Frederick & Ors v Positive Financial Solutions (Financial Services) Ltd

By this Claim, issued on 2^nd March 2015, the Claimants seek to recover from the Defendant, Positive Solutions (Financial Services) Ltd (Positive Solutions), compensation for losses that they have allegedly suffered as a result of the conduct of a Mr Qureshi and a Mr Warren.

In barest outline it is argued that Positive Solutions are vicariously liable for the conduct of Mr Warren; alternatively that, in his actions in respect of the Claimants, Mr Warren acted with the ostensible authority of Positive Solutions, such that that company is liable for losses arising from his conduct; alternatively, again, that Positive Solutions owed, in its own right, a duty of care to the Claimants, such as to render it liable for the consequences of Mr Warren’s and Mr Qureshi’s activities; alternatively, again, that as regards the fourth named Claimant, the transaction, in respect of which compensation is sought, was regulated business carried on by Positive Solutions in respect of which Positive Solutions is liable to pay statutory damages, pursuant to section 150 of the Financial Services and Markets Act 2000, as then in force (now section 138D(2) of that Act), by reason of breaches of the rules and duties owed by authorised persons, as defined in that Act, contained in the Mortgages: Conduct of Business Sourcebook (MCOB). Positive Solutions is an authorised person, for purposes of the Act, regulated, at the material time, by the Financial Services Authority and authorised by that authority to advise, among other things, in respect of mortgage contracts.

The circumstances in which it is said that these claims arise, as set out in the Claimants’ Particulars of Claim. are as follows.

In early 2008, Mr Warren, through an associate, Mr Qureshi, who was a friend of the Third Claimant, Janine Frederick, approached the Claimants, who are all members of the same family with the proposal that they should make short term loans to Mr Warren to facilitate a property development that Mr Warren was intending to carry out in Wembley, pursuant to which, at the end of a six month period, they would secure a fixed return and, as I understand it, the return of their monies. The Claimants were interested in the proposal but lacked cash resources to make the proposed investment.

In that context, it was Mr Qureshi’s suggestion that Mr Warren should help the Claimants to raise money to invest by way of re-mortgages of their respective properties. Mr Warren was, as it is pleaded, an Independent Financial Adviser ‘employed or otherwise authorised’ by Positive Solutions and, as it is pleaded, his ‘regulated position’ gave comfort to the Claimants, in entering into the proposed re-mortgages.

The re-mortgages, in question, were these: a re-mortgage by the First and Second Claimant of a ‘buy to let’ property at 11 Old Oak Road, London W3; a re-mortgage by the Third Claimant, the daughter of the First and Second Claimants, of a ‘buy to let’ property at 10 Oakleigh Avenue, Surbiton; a re-mortgage by the Fourth Claimant, the sister of the Second Claimant, of a property, her home, at 112 Elmbridge Avenue, Surbiton.

The applications for re-mortgage were, in each case, prepared, submitted and successfully arranged by Mr Warren.

In respect of the First and Second Claimant, the application submitted by Mr Warren stated, as was not the case, that the First Claimant had an annual income of £80,000 with an intended retirement age of 75, when, in point of fact, his income, as a local authority employee, was £47,000. The application further stated, as, again, was not the case, that the purpose of the loan was a pound for pound replacement of existing borrowing, when, in fact, the purpose was to raise capital for the proposed investment. Neither the First nor the Second Claimant, so it is pleaded, were aware of these mis-statements.

In respect of the Third Claimant, the application submitted by Mr Warren stated, as was not the case, that her annual earnings were £92,000, with a further £25,000 in non-regular overtime, when, in point of fact, her income was £58,000. The application further stated, as, again, was not the case, that she was a manager at an investment bank, when, in fact, she was an associate and, further, that she lived at the relevant property, when, in fact, it was a ‘buy to let’ property. She was not, it is pleaded, aware of any of the foregoing mis-statements.

In respect of the Fourth Claimant, the application submitted by Mr Warren stated, as was not the case, that she was a Human Resources manager, earning £83,750 per annum, when, in fact, she was a single mother with a child, earning some £26,000 per annum as a personal assistant. Like the other Claimants, the Fourth Claimant was not, so it is pleaded aware of the mis-statements contained in the application.

In reliance upon these applications, Abbey advanced to the Claimants the following sums, which were then applied in the following way.

The First and Second Claimants received an advance of some £500,000, of which £217,500 went to pay off bridging finance obtained by a company, HGQ Limited (HGQ), of which Mr Warren and Mr Qureshi were directors, and some £39,000 went to Mr Warren. The balance went to redeem the First and Second Claimants’ then existing mortgage.

The Third Claimant received an advance of some £430,000, on an interest only basis and without any supporting investment vehicle to provide repayment at term. Of the advance, some £246,000 was paid to HGQ and the bulk of the balance in redemption of her existing mortgage.

