Eco Quest Plc v GFI Consultants Ltd (In Liquidation) & Ors

Much of the argument at the hearing before me concerned issues as to the extent to which the position at the time of that hearing differed from the position at the time of the Salter orders. For that reason it is convenient to adopt the exposition in the Salter judgment of the evidence as it stood at that time and to set out, in addition, relevant observations made in the Salter judgment. Passages set out from the Salter judgment below include a number of defined terms. Where convenient, I shall use those defined terms in the remainder of this judgment.

Under the heading “The parties” the Salter judgment stated at paragraphs 2 to 5:

2.

The claimant company (“EQ”) was incorporated on 6 June 2012. Its chief executive officer is Mr John Davies, who also owns 75% of its issued shares. According to Mr Davies, “its business model is to provide investment routes into ecologically-friendly projects”.

3.

The first defendant company (“GFI”) was incorporated on 13 April 2010. It traded, inter-alia, as a promoter of unregulated investments in Brazilian forestry. The second defendant (“Mr Skeene”) and the third defendant (“Mr Bowers”) were at all relevant times directors of, and shareholders, in GFI.

4.

A winding up order was made against GFI on 3 March 2014. Carr J's order dated 8 July 2014 gave the claimant leave under the Insolvency Act 1986 (“IA 86”) s 130(2) to commence and proceed with this action. Bankruptcy orders were made against Mr Skeene and Mr Bowers by the Croydon County Court on 29 July 2014. Mark Philip Bassford, of Guardian Business Recovery LLP was in each of their cases appointed as Trustee in Bankruptcy.

5.

The claims made in this action include a claim to trace and recover monies which it is alleged that GFI, Mr Skeene and Mr Bowers hold on trust for EQ. Such trust monies would in any event not form part of the assets available for distribution in GFI's liquidation, or form part of the bankruptcy estate of Mr Skeene or Mr Bowers. In any event, so far as Mr Skeene and Mr Bowers are concerned, this action involves a claim in fraud: and, under IA86 s 281(3), discharge from bankruptcy would not release Mr Skeene or Mr Bowers from the bankruptcy debt which would arise from that claim, were it to be established. No application has been made under IA86 s 285(2) to stay this action.

Under the heading, “The claim” the Salter judgment stated at paragraphs 7 and 8:

7.

In summary, EQ says that it was deceived, by fraudulent misrepresentations made by or on behalf of GFI, Mr Skeene and Mr Bowers, into investing some GBP 2.2m with GFI for the purpose of acquiring beneficial interests in demarcated plots covering a total of 35.2 ha in an area of Brazilian teak forest known as the Para Sky Plantation.

8.

EQ claims against GFI a declaration that it held and still holds on trust the monies paid to it by EQ. Against Mr Skeene and Mr Bowers, EQ claims damages for deceit. EQ also claims a declaration that, in dealing or causing GFI to deal with the monies paid to it by EQ, Mr Skeene and Mr Bowers acted and are accountable to EQ as constructive trustees. As part of its trust claims, EQ claims against all three defendants consequential accounts, enquiries and orders for payment.

It was said on behalf of EQ that Mr Davies first made contact with the defendants when he was acting for one of his other companies in relation to a teak plantation at Belem in Brazil. In this regard the Salter judgment stated, under the heading “Belem Sky”:

10.

According to Mr Davies, his initial contact with the defendants was in his capacity as managing director of another of Mr Davies's companies, Hedge Capital Investment Group Plc (“HCI”). HCI is an unlisted company which, inter-alia, invests in start-up businesses using funds sourced from “small pot” pension savings.

11.

Mr Davies was introduced to GFI's Global Sales Director, John Fraser, through another of HCI's clients. At a meeting in Malaga, Spain, on 23 February 2012, Mr Fraser invited Mr Davies to consider investing in a teak plantation at Belem in Brazil, known as “Belem Sky”. Mr Fraser told Mr Davies that the investment was eco-friendly and promised higher than average returns. Mr Fraser also told Mr Davies that the investment scheme was overseen by Title Trustees International (“TTI”) which, by acting as trustee, was effectively guaranteeing that the funds were safe.

12.

After a further meeting in London (at which Mr Fraser told Mr Davies that Mr Fraser's company, Investment Alternatives Limited (“IAL”) would receive an introducer's commission if HCI invested in the GFI scheme), and a number of exchanges of correspondence, HCI decided to invest in Belem Sky. On 6 March 2012 HCI purchased plots 1 to 58 of the Belem Sky Plantation for GBP 359,600, which it paid into TTI's bank account.

13.

Shortly thereafter, the Pensions Regulator began an investigation into the affairs of HCI. This meant that HCI was no longer in a position to access further funds to invest in similar projects. However, Mr Davies did not stop looking for projects in which to invest, albeit using a different investment vehicle. In that connection, Mr Fraser introduced Mr Davies to Mr Bowers and to a Ms Best, another executive of GFI, at a meeting on 14 March 2012. Mr Davies also met Mr Skeene and Mr Bowers on 5 April 2012. At that meeting Mr Skeene and Mr Bowers gave Mr Davies a presentation promoting green investment in the teak plantations at Belem Sky. At a further meeting on 13 April 2012, Ms Best and Mr Bowers provided Mr Davies with a due diligence pack issued by TTI in relation to Belem Sky.

EQ’s account of how Mr Davies learnt about Para Sky was set out in paragraphs 14 to 16 of the Salter judgment, under the heading “Para Sky”:

14.

Also according to Mr Davies, it was shortly after that 13 April 2012 meeting — probably at a meeting on 23 April 2012 – that he proposed making an investment in a Brazilian teak plantation that was not part of the Belem Sky scheme. Mr Davies's reason for this was to cut out TTI, and so to avoid paying its fee of 2.5% for acting as trustee.

15.

Discussions about this potential new investment continued through May and June 2012. At some point, Mr Davies told Ms Best Mr Bowers and Mr Skeene that he was looking to incorporate a new company with a view to investing something of the order of GBP 2m per month. EQ was in fact incorporated (as recorded above) on 6 June 2012. Also at some point in these discussions, Ms Best and Mr Bowers told Mr Davies that they had another Brazilian plantation, called Para Sky, which could be set up for investment without involving TTI as trustee.

16.

By early July 2012, Mr Davies was seriously considering a significant investment by EQ in Para Sky. On 4 July 2012, he sent an email to Ms Best hoping to set up a meeting the following day.

The next section of the Salter judgment was headed “the pleaded representations”. It began with what it described as the “first set of alleged mis-representations”. I shall refer to these representations as “the oral representations”. They are dealt with in paragraphs 17 and 18 of the Salter judgment:

17.

According to Mr Davies, he had a meeting with Ms Best, Mr Bowers and Mr Skeene on 5 July 2012, in the downstairs meeting room at GFI's offices in St Clements Lane, and it was at that meeting that the first of the three sets of what EQ alleges to have been fraudulent misrepresentations came to be made.

18.

This first set of alleged mis-representations is pleaded in paragraph 11 of the Particulars of Claim. That paragraph states that:

At that meeting [on 5 July 2012] Mr Skeene and/or Mr Bowers:

11.1

told Mr Davies that they already held an option to buy the entirety of the Para-Sky Plantation;

11.2

told Mr Davies that they would be taking further options in their own names but which would be exercised by Maos Seguras Administracao Agricolla Ltda (“Maos Seguras”);

11.3

told Mr Davies that Maos Seguras was controlled by [GFIC Title Ltd]”

11.4

gave Mr Davies a template “declaration of trust” and “certificate of declaration of trust” each to be executed by GFI once the investment had been made, giving the investor title to the plots bought.

The Salter judgment then turned to what it described as a “second set of alleged misrepresentations”. I shall refer to them as “the “suite” representations”. They are described in paragraphs 19 and 20 of the Salter judgment:

19.

The second set of alleged misrepresentations is pleaded (in paragraphs 12 and 13 of the Particulars of Claim) as having been made in a “suite of contractual documentation” sent to Mr Davies by email on 12 July 2012 by Ms Best. This suite of documents included a draft of the Para Sky Plantation Corporate Investment Agreement. Paragraph 13 of the Particulars of Claim states that:

The following were material misrepresentations in this agreement.

