England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(QUEEN'S BENCH DIVISION)
HHJ Seymour QC (sitting as a Judge of the High Court)
[2011] EWHC 92 (QB)

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/03/2012

Lord Justice Kitchin:

Introduction

1. This is an appeal from aspects of a decision and order of HHJ Seymour QC sitting as a judge of the High Court dated 15 February 2011. Permission to appeal to this court was granted by Moore-Bick LJ on 13 October 2011 on a renewed application for permission to appeal following refusal of permission on paper by Smith LJ.
2. The proceedings the subject of this appeal concern a project to buy and develop a parcel of land called Sector 129 on the outskirts of Playa Quemada in Lanzarote. The project was conceived and implemented by the respondent, Mr Richard Bailey, and the first appellant, Mr Clive Jefferson.
3. Mr Bailey has acted as an estate agent in Lanzarote for very many years, initially as an employee of a business trading as Park Offices. Mr Bailey and his wife are also the owners of a company called White Wind Ltd ("White Wind") which was incorporated in Gibraltar in 1989 and carries on business primarily as a letting agent. In about 1999 Mr Jefferson, a retired investment adviser, met Mr Bailey when he purchased a residential property in Lanzarote which was being marketed by Park Offices. A year later, Park Offices marketed a parcel of land suitable for development called Plot A3 at Playa Blanca, and Mr Jefferson decided to buy that too. The vendor was a company called Red Volcano SA ("Red Volcano").
4. Towards the end of 2000 the owners of the Park Offices business decided to retire and Mr Bailey, Mr Jefferson and their respective wives agreed that they would purchase the business and its assets through a new company formed for that purpose called Park Offices (Lanzarote) SL ("Park Offices SL"). Their intention was to extend the operation of the business to include the buying of land and the arrangement of its development. Shortly afterwards, Mr Bailey identified Sector 129 as a suitable development opportunity and Mr Jefferson indicated that he knew of a group of potential investors. The vendor was once again Red Volcano.
5. In due course and in order to facilitate the purchase and development of Sector 129, Mr Bailey caused another company called Vista Properties SL ("Vista") to be incorporated.
6. Broadly speaking, the scheme devised by Mr Bailey and Mr Jefferson envisaged Vista buying and developing Sector 129 using funds provided by the investors, each of whom would be offered an opportunity to acquire shares in the company in units representing 5% of the total issued shares, with each unit costing £40,000.
7. Mr Jefferson gathered together ten investors in addition to himself and Mr Bailey and, in the course of January 2002, those ten investors paid a total of £710,000 which was credited to White Wind's account at the Royal Bank of Scotland in Gibraltar. The monies were paid into White Wind's account because first, Vista was not incorporated until 4 March 2002, and secondly, it allowed part of the purchase price to be paid with funds which never entered Spain.
8. On 15 March 2002 the purchase of Sector 129 by Vista was completed. The price declared in the public deed of purchase or, as it is known in Spanish practice, the escritura, was €288,485.81. In fact, the true purchase price was $700,000, amounting to approximately €806,450, but the lower price was declared in the escritura in order to cheat the Spanish revenue authorities of a significant proportion of the stamp duty properly payable on the transaction.
9. Mr Bailey frankly accepted that he always intended that the payment for Sector 129 should be made in two parts, one of which, the undisclosed part, would involve the payment outside Spain of a sum of money, sometimes called black money, which would not be included in the price declared in the escritura. He also contended that this was a matter of which Mr Jefferson was always well aware. Mr Jefferson disputed that he had any such knowledge but, for reasons to which I shall shortly come, the judge did not believe him.
10. The judge also found that Mr Bailey and Mr Jefferson combined together to deceive the other ten investors as to the true price of Sector 129, misrepresenting that it cost 145 million pesetas or €871,467 when in fact, as I have said, it only cost $700,000 or about €806,450. The purpose of this deception was, according to Mr Bailey, so that Mr Jefferson could acquire a 5% share in Vista and in the development of Sector 129 without having to pay for it. The other ten investors would be led to believe that the purchase price of Sector 129 was considerably greater than it actually was. Mr Jefferson could then pretend he had contributed £40,000. Given that the undisclosed part of the purchase price was to be paid using funds which were never to enter Spain, the investors would be none the wiser. It was also Mr Bailey's evidence that, upon implementation of the scheme, Mr Jefferson told him that he could use any excess towards a 5% share in Vista for himself.
11. The finding by the judge that Mr Jefferson was aware of the fraud on the investors is challenged on this appeal and this is a matter to which I must return. But first, I must relate a little more of the history of the acquisition of Sector 129, the basis of the judge's finding that, despite his protestations to the contrary, Mr Jefferson was always aware of the fraud on the Spanish revenue authorities and explain the nature of the various claims advanced at trial and the judge's findings in relation to them.