The Fourth Claimant received an advance of some £386,000, on an interest only basis and, again, without any supporting investment vehicle to provide repayment at term. Of her advance, some £53,000 went to Mr Warren’s personal account and the balance, after redemption of her existing mortgage, to HGQ.

The monies advanced by each Claimant to Mr Warren, or HGQ, have been lost by the failure of the property development and, in these proceedings, the Claimants and each of them claim the losses they have incurred by reason of that failure, credit being given for partial recoveries already, apparently, obtained elsewhere. The total amount claimed is in the order of £400,000.

In regard to the causation of those losses, the Claimants’ case is that, had Mr Warren acted properly as their agent (and, therefore, as a fiduciary) the clear conflict of interest as between the Claimants and Mr Warren would have resulted in his refusal to act, in the applications not being made and the monies, therefore, not being advanced and lost.

Alternatively, as a fiduciary, Mr Warren should have given full disclosure of the content of the applications, at which point the Claimants would have withdrawn, the applications would not have been made and, again, the monies advanced and lost would not have been advanced and lost.

As a further alternative, Mr Warren assumed a responsibility and, in consequence, a duty of care to the Claimants to advise them as to the suitability of their applications, such that, if that duty had been complied with, the Claimants would have been advised not to proceed and would not have proceeded.

Alternatively, again, by reason of Mr Warren’s assumption of responsibility and the duty of care, arising therefrom, any application made upon behalf of the Claimants by Mr Warren should have been made truthfully, in which event the Abbey would either not have advanced any monies, or significantly, smaller sums of money, with a corresponding diminution in the Claimants’ loss.

The primary basis upon which it is said that Positive Resolutions bears legal responsibility for Mr Warren’s conduct and for its alleged consequences is said to be found in Mr Warren’s relationship with Positive Solutions; it being said, as already outlined, that, by reason of that relationship, Positive Solutions are vicariously responsible for the wrongdoing of Mr Warren, or, in the alternative, that Mr Warren acted, in respect of the transactions now complained of, with the ostensible authority of Positive Solutions.

The secondary basis upon which it is contended that Positive Solutions bears responsibility for Mr Warren’s misconduct and its consequences is said to arise from an assumption of responsibility by Positive Solutions, in respect of that conduct, derived from the fact that it was only by reason of his status as an agent of Positive Solutions that he had access to the electronic ‘portal’ through, or via, which the mortgage applications were made and only by reason of that access that the applications now complained of could have been made. That assumption of responsibility is said to give rise to a ‘direct’ duty of care as between Positive Solutions and the Claimants

The further basis of liability to the Fourth Claimant arises, it is said, from the fact that Positive Solutions was an authorised person and that the mortgage application in respect of the Fourth Claimant was regulated business carried on by Positive Solutions under the Act, such as to give rise to a duty in Positive Solutions to advise as to the suitability of the transaction. That liability can, of course, only arise if Positive Solutions was acting in the transaction and, therefore, if Mr Warren was, or is to be treated as, Positive Solutions’ agent in respect of the transaction.

Positive Solutions challenges the several bases upon which its liability is alleged to arise and, by this application, seeks to strike out the Claim, as disclosing no reasonable grounds for making the Claim or, in the alternative, for judgment on the Claim in its favour, on the basis that the Claim has no realistic prospects of success.

Both the Claimants and Positive Solutions have filed evidence. The material facts relevant to the involvement of Positive Solutions and its liability were helpfully summarised by Mr Howarth, counsel for Positive Solutions, in his skeleton argument. Subject to some elaboration, his summary was not disputed by Mr Bennion-Pedley, for the Claimants.

It is not in dispute but that Mr Warren was, for some purposes, the agent of Positive Solutions. He was appointed as such by an agreement dated 29^th November 2005.

Under that agreement he was appointed a ‘Registered Individual for the purpose only of introducing Applications by Clients for new Contracts for submission to Institutions specified by the Registered Individual and approved by’ Positive Solutions. Applications for a re-mortgage would, in principle, fall within that rubric and, accordingly, the applications in this case, prima facie, fall within the scope of the agency created by the agreement.

The agency agreement, however and as one would expect, contained, at clause 2.4, a number of provisions intended to exclude the liability of Positive Solutions for any conduct carried on by Mr Warren in excess of the authority granted to Mr Warren by the agreement. In particular, the agreement stated, in terms, that Positive Solutions was not to be bound by acts of Mr Warren which exceeded the authority granted by the agreement, or by fraudulent actions on his part, and included, also, provisions making clear that Mr Warren did not, by reason of, or pursuant to, the agreement become an employee of Positive Solutions.

