misrepresentation against both defendants.

Mr Kalamohan’s accounts of what happened in relation to the Fullers Slade and Stomp Road purchases are markedly similar.

He and Mr Alamaigan both say that, prior to entering into the agreement to purchase the Fullers Slade business, Mr Alamaigan gave Mr Kalamohan a cheque for £65,000 dated 15^th August 2005 as a deposit in respect of stock but asked him not to bank it for the time being. It is then said that the stock was subsequently valued in the sum of £126,743.66 by NPR Stocktaking (“NPR”) and that Mr Alamaigan gave Mr Kalamohan a cheque for that sum in lieu of the other (writing “cancelled 26. 08.2005” across the original cheque) but again asked him not to bank it, on the basis that payment would be made by the end of December 2005. When, on 1^st December 2005, the banker’s draft was paid into Mr Kalamohan’s account it was said to be payment for the stock. No plausible explanation has been given why, if that sequence of events is true, Mr Kalamohan did not simply cash the cheque he was holding. Instead, his account is that he crossed out the cheque to cancel it, photocopying that too. The photocopies were all produced for the first time in the February 2007 disclosure.

The account in relation to Stomp Road is that Mr Jesuthas gave Mr Kalamohan £64,750 (£44,750 by cheque and £20,000 in cash) prior to contract, but again on the express basis that the money would not be banked or used. It is then said that following an independent valuation the stock at Stomp Road was valued at £74,252.73. Mr Jesuthas says that he made various payments leaving £61,000 outstanding which was to be paid by 12^th December 2005. Mr Kalamohan asked that the money be paid to K Ravi, specifically by way of a banker’s draft. The draft was paid in the sum of £63,000, but it came from Mr Alamaigan. The discrepancy in the sum is said to be accounted for by the fact that Mr Kalamohan returned £2,000 to Mr Jesuthas in cash. As to the identity of the transferor, it is said that Mr Jesuthas had previously lent Mr Alamaigan £63,000 and therefore agreed to repay it by means of the banker’s draft.

When cross-examined about why Mr Alamaigan did not realise there had been a mistake, in other words, why he thought such a large sum of money had been paid into his account, Mr Alamaigan gave the risible explanation that he believed it was a lottery win. I observe that he took no steps to confirm his standing with the lottery.

Mr Kalamohan acknowledged that there must have been a fraud. Sometimes he alleged that the fraudster was Mr Kumar and sometimes his employee Miss Sivagamy. Mr Kalamohan was unable to give any coherent explanation of how Forward benefited from the arrangement to an extent that would justify such a host of complex fraudulent steps. When cross-examined about this his answer was, as far as I understood it, that Mr Kumar obtained commission when loans were obtained and Miss Sivagamy, who was a salaried employee, must have taken backhanders. Much was made of the friendship between Miss Sivagamy and Jacqueline Hunt, the Bank’s Ruislip business manager at the relevant time. The relevance of this friendship to the defence was not explained and it seems to me that it was only introduced in a futile attempt to throw some doubt (unspecified) on the Bank’s bona fides in respect of the relevant transactions.

Mr Levey and the court explained to Mr Kalamohan (both directly and through his interpreter) and Mr Chambers that allegations that Mr Kumar told lies in his evidence had to be put to him in specific terms. I satisfied myself that Mr Kalamohan understood this explanation. Mr Kumar was tendered for cross-examination and then recalled to deal with allegations against Forward which had arisen during the course of other evidence. However, although Mr Kalamohan was reminded in relation to each specific piece of evidence, he did not cross-examine Mr Kumar on several important matters. The Court put to Mr Kumar such allegations as appeared to have been made, but by the end of the evidence the principal thrust of Mr Kalamohan’s allegations was directed at Miss Sivagamy. She has long since left Forward to get married overseas and was not called to give evidence to rebut the allegations made against her. As the trial progressed, a number of increasingly wide-ranging, and in my view preposterous, allegations were made about her involvement and venality, none of which had been pleaded.