The acquisition of Sector 129

12. Mr Bailey first proposed the acquisition of Sector 129 in a letter to Mr Jefferson dated 14 May 2001. A paper enclosed with the letter included the following passage:

"In addition, by the sensible use of the declared value mechanism on the deeds, you can artificially lower your profit margin, which makes the concept even more interesting."

13. Mr Jefferson was cross examined about this but the judge found his evidence unsatisfactory for the reasons he gave at paragraph [51] of his judgment. In short, Mr Jefferson said he did not understand the reference to "the declared value mechanism" and it seemed "ambiguous" to him. But eventually he accepted that he did know that it was the practice in Lanzarote for a purchaser of land to pay a sum to the vendor in addition to the price declared in the relevant escritura. He also accepted that he knew the purchaser was required to confirm to the notary before whom the escritura was signed that its contents were true. The judge found Mr Jefferson's prolonged lack of frankness on this point very troubling.
14. The judge then referred to documents purportedly sent by Mr Bailey to Mr Jefferson by fax on 13 September 2001, 12 November 2001, 28 November 2001 and 15 January 2002, each of which referred, in one way or another, to the use of black money to buy Sector 129. In his fourth witness statement Mr Jefferson denied receiving any of them. However, it emerged that transmissions were made to what Mr Jefferson accepted was his fax number on each of the days in question and that Mr Jefferson was not able to identify any other documents as having been sent to him by those transmissions. Further, Mr Jefferson accepted in cross examination that the information contained in the various faxes was probably given to him orally by Mr Bailey and passed on by him to the other investors in any event.
15. In all these circumstances the judge was plainly entitled to find that the evidence given by Mr Jefferson on this issue was "very puzzling", as he did at paragraph [52] and "wholly implausible", as he did at paragraph [145].
16. Meanwhile, on or about 9 November 2001, Mr Bailey reached final agreement with Red Volcano on the sale price of $700,000. However, as the judge also recognised, the fax communications from Mr Bailey to Mr Jefferson of 12 November 2001 and 15 January 2002 referred to the inflated price of 145 million pesetas or €871,467.
17. Mr Bailey was cross examined on this discrepancy but explained the purpose of referring to the inflated price was to enable Mr Jefferson to deceive the other investors in the manner I have described.

