England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (Mr Simon Berry QC
sitting as a Deputy Judge of the High Court)

		Royal Courts of Justice Strand, London, WC2A 2LL
		20 December 2002

Lord Justice Jonathan Parker :

INTRODUCTION

1. This is a cautionary tale of what can happen when a case is allowed to drift further and further away from the pleadings.
2. Before the court are appeals by the second and fifth defendants in the action, Mr James Scott and Mr David Conway, from an order made by Mr Simon Berry QC, sitting as a Deputy High Court Judge in the Chancery Division, on 26 March 2002. I granted permission to appeal on the papers on 22 May 2002.
3. The claimant in the action, Mr Armin Grabowski, was defrauded of a sum of $2.7M, being part of a sum of $2.9M which he paid to the first defendant Grangemore Investments Ltd ("Grangemore"), a company incorporated in the British Virgin Islands, on 17 June 1993. At that time, Grangemore was owned and controlled by Mr Scott. The $2.9M was to be applied for a specific purpose but in the event it was not so applied and, save for a repayment of $200,000, has been lost to Mr Grabowski.
4. The action was started as long ago as February 1995. One of the reasons why it took so long to come to trial was that Mr Grabowski, who is a German national, was serving a sentence of imprisonment in Germany for tax offences.
5. In the action, Mr Grabowski alleges that Mr Scott was a party to the fraud concerning the $2.9M, and until shortly before the trial he claimed damages against Mr Scott for conspiracy to defraud and fraudulent misrepresentation. However, under the terms of an agreement made between Mr Grabowski and Mr Scott shortly before the trial Mr Grabowski undertook not to seek any money judgment against Mr Scott if Mr Scott would make himself available to be cross-examined (as in the event he did).
6. Mr Scott denies that he was a party to any fraud, or that he made the alleged misrepresentations. He contends that in all dealings with Mr Grabowski's $2.9M he acted on the instructions of Mr Grabowski's business associate Mr Klaus Rachow. Mr Rachow is not a party to the action. It is, however, common ground between Mr Grabowski, Mr Scott and Mr Conway that Mr Rachow acted fraudulently in relation to the $2.9M. Mr Grabowski's evidence at trial was that Mr Rachow was currently in prison (although he did not give any further details).
7. Mr Grabowski alleges that $800,000 of his $2.9M was paid by Grangemore to the third defendant in the action, Langtry Trust Company (Channel Islands) Ltd ("Langtry"), a Jersey-based trust company, as trustee of an offshore settlement set up on the instructions of Mr Conway known as the Drummond Settlement, and was applied by Langtry in the purchase of a property in Surrey known as Hyde Farm. The full amount paid to Langtry was $1M, but $200,000 of that sum was subsequently returned to Grangemore. Mr Scott and Mr Conway contend that the $800,000 which was used to purchase Hyde Farm was Mr Conway's money, in that it was paid out of a sum of $1.035M which was standing to the credit of Grangemore's bank account immediately before the payment into the account of Mr Grabowski's $2.9M. It is common ground that when Mr Grabowski's $2.9M was paid into the account there was an existing credit balance on the account of $1.035M, but Mr Grabowski denies that that money belonged to Mr Conway. Mr Grabowski's case at trial was that it belonged to Mr Scott. Mr Grabowski also alleged that Mr Conway knew that the $800,000 belonged to Mr Grabowski, but it was subsequently accepted that there was no evidential basis for that allegation and it was not pursued at trial.
8. The current registered proprietor of Hyde Farm is the fourth defendant in the action, Bartholdy Trust, as successor to Langtry. Mr Conway, who was joined as an additional defendant in 2000, has in turn succeeded Bartholdy Trust as trustee of the Drummond Settlement. Hyde Farm is currently occupied by Mr and Mrs Scott (Mr Scott and Mr Conway have for many years been friends and business associates) on a monthly tenancy granted by Langtry to Mrs Scott at a rack rent. Mr Grabowski claims that Hyde Farm is held on trust for him, and seeks an order that the legal title to it be transferred to him.
9. In December 1993 Mr Scott transferred ownership of Grangemore to Mr Grabowski and Mr Rachow. Since then, Mr Scott has had no further connection or dealings with Grangemore.
10. The trial of the action took place in February 2002. In the result, the judge found that Mr Scott had made the alleged fraudulent misrepresentations and was a party to the alleged fraudulent conspiracy. In addition, and notwithstanding the absence of any allegation to that effect in Mr Grabowski's pleaded case, the judge also found that a document purporting to be an agreement dated 4 June 1993 between Mr Scott and Mr Conway whereby Mr Conway sold Grangemore to Mr Scott for $100, on terms of which Mr Scott and Mr Conway had relied in support of their case that the £1.035M was Mr Conway's money, was a forgery. He also found that the entirety of the $800,000 which had been used to purchase Hyde Farm was Mr Grabowski's money. However – and this is of considerable significance in the context of Mr Conway's appeal – whilst rejecting Mr Conway's evidence (supported by Mr Scott) that the $1.035M was his money, the judge made no finding as to who was beneficially entitled to that sum: in particular, he made no finding that it was Mr Scott's money (which had been Mr Grabowski's case at trial).
11. Given the terms of the agreement between Mr Grabowski and Mr Scott, the judge made no award of damages against Mr Scott. By his order, he declared that Mr Grabowski had the right to trace the $2.9M into Hyde Farm and that Hyde Farm was held on trust for Mr Grabowski, and he granted consequential relief. Following delivery of the judgment, an issue was raised by Mr Matthew Collings (appearing for Mr Conway, as he does before us) as to the benefit of improvements carried out to Hyde Farm at Mr Conway's expense. The judge accordingly directed that there be a further hearing in relation to that issue.
12. On his appeal, Mr Scott seeks, in effect, to clear his name. Since no award of damages was made against him, and since he has never claimed any legal or beneficial interest in Hyde Farm (and it has never been alleged that he had such an interest), he is in the unusual position of being the subject of findings of fraud and forgery but with no substantive order against him in respect of which he can appeal. However, it has not been contended that he has no locus to pursue his appeal; and in any event it would seem to me to be grossly unjust if he were for some reason precluded from doing so, given the extremely serious nature of the judge's findings against him.
13. So far as Mr Conway's appeal is concerned, the focus of the appeal is on the funding of the purchase of Hyde Farm, and in particular on the existence of the $1.035M in Grangemore's bank account. Mr Conway contends (as he contended before the judge) that there was no evidential basis for the judge's rejection of his evidence that the $1.035M was his money, and in any event that the $800,000 used in the purchase of Hyde Farm represented on any footing money which did not belong to Mr Grabowski.
14. Thus, although the factual and procedural history of the matter is complex, the issues which arise on the two appeals, once identified, are much less so. However, before addressing the issues in more detail it is first necessary to recount the way in which Mr Grabowski's case has developed as the action has progressed.

THE DEVELOPMENT OF MR GRABOWSKI'S CASE

The pleadings

15. By paragraph 2 of his Statement of Claim (the final form of which is contained in the Re-amended Statement of Claim served in November 2000, following the joinder of Mr Conway) Mr Grabowski alleges that pursuant to an unlawful conspiracy on the part of Mr Scott "and others" he has been defrauded of a sum of $2.7M, being part of a sum of $2.9M which he paid to Grangemore on 17 June 1993. At no stage have the other parties to the alleged conspiracy been identified in Mr Grabowski's pleadings.
16. Mr Grabowski alleges in paragraphs 4 and 10 of the Re-amended Statement of Claim ("the Statement of Claim") that he was induced into parting with the $2.9M by fraudulent misrepresentations made by Mr Scott, either as principal or as agent for Grangemore (which was controlled by him), at a meeting on 6 June 1993. It is not pleaded expressly that Mr Scott made such misrepresentations pursuant to the alleged conspiracy, but no other overt act pursuant to the alleged conspiracy is pleaded. The alleged misrepresentations are that Mr Scott had expertise in 'first class bank instruments' (that being the nature of the dealings to which the $2.9M was to be applied) and that Grangemore had made investments in that field. Paragraph 5 of the Statement of Claim alleges that Mr Grabowski was induced by these representations to enter into a joint venture agreement with Grangemore for investment in prime bank notes, prime guarantees and stand-by letters of credit.
17. It is then alleged (in paragraph 7 of the Statement of Claim) that on 18 June 1993 $2.9M of Mr Grabowski's money was paid into Grangemore's bank account to enable Grangemore or Mr Scott to invest in such instruments. Paragraph 7 of the Statement of Claim pleads as follows:

"In the aforesaid premises [Grangemore] and/or [Mr Scott] were not bona fide purchasers for value without notice and held the sum of [$2.9M] on trust for [Mr Grabowski] to whom they owed a fiduciary relationship to invest in [the instruments referred to earlier]."

18. Paragraph 9 of the Statement of Claim pleads that Grangemore did not invest the $2.9M in the specified instruments, and paragraph 12 pleads that Grangemore and Mr Scott have failed to repay the full sum to Mr Grabowski (it is common ground that $200,000 of it was repaid).
19. Paragraph 13 alleges in the alternative that the $2.9M was paid under a mistake of fact.
20. Paragraphs 15 to 27 of the Statement of Claim relate to Hyde Farm and to Mr Conway. Paragraph 15 pleads that as at 17 June 1993 (i.e. immediately before the payment into it of the $2.9M) Grangemore's account was in credit in the sum of $1.035M. Paragraphs 18 to 20 allege that the $1M transferred out of the account to Langtry on 24 September 1993 ($800,000 of which was subsequently used to purchase Hyde Farm) was money which Grangemore and Mr Scott held on trust for Mr Grabowski. Paragraph 21 pleads the subsequent transfer of Hyde Farm from Langtry to Bartholdy Trust, and continues:

"Neither [Bartholdy Trust] nor the Drummond Settlement were bona fide purchasers for value without notice and [Bartholdy Trust] holds the said property on trust for [Mr Grabowski]."