13.1

A “Plot” would contain “teak trees which are approximately 8 to 9 years into a growth cycle” and would be “demarcated on the ground”

13.2

A “Plot” would be within the “Property”, being the “Para-Sky Plantation” in the state of Para, Brazil and would be held by GFI's the

13.3

A “Lease” “would be of “the beneficial interests in the Plot and the teak trees thereon”

13.4

GFI would sell the claimant “a Lease in the Plot”

13.5

GFI would warrant that

13.5.1

“It will procure the acquisition of a beneficial interest in the freehold of the Plot after Maos Seguras has purchased the freehold of the plot”; and

13.5.2

“The Plot and all the plots of land surrounding it that are within the Property contain semi mature teak trees planted approximately 8 to 9 years ago”

13.6

The “Price” paid by the Claimant “may be used if needed to purchase the land in which the Plot is situated prior to GFI being able to grant any lease”

13.7

“If the Plot has not been purchased by MS so that it forms part of the Property.. within 6 months of the date of this Agreement, then the [Claimant's] money paid under.. this Agreement.. shall be returned by GFI

13.8

GFI undertook “to create the Lease after it has been granted the beneficial interest in the freehold of the Plot”

13.9

GFI would thereafter “hold the benefit of the Lease on trust for the [Claimant]” and “issue to the [Claimant] a Certificate of Declaration of Trust which will constitute evidence of the beneficial interest in the Plot. No certificate issued by any other party shall be valid”

13.10

Upon issue of such Declaration of Trust, the Claimant “agrees to grant a long-term sub- lease over the Plot to Maos Seguras which shall assume full responsibility for the management of the Plot”

13.11

“After having held the Lease for a minimum of four years the [Claimant] shall be entitled to exercise an option to surrender it to GFI in consideration for the payment by GFI of the original Price plus 5%”.

20.

Paragraphs 14 to 17 of the Particulars of Claim then set out certain terms extracted from the draft Rental Agreement, the draft Declaration of Trust, and the draft Certificate of Declaration of Trust included in the suite of documents sent to Mr Davies.

In relation to the oral representations and the “suite” representations the Salter judgment made observations about what can conveniently be described as poor pleading. Those observations are set out in paragraphs 21 to 25:

21.

It is notable that only the first and third of the first set of pleaded mis-representations is in express terms a representation of past or present fact, and that none of the second set is in express terms a representation of past or present fact.

22.

In relation to both the first and second sets of representations, Mr Prentis (who appears for EQ) relies instead upon the principle that a statement of intention may be looked upon as a misrepresentation of existing fact if, at the time when it was made, the person making the statement did not in fact intend to do what he said, or knew that he did not have the ability to put the intention into effect. His case, he told me, was that none of the defendants at any time in fact intended to carry through the scheme described in these draft contractual documents.

23.

The principle on which Mr Prentis seeks to rely is a well-established one. However, CPR 16 PD 8.2 requires the claimant specifically to set out ( inter alia ) any allegation of fraud, and to give details of any misrepresentation in the Particulars of Claim. As Buckley LJ said in Belmont Finance Corporation Ltd v Williams Furniture Ltd, “An allegation of dishonesty must be pleaded clearly and with particularity”. In my judgment, if Mr Prentis wished to rely upon this principle, he should have pleaded expressly that the making of the statement as to future intention pleaded in paragraph 11, and the delivery of the suite of documents pleaded in paragraphs 12 to 17, each amounted to an implied representation as to the defendants' then intentions. He should also have spelled out precisely what intentions he was alleging that the defendants had (falsely) represented that they then had.

24.

However, a perhaps more fundamental problem with Mr Prentis's reliance upon this principle is that the Particulars of Claim do not expressly plead, in the Particulars of Falsity given in paragraphs 23 to 27, that the defendants did not at the material time have the intention which Mr Prentis has told me that they represented (in these first two sets of representations) that they then had.

25.

These are deficiencies in a Statement of Case which are capable of cure by an appropriate amendment. However, in an action such as this, where fraud is alleged, it is in my judgment of special importance that the Particulars of Claim should set out clearly and precisely the case which the defendant has to meet. This aspect of EQ's claim does not fulfil that fundamental requirement: and that is a factor which I take fully into account in favour of Mr Skeene and Mr Bowers.

The Salter judgment then dealt with the third and final set of alleged misrepresentations. I shall refer to the representations in question in this regard as “the “letter” representations”. They are described in paragraphs 26 to 29 of the Salter judgment:

26.

EQ's investments in Para Sky were made between 27 July 2012 and 30 November 2012. Over that period, EQ entered into 16 Investment Agreements with GFI to acquire plots covering 35.2 ha in the Para Sky Plantation 10 .

27.

The third set of alleged misrepresentations on which EQ relies is pleaded in paragraphs 20 and 21 of the Particulars of Claim. Those paragraphs are in the following terms:

20.

On the dates identified in Schedule A, in respect of each of the 16 investments GFI send Mr Davies a letter which referred to the Claimant's investment in the Para Sky Plantation, and enclosed the “fully executed” Investment Agreement and Rental Agreement, the Declaration of Trust, the Certificate of Declaration of Trust and a Map of the Project identifying the Plots acquired. In each case this letter was signed on behalf of GFI by Mr Skeene and Mr Bowers.

21.

Each such letter amounted to a further representation by Mr Skeene and Mr Bowers that the investments referred to had completed in the manner contemplated by the contracts and, in particular, that the Claimant had acquired a beneficial interest in a particular Plot in the Para Sky Plantation, which Plot was of the size and quality contracted. Each such letter was intended by Mr Skeene and Mr Bowers to be relied upon by the Claimant and in the making of subsequent investments was so relied on.

28.

Copies of all of these documents were exhibited by Mr Davies to his first affidavit. The set of documents for each investment made by EQ was in materially identical form. By way of example, the Certificate of Declaration of Trust for the investment made on 27 July 2012 stated as follows:

GFIC Title Ltd hereby certifies that (the “Investor”) [EQ] has invested in the Para Sky Plantation Project in Brazil and has Plot number(s) 80–94 registered in their name.

You hereby have the rights to 1.5 ha of Land, subject to the terms set out in your Investment Agreement

Valid from 27th of July until The Termination Date

The Declaration of Trust for that investment stated:

We, the undersigned, GFIC Title Ltd.. HEREBY CONFIRM that we are the registered majority shareholders of Maos Seguras Administracao Agricolla Ltda which is the registered legal owner of the Land and which forms part of the Para Sky Plantation Project she is more particularly described in the Investment Agreement

The Plot(s) named and identified overleaf form part of the Properties stop

Further we HEREBY ACKNOWLEDGE AND DECLARE that, pursuant to the Investment Agreement between [GFI] and the Investor named overleaf, we hold the Lease of the said Plot in trust for the Investor, and hereby agree to transfer, pay and deal with the said Plot in such manner as the Investor shall from time to time direct, subject only to the terms of the aforementioned Investment Agreement and Deed of Trust, and payment being made to us for any fees or disbursements which may be necessary arising from or in execution of such directions

29.

EQ's case, as pleaded in paragraphs 22 to 27 of the Particulars of Claim is (in summary) that — contrary to these representations – neither GFI, nor Maos Seguras, nor Mr Skeene, nor Mr Bowers, was ever registered as the legal owner of the land referred to in these Certificates and Declarations. Neither Mr Skeene Mr Bowers owned or controlled any option to purchase any part of the Para Sky Plantation until 18 September 2012, when Maos Seguras (acting by Mr Skeene and Mr Bowers) contracted to buy the Plantation. However, those contracts were never completed and were formally cancelled on 18 April 2013. In any event, the Para Sky Plantation only ever extended to approximately 22.68 ha.

Under the heading “The defence” the Salter judgment stated at paragraphs 30 to 34:

30.

In October 2014, Mr Skeene and Mr Bowers served their Defence. In broad summary, their pleaded case is as follows:

30.1

With regard to the first set of alleged misrepresentations, they deny being present at the meeting on 5th July, averring that that meeting was between Mr Davies and Ms Best alone. They accordingly deny making any representations whatsoever at that meeting;

30.2

With regard to the second set of alleged misrepresentations, they deny that the sending of draft documentation amounted to the making of any representations of any kind;

30.3

With regard to the third set of alleged misrepresentations, they admit the making of the 16 Investment Agreements, but deny making any of the alleged representations. Paragraph 15 of the Defence states that:

It is expressly denied that Mr Skeene and Mr Bowers made the alleged or any representations, alternatively actionable representations and/or that [EQ] relied on any such representations. The allegation that any such representation was made on behalf of Mr Skeene and Mr Bowers is embarrassing and denied in any event – [EQ] has nowhere alleged that any person made any such representations on behalf of Mr Skeene and Mr Bowers.

30.4

They also aver that EQ's decision to invest in Para Sky was made on 25 July 2012, so that it could not have relied on any later representations.

30.5

With regard to the Para Sky Plantation and its ownership, they state that Maos Seguras entered into agreements to purchase the plots on or about 29 June 2012, that those agreements have never been cancelled, and that “Maos Seguras has at all material times since 29 June 2012 been the owner or has been entitled to be treated as the owner of the Plantation, and has been entitled to have its ownership recorded on the public register”. They aver that EQ “has purchased 35.2 ha worth of land and… has 35.2 ha worth of teak trees”.

