England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, CHANCERY DIVISION
MS VIVIEN ROSE (sitting as a Deputy High Court Judge)
HC10C00284

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/04/2013

Lord Justice Jackson :

1. This judgment is in ten parts, namely:

Part 1. Introduction,

Part 2. The facts,

Part 3. The present proceedings,

Part 4. The appeal to the Court of Appeal,

Part 5. Did the judge correctly identify the ingredients of the tort of deceit?

Part 6. The pleading points,

Part 7. The diary note,

Part 8. Agency,

Part 9. The other grounds of appeal,

Part 10. Conclusion.

Part 1. Introduction
2. This is an appeal by two companies and three directors of those companies against a judgment holding that they are liable to pay £1.4 million as damages for the tort of deceit. The deceit consisted of inducing the claimant to invest £2 million in a project by misrepresenting crucial features of the project.
3. The principal issues in the appeal are (i) whether the trial judge correctly identified and addressed all the ingredients of the tort of deceit; (ii) whether the claimant's claim was properly pleaded; (iii) whether the judge was correct to find that the first and second defendants had made fraudulent misrepresentations and (iv) whether the judge was correct to find that in doing so the first and second defendants were acting as agents for the third, fourth and fifth defendants.
4. The claimant in this action is Ludsin Overseas Limited, to which I shall refer as "Ludsin". Mr Pavel Lisitsin ("Mr Lisitsin") owns and controls Ludsin. Mr Lisitsin is a Russian and a former oil trader, who came to live in England in 1994. He became a British citizen in 2001.
5. Eco 3 Capital Limited, to which I shall refer as "Eco", is the first defendant. Eco is described as an independent venture capital investment firm. Doctor Alexander Shadrin ("Doctor Shadrin") is the principal shareholder and also a director of Eco. Doctor Shadrin is the second defendant.
6. Wharf Investments Ltd, to which I shall refer as "Wharf", is the third defendant. Mr Douglas Maggs ("Mr Maggs") is the fourth defendant. Mr Maggs is a property developer and a director of Wharf. He uses that company as one of the vehicles through which he does business. Mr Maggs and Mr David Mellor ("Mr Mellor"), the former cabinet minister, each own 50% of the shares of Wharf.
7. The Honourable Charles Yule Balfour ("Mr Balfour") is fifth defendant. Mr Balfour is an investment banker, who at the material time was working for Fleming Family and Partners as international director. Mr Balfour was also a director of Eco. He was not a director of Wharf during the crucial period with which this court is principally concerned, but he became a director in April 2006.
8. Forsters LLP ("Forsters") are a firm of solicitors practising in London W1. Forsters were sixth defendant in the action until they reached a settlement with the claimant in February 2011.
9. In this judgment I shall refer to Hicks Persimmon Ltd, the property development company, as "Hicks Persimmon". I shall refer to Investec Bank (UK) Limited as "Investec". I shall refer to Abbey National Treasury Services as "ANTS". I shall refer to the Financial Services Authority as "FSA". I shall use the abbreviation "SPV" for special purpose vehicle.
10. One provision of the Civil Procedure Rules ("CPR") is relevant to this appeal. That is rule 32.19, which provides as follows:

"(1) A party shall be deemed to admit the authenticity of a document disclosed to him under Part 31 (disclosure and inspection of documents) unless he serves notice that he wishes the document to be proved at trial.

(2) A notice to prove a document must be served –

(a) by the latest date for serving witness statements; or

(b) within 7 days of disclosure of the document,

whichever is later."