21. The pleading then turns to the position of Mr Conway. Paragraph 24 pleads that if (which is not admitted) Mr Conway has succeeded Bartholdy Trust as trustee of the Drummond Settlement, he holds Hyde Farm on trust for Mr Grabowski.
22. Paragraph 27 of the Statement of Claim pleads that the $1M transferred to Langtry was Mr Grabowski's money, "as [Mr Conway] well knew", and that in the premises Mr Conway and the Drummond Settlement held the $1M "as a constructive trustee on [Mr Grabowski's] behalf". Particulars of Mr Conway's alleged knowledge are then pleaded. However, as already mentioned, the allegation of knowledge was not pursued at trial.
23. The prayer for relief claims the following relief (so far as material):

1. As against Grangemore, repayment of the $2.7M with interest, as money paid under a mistake of fact.

2. As against Grangemore and Mr Scott, damages for fraudulent misrepresentation.

3. As against Mr Scott, damages for conspiracy.

4. A declaration that Hyde Farm is held by Bartholdy Trust on trust for Mr Grabowski absolutely, and an order for its transfer into Mr Grabowski's name.

5. As against Mr Conway, if (which was denied) he had any interest in Hyde Farm, a declaration that Hyde Farm was held by Mr Conway on trust for Mr Grabowski absolutely and (if Mr Conway had become the registered proprietor of Hyde Farm) an order that he transfer Hyde Farm into Mr Grabowski's name.

24. Mr Scott's Defence was settled by counsel, Mr Peter Griffiths, as long ago as July 1995, and has not been amended. Save that on occasion he has had the benefit of legal assistance (the settling of his Defence being one such occasion), Mr Scott represented himself throughout the interlocutory stages of the action.
25. By his Defence he denies being party to any unlawful conspiracy, or making the alleged misrepresentations. By paragraph 4 of his Defence he pleads that at all material times prior to 13 December 1993 (when he transferred Grangemore into the ownership of Mr Grabowski and Mr Rachow) he acted as Grangemore's agent. By paragraph 5 of his Defence he pleads that on 5 June 1993 he agreed (on behalf of Grangemore) with Mr Rachow that, on Mr Grabowski paying $2.9M to Grangemore for the purpose of trading specified bank instruments provided by Mr Grabowski, Grangemore would undertake such trading. By paragraph 6 of his Defence he admits that he was present at a meeting on 6 June 1993 with Mr Grabowski and Mr Rachow (being the meeting in the course of which he is alleged to have made the fraudulent misrepresentations), but (in paragraph 10) he denies making the alleged misrepresentations. By paragraph 7 of his Defence he admits the joint venture agreement between Mr Grabowski and Grangemore, but denies that Mr Grabowski entered into it in reliance on any misrepresentations. In paragraph 8 of his Defence he admits the payment of the $2.9M.
26. In paragraphs 15 and 16 of his Defence Mr Scott pleads that the investment of Mr Grabowski's $2.9M was to be undertaken not by him but by Grangemore, and that since December 1993 Grangemore has been controlled by Mr Grabowski. By paragraph 18 of his Defence he pleads that the $1M paid to Langtry on 24 September 1993 was a payment by way of "dividend", and by paragraph 19 he pleads that it was derived from the $1.035M which was already in the account. Paragraph 22 denies that Hyde Farm was purchased with Mr Grabowski's money.
27. By his Amended Defence, Mr Conway joins issue as to the derivation of the funds used to purchase Hyde Farm, and denies that Hyde Farm is held on trust for Mr Grabowski. He also denies the allegation (in the event, not pursued) that he knew that the $1M paid to Langtry was Mr Grabowski's money.
28. By his Reply to Mr Conway's Defence, Mr Grabowski denies that the $1M paid to Langtry was paid out of the $1.035M already in Grangemore's account, and asserts that it was paid out of his $2.9M. By paragraph 4 of his Reply he denies that Mr Conway or any settlement controlled by him had any interest in the $1.035M, and by paragraph 5 he puts Mr Conway to "strict proof" as to how that sum was calculated and the circumstances in which it is said to belong to Mr Conway or a settlement controlled by him.

The witness statements

29. In due course, witness statements were served. Mr Grabowski's witness statement is dated 14 February 2001. In paragraph 29 of that statement he refers to the meeting on 6 June 1993 at which Mr Scott is alleged to have made the fraudulent misrepresentations. However, the account of that meeting which appears in his witness statement makes no reference to any such misrepresentations. He merely says that he was given to understand that Mr Scott owned and controlled Grangemore (as was indeed the case as at that date) and that Grangemore had the right to deal in the specified types of bank instruments (as it admittedly had). In view of its central importance in Mr Grabowski's pleaded case, I set out paragraph 29 below:

"On the 6^th June 1993 I went to the Sheraton Hotel at Frankfurt/Main where I met Mr Rachow, Mr Ulbrich [a lawyer] and Mr James Scott …. who was introduced to me by Mr Rachow as representing [Grangemore]. [Mr Scott] did not appear to speak German and where necessary Mr Rachow translated. I was given to understand that he occupied a similar position in Grangemore as Mr Rachow did to Intervest, namely that Grangemore was a company which he owned and controlled which had the right to handle negotiable instruments and bank guarantees. During the meeting I was persuaded to enter a joint venture agreement with Grangemore. I agreed to invest [$2.9M]. Whether this sum was mentioned prior to the meeting I cannot now recall. During the meeting Mr Rachow, Mr Ulbrich and [Mr Scott] spoke of a 'rolling program' [sic] or trading program with the investment being traded." (Emphasis supplied.)

30. In the light of a reference which the deputy judge makes in paragraph 14 of his judgment to Mr Scott's business experience (a reference to which I shall have to return in due course) it is material to note at this point that earlier in his witness statement Mr Grabowski says that he understood from Mr Rachow that Mr Rachow was a director of a company called Intervest, which invested in first class bank instruments.
31. Mr Scott's witness statement is dated 7 September 2001. In his witness statement, Mr Scott states that in early 1993 he was bankrupt and out of a job but was looking for contacts with whom he hoped to do business. In about May 1993, he says, he was contacted by a Dr Nulliah, who raised with him the possibility of effecting investments in prime bank guarantees on behalf of Mr Rachow. This, Mr Scott says, was the first he had heard of Mr Rachow. Mr Scott goes on to say that he set about looking for a suitable offshore vehicle for this purpose, and that in this connection he contacted Mr Conway, who was an old friend and business associate of his, to see if he would be interested in selling Grangemore. According to Mr Scott, Mr Conway was willing to do this. Mr Scott's witness statement continues (in paragraph 11):

".... I purchased his interest in [Grangemore] for a nominal sum. I have been unable to locate the purchase agreement but I believe the price was US$100.

12. The only complication was that Grangemore had just over $1,000,000 in its bank account. Given the high degree of trust between Mr Conway and myself he was prepared to sell Grangemore on the footing that this sum was to remain in Grangemore's account pending his further instructions."

32. Mr Scott's witness statement goes on to deal with the meeting on 6 June 1993. Present at that meeting, according to Mr Scott, were Mr Grabowski, Mr Rachow and Mr Ulbrich. Mr Scott states that the meeting was conducted largely in German (which he does not speak) and that he made virtually no contribution to it. He says that Mr Rachow spoke English, and that Mr Rachow confirmed that they would be using Grangemore as an off-shore vehicle and that he (Mr Scott) would be providing administrative services to Grangemore to a limited extent by operating its bank account. Mr Scott denies making any misrepresentations. He goes on to say that, following the payment to Grangemore of the $2.9M, he received instructions from Mr Rachow and from Dr Nulliah to make a number of payments out of the account. However, he says that the payment of $1M to Langtry was paid on Mr Conway's instructions. He continues (in paragraph 23):

"This $1,000,000 was the sum which Mr Conway left in Grangemore's account and which we had agreed I would not touch. The precise sum which had been in Grangemore's account when Grangemore was sold to me was [$1.035M]. .... that sum remained in the account until 24th September 1993 when shortly before that date Mr Conway instructed me to pay that sum out to Langtry. That I duly did."

33. Mr Scott goes on to refer to a number of payments made out of the account for his personal benefit.
34. Mr Scott concludes his witness statement by saying:

".... I deny that I am a party to any fraud or conspiracy. I certainly did not make the alleged representation [sic] to Mr Grabowski. My role was confined to operating Grangemore's bank account. If there was a fraud as alleged I was deceived just as much as Mr Grabowski."

35. Mr Conway, in paragraph 14 of his witness statement (also dated 7 September 2001), states that Grangemore was incorporated in November 1992 at his request, and that whilst he was not a director or shareholder of Grangemore, he controlled the commercial transactions in which it was involved, which related (among other things) to the buying and selling of optical frames in Malta. The shares in Grangemore were held by Langtry, as nominee for him. In May 1993, he says, he set up a settlement called the Grangemore Settlement, to receive distributions from Grangemore. The witness statement continues (in paragraph 12):

".... At the time I recall [Grangemore] had about US$1.1m to distribute. Around the same time, Mr Scott suggested that I get involved in the UK tourist industry. The idea appealed and I decided to establish a number of small exclusive country houses and hotels in Europe. I asked Mr Scott to find potentially suitable properties that might be for sale and he provided me with the sales particulars for a number of properties. Eventually because of its history and potential .... I decided to purchase Hyde Farm.

