Sweetman v Nathan and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Schiemann |
| Judgment Date | 25 July 2003 |
| Neutral Citation | [2003] EWCA Civ 1115 |
| Docket Number | Case No: A2/2002/2607 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 July 2003 |
[2003] EWCA Civ 1115
Lord Justice Schiemann
Lord Justice Waller and
Lord Justice Dyson
Case No: A2/2002/2607
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (STANLEY BURNTON J)
Royal Courts of Justice
Strand,
London, WC2A 2LL
David Hodge QC & Thomas Grant (instructed by Wason & Co Solicitors) for the Claimant / Appellant
Michael Pooles QC & Matthew Jackson (instructed by Beachcroft Wansbroughs Solicitors) for the Defendants / Respondants
Introduction
This is the judgment of the Court. Mr Sweetman sued the partners of his solicitor. They successfully applied to Stanley Burnton J to strike out his case. Mr Sweetman appeals to this court. This appeal takes place against a background of fraud involving considerable sums of money. As so often in such cases, the background facts are complex and the matter is further complicated by the existence of a number of actions by and against a variety of people.
The factual background
The background facts, some of which have been taken from Mr Sweetman's written statement dated 3 October 2002 and placed before the court in this action and the remainder of which have been taken from the judgment below, appear to be as follows.
Some 37 acres of moorland had been valued in November 1990 at £10.4M on the basis that it either had, or had good prospects of obtaining, planning permission for mining.
The land was owned by a Mr Marsden but a Ms Shawdale had an option to buy it. On 1 February 1991 Mr Sweetman exchanged contracts to buy it from Ms Shawdale in return for
i) a sum of £1.5M payable on completion and
ii) half of any profit made on any resale ("the Shawdale Profit Share").
Mr Sweetman had a solicitor a Mr Nathan. Mr Sweetman agreed with Mr Nathan that, in return for the latter doing the legal work free of charge, they would share any profits accruing to Mr Sweetman on any resale of the land. The relative proportions between the two of them were eventually agreed as 60:40 in favour of Mr Sweetman. The defendants in the present action were Mr Nathan's partners at all relevant times. They were however not personally involved in any material transaction. They are sued solely as partners.
Mr Sweetman needed to borrow the purchase price. He approached a Mr Brown of Coutts the bankers and they agreed to make a loan ("the First Loan") against security. Mr Brown asked Nathan to act as Coutts' solicitor and Nathan agreed.
Mr Sweetman on 26 February 1991 borrowed £1.6M from Coutts, it being envisaged that this loan would be repaid out of profits made on the resale. With that money he then completed the purchase of the land from Ms Shawdale and paid attendant fees. This action is not concerned with the First Loan which features only as part of the history.
In May 1991 a Mr Corbett introduced as a possible purchaser of the land from Mr Sweetman what was presented as a reputable company of substance called Darvist Property Company Ltd ("Darvist"). It was a term of that introduction that Mr Sweetman would pay to Mr Corbett £200K on exchange of contracts and £800K on completion ("the Corbett Commission").
Darvist's solicitor was a Mr Roberts in a firm called Shepherds. He was also a director of Darvist.
On 14 May 1991 Mr Sweetman informed Coutts that he had found a buyer for the land at a price of £10.5M, namely, Darvist.
On 23 June 1991, in a letter drafted by Nathan and forwarded by Mr Sweetman, Coutts were informed that Ms Shawdale would release her claim to the Shawdale Profit Share in return for £1.5M on completion of the resale. On 25 June 1991 Mr Sweetman, by letter, asked Coutts whether they would lend him this sum for this purpose. It was common ground before the judge and before us that, at the time that these two letters were written, Mr Sweetman had no intention of using all of the loan for the purpose for which it was sought : Ms Shawdale, as he knew, was willing to release her claim to the Shawdale Profit Share for much less.
On 26 June 1991 three things happened:-
i) Coutts made a loan ("the Second Loan") of £1.5M to Mr Sweetman for the purpose of buying out the Shawdale Profit Share.
ii) Ms Shawdale agreed to release her claim to the Shawdale Profit Share in return for the immediate payment of £200K
iii) Contracts for the sale of the land were exchanged. The buyer however was not Darvist but a shell company without substance which had the name of Darvis. The final T was missing.
In October 1993 Mr Sweetman was declared bankrupt and on 11 November 1993 a trustee in bankruptcy was appointed.
What happened to the £1.5M provided by the Second Loan?