I did not find Mr Kumar’s account of his business dealings wholly satisfactory; in particular he kept no, or inadequate, records in relation to Forward. However he is not on trial here and where his evidence conflicted with that of Mr Kalamohan and his witnesses I preferred the evidence of Mr Kumar. I have no doubt that Mr Kalamohan made the introductions specified by Mr Kumar and I have no doubt that the genesis of the receipt letters was Mr Kalamohan and not, as alleged, Forward.

A very great number of matters underline the inherent implausibility of Mr Kalamohan’s story. One is the whole issue of the stock valuations. There are two alleged written valuations of the stock at Fullers Slade and at Stomp Road respectively. The valuers are said to be independent of and unconnected with Mr Kalamohan and independent of and unconnected with each other. It is crucial to the defendants’ case that the stock valuations were genuine. The valuation of the Fullers Slade stock was allegedly carried out by “NPR Stocktaking” of 18 Douglas Close, Grays, Essex, the acronym ‘NPR’ standing, according to the heading of the valuation, for “National Professional Reliable”. The valuation of the Stomp Road stock was allegedly carried out by “SjS Valuers and Stocktakers” (“SjS”) of an address in Yiewsley, West Drayton, Middlesex. However the two valuations are strikingly similar in format and style. The latter has plainly been amateurishly copied from the former, and the words “National Professional Reliable” appear in its letterhead also.

Inquiries by the claimant elicited evidence from HM Customs & Excise that the VAT numbers on the SjS and NPR invoices were invalid and there was no record of traders registered under those names. The claimant’s investigations into NPR included calling the telephone number on the NPR invoice. The man who answered did not identify himself or NPR, but when pressed said he was connected with NPR, refusing to say anything more.

In this context I must refer to a purported witness statement dated 5^th February 2007 from a Mr Richard Burdoh. This states in five short sentences that Mr Burdoh was an employee of SjS and the person who carried out the SjS stock valuation. However, it is immediately suspicious in that the valuation attested to is the one at Fullers Slade, not the one at Stomp Road. SjS is supposed to have had no connection with Fullers Slade. Mr Burdoh was not tendered for cross-examination. Inquiries at the address given as Mr Burdoh’s address yielded no information about him.

Mr Levey and the Court explained to Mr Kalamohan at more than one juncture that he should, if he could, produce Mr Burdoh with some evidence of identity, failing which he should produce some evidence, any evidence, that Mr Burdoh exists and that his witness statement is genuine. I am satisfied that Mr Kalamohan fully understood this request and the reasons for it. Several warnings against self-incrimination were given during the course of the trial and explanations were given about adverse inferences that might be drawn if specified evidence was not forthcoming. His only response in this instance was to say that his former solicitors had drafted the witness statement but have now closed their file. Whatever the truth about that, there is no evidence (although Mr Kalamohan was invited to adduce it in the form of a letter from his former solicitors) that they ever saw Mr Burdoh in person. Indeed, it is possible, although this is speculation, that the second page of the statement, which contains only the statement of truth and the signature and date, does not even belong with the first page. I am sorry to have to say that there is a serious question mark over the genuineness of Mr Burdoh’s witness statement. Genuine or not, its probative value for the defendants is nil.

There is also the matter that there are two different copies of the same valuation by SjS of the Stomp Road stock with different signatures for the valuers. Mr Kalamohan’s evidence was that one (disclosed in the February 2007 disclosure) was a photocopy of the original, the other was one that he asked for subsequently, having forgotten that he had a copy of the original. It is that second one which contains a signature which looks like “Richard Burdock”. It is dated 14^th October 2005, but it was not suggested anywhere else in the evidence that the formal written valuation was produced after the date of the stocktaking itself.

There is also an obvious connection between SjS and SjS Business Developments (“SjSBD”) an alleged business giving the St Luke’s Road address. The three “directors” of SjSBD named at the bottom of an invoice include Mr Rosil Stanislous, Mr Kalamohan’s manager, although his initial evidence was that he was the sole proprietor. Mr Stanislous’s evidence was that SjSBD had no bank account and had very few business dealings each year. He did not know why the business was called SjS and had not thought anything of the similarity in name and logo with the other SjS. I was unimpressed by Mr Stanislous’s evidence that neither he nor Mr Kalamohan had anything to do with the other SjS. There was evidence that the VAT registration number on SjSBD’s invoices was also invalid. SjSBD’s shop fitting invoice was produced for the purpose of obtaining the loan to Mr Alamaigan and a loan to Mr Thiyagarasa from the Bank. It is possible that SjSBD was used as a vehicle to support loan applications. Alternatively, if SjS and SjSBD had any genuine existence, they were controlled by Mr Kalamohan.

