Rapid Displays Inc. v Dr Dominique Ahkye
| Jurisdiction | England & Wales |
| Judge | Pearce |
| Judgment Date | 10 February 2022 |
| Neutral Citation | [2022] EWHC 274 (Comm) |
| Docket Number | Case No: CC-2021-MAN-000061 |
| Year | 2022 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 274 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
CIRCUIT COMMERCIAL COURT (QBD)
HIS HONOUR JUDGE Pearce SITTING AS A JUDGE OF THE HIGH COURT
Case No: CC-2021-MAN-000061
Mr Neil Berragan (instructed BY BBS LAW LIMITED) for the CLAIMANT
Mr Jason Perrin (instructed by BERKELEY ROWE LIMITED) for the DEFENDANT
Hearing dates: 7, 10 February 2022
This judgment was handed down on 10 February 2022. 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.
This is my judgment on the application by the Defendants for relief from sanction and the cross application by the Claimants for summary judgment following hearing the parties' submissions on 7 February 2022.
INTRODUCTION
On 23 September 2021, the sum of US$500,000, intended for the First Claimant, was transferred into a bank account at the National Westminster Bank in the name of the Second Defendant, and in respect of which the First Defendant was the authorised signatory. After the deduction of charges, the sum of £363,471.90 was credited. Thereafter, the monies were in large part paid out to others, although a small element (about £18,000) was retained by the Second Defendant, simply reducing an existing overdraft.
It is the First Claimant's case that they were victims of a fraud and that the Second Defendant had no right to the money. In contrast, the Defendants' case is that the money was paid to the Second Defendant in circumstances in which the Defendants believed it to be a genuine investment in a project and that the Defendants innocently paid the money out in several tranches, believing those payments to be pursuant to the proposed investment project. Whilst the Defendants accept that the First Claimant has been defrauded and that in fact the Second Defendant had no right to the money paid to it, the money is no longer available to be repaid (subject to a repayment of just over £18,000 that it has already been made), that the Defendants dealt honestly with the money and that the Defendants therefore have a good defence to the Claimants' claims.
For the purpose of these applications, I had the following witness statements:–
i) On behalf of the Claimants from Mr Ruben dated 30 September 2021, 14 October 2021, 21 October 2021, 27 October 2021, 4 November 2021, 12 November 2021 and 2 December 2021; and from Ms Odelia Pollak dated 2 February 2022. (Ms Pollak's statement was served less than 3 working days before the hearing, but the Defendants took no issue in respect of this.)
ii) On behalf of the Defendants, from the Second Defendant dated 22 October 2021, 3 November 2021, 9 November 2021 and 24 November 2021.
Counsel both filed skeleton arguments and, in Mr Perrin's case, a supplemental skeleton dealing with matters raised in the late statement of Ms Pollak. Both provided bundles of authorities and certain additional authorities were referred to during the hearing. I am grateful to them both for their detailed submissions.
THE PARTIES AND THEIR INVOLVEMENT
The First Claimant is based in Illinois. It contracted by an agreement dated 13 April 2021 to purchase shares in a company, Outform Limited. The counter parties to that agreement were various shareholders in that company. The agreement, entitled “Securities Purchase Agreement”, is contained in the Supplemental Bundle before the court. One of the shareholders who were selling his shares was Mr Ariel Haroush. Mr Haroush was also named as the representative for the sellers collectively. The sale consideration was in part retained, to be paid to the sellers or the First Claimant (as purchaser) dependent on certain accounting issues. The agreement provided for this portion of the consideration to be held in an escrow account.
The escrow agreement, dated 13 April 2021 and contained in the main bundle, is between the First Claimant as purchaser, Mr Haroush as representative for the sellers generally and the Second Claimant, which is named as the escrow agent. The amount of the escrow was $2,875,000. The bank account of the escrow agent is said to be Bank Leumi in Tel Aviv, the account name being given as Excellence Nessuah Brokerage Services Limited. Ms Pollak says at paragraph 3 of her statement that the name of this company was later changed to Excellence Investments Management and Securities Limited. Both the Second Claimant and Excellence Investments Management and Securities Ltd are stated to be subsidiaries of Excellence Investments Limited.