13. As was my usual practice, I decided to have a single purpose vehicle established for the purchase of Hyde Farm. Accordingly, I had Langtry via Mr Scott set up the Drummond Settlement for me to hold Hyde Farm.

14. At around the same time, Mr Scott advised me that he needed a company to carry out a new business venture which he was going to pursue. As by this time I had no real need for [Grangemore] (provided the assets in it were distributed in accordance with my wishes) I sold [Grangemore] to Mr Scott pursuant to the agreement dated 4 June 1993 made between us. I had absolutely no idea what Mr Scott's intended venture was. I agreed to sell [Grangemore] to Mr Scott to help him out (he said he had very little money at that time) subject to the express reservation that Mr Scott was obviously not getting the [$1.035M].

15. ....

16. In due course, in order to put Langtry in funds to make the purchased of Hyde Farm and the adjoining fields, I instructed Mr Scott to transfer the sum of US$1m from [Grangemore] to Langtry on 24 September 1993 ...."

36. In paragraph 26 Mr Conway states that he first heard of Mr Grabowski, and of the action, in early December 1999, whereupon his solicitors wrote to Mr Grabowski's solicitors asking that Mr Conway be joined as an additional defendant. As mentioned earlier, he was duly joined.
37. In his List of Documents dated 9 February 2001 Mr Conway had disclosed, as item 38, "Copy Agreement James Scott and David Conway" dated 4 June 1993. A document purporting to be the original of this agreement was produced by Mr Scott shortly before the commencement of the trial. In addition to recording the purchase of Grangemore by Mr Scott from Mr Conway for $100, the agreement also provided that all funds in Grangemore's account as at the date of the agreement were to "remain the property of" Mr Conway. If genuine, this document provided important contemporary corroboration of the evidence of Mr Scott and Mr Conway that the $1.035M standing to the credit of Grangemore's account immediately prior to the payment into the account of Mr Grabowski's $2.9M belonged to Mr Conway.

The pre-trial agreement between Mr Grabowski and Mr Scott

38. On 7 February 2002, some 5 days before the commencement of the trial, an agreement was reached between Mr Grabowski and Mr Scott whereby Mr Grabowski agreed that, provided that Mr Scott made himself available for cross-examination at the trial, he would not seek a money judgment against Mr Scott (that is to say, that he would abandon his claims for damages against Mr Scott) but would confine his claim against Mr Scott to ancillary relief in respect of Hyde Farm in the event that the court should declare that Mr Scott had an interest in Hyde Farm. Since it was not alleged in the Statement of Claim that Mr Scott had an interest in Hyde Farm, a claim for such a declaration would have entailed an amendment to the Statement of Claim. In the event, no such amendment was at any stage sought to be made.

The trial

39. The trial began on 11 February 2002 and continued over some five days. Mr Grabowski was represented (as he is on these appeals) by Mr Charles Gratwicke. Grangemore (which had since December 1993 been owned by Mr Grabowski and Mr Rachow) was not represented and no relief was in the event sought against it. Mr Scott represented himself, but with assistance provided on a pro bono basis by Mr Mark Hapgood QC (who also appears for Mr Scott on his appeal). Mr Hapgood attended only part of the hearing. Bartholdy Trust was not represented. As already mentioned, Mr Conway was represented by Mr Collings.
40. Mr Gratwicke's opening skeleton argument made no reference to the alleged fraudulent misrepresentations, beyond saying (in paragraph 6) merely that Mr Grabowski was "induced to pay the sum of $2.9M into the Joint Venture Agreement [with Grangemore] by [Grangemore] and [Mr Scott]". Paragraph 6 went on to submit that Grangemore and Mr Scott received the $2.9M as volunteers and that they owed fiduciary duties to Mr Grabowski in respect of it. Paragraph 9 contained submissions that the $800,000 used to purchase Hyde Farm can be traced from the £2.9M; that there is an equity to trace arising out of the fiduciary relationship between Mr Grabowski on the one hand and Grangemore and Mr Scott on the other; and that tracing would not produce an inequitable result. In paragraph 13 it was submitted that the purchase of Hyde Farm was not effected by any monies belonging to Mr Conway and that in the premises Mr Conway holds the property as constructive trustee for Mr Grabowski. Paragraph 14 contained an alternative submission, should it be held (contrary to Mr Grabowski's case) that the $1.035M belonged to Mr Conway, that that sum was dissipated prior to 24 September 1993 (when the $1M was paid to Langtry).
41. Notwithstanding that Mr Grabowski's case in relation to Hyde Farm had been pleaded in terms of constructive trust, Mr Gratwicke explained to the deputy judge in the course of his opening speech that he was not putting the case on the basis that the moneys used in the purchase of Hyde Farm were trust moneys to which Mr Grabowski was beneficially entitled: rather, the case was that Mr Grabowski had been the victim of fraud and that by virtue of that fraud there was an entitlement to trace the missing $2.7M (see the transcript of the proceedings at trial, Day 1, p.61C-D). Mr Gratwicke also stated (transcript Day 1, p.62G) that it was Mr Grabowski's case that the $1.035M belonged to Mr Scott (although no allegation to that effect had been pleaded).
42. Mr Gratwicke submitted that $800,000 of the $2.9M had been applied in funding the purchase of Hyde Farm. He also submitted that Mr Scott had breached fiduciary duties which he owed to Mr Grabowski. He did not refer to the alleged fraudulent misrepresentations (of which Mr Grabowski had made no mention in his witness statement) save as a suggested basis for the existence of a fiduciary duty (see ibid. p.62G-H). He did, however, express "grave reservations" as to the genuineness of the document purporting to record the agreement dated 4 June 1993 (transcript Day 1, p.39E), notwithstanding that no allegation of forgery had been pleaded.
43. Mr Grabowski gave oral evidence in chief, confirming his witness statement, and was cross-examined by Mr Collings (Mr Hapgood was not present while Mr Grabowski was giving evidence). Although he speaks some English, Mr Grabowski's mother tongue is German, and he gave his evidence with the assistance of an interpreter. With reference to paragraph 29 of his witness statement, the following passage of cross-examination occurred (transcript Day 2, pp.24-25):

"Q. …. You say that you were given to understand that Mr Scott occupied a similar position in Grangemore as Mr Rachow in Intervest. How did you understand that?

A. Because Mr Rachow told me.

Q. And was that a translation of what Mr Scott said or was that from Mr Rachow?

A. It was a translation of what Mr Scott said because I asked what he [i.e. Mr Scott] did – what he was, what his position was.

Q. Did Mr Scott say a lot at this meeting?

A. Mr Rachow has certainly spoken because he continually translated. They both talked a lot and I was the one who talked the least.

Q. What did you understand [Grangemore] to be?

A. That by [Grangemore] the bank guaranteed investment businesses were proceeded or carried out.

Q. Was there to be any special arrangement concerning the payment of [$2.9M] to [Grangemore]?

A. It was agreed or it was explained to me that the deal was to be done – [that] I would be paid a percentage.

Q. But the [$2.9M] was not to go into a special account was it?

A. Yes. I had to transfer [the $2.9M] into a certain account in order to receive this CDC.

Q. But did you understand that this was being paid to a special account [or] just simply to Grangemore? …. You understood the money was simply being paid to Grangemore?

A. But for a certain purpose.

Q. Was it paid into a specially designated account in Grangemore?

A. Was it specially opened for this purpose?

Q. Yes.

A. I don't know.

Q. It was simply making a payment to an investment company?

A. Connected with an agreement for a certain purpose."

44. That was the entirety of Mr Grabowski's oral evidence as to what was said and agreed at the 6 June meeting. It is pertinent to note that, on Mr Grabowski's evidence, it was Mr Rachow (purportedly translating what Mr Scott had said to him in English) who told Mr Grabowski in German that Mr Scott held the same position in Grangemore as he (Mr Rachow) held in Intervest.
45. The next witness was Mr Scott. After Mr Hapgood had examined him briefly in chief by reference to his witness statement, he was cross-examined by Mr Collings and Mr Gratwicke. Mr Gratwicke's cross-examination of Mr Scott was extensive. It lasted for about a day (starting on the second day of the trial and ending on the third). Not surprisingly, since there was nothing in Mr Grabowski's witness statement to support the allegation of fraudulent misrepresentations made by Mr Scott, Mr Gratwicke did not pursue that topic. In effect, the case against Mr Scott based on fraudulent misrepresentation was abandoned.
46. Mr Gratwicke did, however, suggest to Mr Scott in the course of his cross-examination that the document purporting to be the agreement dated 4 June 1993 to which Mr Scott had referred in his witness statement was not a genuine document. As already noted, this allegation had not been pleaded, and no advance notice was given that it was going to be made. Mr Scott's evidence was that he had recently come across the original agreement in a pile of documents, and that he had immediately passed it to his solicitor. He also gave evidence that he had spoken about the agreement at the time to Ms Margaret Lenaghan of Langtry, which was providing all the administrative services in relation to Grangemore and the various settlements set up by Mr Conway. Evidence to that effect by Ms Lenehan would (if accepted) have proved that the agreement had indeed been entered into on the date shown on the document, and hence that the document was genuine. However, in the event Ms Lenehan was not called as a witness (a matter to which I shall have to return).
47. Asked who was entitled to give instructions to Langtry in relation to payments to be made out of the $2.9M, Mr Scott's evidence was that all the instructions came from Mr Rachow. He said (at transcript Day 3, p.133C):

"Mr Rachow made it quite clear right from the beginning that he was in charge and I should follow his instructions."

