Stevenson & Anor v Singh & Ors

This action arose out of the desire of the claimants, Mr. and Mrs. Julian Stevenson, to purchase the property known as and situate at 5, Manor House Drive, Brondesbury Park, London NW6 (“the Property”). On 8 December 2009 Mr. Kashim Bukar Shettima was registered at HM Land Registry as the proprietor of the Property with title absolute. It was noted in the Land Certificate relating to the Property as at 13 May 2011 that Mr. Shettima had purchased the Property on 25 November 2009 at a price of £1,850,000. As at 13 May 2011 no legal charges were secured upon the Property. The Mr. Shettima who was registered as the proprietor of the Property at HM Land Registry on 8 December 2009 I shall describe in this judgment as “the True Owner”. The True Owner had the same name as the fifth defendant in this action, but they were not the same person. The fifth defendant (“the Impersonator”), who has not been traced or served with the claim form in this action, impersonated the True Owner in giving instructions to the sixth defendants, Messrs. Haque & Hausmann (“H & H”), a firm of solicitors, to act on his behalf in the purported sale of the Property to Mr. and Mrs. Stevenson. With the instructions which it appeared to have from the Impersonator H & H ostensibly completed the sale of the Property to Mr. and Mrs. Stevenson on 8 June 2011 and received from the solicitors acting on behalf of Mr. and Mrs. Stevenson, Rae Nemazee LLP (“RN”) the purchase price ostensibly agreed for the Property, £1,250,000. In accordance with instructions given by the Impersonator H & H instructed its bankers, Barclays Bank Plc (“Barclays”), to transfer the £1,250,000 as to £625,000 to the first defendant, Mr. Surjit Singh, the money being transferred electronically to an account (“the Singh Account”) numbered 52792740 maintained by Nationwide Building Society (“Nationwide”); as to £565,000 to the second defendant, Mr. Richard Phillips, the money being transferred electronically to an account (“the Phillips Account”) numbered 90041335 maintained by Barclays; and as to £58,200 to the fourth defendant, Mr. Al-Amin Rahman, the money being transferred electronically to an account (“the Rahman Account”) numbered 23948803 maintained by Barclays. The balance of £1,800 H & H kept as their own fees for acting in the transaction.

In this action Mr. and Mrs. Stevenson made claims against H & H for breach of an alleged warranty “that it was authorised and instructed by the registered freehold owner of the Property to act for him on the sale of the Property to the Claimant”. The claims against H & H were settled before trial by a consent order dated 19 September 2012. By the schedule to the order provision was made for a payment of £1,200,000 to be made on behalf of H & H by 4.00 p.m. on 3 October 2012 and for H & H to pay the reasonable costs of the claim of Mr. and Mrs. Stevenson against H & H. I was told that the payment provided for had been made on 3 October 2012. H & H took no part in the trial.

It was common ground that H & H transferred to an account maintained at Barclays on behalf of the solicitors acting on behalf of Mr. and Mrs. Stevenson in this action, Fladgate LLP, amounts totalling £58,200 in three transfers between 19 and 26 July 2011. The position adopted in his pleaded Defence by Mr. Rahman, who did not appear at the trial and was not represented, was that that £58,200 represented repayment by him to H & H of the amount originally transferred to him, he returning the money once it had come to his attention that the money was said to have been part of the proceeds of a fraud. That was not accepted on behalf of Mr. and Mrs. Stevenson, who pursued claims against Mr. Rahman for a total sum of £1,250,000, notwithstanding the payments totalling £58,200 which it was accepted had been received.

It will be necessary to consider in detail the explanations offered as to why these things were done, but, for the present, it is convenient to focus simply on what happened to the money respectively transferred to Mr. Singh and Mr. Phillips by H & H on 8 June 2011.

Mr. Singh spent a total of £573,627.50 purchasing 60 100 gram and 50 250 gram gold bars from Baird & Co. Ltd. (“Baird”) on 10 June 2011, as was demonstrated by an invoice issued by Baird on that date, a copy of which was put in evidence. Of the balance of £51,372.50 Mr. Singh transferred £40,000 to his sister, Mrs. S. K. Sanghera, the seventh defendant, as she accepted. Mrs. Sanghera was made a defendant in this action, but she and Mr. and Mrs. Stevenson compromised the claims against her and she took no part in the trial. The terms of settlement as between Mr. and Mrs. Stevenson and Mrs. Sanghera were embodied in a consent order dated 28 September 2012. Those terms provided, inter alia, for Mrs. Sanghera to pay an amount of £17,500 in settlement of the claim against her by 26 October 2012. I was told that that sum had not been paid by the start of the trial. It was unclear what happened to the remaining £11,372.50 of the £625,000 paid to Mr. Singh.

Mr. Phillips produced statements of the Phillips Account which showed that the sum of £565,000 was received into that account on 9 June 2011. Prior to receipt of that sum the account was overdrawn by £675.25. On 10 June he gave instructions to Barclays, as recorded in the statements of the Phillips Account, to transfer £14,095 to the ninth defendant, Mrs. Donna Zammit, the wife of the third defendant, Mr. Terence Zammit, and £98,000 to Miss Lesley Mason, his own partner. The statements of the Phillips Account put in evidence showed the following transactions which Mr. Phillips contended were relevant to what happened to the remainder of the £565,000: on 13 June 2011 £10,000 was withdrawn in cash from a branch of Barclays in Colchester, Essex, £10,000 was withdrawn in cash from a branch of Barclays in Brentwood, Essex, a payment of £16,665 was made by electronic transfer to Father J. Kelly, and a payment of £200,000 was made by electronic transfer to Freedex Ltd. (“Freedex”), the tenth defendant; on 15 June 2011 an amount of £150,000 was transferred electronically to a company called The Lucky Falcon Ltd.; and on 17 June 2011 an amount of £50,000 was withdrawn in cash from the Colchester branch of Barclays which I have already mentioned. The various amounts which I have mentioned do not explain what happened to all of the £565,000. The sums identified thus far come to £548,760. £16,240 seemed to be unaccounted for. The transactions which I have noted were not the only transactions on the Phillips Account during the period 9 June 2011 to 17 June 2011, and the balance shown as at close of business on 17 June 2011 was £45.49. Mr. Phillips had another account at Barclays, called an Everyday Saver account (“the Everyday Saver Account”) and numbered 13835030. That account had a nil balance as at 9 June 2011. There were various transactions between the Everyday Saver Account and the Phillips Account between 13 June 2011 and 17 June 2011, but the upshot was that the balance on the Everyday Saver Account was back to nil at close of business on 17 June 2011. There were two transactions on the Everyday Saver Account between 13 June 2011 and 17 June 2011 which were not simply transfers from or to the Phillips Account, a cash withdrawal of £5,000 on 14 June 2011 and a cash withdrawal of £10,000 on 16 June 2011. Mr. Phillips said that he had withdrawn £5,000, which was part of the £565,000, in cash on 14 June 2011, and that seemed in fact to have come from the Everyday Saver Account. Mr. Phillips did not mention in his explanations as to what had happened to the £565,000 the £10,000 withdrawn from the Everyday Saver Account in cash on 16 June 2011.

By an order dated 27 February 2012 Master Fontaine directed, so far as is presently material, that:-

“Unless the Fourth Defendant do by 4 pm on Monday 12 ^th March 2012 give standard disclosure by list in compliance with the Order of Master Fontaine dated 25 November 2011, his Defence herein be struck out and the Claimant be at liberty to enter judgment in the sum of £1,250,000 plus interest to be assessed.”

Mr. Rahman did not comply with that direction, with the consequence that his Defence was struck out. That notwithstanding, the claimants did not, in advance of the commencement of the trial, seek to enter judgment against him.

By an order dated 29 March 2012 judgment against Mrs. Zammit was entered by Master Fontaine in the sum of £18,095, together with interest, but she was given permission to defend the balance of the claims against her. However, she did not serve a witness statement, and the effect of an unless order dated 23 July 2012 made by Master Fontaine was that it was not open to Mrs. Zammit to call any evidence at the trial. Moreover, by an order for disclosure made on the same occasion Master Fontaine directed that unless Mrs. Zammit gave standard disclosure by 4.00 p.m. on 17 August 2012 her defence be struck out and the claimants be at liberty to enter judgment against her for an amount to be assessed at the trial. In fact the claimants did not elect, before the commencement of the trial, to enter judgment against Mrs. Zammit for an amount to be assessed at the trial.

On 27 February 2012 Master Fontaine entered judgment in default of acknowledgment of service against the tenth defendant, Freedex, in the sum of £1,250,000, plus interest to be assessed. That judgment was set aside by order of Master Fontaine made on 23 July 2012 giving “Permission to defend the claim on condition that there is a payment into court by the Tenth Defendant of the sum of £200,000 by 28 August 2012”. That condition was not met. Consequently it was not open to the Freedex to defend the claim.

It was a striking feature of this action that, by the start of the trial Mr. and Mrs. Stevenson had recovered, from the repayments totalling £58,200 made by H & H in July 2011 and the settlement with H & H rather more than the £1,250,000 which had been paid over to H & H as the purchase price of the Property. In addition Mr. and Mrs. Stevenson had a judgment against Mrs. Zammit for the principal sum of £18,095 and Mrs. Sanghera had agreed to pay £17,500 in settlement of the claim against her. Those circumstances prompted the question what actually was the point of the trial, a matter to which I shall return.

On the second day of the trial settlements were agreed between both Mr. Phillips and Mr. and Mrs. Stevenson, and between Miss Mason and Mr. and Mrs. Stevenson. Mr. Phillips agreed to pay Mr. and Mrs. Stevenson a total of £75,000 by instalments, whilst Miss Mason agreed to pay them a total of £98,000 by instalments. None of the instalments agreed fell due for payment before the end of the trial.

In the Re-Amended Particulars of Claim most attention was given to the case against H & H. As against the other defendants, the payments on 8 June 2011 caused by H & H to be made to the accounts of the first, second and fourth defendants which I have mentioned were pleaded at paragraph 11, and the payments which I have identified by Mr. Phillips to the eighth, ninth and tenth defendants were pleaded in paragraph 12A. The case against Mr. Zammit was set out thus at paragraph 12:-

“To the best of the Claimant’s knowledge and belief and upon the admission of the Third Defendant, made in writing on about 20 June 2011 the sum of £565,000 was paid by the Second Defendant to the Third Defendant, who has further claimed he has paid the same less £96,085 to the Fifth Defendant.”

Against the background of the payments to which reference was made in paragraphs 11 and 12A of the Re-Amended Particulars of Claim, and the pleas in paragraph 12, the case against the first to fifth, inclusive, and seventh to tenth, inclusive, defendants was pleaded in this way:-

“The Fifth Defendant fraudulently represented to the Claimant through his solicitor and agent the Sixth Defendant that he was the registered freehold owner of the Property and entitled to sell the same. In so doing, he conspired with the First, Second, Third and Fourth Defendants or some of them, to defraud the Claimant of the purchase price paid for the Property, namely £1,250,000.

