Kinch v Rosling & Ors

This is the assessment of damages in relation to a claim in deceit brought by Mr Kinch, the claimant against the first defendant Mr Rosling who is a solicitor. The second and third defendants have taken no part in the proceedings before me. Judgment for the claimant was entered on 23 June 2008. On 8 October 2008 Sir Thomas Morison ordered that the first defendant’s application to set aside judgment be dismissed and made an order for the payment of £250,000 by way of interim payment. That hearing was attended by counsel for the claimant and the first defendant and the order was complied with. Before me no one has attended on behalf of the first defendant and he was not present. No judgement has been entered against the second or third defendants. The proceedings remain on foot against them.

At the close of the hearing I stated the sums in which I had assessed special damages and interest as set out below. I also made an award of general damages in the sum of £10,000, and summarily assessed the costs.

I said that I would give my reasons later, and these are they.

The claimant is the victim of an advanced fee fraud. In 2000 he wished to raise money to finance the acquisition of shares to take over control of Leicester Football Club (“the Club”). The claimant thought he was in negotiations with an organisation called Tolmie acting through the first defendant as their solicitor. The first defendant made representations to the effect that funds were available, but required the payment of various fees said to be in respect of legal and other expenses in advance of the funds being made available.

Following a hearing on 22^nd November 2005, on 30^th January 2006 the Solicitors Disciplinary Tribunal ordered that the First Defendant be struck off the roll of solicitors. In their findings they addressed, amongst other matters, the events involving the claimant. The position of the First Defendant in those proceedings is set out in paragraph 43 of the Findings. He offered no admission or denial but did not require strict proof of the allegations. I was informed that on the application to set aside judgment no submission was put forward to the effect that there was a defence to the proceedings, the application depending upon an alleged agreement as to the timing of the proceedings.

The claimant built up a successful business in Leicestershire operating coaches and buses that gave him a number of important connections, including the Club. He sold the business for a substantial capital sum. He then took a further interest in the Club’s affairs, which led him to wish to make funds available to the Club and in due course to take control of it. This involved the commitment of money for the expenses of preparing the bid. Although the bid was to be through a corporate vehicle, he undertook personal liability on agreements made by it.

When it became apparent that the funds were not available as represented, the consequences for the claimant were catastrophic. He was liable for debts incurred which he was then unable to pay. He had acquired shares in the Club which represented a minority holding. When his own intended bid fell through, the Club went into administration and his shares became worthless. He was made bankrupt on 15 April 2003. That led to the incurring of substantial costs, and the realisation of his assets led to further losses. The claimant’s bankruptcy has been discharged and the trustee has assigned to him rights of action against the defendant. These proceedings were issued on 26^th January 2007.

The law provides that damages for deceit are to be the sum which serves to put the claimant into the position he would have been in if the representation had not been made to him. The law allows the recovery of consequential losses which are caused by the deceit, including damages which could not reasonably have been foreseen: Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158, 167.

The first and most straight forward head of special damage is in respect of a total sum of £57,000 paid to the defendant solicitors. The first payment made in September 2000 was £25,000 and the second payment made in April 2001 was £32,000. Immediately before the payment on 22^nd September 2000 the first defendant had represented to the claimant that the payment was required for payment of fees including those of German lawyers. The letter dated 21^st September from the defendant firm states that they confirm they have received confirmation that there will be sufficient funds paid into Barclays Bank on 26 September 2000. This was one of many false representations upon which the claimant relied to make the payments that he did. This claim therefore succeeds in full.

The second head claimed is referred to as “Guarantee Deposit Bond”. As pleaded it is a claim in respect of £155,515.62. But in his second witness statement dated 25^th November 2008 the Claimant gave notice that the actual sum under this head should have been £160,410.85. He requested permission to amend without the service. There has been no application notice or any other formality in respect of this request for permission. But there has been no reason put forward in correspondence as to why it should not be granted and I can see none. Accordingly I give permission. This sum was deducted from the claimant’s account with Barclays Bank in respect of a claim received buy Barclays from the beneficiary of a guarantee issued by Barclays at the request of the claimant. According to the letter of advice dated 30^th March 2001 from Barclays, this claim represented the amount of the guarantee plus $5000 bank charges and £542.45 interest. The beneficiary had granted accommodation by way of loan facilities to the claimant. The loan had been required to fund a deposit of US $$ 225,000, which was made at the request of the first defendant to Tolmie.

