Hampton Capital Ltd, Re

This is a judgment given following the trial of (a) an application by the Joint Administrators of Hampton Capital Ltd (“the Company”) made by Application Notice issued on 10 January 2014 for orders under section 238 of the Insolvency Act 1986 (“the 1986 Act”) in respect of various payments made by the Company, and (b) an action started by the Company by Claim Form issued on the same date claiming amounts equal to the sums forming the subject of the section 238 claims.

I shall refer to the Company and the Administrators collectively as “the Claimants”. At the trial they were represented by Counsel, Mr Siward Atkins. On their behalf Mr Anthony Murphy, one of the Administrators, gave both written and oral evidence.

The respondents to the application and the defendants in the action were the same. However the case against the Second Respondent/Defendant, Mr Paul Commerford, had been settled before the trial. He had served a Defence and made a witness statement. He was called by the Claimants to give evidence at the trial.

Of the remaining respondents and defendants only the third, Mr Oswald Kanzira, was present at the trial. He represented himself. He made his submissions, and gave his oral evidence, with clarity, restraint and dignity.

The First Defendant, Elite Performance Cars Ltd (“Elite”), was not represented at the trial. It had served a Skeleton Argument for the trial. The individual who was to have made submissions on Elite’s behalf, a director of Elite, had been available for the start of the notified trial window, but was no longer available when the trial started. There was no application made for the trial to be adjourned. The trial therefore proceeded in Elite’s absence, after I had made an Order under CPR r. 39.3(1) striking out its Defence.

The Fourth Defendant, Mr Erkan Akbas, was not present at the trial. His whereabouts are unknown and there was no evidence that he had been given any notice of the trial. In those circumstances the trial did not proceed on the claims against him, and they remain alive: I have directed that as regards the Fourth Defendant the trial is to be adjourned with liberty to the Claimants or the Fourth Defendant to apply to have it relisted.

Against Elite and Mr Kanzira the Company’s only basis of claim is a personal one at common law for restitution: the Company makes no proprietary claims, and its personal claims do not include any constructive trust claim (for example for knowing receipt). As mentioned, the Administrators claim against these two defendants under section 238 of the 1986 Act.

The Company was incorporated on 26 January 2012. Its first director and shareholder was a Mr Sean Lewis. He resigned as a director on 12 July 2012, when Mr Commerford became a director. He was a director until 5 December 2012, when he was replaced by a Mr Alani Kusimo. Mr Commerford’s Defence states that during this period Mr Commerford was the sole director and shareholder; and in his written evidence he confirmed what he said in his Defence concerning his involvement in the Company.

There is no evidence of the Company having had any activity or assets before July 2012. From then on it was the creature of a Mr Alick Mayweather: at that time he approached Tolent Construction Ltd (“Tolent”) ostensibly with a view to assisting in the purchase and development of a site in Seaham, Co Durham, owned by a subsidiary of Tolent. Mr Mayweather was at the time an undischarged bankrupt. He has not appeared before me and not taken any part in these proceedings, and so I have not heard what he might say about the matters I am about to describe.

The evidence given by Mr Murphy, and indeed by Mr Commerford, is that Mr Mayweather was the driving force behind the Company. It is clear that the Company to all intents and purposes was his creature. He had responsibility for and had the conduct of all negotiations with Tolent, so Mr Commerford told me. Mr Commerford himself never had any negotiations with anyone on behalf of the Company; all he did was to disburse the Company’s money from its bank as directed by Mr Mayweather. Mr Commerford’s function as a de jure director was to give effect to Mr Mayweather’s instructions.

Mr Mayweather appears to have been a plausible con-man. I was told by Mr Commerford and Mr Kanzira that he was convincing. In his approach to Tolent he must have been remarkably convincing and successful. His pitch was that Tolent would be engaged as the contractor to develop the Seaham site once the Tolent subsidiary had been purchased. To this end the purchase was to be carried out by a newly formed off-shore company, with which Tolent in October 2012 entered into a share sale agreement to sell its subsidiary for some £7.6 million. The Company’s part in this was that it was supposedly to procure funding for the transaction; although Mr Commerford in his Defence said “it was not made clear to” him “what precise role the Company was to play in the acquisition of Coolmore”, Coolmore Ltd being the Tolent subsidiary which owned the Seaham site.

Between October 2012 and January 2013 Tolent provided to the Company, by various instalments ranging from £15,000 to £324,000, an aggregate of approximately £1.4 million in respect of fees for the anticipated funding. The anticipated funding was never forthcoming, and the payments to or at the request of the Company were made by Tolent without any documentation being forthcoming from the Company. This eventually, after a period of several months, led Tolent to make investigations in the course of which it learnt that the Company had made large payments to third parties but that otherwise what had become of the £1.4 million or what remained for the Company was unexplained. In consequence Tolent caused the Administrators to be appointed.