Further, the sale of the Property by the Fifth Defendant and receipt of the purchase monies by each of the First, Second, Third, Fourth and Fifth Defendants and Seventh, Eighth, Ninth and Tenth Defendants as set out above amounted to a dishonest assistance in a breach of trust.

Further or in the alternative, the purchase monies were paid under a mistake of fact and the Claimant is entitled to be repaid the same as monies had and received to the use of the Claimant.”

It is, perhaps, important to notice that it was not alleged that any of the seventh, eighth, ninth or tenth defendants had conspired with anyone to do anything. All that was said against them was that each had provided dishonest assistance in a breach of trust or had received monies which he, she or it ought to disgorge by way of restitution. The pleaded case thus could not have had the result that any of the seventh, eighth, ninth or tenth defendants was found liable in conspiracy to pay damages assessed by reference to the losses suffered by Mr. and Mrs. Stevenson as a result of the conspiracy alleged – it could only, if successful, have the consequence that each had to hand back that which he, she or it had received. I think that that was accepted at the trial on behalf of Mr. and Mrs. Stevenson by Mr. Charles Douthwaite, who appeared on their behalf. He did not seek any further judgment against Mrs. Zammit.

Before coming to the evidence relevant to the cases against the first, third and tenth defendants, the only defendants who had been served, but who had not settled the claims against them by the end of the trial, it is convenient to remind oneself as to the law in relation to conspiracy and dishonest assistance.

A convenient modern analysis of the tort of conspiracy is to be found in the judgment of the Court of Appeal in Kuwait Oil Tanker Co SAK v. Al Bader [2000] 2 All ER (Com) 271 in these passages from the judgment of the court delivered by Nourse LJ:-

“107.

It is common ground that there are two types of actionable conspiracy, conspiracy to injure by lawful means and conspiracy to injure by unlawful means. The first is sometimes described simply as a conspiracy to injure and the second as a conspiracy to use unlawful means (see eg Clerk and Lindsell on Torts (17th edn, 1995) pp 1267-1268, paras 23-76). In our view they are both conspiracies to injure and their ingredients are the same, with one crucial difference. In both cases there must be conspiracy to injure the claimant, but in the first case (in which the means employed would otherwise be lawful) the predominant purpose of the conspiracy must be to injure the claimant whereas in the second case, although the defendant must intend to injure the claimant, injury to the claimant need not be his predominant purpose.

108.

We shall treat them as different torts, although, as it seems to us, they are better regarded as species of the same tort. It matters not. For present purposes we would define them as follows. (1) A conspiracy to injure by lawful means is actionable where the claimant proves that he has suffered loss or damage as a result of action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him, where the predominant purpose of the defendant is to injure the claimant. (2) A conspiracy to injure by unlawful means is actionable where the claimant proves that he has suffered loss or damage as a result of unlawful action taken pursuant to a combination or agreement between the defendant and another person or persons to injure him by unlawful means, whether or not it is the predominant purpose of the defendant to do so. We shall call them a ‘lawful means conspiracy’ and an ‘unlawful means conspiracy’ respectively.

109.

Those principles seem to us to be consistent with the authorities, including in particular Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1981] 2 All ER 456, [1982] AC 173 and Lonrho plc v Fayed [1991] 3 All ER 303, [1992] 1 AC 448, which analyse the leading cases. (See also for example Rookes v Barnard [1964] 1 All ER 367 at 400, [1964] AC 1129 at 1209 where Lord Devlin drew a clear distinction between the two types of conspiracy.)

110.

It is important to note that the tort of conspiracy to injure by unlawful means is different in significant respects both from the crime of conspiracy and from the law of contract. A criminal conspiracy is in essence an agreement to commit a crime and, as such, is complete when the agreement is made, whether or not it is carried out. For this reason care must be taken in considering decisions in criminal cases where (as here) the question is whether the tort of conspiracy was committed. Lord Diplock put it in this way in the Shell Petroleum case:

'Regarded as a civil tort, however, conspiracy is a highly anomalous cause of action. The gist of the cause of action is damage to the plaintiff; so long as it remains unexecuted, the agreement, which alone constitutes the crime of conspiracy, causes no damage; it is only acts done in execution of the agreement that are capable of doing that. So the tort, unlike the crime, consists not of agreement but of concerted action taken pursuant to agreement.' (See [1981] 2 All ER 456 at 463, [1982] AC 173 at 188.)

In that passage Lord Diplock appears to have been referring to both types of conspiracy. The essence of the unlawful means conspiracy is injury to the claimant as a result of an unlawful act or acts where two or more people have combined to cause the injury. It is not necessary that every overt act is done by every conspirator, but the act must be done pursuant to the conspiracy or combination.

111.

A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that, as the judge pointed out (at p 124), it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O'Connor LJ in R v Siracusa (1990) 90 Cr App R 340 at 349 is of assistance in this context:

'Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made, or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company's name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.'

Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. In a criminal case juries are often asked to decide whether the alleged conspirators were 'in it together'. That may be a helpful question to ask, but we agree with Mr Brodie that it should not be used as a method of avoiding detailed consideration of the acts which are said to have been done in pursuance of the conspiracy.

112.

In most cases it will be necessary to scrutinise the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy or combination. It will be the rare case in which there will be evidence of the agreement itself. Curiously this is such a case, although it appears to us that in crucial respects it is also necessary to draw inferences as to the extent of the agreement from what happened after it. Thus the essential nature of the agreement can be seen in part from the evidence of Mr Al Bader and Captain Stafford, although, especially in the case of Captain Stafford, the extent of the agreement will depend upon inferences to be drawn both from the surrounding circumstances and subsequent events.”

I think that it follows that, in order to be liable as a conspirator participating in a conspiracy to use unlawful means, a party must at least be aware of the means intended to be used, aware that the use of those means would be unlawful and agree to the use of those means. If the party in question was not aware of the means intended to be used, or not aware that the use of those means would be unlawful, it could not be said that that party was a party to a combination to use unlawful means. That said, it will rarely, if ever, be the case that clear evidence of an agreement or combination will be put before the Court. Proof of a conspiracy is almost always going to depend upon drawing inferences from such evidence as is available, what are often referred to as “the overt acts” performed pursuant to the alleged conspiracy. The initial focus of the inquiry is whether the acts themselves are suggestive of a conspiracy. If so, before reaching a conclusion as to what inferences, if any, it is appropriate to draw, it is necessary to consider any explanation offered by one performing an overt act or overt acts for what he, she or it did. An implausible or incredible explanation will not merely not displace the initial inferences suggested by the nature of the act or acts themselves, but may itself provide further evidence in support of the initial inferences.

If and insofar as it was found, on the evidence in the present case, that a particular defendant had been a party to a conspiracy to defraud Mr. and Mrs. Stevenson, it was not necessary to go further and consider any question of what is often called, by way of short-hand, “dishonest assistance”. That convenient, if inaccurate, phrase at least indicates the nature of the liability which needs to be considered – helping those who are the primary villains to carry out their dishonest scheme. However, the slightly expanded version of the short-hand, “dishonest assistance in a breach of trust”, draws attention to the necessities, if there is to be liability for “dishonest assistance”, for there to be, first, a trust, and, second, a breach or breaches of that trust. In this context a “trust” means a fiduciary obligation owed by the person or persons alleged to have been assisted in breaching it to the claimant. In the present case what was contended for was what is sometimes called a “Quistclose” trust by reason of the decision of the House of Lords in Barclays Bank Ltd. v. Quistclose Investments Ltd. [1970] AC 567. Such a trust arises where money is paid by one party to another to be devoted by that other to a specific purpose. In the present case the sum of £1,250,000 paid by Mr. and Mrs. Stevenson through RN to H & H was paid for the sole purpose of being applied to the purchase of the Property. I do not think that that proposition was in dispute before me. Equally, I do not think that it was in dispute that applying that sum to other purposes amounted to breaches of trust. The case against certainly Miss Mason, Mrs. Zammit and Freedex was that each, by receiving the money which it was not in dispute she or it had received, had thereby assisted in the breaches of trust to which I have referred.

For the reasons explained by Lord Nicholls of Birkenhead in giving the advice of the Privy Council in Royal Brunei Airlines Sdn. Bhd. v. Tan [1995] 2 AC 378, to describe the relevant wrongdoing as “knowingly assisting” in a breach of a fiduciary obligation is misleading and may tend to obscure the fact that what is necessary to be proved to make out the case is dishonesty. At page 391B – D of the report Lord Nicholls said:-

“Before leaving cases where there is real doubt, one further point should be noted. To inquire, in such cases, whether a person dishonestly assisted in what is later held to be a breach of trust is to ask a meaningful question, which is capable of being given a meaningful answer. This is not always so if the question is posed in terms of “knowingly” assisted. Framing the question in the latter form all too often leads one into tortuous convolutions about the “sort” of knowledge required, when the truth is that “knowingly” is inapt as a criterion when applied to the gradually darkening spectrum where the differences are of degree and not kind.”

Earlier in the advice, at page 385A – C Lord Nicholls had formulated the correct principle in this way:-

“These examples suggest that what matters is the state of mind of the third party sought to be made liable, not the state of mind of the trustee [that is, the person owing the fiduciary obligation]. The trustee will be liable in any event for the breach of trust, even if he acted innocently, unless excused by an exemption clause in the trust instrument or relieved by the court. But his state of mind is essentially irrelevant to the question whether the third party should be made liable to the beneficiaries for the breach of trust. If the liability of the third party is fault-based, what matters is the nature of his fault, not that of the trustee. In this regard dishonesty on the part of the third party would seem to be a sufficient basis for his liability, irrespective of the state of mind of the trustee who is in breach of trust. It is difficult to see why, if the third party dishonestly assisted in a breach, there should be a further prerequisite to his liability, namely that the trustee also must have been acting dishonestly. The alternative view would mean that a dishonest third party is liable if the trustee is dishonest, but if the trustee did not act dishonestly that of itself would excuse a dishonest third party from liability. That would make no sense.”

What amounts to dishonesty in the context of dishonestly assisting a breach of a fiduciary obligation Lord Nicholls explained at page 389B – G:-

“Before considering this issue further it will be helpful to define the terms being used by looking more closely at what dishonesty means in this context. Whatever may be the position in some criminal or other contexts (see, for instance, Reg. v. Ghosh [1982] QB 1053), in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher and lower values according to the moral standards of each individual. If a person knowingly appropriates another’s property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.

In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others’ property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless. …”

Finally, at page 392A – C Lord Nicholls stated his conclusion as to the obligations of those dealing with dishonest trustees:-

“There remains to be considered the position where third parties are acting for, or dealing with, dishonest trustees. In such cases the trustees would have no claims against the third party. The trustees would suffer no loss by reason of the third party’s failure to discover what was going on. The question is whether in this type of situation the third party owes a duty of care to the beneficiaries to, in effect, check that a trustee is not misbehaving. The third party must act honestly. The question is whether that is enough.

In agreement with the preponderant view, their Lordships consider that dishonesty is an essential ingredient here. There may be cases where, in the light of the particular facts, a third party will owe a duty of care to the beneficiaries. As a general proposition, however, beneficiaries cannot reasonably expect that all the world dealing with trustees should owe them a duty of care lest the trustees are behaving dishonestly.”