48. At transcript Day 3, p.139E-F he said:

"All the instructions came very quickly from Mr Rachow – very quickly."

49. Mr Scott said that initially Langtry would confirm Mr Rachow's instructions with him, but that in about July 1993 a formal agreement was concluded which enabled Langtry to take instructions direct from Mr Rachow, without reference to him, and thenceforth matters proceeded in that way. Mr Scott also said that Mr Rachow had told him that he (Mr Scott) would in due course be paid commissions.
50. As to the payments made out of the account for his own benefit, Mr Scott's evidence was that he was using Mr Conway's money; that he told Mr Conway about it; and that Mr Conway was content with that arrangement (transcript Day 3, p.146B); and that he expected that money would in the future be coming into the account for him by way of commission on dealings concluded on Mr Rachow's instructions with which he could repay Mr Conway.
51. As to the $1.035M, Mr Scott's evidence, consistently with his witness statement, was that it was Mr Conway's money. He said that he knew that the $1.035M was Mr Conway's money, and that (as he put it at transcript, Day 2, p.101C-D) it "was to be kept separate" from Mr Grabowski's money. Asked why a separate account had not been opened to receive Mr Grabowski's $2.9M, Mr Scott said (transcript Day 3, p.153F):

"Well, it wasn't done. Mr Conway was quite happy leaving his money where it was. Mr Grabowski's money came in. Yes, of course, it should have probably gone into a separate account."

52. When Mr Gratwicke put it to Mr Scott in terms that the $1.935M belonged to him and not to Mr Conway, Mr Scott replied (transcript Day 3, p.160B-C):

"No, they were not my funds at all."

53. As to the payment of $1M to Langtry on 24 September 1993, Mr Scott's evidence was that it was Mr Conway's money, and that it had nothing to do with Mr Grabowski. Asked about the description of the payment in his Defence as a "dividend" paid by Grangemore, Mr Scott's evidence was that that was his counsel's description of it.
54. Asked how the rent payable under the tenancy of Hyde Farm was paid, Mr Scott pointed out that the tenancy was in his wife's name, and that he did not know how many rental payments she had made. Asked whether he had any documentary proof that rent was paid, he replied (transcript Day 3, p.212A-B):

"I don't know if she has or not. I really don't. I personally haven't."

55. At the conclusion of Mr Scott's evidence, Mr Hapgood expressed concern that points had been put to Mr Scott in cross-examination which seemed to him to go well beyond the case pleaded against him, and asked if he could have the opportunity to make submissions in writing when he had seen the other parties' written submissions. The deputy judge agreed, saying (at transcript Day 3, p.235G-H):

"Yes. I think it was almost being put to Mr Scott at one point that in fact Grangemore was his vehicle and almost that he was the owner of Hyde Farm."

56. Mr Hapgood also complained that if it was alleged that the agreement dated 4 June 1993 Mr Conway and Mr Scott was a forgery ("which I think is in fact what is being put": transcript Day 3, p.236B), that allegation ought to have been pleaded.
57. The only other witness was Mr Conway. He too was extensively cross-examined by Mr Gratwicke. He gave evidence, consistently with his witness statement, that he no longer needed Grangemore as a vehicle; that Mr Scott had asked whether he was willing to sell it to him; and that he had done so.
58. As noted earlier, the allegation of 'knowing receipt' was not pursued. Mr Gratwicke did, however, put questions to him as to the genuineness of the document purporting to record the agreement dated 4 June 1993, and Mr Conway described the circumstances in which it had come to be signed.
59. As to the $1.035M, Mr Gratwicke cross-examined Mr Conway on the basis that it was Mr Scott's money. Consistently with his witness statement, Mr Conway maintained that it was his own money. He said that he had made it clear to Mr Scott that his money should be isolated. He said (transcript Day 4, p.297B):

"It was perfectly acceptable to me that [Langtry] was guarding my money. What little box they put it in never crossed my mind …. You trust these people as in trust."

60. Asked why he had thought it necessary to include a clause in the agreement for the sale of Grangemore relating to the money in its account, Mr Conway said this (transcript Day 4, p.297C-D):

"Prior to my selling the company to Mr Scott, whatever account it was in it was mine, and after I sold the company to Mr Scott I am no longer the beneficiary of that, so if accounts pop up they won't be mine. It was rather important to me that what was mine was where I could have access to it … So of course I would include that in a sale agreement."

61. Mr Conway's evidence was that he was not in touch with Miss Lenahan about the sale of Grangemore to Mr Scott.
62. At the conclusion of Mr Conway's evidence, Mr Collings pointed out that the pleaded case of 'knowing receipt' had not been pursued, and complained (as Mr Hapgood had done earlier in relation to Mr Gratwicke's cross-examination of Mr Scott) that the case against Mr Conway had, as he put it (transcript Day 4, p.3116) "ranged far and wide beyond the pleaded case". At transcript Day 4, p.316D, the deputy judge commented (as he had done earlier, in response to Mr Hapgood):

"I have to say that sometimes when I was listening to the cross-examination of Mr Scott I had the feeling that it was being directed to the question that Grangemore was in fact Mr Scott's vehicle and it was Mr Scott's money."

63. Mr Collings then pointed out, correctly, that no such allegations had been pleaded.
64. In his written closing submissions, Mr Gratwicke said that there could be no dispute that "from 4th June 1993 at the very latest" Grangemore was under the total control of Mr Scott (it was, of course, admitted that as from 4 June 1993 Grangemore was owned and controlled by Mr Scott). As with his opening skeleton argument, Mr Gratwicke's closing submissions make no reference to the allegation of fraudulent misrepresentations by Mr Scott, although they do assert (in paragraph 3(b)) that Mr Scott was "an active participant in the fraud". Various evidential matters are then listed as being matters relied on to make good that assertion. The only one which relates to the meeting on 6 June 1993 is that which is contained in paragraph 3(b)(i)(d), as follows:

"travelled to the meeting with [Mr Grabowski] at Frankfurt apparently for no reason".

65. In paragraph 4 of his closing written submissions Mr Gratwicke submitted that Mr Scott was "accountable in equity for breach of fiduciary duty". In paragraph 5 it was submitted that Mr Conway had no interest in the $1.035M. Paragraph 6 repeated the submissions made in Mr Gratwicke's opening skeleton argument with regard to tracing. In paragraph 7 it was submitted that on payment of the $2.9M to Grangemore, Mr Scott held that sum on trust for Mr Grabowski. The closing written submissions then set out a list of payments which, it was submitted, fell to be deducted from the $1.035M and from the $2.9M (which was described as trust money), on the basis of which it was submitted that the $1M paid to Langtry derived from the $2.9M. Finally, in paragraph 12 of the closing written submissions it was submitted that if (contrary to Mr Grabowski's case) the $1.035M was Mr Conway's money, then Mr Grabowski and Mr Conway were beneficially entitled to Hyde Farm in the proportion to their respective contributions.

THE JUDGMENT OF THE DEPUTY JUDGE

66. Having set out the factual history, and having expressed the view that it was quite clear that Mr Rachow and Mr Ulbrich had fraudulently induced Mr Grabowski to part with the $2.9M, the deputy judge turned to the questions whether Mr Scott had any part in the fraud and whether Mr Grabowski had a right to trace into Hyde Farm.
67. Addressing the first of those questions, the judge (in paragraph 14 of the judgment) refers in terms to the allegation of fraudulent misrepresentation in paragraph 4 of the Statement of Claim, noting (correctly) that:

"…. this is not a matter which is spoken to in Mr Grabowski's witness statement".

68. The judgment continues:

"Nevertheless, Mr Grabowski did say in cross-examination that Mr Scott said that he had experience of the same kind of investment that was then being discussed. Also, Mr Grabowski said that it was both Mr Rachow and Mr Scott who talked the most (with Mr Rachow translating into German that which was being said by Mr Scott), and that Mr Grabowski spoke the least."

69. The judge goes on to summarise Mr Scott's evidence about the meeting.
70. In paragraph 18 of the judgment the deputy judge turns to the question of the reliability of the evidence of Mr Grabowski, given his conviction for tax offences. He also finds that Mr Grabowski:

"…. understated the extent of his current ability to speak English and also, perhaps, the extent of his ability to do so in 1993".

71. The judgment continues:

"However, I do accept that the extent of the ability of Mr Grabowski to speak English in 1993 in relation to business, as opposed to social, matters was limited and that it was not such as that it has the effect of undermining his evidence that Mr Scott did speak at the meeting …. and that what Mr Scott said was translated for Mr Grabowski into German by Mr Rachow."

72. Paragraph 19 of the judgment contains the central findings of the deputy judge. It reads as follows:

"I prefer the evidence of Mr Grabowski as to the involvement of Mr Scott in the meeting at Frankfurt. Indeed, I do not accept the evidence of Mr Scott that his role was limited to the introductions mentioned above and to the making available of Grangemore and its subsequent administration. I find that Mr Scott played a material part in the endeavour to persuade Mr Grabowski to invest $2.9M through Grangemore in what he (Mr Grabowski) thought was going to be a CDC [a specific type of bank instrument] and that Mr Scott knew that no such investment would be made and that the funds would be deployed in another manner for the benefit of (amongst others) himself."