Before me there has been some argument as to whether or not the monies paid by Tolent were monies lent to the Company. Mr Commerford in his Defence had put forward a case that in fact the monies were lent by Tolent to Mr Mayweather rather than to the Company. This point was relied upon by Mr Kanzira in support of an argument that what was paid to him by the Company and applied by him for the benefit of Mr Mayweather could have been in reduction of a debt due from the Company to Mr Mayweather, or indeed Mr Mayweather’s money.

In evidence is a witness statement made by Tolent’s Chairman and Chief Executive, a Mr Wood. This statement supported Tolent’s application to have the Administrators appointed. Mr Wood explained in his statement that the monies provided by Tolent had been provided by way of loan to the Company. Further, Mr Commerford’s Defence also states that he, Mr Commerford, “ cannot speak to the true nature of the arrangement that had been reached between Mr Wood and Mr Mayweather ”, that his conclusion that Tolent was lending money to Mr Mayweather and not to the Company “ appears from documents disclosed by Mr Wood ”, but further that “ none of the payments made by Tolent to the Company were documented, invoiced, receipted or subject to any written agreements ”. Hardly surprisingly, in view of the last point, I was not shown any documents concerning the Tolent payments, and none which might point to the payments having been by way of loan to Mr Mayweather personally rather than, as Mr Wood stated, to the Company. Accordingly I conclude that insofar as monies standing to the credit of the Company’s bank were drawn and paid to any of the Defendants, they were the product of money lent by Tolent to the Company.

The Company was, as Mr Murphy has stated and I find, insolvent at all times when it was making the payments which have formed the subject of the claims against Elite and Mr Kanzira. It was liable to Tolent for the totality of what had been paid by Tolent; and it had as assets only what remained in its bank account after the depredations of Mr Mayweather. The payments were all made, in short, in fraud of the Company’s creditors, insofar as they were gratuitous dispositions of the Company’s money. My conclusion, as appears, is that the Company received no consideration for the monies it paid out.

One of the third parties identified by Tolent as a recipient of the Company’s money was Elite. It received from the Company’s bank account a total of £335,000. The payments making up this total, and the dates were: £5,000 on 21 November 2012; £65,000 on 26 November 2012; £100,000 on 3 December 2012; a further £15,000 on 3 December 2012; two payments, each of £20,000, on 4 December 2012; and £110,000 on 19 December 2012. In every case the payment was made by bank transfer to Elite’s bank.

All but the last of these payments were effected by Mr Commerford: while a director he was the person with the mandate from the Company’s bank. The last of the payments was effected by Mr Kusimo.

Mr Commerford’s position set out in his Defence (and confirmed in his witness statement) in relation to the various payments he authorised (and these include not only payments to Elite but also those to Mr Kanzira discussed below) is that they were made by him as the Company’s director and sole shareholder. He said in his Defence that “ Each and every payment identified in the Particulars of Claim as being authorised by [him] was genuinely and in good faith considered by him to be in the interest of the Company and made to promote its success ”. He was misled by Mr Mayweather, so he says, into making the payments he did, in each case (that is including the payments to Elite and to Mr Kanzira) having been told and believing that the payment was in some way to further the project of developing the Seaham site.

In relation to the Elite payments specifically he said in his Defence (confirmed in his witness statement) that he was directed to make them; that he was told that the payments were required for the purposes of obtaining funding from outside investors to finance the purchase of the Tolent subsidiary and that Elite was one such investor or represented one such investor, and also were needed for fees or other upfront funding costs. He said he asked Mr Mayweather whether the payments to Elite were needed for purchasing vehicles, and told Mr Mayweather that he would not authorise them for that purpose.

I have serious misgivings about the reliability of Mr Commerford’s evidence concerning his authorisation of payments from the Company’s bank account, in particular in relation to the payments to himself and to Mr Kanzira (as I explain later). In the case of the payments to Elite a possible, in my view the likely, conclusion is that Mr Commerford did what he did because that is what he was told to do by Mr Mayweather, and that he did not regard it as any part of his business what the payments were for or why he was being asked to make them: it was enough that Mr Mayweather wanted them.

In making this finding I have not overlooked the fact, urged on me by Mr Atkins, that Mr Commerford did eventually resign as a director in December 2012. Mr Commerford said that he resigned because he became concerned about the activities of Mr Mayweather. However I do not see this as demonstrating that before that time Mr Commerford had been doing anything at all to consider the interests of the Company; rather it suggests to me that Mr Commerford had realised that he was now deeply implicated in the dissipation of the money obtained from Tolent and hoped to remove himself from the scene before the Company’s inevitable collapse.

The Claimant’s case against Elite is simple. It is that none of the payments was “for the purposes of the Company’s business or otherwise for the benefit of the Company”. It is said that in consequence the payments were “void”. And it is said that this gives rise to a right for the Company to reclaim in restitution from Elite an amount equal to the payments made to it: as I have already said, the claim is not a proprietary one but a personal one. It is no part of the Claimant’s case that Elite knew, suspected or was on notice of any impropriety or irregularity in the payments.