I note that the reason the Bank intended to credit Mr Alamaigan’s account with the sum of £2,053.58 was because it had prematurely paid a post-dated cheque which he had drawn on his account. The payee of that cheque is partly illegible but appears to read “SjS & [illegible] Shop Equipment”.

I heard a considerable amount of oral evidence from Mr Kalamohan, Mr Alamaigan and Mr Jesuthas about the alleged stocktakings. There were a number of discrepancies between their accounts, for example as to who organised the valuations. It is not in itself suspicious that there should be such differences about matters that took place some considerable time ago. However, I was unimpressed generally with the evidence that they gave. I make full allowance for the evidence that in the Sri Lankan community business is conducted with a degree of informality that might be considered unusual to western eyes. Nevertheless, I cannot believe that stocktaking would, as alleged, have been undertaken without scrutiny of any records. I also note that in his earlier evidence Mr Kalamohan identified the person who did the stocktake on behalf of SjS as a man known to him as ‘Gan’. He did not mention a Mr Burdoh.

I bear in mind that the fact that lies are told, or that documents are fabricated to bolster an account of events which is in reality undocumented, is not in itself conclusive of guilt in relation to the underlying transaction. However, it seems to me that the untrue accounts of so many matters in this case are so woven into the whole matter of the stock receipts that those accounts are strong evidence that Mr Kalamohan’s whole case is fabricated.

The main witnesses also gave a long and involved account of the due diligence said to have been effected before the purchases. I found those accounts inherently unlikely. There was the very vaguest evidence about how the purchase price for the businesses was determined. I also observe that in both transactions the schedule of fixtures and fittings said to be attached to the sale agreement is missing.

Both letters are strikingly similar. They have the same idiosyncratic format and spacing. The letter about Mr Alamaigan is headed “To whom it may concern” and that about Mr Jesuthas is headed “To whomever it may concern”. This second letter was part of the February 2007 disclosure. Both letters confirm receipt of money for stock, for Fullers Slade and Stomp Road respectively. Both were signed by Mr Kalamohan. The letter relating to Mr Alamaigan bears a facsimile print across the top indicating that it was sent from St Luke’s Road to Forward. Both letters were sent by Forward to the Bank in support of the loan applications.

Mr Kalamohan says that he was not involved in the loan applications and he did not know that the letters were to be used for such a purpose. He accepts that Mr Stanislous read them over to him in Tamil but asks the court to accept that he thought they were simply receipts. His account and that of Mr Jesuthas is that both letters were generated by Miss Sivagamy. Mr Kalamohan said that Mr Jesuthas’s letter had been brought to him by Mr Jesuthas, already prepared, for signature. Mr Alamaigan’s account as to how his letter had been produced differed between his witness statement and his oral evidence, but in both cases he said that Miss Sivagamy had given him a letter in “sample” form. He said he told Mr Kalamohan that the letter was needed by Miss Sivagamy, but he did not say that it was needed for the purposes of the loan application.

Mr Stanislous’s evidence is important in this regard. In his first witness statement he said that Mr Kalamohan had dictated both letters to him in Tamil and he had translated them and transcribed them in English. In his second witness statement, however, sworn three years later, he said without explanation for the changed account, that the first letter was brought to him in the form of a sample by Mr Alamaigan, and he, Mr Stanislous, was asked to produce a letter in the same format. He said Mr Jesuthas brought a similar letter, but in final form, for Mr Kalamohan to sign. In oral evidence he stuck to the second version of events, saying that he had not realised that his witness statement was such an important document.

In considering this evidence I take into account the fact that there are very many letters relating to this and other matters connected with Mr Kalamohan which are in the same idiosyncratic style and format as the receipts, including another “to whom it may concern” letter from one R Santhirasekaran disclosed in the February 2007 disclosure. Many end “thanking you” as does the Alamaigan receipt. Many bear the St Luke’s Road Costcutter fax number banner across the top indicating that they were sent from Mr Kalamohan’s shop.