In the result, therefore, as it seems to me, in order to establish liability for dishonestly assisting a party acting in breach of a fiduciary obligation, it is necessary to demonstrate that the person providing the assistance was acting dishonestly, in the light of what he or she actually knew at the time, as distinct from what a reasonable person would have known or appreciated. In the present case it was necessary, in my judgment, to demonstrate that those alleged to have dishonestly assisted Mr. Singh, Mr. Phillips, Mr. Zammit and/or the Impersonator to act in breach of trust were either aware of the obligation in question, or turned a blind eye to the possibility of the existence of such an obligation, otherwise they could not have assisted dishonestly in the breach of it.

It seems fairly obvious that the Impersonator was setting out to defraud Mr. and Mrs. Stevenson. The immediate questions were whether he sought to achieve that on his own, or whether either of Mr. Singh or Mr. Zammit agreed to assist him in his efforts by conspiring with him to seek to achieve his ends.

It is, as it seems to me, obvious that one would not expect that an amount paid to solicitors ostensibly as the sale price of a property free of any legal charges immediately prior to purchase would be passed on by the solicitors not to the ostensible vendor of the property, but to other persons who did not appear to be creditors of the vendor. It might be different if those directed by the ostensible vendor to be paid by the solicitors did appear to be creditors of the vendor, such as a bank, or building society, or some other sort of financial institution, although even then one might expect that the creditor would have some sort of charge over the property to be sold, or have required an undertaking from the solicitors to account for an amount of the proceeds of sale. The instructions apparently given by the Impersonator to H & H to pay £625,000 to Mr. Singh and £565,000 to Mr. Phillips were certainly unusual and, in my judgment, were suggestive of the monies in question being the proceeds of a fraud of some kind. If there was a fraud, the instructions to pay Mr. Singh and Mr. Phillips would seem to indicate that that they were participants in the fraud, that is to say, that there was a conspiracy to defraud to which each of them was a party. However, before reaching any conclusion on that point in relation to Mr. Singh – the settlement with Mr. Phillips making it unnecessary to consider his position further, other than as part of the background – it was necessary to consider his account of the circumstances in which he received the money which he accepted that he had received.

Mr. Singh acted in this action throughout as a litigant in person. He produced a witness statement dated 24 July 2012 which was written in manuscript. That manuscript was not altogether easy to read, but, doing the best I can, what he wrote which was relevant seemed to be this:-

“I deny all allegations against me.

I purely brokered a transaction from a sale of a house and the money from a solicitor’s account, with an undertaking and permission consent for use of money.

I first met Ali and Saddiq Khan in Jan 09 in Dubai. They work for the Royal Family.

They told me returns on yields in banks at 1 or 2 per cent, stock, shares, bonds, saving were poor returns and buying gold was the way forward.

He proved to be correct. £941 an ounce to £1660 an ounce was very good business.

I had simple instructions to send £585,000 to Coutts Bank and keep my commission and buy at £941 an ounce.

I spoke to Paul Beasley and made the order. I kept my commission and never heard anything.”

A slightly fuller, but very similar account, was given by Mr. Singh in his manuscript Defence, which again was not easy to read. However, the Defence appeared to include these details:-

“I deny all allegations against me.

I received all funds from a solicitors with solicitors undertaking and instructions see enclosed copies – attach e mail.

I purely brokered a transfer for clients from proceeds of a property transaction.

Attach e mail to Coutts Bank

I met Ali and Saddiq Khan in Dubai approx Jan 09. They worked for the Royal Family. Mr. Khan advised me he has sold a property in North London and with stocks and shares low and bank interest low gold would be a good investment and to transfer £585,000 to Coutts. My commission was £40,000.

The solicitors would give me consent, undertaking and permission to use funds documents enclosed.

I told Mr. Khan I would require a undertaking that the funds were for the sale of a property which he promised from solicitors Haque & Hausmann solicitors. My instructions were to speak to Mr. Paul Beasley at Baird & Co. which I did comply with.”

None of the documents copies of which were said to be attached to the Defence were in fact attached. Copies were asked for in a Request under CPR Part 18 dated 27 February 2012 delivered on behalf of Mr. and Mrs. Stevenson. All it drew forth were copies of an instruction in a standard form used by Nationwide given by Mr. Singh to Nationwide to transfer an amount of £585,000 to the account of Baird maintained at Coutts and a copy of the invoice dated 10 June 2011 raised by Baird to which I have already referred. That invoice noted:-

“£585,000 received via CHAPS on 10/06/11

£11,372.50 to be refund on 13/06/11 by CHAPS ”

In an attachment to the Defence Mr. Singh went on, so far as is presently material:-

“I spoke to Mr. Paul Beasley at Baird & Co. and made order.

I kept my £40,000 commission. Saddiq was given the bullion and everything was fine.”

Two of the questions raised in the Request for information dated 27 February 2012 to which I have referred were:-

“4.

You say in your statement: “I kept my commission. Saddiq was given the bullion and everything was fine.” Please explain what has become of the £40,000 which you received, and the balance of the monies (including the £11,000 which was refunded to you by Baird & Co.).

5.

Please explain as fully as possible the circumstances in which you handed the gold bullion to Mr. Khan, including a copy of all instructions and correspondence relating to the matter, the location of the hand-over, any receipt that you received and full contact details for Mr. Khan.”

Mr. Singh replied to the Request in a document dated 24 July 2012. The replies which he gave to the two questions quoted in the preceding paragraph were:-

“ QUESTION 4 The commission was due to me after I did a transaction. I paid creditors.

QUESTION 5 Just down the road from Baird & Co. As you can appreciate I had been paid my commission and did not want to [be] in control of such large sums. His home address was around Dubai Marina.”

Thus Mr. Singh did not attempt to answer the question as to what had happened to the sum refunded by Baird. He gave no details of any instructions to deliver the gold to Mr. Saddiq Khan and produced no documents relevant to the alleged delivery.

Subsequently Mr. Singh did give disclosure of some documents which had not previously been revealed and which he contended amounted to a solicitor’s undertaking and/or consent from H & H to him purchasing gold with the £625,000 to be transferred to him. In fact the documents disclosed were difficult to comprehend and certainly appeared to support the case against him, rather than to support his case.

The first of these documents was an e-mail chain running to three pages as printed out. What “Page 1 of 3” showed was that at 15:45:42 hours on 9 June 2011 an e-mail was forwarded from the e-mail address kashimshettima@ymail.com to the e-mail address wealth@hotmail.co.uk . The e-mail address which Mr. Singh used for communicating with the claimants’ solicitors was surjsingh2009@hotmail.com . Nonetheless Mr. Singh had produced the e-mail forwarded to wealth@hotmail.co.uk . The forwarded message came with no added message. The forwarded message was from Mr. Ehsan Haque of H & H to the e-mail address kashimshettima@ymail.com and sent at 15:01:27 on 9 June 2011. The text, using the spelling in the original, was:-

“kashim,

i have instructed my banks to forward the proceeds from the sale to your all nominees, as per your instructions. they should be recieving funds by the end of today’s working day. once gain thnak you for instructing us and we look forward to working for you in future.”

Mr. Singh offered no explanation as to why he had a copy of that forwarded e-mail, but he relied upon it. A second e-mail of which a copy had been printed out and of which a copy was produced by Mr. Singh was an e-mail sent to Mr. Haque of H & H at 13:11 hours on 8 June 2011. It began in this way:-

“Further to our telephone conversation about the account details to remit the sum of £625,000.

I hereby confirm in writing the instruction to send £625,000 (six hundred and twenty five thousand pounds only) to the following personal account:

Mr SURJIT SINGH

SORT CODE: 07-10-40

ACCOUNT NO: 52792740”

Those were the details of the Singh Account. It would appear that the Impersonator was aware of those details. Mr. Singh was asked about that in cross-examination. What he said was that he had provided the details of the Singh Account to Ali and Saddiq Khan. He seemed to suggest that, in some unexplained way, it must have been from H & H that the Impersonator obtained those details.

In cross-examination Mr. Singh was again asked about the circumstances in which he encountered Mr. Saddiq Khan in order to be able to hand over to him the gold which Mr. Singh had purchased from Baird for Mr. Khan and his brother. Mr. Singh said that he did not know exactly where the Khan brothers lived in Dubai, but that he made contact with them, when he needed to, by telephoning Raffles Hotel in Dubai. The Khan brothers, on the other hand, had the number of Mr. Singh’s mobile telephone and used to telephone him on that number. So it was, according to Mr. Singh in cross-examination, that Mr. Ali Khan telephoned him from Dubai shortly before Mr. Singh was to collect the gold from Baird, and, in the course of the conversation, Mr. Singh said when he was intending to do that. Mr. Ali Khan, allegedly, then said that after collecting the gold Mr. Singh should meet Mr. Saddiq Khan in a car park not far from Baird’s premises in Hornet Way, London E6 and hand the gold over. Although Mr. Singh said that the car park was at a Tesco supermarket and was only a short distance from the premises of Baird, he was unable to say in what street the car park was to be found. That notwithstanding, apparently, Mr. Singh met Mr. Saddiq Khan and handed over the gold. Mr. Singh told me that the Khan brothers had never asked him for the £11,372.50 refunded by Baird, and he, Mr. Singh, had simply spent that money. He said that it seemed suspicious to him that he was never asked to repay that money to the Khan brothers, but, even so, he spent it, but was unable to say on what.

The story, therefore, seemed to be that Mr. Singh was asked by Mr. Ali Khan and Mr. Saddiq Khan to use funds to be provided by them out of the proceeds of sale of a property in North London to send £585,000 to Baird to buy gold. Mr. Singh was to be paid a commission of £40,000 for providing that service, collecting the gold and delivering it to the Khan brothers as directed. Mr. Singh did what he was asked, bought the gold from Baird evidenced by the invoice of 10 June 2011, and handed the gold over to Mr. Saddiq Khan. Mr. Singh asserted in cross-examination that his commission on the transaction was 8%. However, 8% of £625,000 is £50,000, 8% of £585,000 is £46,800 and 8% of £573,627.50 is £45,890.20.

Mr. Singh’s story made no sense. There were any number of holes in it. Perhaps one of the more significant was that, if the account were genuine, however improbable, Mr. Singh would have accounted to the Messrs. Khan for the sum of £11,372.50 returned to him by Baird. Mr. Singh accepted that that never happened. Moreover, no explanation was offered as to why the sum of £585,000 was sent to Baird in the first place, if it was £11,372.50 in excess of what was required. The invoice dated 10 June 2011 raised by Baird indicated that the price, as at 10 June 2011, of a 100 gram bar of gold was £3,106.50, and the price of a 250 gram bar was £7,744.25. If what was requested was £585,000 worth of gold, one more 100 gram bar and one more 250 gram bar (totalling in aggregate £10,850.75) could have been purchased out of the available excess funds of £11,372.50. If what was wanted was what was delivered, 60 100 gram bars and 50 250 gram bars, why was the amount sent so much in excess of what was necessary?