I do not accept that the payments were “void”, if by that it is meant that the payments never happened or were in some sense a nullity. As it happens, for all but the £110,000 payment Mr Commerford as the Company’s sole director did have authority to give instructions to the bank to effect the payments: he was the person who gave the instructions and whom the bank was entitled to obey, so that the disposition of the Company’s funds was not made by the bank without authority. This is so whether, as Mr Commerford says, he genuinely believed the payments he authorised to be for what he called “the Coolmore Project”, being in some way associated with bringing in investors, having been misled in this respect by Mr Mayweather if the true purpose was the acquisition of vehicles from Elite; or whether, as I think more likely, he was indifferent as to the purpose for which the payments were being made and made them simply because he had been told to. Had the payments been “void” no doubt the Company would have been claiming against its bank that the bank had no authority to debit its account and making a claim against the bank for the amount debited.

I take it that what is being asserted by the Claimants when characterising the payments as “void”, as the Company does in its Particulars of Claim, is that the payments made to Elite were of money stolen from the Company. The dispositions in favour of Elite were of course not of cash but by way by of bank transfer, so that Elite received the benefit of a credit to its bank account (and hence a chose in action rather than cash). Mr Atkins submitted, and I accept, that this makes no difference. What had happened was that by causing Mr Commerford to instruct the Company’s bank to make transfers to Elite’s bank, Mr Mayweather had brought about the misappropriation of the Company’s money, the money being paid away from the Company for his benefit and with nothing to do with the Company, and with the result that inevitably Tolent would be left unpaid. What was received by Elite was just as much stolen money as the money handed to the casino in the Lipkin Gorman case referred to below.

So far as concerns the £110,000 payment, I infer that Mr Mayweather procured Mr Kusimo likewise to make a payment in favour of Elite with nothing to do with the Company, so that as to this payment the position is no different from the other payments to Elite. I should add that I reach the same conclusion as regards the last two of the payments made from the Company to Mr Kanzira, discussed below, payments procured by Mr Kusimo rather than Mr Commerford.

What this gives rise to is a claim in which an innocent third party, in this case Elite, has received from a company various sums of money stolen from the company, and is then sued by the company for an amount equal to those sums. Against Elite the case is that it has been unjustly enriched at the expense of the Company by an amount equal to the payments and, absent any change of position defence, is liable to repay to the Company the full amount of the claims.

I was referred by Mr Atkins to very little in the way of authority to support his clients’ claims against an unrepresented company and a litigant in person. The only decided case on unjust enrichment which Mr Atkins drew to my attention, in his closing submissions, was Criterion Properties v Stratford UK Properties [2004] 1 WLR 1846, [2004] UKHL 28. He referred me to the passage in the opinion of Lord Nicholls of Birkenhead at para [4] to support his argument as to the various payments being void and as to the consequences of these being void. In that passage Lord Nicholls was clarifying a point on which the court below had been confused, confusing on the one hand the principles on which an agreement made by a company through its agents will be binding on the company in cases where the agents’ authority is in question, with those required for establishing a “knowing receipt”. What Lord Nicholls said was as follows:

I accept that this passage supports Mr Atkins’ argument on unjust enrichment. The proposition for which Lord Nicholls’ comments are authority is that the recipient of benefits paid under an avoided contract will be personally liable to the provider of the benefits, the liability being “strict”, subject to a defence of change of position. However, for reasons I have explained, it does not seem to me that the present case turns on any question of an agent’s actual or ostensible authority to bind the principal when causing a bank transfer. The position could have been different if (which is not this case) there were an issue as to the validity of a contract made between the Company and the recipient of a payment and the payment was made pursuant to the contract.

More immediately relevant to the issues in the present case is the leading case of Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, which I drew to the parties’ attention in argument. That is authority for Mr Atkins’ submission that the recipient of stolen money, unless a bona fide purchaser without notice, is personally liable to the person whose money has been stolen. But of course that case is also authority for the proposition that the recipient may have an available change of position defence. The parameters of the defence were not stated in the case, however, but were left to be refined in future cases. As Lord Bridge of Harwich said at page 558B:

In relation to the payments to Elite the Company has satisfied me that there was no contract with Elite and that what was paid over was money stolen from the Company. It is for Elite to make out any change of position defence; and this it has not done. Its receipt from the Company has the result that it has been unjustly enriched at the expense of the Company, and should repay what it received.

For this reason I am satisfied that the Company should be given judgment against Elite for the sum of £335,000.

There was an alternative claim for restitution advanced by the Company. This was for £315,000 of the £335,000. The submission was that there was a total failure of consideration, if the money had been paid for a purchase which was never effected. The difference between the £335,000 and the £315,000 is explained in this way. The Joint Administrators were told by a representative of Elite that £20,000 of the £335,000 of payments was in respect of vehicle hire. Of the remaining £315,000, £110,000 was explained to the Joint Administrators as having been paid for the purchase of a Ferrari car which was never delivered; and the balance was told to the Joint Administrators as having been for the purchase of vehicles which had not been and would not be delivered to the Company.