31.

Mr Bowers, in his third witness statement, supports this case as to the ownership of the Para Sky Plantation by exhibiting transcripts of public deeds of sale and purchase obtained from the Sole Office of Deeds, Land Registry, and Registry of Natural and Legal Persons, Deeds and Documents. According to Mr Bowers “These documents confirm that Maos Seguras did purchase on 18 September 2012 and 26 October 2012 the land for the Para-Sky Plantation” and that “it is clear from this document.. That the purchase of this land has not been cancelled.. The final step of the transaction is the entry of Maos Seguras' title on the public register this is expected to take place in the next 10 days”.

32.

In response to this, EQ's solicitor, Ms Lelliott, has exhibited to her fourth witness statement a report from a firm of Brazilian lawyers named Peixoto & Lupoli. This report (according to Ms Lelliott) appears to show “that the assertions made by Mr Bowers in his third and fourth witness statements insofar as [concerns] the ownership of [the] Para Sky land cannot be true”. I cannot (and do not need to) resolve that conflict of evidence for the purposes of determining these applications.

33.

However, I should record that, on the morning of the second day of the hearing, Mr Jones (who appears for Mr Skeene and Mr Bowers) produced what appeared on its face to be a copy of a Registration Certificate relating to Lot No 493 at Para Sky. This Certificate was in Brazilian Portuguese, but was accompanied by a certified translation. It referred to a Public Deed of Sale and Purchase dated 18 September 2012 and a Deed Certificate dated 5 December 2014, and purported to record the registration on 11 December 2014 of Maos Seguras as owner of Lot 493.

34.

Since EQ had had no opportunity to investigate the genuineness of this Certificate before it was produced to the court, Mr Prentis invited me to adjourn the hearing and to order Mr Skeene and Mr Bowers to swear and file yet further affidavits, explaining how this registration had been brought about. Mr Jones resisted the suggestion of an adjournment: and since I had already formed the view that I could not (and did not need to) resolve the conflict of evidence about title, I declined to adjourn the applications. However, in fairness to EQ, I can in consequence attach no weight in the defendants' favour to this belatedly produced document.

At paragraphs 35 to 37 the Salter judgment made further observations about the trust claim, additional to those set out in section C3.1 above. They were as follows:

35.

In paragraphs 29 and 30 of the Particulars of Claim, EQ relies upon the terms of the Investment Agreement pleaded in paragraphs 13.6 and 13.7 of the Particulars of Claim as giving rise to a trust of the monies paid by EQ to GFI, either to use those monies to purchase the freehold of the relevant Plot, or to return them to EQ.

36.

In paragraphs 25 to 28 of their Defence, Mr Skeene and Mr Bowers deny the existence of this alleged trust. Their case is that the Investment Agreement “permitted but did not require” the monies paid by EQ to be used for the purchase of the land: and that, in any event, EQ well knew that “40% of all monies paid by the claimant to GFI were to be used to pay the claimant's sales/marketing agents and/or Mr Davies and/or Taurus [Business Consulting Ltd]” (an entity which the Defence describes as “a company associated with Mr Davies”).

37.

I note in passing that, if EQ can establish that it was deceived about title to the Para Sky land, it might perhaps be able to establish its trust claim on the alternative basis that it paid those monies under an operative mistake.

In a footnote at the end of paragraph 37 the Salter judgment stated:

See Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105, as explained by Lord Browne-Wilkinson in Westdeutsche Bank v Islington LBC [1996] AC 669 at 714–5.

A substantial part of the Salter judgment then dealt with the contentions on behalf of Mr Skeene and Mr Bowers that there had been material non-disclosure. Those contentions were rejected by the deputy judge. There was no suggestion at the hearing before me that I would be assisted by consideration of those contentions or the deputy judge’s reasoning in relation to them. I accordingly say no more about them.

On the question whether to grant EQ’s application to continue the Carr order as varied, the Salter judgment included a section headed “Good Arguable Case/Serious Issue to be Tried”. Under this heading paragraphs 73 to 79 of the Salter judgment dealt with the deceit claim:

73.

Mr Jones, on behalf of Mr Skeene and Mr Bowers, submits that EQ does not have a good arguable case and/or that there is no serious issue to be tried. He argues that EQ's misrepresentation case is hopelessly flawed, because (I summarise):

73.1

As to the first set of alleged mis-representations, it is plain from the contemporary emails that only Ms Best met Mr Davies on 5 July 2012. There is no evidence that Ms Best was speaking on behalf of Mr Skeene and/or Mr Bowers. In any event, the matters relied on do not amount to actionable mis-representations and/or were not relied on;

73.2

As to the second set, the sending of a specimen set of contractual documents cannot amount to an actionable mis-representation. In any event, it was (again) Ms Best who sent the documents, and she was acting for GFI, not Mr Skeene and Mr Bowers personally;

73.3

As to the third set, these were contractual promises by GFI and/or GFIC Title Ltd, not representations by Mr Skeene and/or Mr Bowers. In any event, the first set of signed documents was not sent back until after the initial four investments had been made. This shows beyond doubt that nothing in those documents was relied on in making those initial investments, and strongly suggests that there was similarly no reliance in relation to the later investments. Mr Davies's desire to dispense with TTI, and the lack of any relevant due diligence, show that EQ was prepared to invest without proof of Maos Seguras' title to the land.

73.4

In any event, Mr Davies's own evidence is that the board of EQ made its decision to invest in Para Sky on 25 July 2012, and so cannot have relied on any later representations.

73.5

In any event, the evidence shows that it is “substantially true that Maos Seguras was entitled to be treated as owner of the plantation”.

74.

I accept that the contemporary emails strongly suggest that only Ms Best was present on 5 July 2012: but it may be that Mr Davies is mistaken only as to the date of the meeting, not as to whether any meeting with Mr Skeene and Mr Bowers happened at all. That is not a dispute that I can resolve at this stage. There is, however, much more force in Mr Jones's second point. I have already pointed out what, in my judgment, are the inadequacies of EQ's pleading in relation to these first two sets of representations.

75.

However, looking at the matter in the round, it seems to me that the facts giving rise to the substance of EQ's case in relation to Maos Seguras's lack of registered title at the time of these investments are (just) sufficiently pleaded. That case (as I understand it) is that, by negotiating with EQ in relation to these proposed transactions, by causing or permitting Mr Best as part of those negotiations to send a suite of documents containing copy certificates referring to Maos Seguras as already having “registered legal title”, and thereafter by causing GFI and GFIC Title to enter into these transactions (in the course of which certificates were provided, signed by Mr Skeene and Mr Bowers, stating that Maos Seguras already had registered title), Mr Skeene and Mr Bowers each impliedly represented to EQ at the time of each investment that they honestly believed on reasonable grounds that Maos Seguras had “registered legal title” to the relevant land.

76.

Mr Skeene and Mr Bowers are plainly alive to the fundamental elements that are relied on by EQ in relation to this aspect of the case, since they have responded specifically and in detail, both in their Defence and in their evidence, to the points made concerning the extent of Maos Seguras' title (if any) to the land. Even though EQ's pleading of this aspect of the case could have been clearer, it does not seem to me that the lack of clarity has caused Mr Skeene and Mr Bowers any significant prejudice in understanding and addressing the case made against them.

77.

It follows that, in my judgment, there is (just) a sufficiently pleaded case of the making of actionable representations by Mr Skeene and Mr Bowers, and of the untruth of those representations. That case is also, in my judgment, sufficiently supported by the evidence presently before the court to pass the threshold requirement of a “good arguable case”.

78.

As to reliance, it seems to me to be properly arguable on the evidence presently before the court that EQ relied on those alleged representations each time it actually made an investment, and not just at the point at which the Board decided in principle to invest. As to Mr Jones' other points in relation to reliance, those seem to me to be matters for trial. They are not matters which I can determine simply on the papers at this stage.

79.

In my judgment, EQ therefore gets over the first hurdle of showing that it has a good arguable case of implied misrepresentation, albeit one that could and should be improved by being spelled out with much greater clarity in its Particulars of Claim.

Under the same heading, the Salter judgment dealt at paragraph 80 with the trust claim. In that paragraph the deputy judge referred to an earlier passage in the judgment (which I have set out in section C5 above):

80.

As to EQ's trust claim, I need say no more than that, for the reasons given in paragraphs 35 to 37 above, this claim seems to me to raise a serious issue to be tried. Given the liquidation of GFI, and the bankruptcy of Messrs Skeene and Bowers, damages would plainly not be an adequate remedy. I will consider the balance of convenience at the same time as I consider the remaining elements in relation to the freezing injunction.