The agreement also provided, within clause 10 of the agreement, that Mr Warren should make reasonable enquiries as to any client’s ability to pay for any products (i.e. mortgages) contracted for; should not act prejudicially towards the interests of Positive Solutions, or its customers; and should not effect any transaction which would place Mr Warren in a position of conflict of interest with any client. By clause 10.7 and apparently, to emphasise Mr Warren’s responsibility to Positive Solutions, as a Registered Individual, for compliance with, inter alia, the foregoing provisions, the agreement provided, further, that any act or omission of the Registered Individual was to be treated as an act or omission of Positive Solutions.

In light of that last provision it does not seem to me to be at all clear that any act or omission of Mr Warren, contrary to the terms of his agency (as his alleged conduct undoubtedly was), would necessarily be conduct carried on in excess of his actual authority. The sense of the agreement seems to me to be, rather, that the Registered Individual must conduct himself in compliance with the terms of the agency precisely because Positive Solutions will be liable, as principal, for his acts and omissions if he does not.

That said, it seems clear to me that on the facts alleged by the Claimants, in this case, Mr Warren did act in excess of authority. On the pleaded facts, there can be no doubt that the applications submitted by Mr Warren were knowingly untrue and, hence, dishonest and fraudulent. On that footing, it is clear, from clause 2.4 of the agreement, that the submission of those applications fell outside Mr Warren’s actual authority. Mr Bennion-Pedley did not seek to argue to the contrary.

The Claimants, themselves, had no personal dealings with Mr Warren. They did not meet him, speak to him, or receive any written communications from him. Their dealings were exclusively with Mr Qureshi. Mr Qureshi, himself, had no relationship at all with Positive Solutions.

The Claimants, likewise, did not receive any communications from, or have any contact with Positive Solutions. They received no correspondence, such, for example, as any letter, or document emanating from Positive Solutions which might indicate to them that Mr Warren was Positive Solutions’ agent for purposes of their applications.

The only matters relevant to Positive Solutions which came to the attention of the Claimants were, firstly, that the mortgage offers from Abbey contained a statement to the effect that ‘Positive Solutions recommended that you take out this mortgage’; and, secondly, that the Third Claimant had found Mr Warren’s entry in the Financial Services Register, as a ‘client facing’ investment adviser for Positive Solutions and that she and the other Claimants derived ‘comfort’ from the fact that Mr Warren was FSA regulated. The statement in the mortgage offers was, as I understand it, an electronically generated product of the fact that the applications had been submitted, to Abbey, via Abbey’s electronic ‘portal’, to which Mr Warren only had access by reason of his status as an agent of Positive Solutions and which, therefore, identified the applications as emanating from Positive Solutions.

Commission was paid to Positive Solutions, by Abbey, in respect of the transactions. The position there, which I did not understand to be challenged, or disputed, by Mr Bennion-Pedley, was that, in the first instance the commission monies paid to Positive Solutions were placed in a suspense account because Positive Solutions could not match the payments with any transaction within its systems. In due course, however, on the strength of false documentation submitted by Mr Warren, purporting to show that the transactions had taken place in 2009 (rather than 2008) and that a proper advice process had been undertaken, the commission monies were, at that stage, allocated.

Against the foregoing factual background, Mr Bennion-Pedley puts, at the forefront of his argument, the submission that Positive Solutions is liable to the Claimants upon the ground of vicarious responsibility. Having regard to that argument and its importance to this case, after the hearing had concluded and following the handing down by the Supreme Court of two judgments pertaining to vicarious responsibility (Cox .v. Ministry of Justice [2016] UKSC 10 and Mohamud .v. W M Morrison Supermarkets Plc [2016] UKSC 11) I gave permission to both counsel to lodge additional submissions. I am grateful for those submissions and for the submissions and arguments advanced by both counsel at the hearing of this matter.

In reliance upon the decision of the House of Lords, in Dubai Aluminium Co Limited .v. Salaam [2003] 2 AC 366 and, in particular, upon the speeches of Lord Nicholls and Lord Millett in that case, Mr Bennion-Pedley submitted that even in a case of agency, as Dubai Aluminium had been (the agency being that arising between co-partners), liability by way of vicarious responsibility could arise, that that liability could arise even in circumstances where the conduct complained of fell outside the authority of the agent in question and even where liability could not be founded upon ostensible authority.

Liability, he submitted, would arise where the connection between the wrongful conduct and the actions which, here, the agent, was authorised to take was so close that, for purposes of the liability of the principal, the conduct of the agent (here Mr Warren) might fairly be regarded as carried out by the agent in the course of his agency.

The rationale, or underlying policy of the common law, giving rise to such a liability was, he submitted, to be found, as set out in paragraph 21 and 22 of the speech of Lord Nicholls in Dubai Aluminium and as endorsed in the judgment of Lord Reed, in Cox (at paragraphs 23 and 24), in the recognition by the courts that those who carry on business through the agency of others create a risk that harm will be caused to others by the agents who carry on that business, such that, when those risks ripen into loss, it is just that the business should be responsible for compensating the person wronged.