In view of my conclusion concerning the claim for £335,000 it is unnecessary for me to consider the claims concerning the £315,000 of payments. It is sufficient for me to record, however, that the Claimants have put before me evidence to support the conclusion that Elite did not provide to the Company any of the cars for which, according to the representative of Elite, the £315,000 was paid.

The Administrators, in their Ordinary Application, made an alternative claim to the remaining £315,000: because there was no consideration and the Company was insolvent when the payments were made, the payments are within section 238 of the 1986 Act, so it was argued, as transactions with the Company at an undervalue and the Court should make an order “for restoring the position to what it would have been” had the payments not been made.

I have found the case under section 238 of the 1986 Act difficult. Sub-section (4) defines transactions at an undervalue. To be within the purview of section 238 there must be a “ transaction with a person at an undervalue ” if the Court is to make an order (under sub-section (3)) “ for restoring the position to what it would have been if the company had not entered into that transaction ”. The sub-section (4) definition is as follows:

the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide for the company to receive no consideration, or

the company enters into a transaction with that person for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the company. ”

The difficulty I have with the Administrators’ section 238 claim is that on the evidence Mr Commerford did not intend to make a gift to Elite when he instructed any of the payments; and I have no ground for thinking that Mr Kusimo did so either. Mr Commerford’s evidence, indeed, is that his intention was positively not to have the Company make a gift. If it is Mr Mayweather’s intention which is in point, the likely inference to be drawn is that he intended to misappropriate the money and had some arrangement with Elite which might help him in that regard. I reach this conclusion because Mr Commerford told me, and it is therefore the Claimant’s case, that there had been payments which, on Mr Mayweather’s instruction, he (Mr Commerford) made to himself so that payments could be made to Mr Mayweather through a casino. Also the payments to Mr Kanzira, which I will discuss later, were made for the personal benefit of Mr Mayweather, including to enable him to gamble, and not as gifts to Mr Kanzira.

On the other hand if the payments were not “gifts”, in order to fall within section 238(4)(a) they would have to be “transactions with” Elite, being “transactions … on terms that provide for the company to receive no consideration”. Yet the submission to me on behalf of the Administrators has been that Mr Commerford had virtually no contact at all with Elite beyond causing money to be remitted to Elite. Indeed, I was pressed by the Claimants with the case that the Company never dealt with Elite at all, or at any rate that there was no evidence of it having ever done so. Mr Commerford’s evidence is that he attended Elite’s premises twice, in each case simply to make a payment (one of £5,000 and one of £65,000), having no discussion there with Elite whatsoever; and the remaining payments he made on Mr Mayweather’s instruction. It is therefore by no means apparent to me that within section 238(4)(a) the Company “dealt” with Elite or entered into a transaction with Elite on any terms at all, let on alone terms providing for the Company to receive no consideration.

I am aware that section 436 of the 1986 contains a definition of “transaction” as including a “gift, agreement or arrangement” and references to “entering into a transaction” are to be construed “accordingly”. Nevertheless I cannot accept that the mere transmission of money, the mere making of a payment, without any form of dealing between the paying company and the payee, can constitute the entering into of a transaction by the company with the payee (at any rate where the transaction is not a “gift”). What is required, on the language of section 238(4), is the entering into of a transaction between two parties. Without straining the language of the section, this must require some engagement, or at least communication, between the two parties and not merely a disposition of money which results in one party’s money landing up in the bank account of the other without anything said or done by that other.

For this reason I reject the Administrators’ claim against Elite and will not make any order against Elite under section 238 of the 1986 Act.

Between 21 September 2012 and 28 December 2012 payments £282,000 were made from the Company’s account to Mr Kanzira’s account. These were as follows: £125,000 on 21 September 2009; £5,000 on 1 November 2012; £10,000 on 19 November 2012; £10,000 on 22 November 2012; £57,000 on 23 November 2012; £35,000 on 21 December 2012; and £40,000 on 28 December 2012. All but the last two of these payments were instructed by Mr Commerford: the last two were instructed by Mr Kusimo. On receipt of each of these payments Mr Kanzira allowed his account to be drawn upon to the extent of the amounts received, the drawing being in favour of one or other of three casinos for the benefit of Mr Mayweather (the casino providing funds to Mr Mayweather).

The three casinos in question were places where both Mr Kanzira and Mr Mayweather resorted for gambling and entertainment. Mr Kanzira and Mr Mayweather had met in a casino. Mr Kanzira explained that Mr Mayweather was a big gambler and in the casinos was “treated like a god” by the managers; and he explained that he believed Mr Mayweather to be very wealthy.

The Company’s pleaded case in relation to these payments is the same as in relation to the payments to Elite, namely that that the person who caused the making of the payments “ had no authority to do so because none of the payments was for the purposes of the Company’s business or otherwise for the benefit of the Company ”. It is said that in the circumstances “ the payments were thus void ” and that Mr Kanzira must restore all of the payments (or the value of them). Further, it is said that the payments were merely gratuitous misappropriations of the Company’s money, that Mr Kanzira furnished no consideration for the payments, and that on this basis also Mr Kanzira must restore the money.