The next section of the Salter judgment was headed “Assets/risk of dissipation/discretion”. In this regard it is necessary only to set out paragraphs 87 to 89:

87.

Bearing in mind that, as I have already found, EQ has established an arguable case of fraud against Mr Skeene and Mr Bowers, these factors each and all reinforce my view that the prudent course – and therefore the just and convenient course — would be to continue the injunction and the freezing injunction until after trial or further order in the meantime.

88.

The freezing injunction must, however, be shaped so that its purpose is to preserve the assets held by or for each of the defendants, for the creditors of that defendant as a whole, and not just for EQ. It must therefore be varied so as to include provisos expressly enabling the Trustee in Bankruptcy to perform his duties for the benefit of the creditors of each defendant as a whole without further reference to this court. In particular, there must be provisos permitting the Trustee to give notice under IA86 s 307 or to seek and/or to enforce an Income Payments Order under IA86 s 310.

89.

I would also encourage EQ as soon as possible to formulate and to apply for permission to make suitable amendments to its Particulars of Claim, in order to spell out with much greater clarity the particular implied representations on which it now relies, and to plead (if it wishes to assert) the untruth of each of those representations. If EQ does not do so, and so fails promptly to put its pleaded case in order, it will be open to Mr Skeene and Mr Bowers to invite the court to re-consider, in the light of that failure, the appropriateness of continuing the injunction and the freezing injunction.

The judgment of Sir Terence Etherton C, giving his reasons for refusing the renewed application for permission to appeal from the Salter orders, included the following:

7.

I turn first to the arguments on non-disclosure. The non-disclosure alleged and relied upon relates to three matters.

8.

The first is that it was not disclosed to Carr J that part of the investment money (said to be at least 27% and in reality 40%) was spent on paying commissions, of which Mr Davies, the claimant's Chief Executive Officer, must have been aware.

9.

I cannot see that this non-disclosure was in any way significant. At least one of the central allegations at the heart of this case is the allegation by the claimant that it was induced to make the investment in the Para-Sky project by the fraudulent misrepresentation that GFIC Title Ltd ("GFIC") or Maos Seguras Administracao Agricola Ltda ("Maos Seguras"), which GFIC controlled, was the registered legal owner of the land in the Para-Sky project. The issue of commissions and who received them does not touch on the question whether such a misrepresentation was made, and if so, whether it was made deceitfully.

...

12.

The third non-disclosure relied upon is the failure of the claimant to draw to the attention of Carr J that, at the time of the hearing before her, Mr Whale was facing charges of dishonesty. The deputy judge agreed with the second and third defendants that fact should have been disclosed to Carr J but considered that it was not a grave non-disclosure and would not have altered Carr J's eventual decision. He concluded that, in all the circumstances, it would not be in the interests of justice for him to discharge the injunction and the freezing injunction on that ground alone.

13.

It is submitted on behalf of the second and third defendants that that conclusion was wrong in principle or was a decision which fell outside the bounds within which reasonable disagreement was possible. That is, with respect, an impossible contention. The claimant's contention is it was induced to make the investment in the Para-Sky project by the fraudulent misrepresentation that GFIC or Maos Seguras was the registered legal owner of the land in the Para-Sky project. As I understand the position, it is not, and has never been, the contention of the second and third defendants that any sale of the Para-Sky land to GFIC or Maos Seguras was in fact ever completed or that either of them was registered as the legal owner until shortly before the hearing before the deputy judge. What they contend is that there was an agreement on 29th June 2012 to sell the land to Maos Seguras, which has at all times since then been entitled to be treated as the owner of the land and that in due course, subsequent to the relevant investments by the claimant, the relevant agreements were completed and Maos Seguras was registered as the legal owner. Those facts are, as I understand it, themselves in contention and disputed by the claimant.

14.

Mr Whale's credibility is irrelevant to this issue. Further, and in any event, as the deputy judge pointed out, the fact of non-completion of the purchase and sale agreements and the alleged non-registration of Maos Seguras as the legal owner were proved by exhibits to the Para-Sky report and it has not been contended in the defence or in evidence that they are forgeries.

…

16.

The next issue is whether or not the second and third defendants are correct to contend that the deputy judge should not have ordered a continuation of the injunctions because the claimant has failed to raise a serious question to be tried or a good arguable case. It is on this particular part of the application that Mr Philip Jones has helpfully concentrated helpfully in his oral submissions.

17.

Part of the argument on this part of the case, developed in their skeleton argument, is that the second and third defendants say that the evidence shows that they never attended any meeting with Mr Davies on 5th July 2012. In the event, Mr Davies has sworn a third affidavit on 9th June 2015 in which he says that he is convinced that he had a meeting with Miss Best and the second and third defendants which, if not on 5th July 2012, was on some date between the first discussions with him about the Para-Sky project and 20th July 2012, and he lists a series of meetings with him attended by the second and third defendants or one or other of them.

18.

In his oral submissions this morning Mr Jones pointed out what he says are deficiencies in the particulars of claim in relation to the misrepresentations said to have been made.

19.

In relation to the first set of misrepresentations said to have been made on 5th July 2012, he says that only the representation specified in para 11.1 in the particulars of claim is actionable, and on the evidence the claim in relation to that representation is bound to fail.

20.

So far as the second set of misrepresentations are concerned, for the reasons which were set out by the deputy judge, those are defective as they presently stand in not specifying that in relation to future conduct the second and third defendants, or any of the defendants, had no intention of carrying out what was there promised or represented.

21.

Turning then to the last and third set of representations, these arise under the circumstances set out in the particulars of claim at paragraphs 16 to 21. What is clear and common ground is that as from 23rd August 2012 at the latest, the claimant was being sent Declarations of Trust signed by the second and third defendants, stating that Maos Seguras was the registered legal owner of the land in which the claimant was investing, forming part of the Para-Sky project, and an accompanying letter also signed by the second and third defendants. The particulars of claim, supported by a declaration of truth by Mr Davies, alleged that the representation thereby made was relied upon by the claimant in making subsequent investments. The second and third defendants point out that four investments out of a total of sixteen were made prior to 23rd August 2012. That, however, does not on the face of it detract from the actionability of at least the remaining investments.

22.

Mr Jones, in the course of his submissions, said that it is clear from the proposed amended particulars of claim, which are currently the subject of a reserved judgment to be given in early November by Paul Walker J, and from consideration of the existing particulars of claim, that what is really being alleged here is something relating to the beneficial interest to be acquired by the claimant, as opposed to reliance upon any representation as to the existing title of Maos Seguras. I do not accept that for a moment. Paragraphs 16 to 21 are clearly alleging that a representation was made at the time that each Declaration of Trust and Certificate of Trust was returned to the claimant that Maos Seguras was the registered legal owner of the relevant land and that those representations were relied upon by the claimant, and that each of those representations was made by Mr Skeene and Mr Bowers and intended to be relied on.

23.

Mr Jones says that there is a conundrum which cannot be surmounted that affects the case of the claimant because, according to at least the proposed amended particulars of claim, what is being alleged is that under the terms of the relevant contracts there was provision for the return of the investment money if the land had not been acquired by GFIC or Maos Seguras within six months and therefore there is an inevitable tension, or inconsistency, between that allegation and an allegation that the claimant relied upon representations by Mr Skeene and Mr Bowers at the time of each investment agreement that Maos Seguras had already acquired legal title to the land.

24.

I can see, if that is the position, although I have not seen the proposed amended particulars of claim, that there may be an inconsistency and I can see that that may be a ground for saying that there is some defect in the proposed amendments, and it may be that that may be a ground also for saying that it weakens the claim of the claimant to a proprietary trust in the investment monies which they handed over. As matters stand at the moment before me, however, and as they stood before the deputy judge, paragraphs 16 to 21 of the particulars of claim do raise a clear allegation of deceitful misrepresentations intended to be relied upon and that were relied upon. Of course I cannot, any more than the deputy judge could, resolve the conflicts of evidence at this stage.

25.

Finally on this aspect, Mr Jones said that these are serious allegations of fraud and it is well established that allegations of fraud should be clearly particularised. In my view, for the reasons I have given, the allegations in paragraphs 16 to 21 are clear and sufficiently particularised for present purposes.

26.

The actionability of at least 12 of the investments, that is those made after the first four, is not in any way undermined by the fact, which is relied upon in the skeleton argument of the second and third defendants, that the claimant's board made the decision in principle to invest in the Para-Sky project on 25th July 2012; that is to say, in advance of any executed documents. The fact that a decision was made in principle is not in any sense inconsistent with the claimant's reliance on statements of fact and representations made in formal documents which were an essential part of the process of completing each investment.

27.