I have no doubt but that these core submissions of principle are correct. Mr Howarth, for Positive Solutions, sought to argue that vicarious responsibility found no place in circumstances where the alleged wrongdoer was an agent rather than an employee and that, in the agency context, liability was determined solely by questions of actual, or ostensible authority.

I do not think that that submission can stand up in the context of the modern authorities. Dubai Aluminium, itself, was, as already stated an agency case, as was Northampton Regional Livestock Centre Co Ltd .v. Cowling [2015] EWCA Civ 651, also relied upon by Mr Bennion-Pedley. Looked at more widely, it seems clear to me that the modern approach to vicarious liability, as most recently explained by the Supreme Court in Cox, is not determined by the application of a ‘badge’ of agency, or employment, but by the determination, in any given particular case, as to whether the circumstances of the wrong doing are such as to enable the court to say that the risk of the loss caused by that wrong doing should ‘fairly and properly’ (echoing Lord Nicholls in Dubai Aluminium) be regarded as arising in the course of the relevant agency, employment, or other relationship, such that liability should fall upon the business, or other entity, which placed the wrongdoer in the position whereby he could cause the loss of which complaint is made.

In that context, the key question is whether, in the terms used in Dubai Aluminium, there is the necessary close degree of connection between the alleged wrong doing of Mr Warren and that which, by dint of his agency, he was authorised to do. As acknowledged by Lord Nicholls and, subsequently, by Lord Phillips in what has come to be known as the Christian Brothers case ( [2013] 2 AC 1) and Lord Toulson, in Mohamud, phraseology, such as close connection, while focusing attention in the right direction, affords no guidance, in itself, as to the necessary degree of connection in any given case. The task is left to the court, case by case, to make an evaluative judgment, having regard to all the circumstances, but having particular regard to the assistance provided by previous case law.

In regard to the circumstances, Mr Bennion-Pedley prayed in aid the fact that the agency granted to Mr Warren by Positive Solutions was an agency which allowed or authorised him, on behalf of Positive Solutions, to introduce clients to lenders approved by Positive Solutions for the purpose of procuring mortgages, or, as here, re-mortgages, and that, to that end and by reason of his agency, Mr Warren had access to the electronic ‘portal’ which allowed him to make such applications. It is submitted that that is precisely what Mr Warren did. He used the ‘portal’ to make mortgage applications on behalf of the Claimants, in his capacity as an agent of Positive Solutions. The fact, that he acted dishonestly, consequently in excess of authority and, substantially, for his own purposes, in raising funds for what turned out to be his abortive development scheme, should not disguise the closeness of the connection between the conduct for which he was authorised and his actual conduct, or that without the ability to access the ‘portal’, arising from his agency, the conduct in respect of which complaint is made could not have occurred.

Mr Bennion-Pedley, in this regard, prayed in aid, also, clause 14.3 of the agency agreement, which provides that the ‘Registered Individual shall indemnify (Positive Solutions) against any liability ….. arising out of or otherwise connected with any misrepresentation, negligence, dishonesty or fraud by the Registered Individual’. That provision reflected, he submitted, the acknowledgment by Positive Solutions, that in appointing a Registered Individual, such as Mr Warren, as agent, it created a risk that harm might be caused by the dishonest conduct of the agency to which the Registered Individual was appointed for which it might be liable and, accordingly, an acknowledgment by Positive Solutions, within its own documentation, of the closeness of the connection between that agency and any dishonest conduct carried on by the agent. Reliance was also placed upon the fact that commission income was obtained by Positive Solutions from the transactions complained of as demonstrative of the closeness of connection between the conduct complained of and the operation of the agency in generating income for Positive Solutions.

I find these submissions compelling. It seems to me that the circumstances relied upon by Mr Bennion-Pedley do demonstrate a very close degree of connection between the conduct complained of (the making by Mr Warren of dishonest re-mortgage applications on behalf of the Claimants in his capacity as an agent of Positive Solutions) and the conduct (the making of legitimate and honest re-mortgage applications in that capacity) which he was authorised to effect upon behalf of Positive Solutions. Put simply and shortly, Mr Warren was doing, albeit dishonestly and for his own purposes, that which he was otherwise authorised to do and used, as the medium of his dishonest activity, the portal which was only open to him by reason of his status as an agent of Positive Solutions. The connection between his agency and his wrong doing could scarcely be closer.

The fact that Positive Solutions, by its own contractual documentation, contemplated the need for an indemnity from its agent, arising from his possible dishonesty in the conduct of his agency, seems to me to further demonstrate that Positive Solutions, itself, acknowledged the possibility of its own liability for the dishonesty of an agent in the position of Mr Warren and, ipso facto, that the risk of harm, or loss, caused by such dishonesty was one which was so closely, or sufficiently, connected with the operation of the agency granted to Mr Warren as to potentially render it liable, as the party creating the agency and creating that risk, for any such loss, or harm.