73. In paragraph 20 the deputy judge gives four reasons for the conclusion expressed in the previous paragraph, as follows:

"I reach this conclusion for four reasons. First, there is material which, in my view, signally reveals that Mr Scott had a much more extensive involvement than that claimed by him in the scheme to persuade Mr Grabowski to invest the $2.9M. Secondly, the payments which were made out of Grangemore's bank account are quite inconsistent with there ever having been any intention to invest Mr Grabowski's money in a CDC. Thirdly, I do not accept the explanations which Mr Scott gave in respect of the above-mentioned material and payments out of the bank account of Grangemore. Fourthly, the credibility of the evidence of Mr Scott is further adversely affected by his evidence as to the involvement of Mr Conway with Grangemore, which I do not accept".

74. The judgment goes on to expand on each of these four reasons. In support of his first reason, the deputy judge relies on a fax sent by Mr Rachow to Mr Scott on 27 May 1993 attaching a "Conditional Swift Wire" (presumably, a form of money transfer), in relation to which Mr Rachow says:

"Please find enclosed [sic] the Conditional Swift Wire which we would like to send to Mr Grabowski as soon as we have your o.k."

75. The judge considered that the terms of this fax evidenced a much greater degree of involvement on the part of Mr Scott than he had been prepared to admit. The deputy judge regarded the reference to obtaining Mr Scott's "o.k." as being of particular relevance in this respect, saying (in paragraph 22 of the judgment):

"Mr Scott could not explain the appearance of these words, other than by repeating something behind which he frequently retreated, namely that Mr Rachow was a pushy person who frequently telephoned and wrote to him."

76. The deputy judge found further support for his conclusion as to the extent of Mr Scott's involvement in the proposed investment in two letters from Mr Scott to Mr Grabowski (one written in September 1993 and the other in October 1993), both of which start by referring to conversations with Mr Rachow. The first says: "Further to my telephone conversation with Mr Rachow". The second says: "Further to your telephone conversation with Mr Rachow".
77. Mr Scott's evidence in relation to these letters was that they were letters which Mr Rachow had asked him to write (transcript Day 3, pp.195-203). As to that evidence, the deputy judge says (paragraph 23 of the judgment):

"I cannot accept the explanation given by Mr Scott which was that he was asked to produce letters in this form by Mr Rachow and that he then did no more than send them to Mr Rachow rather than Mr Grabowski."

78. The deputy judge gave no reason why he was unable to accept Mr Scott's evidence in this respect. Similarly, without giving any reason, the deputy judge went on to say that he was unable to accept Mr Scott's evidence in relation to a payment of $273,000 made out of the account in September 1993 (not a matter directly in issue); or his evidence in relation to the drafting of the joint venture agreement relating to the $2.9M (again, not a matter directly in issue); or his evidence that he was asked by Mr Rachow to attend the meeting in December 1993 when (as is common ground) he transferred Grangemore to Mr Grabowski and Mr Rachow.
79. As to his second reason, the deputy judge, after referring to those payments out of the account which were admittedly for Mr Scott's benefit, continues (in paragraph 31 of the judgment):

"Mr Scott said that he was paying these monies out of the funds in the account which belonged to Mr Conway, and Mr Conway knew and approved of the payments. I do not accept that there were any monies belonging to Mr Conway, and this is a matter to which I shall return below."

80. There are two points to note about this important passage in the judgment. In the first place, in making these findings the deputy judge is also rejecting the evidence of Mr Conway (which Mr Grabowski was not in a position to controvert) that the $1.035M was his money, and that he knew and approved of the payments in question. Secondly, having found that the $1.035M did not belong to Mr Conway, the deputy judge makes no finding as to whose it was.
81. In paragraph 32 of the judgment the deputy judge rejects Mr Scott's evidence that he was not paid commissions since no terms had been agreed with Mr Rachow: again, he gives no reason for his rejection of this evidence. The judgment continues:

"In my view, [Mr Scott] was to retain such of the monies as were not otherwise paid out to or for the benefit of Mr Rachow, Dr Nulliah and Mr Ulbrich."

82. In paragraph 33 of the judgment the deputy judge makes a wide-ranging finding of fraud against Mr Scott, saying:

"…. Mr Scott and Mr Rachow, Dr Nulliah and Mr Ulbrich, always intended that the monies of Mr Grabowski should be deployed in a manner which was to their benefit."

83. In paragraph 34 of the judgment the deputy judge, as his third reason, returns to the question of the credibility of Mr Scott's evidence, saying this:

"He came across to me as being an able, experienced and intelligent man, and he is articulate. But, it seemed to me that this only served to enable him to appear to be telling a consistent story. Also, as mentioned above, I have found his numerous retreats into ignorance about certain matters, and into saying that Mr Rachow was a demanding man and that he was doing no more than acting on his instructions (in particular in relation to the bank account transfers), quite unconvincing."

84. As the deputy judge's fourth reason, the judgment turns to Hyde Farm.
85. In paragraph 36 the deputy judge returns to the question of the $1.035M. In this connection, he quotes in full the terms of the purported agreement dated 4 June 1993. In paragraph 37 the deputy judge summarises Mr Conway's evidence to the effect that he no longer needed Grangemore as an off-shore vehicle. In paragraph 38 the deputy judge comments that, apart from the evidence of Mr Scott and Mr Conway:

"…. there was no supporting documentation, or any corroborative evidence as to the claimed involvement of Mr Conway in Grangemore."

86. The deputy judge then goes on to refer to four other matters which, in his view, were to be taken into account in this connection.
87. The first matter relates to the date of incorporation of Grangemore and the date on which its bank account was opened. I can for my part see nothing remotely controversial in this aspect of the unchallenged evidence of Mr Scott and Mr Conway.
88. The second matter is the $1.035M, which the deputy judge accepts was standing to the credit of the account immediately before the payment into the account of Mr Grabowski's $2.9M. The deputy judge refers to the account as being "the account which was said to contain the monies which belonged to Mr Conway", and goes on to observe "that no account [had] been produced so as to show how it came about that on 17 June 1993" that sum was standing to the credit of the account, and that "the only explanation given in evidence was that Langtry would not make copies of the account statements available".
89. Mr Hapgood points out that it was indeed the case that Langtry had refused to make available the relevant accounts of Grangemore, but that it had never been explained why Mr Grabowski, who had since December 1993 been a 50 per cent owner of Grangemore with Mr Rachow, could not have obtained copies of the accounts himself had he wished to do so.
90. The third matter which the deputy judge thought it right to take into account in this connection related to the date on which the Grangemore Settlement was set up (11 May 1993). Despite the fact that, the allegation of 'knowing receipt' by Mr Conway having been abandoned, it had not been alleged that Mr Conway was a party to the fraud perpetrated on Mr Grabowski, the deputy judge appears at this point to be drawing an inference that the Grangemore Settlement was a sham arrangement which had been entered into for the purposes of the fraud, thereby implicating Mr Conway directly in the fraud.
91. The deputy judge concludes this part of the judgment by saying (in paragraph 38):

"In my view, these are matters which point to the driving force behind Grangemore being Mr Scott."

92. In paragraph 39 the deputy judge refers to further matters which, in his view, support that conclusion. Thus, the deputy judge found it surprising that Mr Scott did not know the precise sum standing to the credit of the account prior to the payment of the $2.9M. He goes on to say that, "if it were the case that there were separate entitlements to the monies standing to the credit of [the account]" – as on any footing there were – he would have expected those entitlements to have been kept separate. He also found it surprising that sums were withdrawn from the account between 4 June 1993 and the payment of the $2.9M. With reference to a particular withdrawal, the deputy judge says this (in paragraph 39 of the judgment):

"It is interesting to note that, later in his evidence, Mr Scott sought to explain a withdrawal of $16,492.68 made on 22^nd September 1993 as being the funding for a car for his wife. I do not accept these explanations."

93. Once again, the deputy judge gives no reason for his rejection of Mr Scott's evidence in this respect.
94. In paragraph 40 of the judgment the deputy judge regards it as significant that Mr Scott did not inform Mr Conway about the present action, rejecting his explanation that he was too embarrassed to do so.
95. In paragraph 41 of the judgment the deputy judge relies on what he takes to be the fact that Mr Scott and Mr Conway did not discuss the replacement of Langtry as trustee of the Drummond Settlement by Bartholdy. (In fact, the evidence was that this was discussed between them.)
96. In paragraph 42 the deputy judge refers to Mr Scott's occupation of Hyde Farm. As to Mr Scott's evidence about the rental payments (quoted earlier) the deputy judge says this:

"Not only was Mr Scott unable to provide information about his wife's source of funds to pay rent and as to how much rent she had in fact paid, but also he was unable to produce any documentation dealing with the payment of rent".

97. The plain inference underlying that passage of the judgment is that Mr Scott was deliberately concealing the true position in relation to the tenancy.
98. In paragraph 43 of the judgment the deputy judge says this:

"Accordingly, I am unable to accept the evidence of Mr Scott and Mr Conway in relation to the question whether [the $1.035M which was] used to purchase Hyde Farm did include monies in which Mr Conway had an interest. I find that he had no such interest."

99. Once again, therefore, the deputy judge, whilst rejecting the evidence of Mr Scott and Mr Conway that the $1.035M was Mr Conway's money, makes no finding as to whose it was.
100. In paragraph 44 of the judgment, the deputy judge concludes, relying on an article in Grangemore's Articles of Association relating to the payment of dividends, that there was no evidence before him to support the contention pleaded in Mr Scott's Defence (quoted earlier) that the $1M was paid to Langtry by way of "dividend". Strictly, that was correct; but in reaching his conclusion the deputy judge appears to take no account of Mr Scott's evidence (quoted earlier) that "dividend" was his counsel's word, and that his understanding was that the $1M was merely a distribution of Mr Conway's money to Langtry.
101. In paragraph 45 the deputy judge refers to the longstanding friendship between Mr Scott and Mr Conway and to Mr Scott's professed lack of experience in dealings off-shore. He concludes that these factors do not carry sufficient weight to require him to arrive at a different finding.
102. In paragraph 46 he turns to the purported agreement dated 4 June 1993, saying this:

"Similarly, as regards the Agreement dated 4^th June 1993, I am unable to find that it was, in fact, entered into on that date. In particular, I do not accept the explanation of Mr Scott as to why this Agreement was not referred to in his Defence, namely that it had been lost but he did find it subsequently when looking through some totally unrelated papers. I find that this purported Agreement, which contains an unnecessary reference to the funds which were said then to be in the company account being intended to be used to complete "a planned property acquisition in the United Kingdom", is not a genuine document and that it was entered into at a later date."