The second and third defendants contend that the deputy judge was wrong to accept, and gave insufficiently cogent reasons for accepting, the claim to a trust and a breach of the trust of the investment money. There is little to be said about this, other than that both the deputy judge and Carr J were entitled to take the view that they did at the interlocutory stage. In that regard, it is to be noted that the liquidator of the first defendant, who would be concerned to protect the interests of the first defendant's creditors, has not sought to argue against the allegation of a trust of the investment money.

...

The legal tests relevant to the dismissal application are not in dispute. The primary remedy sought is striking out. Pursuant to CPR 3.4 the court has the power to strike out the whole or any part of any statement of case where:

… it appears to the court -

(a)

that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b)

that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or

(c)

that there has been a failure to comply with a rule, practice direction or court order.

In relation to paragraph (c) of CPR 3.4, paragraph 8.2 of the Practice Direction accompanying CPR 16 is relied on by Mr Skeene and Mr Bowers. As noted in paragraph 23 of the Salter judgment (see section C3.6 above), the Practice Direction states that particulars of claim must specifically set out any allegation of fraud and details of any misrepresentation. More generally, the same paragraph of the Salter judgment recalls the well known observations of Buckley LJ in Belmont Finance Corporation Ltd v Williams Furniture Ltd:

An allegation of dishonesty must be pleaded clearly and with particularity.

The alternative remedy sought is summary judgment. Key elements in this regard were set out in Mr Collins’s skeleton argument, and were not disputed by Mr Prentis. These key elements were that:

In section D2 below I deal with general objections advanced by EQ in answer to the dismissal application. In sections D3 to D8 below I deal with the parts of the claim targeted by the dismissal application. My conclusions on the dismissal application are set out in section D9.

As regards the Salter judgment, Atton 1 contained observations about what had been said by the deputy judge. In particular, paragraph 12 of Atton 1 said that:

… paragraph 89 of his judgment contained a clear warning to the Claimant of the need to amend its particulars of claim. His order therefore provided a deadline of 30 January 2015 for the Claimant to make any application to amend its particulars of claim. The Claimant has not made any such application, before or after the deadline. Accordingly Mr Skeene and Mr Bowers have made this application for a strike out or summary judgment.

In this context EQ advanced a first general objection to the dismissal application. EQ’s skeleton argument said that Mr Atton, in the passage cited above, had proceeded on a misapprehension. The deputy judge had found that the claim as it stands is valid, and it was not open to Mr Skeene and Mr Bowers to go behind that, without new and cogent evidence. No such evidence had been adduced.

As regards the deceit claim this first general objection is unwarrantedly complacent. The deputy judge had not found the claim “as it stands” to be “valid”. He had identified in paragraph 75 of the Salter judgment what he understood to be “EQ's case in relation to Maos Seguras's lack of registered title at the time of these investments …”. He thought that “the facts giving rise to the substance” of that case were sufficiently pleaded. EQ seizes upon this remark and misinterprets it. The deputy judge did not say that EQ’s case was sufficiently pleaded.

Mr Collins described the particulars of claim as “a disgrace”. I do not think this can be said of all parts of the particulars of claim. However, the claims in relation to what I have called the oral representations and the “suite” representations were abysmally pleaded. Paragraphs 21 to 25 of the Salter judgment identified failings in relation to reliance upon statements as to the future when it is elementary that deceit is only actionable if there has been a statement as to past or present fact. Those same paragraphs noted that Mr Prentis’s oral answer, in effect relying upon an implicit representation of an actual intention to bring about what was said would happen, was problematic because there was no express pleading as to precisely what alleged intention was said to have been represented, and because there was no plea that Mr Skeene and Mr Bowers did not, at the relevant time, in fact have that intention.

EQ can have been in no doubt that it needed to prepare, and if necessary issue an application notice seeking permission for, draft amendments to parts of the particulars of claim concerned with the oral and “suite” representations and their falsity. It had been told in the Salter orders that if it were to do this, or to seek to amend any other part of the particulars of claim, then it was required to issue an application notice no later than 4pm on 30 January 2015. It did not do so. As regards the claim based on the oral and “suite” representations EQ can hardly complain about the issue of the dismissal application on 25 February 2015.

Moreover, the Salter judgment identified a “good arguable case” of one kind only. The deputy judge understood that all alleged representations, including what I have called the “letter” representations, were in support of a case that at the time of each investment implicit representations were made to EQ by Mr Skeene and Mr Bowers, and deceitfully made, with a particular content. The content is identified at the end of paragraph 75 of the Salter judgment. There the deputy judge says he understood EQ’s case to be that Mr Skeene and Mr Bowers impliedly represented that they honestly believed on reasonable grounds that Maos Seguras had “registered legal title” to the relevant land. It is convenient to refer to a claim based on the deceitful making of such representations as “the paragraph 75 claim”.

Nowhere, however, in the particulars of claim was any paragraph 75 claim expressly asserted. By contrast, numerous other representations were asserted, and in relation to those other representations the deputy judge had made no finding that a claim based on them gave rise to a good arguable case. The defence sought to deal with representations generally, and had not specifically addressed the representation identified in paragraph 75 of the Salter judgment. In the absence of an application to amend the particulars of claim, the position on 25 February 2015 appeared to be that those other representations were intended by EQ to be relied upon as actionable falsehoods, and that there had been no express adoption by EQ of what the deputy judge had understood EQ’s case to be.

It would have been open to EQ, no later than 4pm on 30 January 2015, to have issued an application notice seeking permission for amendments which expressly pleaded the paragraph 75 claim and which abandoned the other ways in which the deceit claim was advanced. It did not do so. In these circumstances I do not consider that the Salter judgment disentitled Mr Skeene and Mr Bowers from seeking to test the position. Indeed it seems to me in accordance with the overriding objective for them to do so. As I explain below, the Salter judgment was not concerned with getting the pleadings into order: it was concerned with whether the injunctions should be discharged, and for that purpose only, whether there was a good arguable case. What the Salter judgment contemplated, and what did not happen, was that EQ would promptly formulate draft amendments to put its claim in order.

Mr Prentis’s oral submissions added a suggestion that if Mr Skeen and Mr Bowers were to “go behind the deputy judge” then I would need to consider the entirety of the evidence before the deputy judge. This suggestion failed to take account of the points made above. Moreover, on its own terms it did not make sense. Mr Skeene and Mr Bowers had filed evidence in support of the dismissal application on 25 February 2015. The grounds for the application were, as required by CPR 23.6, stated briefly but adequately in the application notice. Much of the evidence before the deputy judge was concerned with non-disclosure, and had no relevance to the dismissal application. It was simply wrong to say that I would need to consider the entirety of the evidence before the deputy judge. I observe also that in oral submissions responding to the dismissal application Mr Prentis in due course, and without opposition, referred to evidence which was before the deputy judge. There was accordingly no difficulty in taking me to such parts of that evidence as EQ considered to be relevant.

EQ’s skeleton argument identified a second general objection. This was that the deputy judge’s own views as to the consequences for failure to apply to amend were set out in paragraph 89 of his judgment. Paragraph 89 of the Salter judgment (see section C9 above) said that if EQ failed “promptly to put its pleaded case in order” then it would be open to Mr Skeene and Mr Bowers to invite the court to reconsider the appropriateness of continuing the injunctions.

This second general objection also, in my view, misreads the Salter judgment. The focus of that judgment was on whether or not the injunctions should be discharged. The warning in paragraph 89 of the Salter judgment was given in that context. Taken in that context, it was both an express warning that if there were no amendments, then EQ could be in difficulty in maintaining the injunctions and an implicit warning as to the reason for this – namely that without appropriate amendments there might no longer be a “good arguable case”.

Outside the particular context of the Salter judgment, procedural avenues open to a defendant who can show a failure to give proper particulars of fraud, and an inability to demonstrate that the pleaded case has a reasonable prospect of success, would include applications to strike out and for summary judgment. It is fanciful to suggest that in the Salter judgment the deputy judge was concerned to consider either of those possible avenues. It is even more fanciful – indeed it is in my view absurd – to suggest that his comments about ability to apply to discharge the injunctions were intended to rule out other avenues open to Mr Skeene and Mr Bowers.

In oral submissions Mr Prentis stressed that there could be no collateral attack on the Salter judgment. If there was a complaint about that judgment, the route was appeal – a route which was being pursued at the time of the hearing before me.

The position now is that the Chancellor on 21 October 2015 refused the renewed application for permission to appeal. Commenting on this, Mr Prentis’s written observations identified passages in the judgment of the Chancellor supporting findings by the deputy judge. By contrast, Mr Collins in his written observations submitted that, for the most part, both the deputy judge and the Chancellor were considering different issues from those which arise on the present applications. In general terms, for the reasons given above, I accept Mr Collins’s submissions. I deal below with certain specific instances where it is nonetheless relevant, in the context of the present applications, to refer to observations by the Chancellor.