The fact that Positive Solutions received commission from the transactions, albeit in the circumstances outlined earlier in this judgment, is a further and not unimportant indicator that the transactions of which complaint is made were transactions carried out by Mr Warren in the course of his operation of his agency, such as to give rise to the commission payments to Positive Solutions which would be expected to arise from such transactions.

Mr Howarth, very understandably, placed considerable emphasis upon the lack of contact between Positive Solutions and the Claimants and, indeed, Mr Warren and the Claimants and upon the distinction, drawn in Cox, between the situation where the activities of the primary tortfeasor (here Mr Warren) were ‘entirely attributable’ to the conduct of a recognisably identifiable business of his own, or a third party and the situation where the primary tortfeasor was acting as an integral part of the business activities carried on by the defendant. His submission was that the conduct complained of was entirely attributable to the property development business, or opportunity, with which Mr Warren and Mr Qureshi were concerned.

I am not persuaded that the want of communication or contact between the Claimants and Positive Solutions is determinative. As explained by Lord Millett in Dubai Aluminium, at paragraph 124, by reference to the decision of the Court of Appeal in Hamlyn .v. John Houston & Co [1903] 1 KB 81, the fact that there are no dealings, as between a claimant and a defendant said to be vicariously liable for the conduct of his agent, is no bar to liability.

Nor am I persuaded that the conduct of which complaint is made is properly characterised, as Mr Howarth would have it, as entirely attributable to the property development business carried on by Mr Warren and Mr Qureshi. There is no doubt but that the activities complained of arose out of Mr Warren’s need to secure monies from the Claimants for his property development. That, however, does not mean that the process of securing those monies, through the medium of his agency with Positive Solutions, was, wholly, or even largely attributable to that business. The conduct complained of, whatever its ultimate, or ulterior purpose, was, for the reasons already identified, so closely connected with his agency with Positive Solutions as to be properly regarded as arising in the course of that agency and, as such, the losses arising from that conduct, if otherwise recoverable, should properly be the responsibility of Positive Solutions.

In this regard, it seems to me that the very fact that these transactions could be carried on by Mr Warren, by reason of his status as an agent of Positive Solutions, notwithstanding Positive Solutions’ effective ignorance of the transactions in question, far from affording a reason for a denial of liability, or responsibility, tends strongly in the opposite direction. This seems to me to be the classic case where a person is placed, unsupervised, in a position where, acting, as set out herein, in what can be properly regarded as the course of his agency, he is enabled to take advantage of the incidents of his agency to act in a way that causes loss, or harm, to others. It is Positive Solutions which has put him in that position and, accordingly, it is Positive Solutions that should take legal responsibility for the consequences arising from that fact.

I am fortified in that view by a consideration of the authorities.

In Dubai Aluminium, itself, Lord Millett made clear, at paragraph 124, that if regard is had to the closeness of the connection between the conduct complained of and the class of acts that the wrongdoer was called upon to perform and to the rationale of vicarious liability, namely (as earlier set out) that those who carry on a business, or other enterprise, should bear legal responsibility for the risks created by the wrongful acts committed by the agents by whom the business, or enterprise, is carried on, then no relevant distinction is to be drawn between an improper mode of performance by an agent in carrying out the class of acts he was called upon to perform and the performance of those acts, as in this case, for an improper purpose.

That view reflected what Lord Millett had, himself, stated, in Lister .v Hesley Hall Ltd [2002] 1 AC 215, to the effect that it is no answer to a claim based upon vicarious responsibility that the agent, or employee, was acting exclusively for his own benefit and reflected, also, the view of Lord Steyn, in that case (in particular, at paragraph 17), to the effect that, in determining whether a particular employer, or principal, bears, or may bear, vicarious responsibility, the decision rests, not upon the presence, or absence, of benefit to the employer, or principal, from the act complained of, but upon an ‘intense focus’ on the connection between the nature of the employment, or, as here, agency of the wrongdoer, and the wrong of which complaint is made.

Both those speeches, explain and rely on the earlier decisions of the House of Lords, in Lloyd .v Grace Smith & Co. [1912] AC 716, and of the Court of Appeal, in Morris .v. C W Martin & Sons Ltd [1966] 1 QB 716. In both instances, the connection between the wrong doing of the employee, in those cases, and the class of acts that the employee had been authorised to conduct, such as to give rise to vicarious liability in the employer, was that the employer had, in each case, put the employee in the position in which, by reason of the class of acts he had been authorised by his employer to carry out, he was enabled to secure a dishonest gain. In Lloyd .v Grace Smith the wrongdoer was put in a position whereby he procured possession of documents of title enabling him to defraud the firm’s client. In Morris .v. C W Martin it was the employer who placed the fur stolen by the employee into the custody of the employee.