The next head is a sum of £117,500 in respect of stockbrokers Granville Baird. The claimant had undertaken personal liability for their fees. The agreements with that firm provided that they would be entitled to fixed fees in the event that the transaction failed and those fees total £100,000 plus VAT.

The next head is a sum of £69,902.02 in respect of the fees of solicitors DLA. There are two invoices one for £33,293.22 and the second for £36,608.87.

The next head is a sum of £115,267.15 in respect of loans made to Leicestershire Sporting Limited, the corporate vehicle controlled by the claimant thorough which the acquisition was to have been made. These funds had been lent to that company to fund the salary of an employee, and the engagement of accountants and of public relations consultants. They were irrecoverable, as a result of there being no funds to finance the take over of the Club.

The next head claimed is the sum of £579,825.31 in respect of the losses suffered in respect of the claimant’s shareholding in the Club. In the months up to 26 September 2000 the claimant had acquired 1,240,000 shares in the Club with a view to increasing his holding and so to obtain control. But for the first defendant’s misrepresentations he would have sold the shares by January 2001. In fact he sold a small quantity of them. In statements published in July and August 2002 the Club announced it was experiencing cash flow problems. It went into administration on 21^st October 2002. The claim is arrived at by taking the shares at the then current sale price of 51 pence making £632,400 and deducting proceeds of sale in the sum of £52,574.69.

The next head claim is in respect of additional shares purchased in April 2002 in the sum of £341,541.60. Their value had depended upon the fact that the Club had been relying on the claimant’s proposed take over in order to escape the administration which was otherwise seen to be impending. They ceased to have any value on the Club going into administration

The next head is in respect of the trustee in the sum of £103,343.82. In the particulars of claim the figure under this head is pleaded as “£68,831.50 to date”. I give permission to amend to the figure now claimed. The figure is arrived at by taking sums listed in a document headed Trustee’s Abstract Of Receipts And Payments to 17 March 2008. There is a total in respect of payments in the sum of £181,998.89. From this there has been deducted figures which do not relate to the trustees expenses, in particular income tax, DSS, Customs and Excise, Trade and Expense creditors and VAT receivable. These are expenses that would have been incurred in any event respective of bankruptcy.

The last head of special damage claimed is in respect of losses incurred on the premature surrender of an investment referred to as the Scottish Mutual Bond. The claimant had invested £250,000 in this bond in April 1998, for a period of ten years. Because of his bankruptcy the bond was cashed in after only 4 years on 16 May 2002 realising a sum of £324,311. The claim in respect of this head was originally advanced in the sum of £122,000. Before me Mr Stuart Smith reduced that claim to £18,976.21. This assumes a real return of 2½ % for the remainder of the term of the bond. Interest is calculated at the mid point between the cancellation of the bond on 16^th May 2002 and its maturity on 16^th April 2008, that is 6^th April 2005. As Mr Stuart Smith acknowledges, there is some difficulty in calculating this head of damage. But he submits that this is a fair way of arriving at a figure. It seems to me that it cannot be said with precision what the lost gain would have been. The court must take a broad view when precise figures are difficult to calculate. This figure represents a fair assessment of the loss.

In addition to these heads of special damages, the claimant claims a sum in general damages in respect of the humiliation, distress and anxiety that he has suffered as a consequence of the bankruptcy. On this issue Mr Kinch gave evidence before me. He was a successful businessman who had over his working life built up a business understanding in the community. All the losses he suffered, and the consequential bankruptcy, were foreseeable consequences of the deceit. I do not need to dwell on the details of the effect on the personal lives of himself and his wife that he described to me in evidence. I accept that this has been an experience which has caused him and his wife the greatest distress and anxiety.

The law recognises that general damages under this head may be awarded on a modest scale. See McGregor on Damages 17^th Edition para 41-37. Cases include Saunders v Edwards [1987] 1 WLR 1116, 1128C-H and A v B (Damages: Paternity) [2007] 2 FLR 1051 paras 54–57. Assessment of damages for injury to feelings is inevitably done on a broad basis. The claimant’s suffering has persisted through nearly seven years. Mr Stuart-Smith submits that a figure that would be in line with those recognised in the few other cases in which such awards had been considered would be £10,000. I agree.

At my invitation counsel drew up the revised schedule of claim incorporated into para 2 above, setting out each of the heads of damage which I have held to be recoverable as special damages together with the interest I have allowed upon. I have allowed interest at 8% up to 17August 2008 and at 10% thereafter. That date represents the expiry of an offer under Part 36 made on 25^th January 2007 and the higher figure is awarded in accordance with Part 36.14.