Mr Sweetman's account in his statement was as follows
i) £618,325 went to him
ii) £525,000 was lent to Darvis so as to enable Darvis to pay the deposit for the purchase of the land. This money went to Nathan. According to Mr Sweetman's statement, Nathan retained £441,667. Presumably the remaining £83,333 went to Mr Sweetman.
iii) £250,000 went to Ms Shawdale
iv) £190,312.50 went to Mr Corbett
Somewhat different figures appear in this Court's judgment in the Shepherd proceedings (to which proceedings reference will be made below) but the difference is of no present significance.
The land did not have the necessary planning permission and was in truth worth about £12,750. Darvis never completed and was not worth suing.
Coutts' attempts to regain the £3.1M which they had lent to Mr Sweetman
Coutts demanded repayment of their two loans to Mr Sweetman. He did not pay. Coutts on 15 April 1992 started proceedings and on 9 November 1992 obtained judgment in debt ("the Coutts Debt Judgment") against him for £3.1M. However they recovered nothing from him under that judgment.
In further proceedings ("the Coutts Deceit Proceedings") brought in September 1992 Coutts sued Mr Sweetman, Mr Nathan, the Defendants, Mr Roberts and the remaining partners of Shepherds. Coutts alleged that Mr Sweetman, Mr Roberts and Mr Nathan had defrauded them. Coutts claimed that Mr Sweetman had obtained the Second Loan by two misrepresentations
i) He required £1.5M to buy out Ms Shawdale
ii) That the purchaser was Darvist, a reputable company of substance.
They claimed that Mr Roberts was a party to the second of these representations. No judgment has yet been obtained against anyone in respect of the second of these representations.
However, in respect of the first misrepresentation, Coutts obtained summary judgment from Mr Conrad Dehn Q.C., sitting as a Deputy High Court Judge on 5 March 1993, for £1.5M against Mr Sweetman, Mr Nathan and Nathan's partners. He found, and this I refer to as "the Dehn Finding", that Mr Sweetman had obtained the Second Loan of £1.5 M from Coutts by false representations made by him and Nathan that he required £1.5M to buy out Ms Shawdale. He found that it was plain that Coutts were willing to lend this sum only because Mr Sweetman wanted it to buy out Ms Shawdale. The Dehn Finding is of significance in this appeal.
Mr Sweetman, acting for himself, did not deal in detail with their case against him. So far as the first misrepresentation was concerned, he stated that he had told Mr Brown of Coutts who was responsible for the transaction that not all of the £1.5M would be used to buy out Ms Shawdale. He also ran a defence of estoppel based on the Coutts Debt Judgment. Mr Dehn rejected Mr Sweetman's assertion that he had told Mr Brown and also rejected the estoppel defence.
None of the Defendants in the Coutts Deceit Proceedings appealed against the Dehn Judgment.
Mr Sweetman has not paid anything on account of that judgment nor has Mr Nathan. Stanley Burnton J records that that Mr Sweetman accepts that Mr Roberts and Shepherds compromised with Coutts by a payment of nearly £.5M. The Judge finds that a substantial part, if not all, of the balance must have been paid by Nathan's Partners or their insurers pursuant to an agreement with Coutts. The amount paid under that agreement is not in evidence. Because the insurance cover of Nathan's Partners was insufficient to meet their liabilities to Coutts, some of them were made bankrupt.
So the overall position so far as Coutts is concerned appears to be that they have recovered most if not all of the Second Loan. Of the recovery most was made available by Nathan's Partners and their insurers. None was made available by Mr Sweetman.
Mr Sweetman's position
Mr Sweetman has paid out £1.5M of the monies provided by the First Loan for the purchase of the land, has paid out some of the further monies provided by the Second Loan and has kept the rest.
Mr Sweetman has not repaid any of either loan made to him by Coutts. So it seems, and appeared to be common ground before us at the hearing, that Mr Sweetman has kept or spent the £618,325 and the £83,333 referred to in paragraph 14 above.
According to Mr Sweetman he was made bankrupt later in 1993 and a trustee in bankruptcy was appointed. Mr Sweetman was automatically discharged from bankruptcy on 28 October 1996. The trustee however is still in office.
In 1996 Mr Sweetman was acquitted in criminal proceedings on counts alleging conspiracy in relation to the above matters but Nathan was convicted.
On 23 July 1997 all relevant causes of action against Nathan, Nathan's partners, Roberts and Shepherds, were assigned by the trustee in bankruptcy to Mr Sweetman in return for a share in anything recovered. Mr Sweetman thereupon commenced two sets of...
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