Another obvious point was why Mr. Singh was to be paid so much, £40,000, for receiving an amount in his bank account, ordering some gold, transferring to the seller’s bank account the funds necessary, and collecting the gold? The time and effort involved seemed vastly in excess of a reasonable fee for those modest services, if the account given by Mr. Singh were truthful. Moreover, if Mr. Saddiq Khan was available to receive the gold once Mr. Singh had collected it, why was it necessary for Mr. Singh to be involved at all? Mr. Saddiq Khan could simply have used his own, or his own and his brother’s, funds to purchase gold directly.

The expressed interest of Mr. Singh in having a solicitor’s undertaking and consent to him receiving funds was also extremely puzzling. What sort of undertaking was he wanting to have? What he produced as being a solicitor’s undertaking from H & H was certainly not one. It was merely confirmation in general terms of instructions apparently given by the Impersonator to H & H.

In my judgment the only proper conclusion was that, possibly subject to obtaining and delivering the gold which he obtained from Baird to a co-conspirator or co-conspirators, Mr. Singh was free to do what he liked with the £625,000 sent to him. Certainly that is what he did do, after purchasing the gold. That, in turn, seemed to me to show that Mr. Singh was a party to a conspiracy to defraud Mr. and Mrs. Stevenson. On the evidence the Impersonator was clearly also a party to the conspiracy. As matters turned out, it was only necessary for me to consider whether the evidence justified the conclusion that Mr. Zammit was also a party to that conspiracy.

Although Mr. Zammit did not appear, and was not represented, at the trial, he had earlier served a Defence and he had also served a witness statement dated 17 August 2012. Mr. Zammit accepted that it had been he who had asked Mr. Phillips to receive the sum of £565,000 into the Phillips Account and to disburse it in accordance with instructions given by Mr. Zammit. The reason for asking Mr. Phillips to receive the money into the Phillips Account which Mr. Zammit gave in his witness statement was rather different from that which Mr. Phillips gave. Mr. Phillips said in his witness statement in this action dated 1 June 2012 that Mr. Zammit had told him that his, Mr. Zammit’s, bank account had been frozen and so he was unable to receive into it the proceeds of sale of a property which a Mr. Shettima was investing in a business of Mr. Zammit in Malta. Before coming to Mr. Zammit’s account it is appropriate to notice the terms of a letter dated 7 June 2011 sent by Mr. Zammit to Mr. Phillips by facsimile transmission:-

“ Re: Mr Shettima’s of 5 MANOR HOUSE DRIVE, BRONDESBURY PARK LONDON NW6 7DE – Investment in Malta

My negotiations and Agreement with Mr. Shettima regarding his investment in Malta have now come to an end and tomorrow the 8 ^th of June his solicitor will pay into your Barclay’s account the sum of £583,000 (Five Hundred and Eighty Three Thousand GB Pounds) less professional fees, which you are receiving on my behalf. Please find hereunder Mr. Shettima’s solicitor’s details for your perusal:

Name: HAQUE & HAUSMANN SOLICITORS

Address: 124 Whitechapel Road

Whitechapel

London E1 1JE

I will be in touch with you tomorrow by phone with details of the disbursement of this sum. Once I will receive the official copies of the Loan/Investment Agreement between Mr. Shettima and myself, I will provide you with a copy for your Tac purposes.

Thank you once again for providing me with this service as after the trouble I had with my bank, I can’t risk that these funds get blocked by my bank.”

In his witness statement dated 17 August 2012 Mr. Zammit gave this account:-

“2.

I am a self-employed sales consultant for a company called Jasom Ltd. trading as “Rough Sawn Warehouse”. The company imports furniture from Malta for sale in The U.K. My remuneration from the company is based entirely on commission. I receive 5% of the value of all orders which I obtain from U.K. customers. I have worked in this capacity since November 2011. The furniture sold by this company is manufactured in Malta by a company called Cubic Pine (Malta) Ltd. I am an agent for this company in The United Kingdom.

3.

In 2010 I was working in association with a company called Culzean Ltd. This company traded in timber from various countries and supplied timber to saw-mills based mainly in Eastern Europe and The United States. There was significant potential in this business and in particular it was my intention to invest in saw-mills in Romania which would supply timber to The U.K. market. However, for this investment to take place I needed capital and therefore made approaches to various people and companies that I was actively seeking investors in this venture.

4.

In about April 2011 I was approached by a man by the name of Kashim Bukar Shettima. As far as I am able to recall the initial contact was made when Mr. Shettima telephoned me on my mobile number. He informed me that he had heard that I was seeking capital to invest in saw-mills in Romania and then import timber to The U.K. and Malta. Following that call various meetings took place between myself and Mr. Shettima in various locations in the London area. He expressed a positive interest in investing in the timber venture. In all my meetings with Mr. Shettima he gave the impression that he was an experienced businessman and appeared to be quite affluent. In the course of our discussions Mr. Shettima told me that he was intending to sell his home at 5, Manor House Drive, Brondesbury Park, London NW6 7DE for a sum in excess of £1,000,000.00. He did not provide details of the exact amount of the sale price of the property. The money he intended to invest in the timber business would be derived from the sale of the property and Mr. Shettima informed me that he was prepared to invest a sum of between £565,000 and £600,000 in the venture. It was decided between myself and Mr. Shettima that the investment would be expressed as a loan with the rate of interest fixed at 20% per annum but paid by monthly instalments. Alternatively, it was agreed that the 5 ^th Defendant would receive 50% of any profits generated by the business. At the request of Mr. Shettima the instalments were to be paid to his solicitors Haque and Hausmann.

5.

I had no reason to doubt the fact that Mr. Shettima was the lawful owner of the property at 5, Manor House Drive. I have never actually entered the property but as I recall on one occasion we actually met outside the house. I also had no reason to doubt the fact that Mr. Shettima was selling the property for a sum in excess of £1,000,000.00. On more than one occasion, Mr. Shettima showed me letters and e-mails relating to sale of the property. These included e-mails and correspondence originating from the 6 ^th Defendants, Haque and Hausmann Solicitors who were the solicitors representing Mr. Shettima in the sale of the property.

6.

Mr. Shettima informed me that the sale of his property was due to take place on the 8 ^th June 2011. He also informed me that it was his intention to open a business account purely for this venture. However, Mr. Shettima failed to open a business account and as I did not have a business account, I requested that the money which Mr. Shettima agreed as a loan or investment in the timber business was to be transferred to the account of a friend of mine by the name of Michael Phillips (R.M. Phillips) the Second Defendant. I explained all of the details of the transaction to Michael Phillips who agreed to receive the money on my account but purely on the basis that the money would be transferred from a solicitor’s account. Accordingly, on the 9 ^th June 2011 the sum of £565,000 was transferred to the account of the Second Defendant at Barclays Bank Romford Branch, account number: 90041335. Mr. Phillips had agreed that he would hold the money to my order and pending my instructions.

7.

About 4 days after the money was transferred to the account of the Second Defendant, I received a telephone call from Mr. Shettima. He sounded quite alarmed and stressed and he told me that he had a serious financial problem and urgently needed the money which had been transferred on his instructions to the account of Mr. Phillips at Barclays Bank in Romford to be returned to him and that he would have no choice but to withdraw from our agreement. He sounded very desperate. Mr. Shettima also informed me that he would require most of the money to be repaid to him in cash.

8.

Therefore, I made arrangements to repay the money to Mr. Shettima less the sum of £96,085.00 which Mr. Shettima agreed would be retained by me to cover compensation for cancellation of the contract and costs involved in arranging for the refund of the money to him. The money was returned to Mr. Shettima in cash on the dates as set out in the Document dated 18 ^th June 2011 and headed: “Re: Mr. Shettima’s Withdrawal From The JV\Loan Agreement between Shettima and Zammit” On each occasion the money was handed personally to Mr. Shettima in cash by either myself or someone acting on my behalf. Therefore between the 14 ^th and the 18 ^th June 2011 a total of £468,240.00 was returned to Mr. Shettima in cash. The sum of £150,000 was transferred on instructions by Mr. Shettima to a Hong Kong company called Lucky Falcon Ltd.”

The document dated 18 June 2011 referred to by Mr. Zammit in his witness statement was most curious. It purported to be in the nature of an acknowledgment by Mr. Shettima of receipt of various monies. It was signed in the name “Kashim” and dated 18 June 2011 in manuscript below the signature in two places on the document, immediately above and immediately below what was described as a “Declaration”. Ignoring the heading of the document and the signatures what the document said was:-

“I the undersigned Mr. Kashim Shettima, holder of British Passport No. 934517633 am hereby giving receipt of £564,325.00 (five hundred and sixty four thousand, three hundred and twenty five pounds) in cash, which sum I hadi [sic] instructed my law firm Haque & Hausmann of Whitechapel to pay to Mr. Terence Zammit at the co-ordinates supplied, such sum had been intended by me to be an investment from my side in the Timber Trade suggested by Mr. Zammit for a period of 6 months.

I received the money as follows:

£229,000 Tuesday 14 ^th of June

£39,240 Wednesday 15 ^th of June

£50,000 Friday 17 ^th of June

£150,000 Today

£96,085 Cashing Up Costs and Abortive Fees due to Mr. Zammit

…

Declaration

I had intended to use the proceeds of my property sale as an investment with Mr. zammit [sic] to purchase timber from Rumania and sell it to the UK and Malta. Due to a family emergency i [sic] had to decline and ask for the investment back immediately.”

The terms of the document were not consistent with Mr. Zammit’s witness statement from which I have quoted, and not consistent with the evidence, otherwise uncontested, as to what happened to the £565,000 actually transferred to the Phillips Account on the instructions of H & H. Thus the sum to be accounted for was not £564,325, as set out in the document dated 18 June 2011, but £565,000. The money was not paid by H & H to Mr. Zammit, but to Mr. Phillips. On no view had the signatory of the document received “£564,325.00 … in cash” when Mr. Zammit’s own evidence was that he kept £96,085 and £150,000 was paid to Lucky Falcon Ltd. The alleged other payments in cash to the signatory of the document were wholly inconsistent with the application of the funds shown in the statements of the Phillips Account which were put in evidence. As at 14 June 2011, the date upon which the document dated 18 June 2011 indicated that the signatory of the document had been paid £229,000 in cash, the statements of the Phillips Account showed that the £565,000 had been applied by payments of £14,095 to Mrs. Zammit, £98,000 to Miss Mason, £250,000 to the Everyday Saver Account, £16,665 to Father Kelly, £200,000 to Freedex Ltd., and £20,000 to cash withdrawals. Even if the £200,000 paid to Freedex Ltd. had been converted into cash, a matter to which I shall return, that sum, plus the £20,000 cash withdrawn on 13 June 2011 and the £5,000 cash withdrawn from the Everyday Saver Account on 14 June 2011 did not produce enough to pay £229,000 on 14 June 2011. No cash was withdrawn from either the Phillips Account or the Everyday Saver Account on 15 June 2011 out of which a payment in cash of £39,240 could have been made. However, £50,000 was withdrawn in cash from the Phillips Account on 17 June 2011. The £150,000 which was noted on the document dated 18 June 2011 as cash drawn that day in fact seemed to represent funds sent to Lucky Falcon Ltd. on 15 June 2011.