For the same reasons as in the case of Elite, I conclude that the Company is entitled to say that what was received by Mr Kanzira was money stolen from the Company. Below I consider the defences put forward by Mr Kanzira to the Company’s claim for repayment.

As in the case of Elite, the Administrators make an alternative claim based on section 238 of the 1986 Act, this being for the total of £282,000.

Mr Kanzira has a pleaded Defence, which he had signed with a truth statement, and also Further Information which he had likewise signed. He made a witness statement in these proceedings. As mentioned earlier, besides making oral submissions he went into the witness box and gave oral evidence on oath.

In giving his oral evidence Mr Commerford specifically confirmed certain paragraphs of his Defence; and it seems to me that his witness statement, together with the answers he gave in his oral evidence, sufficiently confirmed the rest. In summary his evidence is that, as in the case of the payments to Elite, he authorised the payments believing them to be in the interests of the Company and for its purposes, in particular the payment of expenses for furthering the acquisition of the Tolent subsidiary. He says he did not know that the payments would be to enable Mr Mayweather to obtain money from the Company. He was, he says, misled by Mr Mayweather.

Mr Kanzira gave evidence that each of these payments was made into his bank account and that in each case (other than with small exceptions where he paid cash to Mr Mayweather) the full amount was drawn out in payment to a casino for the credit of Mr Mayweather. He says he accepted Mr Mayweather’s explanations as to why it was necessary for Mr Kanzira to receive money and to pay a casino, rather than for Mr Mayweather himself to pay the casino. In the case of the first payment, the £125,000 which came to be paid in September 2012, the explanation given by Mr Mayweather was that Mr Mayweather did not have his personal debit card, only a company one, and had recently moved “from Manchester to London and he not yet received his new card”; and Mr Kanzira understood that a casino would not take payment on a company card. Mr Kanzira was asked in cross-examination what explanation Mr Mayweather had given him in relation to the subsequent payments. He said that he could not remember but that Mr Mayweather must have given him some explanation.

Mr Kanzira told me that in the case of the £125,000 paid in September 2012, the first of the payments, at the time when his account was debited he did not know that what had been credited to his account had come from the Company. This he only discovered shortly afterwards, when he saw his bank statement.

After that, when he was asked by Mr Mayweather to repeat what had been done, he did know that the money which had come to his account had come from the Company. But he says that he was told by Mr Mayweather and believed that the Company belonged to Mr Mayweather and that the money credited to his account had been caused to be paid by a director of the Company (whom he understood to be one “Paul” and whom he believes now to be Mr Commerford) at the direction of Mr Mayweather.

Mr Kanzira’s evidence concerning Mr Commerford centred on a telephone conversation, which Mr Commerford said that he could not recall. This conversation took place, so Mr Kanzira said, after the payment of the £125,000 and before the remaining payments, when Mr Kanzira had discovered from his bank that the source of the £125,000 had been the Company and when Mr Mayweather wanted a repeat transaction. Mr Mayweather, said Mr Kanzira, telephoned Mr Commerford in Mr Kanzira’s presence so that “his director” could confirm that the payment had been “done” by Mr Commerford, and so that Mr Kanzira would agree to provide further funds for Mr Mayweather. With the phone on loud speaker Mr Commerford confirmed his directorship; and then also Mr Mayweather explained to Mr Commerford that he needed Mr Commerford to send money to Mr Kanzira’s account and would provide account details. What then happened, according to Mr Kanzira’s witness statement, was that from time to time Mr Mayweather would tell Mr Kanzira that money had been paid to his account and that he wanted to have the money paid out by Mr Kanzira for him.

Except in one respect I accept Mr Kanzira’s evidence; in particular I accept his evidence concerning the telephone conversation with Mr. Commerford. I also think it likely that this conversation did involve Mr Commerford, and not some unknown third party. The one respect concerns what Mr Kanzira said about the explanations given to him by Mr Mayweather in relation to the various payments after the first.

I should record, in relation to the telephone conversation, that Mr Commerford said that he could not remember having had the conversation described by Mr Kanzira. However it seems to me the sort of conversation which might well have taken place. Mr Commerford’s witness statement contains an explanation of events in relation to Elite which shows that he was willing to go to Elite’s showroom, at short notice and at considerable personal inconvenience, at Mr Mayweather’s instruction and without any worthwhile explanation, in order to make a payment; and I cannot see why it would have been remarkable and memorable for him to take an instruction from Mr Mayweather in the manner described by Mr Kanzira.

There is a further finding I would make about Mr Commerford’s evidence. He had caused large amounts to be transferred from the Company’s account to his own, which he explained he had paid on to casinos to provide credit for Mr Mayweather. Doing this, he said, was believed by him to be a way of providing funds to Mr Mayweather for legitimate expenditure for the Company. In contrast, he said that he did not think that Mr Kanzira was to provide credit for Mr Mayweather, but rather believed Mr Kanzira to be someone who needed to be paid in relation to the obtaining or capitalisation of the overseas company, having been told this by Mr Mayweather.