103. Given the finding of the deputy judge that no transfer of the ownership of Grangemore occurred on 4 June 1993, the inference would appear to be that Mr Scott had been the owner of Grangemore since its incorporation. This, however, involves a degree of speculation, since the deputy judge made no express finding to that effect.
104. The deputy judge then turned to the issue of tracing into Hyde Farm. He disposed of that issue in a single paragraph (paragraph 47 of the judgment) in which he says this:

"Accordingly, to adopt the phrase used by Lord Millett (albeit in a slightly different context) in Foskett v. McKeown [2000] 1 AC 102 HL at 126G, I find this is a "textbook example" of money being obtained by Mr Scott and Mr Rachow and others by fraud from Mr Grabowski, and using Grangemore as a vehicle for that fraud. For those reasons, and because I can see no reason why such a right should give rise to unfairness (indeed, it would be unconscionable if there were to be no tracing), I hold that Mr Grabowski does have a right to trace. Further it is clear, and I do not think there is any dispute about this, that the application of the rule in Re Hallett's Estate (1880) 13 Ch D 696 has the consequence that such right to trace applies to monies in [Grangemore's bank account] (into which account the [$2.9M] made available by Mr Grabowski was paid and which account funded the purchase of Hyde Farm) and that, therefore, Mr Grabowski has a right to trace into Hyde Farm. I do hold that Mr Grabowski has such a right."

105. It seems clear from the terms of the paragraph just quoted that the deputy judge found that the entirety of the $800,000 used to purchase Hyde Farm derived from Mr Grabowski's $2.9M. At all events, the deputy judge manifestly did not find it necessary to address Mr Grabowski's alternative argument (in paragraph 12 of Mr Gratwicke's closing written submissions, referred to earlier) that if and to the extent that not all the monies used to purchase Hyde Farm belonged to Mr Grabowski, Mr Grabowski was nevertheless entitled to a beneficial interest in Hyde Farm proportionate to his contribution.

THE ORDER MADE BY THE DEPUTY JUDGE

106. The deputy judge's order provides as follows (so far as material):

"AND UPON THE COURT FINDING the Claimant had a right to trace the sum of $2.7 million ("the Claimant's funds") being the balance of the sum of $2,900,000 paid into the account of the First Defendant [Grangememore] on 17 June 1993 to the property known as Hyde Farm .... ("the Property")

AND UPON THE COURT finding that the Property was purchased with the Claimant's funds

AND UPON THE COURT declaring that the Fifth Defendant [Mr Conway] as successor to the Fourth Defendant [Bartholdy Trust] had at all times held the legal and beneficial title of the Property upon trust for the Claimant absolutely....

IT IS ORDERED THAT:

1) That the Fifth Defendant shall not remove or in any way dispose of or deal with or diminish the value of [Hyde Farm].

2) That the Second and Fifth Defendants in as far as the same are within their control deliver to the Claimant's solicitor the Land Certificates and other deeds relating to the Property. ....

3) That the Second Defendant shall produce a copy of the current building insurance ....

....

6) That there be a further issue to determine how the right to trace is to be enforced including whether the Fifth Defendant has any interest in [Hyde Farm] arising out of improvements carried out to [it] ....

....

10) The Fifth Defendant do pay to the Claimant 50% of the costs of the action since his application to be joined as a party to the action ...."

THE GROUNDS OF APPEAL

Mr Scott's grounds of appeal

107. Mr Scott challenges the deputy judge's findings of fraud and forgery against him on the basis (among others):

that the deputy judge failed to have any regard to the case pleaded against him;

that in attempting to address issues of fact of which Mr Scott had been given no prior warning the deputy judge made unfair criticisms of Mr Scott's evidence;

that the deputy judge failed to have regard to important parts of Mr Scott's evidence which had not been challenged by Mr Grabowski and which were inconsistent with the deputy judge's findings of fact;

that the deputy judge failed to give any reasons for rejecting Mr Scott's evidence where it was unchallenged;

that the deputy judge accepted Mr Grabowski's evidence in its entirety notwithstanding indisputable facts which cast grave doubts on its reliability;

that the deputy judge failed to consider the inherent probabilities; and

that the deputy judge failed to have any regard to the extraordinary consequence of his findings taken as a whole, viz. that the $1.035M was beneficially owned by Grangemore itself.

Mr Conway's grounds of appeal

108. Mr Conway contends (among other things):

that the finding of the deputy judge that Mr Grabowski had a right to trace into Hyde Farm took no account, or no sufficient account, of the existence of the $1.035M and of the fact that that sum was sufficient to fund the purchase of Hyde Farm and did so;

that the judge erred in law in his application of the rule in Re Hallett's Estate;

that it was no part of Mr Grabowski's pleaded case that Mr Scott was the "driving force" behind Grangemore (see paragraph 38 of the judgment);

that the deputy judge erred in finding that Mr Conway had no interest in the $1.035M;

that it was no part of Mr Grabowski's pleaded case that Mr Conway was guilty of dishonesty, conspiracy, forgery and perjury, and that any such allegations ought to have been pleaded; and

that the findings of the deputy judge to that effect were in any event inherently improbable and wholly contrary to the weight of the evidence before him.

THE ARGUMENTS ON THE APPEAL

The arguments for Mr Scott

109. Mr Hapgood submits that it is a fundamental defect of the deputy judge's judgment that he made findings against Mr Scott which were not open to him on Mr Grabowski's pleaded case; and that he did so notwithstanding that it had been pointed out to him that questions put to Mr Scott in cross-examination went way beyond the pleadings and that Mr Gratwicke, in his closing submissions, had not invited the deputy judge to make the findings which in the event he made. The deputy judge's disregard of the pleadings, he submits, led him to make criticisms of Mr Scott's evidence which were unfair and unfounded. He refers in particular in this connection to Mr Scott's evidence about the payment of rent for Hyde Farm. He also refers to Mr Scott's evidence as to why he had only recently found the original of the agreement dated 4 June 1993.
110. Mr Hapgood also criticises the deputy judge's treatment of Mr Scott's evidence as to the payments made out of Grangemore's account, pointing out that there was nothing on the pleadings to indicate that this was going to be a major issue. He also challenges the criticisms made by the deputy judge of Mr Scott's evidence about the "dividend" to Langtry, submitting that it mattered not whether the distribution to Langtry was by way of dividend.
111. Mr Hapgood goes on to submit that in relation to a large number of matters the deputy judge rejected Mr Scott's evidence notwithstanding that it was unchallenged.
112. Mr Hapgood also submits that the judgment is fundamentally defective for its lack of reasoning and analysis. The judge's comprehensive and summary rejection of Mr Scott's evidence without assigning any reason amounts, he submits, to a denial of justice – the more so since the rejection of that evidence led to findings of fraud and dishonesty. He submits that by far the most significant instance of this failing is the deputy judge's rejection of Mr Scott's evidence of what was said at the meeting on 6 June 1993, given that Mr Grabowski's own account of that meeting in his witness statement omitted any reference to fraudulent misrepresentations.
113. Mr Hapgood submits that the finding of the deputy judge (in paragraph 32 of the judgment) that Mr Scott was to retain such of the monies as were not otherwise paid out for the benefit of Mr Rachow, Dr Nulliah and Mr Ulbrich is so improbable as to be almost fantastic.
114. Mr Hapgood submits that the judgment is further flawed by the complete failure of the deputy judge to address Mr Scott's defence. Had he done so, submits Mr Hapgood, the deputy judge must have concluded that Mr Scott had no part in the dishonesty which undoubtedly took place.
115. Mr Hapgood points to the obvious question-marks over Mr Grabowski's evidence, and to the fact that since December 1993 Mr Grabowski has been a co-owner of Grangemore and Mr Scott has had no interest in it.
116. As to the deputy judge's finding that the 4 June 1993 Agreement was a forgery, Mr Hapgood submits this was not a finding which was open to the deputy judge on the pleadings. In any event, he submits, had there been any forewarning that an allegation of forgery was being seriously pursued, steps would have been taken to call Ms Lenaghan as a witness with a view to her confirming that Mr Scott had spoken to her about the agreement at the time.
117. Lastly, with regard to the $1.035M, Mr Hapgood submits that the fact that no one other than Mr Conway has come forward in the last nine years to claim ownership of that money makes it overwhelmingly probable that it belonged to Mr Conway, as he and Mr Scott have consistently maintained.

The arguments for Mr Conway

118. Mr Collings submits that the absence of any finding as to the ownership of the $1.035M is fatal to the deputy judge's finding that Mr Grabowski is entitled to trace into Hyde Farm. He points out, in particular, that the deputy judge made no finding that the $1.035M belonged to Mr Scott. As to the findings of dishonesty and forgery against Mr Conway, Mr Collings echoes the submissions of Mr Hapgood as to the need for allegations of that kind to be clearly pleaded and proved, and as to the inherent improbability of the deputy judge's finding. Had Mr Conway had prior notice that such allegations were going to be made, he submits, he would have prepared himself properly to deal with them. As it was, he was able to produce, overnight, corroborative details and materials.

