Chandrakant Patel v Salman Mirza
|England & Wales
|05 July 2013
| EWHC 1892 (Ch)
|05 July 2013
|Claim No. HC11C04047
 EWHC 1892 (Ch)
IN THE HIGH COURT OF JUSTICE
David Donaldson Q.C. sitting as a Deputy High Court Judge
Claim No. HC11C04047
This action is centred on three men: the Claimant, the Defendant, and a common friend of each of the two parties, Mr George Georgiou. Though not a party to the action, Mr Georgiou was projected to give evidence in support of the Defendant, and the hearing proceeded on that basis. At the very last moment before he was due to call Mr Georgiou as his last witness Counsel for the Defendant, Mr William McCormick Q.C., announced that he no longer intended to do so. Mr Georgiou is nonetheless a central character in the events which I have to consider, and his absence from the witness-box was unfortunate, to say the least. Though the decision not to call him might be thought to betoken concerns as to what he would say on the witness stand in answer to pertinent questions, I am unable to identify any specific inference which it would right for me to draw from the bald fact of that decision, for which I was offered no explanation. It remains the case that the Defendant has deprived himself of a witness who was at the heart of this matter, and who, if the Defendant's account of matters was correct, could have been expected to support the Defendant's case, as indeed was foreshadowed by his witness statement.
Mr Georgiou was a property investor and dealer in property investments, operating through a number of companies including Simply George and Georgiou Inc. Prior to the property crash his wealth was considerable, and demonstrated to the outside world by a large house, exotic cars, and a private aircraft. In mid-2008, as for many in the property world, things began to sour badly, though the trappings of his opulence remained. Eventually, he was declared bankrupt in May 2010.
The Claimant ("Mr Patel)", usually known as Charlie, became friends with Mr Georgiou and his future wife around 2004. They went socialising and clubbing together and shared Christmas. Mr Patel was an usher at Mr Georgiou's wedding in 2006. Though less opulent than Mr Georgiou, Mr Patel was also a man of some wealth. Initially, Mr Patel bought two properties from Mr Georgiou, and then began to offer to friends properties which Mr Georgiou owned or was about to own, receiving a commission from Mr Georgiou for this service. Mr Georgiou then suggested to Mr Patel that if he could obtain investors to advance him money for use as deposits he could profitably "flip" contracts for the purchase of property to third parties without the need for him ever to complete on the deal. To this end Mr Patel introduced various relatives and friends to Mr Georgiou. Mr Patel told me that, though he was supposed to be paid commission, he never received it. In a further touch to the picture, Mr Patel had a desk in Mr Georgiou's office in Ilford, used the latter's email facilities, and was even provided with a mobile phone by him.
The Defendant ("Mr Mirza"), often known as Simon, was and is employed by Tullet Prebon Plc as a foreign exchange broker with the title of Divisional Director in charge of a substantial team. He is not a trader, and his broking activities at Tullet Prebon are limited to forex. He did however have a personal spread-betting account with IG Index, though my impression was that it was little used, other than possibly for a few forex transactions.
Mr Mirza came to know Mr Georgiou when they were both young teenagers. Mr Georgiou was a cousin of a neighbour of Mr Mirza in Ilford; his family saw Mr Georgiou regularly and Mr Georgiou became like one of that family. In his twenties, when Mr Mirza married and later moved away from Ilford, he lost touch with Mr Georgiou for some 10 years, until he ran into him by chance during a visit to his mother in 2007. Their two families began then to socialise, and Mr Georgiou and Mr Mirza went on one or two skiing trips with other friends. In December 2008 Mr Georgiou persuaded Mr Mirza to advance him £300,000 to enable Mr Georgiou to buy a site at Gants Hill on the basis that Mr Mirza would be given a share in the profit on resale. In March 2009, Mr Georgiou asked for a further loan, apparently unrelated to Gants Hill, and Mr Mirza lent him £70,000. Sometime between May and August 2009 Mr Mirza asked for, but did not obtain, the return of his Gants Hill loan.
