Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd

JurisdictionEngland & Wales
CourtChancery Division
JudgeTHE HON MR JUSTICE LEWISON,The Hon Mr Justice Lewison
Judgment Date30 June 2010
Neutral Citation[2010] EWHC 1614 (Ch)
Date30 June 2010
Docket NumberCase No: HC07C03030

[2010] EWHC 1614 (Ch)



Royal Courts of Justice

Strand, London, WC2A 2LL


The Hon Mr Justice Lewison

Case No: HC07C03030

Sinclair Investments (UK) Ltd
(1) Versailles Trade Finance Limited (in administrative receivership)
(2) Versailles Group Plc (in administrative receivership)
(3) National Westminster Bank Plc
(4) Anthony V Lomas
(5) Robert Birchall
(6) Royal Bank of Scotland Plc

Richard Hill (instructed by Sinclair Investments (UK) Ltd) for the Claimant

Matthew Collings QC (instructed by Denton Wilde Sapte LLP) for the Defendants

Hearing dates: 11–19 th May 2010

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.




The Versailles Group collapsed in January 2000. Its business was discovered to be little but a fraudulent scam. Both investors and lenders were seriously out of pocket. However, there were some assets that have been recovered. In addition shortly before the collapse Mr Carl Cushnie, a director of Versailles Group plc, sold part of his shareholding at the top of the market for £28.6 million. Those share sale proceeds (or some of them) have also been recovered. Who gets the money? The defrauded investors or the defrauded banks? Mr Richard Hill argued the case for the investors. Mr Matthew Collings QC argued the case for the banks. Both did so extremely well.


The trial of the claim has been unusual. Almost all the underlying facts have been agreed, not least because they have been comprehensively found by Rimer J in the course of a judgment he gave after a trial in 2007: Sinclair Investment Holdings SA v Versailles Trade Finance Ltd [2007] EWHC 915 (Ch). However, what was in dispute before me was the extent to which the banks knew about the claimed rights. I will make findings about that in due course. For the moment I outline the underlying story. The following narrative is largely taken from Rimer J's judgment.

The overall picture


The holding company for the group was Versailles Group plc ("VGP"). Its principal shareholder was Marrlist Ltd, which was the alter ego of Mr Cushnie. It is thus agreed that Marrlist and Mr Cushnie can be taken to be interchangeable. VGP's principal trading subsidiary was Versailles Trade Finance Ltd ("VTFL"). Ostensibly VTFL's main business was a modified form of factoring. This involved the provision of transaction based finance using two methods called Accelerated Payment Trading ("APT") and Materials Purchase ("MP-APT"). The details do not matter. Rimer J described APT as follows:

"APT involved the provision of funds on a short-term basis to enable transactions to take place. It worked as follows. VTFL would purchase at a discount (usually about 2.5% of the purchase price) goods that its clients (usually small manufacturers or distributors who could not afford to wait for payment) had already agreed to supply to the end-buyers, i.e. customers. VTFL would insure the goods for their full face value, sell them on to the customer for that value and the client would then deliver them to the customer. VTFL would invoice the customer and then, within seven days, pay the client 80% of the discounted purchase price, retaining the remaining 20% until the customer had paid it the full amount of the purchase price. The customer acquired title to the goods as and when it paid VTFL; and when VTFL had received the full price from the customer, it paid the client the remaining 20% of the discounted price less a daily interest charge calculated by reference to the time the customer had taken to pay the full price. VTFL's profit was the amount by which the discount and the interest exceeded its costs of the operation."


Plainly, this kind of business requires money up front, at least to the extent of a cash float. Money came from three main sources. First, it came from wealthy individuals, known as "traders". They are the defrauded investors. Second, it came from loans made by banks. Third, it came from the profit derived from the trading activities themselves, a small proportion of which were legitimate.


The traders did not provide money directly to VTFL. They provided money to a company called Trading Partners Ltd ("TPL"). This company was not part of the Versailles Group, but it was also controlled by Mr Cushnie and his associate Mr Clough. They were both directors of TPL. Rimer J found: "As from March 1996, it was TPL that solicited funds from traders for the purpose of being applied in APT." The traders had (of course) been promised high returns on the money they advanced. They supplied funds to TPL on the terms of a written agreement. It provided (in part):

"1. We [the trader] may direct you [TPL] as our agents to buy particular goods but in the absence of any specific direction from us you shall purchase goods of merchantable quality and goods which have been agreed for sale.

2. If any of the money provided by us is not currently used in the purchase of goods it shall be deposited by you in trust for us in a money bank account or such other account as we shall from time to time discuss …

5. Unless we direct otherwise you will account to us for the sale and purchase of all goods and the profit therein on a quarterly basis and will pay the net profit to us with quarterly reports if so requested and in the absence of any specific direction any profit will be deposited in accordance with Clause 2.

6. Upon request you will provide details of all goods purchased and sold and copies of any invoices relating thereto.

7(a) Any of the monies paid hereunder and accrued interest shall be repaid to us at not less than three months notice in writing expiring at the end of a quarter except for that relating to goods which have been sold but not paid for by the purchaser, in which event repayment in respect of that money shall be made when payment has been received by you for the sale of the goods.

(b) You may terminate this agreement by giving us not less than three months notice in writing expiring at the end of a quarter.

