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Collins v Union Bank Of Switzerland & Ors [2000] EWCA Civ 176 (25 May 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/176.html
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[2000] EWCA Civ 176
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Case No: SLJ 99/8087/8
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ORDER OF THOMAS J.
QUEEN'S BENCH DIVISION HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand, London, WC2A 2LL
Thursday 25 May 2000
B e f o r e :
LORD JUSTICE OTTON
LORD JUSTICE BUXTON
-------------------
|
SAMUEL
JOHN COLLINS
ANTHONY THOMAS ETRIDGE
JOSE LUIS MENDEZ GONZALEZ
|
Claimants/Appellants
|
|
-
and -
|
|
|
UNION
BANK OF SWITZERLAND
BARCLAYS BANK PLC
RICHARD CAPLAN & CO (A FIRM)
ST GEORGES STREET TRUSTEES LIMITED
ST JAMES'S TRUSTEES LIMITED
|
Defendants/
Respondents
|
__________________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Adrian Brunner Q.C./Kenneth Hamer (instructed by Messrs Collins for the
Appellants)
Antonio Bueno Q.C./Geraldine Andrews (instructed by Herbert Smith for
the Respondents)
__________________________________
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE OTTON:
This is an application by the claimants for permission to appeal from the
Order of Thomas J. dated 15 November 1999 whereby the Learned Judge dismissed
the appeal of the claimants against the Order of Senior Master Turner granting
summary judgment to the first and second defendants on the basis that the
claimants had no real prospect of succeeding in their claims at trial. The
Senior Master had also refused to allow the claimants to resurrect an
allegation of fraud against Union Bank of Switzerland (UBS) which had been
struck out by Timothy Walker J. on 10 November 1997.
Permission to appeal is only sought against the Order in respect of the
first defendants, the claim as against the second and third defendants having
been withdrawn. There is an accompanying application to admit further evidence
on the basis that there are special grounds for so doing pursuant to Order 59,
Rule 10(2) Schedule 1 CPR.
Background
The claimants are businessmen and claim to be the ultimate beneficial owners
of a golf course and leisure development in Valencia in Spain (known as the "El
Bosque Development"). The El Bosque Development was beset by financial
problems which by January 1992 were brought to a head by a major creditor,
Rattan Limited, calling in a debt in excess of £700,000 owed by the
principal company within the group, El Bosque Holdings Limited. The claimants
urgently needed to find money to pay off Rattan and save the development.
The claimants assert that in early May 1992 they received an offer to purchase
the El Bosque development for £18,000,000 from a Mr Zack Goodman,
representing the prospective owners of an off-shore company yet to be formed
in Alderney called Jouvin Limited. Jouvin obviously had no funds of its own
but intended to raise the finances.
In early May 1992 the second plaintiff saw a copy of an unsigned document
entitled "Expression of Intent" emanating from an entity called the Royal Trust
of Greece whose alter ego was a Mr George Langoudontis. The Expression of
Intent was addressed to Jouvin and assured it of RTG's intent to proceed with
the structuring of the required loan of £45,000,000. Insofar as it
relates to UBS, the only defendant left in the action, it would seem that the
second plaintiff made enquiries about RTG through The Heritable and General
Investment Bank Ltd.and his solicitor, Mr Caplan, the third defendant, using
the bank account details set out in the Expression of Intent.
Heritable and General asked UBS for their opinion as to the "integrity and
financial standing of your above customer." Mr Beat Hunold of the UBS Glarus
branch in Switzerland replied in German on 15 May 1992 which (when badly
translated) stated "unfortunately the Bank was unable to give any information
about Mr Langoudontis and had no connection with RTG." The gist of the message
was (inaccurately) reported back to the second plaintiff on the 18 May by
Heritable and General as follows :
"We think they are saying that Langoudontis is unknown to them and they have no
association with Royal Trust."
In the interim the third defendant had approached his bank, Barclays,
who sent a fax to Mr Hunold asking for his opinion on RTG in confidence. On 18
May Mr Hunold replied in German, when translated :
"We inform you that we have no account dealing with the Royal Trust of Greece
and no information about this company. The account number 212-037-60F is a
private account of Mr Langoudontis director of the Royal Trust. At the present
time it has enough to cover £18m."
UBS in Switzerland uses the abbreviation "m" in its internal documents to
denote "mille", meaning thousand, and "mio" to denote million. Hunold
interpreted the "m" in Barclays request to mean "mille", and answered the
question accordingly. There was at the time some $82,812 in Langoudontis
account. However, his answer was interpreted by the English recipients as
indicating that there was £18 million to the credit of Langoudontis
account at the Glarus branch of UBS at that time.