Mr Kalamohan’s response to this was to recognise that some at least of the letters were produced by the same person but to identify that person as Miss Sivagamy. When cross-examined about the fax numbers his first answer was that the fax machine was in the open part of the shop so could have been used by anyone and must have been used by Forward. His second answer was that the headers were concocted by Forward and he pointed to allegedly sinister differences in the fax heading fonts. However although invited to do so he did not produce any corroborative information about how fax headers are generated.

One difficulty (of many) with his evidence about the faxes is that both Mr Kalamohan and Mr Jesuthas accepted, as they had to in the face of other evidence, that they had personally faxed some of the documentsfrom the St Luke’s Road fax machine to Joseph & White who were acting for Mr Jesuthas. One fax is particularly telling. It contains a one page summary of transactions on Mr Kalamohan’s bank account with Nat West. He accepts that he sent it, as he must since it says so and the page is in a form that is obtained by the customer in branch. However, the same fax contains several pages and the other pages comprise a copy of Mr Jesuthas’s Nat West bank statement at the Costcutter Fullers Slade address and a copy of a cheque and a letter (referred to below) from Mr Thiyagarasa relating to Mr Jesuthas’s loan application. Mr Kalamohan’s only explanation was that he was unaware of anything other than the page constituting his own bank statement.

I find as a fact that Mr Kalamohan did indeed send the whole fax and was actively involved in Mr Jesuthas’s loan transaction.

Mr Jesuthas similarly accepted that he sent a fax to Joseph & White comprising evidence of payments of stock in relation to Stomp Road. However, that fax also contained the letter from Mr Thiyagarasa of which Mr Jesuthas disclaimed all knowledge. His only explanation, which I do not accept, is that he was not personally responsible for that page of the fax and he had nothing to do with it.

I find it implausible in the highest degree that Miss Sivagamy generated and prepared all the letters which had a similar format. I say this for a great number of reasons, but an important one is that, even on Mr Kalamohan’s own case, she had nothing to do withsome of the letters, namely another “to whom it may concern” letter, dated 12^th February 2006 (explaining why the banker’s draft came from Mr Alamaigan’s account to Mr Kalamohan in payment of a debt ostensibly owed by Mr Jesuthas) and party and party letters written to the claimant’s solicitors in 2010.

Further it appears that Mr Alamaigan’s cheque, allegedly made for payment for stock, was torn from his cheque book out of sequence, indicating that it was written much later than the date which it bears. Mr Alamaigan’s explanation for this, that his children spoiled all the earlier cheques was, in the circumstances, implausible in the highest degree. A much more likely explanation, in the light of the fact that the cheques were only produced in the February 2007 disclosure, is that they were concocted after the event.

Mr Kalamohan and Mr Jesuthas tied themselves in knots to account for the discrepancy between the £61,000 now said to have been owed to Mr Kalamohan and the £63,000 mentioned as owing for stock in an alleged letter from Mr Jesuthas to Mr Kalamohan dated 12^th October 2005 and, incidentally, pleaded as the correct amount of the debt. There were elaborate and contradictory accounts of how the letter was created, including an assertion by Mr Jesuthas that Miss Sivagamy prepared it. Both witnesses say that the error was spotted at a party to celebrate Mr Jesuthas’s acquisition of Stomp Road. A second corrective version of the letter was then prepared on a different computer with a different type face on the same day. Different accounts were given of who prepared it and how. The figure of £61,000 is said to be supported by an alleged note made by Mr Kalamohan in his notebook, but it is not at all clear how the figures were arrived at. It is also far too convenient that a figure appears in the calculation which has the effect of rounding up the SjS valuation to a whole number. There is also a suggestion in Mr Jesuthas’s first witness statement that the agreement to pay was about four weeks after completion of the Stomp Road purchase. He was unable to give any coherent explanation of these discrepancies in oral evidence.

