Grosvenor Casinos Ltd v National Bank of Abu Dhabi
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE DAVID STEEL,Mr Justice David Steel,THE HONOURABLE MR JUSTICE FLAUX,Mr Justice Flaux |
| Judgment Date | 17 March 2008 |
| Neutral Citation | [2007] EWHC 2600 (Comm),[2008] EWHC 511 (Comm) |
| Docket Number | Case No: 2005 FOLIO 392 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 March 2008 |
[2007] EWHC 2600 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
Mr Justice David Steel
Case No: 2005 FOLIO 392
Stephen Phillips QC & James Evans (instructed by City Law LLP) for the Claimant
Bankim Thanki QC & Richard Handyside (instructed by Simmons & Simmons LLP) for the Defendant
Hearing dates: 29 & 30 October 2007
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Background
This is a further skirmish relating to the pleadings in this case. There are cross applications. The Claimant seeks leave to serve Re-Amended Particulars of Claim and to serve expert accounting evidence. The Defendant seeks to strike out the presently pleaded formulation of the quantum of the claim. It is only necessary to deal with the Claimant's application as the latter application is broadly conceded.
The Claimant (“Grosvenor”) is the former owner of the Claeremont Club in Berkeley Square. Ahmed Al-Reyaysa (“AAR”) was a member of the club from 1999 to 2000. The Claeremont is a well-known gambling club. AAR was one of its biggest customers. He staked in excess of £150 million in his 18 month membership of the club.
AAR had various bank accounts. One of these was with the Defendant (“NBAD”). Between December 1999 and February 2000 Grosvenor permitted AAR to cash a number of cheques drawn on NBAD for substantial sums. This was arranged under a cheque cashing facility (“CCF”) operated by Grosvenor in accordance with Section 16 of the Gaming Act 1968 and guidelines promulgated by the British Casino Association and the Gaming Board. There were 20 such cheques all drawn on account number 0155379990 held in AAR's name at the Defendant's branch in Ajman. The total of the 20 cheques was over £25,000,000.
The claim arises out of two of the cheques—cheque “A” dated 4 February 2000 for £3,070,000 and cheque “B” dated 9 February 2000 for £3,610,000. The two cheques were both orally advised as “paid” by a Mr. Subhi of NBAD to Grosvenor's bankers Natwest. It is to be assumed for present purposes that these representations were, and were known to be, false (or at least made negligently). The cheques were and remain unpaid. Further AAR has failed to repay the loans for which these cheques were conditional payment. Grosvenor has duly obtained judgment against AAR but this remains unsatisfied.
The essence of Grosvenor's case against NBAD is that, if as is contended it should have done, NBAD had informed Natwest on 8 February 2000 that cheque A was not paid, Grosvenor would not have permitted AAR any further use of the CCF. Thus, it is contended, the advance of £3,610,000 against Cheque B would not have been made
Grosvenor relies upon two causes of action. The first is in contract under the Uniform Rules for Collection. The second is in deceit. Both these claims were introduced by amendment in April 2006 pursuant to an order of Colman J. Grosvenor's case on causation and loss is the same in relation to both causes of action. It is the newly proposed pleaded case on the loss sustained which is at the heart of the present argument.
Loss
In his judgment allowing the amendment, Colman J indicated that a revised draft of the Claimant's case on causation and loss should be served. In the result the particulars thereafter furnished (as presently contained in the Amended Particulars of Claim) alleged a loss of about £5million reflecting the difference between the net winnings paid to AAR, together with the gambling duty incurred by Grosvenor, less the value of the cheques issued by AAR and paid.
Following disclosure and exchange of witness statements, NBAD challenged the calculation of the loss in correspondence. In particular, it was contended, first, that the figure for gaming duty was greatly exaggerated and, second, that the figure for payments made by AAR failed to include all of the winners cheques and cash that had been unsuccessfully “invested” by AAR during the relevant period. It was suggested that the true position was that Grosvenor had not made a loss but a profit.
At a hearing before Andrew Smith J in June 2007, the trial date was vacated and refixed for 11 February 2008. Grosvenor was ordered to provide a “Statement of Loss” clarifying its case. This was duly done on 22 June and, on 12 July, Grosvenor served its application to re-amend the Particulars of Claim. The relevant amendments reflected the approach contained in the Statement of Loss.