It is common ground that Mr Langoudontis was carrying on the fraudulent and
dishonest business of inducing persons who wished to borrow funds to pay a fee
for the arranging of significant loans which never materialised and that there
were a number of victims of the fraud perpetrated by Langoudontis and RTG and
their representatives in England.
Barclays' enquiry, together with Hunold's response which was endorsed on the
same document, was passed on to the third defendant by Barclays under cover of
a slip which contained an express disclaimer. A loose translation of the UBS
reference was forwarded by Mr Caplan to the second plaintiff, apparently
without also passing on the disclaimer. On receiving the reference the third
plaintiff wrote to Heritable and General and enclosed the UBS reference. Thus
the second plaintiff had the two apparently conflicting UBS references.
By early June it was apparent to the plaintiffs that RTG's role was as a mere
arranger of finance and not the providers. The second plaintiff travelled to
Greece with Mr Goodman where they met Mr Langoudontis. Mr Etridge asserts that
about a week after his return, on 17 June 1992, he received an offer for the El
Bosque Development from Paramount Property Gibraltar Ltd. The offer was for 12
million pounds. About two weeks later Rattan Limited obtained a judgment
against El Bosque Holdings in the Isle of Man. Shortly after this, Mr Etridge
was supplied by Mr Goodman with a copy of a Loan Contract between Jouvin and
RTG dated 8 July 1992. This document clearly described RTG as "acting on
behalf of the principal lenders with a signed contract" and stipulated that it
was "subject to ...... final agreement thereafter of the capital principal
lenders to provide the required loan to the borrowers."
On 14 July Mr Etridge wrote to Paramount turning down its offer. He gave the
reason that a "much higher offer (had been received from) another party in May
(who) during last week received confirmation that their finances were under
lock and key." It appears that the claimants' primary claim in damages is
based on the assertion that they would have sold to Paramount and would have
received £12 million had it not been for the UBS reference. They alleged
that Mr Etridge on their behalf turned down the Paramount offer in reliance on
Hunold's representation that RTG were good for £18,000,000 in mid-May.
The Senior Master and the Judge made the critical finding that by that stage
any reasonable businessman in their position would have appreciated that RTG
were mere intermediaries and their financial status had nothing whatever to do
with the viability of the Jouvin transaction.
On 19 August Rattan commenced winding up proceedings in the Isle of Man. In
spite of extensive attempts by the claimants to find funds they were not
forthcoming. The shares in El Bosque never changed hands. Eventually, in
November 1993 the proceedings in the Isle of Man were settled on terms whereby
Mr Stirling, the owner of Rattan Ltd. gained control of the El Bosque
Developments in exchange for writing off the indebtedness.
The Judgment
Thomas J. found as a fact that Collins and Etridge did not rely on the UBS
reference. They never believed that RTG was going to be the source of the
funds for Jouvin. The contemporaneous documents, which Mr Etridge studied with
great care, made it "clear beyond argument" that RTG was not the source of the
loan.
The reliance issue
In the proposed grounds for the appeal no challenge is made to the judge's
finding that the claimants placed no reliance on the reference dated 8 May
1992. In the claimants' skeleton argument in support of their application for
leave to appeal to the Court of Appeal dated 18 December 1999 there is again no
suggestion that the Learned Judge erred in this regard. However on the 8 May
2000, four days before the Hearing, the applicants lodged a supplementary
skeleton argument in which they sought to raise the issue before this Court.
Not surprisingly the defendants objected strenuously. We decided to hear the
argument on a provisional basis.
Mr Adrian Brunner Q.C. contended that the question whether and to what extent
the claimants relied upon the UBS reference in proceeding with the Jouvin offer
of £18,000,000 and rejecting the Paramount bid of £12,000,000 is one
of fact. The information must have played a "real and substantial part though
not by itself a decisive part, in inducing the claimants to act" in order to be
the cause of the loss. The claimants contend that they did rely on the
misrepresentation and are prepared to say so on oath. That the ultimate source
of the money was not RTG determinative ; banks do have their lines of credit.
RTG was described as the "the lender" in both the Letter of Intent and the Loan
Contract with Jouvin and assurance was needed as to the standing of RTG. Their
assertion that they relied on the reference in rejecting Paramount and
proceeding with Jouvin is strongly supported by Mr Etridge immediately [after]
instructing Mr Caplan to act on the sale of the El Bosque development to Jouvin
on 28 May 1992. In the absence of the reference the claimants would not have
continued to treat with Jouvin. The reference enabled the claimants to proceed
on the basis that RTG was a bank of good standing with substantial assets
rather than, as was the truth, on the basis that it was of no standing or
worth. A bank of substance would not be expected to enter into loan
commitments without its lines of credit in place. Leading counsel was
particularly critical of the conduct of Hunold. The explanation of £18m
meaning £18 thousand is unconvincing and can only be evaluated at trial.
