Patrick Brian Gore and Another v Mishcon de Reya
| Jurisdiction | England & Wales |
| Judge | Judge Hodge |
| Judgment Date | 30 January 2015 |
| Neutral Citation | [2015] EWHC 164 (Ch) |
| Court | Chancery Division |
| Date | 30 January 2015 |
| Docket Number | Case No: HC 2013 000248 HC 2013 000181 |
[2015] EWHC 164 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
7 Rolls Building,
Fetter Lane
London EC4A 1NL
His Honour Judge Hodge QC
sitting as a Judge of the High Court
Case No: HC 2013 000248 HC 2013 000181
Mr Robert Hantusch (instructed by Kennedys Law LLP) for the Claimants
Mr Robert Anderson QC and Mr Robert Weekes (instructed by Robin Simon LLP) for the Defendants
Hearing dates: 13–16, 19, 20, 22, 23, 30 January 2015
Judgment
Judge Hodge QC:
1. This is the trial of two claims which were heard together between Tuesday 13 and Friday 23 January 2015. The first, issued on 19 February 2013, is a claim by Mr Kwok Choon Chiang (who is known by the initials "KC") and Merlion Limited ("Merlion"), a limited partnership formed in the State of Alabama, USA (and named after the well-known Singapore tourist icon which combines the head of a lion with the body of a fish) which is beneficially owned and controlled by KC. For the purposes of this judgment, it is unnecessary to distinguish between KC and Merlion; and I shall proceed as though KC were the sole claimant. This claim relates to some US $3.5 million1 received by the Defendants, the well-known firm of solicitors, Mishcon de Reya ("Mishcons"), from another well-known firm of solicitors, Simmons & Simmons ("S & S"), between 10 October and 9 November 2007 and representing part of a series of payments (totalling some $4 million) which had been transferred to S & S by two firms of Alabama-based attorneys instructed by KC. Mishcons released these moneys on the instructions of a client of that firm, Mr Mick Shephard ("Mr Shephard"), to persons and for purposes appointed by him. The claim by KC was the subject of an unsuccessful application for summary judgment before Roth J whose judgment (dated 23 May 2013) bears the neutral citation number [2013] EWHC 2319 (Ch). The second claim, issued on 26 November 2013, is brought by Mr Patrick Brian Gore ("Mr Gore") and a UK-based company of which he is one of the three directors and an equal one third shareholder, Allied Developments (Europe) Limited ("ADEL"). This claim relates to £224,500 paid directly to Mishcons by Mr Gore on 27 November 2007 and released by Mishcons on the instructions and at the direction of Mr Shephard. For the purposes of this judgment, it is unnecessary to distinguish between Mr Gore and ADEL; and I shall proceed as though Mr Gore were the sole claimant, whilst bearing firmly in mind that Mr Martin Griffiths (who gave evidence before me) and Mr Christopher Hamilton (who did not) are also equal one-third shareholders and co-directors of ADEL with Mr Gore. All four claimants are represented by Mr Robert Hantusch (of counsel); and Mishcons are represented by Mr Robert Anderson QC leading Mr Robert Weekes (also of counsel).
2. In one sense this is an unusual case because there is really little dispute about the primary facts. Rather, the case centres upon the inferences to be drawn from the undisputed facts and the contemporaneous documents. With their written opening, counsel for Mishcons produced a written chronology with which Mr Hantusch has taken no issue. A more detailed survey of the facts is now to be found at Section E of Mishcons' written closing submissions. Accordingly, it is necessary for me to provide only the most brief description of the facts which give rise to the present claims, supplemented by the schedule to this judgment which details (1) the sums received by S & S by and on behalf of KC and Merlion, (2) and (3) the sums transferred to Mishcons by S & S and Mr Gore respectively, and (4) the payments out of Mishcons' client account. This judgment breaks no new legal ground; but it may serve as a salutary warning that even the most experienced and successful of businessmen can be taken in by an apparently plausible chancer.