I do not accept that Mr Commerford believed Mr Kanzira to be a potential investor or someone who would help with potential investors. As I have explained, I conclude that Mr Commerford was indifferent as to the way that the Company’s money was applied, simply taking Mr Mayweather’s instructions. I very much doubt that he was told anything about Mr Kanzira. Indeed, if Mr Commerford had been told the truth, that Mr Kanzira was to provide credit for Mr Mayweather, Mr Commerford would no doubt still have made the payment to Mr Kanzira, just as he had done when paying himself to provide funds for Mr Mayweather.

The feature which distinguishes the Company’s claim against Mr Kanzira from that against Elite is that Mr Kanzira gave up something which, he says and I accept, he would not have given up unless he had first received the payments made to him. That is to say, Mr Kanzira made the payments he did because he had first been paid and because he had agreed with Mr Mayweather that he would make the payments once he had himself been paid.

In his statements of case and submissions Mr Kanzira has put forward various defences to the claims made by the Claimants.

He says that in good faith he provided full consideration for the payments he received and is therefore a bona fide purchaser without notice; and he says that insofar as necessary, any transaction he had with the Company is subject to section 40 of the Companies Act 2006 (“the 2006 Act”) so that the transaction is binding on the Company.

He says that by paying out money to the casinos equal to the payments he had received he had in good faith changed his position, so that it would be wrong, “inequitable” in the words of Lord Goff in Lipkin Gorman at page 580, to order him to make any repayment.

He says that the money was only received by him as agent for Mr Mayweather and that he has a defence of ministerial receipt.

It seems to me that Mr Kanzira’s first defence cannot be sustained: he did not purchase anything from anyone, and further he did not enter into any transactions with the Company. His agreement was with Mr Mayweather and was for him to pay amounts to Mr Mayweather’s credit once he had been paid. He knew that Mr Mayweather was not a director of the Company. He has not alleged in his Defence or in his witness statement that he entered into any contract with the Company to pass on money for Mr Mayweather as and when paid by the Company. Indeed, his pleaded case (which I accept) is that he had no transactions with the Company. Further, his case of “ministerial receipt” is that he was acting for Mr Mayweather when he received payments from the Company and was obliged to pass them on for the benefit of Mr Mayweather, in this respect his principal.

Section 40 of the 2006, as I see it, has no relevance to the matter. This provides, by sub-section (1), that “In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company’s constitution”. Sub-section (2) explains that a person “deals with” a company if “he is a party to any transaction or other act which the company is a party”. However, I do not understand section 40 to have the result that any recipient of money paid by a company is entitled to meet an unjust enrichment claim simply by saying that his receipt was in good faith. While the good faith of the recipient is likely to be necessary condition of the recipient’s defence, it will not by itself be a sufficient condition.

The second and third of Mr Kanzira’s defences may be taken together. Traditionally the defence of “ministerial receipt” would allow an agent to argue for a change of position defence which might not otherwise be available to a claim to recover from him a payment made for his principal under a mistake of fact. In the present case I think that Mr Kanzira can indeed contend that his receipt of the payments from the Company was for the benefit of Mr Mayweather, that in receiving them he was acting for Mr Mayweather, and that to this extent he can say that he received the payments in a ministerial capacity: Mr Commerford (and no doubt Mr Kusimo) made the payments to Mr Kanzira because that was what he was instructed to do, and Mr Mayweather gave that instruction because he wanted the money and intended it to be paid on to him.

Mr Atkins submitted that Mr Kanzira cannot say his receipt of the Company’s money was a ministerial receipt because what Mr Kanzira chose to do with the payments made to him was a matter for him. I do not accept Mr Atkins’ analysis. Leaving aside the fact that, as it has turned out, the money paid to Mr Kanzira had been paid to him improperly, from Mr Kanzira’s perspective he received the payments because he had an arrangement with Mr Mayweather to pay on for Mr Mayweather’s benefit the corresponding amount once received. Had Mr Kanzira received a payment and then kept it for himself, for all he knew it would have been open to Mr Mayweather to sue him for the money.

Ultimately, however, the question whether Mr Kanzira’s receipt was “ministerial” in not the one which matters. What is relevant is whether Mr Kanzira’s payments are causally linked with his receipts from the Company, that causal link being an essential element in any change of position defence. In other words, as it seems to me, the relevance of the circumstances in which Mr Kanzira received the payments is part of the inquiry as to whether Mr Kanzira can claim that his payments for Mr Mayweather’s benefit are to be recognised as providing him a defence to the Company’s claim that he has been unjustly enriched at the Company’s expense. Given my conclusion that Mr Kanzira would not have made the payments for Mr Mayweather if he had not first received what he did, and that he would not have received what he did had he not first indicated to Mr Mayweather that he was willing to make the payments if he was first paid, I am satisfied that the only remaining question is whether nevertheless Mr Kanzira is unable to show that it would be unjust, or inequitable, to allow restitution.