8. You are permitted to purchase the goods as our agents.. "


TPL and VTFL entered into written agreements under which VTFL managed TPL's business. The first of the agreements, dated 4 July 1996, provided (in part):

i) The agreement recites that TPL "carries on the business of the provision of trade finance in association with various persons from time to time" and that TPL and VTFL have agreed to enter the management agreement "for the purpose of regulating the terms and conditions upon which the Manager [VTFL] shall take responsibility for the management and administration of the business activities of the Company [TPL]".

ii) By Clause 1(a) TPL "appoints the Manager to manage the business activities of the Company."

iii) Clause 3(a) states that VTFL "shall, subject to the directions of the Board and to the investment policy of the Company, assume the responsibility for the continuous management of the Company's business activities."

iv) Clause 3(b) states that subject to its obligations under clause 3(e)(i) and clause 4 "the Manager shall have complete discretion to enter into contracts for the sale and purchase of goods or any other contracts in the ordinary course of the Company's business subject to the restrictions and limitations contained in this agreement and any other restrictions and limitations as the Board may from time to time intimate in writing to the Manager."

v) Clause 3(c) states that TPL "shall during the continuance of this agreement employ the services exclusively of the Manager to perform all duties and render such services as herein mentioned."

vi) Clause 3(e)(ii) states that during the period of appointment VTFL "shall make all purchases and sales of goods for the Company in the name of the Company or as the Board shall direct."

vii) Clause 3(e)(iii) states that during the period of appointment VTFL "shall carry out its duties hereunder in an efficient and responsible manner and with due skill and care and procure that its relevant directors and employees devote such of their time and attention to the performance of the Manager's duties hereunder as shall be necessary for the purpose."

viii) Clause 3(f) states that TPL "shall effect through the Manager all transactions and dealings in its business of the provision of trade finance."

ix) Clause 3(g) states that "Nothing in this agreement shall make the Manager responsible to any other person in association with whom the Company carries on its business for any of the Company's obligations to those persons".

x) Clause 5 states that "The Manager may open, maintain and operate such bank accounts as it may consider necessary or desirable for the purpose of managing the business activities of the Company. Such accounts shall be maintained in the name of the Company. The cost and proceeds of transactions, income, expenses and relevant charges (excluding the Manager's remuneration payable under clause 6 below) may be debited from and credited to those accounts without further authorisation from the Board."

xi) As regards remuneration, clause 6(A) states that TPL "shall, during the continuance of the Agreement, pay to the Manager …by way of remuneration for its services hereunder as Manager a fee (exclusive of Value Added Tax) of a sum equal to 95% of the audited profit of the Company in each financial year as shown by its audited accounts, before taxation and before any exceptional or extraordinary items and before deduction of this remuneration".


A subsequent agreement increased the level of VTFL's remuneration to 99.5 per cent of TPL's audited profit. Otherwise VTFL's duties did not change in any relevant...

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12 cases
  • Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd
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    ...issues relating to tracing claims. The background The facts in outline 3 I take the relevant facts largely from the judgment below at [2010] EWHC 1614 (Ch), paras 3–19, where Lewison J set out the background, which was more fully described by Rimer J in an earlier case, Sinclair Investment......
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    ...test).” He relied on Lewison J's (obiter) exposition of notice in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2010] EWHC 1614 (Ch) at [98], this was approved by the Court of Appeal in Sinclair Investments UK Ltd v Versailles Trade Finance Ltd [2012] 453 Ch (CA). Lewison J......
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    ...Such a trust may have a significant effect on third parties by varying proprietary rights: Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administrative receivership) and others [2011] 1 BCLC 202. 25 The strength of the present case cannot be so easily dismissed. Mr Bacon ......
  • Federal Republic of Brazil and Municipality of São Paulo v Durant International Corporation and Kildare Finance Ltd
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    ...2 W.L.R. 1213; [2003] W.T.L.R. 1165; [2003] EWHC 1637 (Ch), considered. (25) Sinclair Invs. (UK) Ltd. v. Versailles Trade Fin. Ltd., [2011] 1 B.C.L.C. 202; [2011] W.T.L.R. 839; [2010] EWHC 1614 (Ch); on appeal, [2012] Ch. 453; [2011] 3 W.L.R. 1153; [2011] 4 All E.R. 335; [2011] Bus. L.R. 11......
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3 books & journal articles
    • Singapore
    • Singapore Academy of Law Journal Nbr. 2016, December 2016
    • 1 December 2016
    ...remedy was awarded, see Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd[2011] 3 WLR 1153 (CA) at [70], per Lord Neuberger; [2011] 1 BCLC 202 (Ch) at [41]–[47], per Lewison J. See also Peter Birks, “Personal Restitution in Equity”[1988] LMCLQ 128 at 133. 17 For the view that a c......
    • Singapore
    • Singapore Academy of Law Journal Nbr. 2011, December 2011
    • 1 December 2011
    ...refer to breaches of it as a breach of fiduciary duty, see, for example, Lewison J in Sinclair Investments (UK) Ltd v VersaillesUNK[2011] 1 BCLC 202 at [26] but cf treatment in Re Neath Rugby Ltd, Hawkes v Cuddy (No 2)UNK[2009] 2 BCLC 426 where the court does not describe the duty as fiduci......
  • The “No Profit from Another's Fraud” Rule and the “Knowing Receipt” Muddle
    • United Kingdom
    • Edinburgh Law Review Nbr. , January 2013
    • 1 January 2013
    ...plc v DB Thakerar & Co [1999] 1 All ER 400 at 408 per Millett LJ; Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2010] EWHC 1614 (Ch) at para [30] per Lewison J: the phrase “ ‘held by the fiduciary as constructive trustee’ has caused much trouble, and it has led to considerab......

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