11. After these introductory remarks, I must now turn to the facts.
Part 2. The facts
12. Mr Maggs became aware of a development site in Berkshire, which was not on the market but which might be available for purchase. This site is known as Sandford Farm. The site comprises about 114 acres (46 hectares) and is situated to the East of the Woodley interchange of the A329M. The site lies within the jurisdiction of Wokingham District Council for planning purposes. The planning permission granted for the site as at June 2005 was consent for 200,000 square feet of buildings in use class C2 (institutional, training and education), hotel and leisure centre. The site was owned by Hicks Persimmon.
13. The site had various problems associated with it. In particular, a family called the Coffs held a ransom strip and there were various other restrictions on the title. The site had originally been used as a gravel pit. When the excavation of the gravel was finished, it had been used as a landfill site. It therefore suffered from some contamination. Hicks Persimmon had made an unsuccessful planning application and had then lost their appeal against that refusal.
14. Mr Maggs devised a scheme to buy the site from Hicks Persimmon, improve the planning permission and then re-sell the site to developers. This scheme would require substantial capital. With a view to raising such capital Mr Maggs' colleague, Mr Mellor, approached Mr Balfour, who was a long-standing friend.
15. Mr Balfour expressed interest in the project. Accordingly Mr Mellor introduced Mr Maggs and Mr Balfour to one another.
16. During June and July 2005 Mr Maggs, Wharf and Mr Balfour spent time working on the details of the scheme. With a view to raising capital for the project Mr Balfour contacted Doctor Shadrin and told him about the site. Both Mr Balfour and Doctor Shadrin were directors of Eco, so this approach made obvious sense.
17. Doctor Shadrin had a strong connection with Mr Lisitsin, since both men were actively involved in the governance of the Russian Orthodox Church in Chiswick. Doctor Shadrin took the opportunity to discuss the Sandford Farm project with Mr Lisitsin on two occasions when they were together at the church. The second occasion was on 12^th July 2005. Doctor Shadrin told Mr Lisitsin that the deal was being promoted by Wharf, a company that Doctor Shadrin said he knew and respected. Doctor Shadrin told Mr Lisitsin that the increase in value of his investment was likely to be substantial. Doctor Shadrin also told him that some very important English people were associated with or involved in the deal.
18. Mr Lisitsin was attracted to the deal, because it appeared to be a short term arrangement with low risk and high reward.
19. On 18^th July 2005 Doctor Shadrin attended a meeting at the offices of Forsters in Mayfair. At this meeting Mr Balfour introduced Doctor Shadrin to Mr Maggs. The purpose of the meeting was to discuss raising money for the Sandford Farm project. Mr Maggs described the site and explained that he could overcome the problems attaching to it, thus substantially increasing the value.
20. Doctor Shadrin was much impressed by what he heard. He was also impressed by the fact that Forsters, a highly respectable London firm of solicitors, were acting for Wharf on the project.
21. Mr Maggs and Mr Balfour resolved to structure the acquisition of the Sandford Farm site as follows. A company controlled by Mr Maggs, Mr Balfour and Wharf would purchase the site from Hicks Persimmon for a sum in the region of £9.5 million. That company would clear any restrictions on the site which had not been cleared before the first sale. That company would then sell the property on to a second company controlled by Mr Maggs, Mr Balfour and Wharf for £12.25 million. In the course of the appeal these two transactions were referred to respectively as "deal one" and "deal two". I shall use those descriptions.
22. Thus a profit of nearly £3 million would be generated between deal one and deal two. This profit was going to be shared out in such manner as Mr Maggs and Mr Balfour decided. Following deal two an improved planning permission would be obtained. The site would then be sold on to developers at a further substantial profit. This latter profit would be shared out amongst all the investors in the project. In other words Mr Maggs and Mr Balfour planned that investors in the project would not receive any share in the first guaranteed tranche of profit. They would only share in the second tranche of profit in the event that the project was a success.
23. In the course of the trial the judge called the profit generated between deal one and deal two "the differential". She described the overall structure of the deals as the "two-tier structure". I shall use the same terms.
24. Mr Maggs and Mr Balfour explained the two-tier structure to Doctor Shadrin at the outset. Indeed Doctor Shadrin had a direct interest in the two-tier structure because part of the differential was going to be paid to Eco as commission for bringing in other investors. It was originally planned that Eco's commission would be £250,000.
25. During August 2005 Doctor Shadrin continued to talk to Mr Lisitsin about the deal and to commend it to him. Unfortunately Doctor Shadrin did not disclose the two-tier structure. Instead he informed Mr Lisitsin that the site was being bought from its current owners for £12.5 million.
26. On 15^th August 2005 Doctor Shadrin sent to Mr Lisitsin a document headed "Sandford Farm Development, Terms of Business Letter," which represented the acquisition of the Sandford Farm site as a single transaction with a purchase price of £12.5 million.
27. On 16^th August 2005 Doctor Shadrin emailed to Mr Lisitsin a document entitled "Terms of Operation". This document included the following passages:

"Pitcomp 119 Limited, a UK company, owned jointly between Oracle Corporation ("Oracle") and Persimmon Developments Limited ("Persimmon"), holds freehold property rights for 170 acres of land situated to the east of the Woodley interchange of A329M ….

Recently, Oracle has decided to sell the site. The selling price of the site is £12.5 million.

….

A UK limited liability partnership (SPV – special purpose investment vehicle) will be formed to acquire the site ("the Acquisition"). Investors will invest up to £5.5 million in SPV in which each investor will acquire a share pro rata the size of investment. The Client will invest £2 million in SPV (the "Investment") and the respective share will be registered in the Client's name. For avoidance of doubt, the Client will have no further liability whatsoever. Eco³ Capital guarantees that a relevant share in SPV will be registered in the Client's name. Forsters of London are the legal advisors to Eco³Capital and SPV on the Acquisition. The Client will transfer funds to the following client account with Forsters (the "Deposit Account") not later than 12 noon on 18 August 2005:

….

The funds will not be released by Forsters until completion of the site purchase which will take place within four week after the funds have been transferred to the Deposit Account. To fund the Acquisition SPV intends to obtain a bank loan of up to £7.5 million. The deposit will only be released if SPV has obtained a bank borrowing sufficient to enable the balance of the full completion price to be paid including costs of purchase."

28. Mr Lisitsin was satisfied with these arrangements. On 17^th August 2005 he caused his company, Ludsin, to transfer £2 million to Forsters as Ludsin's investment in the Sandford Farm project. Forsters were by this time acting as solicitors for both Eco and Wharf.
29. The total investments in the project which Eco procured were £2.5 million. Of this sum Doctor Shadrin contributed £300,000; a company operated by a colleague of Doctor Shadrin contributed £200,000; Ludsin at the behest of Mr Lisitsin contributed £2 million.
30. Investors introduced to the scheme otherwise than by Eco contributed just over £2.5 million. Finally Investec provided a loan of £7.5 million.
31. In this way Mr Maggs, Mr Balfour and Wharf collected a total of just over £12.5 million. This was a sufficient sum to fund both deal one and deal two.
32. A number of changes were made to the details of the transactions, none of which are material for present purposes. Suffice it to say that contracts were exchanged on both deal one and deal two on 12^th October 2005. Completion of both deals took place on 9^th November 2005.
33. As finally structured, the transactions were as follows. Forsters set up a shell company called Bound Oak Properties Limited ("Bound Oak"). Mr Balfour and a colleague of Mr Maggs who played no part in the transaction owned Bound Oak. Bound Oak purchased the Sandford Farm site from Hicks Persimmon for £9.3 million. Hicks Persimmon used part of this sum to clear most of the encumbrances on the land. Bound Oak paid £25,000 to the Coffs family to remove the final encumbrance. Bound Oak then sold the site for £12.25 million plus VAT to a Jersey company called Sandford Farm Properties LLP ("SFPL"). A Jersey company called JTC Management Ltd ("JTC") managed SFPL and provided its directors.
34. Throughout the course of these events Mr Lisitsin and Ludsin were unaware of the two-tier structure. They believed that their money was being used to fund the purchase of the site by Bound Oak from Hicks Persimmon for £12.25 million. In fact, unbeknown to Mr Lisitsin and Ludsin, their £2 million contribution was being used to fund the purchase of the site by Bound Oak from Hick Persimmon at a price of £9.3 million.
35. Following the completion of deal one and deal two and the payment of £25,000 to the Coff family, there was an immediate surplus of £2.95 million held by Bound Oak. This sum was available to be distributed in such manner as Mr Maggs and Mr Balfour decided. Mr Maggs and Mr Balfour arranged for the following payments to be made out of the surplus held by Bound Oak:

i) £1.125 million was paid to L & H Estate Management Acquisition (a company owned and controlled by Mr Maggs);

ii) £587,500 was paid to Mr Mellor trading as DM Consultancy;

iii) £587,500 was paid to Mr Simon Holley;

iv) £125,000 was paid to Eco as commission;

v) £500,000 was paid to Catchphrase Holdings Limited (Mr Balfour's wife's trust fund).