The arguments for Mr Grabowski

119. Mr Gratwicke, whilst frankly accepting that the position on the pleadings was most unsatisfactory, submits that the deputy judge was fully entitled on the evidence to make the findings he made.
120. As to the deputy judge's finding of forgery, he submits that although the late disclosure of the purported original agreement was sufficient to excite suspicion, Mr Grabowski was not in a position to allege forgery until Mr Scott had been cross-examined. In any event, he submits, there was ample opportunity for Mr Scott or Mr Conway to call Ms Lenehan to give evidence.
121. Mr Gratwicke submits that it was open to Mr Grabowski, notwithstanding his pre-trial agreement with Mr Scott, to allege fraud against Mr Scott, and that the cross-examination of Mr Scott was perfectly proper. He submits that the deputy judge's criticisms of Mr Scott's evidence were justified. He also submits that the deputy judge was entitled to find that the payments for the benefit of Mr Scott came from Mr Grabowski's monies and not from monies belonging to Mr Conway, and that there was no evidence to support the pleaded allegation that Grangemore had paid a "dividend" to Langtry. As to Mr Scott's unchallenged evidence, Mr Gratwicke submits that it was for the judge to assess the credibility of the witnesses. As to the complaint of lack of reasons and analysis, Mr Gratwicke submits that the deputy judge's reasons sufficiently appear from his judgment.
122. As to the inherent probabilities, Mr Gratwicke submits that there was nothing inherently improbable in Mr Scott being engaged in a conspiracy to defraud.
123. As to the $1.035M, he submits that it is not inconsistent with the fact that no third party has come forward to claim ownership of it that it may belong to someone other than Mr Conway, although he accepts that the absence of a finding that it was Mr Scott's money places him in a difficulty in this respect. In his oral submissions he at times came close to inviting this court to proceed on the basis that the $1.035M was Mr Scott's money (as he had submitted at trial), but he very properly accepted that, absent a respondent's notice, that is not a course which is open to us.
124. He also accepts that, no respondent's notice having been filed, it is not open to him to argue in this court the alternative case put in paragraph 12 of his closing written submissions at trial to the effect that Mr Grabowski in entitled to a beneficial interest in Hyde Farm in proportion to the extent to which the $2.9M was used in its purchase.

CONCLUSIONS

125. From whatever direction one approaches the deputy judge's judgment, it is in my view fundamentally flawed and represents a serious injustice to both Mr Scott and Mr Conway.
126. So far as the pleadings are concerned, I would accept that it was open to the deputy judge on the pleadings to address the issue whether any part of Mr Grabowski's $2.9M was used in the purchase of Hyde Farm. On the other hand there were obvious dangers in doing so in circumstances where the facts relied on at trial in support of the tracing claim had never been properly pleaded (or, in many instances, never been pleaded at all). In the event, by addressing the factual issues without the benefit of a properly pleaded case the deputy judge allowed himself to be led into serious error.
127. So far as Mr Scott is concerned, I accept Mr Hapgood's submission that there was no evidential basis for a finding that at the meeting on 6 June Mr Scott made the misrepresentations alleged in paragraph 4 of the Statement of Claim. The only evidence in this respect was Mr Grabowski's evidence (quoted in paragraph 43 above) that Mr Rachow told him (purportedly translating what Mr Scott had said) that Mr Scott's position in Grangemore was the same as Mr Rachow's position in Intervest. It being accepted on all sides that Mr Rachow was acting fraudulently, that cannot possibly be sufficient to found a finding of fraud against Mr Scott. Moreover, as Mr Hapgood points out, that was the only overt act on the part of Mr Scott which was pleaded against him. Still less, therefore, can it serve as a basis for the wide-ranging findings in paragraphs 32 and 33 of the judgment that Mr Scott was a party to a fraudulent conspiracy with "others" (viz. Mr Rachow, Dr Nulliah and Mr Ulbrich) in which Mr Scott was to retain whatever balance of the $2.9M should remain after the others had been paid off. In any event, I agree with Mr Hapgood's description of such an arrangement as bordering on the fantastic.
128. In my judgment, therefore, the pleaded case of fraud against Mr Scott simply collapses for want of evidence.
129. As to the finding of forgery, in my judgment the deputy judge ought not to have addressed the question whether the agreement of 4 June 1993 was a forgery without first requiring the allegation of forgery to be properly pleaded and without satisfying himself that Mr Scott and Mr Conway were in a position properly to meet that allegation. As pointed out earlier, Ms Lenaghan could have been called as a witness. The fact that neither Mr Hapgood nor Mr Collings saw fit to call her does not serve to remedy what was manifestly an extremely unsatisfactory situation, and one which was liable to lead (and in the event did lead) to injustice. Mr Grabowski's advisers had had ample time prior to trial to decide whether to allege forgery, and advance notice should have been given that the allegation was going to be made.
130. As it was, the allegation, when made, emerged from a probing operation (not to say a fishing expedition) conducted by Mr Gratwicke in the course of his cross-examination of Mr Scott and Mr Conway, as to which complaints were made at the conclusion of their cross-examination. In any event, there was, so far as I can see, no evidential basis whatever for the allegation. The existence of the agreement of 4 June 1993 was, after all, entirely consistent with the unchallenged evidence of both Mr Scott and Mr Conway – evidence which the deputy judge chose summarily to reject without giving any reasons for doing so.
131. As to the deputy judge's rejection of the unchallenged evidence of Mr Scott and Mr Conway, I accept the submission of Mr Hapgood and Mr Collings that the judgment is in any event fatally flawed by the absence of any reasons for such rejection. It is, of course, for the judge to decide what evidence to accept and what to reject. On the other hand, to reject unchallenged evidence without giving any reason for doing so may amount to a denial of justice: and in my judgment it certainly does in the instant case, where the deputy judge's rejection of unchallenged evidence was the basis for his findings of fraud against both Mr Scott and Mr Conway.
132. It is also remarkable, in my judgment, that the deputy judge did not find it necessary to review Mr Scott's defence. In my judgment, elementary justice required him to do so. Moreover, the inferences which the deputy judge drew from Mr Scott's inability to give details of payments of rent by Mrs Scott seem to me to be grossly unfair.
133. Further, I find it most surprising that the deputy judge made no reference to the inherent probabilities of the situation, which clearly pointed in the opposite direction to the findings which the deputy judge made.
134. The same general considerations apply to the deputy judge's rejection of the evidence of Mr Conway. There was, so far as I can see, no evidential basis whatever for the deputy judge's findings of dishonesty against Mr Conway. Moreover, as pointed out earlier, the only case pleaded against him (that of 'knowing receipt') was not pursued.
135. As to the tracing claim itself, I am unable to discern the reasoning which led the deputy judge to conclude (in paragraph 47 of the judgment) that the entirety of the $800,000 used in the purchase of Hyde Farm derived from Mr Grabowski's $2.9M. My inability to do so is attributable to the fact that the deputy judge gave no reasons for that conclusion. In particular, the deputy judge does not appear to have addressed the alternative argument (which Mr Gratwicke does not seek to argue before us), that Mr Grabowski is entitled to a beneficial interest of less than 100 per cent., by reference to the extent to which his monies were used in the purchase of Hyde Farm.
136. I conclude, therefore, that the deputy judge's judgment cannot stand and should be set aside.
137. As to the relief to be granted, I have considered whether the appropriate course would be to remit the case for a retrial. In my judgment, however, that would not be an appropriate course in the particular circumstances of the instant case. The action was started as long ago as February 1995, and Mr Grabowski has had ample opportunity to marshal his evidence and to plead his case properly. To allow the action to continue would, in the circumstances, be an injustice to Mr Scott and Mr Conway. Mr Scott has had an allegation of fraudulent conspiracy hanging over his head for far too long. As to Mr Conway, the pleaded case against him of 'knowing receipt' not having been pursued, that should be the end of the matter so far as he is concerned.
138. In my judgment, therefore, the appropriate course is to allow the appeals, set aside the deputy judge's judgment, and dismiss the action.
139. In conclusion I would like to express my gratitude for the assistance provided by Mr Hapgood, who has appeared 'pro bono'.

