Lindsay v O'Loughnane
| Jurisdiction | England & Wales |
| Judgment Date | 18 March 2010 |
| Neutral Citation | [2010] EWHC 529 (QB) |
| Docket Number | Case No: HC09X00691 |
| Court | Queen's Bench Division |
| Date | 18 March 2010 |
[2010] EWHC 529 (QB)
Before: The Honourable Mr Justice Flaux
Case No: HC09X00691
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Alan Maclean QC (instructed by Mishcon de Reya) for the Claimant
Mr Ciaran Keller (instructed by Bates Wells & Braithwaite) for the Defendant
Hearing dates: 23, 25, 26 February, 1 and 2 March 2010
The Hon. Mr Justice Flaux :
Introduction and overview of the case
The claimant is a professional investment adviser with Credit Agricole Cheuvreux in London, in charge of the business dealing with Nordic shares. In 2004 he purchased in his private capacity some land in Corfu for development. In order to finance the development which was to be paid for in Euros, he needed to convert sterling into Euros and transfer substantial amounts of Euros to a bank account he set up with Alpha Bank in Corfu. In 2006, the claimant also purchased a villa in Cape Verde for which he needed to convert sterling into Euros and then transfer the funds to a bank in Cape Verde.
Initially he carried out foreign exchange transactions through his bankers in London, Barclays Bank, with whom he held the current account from which the sterling to be converted into Euros was transferred. However in July 2005, he was introduced by Barclays to a company called FX Solutions Ltd on the basis that they offered a cheap and easy way to convert sterling into Euros at very competitive rates.
FX Solutions was incorporated in 2000. The defendant was the managing director and held 50 of the 70 shares, that is all the voting shares. At the time with which this claim was concerned the only other director was Penny Compton, who is in fact Mrs O'Loughnane. She held 10 shares and the remaining 10 shares were held by a Kevin Gunning, who had left the company before the claimant started dealing with it. The defendant was also a director and the sole shareholder of another company Global FX, of which the only other director was his wife. That company was incorporated in 2000 but was dormant until early 2008, when it began to trade in circumstances to which I will turn in more detail later.
On 18 July 2005 the claimant signed and returned to FX Solutions a copy of their Terms and Conditions of Business. In the period between July 2005 and September 2008 the claimant engaged in some thirteen foreign exchange transactions with FX Solutions to transfer Euros abroad for the land development in Corfu and for the purchase of the villa in Cape Verde. In each case, he entered a spot contract, that is an agreement to buy a specified amount of Euros at the current market rate for settlement in a few days time, as opposed to a forward contract, that is an agreement to buy a specified amount of foreign currency at a pre-agreed rate of exchange on a specified future date, with the buyer providing a 10% margin or deposit in the meantime.
In the series of foreign exchange transactions conducted between July 2005 and October 2007, the claimant dealt largely though not exclusively with Mr Paul O'Sullivan who was the senior manager and head of trading. It is clear that through Mr O'Sullivan FX Solutions provided a swift, efficient and economic service with which the claimant was satisfied.
He had no need for any further foreign exchange transaction until June 2008, some 8 months later. He then carried out a transaction on 5 June 2008 to convert £185,000 into Euros and two transactions on 8 August 2008 to convert £25,000 and £400,000 into Euros. In the case of the June 2008 transaction he dealt with the defendant, Mr O'Sullivan having left since his last transaction in October 2007. All three transactions were confirmed by trade notes issued in the name of Global FX and payment of the sterling amounts for conversion was to be made not into an account of FX Solutions at Barclays as previously, but into an account of Global FX with HSBC. The claimant assumed that Global FX was just another trading name for FX Solutions and nothing was said to disabuse him of that impression.
In the case of all three transactions, the Euros were received into his Corfu bank account late. The excuse for the late payment provided by the defendant and others at FX Solutions/Global FX was that it was due to the inefficiency of HSBC. That was not true. The real reason was that by mid May 2008 at the very latest and in any event before the trades in June and August 2008, FX Solutions was hopelessly insolvent, unable to pay its debts as they fell due. This was known to the defendant before those trades took place, as was accepted on his behalf by his counsel Mr Ciaran Keller in closing submissions.
