Century Financial Holdings Ltd & Anor v Jamtoff Trading Ltd & Ors

These applications relate to the judgment of HHJ Waksman QC on 14 August 2015 together with his supplemental judgment of 30 September 2015 (see [2015] EWHC 2654 (QB)). Those judgments, in what can be referred to as the ‘original case’, were dealing with a claim for fraudulent misrepresentation brought by Jamtoff Trading Limited (‘Jamtoff’) against Century Financial Holdings Limited (‘Century’), Sanjay Thakrar and Paresh Thakkar. Without intending any disrespect, I shall refer to those last two defendants as ‘Sanjay’ and ‘Paresh’ so as to avoid any confusion between them. Jamtoff succeeded in that claim for fraudulent misrepresentation against all three defendants and was awarded damages of €795,060. The defendants were held to be jointly and severally liable. It was also decided in the supplemental judgment that contribution as between Century and Sanjay, on the one hand, and Paresh, on the other, should be fifty-fifty. As I understand it, those damages, plus interest and costs, have not been paid to Jamtoff. Permission to appeal his decision was refused by HHJ Waksman QC and, on application to the Court of Appeal, was refused by Sales LJ on 25 January 2016.

It is important as background to set out what HHJ Waksman QC said about the credibility of Sanjay in his judgment at [17]:

“… I regarded Mr Thakrar as generally unreliable, evasive and a person who was caught out on a number of occasions by the documents. This is consistent with how John Baldwin QC, sitting as a High Court judge, found him to be in the case of Jean Christian Perfumes Ltd & Anor v Thakrar (t/a Brand Distributor or Brand Distributors Ltd) [2011] EWHC 1383 at paragraph 17 of his judgment. The judge said Mr Thakrar was on many occasions evasive and made unsatisfactory excuses for not answering a question and that it was clear from the contemporaneous documents that what he said in his examination-in-chief was untrue.”

HHJ Waksman QC went on to say the following about Paresh in his judgment at [18]:

“Mr Thakkar I also find was unreliable on key points, which could often be judged by the many contemporaneous documents available in this case.”

It is also important to mention what Sales LJ said in refusing permission to appeal. The applications for permission to appeal were ‘totally without merit’. He noted that the judgment of the trial judge was ‘thorough and well reasoned’, that the learned judge ‘was fully entitled’ to make the relevant findings of dishonesty against Century, Sanjay and Paresh, and that ‘the judge’s order in relation to the liability of each appellant was correct’. Sales LJ concluded, as HHJ Waksman QC had done before him, that:

“There is no real prospect of success on appeal on any of the grounds advanced, and no other compelling [reason] to grant permission to appeal.”

It is unnecessary for me to go into all the details of the original case. Suffice it to say that Jamtoff entered into two contracts of sale with a company called Expopet Green International Limited (‘Expopet’) to sell to Expopet quantities of polyethylene terephthalate (‘PET’). Paresh is the commercial director of Expopet. Expotet received the consignments of PET but Jamtoff was not paid for them. The payment was meant to be by letters of credit issued by Century. Sanjay is Century’s principal director and majority shareholder. The first letter of credit was never issued; and the second letter of credit was issued but not paid out on.

The essential reasoning of HHJ Waksman QC was that Jamtoff had been the victim of a fraud by Century and Sanjay, on the one hand, and Paresh on the other. He found that there were two fraudulent misrepresentations for which the defendants were jointly and severally liable. The first was a representation that Century was a bank when it was not. The second was a representation that the first letter of credit had been issued when it had not been. Jamtoff relied on those misrepresentations in suffering its loss. In deciding that the defendants were jointly and severally liable, the judge said, at [127], that the three defendants were ‘all in it together’.

Last year, Century and/or Sanjay started proceedings bringing two claims against Paresh and Jamtoff (as I understand it, permission is sought to amend the claim forms to include Expotet as a defendant and permission is also sought to amend the particulars of claim in both claims).

The first claim (Claim No LM-2017-000127) is brought by Century and Sanjay against Paresh and Jamtoff and is to set aside the judgment and order of HHJ Waksman QC dated 14 August 2015 on the grounds that it was procured primarily by the fraud of Paresh but also (by reason of amendments for which permission is sought) by the fraud of Jamtoff. I shall refer to this as ‘the fraud set aside claim’.

The second claim (Claim No LM-2017-000173) is brought by Century against Paresh and Jamtoff and is for the delivery up of the bill of lading for the second consignment of PET or damages based on the conversion of the bill of lading. The essence of this claim appears to be that the defendants did not deliver the bill of lading to Century so that Century lost its security for non-payment under the second letter of credit. For shorthand, I shall refer to this, as it was referred to throughout the hearing, as ‘the delivery up claim’. Again, I am asked by the claimants to give permission for various amendments to the particulars of claim, including adding claims for damages for breach of contract and negligence. Throughout I am going to assume in the claimants’ favour, although it is unnecessary for me to decide this, that permission will be granted for all the various amendments sought.