36. Unfortunately matters did not proceed smoothly after SFPL had acquired the Sandford Farm site. There were delays in applying for planning permission. An application for mixed use planning permission was made in July 2007. In December 2007 Wokingham District Council refused that application. In June 2008 an application was made for residential planning permission. Wokingham District Council refused that application in January 2009.
37. In the meantime interest continued to accrue on the bank loan which had been used to fund deals one and two. The original bank loan came from Investec. In September 2007 SFPL refinanced the project by replacing the Investec loan with a loan from ANTS.
38. ANTS required all creditors other than Investec to sign a deed of subordination. The effect of this deed was that SFPL could not repay any monies to investors while the loan to ANTS remained outstanding.
39. By 2009 SFPL had run out of money and was unable to meet the interest payments due to ANTS. Both Mr Maggs and Doctor Shadrin invited Mr Lisitsin to invest further sums in the project, but he declined to do so.
40. In early 2009 Wharf filed a petition to wind up SFPL. This prompted ANTS to appoint a Law of Property Act receiver. SFPL went into liquidation. On 29^th June 2009 the receiver sold the Sandford Farm site to Woodley Developments Limited ("Woodley") for £15 million. Woodley was a company owned and controlled by Mr Maggs.
41. In the result therefore the Sandford Farm project, in which Ludsin at Mr Lisitsin's behest had invested £2 million, came to nothing. Ludsin lost the whole of £2 million which it had invested. Mr Maggs, by contrast, did extremely well. He subsequently obtained planning permission for residential developments. His company, Woodley, then sold off part of the site for £27 million.
42. Ludsin and Mr Lisitsin took the view that they had been the victims of fraudulent misrepresentation. Accordingly Ludsin commenced the present proceedings.
Part 3. The present proceedings
43. By a claim form issued in the Chancery Division of the High Court on 28th January 2010 Ludsin claimed damages for misrepresentation against (1) Eco, (2) Doctor Shadrin, (3) Wharf, (4) Mr Maggs and (5) Mr Balfour. Ludsin also claimed equitable relief against Forsters as sixth defendant for misuse of the £2 million which Ludsin had advanced.
44. Ludsin's claim against Forsters was subsequently settled for £600,000 plus costs. Ludsin gives credit for that sum in its claims against the first, second, third, fourth and fifth defendants. In those circumstances I need say no more about the details of the claim against Forsters. It should, however, be noted that Ludsin was also threatening to bring a separate claim against Forsters as assignees of SFPL's claims against that firm. This threatened claim was settled before the issue of proceedings.
45. So far as the claims against the first, second, third, fourth and fifth defendants are concerned, Ludsin served particulars of claim making it clear that they alleged fraudulent misrepresentation. Although much criticism has been directed at Ludsin's pleading, the salient facts are all set out. Paragraph 7 of the particulars of claim sets out representations which Doctor Shadrin made to Mr Lisitsin including:

"The site was available for purchase at a price of £12.5 million."

Paragraphs 9 and 10 set out the "Terms of Business" and the "Terms of Operation". Paragraphs 21 and 22 on the particulars of claim read as follows:

"Misrepresentation as to purchase price: D1-5

21. The Claimant repeats paragraph 7.1 (the Site was available for purchase at a price of £12.5 million) and paragraph 10.1 (Hicks Persimmon Limited, a UK company jointly owned by Oracle Corporation and Persimmon Developments Limited held the freehold of the Site. Oracle had decided to sell the Site. The Selling price of the Site was £12.5 million) above.

22. The aforesaid representations as to the selling price of the Site were made by Eco³ and Mr Shadrin intending that they should be relied upon by the Claimant, alternatively Mr. Lisitsin who would request or encourage the Claimant to invest as aforesaid."

46. Paragraph 23 of the particulars of claim describes the two-tier structure and avers that Mr Ludsin and Lisitsin were unaware of it at the material time. Paragraphs 26 and 27 of the particulars of claim are as follows:

"26. Accordingly, at all time up to and including 17 August 2005, the true selling price of the Site was not £12.5 million, but was in the region of £9.3 million. Eco³, Mr Shadrin, Wharf Land, Mr Maggs and Mr Balfour were at all times aware of the falsity of the representations made to the Claimant, by reason of the matters set out above, and by reason of the memorandum referred to in paragraph 35.4 below.

27. The Claimant relied on the aforesaid representation as to the sale price of the Site in reaching its decision to invest in the Site. It would not have invested in the SPV had it been told that a vehicle for Wharf Land and/or Mr Maggs and/or Mr Balfour, would make a profit of £2.95 million on a purchase and sale of the Site prior to its acquisition by the Investment Vehicle."