3. In or about June 2007 ADEL and its affiliates needed to raise funding to refinance an existing development in Cardiff (Bay Pointe) and to acquire a property development in Orlando, Florida USA known as 1000 North Orange. The plan was that they should
do so by procuring a bank guarantee which could then be "cashed" (in the sense of procuring a loan facility to be secured by the bank guarantee). Initially it was hoped to obtain the bank guarantee from UBS Bank in the United States with the assistance of a French Canadian, Mr Patrick Danan, and his associate, Mr Edmondson. Mr Shephard and his company, MKC Holdings International Limited ("MKC"), were introduced to ADEL by a broker, Mr Mark Timmis, as someone who could assist in obtaining the loan facility. However, having "planted the seeds of doubt", by the end of July 2007 Mr Shephard had persuaded ADEL that this funding mechanism was not going to work and that the only viable option was for Mr Shephard to obtain the bank guarantee as well as cashing it. This became known as "Plan B". Mr Shephard represented that this would require an advance fee of up to $10 million to be paid to the "owner" of the guarantee. Mr Shephard was prepared to provide part of this; but ADEL lacked the resources to provide the remainder. During the latter half of September 2007, KC was introduced to ADEL in the United States as someone who needed to raise money to refinance certain real estate owned by Merlion in Orange Beach, Alabama and to develop it as a condominium resort hotel, but who had the cash available to assist with the payment of the advance fee. As the matter developed, KC, Merlion and a specially incorporated affiliate of ADEL called CAMP (Orange Beach) Holdings LLC (" CAMP") entered into a written agreement ("the JVA") effective 1 October 2007 regarding a joint venture to be formed under which Merlion and/or KC were to deposit $3 million into "a client escrow account" with S & S in the UK to be "used only for the specific purpose of closing the Credit Facility to complete" a $35 million loan to refinance the exiting secured indebtedness on Orange Beach and to develop the resort hotel. The moneys paid over to Mishcons were intended by KC, Merlion, Mr Gore and ADEL to be used by Mr Shephard to obtain the bank guarantee, which would then be cashed to raise the required finance. In fact, these moneys were "pocketed" by Mr Shephard in what is said (almost certainly correctly) to be an "advance fee fraud".4. The relevant partner in Mishcons was Mr Kevin Steele ("Mr Steele"). He was convicted on 5 December 2011, after a trial at the Crown Court at Southwark, on 2 counts of conspiring with Mr Shephard to use false instruments and to commit fraud by false representation – offences to which Mr Shephard had previously pleaded guilty – and on a third count of fraud for which Mr Steele was sentenced to a total term of 5 years and 6 months' imprisonment (which was subsequently reduced on appeal to 4 years and 4 months). Those convictions related to a wholly separate fraud which had been committed against a Swiss bank, EFG Private Bank Limited, in or about the middle of 2008, some months after the events complained of in these actions, and it was in no way connected with the present claims. As a result of this latter fraud, Mr Steele had been expelled as a partner in Mishcons on 19 September 2008 (following a period of suspension); and he was subsequently struck off the Roll of Solicitors on 22 August 2012. He had earlier been adjudged bankrupt on 5 October 2011. The issue at this heart of this litigation is whether Mishcons can be rendered vicariously liable for Mr Steele's actions in releasing the moneys which form the subject-matter of these two claims on the authority of, and in accordance with directions from, Mishcons' client, Mr Shephard.
5. The claims against Mishcons are founded upon three separate but, by reason of their common factual basis, closely-linked causes of action. These are:
(1) First, that Mishcons received, and then permitted the disposal by Mr Shephard, for his own personal benefit, of some $ 3.5 million of the moneys provided by KC and Merlion and £ 224,500 of moneys provided by Mr Gore which monies were, on the claimants' cases, held subject to a Quistclose2 resulting trust under which they should have been applied for the specified purpose of obtaining bank funding or returned if that purpose were not achieved. This cause of action focuses upon the fiduciary duties of Mishcons as the recipient of the moneys. The claims for breach of trust under this head are for the sums of $ 3.5 million (plus interest) paid by KC and Merlion and £ 224,500 (plus interest) paid by Mr Gore.
(2) Secondly, that Mr Steele, as a partner in Mishcons, dishonestly assisted Mr Shephard in dealing with those same moneys, and that Mishcons are vicariously liable for the defaults of Mr Steele, and so for the loss of those moneys. Unlike the Quistclose resulting trust claim, this cause of action focuses upon the fiduciary duties of Mr Shephard as the client of Mishcons at whose direction the moneys were disbursed. The claim under this head is again for the sums of $ 3.5 million (plus interest) paid by KC and Merlion and £ 224,500 (plus interest) paid by Mr Gore.
(3) Thirdly, that Mr Steele and Mr Shephard conspired together to defraud all four claimants, and that Mishcons are vicariously liable for all of the losses resulting from that conspiracy. The losses claimed from the conspiracy are greater than the sums totalling $ 3.5 million and £ 224,500 that were received and disbursed by Mishcons; and for the purposes of this trial they also include the following other losses suffered, being:-
(a) In the case of KC and Merlion:
(i) The substantial costs and interest payable under certain promissory notes and later loans used partly to repay those promissory notes;
(ii) Payments totalling $ 500,000 that were used to pay S & S and to discharge...
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Does The Intention Required For A Quistclose Trust Differ Onshore To Offshore?
...resulting trust. In both the cases of Bellis & Ors v Challinor & Ors [2015] EWCA Civ 59 and Gore & Ors v Mishcon de Reya [2015] EWHC 164 (Ch), the court found that monies held in a solicitor's client account were held on bare trust for that client. Clear intention would have bee......