What I am here dealing with are applications by Jamtoff, dated 19 July 2017 and 29 August 2017, to strike out the fraud set aside claim and the delivery up claim under CPR 3.4. It should be noted that Paresh has also applied, in an application dated 17 May 2018, to strike out the claims but I am not dealing with his applications today.

It is relevant to mention, as background, that Jamtoff has registered a charge over, and has obtained an order for the sale of, Sanjay’s residential property in London as a means of enforcing its judgment in the original case. As I understand it, there is an interim stay of proceedings in relation to that sale pending the determination of these applications.

The fraud set aside claim is a claim by Century and Sanjay to set aside the judgment of HHJ Waksman QC on the grounds that that judgment has been undermined by new evidence not available at the time of that judgment which, it is submitted, shows that the court was misled by the fraud of Paresh (and secondarily, as now alleged, by the fraud of Jamtoff). The alleged new evidence has emerged from witness statements produced in a criminal prosecution brought by Century and Sanjay against Paresh (and some of those witness statements were, in turn, triggered by the investigations of the liquidator of Expotet).

The claimants (and I shall continue to refer to Century and/or Sanjay as the claimants although they are the respondents to these strike out applications) submitted that the new evidence shows that the only relevant misrepresentations can have been those made by Paresh in his dealings with Jamtoff; and that, by the time of the involvement of Century and Sanjay, Jamtoff had already started to perform the contract by moving the goods from warehouses. It was Paresh alone who was misleading Jamtoff, thereby causing Jamtoff to suffer the loss. It is submitted by the claimants that HHJ Waksman QC was deceived by the fraud of Paresh as was Century, Sanjay and Jamtoff.

To be more specific, it was submitted by the claimants that Paresh had been in contact by e-mails in early June 2012 with Jamtoff. By an e-mail of 22 June 2012, Paresh had sent what was submitted to be a forged copy of a letter of credit to Jamtoff. That was before the first meeting of Century and Sanjay with Paresh on 28 June 2012. Jamtoff was relying on that forged letter of credit when it started to authorise transportation of the goods from warehouses on 29 June 2012. It was only later, on 4 July 2012, that Century produced a draft letter of credit which was sent to Jamtoff by Paresh, not by Century or Sanjay.

It was submitted on behalf of the claimants that the fact that Paresh had sent a forged copy of a letter of credit to Jamtoff by an e-mail of 22 June 2012 only emerged from new evidence during the criminal proceedings. The fact that Jamtoff had started to transport the goods on 29 June 2012 also emerged from the new evidence.

It was also submitted on behalf of the claimants that the forging of the letter of credit by Paresh, and the later involvement of Century and Sanjay, showed that, contrary to what the judge had thought, Century, Sanjay and Paresh were not all in it together. Paresh had fraudulently misled not only Jamtoff, Century and Sanjay, but also the judge.

I was taken by Mr Bogle, counsel for Century and Sanjay, to many paragraphs in the judgment of HHJ Waksman QC where, he submitted, the judge had misinterpreted what had happened because he had incorrectly taken the view that Century/Sanjay and Paresh were in it together. He submitted that, once one realised that Paresh was the fraudster, one could see where the judge had gone wrong.

Mr Bogle also submitted that the fresh evidence could not, with reasonable diligence, have been obtained earlier.

As a matter of law, the fraud set aside claim is based on the long-standing doctrine that a judgment obtained by the fraud of a party can be set aside. Several authorities were cited to me by both sides showing the application and scope of this fraud doctrine. They included, for example, Flower v Lloyd (1877) 6 Ch D 297; Cinpres Gas Injection Ltd v Melea Ltd [2008] EWCA Civ 9, [2008] RPC 17; Noble v Owens [2010] EWCA Civ 224, [2010] WLR 2491 at [24]; Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA Civ 328, [2013] 1 CLC 596; and Salekipour v Parmar [2017] EWCA Civ 2141, [2018] QB 833.

Clearly the power to set aside a judgment for fraud must be very carefully exercised for fear that one may undermine the finality of litigation. Put another way, there is the danger of this being used as a means of circumventing the failure to be given permission to appeal. Nevertheless, it is a distinct and different route than appealing against a judgment. The latter has of course been closed off in this case because of the refusal of Sales LJ to grant permission.