47. The memorandum referred to in the last sentence of paragraph 26 of the particulars of claim was sent by Forsters to Doctor Shadrin, Mr Balfour and Mr Maggs. This memorandum stated unequivocally that Eco, Wharf, Doctor Shadrin, Mr Maggs and Mr Balfour were under a duty to disclose the two-tier structure and the differential to investors.
48. The case pleaded against the third, fourth and fifth defendants is based on agency. It is alleged that in making the representations to Mr Lisitsin, Doctor Shadrin and Eco were acting as agents for Wharf, Mr Maggs and Mr Balfour.
49. All defendants served defences denying Ludsin's claim. Doctor Shadrin was acting in person until a late stage of the litigation. This had the consequence that the defence of first and second defendants was a somewhat informal document. No prejudice was caused to any party on that account.
50. The court made an order for standard disclosure. In compliance with that order Doctor Shadrin served his list of documents on 3^rd January 2012. Amongst other documents Doctor Shadrin served extracts from his 2005 diaries. One extract purported to be a note of a telephone conversation between Doctor Shadrin and Mr Lisitsin on 12^th August 2005. Paragraph 2 of that note records Doctor Shadrin as telling Mr Lisitsin about the two-tier structure and the differential.
51. No party served a notice under CPR rule 32.19 (2) requiring that any of the disclosed documents be proved. In those circumstances under rule 32.19 (1) all parties were deemed to have admitted the authenticity of all the disclosed documents.
52. The action came on for trial before Ms Vivien Rose QC, sitting as a deputy High Court judge ("the judge") on 19^th June 2012. Mr Mark Cunningham QC and Mr Gregory Banner represented the claimant, Mr Malcolm Bishop QC and Ms Sarah O'Kane represented the first and second defendants. Mr Mark Warwick represented the third, fourth and fifth defendants. Mr Lisitsin, Doctor Shadrin, Mr Maggs and Mr Balfour all gave evidence and were cross-examined. The trial lasted for nine days, concluding on 29^th June.
53. In the course of his opening speech Mr Cunningham drew attention to the diary note of 12^th August 2005. He submitted that this document was a fabrication which had been inserted into Doctor Shadrin's diary at a later date.
54. Doctor Shadrin was called to give his evidence on the fourth day of the trial. Immediately before he went into the witness box Mr Warwick raised a point on the rules. He submitted that the claimant had not served any notice under CPR rule 32.19. Accordingly the claimant was deemed to have admitted the authenticity of the diary note dated 12^th August.
55. The judge's response to this observation, which may or may not be characterised as a ruling, was as follows:

"Judge Rose: I think we can therefore proceed on the basis that, other than those documents where it's already clear that the provenance is disputed, there is no need to prove them in the formal sense, and that in your opening and in cross-examination you should attempt, so far as possible, as we go along, to raise – draw our attention to documents on which you are going to rely. If, as you say, at a late stage a document arises which you hadn't previously realised the significance of, we will cross that bridge when we come to it."

56. In effect the judge was saying that, regardless of the absence of notices under rule 32.19, if it transpired that the authenticity of any documents was in dispute, these matters would be dealt with during the trial.
57. Doctor Shadrin then proceeded to give his evidence. This occupied the rest of day four and continued into day five. On the morning of day five Mr Cunningham cross-examined Doctor Shadrin about the diary entry of 12^th August. He suggested two alternative scenarios. The first scenario was that Doctor Shadrin had fabricated this document at a later date to support his defence. The second and alternative scenario was that Doctor Shadrin had made his note on the recorded date, namely 12^th August 2005, but it was untruthful. Doctor Shadrin had deliberately drafted the note to give the false impression that he had told Mr Lisitsin about the two-tier structure and the differential. Doctor Shadrin denied both of these suggestions. He maintained that he had made the note on the recorded date and that it was accurate.
58. There was no further reference to the point on the rules which Mr Warwick had raised on day four until final speeches. In the course of his final speech on day nine Mr Bishop submitted that the claimant had had more than one opportunity before the trial to serve a notice under rule 32.19, but had failed to do so. Mr Bishop then made two submissions. First, he submitted that under the rules the claimant should be prohibited from questioning the authenticity of the diary note. Secondly, he invited the judge to prefer the evidence of Doctor Shadrin to that of Mr Lisitsin and to hold that the diary note was genuine and accurate.
59. All the other issues in the case were vigorously fought out both in cross-examination and in counsel's submissions. For present purposes, however, I need not recount any other episodes during the trial. At the end of the trial the judge reserved judgment.
60. On 19^th July 2012 the judge handed down her judgment in writing. I would summarise the judge's findings and conclusions in the following nine propositions:

i) Doctor Shadrin represented to Mr Lisitsin that Hicks Persimmon was selling the site to SFPL for £12.5m. This comprised two untrue representations because (a) Hicks Persimmon was selling to Bound Oak, not SFPL and (b) Hicks Persimmon was selling for £9.3m, not £12.5m.

ii) The diary note dated 12^th August 2005 was either made at the time and inaccurate or it was added later onto blank pages in the 2005 diary. Contrary to the contents of that note Doctor Shadrin did not disclose the two-tier structure or the differential to Mr Lisitsin.

iii) Doctor Shadrin made the representations to Mr Lisitsin, knowing that those representations were untrue and intending that Mr Lisitsin should rely on them.

iv) The claimant acted in reliance on the untrue representations. If Mr Lisitsin had known about the two-tier structure and the differential, he would not have authorised Ludsin to invest any money in the Sandford Farm project.

v) Accordingly both Eco and Doctor Shadrin are liable to the claimant for fraudulent misrepresentation.

vi) Eco and Doctor Shadrin were acting as agents for Wharf, Mr Maggs and Mr Balfour when they made the fraudulent misrepresentations to Mr Lisitsin.

vii) Mr Maggs and Mr Balfour were complicit in the matter of concealing the two-tier structure and the differential from Mr Lisitsin. They were thereby acting dishonestly.

viii) Accordingly Mr Maggs, Mr Balfour and Wharf are jointly and severally liable with Eco and Doctor Shadrin to Ludsin for deceit.

ix) After giving credit for £600,000 received from Forsters, the measure of damages is £1.4 million. All five defendants are jointly and severally liable to Mr Ludsin for that sum.

I shall refer to these elements of the judgment as "proposition (i)", "proposition (ii)" and so forth.