As a consequence of the insolvency, the claimant's sterling, once deposited in the HSBC account of Global FX, was not used to purchase the equivalent amount of Euros and then to transfer that Euro amount to his Corfu bank as contemplated by the Terms and Conditions. Nor was his money kept in the trading account of FX Solutions on trust for him pending the purchase of the relevant foreign exchange as required by the Terms and Conditions. Rather, unbeknownst to the claimant his money was used to pay other creditors of FX Solutions or business and other expenses of FX Solutions and the defendant in an illegitimate manner described in more detail below.
FX Solutions and Global FX appear to have purchased Euros en bloc rather than by reference to the particular transactions. It was only when sufficient Euros were received into Global FX's Euro business account with HSBC from other transactions that FX Solutions instructed HSBC to transfer the requisite amount of Euros to the claimant's bank account in Corfu. Hence the June amount of €231,250 which should have arrived in that account by about 10 or 11 June did not arrive until 27 June having been paid out of the Global FX Euro account on 26 June. Similarly, the August amounts of €31,562.50 and €504,000 which should have arrived in the Corfu bank account on about 15 August 2008 did not arrive until 21 August and 26 August respectively. The reason for the delay in each case was that FX Solutions and Global FX had to wait for sufficient funds from other transactions to be in the HSBC Euro account and not, as the claimant was told, inefficiency on the part of HSBC.
The claimant entered two further foreign exchange transactions with FX Solutions in September 2008 and it is these which have given rise to the loss he has suffered. On 3 September 2008 he entered a transaction to convert £315,000 into Euros and on 9 September 2008 he entered a transaction to convert £250,000 into Euros, in each case to be transferred to his bank account in Corfu. In neither case was the conversion made or the transfer effected. On 18 September 2008 both FX Solutions and Global FX went into administration and Mr Andrew Tate of Abbott Fielding was appointed one of the administrators. In due course the companies went into liquidation and Mr Tate is the joint liquidator.
The claimant is one of the major creditors of FX Solutions in the liquidation but according to Mr Tate, who gave evidence at the trial, on current information the dividend expected has gone down from what was originally anticipated, 27 pence in the pound to 18 pence in the pound. The current proceedings were issued by the claimant on 20 February 2009. The claimant makes two alternative claims against the defendant. His primary claim is for damages for deceit. In the alternative the claimant seeks to pierce the corporate veil and to hold the defendant personally liable for the debts of FX Solutions and Global FX, including the liability to repay the sum of £565,000.
The witnesses
Before dealing with the facts of the case in more detail and with each of the claims, I should say something about the witnesses. The claimant was an impressive witness who gave his evidence in a careful, precise and measured way. He made no attempt to overstate his case and where ground had to be ceded, as it did in relation to some of the pleaded representations, he readily did so. I accept his evidence that had it not been for the representations which were made to him in relation to the June transaction in particular (but in addition the August and September transactions) he would not have parted with the sums of £315,000 and £250,000 as he did on 5 September and 10 September respectively. As to the representations made, by whom and whether they were fraudulent, I deal with those matters in detail below.
The claimant also called Mr John Barnett who had worked for FX Solutions as part of the “back office” from 2004 and who was Head of Operations at the time that the companies went into administration in September 2008. It was he who ascertained and then subsequently investigated from December 2007 onwards, the “hole” in FX Solutions, that is the shortfall between the cash at bank and other debtors on the one hand and the creditors on the other, which meant that the company was in fact insolvent. Leaving aside some understandable reticence about certain matters, such as the fact that he had personally been paid on occasion towards the end of the business direct from the trading account or with monies transferred from the trading account (which he obviously appreciated should not have been permitted), I found Mr Barnett a straightforward witness. Where his evidence differed from that of the defendant, such as over the extent to which the defendant was in control of the business and the extent to which Mr Barnett explained the hole and the reasons for it to the defendant and his wife, I preferred Mr Barnett's evidence.
The claimant also called Mrs Carole Groombridge who was another client of FX Solutions who lost her money when the companies went into administration. She was clearly...
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