While the analogy is, of course, not exact, it seems to me that, as in those two cases, it was the principal, Positive Solutions, which, in this case, put Mr Warren in a position, whereby, by giving him authority to act upon its behalf in procuring mortgage offers and by giving him the wherewithal, in the shape of access to the electronic ‘portal’, required to process such applications, as agent of Positive Solutions, he was enabled to make the dishonest re-mortgage applications upon behalf of the Claimants, which is alleged have caused their loss. It does not seem to me that the connection between Mr Warren’s position, as agent of Positive Solutions, and his alleged misconduct is, merely, that that agency gave him the opportunity to act in a way that has allegedly caused loss to the Claimants. It is not to be equated with the position, discussed in argument in Lister .v Hesley Hall and referred to by Lord Millett, at paragraph 73 of his speech, in that case, of the solicitor’s clerk who steals the contents of the client’s handbag. Mr Warren’s agency provided him both with the status and the means to make the applications complained of and without that status and that means the applications could not have been made. The applications complained of are integrally related to his agency and, for that reason, sufficiently connected to give rise to vicarious liability.

In Dubai Aluminium, both Lord Nicholls and Lord Millett were concerned to chart the borderline, or the limits, of the principle they advanced and, in particular, to absolve from the application of the principle those cases where, in familiar language, an agent, or employee, was on a frolic of his own. Lord Nicholls, at paragraph 13, drew the line at the point where the employee, or agent, acted ‘only in furthering his own interest’ and held that, at that point, vicarious liability would not apply. I do not think that that view is correct.

As already stated, it does not reflect the views of Lord Steyn and Lord Millett, in their speeches in Lister. Nor does it reflect either the decisions or the reasoning, in Lloyd .v Grace Smith and Martin .v. C W Morris, which decisions Lord Nicholls chose to explain as being derived from the application of narrower principles (see paragraphs 27 and 28 of Dubai Aluminium), nor the decision in Lister itself. Nor is it consistent with the approach to vicarious responsibility which has been applied in cases of sexual abuse post Lister and in which, as in Lister, the abuse in question was self evidently not carried out for the benefit of the entity, or organisation, held liable. That approach, as explained by Lord Reed, in Cox, at paragraph 29, is not confined to cases of sexual abuse, but is one of general application.

Conclusively, for this purpose,in Mohamud, Lord Toulson, with whom all the other Justices agreed, drew particular attention to Lloyd .v Grace Smith and to the rejection, in that case, of the proposition, derived from a misreading of earlier authority (Barwick .v. English Joint Stock Bank (1867) 2 LR Exch 259), that in order to establish vicarious liability it was necessary to show that the wrongdoer had acted for the benefit of the person upon whom liability was sought to be imposed. As it was put, by Lord Millett, in Lister, at paragraph 71, that proposition might be a sufficient condition to establish liability, but it was not a necessary one.

It follows that even if, in this case, the conduct of Mr Warren is to be characterised as being entirely for his own benefit and the commission, in fact, procured by Positive Solutions, by reason of his dishonest applications on behalf of the Claimants, as an irrelevant incident, that characterisation would not, of itself, preclude a finding of vicarious liability, if, otherwise, the test for such liability is satisfied.

What would preclude such a finding would be a determination, such as that to be found in Kooragang Pty .v Richardson & Wrench [1982] AC 462, that the conduct complained of (there, the making of negligent mortgage valuations) was carried on without any connection with the business of the defendant upon whom liability was sought to be imposed (see Lord Wilberforce at page 475 below A) and where, in consequence, the employee, in that case, even while performing acts of the class that he was authorised to do, so clearly departed from (and so clearly acted outside) the scope of his employment that his employer would not be liable for his wrongs.

I do not regard Kooragang, or, similarly, those of the ‘deviation’ cases, in which drivers have been found to have so far stepped outside the limits of their employment as to preclude vicarious liability, as establishing a limitation, as such, upon the operation of the principles whereby vicarious responsibility is to be attached, which arise from Dubai Aluminium and Lister .v. Hedley Hall and subsequent authorities. Rather, it seems to me that, in those cases, the evaluative judgment, described by Lord Nicholls, in Dubai Aluminium, provides the conclusion that the connection between the conduct complained of and the class of acts which the relevant agent, or employee was authorised to carry out, when subjected to the intense focus, contemplated by Lord Steyn, in Lister, is not sufficiently close to warrant the conclusion that the risk of loss, or harm, created by the agency, or employment, in question should result in and warrant the imposition of vicarious liability.