61. The defendants are aggrieved by the judgment given against them. Accordingly they appeal to the Court of Appeal.
Part 4. The appeal to the Court of Appeal
62. By an appellants' notice dated 2^nd August 2008 the first and second defendants appealed against the decision of the judge on six grounds which I would summarise as follows:

i) The judge failed to direct herself that intention to deceive was an ingredient of the tort of deceit or to find that the first or second defendant had such intention.

ii) The judge erred in holding the first and second defendants liable for misrepresentations which differed from those which were pleaded.

iii) The judge ought to have held that the diary note was correctly dated and accurate, because the claimant had to failed to serve a notice under CPR rule 32.19 challenging the authenticity of that document.

iv) The judge erred in treating the Terms of Operation as constituting representations made to the claimant.

v) The claimant's loss was not caused by the fraudulent misrepresentations but by the claimant's failure to invest additional funds in the project when requested in 2009.

vi) The judge in assessing damages failed to give credit for certain funds paid by Forsters in settlement of the claimant's claims against that firm.

63. Out of those six grounds of appeal the fourth ground appears to be unsustainable. Doctor Shadrin sent the Terms of Operation to Mr Lisitsin, shortly before he authorised the payment of £2 million. That document contains factual assertions as pleaded in the particulars of claim. Very sensibly, counsel did not press the fourth ground of appeal in their oral submissions. I shall therefore say no more about the fourth ground of appeal save that I reject it.
64. By an appellants' notice dated 9^th August 2012 the third, fourth and fifth defendants appealed against the decision of the judge on three grounds, which I would summarise as follows:

i) The judge failed to appreciate that the third, fourth and fifth defendants could not be liable if they did not have an intention to deceive. No such intention on the part of those defendants was established.

ii) Transaction notes revealing the two-tier structure were disclosed to other investors. The judge ought to have held that this was inconsistent with any intention to deceive.

iii) The judge erred in holding the third, fourth and fifth defendants liable for misrepresentations which differed from those which were pleaded.

65. Shortly before the hearing of the appeal the third, fourth and fifth defendants instructed Mr Romie Tager QC to represent them, leading Mr Warwick, who had appeared at trial. On Mr Tager's advice the third, fourth and fifth defendants applied to add new grounds of appeal contending that, in one way or another, the judge erred in holding that the third, fourth and fifth defendants were liable as agents. These new matters constitute a fourth ground of appeal, which I would summarise as follows. Even if the first and second defendants are liable for fraudulent misrepresentation, the judge erred in holding that they made any such fraudulent misrepresentations as agents for the third, fourth or fifth defendants.
66. The appeal was heard on 5^th and 6^th March 2013. The same counsel appeared for the parties in this court as appeared at trial, save that Mr Tager was now appearing with Mr Warwick for the third, fourth and fifth defendants. At an early stage Mr Cunningham indicated that the claimant did not oppose the third, fourth and fifth defendants' application to rely upon their new ground (iv). In those circumstances we allowed Mr Tager to develop that ground in addition to the original grounds.
67. I am grateful to all counsel for their clear and helpful submissions.
68. In the skeleton arguments and also during the oral hearing Mr Balfour, Mr Maggs, and Wharf were referred to by the acronym "BMW". For convenience I shall use that same abbreviated description of the third, fourth and fifth defendants.
69. In order to address the issues raise by the appellants in a logical sequence, I must first consider whether the judge correctly identified the ingredients of the tort of deceit.


 


Part 5. Did the judge correctly identify the ingredients of the tort of deceit?
70. The first ground of appeal advanced by all appellants is that the judge failed correctly to identify and address the ingredients of the tort of deceit.
71. Mr Bishop for the first and second appellants and Mr Tager for BMW (the third, fourth and fifth appellants) approached this issue from slightly different angles. Nevertheless in their oral and written submissions, counsel for all parties have drawn attention to three classic authorities, namely Derry v Peek (1889) 14 App Cas 337, Nocton v Lord Ashburton [1914] AC 932 and Armstrong v Strain [1952] 1 KB 232.
72. In Derry v Peek the directors of a company issued a prospectus describing tramways which they proposed to construct. The prospectus stated that a "great feature of the undertaking" was that the company would be able to use steam or mechanical motive power, instead of horses. In the event the Board of Trade refused consent for the use of steam or mechanical power, except on certain parts of the tramways. In those circumstances the venture failed and the company was wound up. Sir Henry Peek, a baronet who had invested substantial sums in reliance on the prospectus, sued the directors for fraudulent misrepresentation. The plaintiff failed at trial, but succeeded in the Court of Appeal. The House of Lords reversed the Court of Appeal's decision and restored the decision of the trial judge, essentially because the mental element of the tort had not been established. Some of the law lords speak of the directors having held an honest but mistaken opinion (e.g. Lord Bramwell at page 149). Others speak of the directors having no intention to deceive (e.g. Lord Halsbury L.C. at page 344). In the course of his speech Lord Herschell reviewed the authorities at some length and then summarised the principles as follows at page 374:

"Having now drawn attention, I believe, to all the cases having a material bearing upon the question under consideration, I proceed to state briefly the conclusions to which I have been led. I think the authorities establish the following propositions: First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made."

73. In Nocton v Lord Ashburton the plaintiff, a mortgagee, claimed that he had released part of the security which he held on the basis of his solicitor's advice; the solicitor had given the advice in bad faith, because he knew that the security would be insufficient; the plaintiff suffered loss in consequence. The plaintiff failed at trial, because fraud had not been proved. The Court of Appeal reversed that decision, but the House of Lords restored the decision of the trial judge. In a famous passage at page 963, Lord Dunedin said this:

"Now, as I understand the matter, if the action had been brought at law, under the old system it could have been based either (1) on fraud, or (2) on negligence, and the relief in either case would have been damages. But if based on fraud, then, in accordance with the decision in Derry v Peek, the fraud proved must be actual fraud, a mens rea, an intention to deceive. It is an action of deceit."

74. Lord Parmoor at page 978 referred to Derry v Peek and then said:

"That case decides that in an action founded on deceit, and in which deceit is a necessary factor, actual dishonesty, involving mens rea, must be proved."