The proceedings

18. Eventually, Mr Jefferson and Mr Bailey fell out and, on 18 March 2009, Mr Jefferson and the other ten investors commenced proceedings against Mr and Mrs Bailey and White Winds alleging that Mr Bailey had misappropriated in various ways some of the funds they had provided. The action came on for trial before the judge in January 2011. Six claims were advanced, the largest of which was, in the end, abandoned. It related to the alleged misapplication of the difference between the £710,000 deposited by the other ten investors in the White Winds account in January 2002 and the aggregate of €288,485.81 (the price specified in the escritura by which title to Sector 129 was transferred to Vista) and €641,071.44 (being the monies paid into Vista's account early in February 2002), that is to say, €929,557. This difference was said to amount to approximately €204,400. Expressed more simply, the claim was, in substance, to the difference between the sums deposited by the other ten investors in the White Winds account and the aggregate of the monies paid to Vista and to Red Volcano.
19. The judge identified the relevant monies paid out of the White Winds account at paragraphs [41]-[48]. He then traced where those monies went at paragraphs [79]-[92]. It is clear that, subject to a small discrepancy attributable to Spanish withholding tax, the monies were all paid either to Red Volcano or into Vista's account. This claim therefore failed and, as the judge observed at paragraph [91], why it was pursued following disclosure of the material documents was unclear. Not surprisingly, there is no appeal against the judge's findings in relation to it.
20. Five other claims were advanced at the trial and the findings of the judge in relation to each of them are challenged on this appeal. These claims were for rather smaller sums of money and were, as I understand it, advanced by Mr Jefferson and only three of the other ten investors, namely Mr Brown, Mr Cantle and Mr Longo. These four claimants are therefore the only appellants.
21. The first of these claims concerns what was described as "the missing £10,000" which was deposited in White Wind's account on or about 25 February 2002 and represented the proceeds of a cheque drawn on the account of Mr Longo. It is contended that these monies were subsequently transferred improperly by Mr Bailey to Park Offices SL.
22. There is no dispute that Mr Longo did indeed pay £10,000 to White Wind by cheque on 25 February 2002. There is also no dispute that shortly afterwards Mr Bailey arranged for the transfer of £10,000 from White Wind's account to Park Offices SL. The question is whether, in so doing, Mr Bailey misappropriated those funds. The judge decided he did not. In order to explain the basis of his reasoning, I must first provide a little more background.
23. First, as the judge recorded at paragraph [96], it was common ground that, as at 25 February 2002, Mr Cantle had only paid £70,000 out of the £80,000 he was due to pay for the two units of shares for which he had agreed to subscribe.
24. Second, and quite apart from the £710,000 of investors' funds to which I have referred, Vista's account had an opening credit of €56,431 which was paid by Park Offices SL to Vista by cheque dated 4 February 2002 ("the Park Offices cheque"). Once again, this was a matter about which there was no dispute.
25. It was Mr Bailey's evidence that, upon formation of Vista, he decided that its account should be credited with all sums due from the investors, including the full £80,000 due from Mr Cantle. He therefore decided to lend Mr Cantle £10,000 through Park Offices SL by including in the Park Offices cheque the euro equivalent of £10,000. Then, when the sum of £10,000 arrived in White Wind's account on or about 25 February 2002, he thought that this was a payment in settlement of Mr Cantle's outstanding debt and therefore reimbursed Park Offices SL in respect of the loan he had earlier arranged for it to make.
26. The judge accepted Mr Bailey's evidence and rejected the claim. He did so in light of the common ground to which I have referred and in light of Mr Bailey's cross examination about a note ("the Calculation Note") made by Mr Bailey concerning a sum of €56,432 which, as the judge observed at paragraph [100], corresponded almost exactly to the sum paid by the Park Offices cheque. The Calculation Note suggests that the sum of €56,432 comprised two elements, one of which was identified as:

"+ J Cantle £10,000 = 16,247€"

27. The judge concluded that, on the face of the Calculation Note, Park Offices SL had indeed paid over to Vista, by the Park Offices cheque, the sum of £10,000 in respect of Mr Cantle's outstanding debt. The judge continued at paragraph [103]:

"It was not suggested that the Calculation Note was not what it purported to be. Indeed Mr Noble cross-examined Mr Bailey on the footing that it was exactly what it purported to be, albeit that he drew attention to a different part of the Calculation Note, which appeared to record the receipt of two amounts of £5,000 …"

28. It followed that Mr Bailey had not misappropriated the funds paid in by Mr Longo. Rather, Mr Bailey was repaying money owed by Vista to Park Offices SL.
29. The next claim related to what was described as "Mr Jefferson's share". Mr Jefferson contended in his particulars of claim that, by overstating the price of Sector 129 by $80,000, Mr Bailey was able to misappropriate funds from the project including, in particular, €60,000 "due from Park Offices SL to [Mr Jefferson] as a share of the profits and retained by [Mr Bailey]".
30. Mr Jefferson relied in support of this claim upon a document entitled "DIVIDEND SPLIT 2001/2002/2003" ("the Dividend Document"). This relates to Park Offices SL and contains the following entry:

"60,000.00 60,000.00 1 SHARE PLAYA VISTA @ £40,000 EACH"

31. The judge understood Mr Jefferson's case to be that the Dividend Document showed there was an amount due to Mr Jefferson from Park Offices SL which Mr Bailey had pretended had been paid when in fact it had not; alternatively, Mr Bailey had taken €60,000 which belonged to Mr Jefferson.
32. Mr Bailey, on the other hand, explained that the purpose of the document was to show the benefits that he and Mr Jefferson had received from Park Offices SL in the period from 2001 to 2003, one being a 5% share in Vista.
33. The judge preferred Mr Bailey's explanation for the following reasons. First, there was no evidence of any payment out of any account of Park Offices SL of €60,000 or €120,000 for any purpose. Further, it was never suggested by Mr Jefferson that he had ever personally transferred either to White Wind or to Vista the amount which he was supposed to pay for his 5% in Vista, that is to say £40,000.
34. Second, the Calculation Note to which I have referred concerning the sum of €56,432 paid by Park Offices SL to Vista identified the second element of that payment as being €40,145, representing the difference between the cost of two units of shares (€130,296) and the amount by which they understood the purchase price for Sector 129 to have been inflated (€90,151 or about $80,000).
35. Third, Mr Bailey made the following note on the back of the Park Offices cheque:

"Balance to pay for shares R Bailey C Jefferson"

This, the judge considered, was entirely consistent with the Calculation Note.

36. Fourth, the judge referred to an exchange of e-mails between Mr Bailey and Mr Jefferson in June 2006 after they had fallen out. Mr Bailey said to Mr Jefferson:

"One more thing … be carefull [sic] how close a look at the books you are promoting because you are alone in being the only one who has never put a penny of your own money into this venture [that is, Vista]. (I have as has Park Offices but you never have … true fact)."

37. The judge observed, and I agree, that this assertion is again consistent with what he had deduced from the Calculation Note. Mr Jefferson replied:

"Your "One more thing" We [sic] find unjust and deeply offensive, are we not the couple that lent you the money to buy your share of Park Offices when you were unable to raise the funds, and Chris Want was threatening to pull the plug, and sell to another party.

The money that you have informed all the investors that you have had to inject into the project/Vista, was I think, one of the reasons it was asked whether I had seen the books. It worried them, as I pointed out before, because they were left wondering why you had had to do that, and why if Vista is such a valuable site, are the Banks being so difficult. Your financial input of funds is appreciated by the majority of shareholders, and it is also great that you are able to be able [sic] to do so, and I am sure nobody would object if Vista paid you interest.

As far as Park Offices putting money into Vista is concerned, is this not half of that money Rose and mine as we own half of Park Offices?

The idea of Vista was mine, and the investors were all clients, and or friends of Rose and myself. The task of bringing them together and convincing them of the merits of the project was not easy, and took up a considerable amount of our time in the Uk [sic]. Time that could have been used in promoting, or selling other products that we had available. Indeed if I had channelled the amount of money put into Vista, into Uk [sic] investments that were available to me at that time, I would have expected to obtain £50,000 in fees."