In this case, I am satisfied, for the reasons already given, that there is a sufficiently close connection between the wrongful conduct alleged against Mr Warren and the class of acts that he was authorised to carry out under and in respect of his agency as to warrant liability for the loss, or harm, arising from that conduct being borne by Positive Solutions. This is not a case, like Kooragang, where the conduct of the employee was, in all material respects, entirely extraneous to his employment and was aptly described, by |Lord Millett, in Dubai Aluminium, as ‘moonlighting’. This is a case where the conduct of Mr Warren, which is complained of, was conduct of the very type that he was authorised to conduct, which he conducted, albeit dishonestly and for his own purposes, through the processes made available to him by reason of his agency, where the risk of loss arising from his abuse of his agency and those processes arose out of the status and facilities granted to him by reason of his agency and where, therefore, recoverable loss, if established should fairly fall upon Positive Solutions.

In the result, it not being suggested, at this stage, that the conduct of Mr Warren, in making the allegedly dishonest applications in question, did not give rise to an actionable wrong, or was not causative of loss and it being my view, for the reasons given, that that loss, if established, is, or would be recoverable from Positive Solutions, I decline to strike out the case, or to give summary judgment in favour of Positive Solutions.

In light of the foregoing, I can deal relatively briefly with the other bases of liability advanced against Positive Solutions by the Claimants.

I do not think that any case of ostensible authority can be made out. For ostensible authority to arise, there must be some holding out of the wrongdoer by the alleged principal as being authorised to carry out the particular acts complained of. The fact that Positive Solutions may have published Mr Warren’s name, as its agent, in the Financial Services Register, is wholly insufficient to establish that he was held out by Positive Solutions as authorised to make the applications complained of.

Additionally, as is well understood, ostensible authority is an estoppel based doctrine, whereby a principal, having held out another as his agent, is estopped from denying the agency in circumstances where the party asserting ostensible authority has relied upon the holding out. The evidence here, from the Claimants, specifically the Third Claimant, is that they derived ‘comfort’ from Mr Warren’s regulated status. There is no suggestion, however, that they relied upon the entry in the Register as a holding out of Mr Warren as acting for Positive Solutions in respect of their transactions.

The electronically generated statement, referred to in paragraph 33 of this judgment, could, likewise, not give rise to a relevant holding out. Not merely did the statement come into existence after the applications had been made, so that, at best, it would constitute a ratification, but, more significantly, it was a statement which emanated from the lender, Abbey, and not from Positive Solutions at all.

The consequence of the foregoing, given that, as already set out, it is not suggested that Mr Warren was acting within his actual authority, is that no direct liability (as opposed to vicarious liability) can be established against Positive Solutions itself, arising from Mr Warren’s agency. In so far, therefore, as such a direct liability is pleaded against Positive Solutions, that liability is unsustainable and Positive Solutions is entitled to judgment on the issue and to require the Claimants’ pleadings to be amended to that effect.

In particular, the claim advanced, now only on behalf of the Fourth Claimant, for so-called statutory damages under and by reason of section 150 of the Financial Services and Markets Act 2000, cannot be made out and should be struck out.

The remaining basis of liability put forward by the Claimants is advanced upon the footing that a direct duty of care arose as between Positive Solutions and the Claimants by reason of an assumption of responsibility by Positive Solutions for the mortgage transactions effected by Mr Warren, arising, as already stated, from the fact that those applications would not have been entertained by the lender, Abbey, had it not been for Mr Warren’s status as agent and his consequent ability to access the electronic ‘portal’.

Although this duty was said, in argument, by Mr Bennion-Pedley to derive from Hedley Byrne & Co. Ltd .v. Heller & Partners Ltd [1964] AC 465, as the argument developed, it seemed to me to derive rather more from the so-called ‘two stage’ test, identified by Lord Wilberforce in Anns .v. Merton LBC [1978] AC 728, whereby proximity was equated with foreseeability of harm and whereby a duty of care arose from that foreseeability, subject to any limitation to be imposed upon that duty for reasons of policy (the second stage).

In essence, Mr Bennion-Pedley submitted that it was reasonably foreseeable that the Claimants might suffer loss and damage, if the applications submitted through the ‘portal’ on their behalf were not suitable, and that that foreseeability gave rise to a sufficiently proximate relationship between the Claimants and Positive Solutions as to render it fair and reasonable for Positive Solutions to bear the responsibility for losses arising from unsuitable applications being submitted, in the absence of reasonable care being taken by Positive Solutions to avoid the possibility of unsuitable applications being made. In argument, the exercise of reasonable care suggested was by way of an appropriate monitoring process in respect of the use of the ‘portal’.

I am not persuaded by this submission. It seems to me that a duty of the kind and of the width and ambit envisaged, owed, it would seem, to any applicant applying for a mortgage through the agency of a person such as Mr Warren, is not one which should be regarded as arising from a relationship of sufficient proximity to give rise to a duty of care, or one where it would be just and reasonable for such a duty to be imposed.