All one could really make of the document dated 18 June 2011 was that it was self-serving and prepared to try to account for the money received in the Phillips Account, but failed miserably even to begin to do so.

No explanation was offered by Mr. Zammit as to why the sum of £565,000, rather than the £583,000 mentioned in his letter to Mr. Phillips dated 7 June 2011 was the sum in fact transferred into the Phillips Account.

Leaving aside the difficulties arising from the contemporaneous, or ostensibly contemporaneous, documents copies of which were put before me, it has to be said that Mr. Zammit’s was an improbable tale. It really amounted to him having decided in 2010 that he wished to invest in saw-mills in Romania – how, whether by purchase of, or investment in, an existing business, or by establishing a new business was not explained – and having approached unidentified people for investment in a vaguely formulated scheme, out of the blue, in April 2011, Mr. Shettima telephoned him and indicated an interest in investing a substantial amount in this venture. Mr. Zammit offered no details of what exactly he was intending to purchase, how whatever it was was to be operated or by whom. That notwithstanding, he would have one believe that he agreed to pay Mr. Shettima interest at a rate of 20% per annum by monthly instalments. How that liability, which amounted to a monthly commitment to pay something of the order of £9,500, if the amount of the loan was £565,000, was to be met, and when the obligation to pay sums of that order of magnitude was to commence, Mr. Zammit did not trouble to say.

Mr. Zammit’s justification for asking Mr. Phillips to receive the sum of £565,000 into the Phillips Account just defies belief. It was that he, Mr. Zammit, did not have a business account. If that was the problem, open one. He had, of course, suggested a different reason in his letter dated 7 June 2011 to Mr. Phillips.

I am afraid that it was obvious that Mr. Zammit’s evidence, which he did not feel it appropriate to offer to be cross-examined upon, was simply a tissue of lies. There was no logic in what he contended was the truth or consistency between what he said and other evidence which I have mentioned.

Consequently, it appeared that Mr. Zammit was making up evidence in order to conceal something, that something being the true nature of the arrangements in which he seemed to accept that he was involved. I find that those arrangements were a conspiracy to defraud Mr. and Mrs. Stevenson.

The other defendant the position of which needed to be considered in the context of liability was that of Freedex. Having obtained the setting aside, by order of Master Fontaine, of the judgment in default entered against it, Freedex actually took no steps in this action. However, in order to support the application to set aside the judgment Mr. Avigdor Fried, a director of Freedex, made a witness statement dated 16 May 2012. At paragraph 10 of his witness statement Mr. Fried described the business of Freedex as a “money facilitator”. What he said about the involvement of Freedex specifically in matters relevant to the issues in this action was:-

“11.

The Second Defendant had approached Freedex on 13 June 2011 and he informed me that he needed to have immediate access to substantial sums of cash over a short period in order to pay builders who were carrying out house renovation works for him. The Second Defendant wanted to withdraw lump sums of cash over one month. However, I informed the Second Defendant that whilst Freedex would be able to provide large sums of cash, Freedex could not hold client monies for more than 1 or 2 days. Therefore, it was agreed that the Second Defendant would transfer the sum of £200,000 to Freedex’s bank account by way of telegraphic transfer on 13 June 2011 and he would collect the same on the following day, less Freedex’s commission of 1%. The transfer from the Second Defendant (in the name of Mr. Richard Michael) to Freedex’s bank account is exhibited at page 13.

12.

Thereafter, the Second Defendant attended Freedex’s premises on 14 June 2011, as agreed, to collect the cash. The Second Defendant was accompanied by a white male on arrival. The Second Defendant provided me with proof of his identity upon which I handed him £198,000 in £20 notes. Freedex retained the sum of £2,000 for its 1% commission. Once the Second Defendant and the other male left Freedex’s premises, I recall seeing them getting into a Land Rover which was being driven by a third white male. They drove away and this was the last occasion I saw the Second Defendant or had any contact with him.”

The account given by Mr. Fried, which I am content to accept is correct, in fact made it clear that the service which Freedex provided to Mr. Phillips was money – laundering. Freedex was not lending Mr. Phillips any money. He had money – £200,000 – in a bank account to which he had ready access. Had he merely wanted cash, he could have drawn cash from his bank, probably without having to pay any fee. The only possible benefit to Mr. Phillips of transferring money to Freedex and then drawing cash from Freedex was to seek to conceal from anyone inspecting the statements of the Phillips Account that he was drawing such a large amount of cash. While there was no evidence that Mr. Fried or anyone at Freedex actually knew where the £200,000 had originated, or why Mr. Phillips wished to conceal that he had converted money held in the Phillips Account into cash, the involvement of Freedex seemed to me to amount exactly to that turning a blind eye, or not making inquiry for fear of finding out something which Freedex did not wish to know, which Lord Nicholls explained amounted to dishonesty justifying liability for dishonestly assisting in a breach of trust in the passages from Royal Brunei Airlines Sdn Bhd v. Tan, supra, which I have quoted earlier in this judgment.

In the result I am satisfied that both Mr. Singh and Mr. Zammit are liable to Mr. and Mrs. Stevenson for conspiracy to defraud them, and that Freedex is liable to them for dishonest assistance in a breach of trust.

The quantification of damages in this action as against Mr. Singh, Mr. Zammit and Freedex in respect of the liabilities which I have found established against them, respectively, was far from straight-forward, by reason of the repayment to Mr. and Mrs. Stevenson, apparently by Mr. Rahman, of £58,200 and the terms of the settlement with H & H, by which Mr. and Mrs. Stevenson had received £1,200,000.

It was further complicated by the terms of settlement with Mrs. Sanghera, Mr. Phillips and Miss Mason, under which sums of £17,500, £75,000 and £98,000 were to be paid. If there had been a judgment against each of Mrs. Sanghera, Mr. Phillips and Miss Mason, as well as against other defendants, then it is well-established that execution on such judgments could not produce more than the total loss which Mr. and Mrs. Stevenson had suffered. However, the sums which Mrs. Sanghera, Mr. Phillips and Miss Mason had agreed to pay were payable as a matter of contract under the settlement agreement respectively made with each, and regardless of what was paid, or not paid, under any judgment which I might enter against Mr. Singh, Mr. Zammit or Freedex.

The position in relation to execution on judgments against more than one party liable in respect of the same loss, and the significance of settlement by one party liable in respect of a loss to the assessment of damages in a claim against another party liable in respect of the same, or part of the same, loss was explained by Waller LJ in his judgment in Townsend v. Stone Toms & Partners (1984) 27 BLR 26 at pages 56 – 57:-

“… The principle is that nobody should recover more damage than he has in fact suffered. In no circumstances should anyone recover a sum exceeding the amount of damage he has suffered from the events giving rise to that cause of action.

We have been referred to a number of cases where there are two defendants, and the plaintiff recovers damages against both defendants. In all such cases it has been held that he is not entitled to execution for more than the total loss he has suffered. (See, for example, Morris Ltd v. Perrott and Bolton [1945] 1 All ER 567 per Lord Goddard at 570) And Imperial Bank of Canada v. Begley [1936] 2 All ER 367, where Lord Maugham, at page 375 said:

“It is clear that in the circumstances the respondent was not put to her election to sue either McElroy or the appellants; she could sue both or either, subject of course to this, that she could not recover more than the total sum due to her.”

If, therefore, the plaintiff has recovered any sum in satisfaction of a cause of action arising out of circumstances which also give rise to a different cause of action against another, but where the damages coincide, then he must give credit for that sum in proceedings involving that second cause of action.

…

It is for the defendant to show, in the first place, a prima facie case that the plaintiff has been wholly or partially compensated for the loss he has suffered. In my opinion, however, once there is a prima facie case that the plaintiff has received a sum of money which reduces the loss he has suffered from that particular event, it is for him to show, if it be the case, that some part of that sum was for another, unrelated, cause of action.

In this case, in my opinion, there can be no possible doubt that some part of the £30,000 paid into Court and taken out by the plaintiffs comprised damages which were for injuries for which damage was also being claimed against the defendant in this action. It was then for the plaintiff to show which, if any, parts of the £30,000 were not so attributable. The judge found that some of the bad workmanship of Laings was not attributable to the defendants, and that the major part of the loss of amenity was not attributable to the defendants. The judge deducted these two sums from the £30,000 and held that the balance was for items attributable to both Laings and the defendants and, insofar as it covered the items attributable to the defendants, would reduce their liability. I agree that he was right to do so.”

In the same case Oliver LJ considered the question whether, in a case in which it was necessary to assess damages payable by one defendant in a context in which another defendant had already settled the claim against it, the appropriate course was to assess the damages payable taking into account the sums paid by the other defendant, or to leave the payment by the other defendant as a matter to be dealt with only in relation to execution. At page 39 he said:-

“Now in the first place there were, in the instant case, clearly two possible approaches, but as I think only two possible approaches. One is that taken by the learned judge, namely, that inasmuch as, at the hearing, the money has actually been received by the plaintiffs, one has to ascertain the amount for which credit has to be given and then enter judgment for the balance. The alternative would be to enter judgment for the whole amount for which, without any credit, the defendants could have been sued, but to provide in the judgment that execution shall not issue for more than whatever is the appropriate amount, having regard to the moneys accepted on the payment in.

The latter course is the one which I think Mr. Price has adumbrated, and is theoretically a possible course, but since it would involve, in effect, an inquiry which, in the end as I see it, would appropriately be conducted by an official referee, and since the matter was already before an official referee, the course which the learned judge took was not only, as it seems to me, the right and sensible course; it was the only course, and I entirely reject the suggestion that he ought not to have taken it. He having then decided to take the only sensible course, the next question is: Did he approach the task before him in the right way?”

It is thus plain, as it seems to me, that in assessing the damages payable by Mr. Singh, Mr. Zammit and Freedex in the present case it is necessary to take into account certainly the sums of £58,200 and £1,200,000. I incline to the view that it is also necessary to take into account the amounts which Mrs. Sanghera, Mr. Phillips and Miss Mason, respectively, have agreed to pay, but have not yet paid. Mr. Douthwaite urged me to leave those payments out of account on the grounds that the agreed sums may not in fact be paid. That plainly is a risk, but there is also the fact that, if I leave the payments agreed to be made out of account in assessing damages, and those payments are in fact made, Mr. and Mrs. Stevenson will have recovered more than their total loss. The real question is upon whom should be the risk that Mrs. Sanghera, Mr. Phillips or Miss Mason may prove not to be good for that which they have contracted to pay. Another way of putting it is, should Mr. Singh, Mr. Zammit and Freedex in effect guarantee that those sums will be paid by being obliged to pay them themselves, whether or not Mrs. Sanghera, Mr. Phillips and Miss Mason discharge their respective obligations under the terms of settlement with each? As it seems to me, on principle the risk should be on Mr. and Mrs. Stevenson. They have agreed to the terms of settlement with each of Mrs. Sanghera, Mr. Phillips and Miss Mason. They have taken whatever steps they thought appropriate to satisfy themselves as to the worth of the promises made to them. If those promises are broken, Mr. and Mrs. Stevenson can seek the appropriate relief against the defaulter.