75. In Armstrong v Strain the purchasers of a bungalow relied upon an estate agent's representation. The estate agent, Mr Skinner, did not know that the representation was untrue. The vendor, Mr Strain, did not authorise Skinner to make the representation or know that Skinner was making it, but he did know of facts which rendered it untrue. Devlin J dismissed the purchasers' claim for fraudulent misrepresentation. The Court of Appeal upheld that decision, essentially on the basis that the court cannot combine the knowledge of an innocent principal and agent, so as to produce dishonesty. Romer LJ said at page 247:

"I can see no sufficient ground for disturbing any of the judge's findings of fact. Of these findings the most important, for present purposes, were that neither Strain, nor either of his agents, Uren and Skinner, was fraudulent. Inasmuch as there are no intermediate stages recognized by the law between fraud on the one hand and innocence on the other, the case has accordingly, on these findings, to be approached on the footing that each of these men was entirely guiltless in relation to the sale transaction in general and, in particular, to the representations on which the plaintiffs bought the bungalow. Strain, Uren and Skinner are, however, being sued for deceit, and the essentials of such an action have been prescribed by the highest authority."

In support of these conclusions Romer LJ cited the passages in Derry v Peek and Nocton v Lord Ashburton which I have set out above.

76. On the basis of these authorities all the appellants contend that intention to deceive is an element of the tort of deceit. The judge failed to address this element. She did not find that it had been established. On the contrary it is clear that the defendants did not have an intention to deceive.
77. I do not agree with the analysis of the authorities which the appellants advance. What the cases show is that the tort of deceit contains four ingredients, namely:

i) The defendant makes a false representation to the claimant.

ii) The defendant knows that the representation is false, alternatively he is reckless as to whether it is true or false.

iii) The defendant intends that the claimant should act in reliance on it.

iv) The claimant does act in reliance on the representation and in consequence suffers loss.

Ingredient (i) describes what the defendant does. Ingredients (ii) and (iii) describe the defendant's state of mind. Ingredient (iv) describes what the claimant does.

78. I do not accept that "intention to deceive" is a separate or free standing element of the tort of deceit. The phrase "intention to deceive" is merely another way of describing the mental element of the tort. It is a compendious description of ingredients (ii) and (iii) as set out in the preceding paragraph.
79. In the present case the judge found that all four ingredients of the tort of deceit were established. See propositions (i), (iii) and (iv) in my summary of the judgment.
80. It is quite true, as the appellants point out, that the judge does not expressly state:

"I find that there was an intention to deceive."

This is not a mantra which the judge must recite before holding a defendant liable for the tort of deceit. That tort can equally well be described as fraudulent misrepresentation. Regardless of what label is applied, the defendant will be liable if the four ingredients set out above are established. On the judge's findings of fact those four ingredients have been established in this case.

81. In the result, therefore, I would dismiss the first ground of appeal advanced by each of the appellants. My answer to the question posed in this part of the judgment is yes.
82. Having established the legal framework of the claimant's claims, I must now turn to the pleading points which arise.
Part 6. The pleading points
83. Mr Bishop contends that the gravamen of Ludsin's pleaded case is that he was led to believe that the site was available to be purchased for £12.5 million, when in truth it was available to be purchased for £9.3 million.
84. Proceeding from this starting point, Mr Bishop deploys two separate arguments. His first argument is that the misrepresentation which the judge found proved differed from that which was pleaded. His second argument is that the representation pleaded was true, rather than false. I must address these two arguments separately.
85. As to the first argument, in my view Mr Bishop is misreading the particulars of claim. It is clear that the claimant's pleaded case is that the first and second defendants represented to Mr Lisitsin that Hicks Persimmon was selling the site to the SPV in a single transaction and that the price that was £12.5 million. Those representations were false. In fact Hicks Persimmon was selling to a company controlled by Mr Maggs and Mr Balfour for £9.3 million and that company was selling on to the SPV for £12.5 million, thus generating a huge profit for Mr Maggs and Mr Balfour. See the summary of the particulars of claim and the quotations from the pleading set out in Part 3 above.
86. The misrepresentations which the judge found proved were in accordance with the claimant's pleaded case. See proposition (i) in the summary of the judgment. I therefore reject Mr Bishop's first argument.
87. In relation to his second argument, Mr Bishop draws attention to the first three sentences of paragraph 94 of the judgment, which read as follows:

"The Defendants' case however is that the £9.3 million price was a special price only available to Mr Maggs and WLI. That appears to be what Mr Maggs told Dr Shadrin. Yet I have not seen any explanation as to the basis of this assertion."