A third general objection, not expressly made in EQ’s skeleton argument, was advanced by Mr Prentis at the outset of his oral submissions. Mr Skeene and Mr Bowers, he submitted, had already issued three previous unwarranted applications against EQ. In addition to this history of previous applications, Mr Prentis said that Mr Skeene and Mr Bowers had themselves failed to provide affidavits within the time required by the court’s order, and moreover they had failed to make accurate affidavits. This was said to be fatal both to the dismissal application and to the 8 June discharge application. As to this, however, allegations as to failure of disclosure were among the six other applications which could not be dealt with in the time available at the hearing before me. If EQ wanted a determination on those allegations it ought to have issued an application notice long before 9 June. It was not suggested by Mr Prentis that the history of previous applications by Mr Skeene and Mr Bowers would, on its own, debar them from advancing the dismissal application and the 8 June discharge applications.

Three representations were alleged in paragraphs 11.1 to 11.3 of the particulars of claim (see section C3.4 above). They were said to be oral representations made to Mr Davies at a meeting on 5 July 2012 in which Mr Skeene and/or Mr Bowers:

Paragraph 11.4 of the particulars of claim added that on the same occasion Mr Skeene and/or Mr Bowers gave Mr Davies a template “declaration of trust” and “certificate of declaration of trust” each to be executed by GFIC Title Ltd once an investment had been made, giving the investor title to the plots sought. The particulars of claim do not, however, say that the giving of these documents to Mr Davies constituted any representation.

In this section I am concerned only with the pleading of the original “current option” representation as set out in paragraph 11.1 of the particulars of claim. Atton 1 made a general assertion that no meeting took place on 5 July 2012, and a specific assertion that the original “current option” representation was substantially true. Those assertions are dealt with in sections D3.5 and D7 below. Atton 1 did not, however, suggest that paragraph 11.1 in itself infringed any rule of pleading.

Mr Collins’s skeleton argument asserted that it was necessary for the particulars of claim to identify an express or implied representation that the “option” was legally binding and enforceable as a matter of Brazilian law. I do not agree. A representation that an option exists is ordinarily a representation that a valid option exists. If no valid option exists, the representation is untrue. However if the representor believed there was a valid option, then the representation will not have been fraudulent. It follows from this analysis that I do not accept a further contention by Mr Collins that EQ must plead why documents dated 29 June 2011, supplied by MTG to Hamlins, did not constitute the option. At the present stage EQ is entitled simply to join issue on the assertions made in Mr Skeene and Mr Bowers’s defence.

Mr Collins submitted that what was asserted in paragraph 11.1 did not represent what the deputy judge had understood EQ’s case to be. In so far as paragraph 11.1 did not expressly form part of a paragraph 75 claim Mr Collins is right: see section D2 above. However, for the reasons given in section D2 above, the only consequence is that the claim expressly pleaded in paragraph 11.1, combined with paragraphs 22 and 24, is not one found by the deputy judge to give rise to a “good arguable case”. The Salter judgment does not suggest that there was any failure in paragraph 11.1 to comply with rules of pleading.

There remains, however, what Mr Collins described as an “obvious defect” in paragraph 11.1 in the particulars of claim. This is that there is no assertion that Mr Skeene and Mr Bowers intended that EQ should act in reliance upon the original “current option” representation. Mr Prentis did not dispute that this was an obvious defect. It can be met by amendment, and would be met if the draft amendments were permitted. Unless permission is granted, however, the original “current option” representation must be struck out for this reason.

The original “future option” representation is pleaded in paragraph 11.2 of the particulars of claim. Mr Prentis accepted in oral submissions that, as with the original “current option” representation, there was an obvious defect in the failure to assert that Mr Skeene and Mr Bowers intended EQ to act in reliance upon the original “future option” representation.

In addition, Atton 1 said that the original “future option” representation was:

Each of these criticisms is sound. Mr Prentis did not identify any answer to them.

The draft amendments do not remedy the “obvious defect” of failure to assert that Mr Skeene and Mr Bowers intended that EQ should act in reliance upon the original “future option” representation. Mr Prentis made a submission that this was an oversight which could be remedied by a revision to the 9 June draft amendments.

It might be thought that this submission would make it necessary for me to examine in section F below whether I should permit changes to the 9 June draft amendments. However as regards the original “future option” representation this will not be necessary. The reason is that even if the “obvious defect” were remedied, the draft amendments would not, in my view, overcome any of the difficulties identified in Atton 1. They merely add the words “with a view to accommodating any further investment”. As Mr Collins pointed out in reply, the original “current option” representation was that Mr Skeene and Mr Bowers already held an option to buy the entirety of the Para Sky plantation. It is impossible to know, in these circumstances, what the words “any further investment” actually refer to.

Thus, on the face of the particulars of claim, the proposed “future option” representation makes no sense. The draft amendments would not remedy this. Nor would they remedy the fatal defect of failure to allege a representation as to past or future fact. In these circumstances the original “future option” representation must be struck out.

Atton 1 stated that the Maos Seguras control representation is not alleged to have been untrue. That is not quite right: the particulars of claim stated that each of “the aforesaid representations” was made in the knowledge that it was false. Nevertheless, in substance Atton 1 is right: the particulars of falsity set out in paragraphs 23 to 26 of the particulars of claim did not identify any respect in which the Maos Seguras control representation was false.

At the hearing before me there was no suggestion by EQ that the Maos Seguras control representation was false. The draft amendments do not say that it was false. Nor do the draft amendments identify any good reason for pleading the Maos Seguras control representation. Whether or not permission is given to amend, it seems to me that the Maos Seguras control representation must be struck out.

In paragraph 10 of their defence Mr Skeene and Mr Bowers deny that they attended any meeting with Mr Davies on 5 July 2012. Atton 1 observes that there does not appear to be a note of the meeting on 5 July 2012. In support of the contention at paragraph 10 of the defence of Mr Skeene and Mr Bowers, Mr Atton relies on:

In his oral submissions Mr Collins noted that Mr Davies had wrongly asserted in Davies A1 that Mr Skeene and Mr Bowers gave a presentation to him at a meeting on 5 April 2012. It is apparent from a recently provided transcript that Mr Skeene did not attend that meeting, and that while Mr Bowers did attend, he did not give a presentation. Mr Collins submitted that this showed that Mr Davies’s account of events was generally unreliable.

EQ’s skeleton argument acknowledged, in the light of transcripts now available, that in Davies A1 Mr Davies was mistaken in his description of those who attended, and the conversations that took place, at meetings on 14 March and 5 April 2012. As to who was present at the meeting on 5 July 2012, however, Mr Prentis stated that EQ did not accept that the email said to have been sent on 5 July 2012 was genuine.

In these circumstances I accept that apparently contemporaneous emails strongly suggest that Mr Skeene and Mr Bowers were not at the meeting on 5 July 2012, and I accept that on other aspects of his account Mr Davies’s memory has been shown to be unreliable. There are thus very strong grounds for thinking that the oral representations were not made, as alleged, on 5 July 2012. I cannot, however, say that EQ’s case that the oral representations were made on 5 July 2012 is so devoid of merit that it has no reasonable prospect of success.

Lest I am wrong, I note that the draft amendments would substitute for 5 July 2012 a range of possible dates between 1 May and 9 July 2012. I deal in section F below with the question whether permission to advance such a wide range of dates should be given. For present purposes, I simply observe that if permission were given then the draft amendments would provide an answer to this aspect of the dismissal application.

What I have called the “suite” representations appear in paragraphs 13 to 17 of the particulars of claim. They are described at paragraphs 19 and 20 of the Salter judgment (see section C3.5 above). It is not necessary for me to set out the precise content of paragraphs 13 to 17 of the particulars of claim. Those paragraphs of the particulars of claim are fundamentally flawed for the reasons given in paragraphs 21 to 25 of the Salter judgment (see section C3.6 above). Mr Prentis does not suggest otherwise.

The draft amendments would remove the plea that the representations in the various “suite” documents were false and deceitful. Instead, the plea of deceit in paragraph 22 of the particulars of claim would be revised so as to assert that so-called “Intended Scheme Representations” were false. A new paragraph 17A would describe the “Intended Scheme Representations” in this way:

17A. In the premises, through the documents identified at paragraph 13 to 17 above, Mr Skeene and Mr Bowers represented to the Claimant with the intent that it should rely on the representations that it was their current intention that in return for each investment made by the Claimant in Para Sky it would receive:

17A.1 a beneficial interest in a particular Plot in the Para Sky Plantation;

17A.2 which Plot would be of the size and quality contracted for;

17A.3 and which Plot would be demarcated on the ground;

unless within 6 months Maos Seguras had been unable to purchase the freehold of the Plot in which case the Claimant’s money would be returned (together, the “Intended Scheme Representations”).