38. As the judge noted, Mr Jefferson did not dispute what Mr Bailey had said. Instead, he asserted that he and his wife owned half of Park Offices SL; that Vista was his idea; and that the investors were all his clients or his friends. This suggested that Mr Jefferson considered he was entitled to gain the benefit of a shareholding in Vista without "putting his hand in his pocket".
39. For all these reasons, the judge found that the claim in respect of the allegedly misapplied €60,000 was totally without foundation, as Mr Jefferson well knew.
40. The third claim the subject of this appeal is by Mr Brown for £5,000. He bought two units of shares in Vista for £80,000 but, by March 2002, had only paid £75,000, leaving a balance of £5,000 which remained outstanding for a very long time.
41. In 2004 Park Offices SL acted as Mr Brown's selling agents in connection with another property which he owned in Lanzarote. A purchaser was found, and a sale completed. In accounting for the net proceeds of sale, Mr Bailey withheld £5,000 for the purpose of transferring it to Vista in payment of Mr Brown's outstanding debt, but, it was contended, he never did so.
42. Mr Bailey gave evidence that he was confident that the money had been paid into Vista's account and that this would be shown by the statements of that account. But that did not prove to be the case. Mr Bailey then changed his story and said he must have paid the sum in cash to settle one of Vista's debts. In the end the judge accepted Mr Bailey's evidence on this point because, in light of all the evidence before him, the judge found Mr Bailey did not simply steal money without any attempt to justify what he had done.
43. The fourth claim the subject of this appeal is that of Mr Longo for £5,000. Mr Longo was one of the original investors in Vista and subscribed for one unit of shares. But having obtained his shares, he then withdrew and was repaid all the monies he had contributed.
44. Then, in 2004, Mr Longo decided he wished to re-invest in Vista and agreed with Mr Jefferson that he should be permitted to do so if he paid not just the originally specified £40,000 but also an additional £5,000 to Vista.
45. In the event, Mr Longo took about a year to produce the £45,000 he had agreed to pay. In the course of 2004 he deposited £20,000 in White Wind's account and, shortly afterwards, these monies were transferred to Vista. But Mr Longo attempted no further payment until 2005. Eventually, on 15 July 2005, he paid £25,000 into White Wind's account by cheque. £20,000 was transferred from that account to Vista on 27 July 2005 but the remaining £5,000 was transferred to a Mr Brian Chambers on 2 August 2005. Mr Chambers was an architect working in Lanzarote who was employed by Mr Jefferson.
46. Mr Bailey's evidence was that Mr Jefferson told him that Mr Longo's £5,000 was in the nature of a fee properly payable to Park Offices SL to compensate it for all its trouble in arranging the return to Mr Longo of his original funds. It was also Mr Bailey's evidence that Mr Jefferson told him that the £5,000 due to Park Offices SL should be used to discharge a debt that Mr Jefferson owed to Mr Chambers.
47. The judge accepted Mr Bailey's evidence and derived some support from other evidence before him that Mr Jefferson was in the habit of using Park Offices SL as a source of funds to meet his own personal liabilities.
48. The final claim was made by Mr Cantle. He gave evidence, which the judge accepted, that towards the end of February 2002 he gave Mr Jefferson £10,000 in cash, being the balance of the monies that he owed in respect of the two units of shares in Vista for which he had subscribed.
49. The judge was then faced with a sharp conflict between the evidence given by Mr Jefferson and that given by Mr Bailey. Mr Jefferson said he gave the £10,000 to Mr Bailey who failed to account for it. Mr Bailey said that Mr Jefferson was not telling the truth and that he never gave him the money.
50. In support of his position, Mr Jefferson relied upon a manuscript note prepared by Mr Bailey which included these figures and explanations:

"07/02/02 Bonus to RB 2,025,000 Diff in above figures

Plus £10,000 CASH FROM J. CANTLE"