As to this, to show that restitution would be unjust Mr Kanzira will need to show, in the words of Lord Goff in Lipkin Gorman that his change of position is “ bona fide ” (page 579G) and not “ in bad faith, as where the defendant has paid away the money with knowledge of the facts entitling the plaintiff to restitution ” (page 580C).

It was accepted on behalf of the Claimants, in the course of the closing argument, that Mr Kanzira had been acting in good faith when he received the Company’s payments and paid out monies to the casino. What is accepted by this, as I understand, is that Mr Kanzira did not know, when he made payments from his account to casinos for Mr Mayweather’s benefit, that he had been the recipient of money which had been wrongfully paid to him and could not properly be applied for Mr Mayweather. It follows also, I think, the acknowledgment made on behalf of the Claimants, that they accept that Mr Kanzira acted in good faith, implies also that Mr Kanzira did not have constructive knowledge that the money paid to him was stolen.

However, this leaves open the question whether what Mr Kanzira knew and thought of the circumstances in which he received and made the various payments is sufficient to prevent him from escaping liability in common law restitution. As to this, by Mr Atkins the Claimants submit that Mr Kanzira was sufficiently on notice that the payments to him were of money stolen from the Company and therefore his further payments for Mr Mayweather were at his own risk, so that his payments for Mr Mayweather cannot in the circumstances provide an answer to the Claimants’ case that he has been unjustly enriched at the Company’s expense.

Mr Atkins did not make detailed submissions as to the law concerning the test to be applied in deciding whether or not what was known to or thought by Mr Kanzira, and what he did in response, would disqualify him from a successful change of position defence. What guidance I have been given is to be found in the Lipkin Gorman case and, it may be, in Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437. The Akindele case was referred to in the speech of Lord Nicholls in the Criterion Properties case from which I have quoted earlier in this judgment.

The Akindele case was one in which the claimant’s case was put forward as a constructive trust case. Nourse LJ, giving the leading judgement of the Court of Appeal, set out a detailed exposition of previous case law concerning the state of mind required for a defendant to be found liable for knowing receipt, and concluded (at page 455F) that “ The recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt ”.

The Company’s claim against Mr Kanzira has not been put forward in constructive trust. Nevertheless I cannot see a principled reason why, in a case such as the present, the legal test as to the defendant’s required state of knowledge sufficient to result in an order for repayment of the amount paid but not retained should differ according to the cause of action, for restitution at law or for an account in equity as a constructive trustee on the basis of knowing receipt. Therefore in approaching the evidence I ask myself whether what was known to Mr Kanzira was sufficient to make it unconscionable for him now to refuse to repay the Company.

There is a significant difference between the £125,000 paid to Mr Kanzira in September 2012 and the remainder of the payments made to him. As to the first, Mr Kanzira had paid away £125,000 to the casino for Mr Mayweather’s benefit before he knew that the money paid to him had not come from Mr Mayweather. This being so, I conclude that the Company is not entitled to restitution of that sum from Mr Kanzira: what he did was in good faith, and there is no ground for suggesting that what he knew at the time should result in his being liable to repay £125,000 to the Company.

The subsequent payments are different. When these were made Mr Kanzira knew he had received the Company’s money. The fact that the first £125,000 had come from the Company was now known to him; and he knew when asked by Mr Mayweather to make the further payments that what he was himself to receive would come from the Company. He had plainly become concerned about the propriety of what was being done, as it was for that reason that Mr Mayweather arranged the brief conversation with Mr Commerford.

I think Mr Kanzira had been right to be concerned. He knew that casinos will not take payment from companies. There must have been a reason for the stance taken by casinos. He knew that Mr Mayweather wanted to pay the casinos, but not to do that himself direct. Further, he knew that Mr Mayweather required an arrangement for obtaining money from the Company for the casinos which did not involve the Company paying Mr Mayweather the money.

Mr Kanzira submitted that indeed he had made the enquiry, referred to above, but that he was given sufficient to allay his concern, this being in his conversation with Mr Mayweather and Mr Commerford which I have already described. Against this Mr Atkins argued that what was said by Mr Commerford on the telephone was insufficient to justify Mr Kanzira in thinking that it was proper for the Company’s money to be paid to him to pay on for Mr Mayweather, even if Mr Kanzira may have decided that it was acceptable for him to pay.

With considerable hesitation in view of the Claimants’ acknowledgment that Mr Kanzira acted in good faith, I have reached the conclusion that Mr Kanzira knew enough to have reasonable grounds for suspecting the money paid to him after the first £125,000 to be stolen; and I have reached the conclusion that this is sufficient to disqualify him from his change of position defence as to those subsequent payments, it not being inequitable for him to be ordered to repay the amount of those payments. In particular I reject his submission that what he was told by Messrs Mayweather and Commerford was sufficient to remove any concerns.