As will become apparent, it is unnecessary for me to decide a potentially difficult question of law as to whether the setting aside of a judgment for fraud applies only where the successful party was fraudulent, as submitted by Mr Edwards, counsel for Jamtoff; or whether the power to set aside extends to where any of the parties to the action was fraudulent as was submitted by Mr Bogle. I shall assume, without in any way deciding, that it is sufficient that there was fraud by any of the parties such as to undermine the judge’s findings and judgment.

It is also unnecessary for me to decide the precise test of causation under the setting aside for fraud doctrine. Mr Edwards submitted that the causation test imposed a high threshold – because of the need to keep the doctrine within narrow bounds – and he relied especially on Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA Civ 328, [2013] 1 CLC 596, at [106], where Aikens LJ, with whom the other members of the Court of Appeal agreed, said the following:

“[I]t must be shown that the fresh evidence would have entirely changed the way in which the first court approached and came to its decision.”

Mr Bogle submitted that, even if that test applied, the claimants satisfied it; but that the better view on the authorities is that that puts the legal hurdle too high and that the correct test, as set out in Hamilton v Al Fayed (No 2) [2001] EMLR 15, at [34] (supported by obiter dicta of Sir Terence Etherton MR in Salekipour v Parmar [2017] EWCA Civ 2141, [2018] QB 833 at [93]), is that there is ‘a real danger that [the fraud] has affected the outcome of the trial’. I shall assume, without deciding, that it is sufficient for the claimants to satisfy that less stringent test.

It is unnecessary for me to decide those legal questions as to the precise scope of the setting aside for fraud doctrine. This is because, even taking the wide view of the doctrine put forward by the claimants, I am clear that the claim for setting aside the judgment for fraud is misconceived in this case.

The reason for that is essentially because, even if the evidence alleged is new, and even if that evidence is true, it would not undermine the judgment of HHJ Waksman QC. His judgment rested on there being two fraudulent misrepresentations for which the defendants were jointly and severally liable. The first was the representation that Century was a bank and it was not; and the second was the representation that the first letter of credit had been issued when it had not been.

Even if it were correct that Paresh had sent a copy of a forged letter of credit by e-mail of 22 June 2012 to Jamtoff, that does not undermine the finding of the judge that Sanjay had misrepresented that the first letter of credit had been issued when it had not been. Nor does it significantly affect the judge’s finding of reliance; the goods were not shipped until 7 July 2012 which was after the representation by Century and Sanjay that a letter of credit had been issued. Even if it were correct that Jamtoff relied partly on the forged letter of credit sent by e-mail of 22 June 2012, that does not negative Jamtoff’s reliance on Century’s false representation that the letter of credit had been issued, nor of course its reliance on the misrepresentation that Century was a bank.

In other words, even if there was a misrepresentation by Paresh through the forged letter of credit on which Jamtoff relied, that does not negative Jamtoff’s reliance on Century’s false representations as found by the judge.

It is clear that, in the context of fraudulent misrepresentation, the legal test for reliance is not an onerous one for the misrepresentee to satisfy. As laid down in Edgington v Fitzmaurice (1885) 29 Ch D 459, it is sufficient that the misrepresentation was ‘present to his mind’ or ‘influenced’ the misrepresentee. ‘But for’ causation does not need to be established.

I should stress that there is no new evidence undermining the judge’s finding that, on 4 July, Century/Sanjay did make a representation that a letter of credit had been issued. It was accepted by the judge at [38] that it was Paresh who had sent on the draft letter of credit from Sanjay to Jamtoff representing that it had been issued. But the judge decided that this was also a representation by Sanjay because, in his words at [114], it was inconceivable that Sanjay did not know that Paresh would take those steps.

There are three further important general points about the claimants’ submissions. First, many and probably most of those submissions were challenging HHJ Waksman QC’s decision not on the basis of new evidence or that he was misled by Paresh but rather on the basis that there was a different possible interpretation of the facts that could have been taken and which the judge did not take. Those are appeal points and do not provide a justification for setting aside the judgment for fraud.

Secondly, some of what is alleged to be new evidence was not new evidence at all. In particular, the alleged forged letter of credit, attached to the e-mail of 22 June 2012, was in the documents at the trial before HHJ Waksman QC.

Thirdly, if Sanjay was misled by Paresh in the way in which the claimants now submit, it was open to Sanjay at the trial to put forward aspects of that case. Although there may have been some details missing, much of what he is now alleging could have been put forward by him from the knowledge he had at the time. But he did not do so.

Moreover, in my view, this alleged new evidence does not undermine HHJ Waksman QC’s decision that the three defendants were in it together and were jointly and severally liable.

It might be that the alleged new evidence could be relevant to the supplementary judgment as to the respective contributions, as between themselves, of Century and Sanjay on the one hand and Paresh on the other. It might even mean that Century and Sanjay have a claim for deceit against Paresh. But the fact that, within a joint fraud, the fraudsters may have in some respects lied to each other does not undermine their joint and several liability to the victim of their fraud. In short, none of this undermines the judgment in favour of Jamtoff.