It is the Claimants' case that the funds in the escrow account were held by the Second Claimant on trust in accordance with the escrow agreement. This is relevant to an issue of standing taken by the Defendants, which is dealt with later.
On 14 September 2021, instructions were given for the release of $2,500,000 from the escrow account to the First Claimant. It has not been disputed that this was a genuine instruction. The escrow release note, signed on behalf of the First Claimant and by Mr Haroush on behalf of the sellers, instructs payment to the First Claimant's bank account. Again, it is not disputed that this is genuine.
However, by email dated 22 September 2021, the escrow agent was told that the payment of the whole sum to the Bank of America would give rise to a tax liability that was unacceptable and that therefore the instruction was changed to pay $2,000,000 to the Bank of America and the other $500,000 to what is described in the email as an “alternative bank in United Kingdom.” It can be seen that the email address of the sender, purportedly Batia Shaham, the CFO of Outform Ltd, uses the email address *****@outfrorm.com (that is to say with an “r” between the “f” and “o”) rather than the correct version that can be seen in other emails, *****@outform.com. The account details for the payment of $500,000 relating to a bank in the United Kingdom were for an account held by the Second Defendant with National Westminster Bank in Chatham. The revised escrow release note giving those details states the account to be in the name of the First Claimant, but otherwise correctly provides the account details.
Thus, on 23 September 2021, a payment was made from the escrow account which, though due to the First Claimant, was in fact paid to the Second Defendant. The Defendants adopt the Claimants' case that this was a fraud.
The First Defendant is a doctor. He explains in his first statement that he has over 20 years of experience working in internal medicine in the United Kingdom. He is currently a consultant within the National Health Service. He states (and I accept) that he is a man of good character who has no criminal record and has never faced proceedings brought by his professional regulator. This good character, both in terms of the absence of involvement of the professional regulator and the absence of any criminal conviction, is a significant factor to be borne in mind in considering the issues on this application.
The First Defendant states that he has developed a portable device to monitor respiratory and cardiovascular disease. To this end, he prepared a business plan, a copy which has been exhibited, as well as a promotional video. The link to the promotional video is given in paragraph 4 of his first statement and I have viewed that. The video is said to have been produced “with a colleague.”
The video comes from a company called Virtual Health Ltd. It is co-presented by the First Defendant and Mr John Bakker. Towards the end, the First Defendant describes himself as the Medical Director of Virtual Health Ltd and Mr Bakker describes himself as its CEO.
The First Defendant says that he met a gentleman called Mr Saad around five years prior to the statement (therefore around 2016). He was introduced as a sales representative for NAPP Laboratories (which the First Defendant describes as a “respectable, well-known business”) and presented himself as a “representative agent of investment companies”. The First Defendant thought that he might be able to assist in contacts and expertise for the development of the monitor. Nothing came of the contact at that time, but the First Defendant said he had no reason to doubt Mr Saad's integrity.
It is the First Defendant's case that, in May 2021, he prepared a business plan. It was annexed to his first witness statement. It relates to a product called “EQ 02 + Life Monitor”. (In the First Defendant's witness statement, he calls it E P02 not E Q02 – this would appear to be simple error.) The letters “EQ” seems to be a reference to Equivital. Certainly the business plan refers to the use of “Equivital TM Manager” (which is said to be “a data management and configuration tool”) and “eqView Software.”
Although the reference to trademarked products (and indeed the reference to a video prepared with a colleague) would tend to suggest to the casual reader of the witness statement who took the trouble to read the Business Plan that this was not simply the First Defendant's project alone, the first witness statement does not reveal that in fact the product referred to in the Business Plan was already in existence. In his sixth witness statement, Mr Ruben produces compelling evidence that a company called Equivital had already developed the product. Mr Ruben spoke to Mr Anmoi Sood, Director of Equivital and states this of their discussions at paragraph 4(d):
“[Mr Sood] was angered to learn from me that the Defendants were seeking to use their name and product. The name “Equivital” is a tradename and yet it appears that the First Defendant has sought,...
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