Mr Jesuthas had even more difficulty in attempting to justify the figure he said he lent to Mr Alamaigan, and thus to justify the repayment by bankers’ draft direct from Mr Alamaigan for the benefit of Mr Kalamohan. He asked the court to believe that he borrowed £61,000 from various relatives for the express purpose of buying a shop but then lent it to Mr Alamaigan instead because he needed it. There was nothing to explain how the two men knew the precise amount of the alleged debt. They said there was no written record but they “just knew”. However Mr Alamaigan said in his witness statement that the sum was £63,000. By a letter dated 12^th February Mr Jesuthas purported to document this transaction but in that letter said that he had to give £63,000 (not £61,000) to Mr Kalamohan. He had no credible explanation for this.

Mr Jesuthas’s had no plausible evidence either about how he managed to pay for ongoing stock and the £15,000 required for the leasing of a pay point machine at Stomp Road. When asked about this and the funding of other payments he produced a vague story of a plantation sale, without any detail or any corroborative documents. It was not explained how, if he was unable to pay the stock money immediately to Mr Kalamohan, he was able to make these other payments. At one stage in his oral evidence he said he borrowed again from his relatives. When asked by the Court whether his family were not angry to be applied to again after he had lent to Mr Alamaigan the £61,000 they had scraped together for a shop purchase, he had no credible reply.

In assessing the explanation for these transactions I take into account the speed with which the mistaken credit was paid out of Mr Alamaigan’s account.

It is evident that Mr Alamaigan and Mr Jesuthas wished to distance themselves from Mr Kalamohan as much as possible.

Mr Alamaigan insisted that he had no knowledge of Mr Kalamohan until July or August 2005; until then all their dealings had been through his father-in-law. However Mr Kalamohan accepted that he personally introduced Mr Alamaigan to Forward on or before 11th March 2005 when he was applying for a loan from the Bank. Crucially, Mr Alamaigan had a bank account in his name “trading as Costcutter Fullers Slade” since 17^th January 2005.

Mr Kalamohan said that he met Mr Jesuthas for the first time some 3 months before the Stomp Road transaction. When asked if he had had any previous involvement with any Costcutter store Mr Jesuthas denied that he had. Both those things were shown to be false. Mr Jesuthas had an account with Nat West since some time prior to the date it is said he met Mr Kalamohan. The account address was his home address in Hayes but the account name was “Jesuthas Joseph, Costcutter Fullers Slade”. The bank statements on that account were sent to the Bank as evidence in support of the loan to Mr Jesuthas. I do not accept his explanation that he opened this account for the benefit of Mr Alamaigan and had never met Mr Kalamohan.

A further issue arose in relation to another document revealed by Mr Kalamohan in the February 2007 disclosure. It is an alleged quotation from a business called Capital Appliances of West Hampstead for works to be done at the defendants’ home address in Hayes. Mr Kalamohan relies on the document as proof of what he did with some of the money he said Mr Alamaigan paid to him for the business in December 2005. Mr Sukamaran of Capital Appliances gave oral evidence. When asked how a company which specialised in selling washing machines and other white goods should quote for building and decorating work he replied that the work was outsourced to subcontracted builders. He was however quite unable to give any cogent explanation as to how the quantities and measurements for double glazing and roof works, and thus the quotations, were arrived at and he was also unable to name any of the builders used. When asked to produce corroborative evidence Mr Kalamohan said it would be with his accountants. Again he was given every opportunity to find it, and again it was explained to him that he ought to take steps to do so if adverse inferences were not to be drawn, but no such information emerged.

It is notable that Mr Kalamohan presents himself in some respects as very businesslike and precise (in relation to the cheques and stock valuations) but in others not at all. In seeking to explain what became of the rest of the moneys allegedly paid to him by Mr Alamaigan he relied on alleged transfers to family and friends in repayment of informal and wholly undocumented loans.

Mr Thiyagarasa, like Mr Alamaigan and Mr Jesuthas, applied to the Bank for a SFLGS loan. That application is not a subject of these proceedings. However, his position is important in evaluating Mr Kalamohan’s evidence in this action. Mr Thiyagarasa is one of the people on the list which Mr Kumar produced of persons whom he said were introduced to Forward by Mr Kalamohan. He is one of the people whom Mr Kalamohan said he did not introduce. Importantly, his evidence, and that of Mr Stanislous and Mr Jesuthas was that none of them had ever even heard of Mr Thiyagarasa.