In the first place Mr Kanzira could not tell me what reason Mr Mayweather had given to him to explain why he needed to involve Mr Kanzira, or why he needed to have the money come to Mr Kanzira from the Company for further payment for his benefit. As it seems to me, if Mr Kanzira had been told a reason by Mr Mayweather he could not have failed to remember it, as it must have been a notable one. Mr Kanzira had in the case of the first payment been led to believe that the money would be coming from Mr Mayweather who on the evening when first speaking with Mr Kanzira did not happen to be in a position to pay the casino himself immediately because he did not have a debit card with him, having moved recently from Manchester. Obviously it was a surprise to Mr Kanzira that the payment to him had come from the Company, and not from Mr Mayweather, as he had expected. Now he was to accept money from the Company for further payments for Mr Mayweather; and that was a matter of concern to him as otherwise the telephone with Mr Commerford would not have taken place. There is no obvious reason why his involvement was needed at all.

Second, Mr Kanzira gave an explanation as to why he continued to assist Mr Mayweather once he knew the money was coming from the Company: he felt that having once done Mr Mayweather a favour in helping him he could not refuse to continue. As he explained it, once you commit yourself you cannot keep changing. His reaction was not that there was nothing wrong and he liked helping an acquaintance, but rather was that he could not back away. However it seems to me that once he knew that money was coming from the Company, not Mr Mayweather, he could have backed away perfectly easily, as he was being asked to accept payment from a different source.

Third, Mr Kanzira never had from Mr Commerford any explanation as to why it was right for the Company to be paying over money to Mr Kanzira to pass on to Mr Mayweather. The fact that a voice on a telephone announced itself as a company director and took an instruction from Mr Mayweather as to a future payment can hardly have helped Mr Kanzira to any understanding on the point which mattered, namely why the Company should be paying for Mr Mayweather’s gaming at and credit from casinos.

This then brings me to the Administrators’ claim against Mr Kanzira under section 238 of the 1986 Act. As to this, it seems to me that claim faces real difficulty. The Claimants have submitted, in relation to Mr Kanzira’s argument based on section 40 of the 2006 Act, that the Company did not deal with Mr Kanzira in relation to the payments made to him. If that is right, as I think it is, the Administrators’ claim against him under section 238 of the 1986 Act will fail for the reason that there will not have been any transaction “entered into” by the Company with Mr Kanzira, and there is no evidence that the Company made him a gift. This is a point which I have considered already in relation to the payments made to Elite.

During the trial there were arguments addressed to me by Mr Atkins on a further issue in relation to the section 238 claim. This issue arises if it is assumed (contrary to my conclusion) that Mr Kanzira had agreed with the Company, by Mr Commerford or Mr Mayweather, that he would make payments to Mr Mayweather if the Company first made, and in return for the Company making, payments to him.

The requirement, in the section 238(4) definition of undervalue transactions other than in cases of gifts, is that the terms of the transaction with another person must have provided for the company to receive no consideration (paragraph (a)), or that the transaction entered into with the other person must be “for a consideration” of significantly less value, “in money or money’s worth”, than “the consideration provided by the company” (paragraph (b)). The submission made by Mr Atkins was that the exercise required by paragraph (b) is to look at the matter only from the perspective of the company in question and to compare what it received with what it gave, considering the extent to which the company was measurably worse off as a result of the transaction. This submission was in order to meet the difficulty that from Mr Kanzira’s point of view he gave as much in value as he received, that that looked at in that way there could not have been an undervalue transaction.

To support his submission Mr Atkins invited me to look at the well-known case of Re M C Bacon Ltd [1990] BCC 78. In that case Millett J, as he then was, held that the creation of security over a company’s assets did not qualify as a transaction at an undervalue because it did not deplete the value of the company’s assets to a measurable extent in money or money’s worth, so that there could be no comparison with the value of any consideration moving from the recipient of the security. This part of Millett J’s decision has not met with universal acceptance, but it is unnecessary for me to spend time considering it. What Mr Atkins relies upon is the comment of Millett J at page 92 (emphasis added), that subsection 238(4)(b) “ requires a comparison to be made between the value obtained by the company for the transaction and the value of the consideration provided by the company. Both values must be measurable in money or money’s worth and both must be considered from the company’s point of view . ”

On this basis Mr Atkins submits that section 238(4) requires, in short, consideration of the impact of the relevant transaction on the company’s net assets. Accordingly, if a company engages with a third party to do something, which the third party does, the fact that the value of the consideration provided by the third party may be equal to or greater than anything given up by the company will not matter if what the company has given up has a measurable value and the outcome of the transaction is that the company’s assets have been depleted.

It is unnecessary for me to reach any conclusion on this argument, and therefore I will say no more about it: success on this would not result in the Administrators’ section 238 claim succeeding.

In the result, therefore, as regards Mr Kanzira the Company’s claim succeeds, but only to the extent of £157,000; while the Administrators’ claim against him under section 238 of the 1986 Act fails.