Mr Patel and Mr Mirza met for the first time at Mr Georgiou's house at the end of 2008 or the beginning of 2009. Mr Georgiou held a poker game every Friday at his house for 10 to 15 friends and cousins, 10 of them being more or less regular attendees — these included Mr Patel and Mr Mirza, and some employees of RBS. Those who had to drop out of a particular session, when their stake was exhausted, would often retire to the kitchen for sustenance in the form of home-cooked curry or takeaway from Nandos, and discussion could take place then, as well as round the poker table. Mr Georgiou's house also contained an office, where more private conversations were possible.
In early 2009 Mr Patel included Mr Mirza in emails relating to some cars and watches which Mr Patel was able to source at a large discount. Mr Mirza was interested in a deal for seven of the cars, but ultimately nothing came of it. He did however agree to take a watch for £9,000, but when the watch arrived in October 2009 it lacked a box and a receipt and it appears that Mr Patel never received payment.
In August 2009, according to Mr Patel, he was approached by Mr Georgiou with a deal which he said he had been offered by Mr Mirza. The idea was that Mr Mirza would use his spread-betting account to bet on the movement of RBS shares. He explained that Mr Mirza knew people who would sit in on any meeting between RBS heads and government officials and within minutes of the end of any such meeting Mr Mirza would know of the outcome. Mr Mirza had offered to include money from Mr Georgiou in bets based on such information along with his own. Mr Georgiou suggested that Mr Patel should become involved, and called Mr Mirza there and then with his phone on loudspeaker, asking Mr Mirza to confirm the scheme directly to Mr Patel, which he did. Not long after, on what was probably 4 September 2009, the three men met up around the kitchen table on a Friday poker evening. According to Mr Patel, Mr Mirza confirmed that he had contacts in RBS who could supply him with information of meetings with government officials, and in particular of a public statement expected from the Chancellor which would have an effect on the RBS share price. Mr Mirza expressed his readiness to include Mr Patel's money in a bet based on such information, and wrote down the details of his bank current account to which Mr Patel could send the money.
I interject by way of brief technical excursus that a spread bet on listed shares is on analysis a contract for differences, based on movements in the quoted share price over a specified period. In the case of IG Index the client was required, as Mr Mirza told me, to deposit 15–20% of the initial share price and maintain a deposit to at least this level as the price moved. The level of the deposit meant that substantial gearing, of at least 5 times, could be achieved. Mr Mirza told me that the level of margin required would decrease — and hence the available gearing would increase — with the size of the bet. It follows that Mr Mirza could benefit from agglomerating outside money with his own in placing any bet.
On 9 September 2009 Mr Patel sent to Mr Mirza's account £120,000 sourced from his investor pool, in particular his cousin Chiraq Patel. £50,000 followed the next day, a further £50,000 on 30 September 2009, and somewhat later a further £400,000 on 16 December 2009, all sourced from the pool but primarily from Chiraq. Though the entries in Mr Mirza's statement of account showed the first three payments merely as emanating from NatWest bank, the payer of the £400,000 was specified as C. Patel. It was apparently intended that a still larger sum would have been paid, but for the fact that Mr Mirza placed a ceiling on it. Even capped at £620,000, this — with a 5x gearing or more — was sufficient to open a position in excess of £3,000,000 worth of RBS shares, even ignoring any additional monies contributed by Mr Mirza himself.
In late January or February 2010, according to Mr Patel, he was told by Mr Mirza that there was no longer expected to be a statement from the government about RBS and he would therefore be returning the money, which he promised would be done around the beginning of March 2010. In March 2010 Mr Patel was, he said, told by Mr Mirza that the monies had been paid to Mr Georgiou through a mistake on the part of Mr Mirza's bank. Mr Patel's attempts to recover the money from Mr Georgiou and subsequently his trustee in bankruptcy were unsuccessful.
Mr Patel's case, as set out in his Particulars of Claim, is that he entered into a contract with Mr Mirza under which Mr Mirza agreed to use the monies transferred to him for the purpose, and only for the purpose, of a bet based on
"advance knowledge of what information a statement anticipated to be made by the Chancellor of the Exchequer about the Government investment in Royal Bank of Scotland would contain, and that the shares in Royal Bank of Scotland would rise or fall dependent upon what information that statement contained "
and in combination with personal funds from Mr Mirza. The basis for such a bet having having disappeared, Mr Patel claims to be entitled to recover the £620,000 on essentially essentially two grounds. Firstly, it is said that it is recoverable as money paid for a consideration which has wholly failed, also presented as an application of a more general, general, and...
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