That cannot be true. Mr Thiyagarasa transferred £10,000 into Mr Kalamohan’s bank account on 19^th September 2005. Mr Kalamohan produced, on disclosure, a letter from Mr Thiyagarasa dated 3^rd October 2005, with the St Luke’s Road address at the top and addressed “to whom it may concern” confirming that he had given £16,000 to Mr Jesuthas towards the Stomp Road purchase. Mr Kalamohan’s wholly incredible explanation was that he had never seen this letter and it must have been obtained by his solicitors without reference to him as part of a fact-finding exercise.

Mr Jesuthas refers to the letter in a witness statement, saying in effect that it had nothing to do with him and had been sent to the Bank by Forward. The implication is that it was concocted by Miss Sivagamy. However in oral evidence he accepted that he had himself sent the letter (and another document relating to Mr Thiyagarasa) by facsimile to Forward. Again there was the wholly incredible explanation that he must have been asked by Forward to send it and he did not look at it. At all events it appears that Mr Thiyagarasa did deposit a cheque (returned unpaid 5 days later) for £16,000 into Mr Jesuthas’s bank account on 6^th October 2005.

Finally, and tellingly, Mr Thiyagarasa is the registered owner of property at the address in Yiewsley given on the SjS invoice for stocktaking at Stomp Road disclosed by Mr Kalamohan in the February 2007 disclosure. It is also the address used for a firm of accountants on accounts provided to the Bank which it is common ground are false accounts. That firm is a genuine one providing accountancy services for Mr Kalamohan but it operates from an address in North Wembley.

The Bank disclosed various sets of accounts deployed in support of loan applications on the purchase of Mr Kalamohan’s Costcutter businesses. For the first time, in his second witness statement, Mr Kalamohan asserted that certain sets of accounts were false and had been forged by Forward. In oral evidence he asserted that accounts relating to a Costcutter shop he had owned in Coventry (apparently prepared in his name by accountants and ostensibly signed by him) were also false and that he had nothing to do with them. However those accounts had been produced by him in the February 2007 disclosure. Whenever he disowned a document which he himself had produced but which turned out to be inconvenient he gave the same explanation as he did in this instance, namely that the accounts had been found by his solicitors as part of a fact-finding exercise and disclosed without reference to him.

In closing Mr Chambers valiantly tried to show why Mr Kalamohan’s account of events was believable and why it should be preferred to Mr Kumar’s account of Forward’s involvement. However it seemed to me that in essence Mr Chambers was simply restating Mr Kalamohan’s case and his submissions did not overcome the very substantial contradictions and coincidences in the defendants’ evidence.

I have not mentioned all of these, and I have barely touched on some that I have mentioned, but suffice it to say that I have no doubt that the Bank has been the victim of fraud in relation to the Fullers Slade loan and the Stomp Road loan and that the fraud was perpetrated by Mr Kalamohan and not Forward. It is a fraud which was unsophisticated in that, once detected, Mr Kalamohan left a trail of evidence pointing to himself.

Mr Chambers submitted that Mr Kalamohan stood to gain nothing from the alleged frauds. However it is readily to be inferred that he shared the proceeds of the frauds with the borrowers. In any event, the fact that he did profit is demonstrated by the several payments into his account for which no explanation satisfactory to the Court has been given.

As to the mistaken payment made by the Bank into Mr Alamaigan’s account, followed by the banker’s drafts out of it, I find that the defendants were not owed any money for stock by Mr Alamaigan or Mr Jesuthas. Mr Alamaigan and Mr Kalamohan were well aware that Mr Alamaigan was not entitled to the monies mistakenly paid into his account and the money was not received by either of them in good faith.