The losses which Mr. and Mrs. Stevenson incurred as a result of the conspiracy in which Mr. Singh and Mr. Zammit were participants were the sum of £1,250,000 paid on 8 June 2011 as the purchase price of the Property and certain legal and other costs thrown away, totalling £13,052.11. Those legal and other costs were: (i) Land Registry fee £920; (ii) local authority search fee £215.39; (iii) environmental and chancel check fees £162.72; (iv) RN’s fees £4,800; (v) bank transfer fee £72; (vi) Land Registry search fee £4; (vii) cost of a measured survey of the Property £2,937.50; (viii) cost of a structural survey of the Property £3,937.50. The total losses were thus £1,263,052.11.

As I have noted, the total sum of £58,200 was repaid, in fact in three tranches, between 19 and 26 July 2011. The claim form in this action was issued on 29 July 2011, so actually the total sum claimed in this action against the first five defendants, those alleged to be the conspirators, should have been no more than £1,204,852.11, together with appropriate interest.

In his closing submissions Mr. Douthwaite submitted that, in assessing interest, I should take a rate of 3% per annum or 4% per annum. He urged me to take 4% per annum, but, realistically, recognised that I might be persuaded, as I am, that 3% per annum is the appropriate rate to award on any damages.

Prima facie, then, in assessing the damages payable by Mr. Singh and Mr. Zammit, one starts with losses, as at the date of issue of the claim form, of £1,204,852.11, with interest to be awarded on the sum of £1,263,052.11 from 8 June 2011 until, say, 26 July 2011, and interest thereafter on £1,204,852.11 As the sum agreed to be paid on behalf of H & H was paid on 3 October 2012, it is appropriate to calculate interest on the figure of £1,204,852.11, at least in the first instance, until 3 October 2012. 8 June 2011 until 26 July 2011 is 48 days. Interest on £1,263,052.11 for 48 days at 3% per annum comes to £4,983.00. The period 26 July 2011 until 3 October 2012 is 1 year and 69 days. Interest on £1,204,852.11 for 1 year and 69 days at 3% per annum is £42,978.57. Thus, leaving aside the payment of £1,200,000 on 3 October 2012 and the settlements with Mrs. Sanghera, Mr. Phillips and Miss Mason, it would have been appropriate to enter judgment in favour of Mr. and Mrs. Stevenson against each of Mr. Singh and Mr. Zammit, jointly and severally, in the sum of £1,252,813.68.

If one deducts from the sum of £1,252,707.16 the sum of £1,200,000 paid on 3 October 2012, the result is £52,813.68. If one then deducts the aggregate of the sums agreed to be paid by Mrs. Sanghera, Mr. Phillips and Miss Mason, £190,500, the loss suffered by Mr. and Mrs. Stevenson is extinguished.

The sum claimed against Freedex was £200,000. That was the sum which it received on 13 June 2011 and that is the sum which, subject to the issue of credit for sums paid or payable by other defendants I should have found, together with interest at 3% per annum, Freedex was liable to pay to Mr. and Mrs. Stevenson. Interest on £200,000 at 3% per annum from 13 June 2011 to 3 October 2012, 1 year and 112 days, amounts to £7,841.10. If it were right to credit against the liability of Freedex £1,200,000, or anything like it, that liability was plainly extinguished.

Mr. Douthwaite sought to avoid the consequence that the damages liability of Mr. Singh, Mr. Zammit and Freedex to Mr. and Mrs. Stevenson was extinguished by the sums paid, or payable, by other defendants by submitting that in fact the liability of H & H to Mr. and Mrs. Stevenson was, or might have been, greater than the liability of the conspirators. He pointed out that, as against H & H, the pleaded claim of Mr. and Mrs. Stevenson was that, by reason of breach of the warranty of authority alleged, “The Claimant has lost the value of the Property which the Sixth Defendant warranted that it had authority to sell”. That formulation introduced an element of confusion, for H & H did not purport to sell the Property, and it was not the case for Mr. and Mrs. Stevenson that it had. The case for Mr. and Mrs. Stevenson pleaded at paragraph 8 of the Re-Amended Particulars of Claim was that H & H had “warranted that it was authorised and instructed by the registered freehold owner of the Property to act for him on the sale of the Property to the Claimant”. That notwithstanding, Mr. Douthwaite submitted that the assessment of the damages payable by H & H, if liability was established, should have proceeded on the same basis as if it had purported itself to sell the Property, and thereby warranted that it had authority to sell. He also submitted, in effect, that it was not open to the defendants other than H & H to contest the propositions that, but for the settlement with H & H, Mr. and Mrs. Stevenson would have established liability against H & H, and would have recovered in full the amount which they claimed as damages against H & H, including damages for loss of bargain. The case for Mr. and Mrs. Stevenson was that the Property was actually worth £1,500,000 at 8 June 2011, so that, as against H & H, they were entitled to damages assessed not only on the basis of their losses, but also loss of profit. The alleged valuation of the Property at £1,500,000 as at 8 June 2011 was supported by an expert’s report from a valuer, Mr. Nicholas Lambarde-Scott, dated 26 June 2012, which was put before me.

For the reasons which I have explained, it was critical to whether Mr. and Mrs. Stevenson succeeded in obtaining any award of damages at all against Mr. Singh, Mr. Zammit and Freedex that Mr. Douthwaite’s submissions as to the claims of Mr. and Mrs. Stevenson against H & H, and the inability of any of the other defendants to challenge the assertions that, but for the settlement with H & H, Mr. and Mrs. Stevenson would have succeeded in obtaining an award of damages against H & H in the sum of £1,513,052.11, together with interest, were sound.

Before turning to the detailed issues which arose in relation to Mr. Douthwaite’s submissions, it is convenient to deal with what was a rather subsidiary point concerning the costs of the action as against H & H, Mrs. Sanghera, Miss Mason, and, perhaps, Mr. Rahman. Mr. Douthwaite submitted that Mr. and Mrs. Stevenson were entitled in any event to have account taken of their costs as against H & H, Mrs. Sanghera, Miss Mason and Mr. Rahman. In support of that submission Mr. Douthwaite drew to my attention some observations of Steyn J in Banque Keyser Ullman SA v. Skandia (UK) Insurance Co. Ltd. (No.2) [1988] 2 All ER 880 at page 882:-

“The first live issue, as between Chemical and Skandia, is whether the costs of the action against Notcutt ought to be deducted from the credit to be given. Notcutt was liable to Chemical on the ground of Notcutt’s vicarious responsibility for the fraud of an employee. I am satisfied that Notcutt would have been held liable in full for the agreed costs if the matter had proceeded to trial against Notcutt. The principle appears to be that if a plaintiff who receives payment from one tortfeasor establishes an additional separate claim against that tortfeasor, the payment is allocated first to that claim, and credit must be given in favour of the second tortfeasor only for the excess necessarily referable to the overlapping claim. That seems to me the approach indicated by the Court of Appeal judgments in Townsend v. Stone Toms & Partners (a firm) [1984] CA Transcript 260 … and by the actual decision of the Court of Appeal in The Morgengry, The Blackcock [1900] P 1, a decision which was not cited in Townsend v. Stone Toms & Partners. It also appears to me to be the approach which is required by an application of first principles. Prima facie therefore the costs of Chemical’s action should be deducted from the credit to be given for the receipt of money under the Notcutt settlement.”

I do not doubt that, in an appropriate case, which would be one like that with which Steyn J was concerned, in which a lump sum was agreed in full and final settlement of all claims, including claims as to costs (see page 881E of the report), it would be appropriate to take account of costs in assessing the amount of the credit to which other defendants were entitled by reason of the settlement in question. However, that case is not this case, so far as H & H is concerned, because it was specifically agreed that, in addition to the payment of £1,200,000, H & H would pay the reasonable costs of Mr. and Mrs. Stevenson against H & H. I doubt that, given the terms of the settlement between Mr. and Mrs. Stevenson and H & H, it is appropriate to consider to what extent, if at all, the actual costs incurred by Mr. and Mrs. Stevenson against H & H exceeded what they were likely to recover on an assessment of costs. However, if it were otherwise appropriate, it was, in the light of the guidance of Waller LJ in Townsend v. Stone Toms & Partners which I have quoted, for Mr. and Mrs. Stevenson to prove what those unrecoverable costs would be, and they did not seek to discharge that burden.

The settlements with Mrs. Sanghera and Miss Mason were, I think, inclusive of costs, and so, in principle it was appropriate to take that into account in assessing credits due to other defendants. However, again it was for Mr. and Mrs. Stevenson to prove the amounts of the costs, and they did not seek to do so.

Mr. Douthwaite submitted that it was not possible for Mr. and Mrs. Stevenson, at the time of the trial, to prove what costs had been incurred in relation to which defendants. I daresay that that is correct, but the consequence was not, as Mr. Douthwaite seemed implicitly to suggest, that assumptions were made in favour of Mr. and Mrs. Stevenson as to what costs had been incurred in respect of any particular defendant.

At some points in his closing submissions Mr. Douthwaite submitted that another point which could be derived from the passage from the judgment of Steyn J which I have cited was that a claimant settling a claim against a party was entitled to allocate first to claims against that party which did not lie also against remaining defendants the sums paid in settlement. In one sense that is correct, but it is important to notice that what Steyn J actually said was that the principle was that “if a plaintiff who receives payment from one tortfeasor establishes [my emphasis] an additional separate claim against that tortfeasor, the payment is allocated first to that claim”. I do not consider that anything which Steyn J said justified the proposition that the claimant who entered into the settlement could allocate the payment first to a claim which had merely been made, and had not been established.

I have to say that, just as a matter of first impression, it seems unlikely that it is the law that a claimant entering into a settlement with one defendant against whom he has made claims which have not been established, can simply allocate the sum paid in settlement first to those unestablished claims. Rather it seems to be obvious that, by entering into a settlement on terms which reflect a discount from the value of the claims made, the claimant recognises that there is a chance, perhaps (depending upon the size of the discount) a substantial chance, that the unestablished claim or claims could never be established. I think that the only way in which the Court can proceed is to examine the unestablished claim or claims and to seek to reach conclusions on the evidence before it as to whether the unestablished claims would have succeeded or not, the onus, as Waller LJ pointed out in the passage from his judgment in Townsend v. Stone Toms & Partners which I have quoted, being on the claimant to demonstrate that the unestablished claim or claims would have succeeded.

The submissions made by Mr. Douthwaite to the effect that the liability of H & H to Mr. and Mrs. Stevenson was based on breach of warranty of authority, and that the measure of damages in respect of such liability included damages for loss of bargain necessitated both a consideration of the alleged warranty and the giving of attention to the measure of damages for breach of the alleged warranty.