The present claim
The formulation of the claim in the Amended Particulars of Claim was as follows:
a) AAR received winnings of £7,285,900;
b) Grosvenor incurred gaming duty of £6,649,920;
c) Since the total value of cheques issued and paid by AAR was only £8,970,000, it followed that the loss sustained by Grosvenor by reason of the continuation of the CCF after 8 February was £4,938,820.
However it is now accepted by Grosvenor that the figure for (a) should be £10,700,800 (of which a somewhat uncertain part—put forward at £923,333—is attributable to winnings from AAR's use of “own casino” winners' cheques over the same period: see below) and the figure for (b) should be £751,640.
That much, at least for present purposes, is common ground. What remains in issue on the figures is what deduction should be made within the compass of (c). Although it is accepted that the total of accepted and paid cheques was £8,970,000, NBAD contend that a further sum of £5,140,000 should be included in the sum received by Grosvenor representing the value of “own casino” winners' cheques issued by Grosvenor to AAR during the relevant sessions and lost back by him to Grosvenor. Allowance for this would, it is suggested, convert a loss into a profit. (It is to be noted that further sums totalling £1,656,500 in the form of cash and “other casino” winners' cheques were also used by AAR but it is accepted by NBAD that the winnings/losses associated with these sums should be disregarded.)
Grosvenor's new case
Grosvenor's primary case as advanced in the proposed re-amendment is now put forward on a different basis, namely that all the winnings and losses subsequent to the provision of the loan proceeds are irrelevant as being transactions for which the breach of contract/deceit afforded the opportunity but did not constitute the legal cause.
The alternative case is that only gaming directly consequent on the use of funds obtained under the facility should be taken into account: the reinvestment by way of gaming with winners' cheques should accordingly not be taken into account.
The issue
The burden is on the Claimant to establish that one or other (or both) of these formulations has a realistic as opposed to fanciful prospect of success. I have reached the conclusion that the Claimant has passed this limited threshold requirement. Having done so, it is important, in giving my reasons briefly, that I do not trespass on the merits other than as may be necessary for this limited purpose.
The law
The principles applicable to the assessment of damages in cases of deceit in the context of purchase of property were recently summarised in Smith New Court Ltd v Scrimgeour Vickers [1997] A.C. 254 per Lord Browne-Wilkinson at p. 267:
“(1) the defendant is bound to make reparation for the damage directly flowing from the transaction; (2) although such damage need not to have been foreseeable, it must have been directly caused by the transaction; (3) in assessing such damage, the plaintiff is entitled to recover by way of damages the full price paid by him, but he must give credit for any benefits which he has received as a result of the transaction; (4) as a general rule, the benefits received by him include the market value of the property acquired as at the date of acquisition; but such general rule is not to be inflexibly applied where to do so would prevent him obtaining full compensation for the wrong suffered; (5) although the circumstances in which the general rule should not apply cannot be comprehensively stated, it will normally not apply where either (a) the misrepresentation has continued to operate after the date of the acquisition so as to induce the plaintiff to retain the asset or (b) the circumstances of the case are such that the plaintiff is, by reason of the fraud, locked into the property. (6) In addition, the plaintiff is entitled to recover consequential losses caused by the transaction; (7) the plaintiff must take all reasonable steps to mitigate his loss once he has discovered the fraud.”
These principles are of more general application and, for present purposes, sub-paragraphs (2) and (3) above are of particular importance. Yet the identification of those benefits (or losses) which must be taken account of as directly flowing from a (fraudulent) misrepresentation (as opposed to being “independent” or “collateral”) is seldom easy.
A good example in this “difficult” area is provided by Komercni Bank A.S. v Stone and Rolls [2003] 1 Lloyd's Rep. 383. The sums derived from the proceeds of discounting fraudulent letters of credit were used to discharge the liabilities of third parties. Toulson J dealt with the submission that these monies should be set against the losses sustained by reference to the following approach:
“167. The question whether an alleged benefit should or should not be taken into account cannot be determined by mere application of the “but for” test. Where the wrongful conduct consists of causing the victim to enter into a venture or transaction which he would not otherwise have entered...
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