88. On the basis of this passage Mr Bishop submits that the judge found, or must be taken to have found, that £9.3 million was a price only available to Mr Maggs or his company. So far as any other purchaser was concerned, the site was only available to be purchased for £12.5 million.
89. Mr Tager sought to support Mr Bishop's argument on this issue by pointing out that the Sandford Farm site was not on the market. It was only available to be purchased by Mr Maggs because of special knowledge which he had acquired from a land agent, Mr Simon Holley. When pressed in argument, Mr Tager accepted that Hicks Persimmon did not have a particular link with Mr Maggs, which would cause Hicks Persimmon to sell to Mr Maggs in preference to any other offeror for the site.
90. Having listened to the submissions of Mr Bishop and Mr Tager, I have come to the conclusion that there is nothing in this line of argument deployed by all of the appellants.
91. The position in 2005 was that the Sandford Farm site had not been placed on the market. Nevertheless Hicks Persimmon, the owners, were in fact willing to sell. Mr Maggs was in an advantageous position because he knew about Hicks Persimmon's willingness to sell. He did not, however, have any special status in the eyes of Hicks Persimmon. Hicks Persimmon would have been willing to sell the site to any purchaser who offered £9.3 million, regardless of whether that purchaser was Mr Maggs or an SPV such as SFPL.
92. Mr Bishop submits that this is not a complete answer to his defence, because Doctor Shadrin's state of mind is what matters. Rightly or wrongly Doctor Shadrin believed that Mr Maggs had special standing as a purchaser; he alone could buy the site from Hicks Persimmon for £9.3 million; any other purchaser would have to pay £12.5 million.
93. I do not accept these submissions. First, it would be an absurd thing for any businessman such as Doctor Shadrin to believe. Secondly, when paragraph 94 of the judgment is read as a whole, it is clear that the judge does not accept that Doctor Shadrin genuinely held this belief. The judge sets out a number of reasons why such a belief would be improbable. In particular, Wharf and Hicks Persimmon did not appear to have any particular relationship. Also on the judge's findings Mr Maggs had not used any particular effort in putting together the deal.
94. In the result I do not accept that the particular representation which Mr Bishop extracts from the particulars of claim was true. Furthermore the pleaded misrepresentations are not limited to the one matter on which Mr Bishop fastens. I therefore reject this element of the first and second defendants' case.
95. BMW's third ground of appeal is also based upon the pleadings and is very similar to the first and second defendants' second ground. In the course of his submissions Mr Tager took us carefully through the particulars of claim. He pointed out respects in which the pleading could have been clearer or better drafted. Nevertheless, Mr Tager very fairly accepted that when BMW's legal team came to court, they knew that they would have to meet a case of fraudulent misrepresentation.
96. Mr Tager sought to characterise the pleaded misrepresentation in the same way that Mr Bishop had done. He submitted that the true market value of the site was £12.5 million (as evidenced by a valuation report), but Mr Maggs was in the special position of being able to buy the site at an undervalue, namely for £9.3 million. Mr Tager therefore submitted that it was quite proper to invite Ludsin to participate in deal two, which involved purchasing the site at market value, without disclosing deal one.
97. Lady Justice Arden pointed out in argument that if the two-tier structure had been disclosed to Mr Lisitsin, he could at the very least have bargained for a share of the profit (i.e. the differential). Mr Tager very fairly accepted that. The reality is that it was a serious misrepresentation to tell Mr Lisitsin that the site was available for purchase at £12.5 million, without revealing the two-tier structure and the differential.
98. Let me now draw this part of the judgment to a conclusion. I do not accept that the only pleaded misrepresentation related to the price at which the site was available for purchase. Nor do I accept that that particular pleaded representation was true. I therefore reject the second ground of appeal of the first and second defendants and the third ground of appeal of BMW.
99. I must turn next to the issues surrounding the diary note.
Part 7. The diary note
100. The first and second defendants' third ground of appeal is that the judge ought to have held that the diary note was correctly dated and accurate, because the claimant had failed to serve a notice under CPR rule 32.19 challenging the authenticity of that document.
101. I have set out in Parts 3 and 4 above the relevant facts concerning Doctor Shadrin's diary note dated 12^th August 2005. The claimant's case in respect of this document was two fold:

i) Doctor Shadrin wrote the diary note on a later date on two blank pages which just happened to be at the right place in his 2005 diary. Alternatively,

ii) Doctor Shadrin drafted the diary note on the recorded date, 12^th August 2005, but he did so inaccurately. His motive was to make it look as if he told Mr Lisitsin about the two-tier structure and the differential, when in fact he had not done so.

102. The judge found that one or other of those two contentions was correct without saying which. See paragraph 88 of the judgment or proposition (ii) in the summary of the judgment above.
103. I have examined the original of Doctor Shadrin's diary for 2005. I am bound to say that the second of the two scenarios is distinctly more likely than the first. It would have been surprising if two blank pages had been left at exactly the right place in the diary.
104. If the second scenario was correct, then there would be no need for a notice under CPR rule 32.19. The document purported to have been written by Doctor Shadrin on 12^th August 2005 and that was indeed what happened.
105. Let me now turn to the first scenario. Suppose Doctor Shadrin wrote the note at a later date on two blank pages which just happened to be at the right place in his diary and then dated it 12^th August 2005. Strictly speaking, a note misdated in this way is a forgery: see section 9 (1) (g) of the Forgery and Counterfeiting Act 1981. For the purposes of rule 32.19 such a diary note would not be "authentic".
106. It was clear from Mr Cunningham's opening that he did not accept the accuracy of the date on the note. The defendants did not object at that stage on the basis that the claimant was deemed to have admitted the accuracy of the note.
107. It is quite true that just before Doctor Shadrin gave evidence Mr Warwick drew attention to rule 32.19. Mr Warwick did not, however, press the point. That is unsurprising, because he was counsel for BMW. Mr Bishop, who represented Doctor Shadrin, did not pursue the point at all. In particular Mr Bishop did not object to Mr Cunningham cross-examining Doctor Shadrin about the accuracy of the date.
108. If Mr Bishop intended to hold the claimant to the deemed admission, he should have objected to that line of cross-examination. If he had done so, the judge would then have had to decide whether to allow the claimant to withdraw the deemed admission. I incline to the view that the judge would have allowed withdrawal, because that would not cause prejudice to the defendants. However there was no objection raised by Mr Bishop, so the issue did not arise.
109. Mr Bishop first placed reliance on rule 32.19 in his closing speech. By then it was too late. The accuracy of the date of the diary note had been fully explored in evidence. It was not appropriate on the last day of trial to invite the judge to ignore part of the evidence on the basis that it was shut out by a deemed admission.
110. Mr Tager submits that all defendants were prejudiced by the absence of notice under rule 32.19; if counsel had given such notice at the proper time, the defendants could have instructed a handwriting expert to advise. In my view it is highly unlikely that any handwriting expert could have assisted the court on the date of the diary note. Although an expert could have assisted on the question of who wrote the note, there was no dispute about that.
111. For the reasons set out above I reject the first and second defendants' third ground of appeal.
112. I must now turn to the agency issue.
Part 8. Agency
113. It follows from Parts 4 to 7 above that I would dismiss the first and second defendants' appeal on liability. The next question which arises is whether, in making their fraudulent misrepresentations, the first and second defendants were acting as agents for BMW.
114. The judge held that the first and second defendants were acting as agents for BMW. See paragraphs 120 to 232 of the judgment and proposition (vi) in the summary of the judgment.
115. I would summarise the judge's findings and reasoning on this issue as follows:

i) Mr Maggs and Mr Balfour asked Doctor Shadrin and Eco to find investors in the Sandford Farm project. Doctor Shadrin and Eco acted as the agents of BMW for this purpose.