Lord Justice Schiemann :

140. I agree.

Lord Justice Pill :

141. The claimant Mr Grabowski seeks to trace $2.7M of which he claims to have been defrauded, into Hyde Farm, a valuable property owned by trustees of the Drummond settlement. By a tenancy agreement dated 27 October 1993, the property is let to Mrs Lucinda Scott, the wife of Mr Scott, the second defendant, and she and Mr Scott live at the premises.
142. It has not been disputed for the purposes of this appeal that Mr Grabowski was defrauded of the sum of $2.7M by Mr K Rachow, who is not a party to the proceedings. It was represented to Mr Grabowski that the money would be used to acquire a prime bank collateral investment.
143. The sum is the balance of $2.9M paid on 17 June 1993 to Grangemore Investments Ltd ("Grangemore"), a company then owned and controlled by Mr Scott and formerly by Mr Conway, the fifth defendant, who transferred it to Mr Scott because he had no further use for it. Mr Scott wanted the company as a vehicle for business ventures through which he could earn commission. The company was transferred following what Mr Conway described as a "genial conversation".
144. The judge found that Mr Scott was a party to the fraud upon Mr Grabowski. By an agreement made before the trial, Mr Grabowski agreed not to pursue a money claim against Mr Scott provided Mr Scott subjected himself to cross-examination at the trial, which in the event he did.
145. In that context, many issues were investigated at the trial but it was on the tracing claim that Mr Grabowski succeeded. The judge held that the money was obtained by "Mr Scott and Mr Rachow and others by fraud from Mr Grabowski and using Grangemore as a vehicle for that fraud". Mr Grabowski's money was paid into Account No 47305020 "which account funded the purchase of Hyde Farm".
146. The relevant account was held, to the instructions of Mr Scott, by Langtry Trust Company (Channel Islands) Ltd ("Langtry") a company based in Jersey against whom no allegations are made. Upon instructions, Langtry paid very substantial sums out of the account including that for the purchase of Hyde Farm. Most of it was Mr Grabowski's money and Mr Scott maintained that the sums were paid on the instructions of Mr Rachow. Langtry were seeking to formalise the situation as to how instructions were to be given in relation to the account.
147. By this appeal Mr Conway, who has succeeded the Bartholdy Trust as trustee of the Drummond Settlement, challenges the right to trace on the ground that, while Hyde Farm was purchased from the relevant account, it was purchased by money held in that account for Mr Conway. Mr Scott's direct interest in the appeal is that orders have been made against him in relation to documents. His indirect interest is the more important one that, if the tracing claim succeeds, his wife's tenancy agreement may be terminated. Both defendants also seek findings in the judgments in this Court to nullify the criticisms of them made in the judgment of the trial judge, in relation to Mr Scott that he was party to the fraud and in relation to both defendants that an agreement in writing they claim to have made on 4 June 1993 was not a genuine document in that it was created at a later date.
148. Jonathan Parker LJ has set out comprehensively the background to the dispute, the relevant facts and the unsatisfactory way in which the case drifted away from the pleadings. It is unfortunate that in a case involving the dissipation of a substantial sum of money, where serious allegations could potentially be made, there was a lack of focus upon the issues and indeed upon their definition. However, I too would accept that it was open to the deputy judge on the pleadings to address the issue whether any part of Mr Grabowski's $2.9M was used in the purchase of Hyde Farm.
149. I accept the submissions of Mr Hapgood QC, for Mr Scott, that upon the pleaded case, the finding that Mr Scott was a party to fraudulently obtaining the sum of £2.9M from the claimant was untenable. Mr Scott's subsequent management of the account can be criticised on the ground that he should have ensured that Mr Grabowski's money was kept separate from the money already in the account. In evidence, he accepted that he should have done so. The unsatisfactory way the account was operated makes it very surprising that Ms Margaret Lenaghan, of Langtry, was not called to give evidence at the trial. It was claimed by Mr Scott that she knew that two separate funds were present in the account. If that is correct, her evidence would have been of great importance to the resolution of the case. No satisfactory explanation has been given for the failure. (Mr Hapgood was not fully instructed at the trial. He was asked to, and agreed, to give limited assistance on a pro bono basis.)
150. Save as to the letter of 4 June 1993, I agree with the analysis by Jonathan Parker LJ of the judgment of the deputy judge. The reasoning by which the judge satisfied himself of Mr Scott's fraud is not supportable for the reasons given by Jonathan Parker LJ. There is no doubt that a sum of just over $1M was present in the account before the claimant's money was paid in. The judge found that Mr Conway had no interest in that sum. He made no finding as to whose money it was. No other claim has been made to it. For the claimant, Mr Gratwicke submits that Mr Scott was a party to the fraud, that he treated the money in the account as if it was his own and that the purchase of Hyde Farm, albeit indirectly, was for his benefit. Mr and Mrs Scott live in the premises.
151. I also agree with Jonathan Parker LJ that the findings on which the judge based his conclusion are not sustainable and that the pleaded case of fraud against Mr Scott simply collapses for want of evidence. Moreover, the judge, with respect, did not confront the issue as to the significance of the presence in the account of $1M which was plainly not Mr Grabowski's money and which provided, almost exactly, the sum required for the purchase of Hyde Farm and another property in Cornwall. The possibility that the properties were purchased by monies other than those of the claimant was simply not considered.
152. I would, however, put into a different category the finding of forgery. The judge made it at the very end of his reasoning and, it appears, only in relation to the question of the ownership of the $1M in the account. I consider it only because of the express invitation on behalf of the appellants to resolve the point in their favour. I consider it with the reservation that I agree with Mr Hapgood, first, that timely notice should have been given of an allegation of forgery, by way of a specific challenge to the authenticity of the document dated 4 June 1993 when it finally emerged in 2001 and secondly, that, had she been called, Ms Lenaghan could have given relevant evidence. It was claimed by Mr Scott in evidence that the agreement was shown to her at the time. The force of this point is weakened by the failure to call Ms Lenaghan on the knowledge attributed to her that there were two separate funds in the account, which is in the same underlying point. It is also suggested that, given notice, the document might have been dated by scientific evidence.
153. The document containing the agreement was dated 4 June 1993, that is two days before the meeting at Frankfurt which led to Mr Grabowski later in June paying over $2.9M. It provided:

AGREEMENT

Between James Scott

Grayswood Hill

Haslemere

Surrey GU27 2LH

Hereafter referred to as the 'Purchaser'

And David Conway

Toronto

Ontario

CANADA

Hereafter referred to as the 'Seller'

Let it be known: that the current rightful owner of the commercial vehicle known as GRANGEMORE INVESTMENTS is David M Conway (the seller) and that the seller no longer has a commercial requirement for the vehicle and in that Mr James Scott (the purchaser) wishes to acquire the commercial vehicle known as Grangemore Investments Limited, the following Agreement has been made:

1. That the seller will sell to the purchaser the right to Grangemore Investments Ltd for the sum of $100.00 United States Dollars.

2. That the purchaser accepts responsibility for the Company and all right, obligations and liabilities therein associated, on the date of signing this Agreement.

3. That all funds held in the Company account on the date of this Agreement will remain the property of the seller, under the control of the Langtry Trust Company until such time as the seller has completed a planned property acquisition in the United Kingdom.

Now therefore, in that all parties to this Agreement, having read and being in full understanding of the terms and conditions herein described, affix their signatures in attestation of the same.

Signed, sealed and delivered this 4^th Day of June 1993"

It was signed by Mr Scott as purchaser and Mr Conway as seller.

154. On the material before the Court, I regret I have considerable doubts about the authenticity of the document:

(a) The first those advising the claimant knew of it was when it appeared in Mr Conway's list of documents as "copy agreement James Scott and David Conway" in February 2001. Mr Scott, who claimed to have lost the original, referred to its existence in his second witness statement but that was not until September 2001. He claimed in evidence to have found it in February 2002, boxed up with other papers, at the time of a move of residence.. Given the great potential importance of the purported terms of the agreement, I find it very surprising that its existence had not been disclosed earlier, in pleadings or otherwise, by Mr Scott, had the document come into existence on 4 June 1993. The importance of the ownership of the $1M had been recognised in Mr Scott's defence served in July 1995.

(b) The document is said to have been drafted by Mr Conway. The formality involved, understandable if treated on its own, is inconsistent with the entirely informal manner in which Grangemore's account at Langtry was allowed by Mr Conway to be managed. In explaining that informality, evidence was given of the longstanding friendship, business relationship and trust which existed between Mr Scott and Mr Conway. Mr Conway's trust in Mr Scott was such that he did not require specific arrangements to be made for the separation of the $1M claimed by him from other money which he must have known would be in the account. That contrasts starkly with the formality of the agreement both in substance and style.

(c) The reference to the proposed use of the money in the account, a planned property acquisition in the United Kingdom, was gratuitous or, as the judge put it, unnecessary. The use to which Mr Conway proposed to put the money was irrelevant to his agreement with Mr Scott. When it eventually emerged, the document contained a fortuitous reference which went to the central point in the proceedings.

(d) Of less significance, it was conceded by Mr Scott that the involvement of Grangemore in the Grabowski venture had been the subject of discussion in May 1993, that is before the date of the agreement.

(e) The very brief accounts given by the parties to the agreement of the circumstances in which it was made are, as recorded in the transcript, not easy to reconcile with each other.

155. The judge found the document not to be genuine having heard the evidence of Mr Scott and Mr Conway about it as well as having had the opportunity to consider all the circumstances. While there was ample material, in my view, on which the judge could reach his conclusion, I am not able to uphold it because, for reasons given by Jonathan Parker LJ, the judge's conclusions as to credibility are so adversely affected on other grounds that, on this issue, his finding cannot be upheld on the basis that he had a better opportunity than has this Court to assess the quality of the evidence. The finding was also unsatisfactory procedurally. Moreover, I would not be prepared to make this serious finding in the circumstances without having had the opportunity to hear oral evidence dealing with the points raised. I have expressed my views on the issue to be fair to the judge and Mr Grabowski's case and because of the invitation made on behalf of the defendants to consider it.
156. I do, however, add that, in my judgment, the important fact stated in the document is likely to have been true; the sum in Grangemore's account in early June 1993 was likely to have been money at Mr Conway's disposal. If the document is false in having been prepared at a later date, it was an attempt to bolster what was already a good case.
157. I agree that the appeal should be allowed. I also agree that, having regard to the state of the evidence and the undesirability of giving a party a second opportunity to put a case after so many years, it would not be just to order a re-trial.
Order: Appeals allowed; no order as to costs in respect of 2^nd Defendant; Appellant do pay 5^th Defendant's costs here and below on an indemnity, such costs to be subject to detailed assessment Appellant do pay £60,000 on interim payment by 31^st Jan 2003; Application for permission to appeal to the House of Lords Refused. (Order does not form part of the approved judgment)