The claimants have sought to amend the particulars of claim to add allegations that Jamtoff was itself fraudulent. However, there is little relevant new evidence in relation to that. In particular, I doubt whether much weight can be placed on the evidence of Mr Pulley to the effect that Jamtoff was experienced in letters of credit. Although of course Mr Pulley’s evidence has not been tested at this stage, I recognise the force of the criticisms of his evidence put forward by Mr Edwards in his skeleton argument at paragraphs 32-34. These criticisms include that Mr Pulley describes himself as ‘a private investigator’ and professes no expertise in relation to international trade in general or documentary creditors in particular. It is clear from the description he gives that all he has done has been to conduct ‘internet-based research’. It appears that he does not speak Russian and so where his ‘research’ has brought to life Russian language documents, he has used ‘Google Translate to convert those documents into English’. Mr Pulley’s evidence is likely to have no value beyond the documents he produces. He is unable to speak to the problems of the material he has found on the internet which is particularly noticeable in the case of the ‘import genius database’; and he gave no assurance at all as to the accuracy of the translations, many of which contained complex and technical passages.

In any event, the alleged new evidence in relation to Jamtoff is largely irrelevant. There is no doubt that Jamtoff made mistakes in relation to this process. HHJ Waksman QC thought this was down to naivety but that Mr Mileev and Ms Zagoskina (for Jamtoff) were reliable witnesses. Even if they were more experienced in international letters of credit than the judge thought that does not affect the essential point that they made mistakes. The judge was aware of the mistakes but plainly decided that they did not break the chain of causation or nullify Jamtoff’s reliance on the misrepresentations.

Moreover, the fact that an organisation may have experience in letters of credit does not mean that the individuals with whom HHJ Waksman QC was concerned, namely Mr Mileev and Ms Zagoskina, themselves had that experience.

Nor do I think there is anything in the argument that Jamtoff may have presented a shipping order form rather than a bill of lading. What is a clear and important point, accepted by the judge, was that the document presented by Jamtoff was discrepant. Nothing new alters that fundamental finding. And it should be noted that it was in Jamtoff’s interests to present conforming documents because otherwise it was risking non-payment under the letter of credit.

Jamtoff’s application to strike out the fraud set aside claim under CPR 3.4 therefore succeeds because there are no reasonable grounds disclosed for bringing the claim. Although not necessary for my decision, it is also an abuse of process: the claim is designed to find a way round the refusal of permission to appeal the decision in the original case and the strategy of Sanjay is to attempt to thwart the judgment obtained against him by Jamtoff.

I now turn to Jamtoff’s second application to strike out under CPR 3.4. This is to strike out the delivery up claim brought by Century. Century’s claim is that, as regards the second consignment of goods, Century is entitled to delivery up and/or damages for conversion by Jamtoff in that Jamtoff did not deliver the bill of lading to Century. Permission is also sought to amend the particulars of claim to include claims against, inter alia, Jamtoff for damages for negligence and/or breach of contract.

As a matter of law, the inclusion of claims for breach of contract and negligence is misconceived. There is no contractual duty or tortious duty of care owed to anyone by a seller – who is the ‘beneficiary’ under a letter of credit arrangement - to present conforming documents. All that happens is that, if the beneficiary fails to present conforming documents, the beneficiary does not get paid under the letter of credit. In the course of the hearing this was conceded, at least as regards contract, by Mr Bogle.

As regards the claim for delivery up/damages for conversion against Jamtoff, this would require the claimants to show that somehow Jamtoff took the bill of lading (and therefore effectively the goods for which it is the document of title) for its own use. There is nothing in HHJ Waksman QC’s judgment or any alleged new evidence to suggest that that was so. That is not surprising because Jamtoff is the seller of the goods and wants payment. Nor, in any event, can I see how Century can be said to have any possessory right to the bill of lading or the goods; Century is the issuing bank under a letter of credit and there can be no claim for conversion of a bill of lading until the issuing bank has received the bill of lading (in return for payment) which it did not.

In any event, this sort of claim should have been raised in the proceedings in the original case and the doctrine of res judicata prevents it being raised now. As is said in Mr Edwards’ skeleton argument for Jamtoff at paragraph 62.4: ‘Everything necessary for it to be advanced was known at the time of the original action and for it to be advanced now is a classic Henderson v Henderson (1843) Hare 100 abuse.’ I agree.

The delivery up claim should therefore be struck out under CPR 3.4 because there are no reasonable grounds disclosed for bringing the claim.

For the above reasons, Jamtoff succeeds in both its applications to strike out under CPR 3.4.