If permission to amend were granted then the objection identified in the Salter judgment would no longer arise. As explained in section F below, however, before permission to amend could be given in this regard there are other objections which must be overcome.

It is convenient to note at this point that the “suite” representations included citations from intended contractual documents which were to describe Maos Seguras as “the registered legal owner” of the relevant plot or plots. In these circumstances it is hardly surprising that the deputy judge, and the Chancellor in paragraphs 9, 13, and 16-27 of his judgment (see section C10 above), thought that EQ attached particular significance to Maos Seguras being registered legal owner, and thus understood EQ to make what I have described as the paragraph 75 claim. The draft amendments would clarify that EQ, as appears from later parts of the particulars of claim, attaches significance to the intended result being that EQ would acquire a beneficial interest in a plot or plots of a particular size and quality. In this regard the draft amendments would make it plain that “suite” representations, including those citing documents which are to describe Maos Seguras as “the registered legal owner”, will be relied on only for the purpose of inferring more limited and more precise “Intended Scheme Representations” which focus upon EQ’s intended beneficial interest.

The draft amendments would make an additional clarification to the representation relied upon. This additional clarification reflects the contractual recognition that Maos Seguras may not be able to purchase the freehold. In those circumstances there is a consequential obligation to return investment monies if the relevant plot or plots has not been acquired by Maos Seguras within 6 months. For that reason the passage beginning “unless within 6 months” is added at the end of the proposed new paragraph 17A.

What I have called the “letter” representations were described in paragraphs 26 to 28 of the Salter judgment (see section C3.7 above). In those paragraphs the deputy judge sets out paragraphs 20 and 21 of the particulars of claim. Atton 1 made an assertion that the letters referred to in paragraph 20 of the particulars of claim were no more than “bland recitals” of the documents enclosed with them, and that the “letter” representations could not be derived explicitly or implicitly from those letters.

As to that, however, Mr Prentis in his oral submissions took me to pages 454 onwards of exhibit JHD1 to Davies A1. At page 454 was a copy of a letter dated 23 August 2012 addressed to Mr Davies at EQ, and signed by each of Mr Skeene and Mr Bowers. It referred to a particular investment, with the reference number PSPEQ80/94, in the Para Sky plantation project. It enclosed, among other things, a Certificate of Declaration of Trust. That certificate was at page 456. It stated that EQ had invested in the Para Sky plantation project and had plot numbers 80 – 94 registered in its name. It added that EQ had rights to 1.5 hectares of land, subject to the terms set out in its investment agreement.

Also sent with the letter of 23 August 2012 was a rental agreement between EQ and the rental company which was to pay rent to EQ. It stated that amounts by way of rent would be paid within fourteen days of 1 December 2013 and thereafter at the end of twelve monthly periods.

A third document sent under cover of the letter of 23 August 2012 was headed “DECLARATION OF TRUST”. It, too, was signed by Mr Skeene and Mr Bowers. Beneath their signatures appeared the words “Signed For GFIC Title Ltd”. The wording of this document is set out in section C3.7 above. It included statements by GFIC Title Ltd that:

… [Maos Seguras] is the registered legal owner of the Land and which forms part of the Para Sky Plantation Project which is more particularly described in the Investment Agreement.

…

Further we HEREBY ACKNOWLEDGE AND DECLARE that, pursuant to the Investment Agreement between [GFI] and the Investor … we hold the Lease of the said Plot in trust for the Investor …

At first sight, contrary to Mr Atton’s assertion, EQ has a strong case that this covering letter, and other similar covering letters, are to be read with the documents that accompanied them. When so read, there is a strong case that they constituted what I have described as the “letter” representations: EQ has a strong case that the whole tenor of the letters, when read with the accompanying documents, was to assure EQ that it had acquired a beneficial interest in a particular plot in the Para Sky Plantation, and that the plot was of the size and quality contracted for.

Mr Collins identified 5 criticisms of the pleading of the “letter” representations. However I am not persuaded by those criticisms. Below I set out my summary of each criticism in italics, followed by the reasons why I do not find it persuasive:

Mr Collins’s written reply submissions stressed points made earlier, and added a complaint that the term “beneficial interest” was too vague. It seems to me that, as a matter of pleading, the “beneficial interest” referred to in paragraph 21 is the “beneficial interest” described in the “suite of documents” pleaded in paragraphs 13 to 17 and which, as is acknowledged in those paragraphs, could be acquired by EQ only after Maos Seguras had purchased the relevant plot or plots.

Mr Collins’s written reply submissions also said that EQ’s particulars of falsity had not alleged that it never had any “beneficial interest”, merely saying in paragraph 27 that there had been no effective grant of “title”. To my mind this overlooks the context in which paragraph 27 is pleaded. It is abundantly clear from that context that the “title” so far as EQ is concerned is title to the beneficial interest described in earlier paragraphs.

In these circumstances I do not accept that there is any such defect in the pleading of the “letter” representations as would warrant striking out. Nor does consideration of the documentary material warrant a conclusion that there is no reasonable prospect of EQ succeeding in its assertions that the “letter” representations were made: on the contrary, EQ appears to me to have a strong case in this regard.

The reply submissions confirmed that I am not asked to make any final findings of fact in relation to title. In relation to the “letter” representations the dismissal application is concerned only with criticisms as to pleading.

It is thus unnecessary for me at this stage to consider whether the draft amendments would remedy any deficiency in the “letter” representations, for there is no deficiency to remedy. It is convenient to note here that the draft amendments would make only a few revisions in this regard. As so revised, what I have called the “letter” representations are referred to in the draft amendments as “the completion representations”. The amount claimed in paragraph 28 is re-worded so as to recognise that under paragraph 21 the claim would not be for the full amount of all investments.

I add that on this aspect the Chancellor (see paragraphs 23 and 24 of his judgment in section C10 above) referred to the draft amendments, which he had not seen. As the proposed appeal concerned the position in December 2014 he did not consider it necessary to examine them. His judgment explains that he understood Mr Skeene and Mr Bowers to seek to rely upon them as showing an inconsistency between the obligation to return investment monies if the relevant plot or plots had not been acquired by Maos Seguras within 6 months and the deputy judge’s understanding that there was what I have called a paragraph 75 claim. In this regard, for the reasons given at the end of section D4 above:

At paragraph 18 of the particulars of claim EQ pleaded reliance on the oral representations and the “suite” representations when making investments. At paragraph 21 of the particulars of claim EQ pleaded, by reference to letters listed in Schedule A, reliance on those letters when making subsequent investments. Atton 1 did not assert that what was said about reliance in paragraph 18 or 21 infringed the rules of pleading. Nor did Mr Collins make any such assertion.

Mr Atton asserted at paragraph 19 of Atton 1 that EQ’s evidence as to reliance generally was “weak”. In that regard Mr Atton made observations about certain passages in Davies A1. However neither Mr Atton nor Mr Collins suggested that the assertions as to reliance in either paragraph 18 or paragraph 21 were so weak as to have no reasonable prospect of success.

I noted earlier that Atton 1 made an assertion that the original “current option” representation, if it were indeed made, was substantially true. In order to make good that assertion, however, it would be necessary for Mr Skeene and Mr Bowers to succeed on an issue concerning the genuineness of contracts for sale alleged to have been entered into on 29 June 2011. I cannot resolve that issue summarily.

In order to prove deceit it is necessary for EQ to show at trial that Mr Skeene and Mr Bowers did not believe relevant representations to be true. In that regard, and on the issue of dishonesty in relation to the trust claim, Mr Atton said that recent developments showed that Maos Seguras had been entitled to be treated as and registered as the owner of the relevant land. Mr Collins submitted that for this and other reasons the allegation of deceit in relation to the original “current option” representation must fail the summary judgment test. It seems to me, however, that there are real issues to be tried as to whether Mr Skeene and Mr Bowers can have been acting honestly when they sent the letters listed in Schedule A. If they were indeed shown to have been acting dishonestly in relation to the letters, then that may add weight to the claim that there was deceit in relation to original “current option” representation. I cannot conclude at this stage that, as regards such representations as are not struck out, allegations of deceit have no real prospect of success.

Mr Atton said at paragraph 20 of Atton 1 that it was critical to the EQ’s pleaded case on breach of trust that the GFI held EQ’s investment monies on trust for EQ for the sole purpose of purchasing a relevant plot of land at Para Sky. He asserted in that regard, however, that the investment agreements did not oblige the GFI to use the money in that way – see clause 1.

The trust relied upon by EQ is a trust of the kind identified in Barclays Bank Plc v. Quistclose Investment [1970] A.C. 567. Such a trust, Mr Collins submitted, could only arise if:

(1)

the sum advanced is to be used exclusively for a particular purpose;

(2)

the sum advanced does not become part of the general assets of the recipient; and

(3)

upon failure of the principal purpose, it is to be held on trust for the payer.