Since the decisions of the House of Lords, in Murphy .v. Brentwood DC [1991] 1 AC 398 and, most particularly, Caparo Industries Plc .v. Dickman [1990] 2 AC 605, the courts have applied a three stage test for duty; firstly, foreseeability; secondly and separately, an appropriate relationship of proximity between the person owing the alleged duty and the person to whom that duty is owed; thirdly, a wide ranging evaluation of factors, such as to decide whether it is fair, just and reasonable that a duty be imposed. In the application of the test to new situations, rather as in the approach to vicarious responsibility, advocated by Lord Nicholls, in Dubai Aluminium, the courts have had particular regard to the previous case law and to the situations where, previously, duties of care have been held to exist, in order to obtain guidance from that case law as to the existence, ambit, or limit, of any suggested duty of care and have, in consequence, adopted an incremental approach to the development of new duties of care.

In this case, considering the matter by reference to the incremental approach just set out, Mr Bennion-Pedley did not refer me to any authority such as to indicate that the duty for which he contended amounted to no more than a modest, or incremental, extension of some well understood, or existing, duty of care.

Rather, as it seems to me, the duty contended for would give rise to a wide ranging duty of care imposed upon organisations such as Positive Solutions in respect of applications made via, or through, their agents, even where the agent in question acted in excess of actual and without ostensible authority and, potentially, even where the conduct of the agent complained of was properly identified, or characterised, as being a frolic of the agent’s own and outside the scope of the principal’s vicarious responsibility, even as that concept has been advanced and developed by modern authority.

It seems to me that such a wide duty, if it existed, would extend the potential liability of entities, such as Positive Solutions well beyond the range of those to whom they should be regarded as being in a proximate relationship.

It is one thing for a defendant, such as Positive Solutions, to owe a duty of care in respect of its conduct in acting, by an agent, for a client (the tortious duty of care, which sits alongside the contractual duty of care owed by a solicitor to his client, is an obvious example). It is, likewise, not at all impossible to conceive that a like duty of care may arise in respect of the conduct of an agent, where, although not acting within actual authority, the agent has been held out by the defendant as acting for the defendant in respect of a particular matter. In both those instances, certainly the former, there is a clear proximity between the defendant and the client, or the person to whom there has been a holding out.

The position, as I see it, is wholly different where, as here, the duty is said to extend to persons, such as the Claimants, in circumstances where the Defendant’s agent, Mr Warren, was acting outside his actual or ostensible authority and where, therefore, there was no relationship at all between the Claimants and Positive Solutions (let alone a sufficiently proximate relationship) such as to found a duty of care. Put another way, by reference to assumption of responsibility, it does not seem to me to be at all realistic to contend that, objectively analysed and simply by reason of the fact that Positive Solutions’ agent, with, or without, the facility of access to the electronic ‘portal’, was in a position to abuse his agency, Positive Solutions, thereby, assumed responsibility for all and every abuse carried out by its agent.

Nor do I think, even if an assumption of responsibility, or an appropriate relationship of proximity, could be made out, that it would, in the context of a case such as the present one, be just, or reasonable, for the court to impose a duty of care.

The duty contended for, namely a duty of care arising to protect persons such as the Claimants from the effects of an agent’s abuse of his position, must be seen in the legal context already discussed at length in this judgment; that is to say, in the context of the circumstances in which vicarious liability can be imposed in respect of such abuse.

In that context, there does not seem to me to be any good reason, or any requirement of justice, to impose the direct duty of care upon Positive Solutions which has been contended for. The modern authorities, commencing with Lister .v. Hesley Hall and Dubai Aluminium, have focused upon the fact that circumstances may exist whereby, as a matter of justice, the common law will impose liability upon a person who has so organised his affairs as to create a risk that the wrongful conduct of his agents, or employees, or others in like positions, and where that risk has ripened into loss. Those authorities, as already discussed, have defined the circumstances, whereby, irrespective of the strict ambit of any given agency, actual, or ostensible, and irrespective of any particular terms of employment, liability may be imposed.

It seems to me that, in light of those authorities, there is no occasion for the imposition of a separate and independent duty of care, covering, in effect, the same ground as that already covered by the developed law of vicarious responsibility. The common law, as developed, in respect of vicarious responsibility, by the modern authorities and the ‘close connection’ test, derived from those authorities, already deals with the position of the agent, or employee, who abuses the position to which he has been entrusted. There is no call for any further intervention.

In the result, I am quite satisfied that there is no proper basis for the imposition of the duty of care contended for by the Claimants and that the liability of Positive Solutions for the misconduct of Mr Warren, if established at trial, falls to be determined and is determined, as set out in this judgment, solely by the application of the principles of vicarious responsibility.

The consequence of the foregoing is that the Claimants must now amend their pleadings so that the Claim proceeds to trial only upon the basis of vicarious responsibility. The other grounds of claim are unsupportable and must be removed.