Hunold's answer was given in flagrant breach of UBS's internal regulation which
required double signatures and confirmed by higher authority. Hunold may well
have fallen under the influence of Langoudontis and must have been in league
with him at least to the extent of doing his will and giving at his behest an
untrue reference. He must have known and intended that the reference would
communicate the fact that such sums were already in the account and that this
would materially affect the judgement of those who were seeking the
reference.
In my judgment the question whether the representation in the UBS reference
was made negligently or dishonestly by Hunold is of only academic importance.
There will never be any prospect of establishing at trial that experienced
businessmen believed that RTG was going to lend the money to Jouvin and that
the reference played any role in their decision to reject the offer from
Paramount. Whatever Mr Etridge and Mr Collins may now contend or genuinely
believe cannot stand alongside the contemporaneous documents. As Thomas J.
said they make it "clear beyond argument" that RTG was not the source of the
loan. I am satisfied that there is no real prospect of reversing the Senior
Master's and Thomas J.'s decisions that there is no real or realistic prospect
of a finding in favour of the claimants on this issue in the face of
contemporaneous documents. In any event, the judge rightly held that if Hunold
was negligent UBS was protected by Barclays' disclaimer of which the claimants
were aware when the action was commenced although UBS were not.
It is not surprising therefore that the claimants have been so tenacious in
trying to construct a fraud claim against UBS arising out of the conduct of
Hunold.
The fraud issue
The claimants' various attempts to construct a case of fraud against UBS must
be briefly stated. In April 1997 the original Statement of Claim included an
allegation that Hunold knew that £18m meant £18 million. This
assertion was not particularised and not surprisingly received severe criticism
from Master Turner in dismissing UBS's application to set aside service of the
writ. An amendment substantially expanded the plea.
In November 1997 Timothy Walker J. ruled that the plea of fraud was unarguable
and that no cause of action could be brought against UBS in England under that
head. Six months later the primary limitation period expired.
In August 1999 senior Master Turner refused permission for an amendment to
reintroduce the fraud plea and granted summary judgment to UBS and Barclays.
In November 1999 the fraud plea was reformulated during the hearing before
Thomas J. in order to bring the pleadings into line with the claimants' then
skeleton argument. Thomas J. refused permission to amend.
In the proposed grounds of appeal it is asserted that the judge erred in
finding that the claimants' witness statements showed that there was no real
prospect of success at trial on the question of fraud. He commented that there
was no witness statement from Hunold rebutting the allegations made against him
and this fact in itself made it inappropriate to give summary judgement. The
judge failed to draw the correct inferences, namely that Hunold had acted
improperly.
In support of this ground the applicants seek to place further evidence before
this Court. It is said that there is credible witness evidence which now
exists that supports the claimants' contentions that Hunold acted dishonestly,
which it was not possible to obtain before the hearing, and which, if it had
been available to the Learned Judge, would have led him to conclude that there
was a real prospect of the claimants succeeding in the allegations of
dishonesty and would have led the claimants to include an allegation of
fraudulent misrepresentation in the Statement of Claim from its inception or in
an earlier amendment.
Thomas J. held (page 20A) :
"There is no evidence whatsoever to suggest that Mr Hunold was in league with
Mr Langoudontis, save the events surrounding this case. Thus to plead he was
in league is in a sense circular because the inference can only be drawn from
the facts of the case."
The further evidence is a statement from a non-party, David Tristram,
supported by a statement of truth dated 17 December 1999. It is submitted that
this evidence is precisely of a kind that Thomas J. found absent from the
claimants' case ; it is independent evidence supporting the allegation made by
the claimants that Hunold and Langoudontis were acting in league. If
Tristram's evidence had been available before Thomas J., the chain of
circularity would have been broken and would have led at the very least to a
finding that the claimants had real prospects of establishing that Hunold was
dishonest and acting in league. Moreover there is clear evidence capable of
supporting the contention that the reference was dishonestly provided by Hunold
acting in association with Langoudontis. Tristram's statement clearly reveals
that the relationship between the two was very much closer than Hunold had ever
admitted and that Hunold on other occasions represented (falsely) that
Langoudontis had millions of pounds in his personal account. If the case on
fraud were not struck out the disclaimer would disappear and could not cover
liability for fraudulent misrepresentations. Moreover the burden of
(disproving) reliance would shift to the defendants. Accordingly it is
submitted it can no longer properly be said that the claimants have no real
prospect of succeeding at trial and leave to appeal should therefore be
granted.