51. On one reading this note certainly appears to support Mr Jefferson's position. However, once again, the judge accepted the evidence of Mr Bailey who, when asked about it, said it referred to the monies paid into White Wind's account by the cheque dated 25 February 2002 to which I have referred.
52. In reaching the conclusions that he did in relation to the claims of Mr Brown, Mr Longo and Mr Cantle, the judge preferred the evidence of Mr Bailey to that of Mr Jefferson. The judge assessed their credibility in some detail from paragraphs [142] to [152]. It is clear that he found Mr Jefferson a wholly unimpressive witness. In reaching that conclusion he had four particular matters in mind.
53. The first was Mr Jefferson's extraordinary reluctance to accept that he was aware of the practice in Lanzarote of purchasers and sellers of land executing escrituras which understated the actual consideration for the transaction.
54. Second, the judge regarded it as a matter of concern that, for a significant period after Mr Jefferson was in possession of the relevant documents, he refused to accept that the entire £710,000 of investors' funds paid into White Wind's account in the course of January 2002 was paid over either to Red Volcano or to Vista.
55. Third, the judge was unable to understand how Mr Jefferson ever came to advance the claim against Mr Bailey for the €60,000 alleged to be due to him from Park Offices SL.
56. Finally, the judge regarded Mr Jefferson's protestations that he did not receive the documents dated 13 September 2001, 12 November 2001, 28 November 2001 and 15 January 2002 as wholly implausible.
57. The judge concluded:

"146. I am afraid that, in the end, I was wholly unimpressed by Mr Jefferson. I formed the view that he was prepared to say, at any given time, whatever he thought served his best interests at that time. I did not feel that I could rely upon anything which he said which was not supported by a contemporaneous document, when properly understood. As I have pointed out, there were no such documents in support of any of the claimants' claims."

58. As for Mr Bailey, the judge found that he was disarmingly frank as to his role in deceiving the investors as to the true price of Sector 129. Mr Bailey accepted that he had benefited the deception by obtaining a 5% share in Vista at a discounted price. Moreover, the judge observed that it was Mr Bailey's practice to generate documents to justify his actions. Indeed, the largest claims failed precisely because Mr Bailey had contemporaneous documents to show what really happened.
59. In the result, the judge continued, the only sustainable claims were those of Mr Longo for £5,000, Mr Brown for £5,000 and Mr Cantle for £10,000. As for Mr Longo's claim, the judge was impressed by Mr Bailey's evidence that there was no reason for it to be paid into White Wind's account unless it was to permit it to be divided. Otherwise, it could have been paid directly into Vista's account. In all the circumstances he concluded Mr Jefferson was acting as Mr Longo's agent in conveying instructions to White Wind and to Mr Bailey as to how the money should be applied. Thus, if Mr Longo had any claim in respect of that money it lay against Mr Jefferson and not Mr Bailey.
60. That left Mr Brown's claim for £5,000 and Mr Cantle's claim for £10,000. As for Mr Brown's claim, the judge preferred Mr Bailey's evidence to that of Mr Jefferson, finding that Mr Bailey would not simply steal money without any attempt to justify his entitlement to it. As for Mr Cantle's claim, the judge did not accept that the manuscript note to which I have referred necessarily meant what Mr Jefferson contended. Again, the judge preferred the evidence of Mr Bailey to that of Mr Jefferson.

The appeal

61. On this appeal Mr Noble, who has appeared again on behalf of the appellants, challenged the judge's findings in relation to each of the five claims to which I have referred. He also challenged the judge's finding that Mr Jefferson knew that the purchase price of Sector 129 had been inflated so as to deceive the other investors.
62. It is convenient to deal with the last point first because the judge's findings in relation to it do have a significant bearing on the other claims the subject of this appeal.
63. Mr Noble submitted that there was no objective evidence to show that Mr Jefferson knew the purchase price had been inflated and, indeed, that the evidence tended to show that he too was misled.
64. In this connection Mr Noble referred us to three categories of documents: the fax communications sent by Mr Bailey to Mr Jefferson on 12 November 2001 and 15 January 2002 which referred to the inflated price; the Vista accounts, by which he meant the Dividend Document, and which, said Mr Noble, indicated that Mr Jefferson's share of the profits had been reduced to cover the purchase price of the shares; and the email from Mr Jefferson protesting that he had paid for his shares out of Vista.
65. I am unable to accept this submission. The judge had the advantage of seeing and hearing Mr Jefferson and concluded, for the reasons I have summarised earlier in this judgment, that he was thoroughly dishonest and, in the judge's words, prepared to say, at any moment in time, whatever he thought best served his interests. In reaching that conclusion he clearly took into account the fax communications of 12 November 2001 and 15 January 2002, the Dividend Document (to which I return below) and the exchange of emails between Mr Jefferson and Mr Bailey after they had fallen out. Moreover and, importantly, Mr Jefferson never established that he had ever paid £40,000 for his 5% share in Vista. Nor was there any evidence of any payment out of any account of Park Offices SL of €60,000 or €120,000 for any purpose, let alone to Vista.
66. In all these circumstances I see no basis whatsoever for interfering with the judge's findings as to Mr Jefferson's integrity.
67. That brings me to the claims the subject of the appeal and it is convenient to take them in the same order as the judge.
68. The first is the claim to the "missing £10,000". As I understood it, Mr Noble's argument ran as follows:

i) The purchase price was overstated by $56,000 which is the equivalent of about €64,000.

ii) The value of each unit of shares was £40,000 and accordingly the value of Mr Jefferson's and Mr Bailey's units was therefore £80,000 or approximately €120,000.

iii) It follows that, after taking into account the price inflation of €64,000, there was a balance of €56,000 to pay for Mr Jefferson's and Mr Bailey's units.

iv) The Park Offices cheque, marked on its back, "balance to pay for shares R Bailey C Jefferson" was for €56,432.

v) It follows that the explanation that the Park Offices cheque represented a payment of €40,145 due for the balance of the units and €16,287 in respect of Mr Cantle's outstanding £10,000 could not have been true.

69. I find myself unable to accept this submission. It is founded upon the overstatement of the purchase price by $56,000. However, the Calculation Note plainly suggests that Mr Bailey was working on the basis that the purchase price had been inflated by 15 million pesetas, equivalent to €90,151, or, at a rate of exchange of €1 = $0.8681, $78,260.79. The judge found, as he was entitled to, that at least this part of the note was made in early February 2002, and there was no good reason for supposing that this was not Mr Bailey's genuine belief at the time.
70. Moreover, the judge considered the contents of the Calculation Note in some detail and made his findings in relation to it in the light of the evidence of Mr Bailey which he had heard. It seems to me that there is no basis for interfering with his finding that the sum of €56,432 paid by Park Offices SL to Vista by the Park Offices cheque comprised €16,247 in respect of Mr Cantle's outstanding £10,000 and the difference between the cost of Mr Jefferson's and Mr Bailey's units of shares and the amount by which they understood the purchase price to have been inflated, that is to say, €40,145.
71. Further, there was, as I have said, no dispute that, as at 25 February 2002, Mr Cantle still owed £10,000 in respect of the two units of shares for which he had agreed to subscribe.
72. When, therefore, the sum of £10,000 arrived in White Wind's account on or about 25 February 2002 as a result of the payment by Mr Longo, it seems to me that Mr Bailey was entitled to reimburse Park Offices SL in respect of the loan that he had earlier arranged for it to make, and the judge was entitled to so find.
73. Further, I believe there is considerable force in the submission advanced by Mr Marsden, who has appeared on behalf of Mr Bailey, that it is wholly unclear which, if any, of the appellants has any proper claim to this allegedly missing £10,000. It is accepted that Mr Longo was refunded the whole of his investment when he decided to withdraw from the project, so he has no claim. Any such missing funds must, it seems to me, have belonged to Vista and yet it has not made any claim in respect of them.
74. The second claim the subject of this appeal is in respect of "Mr Jefferson's share". Mr Noble submitted that the reasoning of the judge on this aspect of the case does not make sense. He continued that the Dividend Document was clearly prepared to show what each party was entitled to draw from the business and the document represented that the dividend or share of the profits of each partner had been reduced by €60,000 because of the payment of €120,000 from the business for their shares in Vista.
75. Once again, I am unable to accept Mr Noble's submission. The position is, I think, relatively straightforward. Neither Mr Jefferson nor Mr Bailey ever made any payment to Vista for their units, save for the payment by the Park Offices cheque. Yet, as I understand it, they each hold 5% of the issued shares in Vista. Moreover, as the judge found, there was no evidence of any payment out of any account of Park Offices SL of €60,000 or €120,000 for any purpose. To my mind the Dividend Document is tolerably clear and shows the benefits each partner received. So far as relevant to the present claim, it shows that Mr Jefferson and Mr Bailey each received a unit of shares in Vista worth £40,000 or about €60,000.