In those circumstances the defendants were unjustly enriched at the expense of the Bank and are liable to repay the sums comprised in the banker’s drafts. Alternatively, when issued, Mr Alamaigan held the banker’s drafts on trust for the Bank and it would be unconscionable for him to deny the Bank’s entitlement to them: see Westdeutsche Landesbank Girozentrale v. Islington LBC [1996] AC 669. By giving the drafts to Mr Kalamohan and the defendants’ solicitors K Ravi, Mr Alamaigan was acting in breach of fiduciary duty and the moneys were received by or on behalf of the defendants in circumstances where it would be unconscionable for them to retain them. Further, Mr Kalamohan is liable for knowing receipt (see BCCI v. Akindele [2001] Ch 437, Uzinterinpex v. Standard Bank plc [2008] 2 Lloyds Rep 456)and the Bank is entitled to trace the proceeds of the second banker’s draft into the residential properties which were purchased, in part, using those moneys: seeFoskett v. McKeown [2001] 1 AC 102.

I do not think that on these facts it is seriously contended that Mr Kalamohan is entitled to rely on a change of position defence in relation to the drafts. Suffice it to say that such a defence is not available where money is not received in good faith.

The claim in relation to the amounts advanced to Mr Alamaigan and Mr Jesuthas under the SFLGS is a discrete and additional one. I find that Mr Kalamohan’s story is fabricated and that no cheques or cash were paid for stock as alleged. Mr Kalamohan signed the receipts in the knowledge and with the intention that they were to be provided to and relied upon by the Bank in deciding whether or not to lend money under the SFLGS to Mr Alamaigan and Mr Jesuthas. I find that Mr Kalamohan was actively involved in those loan applications.

It is also said that the Bank was negligent and should have done more to ensure that Mr Alamaigan and Mr Jesuthas had invested their own money. Such a defence is not open to the fraudster for the reasons given by the House of Lords in Standard Chartered Bank v. Pakistan National Shipping Co [2003] 1 AC 959; see per Lord Hoffmann at [10]-[18] and Lord Rodger of Earlsferry at [42].

In the above circumstances the defendants’ counterclaim as to loss of reputation and damages suffered as a consequence of dishonouring cheques does not arise.

Lastly, I must consider the claims against Mrs Kalamohan. I have to pay particular attention to this because she is not now legally represented and, as I have said, it is not alleged that she was personally involved in the fraud or that she knew any details about the money that passed through Mr Alamaigan’s account.

There is a claim against her in respect of the money that passed from K Ravi & Co into the residential property that she owned, and a separate claim in respect of the SFLGS loan to Mr Jesuthas on the basis that she was the owner of the Stomp Road property and business.

It could be argued that the fact that she was the owner of Stomp Road should not make her liable for a representation to the Bank in relation to alleged payment for stock which happened to belong to her. On one view the fraud was completely separate from her ownership or sale of the Stomp Road business. She swore a witness statement on 15th January 2010 in which she said that she had no knowledge of any representations made to the Bank and left all business matters in relation to Stomp Road to her husband.

However, in the defence (filed on her behalf as well as that of Mr Kalamohan at a time when she was represented by solicitors) it is positively averred that Mr Kalamohan acted in relation to the Stomp Road transaction, including the alleged arrangements for payment for stock and the alleged appointment of SjS to value the stock, as her agent on her behalf. The details of the transaction are pleaded by both defendants as genuinely having happened. Thus the alleged receipt for the stock moneys was given by Mr Kalamohan to Mr Jesuthas on Mrs Kalamohan’s behalf. Mrs Kalamohan signed the sale documents herself including a receipt for all the payments alleged to have been made by Mr Jesuthas for the property, and fixtures and fittings.

It is common ground between the claimant and both defendants that Mr Kalamohan acted as Mrs Kalamohan’s agent in respect of the Jesuthas transactions. It follows that, even if she did not know elements of the transaction were shams, Mr Kalamohan nevertheless acted within his authority, or apparent authority, and she is vicariously liable for the fraud: see Lloyd v. Grace, Smith & Co [1912] AC 716 per Lord Macnaghten; Briess v. Woolley [1954] AC 333 at 348 per Lord Reid; Egger v. Viscount Chelmsford [1965] 1 QB 248 at 261 per Lord Denning MR.

In the circumstances no defence has been advanced which would avail Mrs Kalamohan in respect of the claim to trace the moneys emanating from Mr Alamaigan’s account into her property 52 Kenilworth Gardens.

I will therefore grant relief to the Bank as asked.