The warranty which Mr. Douthwaite contended for is a most unusual one. It was, in effect, a warranty on the part of H & H that the person who instructed H & H was who he said he was.

It is well-established that a solicitor commencing proceedings warrants that he has the authority of his client to do so. As was pointed out by Waller LJ in Nelson v. Nelson [1997] 1 WLR 233 at page 239, “where the court orders a solicitor to pay costs when he is acting without authority the court is acting under its inherent jurisdiction.” In other words, in such a case the solicitor does not enter into any sort of contractual warranty. The jurisdiction of the Court is an aspect of its jurisdiction over solicitors as its officers, like enforcement of a solicitor’s undertaking. So far as the remedy for breach of a warranty of authority to commence proceedings is concerned, in Yonge v. Toynbee [1910] 1 KB 215 Buckley LJ stated, at page 229, that, “the measure of damage is, no doubt, the amount of the plaintiff’s costs thrown away in the action.” No possibility of claiming damages assessed by reference to a loss of bargain seemed to arise. In the later case of Fernee v. Gorlitz [1915] 1 Ch 177 at page 181 Eve J also had to consider the measure of damages in a case in which a solicitor had commenced proceedings without authority. He said:-

“But what is the measure of the damages? Is it the costs which they might have recovered from a competent and solvent next friend if they had succeeded in the action, or is it the expense to which they have been put in consequence of the futile proceeding? Swinfen Eady J., in dealing with the case of an agent falsely representing he has authority which in fact he has not, adopts in Yonge v. Toynbee the following statement of the law by Lord Esher MR: “The principle of Collen v. Wright extends further than the case of one person inducing another to enter into a contract. The rule to be deduced is, that where a person by asserting that he has the authority of the principal induces another person to enter into any transaction which he would not have entered into but for that assertion, and the assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook that it was true and he is liable personally for the damage that has occurred.” The damage which has occurred to these two defendants is represented by the costs which they have incurred in defending the action, and, in my opinion, it is these costs, including the costs of this application, to be taxed as between solicitor and own client, which the plaintiff’s solicitors are liable to pay, and I make an order accordingly.”

What can be derived from that passage is not only that, in a case in which a solicitor has acted in breach of his warranty of authority in commencing an action the measure of damages is the actual costs to which the opposite party was put in consequence in having to resist the action, but also that it is the actual costs thrown away which is the normal measure of damage in any case in which a party has, by falsely representing that he has authority to enter into a transaction, induced the other party to enter into a transaction which he would not have entered into but for the representation. Thus there is a distinction between a transaction which a party enters into on the faith of the transaction being capable of being brought to a successful conclusion because the other party has authority to bind a third party, the ostensible contracting party, and a transaction which the party would never have entered into had he known the true position. A case involving a solicitor which falls in the first type of case is Suleman v. Shahsavari [1988] 1 WLR 1181, in which a solicitor, who was not authorised so to do, signed a contract of sale of a property. If he had been authorised, the contract would have been binding on his client. Consequently damages were assessed on the footing of what the opposite party lost by reason of the solicitor not in fact being authorised to enter into the transaction on behalf of his client, which included damages in respect of loss of bargain. The present case, however, seems to fall, if, indeed, any warranty was given, in the second category. H & H never purported to be able to bind the vendor, or supposed vendor, of the Property, so whatever warranty H & H gave would not have had the consequence, if true, that the vendor of the Property was bound to sell it to Mr. and Mrs. Stevenson at a price of £1,250,000. If Mr. and Mrs. Stevenson had appreciated that H & H did not in fact act for the freehold owner of the Property, they would not have entered into the transaction at all.

Once it is appreciated that the measure of damages for breach of a warranty of authority depends upon the nature of what has been warranted, it becomes important to understand the nature of the warranty alleged against H & H. Mr. Douthwaite submitted that the leading case on identity fraud and breach of warranty of authority was Penn v. Bristol & West Building Society [1997] 1 WLR 1356. The material facts of that case were that a husband and wife purchased a house with the aid of a loan secured by a charge upon the property. The husband incurred business debts and concocted a scheme to raise funds on the matrimonial home by purporting to sell it to a participant in the fraud, who could then raise a loan on the property purportedly on the security of a charge. The husband instructed solicitors who supposed that they were acting on behalf of both the husband and the wife. The husband forged his wife’s signature on the contract documents. The transaction proceeded to ostensible completion and the defendant building society advanced a loan to the ostensible purchaser purportedly secured on the property. The wife then commenced proceedings against the building society claiming a declaration that the purported charge over the house in favour of the building society was null and void. The building society counterclaimed, inter alia, damages against the solicitors who had acted in the transaction on the instructions of the husband for breach of an alleged warranty that they acted also for the wife. The trial judge found the warranty and breach thereof established. The solicitors appealed. The only substantive judgment was that of Waller LJ.

At page 1363 Waller LJ said:-

“In truth as I see it, the question whether a warranty of authority has been given rests on a proper analysis of the facts in any given situation, and not on any preconceived notions as [to] what is essential as part of the factual analysis. Of course there is no issue that to establish a warranty of authority as with any other collateral warranty there must be proved a contract under which a promise is made either expressly or by implication to the promisee, for which promise the promisee provides consideration. But consideration can be supplied by the promisee entering into some transaction with a third party in a warranty of authority case just as it can in any other collateral warranty case. Furthermore, the promise can be made to a wide number of people or simply to one person, again all depending on the facts. It follows, as Mr. Jackson has submitted, that the plaintiff, whether as one of the wide number of people to whom the offer is made or by virtue of being the only person to whom the offer is made, has to establish that the promise was made to him. There is also no doubt that what he has to establish is that a promise was made to him by the agent, to the effect that the agent had the authority of the principal, and that he provided consideration by acting in reliance on that promise.”

In his judgment, continuing after the passage cited, Waller LJ applied the law as he had summarised it to the facts of the particular case:-

“Mr. Brill undoubtedly represented throughout the negotiations with Mr. Thorley of Gartons that he was authorised to act for Mrs. Penn. It is accepted by Mr. Jackson that if Mr. Wilson had not had knowledge of the fraud, he, as Garton’s principal, would have been entitled to rely on the warranty being given by implication by Mr. Brill. This is a concession properly made in my view, but it is important to recognise that the facts of Suleman v. Shahsavari [1988] 1 WLR 1181, referred to by Mr. Jackson in his skeleton argument in making the concession, were different in one material respect. In that case the solicitor actually signed the contract purporting to act for his client. In the instant case it is the negotiations up to the point of signature, and the acting in the exchange of documents which produces the representation on which reliance was placed by Gartons. During the negotiation, following which a number of documents were to be executed in order to bring the transaction to fruition, and in completing the transaction, Mr. Brill knew that Gartons were also acting for the building society. He knew that Gartons would be arranging the completion of the purchase, including arranging for Mr. Wilson to execute a mortgage so as to obtain from the building society the purchase price and secure the building society’s interest in the house. Thus he knew that Gartons, in their capacity as the solicitors for the building society, would rely on his having the authority of Mrs. Penn to bring the transaction to fruition, just as much as they relied on the same as the purchaser’s solicitors. What is more, Bristol & West through Gartons relied on Mr. Brill having the authority of Mrs. Penn to bring the matter to fruition, in that having obtained from Mr. Wilson execution of a charge, money was advanced and available for the purpose of completing the transaction. If at any stage Mr. Brill had said that he did not have the authority of Mrs. Penn the result would have been that Bristol & West would have proceeded no further.

There was a debate at the trial as to whether Mr. Brill knew the actual name of the building society. The judge found that it did not matter whether he knew the actual name or not, but was of the view on balance that it was likely that the actual name had been given by Mr. Thorley to Mr. Brill. I am clear that it matters not whether the actual name of the building society was known to Mr. Brill. I should however also add that, on the oral evidence to which we were referred, if it had mattered I would have been doubtful if the judge’s finding that Mr. Thorley had told Mr. Brill the actual name could have been upheld.

In my view all the necessary ingredients are present for establishing a warranty by Mr. Brill in favour of Bristol & West enforceable by Bristol & West, that warranty being that Mr. Brill had the authority of Mrs. Penn.”

Superficially the facts of Penn v. Bristol & West Building Society are not dissimilar from the facts of the present case. The decision in Penn v. Bristol & West Building Society was followed, on similar facts to those of that case, by Chadwick J in Bristol & West Building Society v. Fancy & Jackson [1997] 4 All ER 582. However, it was a feature of each case that the solicitors were purportedly acting on behalf of a husband and wife who actually existed and who actually did own the property which was the subject matter of the relevant transaction. The husband in each case forged the signature of his wife on relevant documents. A course which would have been open to the solicitors in each case, but which neither set of solicitors took, was to confirm with their female client that she was actually instructing them. A telephone call or a brief meeting might have sufficed for this purpose. The effect of the warranty contended for in the present case could be rendered as H & H warranted to Mr. and Mrs. Stevenson that they had not been duped by the Impersonator as to his identity.

Before considering the nature of the warranty contended for in the present case further, it is convenient to notice what Waller LJ said about causation in Penn v. Bristol & West Building Society at page 1364:-

“The premise which on the above analysis was made, was that Mr. Brill had the authority of Mrs. Penn to negotiate and complete the transaction on her behalf. It was that warranty that was broken. If Mr. Brill had actually obtained Mrs. Penn’s instructions, either the transaction would never have gone as far as completion, and Bristol & West would not have advanced any money, or (and this is not very likely) the transaction would have been completed properly without forged signatures and they would have had security for their loan. … The question is simply whether Bristol & West can establish that Mr. Brill’s failure to have authority which he promised he had, caused them the loss they suffered. It seems to me clear on the basis outlined above that they can.”

It thus appears that the measure of damage in a case in which a solicitor warrants that he has authority to act on behalf of his clients in a conveyancing transaction, but does not purport to have authority to sign any contract, and the warranty is broken, is the amount of any money advanced and the costs thrown away him not having the requisite authority. No support can be found from the decision in Penn v. Bristol & West Building Society, or that in Bristol & West Building Society v. Fancy & Jackson, for the proposition that a solicitor is liable in such a case for loss of the profit anticipated by the intending purchaser if the transaction had been successful.

Mr. Douthwaite very properly drew to my attention a decision of H.H. Judge Hegarty Q.C., Excel Securities v. Masood [2010] Lloyd’s Rep PN 165. That was a case in which the facts were almost indistinguishable from those of the present, in that a solicitor was instructed by an impostor to act for him in the raising of a loan on the security of a property which he did not in fact own, but the proprietor of which with title absolute was registered at HM Land Registry with the name which the impostor purported to have. The loan was advanced on the assumption that the impostor was who he purported to be. When it emerged that he was not and that the purported charge securing the loan over the property was ineffective, the lender commenced proceedings against the solicitor for breach of warranty of authority to act on behalf of the real freehold owner of the property. The lender sought summary judgment against the solicitor. Judge Hegarty Q.C. declined to enter summary judgment. He said that, far from the solicitor having no real prospect of succeeding on the alleged warranty, it appeared that the claimant lender was unlikely to succeed.