76. In all these circumstances I do not begin to understand how Mr Jefferson can claim that he has been deprived of €60,000 due to him from Park Offices SL as a share of the profits, or that these profits have been improperly retained by Mr Bailey. I consider the judge's reasoning on this issue to be unimpeachable.
77. The third claim the subject of this appeal is by Mr Brown for £5,000. Mr Brown accepts that he owed £5,000 on his investment and, as the judge held, Mr Bailey withheld £5,000 arising from the sale of another property which Mr Brown owned in Lanzarote in order to cover the shortfall. In the end, and as I have explained, the judge accepted Mr Bailey's evidence that he must have paid the sum in cash to settle one of Vista's debts.
78. Mr Noble submitted that the approach of the judge reveals that he had a blinkered approach to the evidence and that it was wholly illogical for him to have concluded that Mr Bailey did not steal the money because he had not sought to cover his tracks.
79. This, it seems to me, was a finding of fact by the judge which he was entitled to make having seen the witnesses and heard all the evidence. It is not one with which I believe this court can possibly interfere.
80. The fourth claim the subject of this appeal is that by Mr Longo for £5,000 which, as I have said, was dismissed by the judge because he accepted Mr Bailey's evidence about his conversations with Mr Jefferson in relation to it and, in particular, that Mr Jefferson told him that the money should be used to discharge a debt that Mr Jefferson owed to Mr Chambers.
81. Mr Noble submitted that the judge fell into error because Mr Bailey stole the money from Mr Longo and it was no defence to Mr Longo's claim that he stole it to the order of Mr Jefferson. I find myself unable to accept this submission. On the judge's finding, which he was entitled to make on the evidence before him, Mr Bailey did not steal the money. To the contrary, Mr Bailey understood the money to belong to Park Offices SL and that it was perfectly proper for Mr Jefferson to direct him to use it to discharge the debt owed to Mr Chambers.
82. Finally, I come to the claim by Mr Cantle. It will be recalled that towards the end of February 2002 he gave Mr Jefferson £10,000 in cash. Mr Jefferson claimed he gave this money to Mr Bailey; Mr Bailey said that was not true. In reaching his conclusion the judge took into account the manuscript note prepared by Mr Bailey which referred to £10,000 in cash as having been received from Mr Cantle. Mr Noble submitted that any suggestion that a person would record a cheque payment as cash is illogical and perverse. It follows, he continued, that Mr Jefferson cannot have been referring to the cheque received from Mr Longo and must have been referring to the cash which Mr Jefferson said he gave him.
83. Once again, these are all matters to which the judge referred and to which he had proper regard. It cannot be said his finding was perverse. Ultimately his decision was founded upon his preference for the evidence of Mr Bailey over that of Mr Jefferson. That is not to say that he found, or needed to find, Mr Bailey to be a truthful or dependable witness. What he found was that Mr Jefferson was an unreliable witness whose word could not be trusted. Even if he had discounted Mr Bailey's evidence entirely the judge would therefore have been justified in dismissing claims which depended on Mr Jefferson's testimony. That the judge may have been in error in crediting Mr Bailey with the creation of a paper-trail to cover his defalcations, rather than simply recognising that his modus operandi was to give them a spurious semblance of propriety, is neither here nor there. What matters is that, by judicial (and judicious) observation and appraisal of two untrustworthy characters, he came as close as he was able to come to the truth. That is all a judge of fact can ever do.
84. For all these reasons I would dismiss this appeal.

Sir Stephen Sedley:

85. I agree.

Lord Justice Longmore:

86. I also agree.