Finally it is submitted, that the finding on fraud was in any event against
the weight of the evidence. The Learned Judge was wrong merely to find that
Hunold was a fool rather than a knave. Conversely, the evidence is of
sufficient strength to justify the opposite finding. There is irrefutable
evidence that UBS told Hunold not to let Langoudontis have any UBS headed
notepaper. UBS have not given any explanation as to this potentially damning
evidence which strongly suggests that they knew Langoudontis could not be
trusted.
UBS strenuously opposed both the application to admit the fresh evidence and
the reinstatement of the fraud allegations. They assert that the action in
tort for deceit is statute barred by section 2 Limitation Act 1980. Time
started to run on the date on which the alleged loss and damage was suffered ;
in the present case, the date of rejection of the Paramount offer on 14 July
1992. Alternatively, the limitation period expired at the latest, in early
August 1999. Tristram's witness statement does not provide "special grounds"
which would justify this late evidence being introduced. This evidence could
have been obtained with reasonable diligence for the hearing before either the
senior master or the judge. The evidence would not have had an important
influence on the outcome of the part 24 application.
Mr Brunner has advanced an argument that time does not run until June 1999
when UBS disclosed documents (relating to the Glarus branch discovery)
sufficient to place reliance on section 32 Limitation Act. I do not consider
it necessary to determine the limitation issue for the purpose of determining
this application.
The claimants' difficulties are far more profound. In approaching Tristram's
evidence it is, to my mind, highly significant to consider the role that
Tristram has hitherto played in the litigation. In May 1998 the claimants
commenced proceedings against Tristram alleging that he was complicit in
Langoudontis's fraudulent schemes. The writ claimed damages for conspiracy to
defraud and for fraudulent or negligent misrepresentations. It is not
necessary to particularise the nature of the allegations but they were
undoubtedly serious and no doubt would have only been made after serious
consideration by the claimants and their legal representatives. There was
certainly documentary evidence from the Metropolitan Police which indicated a
close association between Tristram and Langoudontis. The evidence therefore
is, at best, that of an accomplice who has been given an immunity from suit by
the claimants in return for his testimonies. I therefore approach his newly
claimed credibility with a good deal of circumspection.
Following the service of the writ Tristram put in a defence which concluded
:
"I, David H.G. Tristram, ..... there have been no related associations,
activities or conspiracies which could give rise to the plaintiffs claims. Any
information required by the plaintiffs has at all times been given freely where
I possess such information."
No explanation has been given for the failure to obtain evidence prior to
commencement of proceedings against him. I accept the submission on behalf of
UBS :
"The inference can be drawn if Tristram had said anything about Hunold which
indicated that Hunold was in league with Langoudontis, either during the
claimants investigations from 1993 onwards, or when he met the claimants
solicitors in June 1998, it would have been at the forefront of the pleaded
case put before the senior master and the judge."
It must follow that the evidence which it is now sought to adduce could have
been obtained with reasonable diligence for the hearing before either the
senior master or the judge, or both. Moreover, if the claimants were in
possession of this information they could have sworn an affidavit that they
were in possession of and wished to rely upon hearsay evidence to this effect.
This was not done.
In these circumstances it is also inherently unlikely that his evidence, had
it been available, would have had important influence on the outcome of the
part 24 application.
There are two final points for consideration. First, Mr Brunner submits that
a CPR part 24 application should not have led to a mini trial. The hearing
lasted over three days and the claimants refer to the dicta of the Court of
Appeal in
Swain v. Hillman `The Times' 1 November 1999 and contend that
difficult questions of fact, including the determination of questions of
reliance by the claimants, which required extensive reference to evidence made
such an application inappropriate. It follows from the above analysis of the
facts and my conclusions that I cannot accept this contention. This was not a
mini-trial ; the principal issue of reliance was determined on the
contemporaneous documents. A considerable part of the three day hearing turned
on the application to reinstate the fraud allegation. The essential issue of
reliance was determined properly conclusively and safely on the contemporaneous
documents. Nothing said by Lord Woolf M.R. in the
Swaine case indicates
that the summary procedure was inappropriate in this case ; it saved the
parties the expense of a lengthy trial and achieved expedition.
Second, this being an appeal following a previous unsuccessful appeal to a
High Court judge in chambers from a decision of the senior master it must be
considered within the Court's approach to such applications for leave as laid
down in paragraph 20 of the Practice Direction (Court of Appeal : Leave to
Appeal and Skeleton Arguments) (1999) 1 W.L.R. 2. Leave will only be normally
granted if the case raises an important point of principle or practice or the
case was "one which for some other reason should be considered by the Court of
Appeal" In my judgment neither of these criteria is met.
I would dismiss this application.
LORD JUSTICE BUXTON
I agree.
Order: Applications dismissed. Minute of order to be lodged with
the court.
(Order does not form part of the approved judgment)