Judge Hegarty Q.C. gave a number of reasons for his decision. One was that in SEB Trygg Holding AB v. Manches [2005] EWCA Civ 1237 the Court of Appeal had held that a solicitor commencing proceedings on behalf of a client does not warrant the name of his client. The judgment of the Court of Appeal in that case was delivered by Buxton LJ. At paragraph 67 he said:-

“The warranty which a solicitor gives is that he has a client who has instructed him to assert or deny the claims made in the proceedings against the opposing party. We do not think he warrants that the client has the name by which he appears in the proceedings. As a matter of principle it would not be right to impose strict liability upon a solicitor for incorrectly naming his client. Otherwise solicitors could be made liable for any case of misnomer including, for example, typographical errors or change of corporate name without a change of rights.”

From that decision Judge Hegarty Q.C. drew the principle that a solicitor does not warrant any particular attributes of his client. It seems to me that that is sound. In Nelson v. Nelson, supra, both McCowan LJ and Waller LJ pointed out that a solicitor commencing proceedings for a client did not warrant either that the client was solvent or that he had a good cause of action. There seems to be no justification for confining those observations, and those of Buxton LJ quoted in the preceding paragraph, only to the warranty of authority given by a solicitor commencing proceedings.

Judge Hegarty Q.C. also pointed out that in Platform Funding v. Bank of Scotland Plc [2008] EWCA Civ 930 it had been reaffirmed in the Court of Appeal that the presumption, in a case in which a professional person was instructed to undertake a task, was that his or her obligation was to exercise about that task the care and skill to be expected of a reasonably competent member of the relevant profession. Rix LJ said, at paragraph 48 in his judgment in that case:-

“I see no reason to give any of these cases, all of them in this court, any prominence over any other. They all turn on their own particular facts. They nevertheless allow the following conclusions: (1) that the default obligation is one limited to the taking and exercise of reasonable care; (2) that it requires special facts or clear language to impose an obligation stricter than that of reasonable care; (3) that a professional man will not readily be supposed to undertake to achieve a guaranteed result; and (4) that if he is undertaking with care that which he was retained or instructed to do, he will not readily be found to have nevertheless warranted to be responsible for a misfortune caused by the fraud of another. It follows from the jurisprudence and from these conclusions to be derived from them, however, that it is not possible to support a blanket approach whereby, even in the absence of an express warranty, a professional’s responsibility is nevertheless always limited to the taking of reasonable care.”

That, as it seemed to Judge Hegarty Q.C., and as it seems to me, is an important consideration in determining whether the warranty for which Mr. Douthwaite contended as against H & H should be held to exist as a matter of law. Ultimately the common law is about justice and fairness. In many circumstances, including the fraud perpetrated upon Mr. and Mrs. Stevenson, as a matter of practical policy the law is concerned with the allocation of risk. It is not the case that, as a matter of law, any particular class of litigant, or any claimant seeking relief in particular circumstances, is entitled to a remedy, still less a remedy against a solvent party, unless the law has determined that that should be so. Thus the question is whether the law has determined, or should now determine, that solicitors duped by a fraudster should be held liable to those who have suffered loss by reason of the fraud.

That was certainly not the view of the Court of Appeal in Midland Bank Plc v. Cox McQueen [1999] PNLR 593. This was another case in which a husband purported to act on behalf of his wife in securing a loan on the security of a property, one of which he was in fact the sole owner. The lending bank wished solicitors, the defendants, to undertake certain steps on its behalf, in particular explaining certain documents to the wife and obtaining her signature to the intended mortgage. The mortgage made provision for it to be signed by the wife and included a certificate to be signed by the solicitors that:-

“We hereby certify that the contents of this document have been fully explained to Constance Jean Dukes that she fully understands the portent and has signed this document of her own free will.”

In fact the husband produced to the solicitors an employee who masqueraded as the wife, and the impostor signed the mortgage. Inevitably when the time came for the mortgage to be enforced the true position emerged and the lender sued the solicitors for negligence, breach of warranty of authority, breach of retainer and breach of the warranty on their part contained in the certificate on the mortgage.

At page 598 of the report Lord Woolf MR pithily summarised the issue before the Court of Appeal and his conclusion:-

“The question is, did the bank intend to ask for and did the solicitors intend to give a promise to answer for the fraud of the customer even if that fraud could not be detected by exercising all proper care? In my view the answer to the question should be no, unless the language used compellingly indicates otherwise.”

In the same case Mummery LJ said, at page 604:-

“The letter was a retainer by the bank of a firm of solicitors to perform professional services of an advisory and ministerial kind for the bank. Professional services provided by the solicitors would not normally involve the guaranteeing of a result by them, such as verifying the identity of Mrs. Dukes, let alone providing the bank with what would amount to an insurance policy against the risk of fraud occurring in a transaction entered into by the bank with its customer, Mr. Dukes; a transaction about which the solicitors were told little by the Bank and in which they had no input or influence.”

At paragraph 96 of his judgment Judge Hegarty Q.C. summarised his view of the law, before coming to apply it to the facts of the case before him. He said:-

“For my part, I do not think that questions of this kind can be answered in the abstract or at a high level of generality. A warranty of authority is an implied obligation arising as a matter of contract in appropriate circumstances. Whilst the core nature of the warranty is well established, its precise limits in any particular case must, in my judgment, be determined by reference to the specific circumstances which have given rise to the warranty. That is an objective question to be determined by reference to the circumstances prevailing and known to the parties at the time when the warranty is deemed to have arisen and not in the light of subsequent developments. It is in this context that considerations similar to those expressed by the Court of Appeal in Midland Bank plc v. Cox McQueen [1999] PNLR 593 are likely to be of considerable relevance, particularly since the Court is dealing with the extent of an implied obligation rather than with the construction of a written document.”

The ultimate conclusion of Judge Hegarty Q.C. on the issue of alleged breach of warranty of authority is perhaps to be found in paragraph 102 of his judgment:-

“I need not repeat the considerations set out, perhaps most clearly, in Midland Bank plc v. Cox McQueen [1999] PNLR 593. But, as I have previously indicated, they seemed to have a particular relevance both to the facts of this case and as to the boundaries of the implied warranty of authority in such circumstances. They strongly suggest that the court should not readily impose upon a person rendering professional services an absolute, unqualified obligation amounting, in effect, to a guarantee of his client’s identity and title. The risk that the law has sought to address by the implication of a warranty of authority is that the agent may not have the authority which he claims; and the justification for such an allocation of risk is that the agent is in much the better position to know or ascertain whether he has the requisite authority. But the risks against which Excel is seeking to be protected in these proceedings are the commercial risks involved in lending to a person who may not be all that he claims to be. For my part, I can see no justification why risks of this kind should be transferred from the shoulders of a commercial concern such as Excel on to those of a professional firm such as BM Solicitors.”

Mr. Douthwaite pointed out that the decision of Judge Hegarty Q.C. in fact was only that there should not be summary judgment, so that his observations were obiter. He also pointed out that, even if Judge Hegarty Q.C. had decided that the warranty of authority alleged in Excel Securities Plc v. Masood was not known to law, such decision would not have been binding upon me. Both of these points are correct. However, I respectfully find the reasoning of Judge Hegarty Q.C. compelling.

At paragraph 6 d of the Amended Defence of H & H in this action it was pleaded that:-

“The Sixth Defendant warranted that it was authorised and instructed by its client who held himself out to be the registered proprietor of the Property and whom the Sixth Defendant had reasonably satisfied itself was the person he held himself out to be.”

That pleading proceeded on the basis that there was a warranty of authority given by H & H, but a rather limited one. At paragraph 96 of his judgment in Excel Securities Plc v. Masood Judge Hegarty Q.C. also proceeded on the basis that there was a warranty of authority in that case, but again a limited one. I incline to the view that in fact it is unarguable that a solicitor could give a warranty of authority which went further than that he had a client who had given the solicitor the name which the solicitor had identified to the opposite party, or other parties. Such a warranty would be of no practical benefit in any foreseeable circumstances, and so the question arises whether even a limited warranty of authority should be found to exist. It may be that a solicitor owes a duty of care in tort to those dealing, through the solicitor, with his ostensible client, to take reasonable care to satisfy himself as to the identity of his client, but that, in my judgment, is conceptually different from a warranty. As Waller LJ pointed out in his judgment in Penn v. Bristol & West Building Society, “whether a warranty of authority has been given rests on a proper analysis of the facts in any given situation…” If the situation is that the solicitor’s client has duped him, as well as the claimant, in my judgment it is not appropriate to say that the solicitor gave any warranty of authority whatsoever.

If I am wrong in that conclusion and some warranty of authority was implied on the part of H & H in acting on behalf of the Impersonator, for the reasons which I have indicated, it seems to me that that could only be a limited warranty that H & H acted for a person calling himself Kashim Bukar Shettima, and not that the person for whom H & H acted was in fact called Kashim Bukar Shettima, still less that he was actually the True Owner. If either of these analyses is correct, H & H was not actually liable to Mr. and Mrs. Stevenson at all, and so the entirety of what was paid in settlement of the claims against H & H fell to be taken into account in assessing whether Mr. and Mrs. Stevenson had suffered any, and if so what, loss by reason of the conspiracy in which Mr. Singh and Mr. Zammit participated, or by reason of the dishonest assistance provided by Freedex.

However, the same result is achieved even if H & H warranted to Mr. and Mrs. Stevenson that the Impersonator was in fact the True Owner. That is because, in my judgment, the measure of damages for breach of a warranty given by a solicitor that he was authorised by those on whose behalf he purported to act, so to do, in circumstances in which the solicitor did not purport to enter into a contract on behalf of his client or clients, is limited to the loss suffered by the opposite party as a result of embarking upon the ultimately ineffective transaction in which the solicitor acted, and does not include damages for loss of bargain. Damages for loss of bargain can only be recovered in a case in which the agent who lacked authority purported to be authorised to enter into a contract on behalf of his principal, or a case like Fibank’s Executors v. Humphreys (1886) 18 QBD 54, in which an agent purported to be in a position to transfer valuable securities to the claimant.

Consequently, by whichever of these routes was followed, the result was that Mr. and Mrs. Stevenson were not entitled to judgment for damages against any of Mr. Singh, Mr. Zammit or Freedex.

In the circumstances, although Mr. and Mrs. Stevenson established that each of Mr. Singh, Mr. Zammit and Freedex was liable to them, in the absence of proof of loss the claim against must be dismissed.

It will be necessary to hear Mr. Douthwaite and Mr. Singh, if he wishes to address me on the point, on the question of costs, but it is, perhaps, worth pointing out that, until the settlements with Mr. Phillips and Miss Mason on the second day of the three day trial, on my findings as to liability, there would have been judgments for damages against each of Mr. Singh and Mr. Zammit. The only costs which might have been saved if the trial had ended at the point at which Mr. Phillips and Miss Mason settled the claims against them, rather than continuing against Mr. Singh, Mr. Zammit and Freedex until the end of the trial was the costs of the third day, amounting to about two hours of hearing time.