Mr Collins identified 4 reasons why EQ’s case in this regard was either inadequately pleaded or had no reasonable prospect of success. His first reason began by saying that it was not alleged that the price was to be used exclusively for the purchase of the plot, nor was this mandated by the contractual documents, which allowed but did not require the money to be used for the purchase of the land within which the plot was situated generally. As to that, however, a question of construction arises. It is plain that no trust arises if Maos Seguras already owns the relevant land. However if Maos Seguras does not already own the relevant land, the investment agreement identifies a specific purpose for which the price can be used. It is strongly arguable that this provision identified a purpose which, so long as Maos Seguras did not own the relevant land, was the unique purpose for which the price could be used, thereby locking up the money in a way which would meet requirements (1) and (2) above, and that the provision for repayment meets requirement (3) above.

Mr Collins’s first reason added that EQ knew that the price was not to be used exclusively to pay for each plot, that generous commissions were to be paid, and that there was no correlation between the price Maos Seguras was to pay for the land and the price that EQ was to pay for the plot or plots in which it was to have a beneficial interest. It is, however, in my view strongly arguable that none of this detracts from the fact that if Maos Seguras did not own the relevant land, then the agreement identified a specific purpose for which the price could be used.

Mr Collins’s second reason was that it was not alleged that the sums were paid into any segregated account, or otherwise kept separate from GFI’s general assets. However it seems to me strongly arguable that the agreement, by identifying the unique purpose for which the money could be used if Maos Seguras did not own the relevant land, contemplated that in that event the money would be kept separate.

Mr Collins’s third reason asserted that the “primary purpose” did not fail, as Maos Seguras had purchased the land in which the plots were situated. However to my mind the question whether the primary purpose had or had not failed gives rise to issues which cannot be decided summarily.

Mr Collins’s fourth reason was that even if the primary purpose had failed, there was no agreement that EQ had to be repaid using the same funds that it had paid. The validity of this fourth reason seems to me to stand or fall with the validity of Mr Collins’s first and second reasons.

For the reasons given above, I conclude that passages in the particulars of claim must be struck out, with consequential alterations to later parts of the particulars of claim, as follows:

It is common ground that:

In support of the 8 June discharge application Atton 2 asserted that:

As noted in section D3.2 above, EQ said that it was not open to Mr Skeene and Mr Bowers to make the 8 June discharge application, and relied in this regard upon allegations of failure to make disclosure as required by court orders. For the reasons given in that section I cannot accept that there is merit in this objection.

The Salter judgment made it clear that the vital next step was for EQ promptly to put its pleaded case in order. EQ must have appreciated this as soon as it received the Salter judgment in December 2014. Yet there was a substantial delay.

In relation to the delay in seeking permission to amend the particulars of claim, Davies 3 noted that the Salter order required that any such application be made by 30 January 2015. Mr Davies stated that he regretted “that this did not prove possible”. His reasons, as set out at paragraphs 11 and 12 of Davies A3, can be summarised:

Boot A1 did not deal with EQ’s delay in issuing its application for permission to amend. Nor did Boot A2, save that it recorded Mr Boot’s belief that, to the best of his knowledge, the contents of Davies A3 were true.

Lelliott A7 included accounts of the history of certain aspects of the case. It did not otherwise deal with EQ’s delay in issuing its application for permission to amend.

Lelliott A8 supplemented what had been said in paragraphs 11 and 12 of Davies A3. Ms Lelliott apologised for the failure to comply with the requirement to issue any application to amend by 30 January 2015. That apology, however, followed an assertion in paragraph 5 of Lelliott A8 that EQ had been “progressing the amendment of the particulars of claim within the constraints of availability of counsel and witnesses and the huge volume of material which it has been required to address in connection with the amendment”. Her evidence in support of that assertion can be summarised:

Mr Prentis repeated Ms Lelliott’s apology. He submitted that the proposed amendments were “almost entirely technical”, and met “the areas of weakness” identified by the deputy judge. Only in relation to the date of the original “current option” representation was there any new factual case.

The evidence filed by EQ does not begin to provide a satisfactory explanation for the delay. It does not explain what, if any, recognition there was by EQ that instructions to prepare the draft amendments needed to be given well before 30 January 2015. Mr Davies had listened to all the recordings prior to the resumed hearing before the deputy judge on 11 December 2014. He identifies only one passage in one recording that might have relevance to the draft amendments. He does not identify anything else in any of the recordings which gave reason to think that they might affect what Mr Davies and Ms Lelliott describe as the “legal amendments” that were needed. What was needed was to listen again to the single passage thus far identified as potentially relevant and provide details to counsel about it, and if necessary to arrange for a member of the legal team to listen to that and the other recordings to check there was nothing else that was potentially relevant to the draft amendments. None of this appears to have been recognised. No attempt appears to have been made to make progress on the draft amendments while waiting for transcripts. At some point it must have become clear that transcripts would not be ready in time to enable consideration of them prior to 30 January 2015. Yet there is no suggestion that any consideration was given to seeking an extension of time.

In these circumstances I cannot accept oral submissions by Mr Prentis that the delay was “not so great” and that work necessary for consideration and preparation of the draft amendments was pursued with vigour until the end of January. Nor can I give significant weight to a further assertion by Mr Prentis that issue of an application to amend earlier would not have made a difference to the delay during the period prior to the scheduled hearing of the dismissal application in June 2015. I do not know whether it might have made a difference. Even supposing that the proposed amendments would have been contentious if an application notice had been issued on or before 30 January 2015, and supposing that the matter could not have been brought on any earlier, Mr Prentis’s submissions ignore the very serious nature of EQ’s allegations. They were allegations of fraud, amounting to the commission of grave criminal offences. Mr Skeene and Mr Bowers were entitled to know by 30 January 2015 precisely what was said to have been done fraudulently. Each day of delay thereafter was a delay about which Mr Skeene and Mr Bowers can legitimately complain.

In relation to exercise of my discretion Mr Prentis submitted that freezing injunctions were in the interests of creditors. I do not attach significant weight to this. Among other considerations, EQ’s tracing claim would deprive creditors of the benefit of the freezing injunctions.

In these circumstances I am satisfied that the appropriate course is to grant the 8 June discharge application.

Principles governing the application for permission to amend are common ground. As set out in Mr Collins’s skeleton argument:

11.1.

The power to extend time is found in CPR 3.1(2)(a). However, whilst this makes clear that the power exists “even if an application for extension is made after the time for compliance has expired” the authorities establish that a clear distinction between applications made before or after the expiry of the relevant period:

(1)

“An application for an extension of the time allowed to take any particular step in litigation is not an application for relief from sanctions, provided that the applicant files his application notice before expiry of the permitted time period. This is the case even if the court deals with that application after the expiry of the relevant period” (emphasis added): Hallam Estates v. Baker [2014] EWCA Civ 661 at [26].

(2)

But where an application for an extension of time is made after the expiry of the relevant time limit, it is to be treated as akin to an application for relief from sanction and the principles derived from the Mitchell and Denton cases apply. See R. (on the application of Hysaj) v. Secretary of State for the Home Department [2014] EWCA Civ 1633.

11.2.

Mitchell v News Group Newspapers Ltd (Practice Note) [2013] EWCA Civ 1537], [2014] 1 WLR 795, and Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) (Practice Note) [2014] EWCA Civ 906, [2014] 1 WLR 3926, establish a clear three stage test. This is set out in Denton at [23]-[38]:

(1)

Stage 1 involves identifying and assessing the seriousness or significance of the failure.

(2)

Stage 2 involves consideration of the reasons for the failure. In short, are they good or bad.

(3)

Stage 3 requires the court to consider all of the circumstances of the case.

As to stage two, on the basis of my analysis in section E above, the reasons given for EQ’s failures are bad reasons. As to stages one and three, Mr Collins made powerful submissions that EQ’s failures were serious and significant and that in the circumstances they warranted a refusal to grant permission to amend. Mr Prentis submitted, by contrast, that a refusal for permission to amend would be disproportionate.

My conclusion, in the light of my observations about the draft amendments in section D above, and the further matters noted below, is that as regards the original “current option” representation, and the proposed “Intended Scheme Representations”, the failures in relation to the draft amendments are serious and significant, and that in all the circumstances it is appropriate to refuse an extension of time. Taking them in turn:

By contrast, however, other proposed amendments simply clarify in limited respects a case which was adequately pleaded. I conclude that an extension of time should be granted, and the application to amend should be allowed, in relation to those other respects only.

I will hear submissions as to the precise provision to be made by way of consequential orders. In broad terms that provision should ensure, among other things, that: