Simetra Global Assets Ltd v Ikon Finance Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Peter Jackson,Lord Justice McCombe |
| Judgment Date | 09 August 2019 |
| Neutral Citation | [2019] EWCA Civ 1413 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A4/2018/2675 |
| Date | 09 August 2019 |
[2019] EWCA Civ 1413
Lord Justice McCombe
Lord Justice Peter Jackson
and
Lord Justice Males
Case No: A4/2018/2675
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Robin Knowles CBE
Royal Courts of Justice
Strand, London, WC2A 2LL
Stephen Hofmeyr QC and Josephine Higgs (instructed by Jackson Parton) for the Appellants
Paul McGrath QC and James Sheehan (instructed by Holman Fenwick Willan LLP) for the 1 st to 4 th, 8 th, 9 th and 12 th Respondents
The 5 th to 7 th, 10 th and 11 th Respondents did not take part in the appeal
Hearing dates: 23 rd to 25 th July 2019
Judgment Approved
Introduction
The claimants in this action, who are the appellants in this appeal, claim to have been the victims of a Ponzi scheme operated by Mr George Daskaleas and companies controlled by him, principally a Belize registered company called GStar FX Inc (“GStar”). They say that Mr Daskaleas's companies were entrusted by them with funds for investment in foreign exchange trading which appeared to be extremely profitable, but that in fact the returns reported by GStar were fictitious. The respondents who took part in the appeal, who can be referred to together as Ikon or the Ikon defendants, owned the trading platform on which this trading supposedly took place and also held trading accounts in the names of the appellants. The appellants' claim against them arises out of confirmations provided by Ikon which appeared on their face to confirm outstanding balances of some US $292 million held in these accounts in October 2014. In fact the money was not there.
The appellants say that these confirmations were provided dishonestly and constituted dishonest assistance by Ikon in breaches of fiduciary duty by Mr Daskaleas and his companies. The appellants say further that, as a result of being deceived into believing that these funds existed, they made substantial payments to investors amounting in total to some US $18.5 million. As a result the appellants advance claims against Ikon for dishonest assistance and damages for deceit and conspiracy.
Ikon say that the confirmations which they provided were not confirmations of real money in trading accounts, but were concerned with what are known as demonstration (or “demo”) accounts, that is to say accounts which are used to practise or to demonstrate trading using only notional money. Accordingly they deny the allegation of dishonesty and deny too that the appellants relied on the confirmations which they provided.
There were numerous issues at the trial, including whether Mr Daskaleas and his companies owed fiduciary duties to the appellants, whether they were in breach of those duties, whether Ikon assisted them in doing so and the quantum of any claim. The judge, however, focused on two issues only:
(1) In providing the account balance confirmations, did Ikon act dishonestly?
(2) Did the appellants rely on these confirmations as referring to real funds?
After a trial in the Commercial Court lasting 13 days, Robin Knowles J decided both issues in favour of Ikon and dismissed the appellants' claim. He acquitted Ikon and its Chief Executive Officer Mr Jagannath of dishonesty and found that Mr Ioannis Litinas, a major investor in the appellants and the individual from whom the appellants' solicitors received their instructions, knew at all times that nothing like the sums alleged to have been held by Ikon were in fact held by them. Indeed he described Mr Litinas's evidence as “wholly unconvincing throughout”. He found also that nothing which Ikon did was relied on by the appellants.
In this appeal the appellants contend that the judgment, which runs to only 13 pages, fails to address many of the issues which arose at trial, that its conclusions are cursory and its reasoning limited, and that it fails properly to analyse the witness and documentary evidence on a number of critical issues. As a result, they say, the critical findings are unexplained and unjust. Realistically, the appellants do not suggest that this court should give judgment in their favour. What they say is that justice requires a retrial before a different judge.
2Ikon say that although the contemporary documents were relevant, ultimately the answer to the two central and decisive questions addressed by the judge turned on the credibility of the witnesses and that it was both legitimate and unsurprising for the judge to express his conclusions succinctly. He was not required to provide a lengthy and detailed decision dealing with every argument raised by the appellants, not least in circumstances where he had concluded that they had presented serious allegations of fraud on the basis of false evidence. What matters is that the issues vital to the judge's conclusion should be identified and the manner in which he resolved them explained. This the judge did.
I have concluded that the appellants' submissions as outlined above are well-founded and that, however unpalatable the prospect, a retrial is the only just course.
As there will need to be a retrial, if my Lords agree, I propose to set out in this judgment only so much of the facts and the evidence as is necessary to understand the issues which arose and to show why, in my judgment, the judge failed to engage with them. It would not be appropriate, for example, for this court to make findings about the honesty or otherwise of Ikon and their witnesses. That will be for the retrial. I shall identify issues which in my view needed to be addressed. I should not, however, be understood as dictating how those issues should be resolved. It is sufficient to show that there was a plainly arguable case of dishonesty on the part of Ikon which needed to be addressed and with which the judge did not engage, and that the judge's findings on the absence of reliance are inadequately reasoned.
The participants
The appellants are British Virgin Islands companies. Richcroft was incorporated on 19 November 2012 and Simetra on 30 July 2013. Mr Litinas was the sole voting shareholder in Simetra and a voting shareholder in Richcroft.
The respondents who took part in the appeal are companies in the Ikon Group incorporated in various jurisdictions and individuals who own or manage them. They include Ikon Finance Ltd, an English company carrying on business in the City of London which is authorised by the Financial Conduct Authority. The group is ultimately owned by Mr Engin Yikilmazoglu, a Turkish national. Mr Ersan Acun, also a Turkish national, was at the material time a director of Ikon Finance Ltd.
The judge found that Mr Diwakar Jagannath, an Indian national, had in all material respects the authority of a chief executive of the Ikon Group companies (which is how he was described in the contemporary documents) and that Mr Yikilmazoglu's evidence to the contrary was not credible. Mr Jagannath was a defendant in the action, giving evidence and providing written submissions in person, but was not represented by those acting for Ikon. It is evident that Ikon were seeking to distance themselves from Mr Jagannath and to minimise his authority to act for them. He is a respondent to the appeal but, although he has been kept fully informed, has played no part in it.
Mr George Daskaleas held himself out as an extremely successful foreign exchange trader, managing substantial funds on behalf of various investors. He operated through various entities, including GStar. His relationship with Ikon went back to 2005 and in October 2013 he was invited by Mr Yikilmazoglu and Mr Jagannath to become a non-executive director of Ikon Group Ltd. Defences served by Mr Daskaleas and GStar were struck out at an early stage of the action. Other companies owned by Mr Daskaleas were joined as defendants but have taken no part in the action.
Accordingly Mr Daskaleas and his companies did not take part in the trial or the appeal. It was, however, common ground between the appellants and Ikon at the trial that he had perpetrated at least some kind of fraud on investors in the funds which he purported to manage, although Ikon suggested in closing (but did not plead) that Mr Litinas was effectively a partner in this fraud. The judge made no clear finding one way or the other as to the existence or scope of any fraud perpetrated by Mr Daskaleas. Certainly he did not give judgment against Mr Daskaleas and his companies as the appellants asked him to do, despite the recognition in their closing submissions that the prospects of any recovery against them were “vanishingly small”.
The appellants' pleaded case
The appellants' pleaded case underwent a number of changes in the course of this action, but in outline their case against Ikon at trial was as follows.
In the course of 2013 Simetra and Richcroft were informed by Mr Daskaleas and GStar that sums totalling over US $202 million had been transferred to accounts operated by Gstar and held in their names. The precise figures were:
(1) US $22,650,382.27 held in an account in Richcroft's name on 1 July 2013; and
(2) US $180,003,249.33 held in an account in Simetra's name on 1 November 2013.
These transfers supposedly represented the profits on investments with predecessor entities and were intended to be used to subscribe for shares in Simetra and Richcroft. The subscribers were various individuals and corporate entities who...
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