ii) BMW became aware that Russian investors as clients of Eco and Doctor Shadrin would be investing substantial sums in the project through Eco. In due course they arranged for shares in SFPL to be issued to Eco as nominee for those investors.

iii) Accordingly Doctor Shadrin and Eco solicited the £2 million investment from Ludsin as agents for BMW.

iv) BMW knew that Doctor Shadrin and Eco were concealing from Mr Lisitsin and Ludsin the two-tier structure and the differential. BMW were complicit in this concealment.

v) Accordingly Doctor Shadrin and Eco made the fraudulent misrepresentations as agents for BMW.

116. Mr Tager accepted that Mr Maggs and Mr Balfour had a financial interest in concealing the two-tier structure and the differential from Mr Lisitsin. He also accepted that Mr Maggs and Mr Balfour were acting unethically. Nevertheless Mr Tager submitted that BMW have no liability as agents for any fraudulent misrepresentations made by Eco or Doctor Shadrin.
117. I would summarise the arguments which Mr Tager developed on this issue as follows:

i) Mr Cunningham put in cross-examination to Doctor Shadrin that he was acting as agent for BMW in soliciting investments in the Sandford Farm project. He did not put the same allegation in cross-examination to Mr Maggs or Mr Balfour.

ii) Even if BMW knew that Eco and Doctor Shadrin were soliciting wealthy Russians to put up funds, that was not sufficient to establish agency. Eco were principals who accepted a mandate to find and introduce purchasers for the acquisition of the Sandford Farm site. More specifically, there were seeking investors who had become shareholders in the SPV which acquired the site under deal two.

iii) Eco operated like many other intermediaries in the financial and property world. They acted as go-between. They put persons seeking a home for their money and persons seeking funds for a project in touch with one another. That activity does not make them agents for either party.

iv) It was Eco's duty to explain the nature of the proposed transaction to their clients. This was not the responsibility of BMW.

v) The payment of a commission is consistent with agency, but is not sufficient to establish agency. In any event it was Bound Oak, not BMW, who paid the commission.

vi) The agency claim was not properly pleaded.

vii) At best Eco was acting as agent for Wharf. There was no basis for saying that Eco or Doctor Shadrin acted as agents for BMW. Eco provided financial services and was authorised by the FSA to do so. Doctor Shadrin was not so authorised.

viii) If Eco or Doctor Shadrin perpetrated a fraud, BMW were not involved in that fraud. Although BMW may have strongly suspected that Doctor Shadrin was concealing the two-tier structure and the differential from Ludsin, they did not know this. Strong suspicion is not enough to establish liability.

118. Although I have not been persuaded by these arguments, it would be churlish if I do not pay tribute to the remarkable skill with which Mr Tager presented them.
119. It is clear from the documents which the judge has analysed that Mr Maggs and Mr Balfour did not simply "suspect" that Doctor Shadrin was concealing the two-tier structure and the differential from Mr Lisitsin. They knew that Doctor Shadrin was doing so and intended that he should do so. This was what the judge found in paragraphs 229 and 230 of her judgment. The judge was fully entitled to make this finding on the basis of the documents and on the basis of the oral evidence given by Mr Maggs and Mr Balfour. The judge found that evidence untruthful in many respects.
120. Let me now address Mr Tager's individual arguments, by reference to the numbering set out above. As to argument (i) it was clearly part of the claimant's case that the first and second defendants were acting as agents for BMW in soliciting investments. This was expressly pleaded in the particulars of claim. In addition, Mr Cunningham made this clear in his opening on day one at pages 83 to 84 of the transcript, where he relied upon the relevant passage in Bowstead on agency. Mr Cunningham put this allegation in cross-examination to Doctor Shadrin, who appeared to accept it. Mr Cunningham did not put the same allegation to Mr Maggs and Mr Balfour in cross-examination and I accept that strictly speaking he should have done so. On the other hand this was obviously part of the claimant's case and BMW had every opportunity to deal with it. The question whether an agency relationship existed is ultimately an issue of law to be determined on the basis of the primary facts. In my view, Mr Cunningham's failure to put the allegation of agency to Mr Maggs and Mr Balfour, as he did to Doctor Shadrin, cannot possibly shut out this part of the claimant's case.
121. As to arguments (ii) and (iii), I accept that in many situations in the property or commercial world intermediaries operate as principals. They effect introductions and are rewarded for doing so without becoming the agents for either party. The present case, however, is different. BMW were desirous of making a handsome profit from the two-tier structure and the differential. They asked Doctor Shadrin to find investors who would put up money for deal two and they asked him not to reveal critical features of the transaction. They were acting dishonestly in this respect and authorising Doctor Shadrin to reveal some matters but not others to prospective investors. In my view the judge's finding of agency was correct and I reject arguments (ii) and (iii).
122. As to argument (iv), I quite accept that Eco was under a duty to disclose the true nature of the transaction to prospective investors. BMW, however, were under a similar duty as they were acting as principals in this dishonest enterprise.
123. As to argument (v), in my view the payment of a substantial commission to Eco supports the inference of agency. The commission originally proposed was £250,000. In the event the commission was reduced to £125,000, since the investors whom Eco introduced only contributed £2.5 million rather than £5 million as originally planned. The fact that Bound Oak, rather than BMW, paid the commission to Eco does not assist the defence case. Mr Maggs and Mr Balfour controlled Bound Oak and determined how and to whom the differential would be paid out.
124. As to argument (vi), the claimant pleaded the agency in paragraphs 23 and 24 of the particulars of claim. Those paragraphs set out the principal facts relied upon and invite the court to infer that the first and second defendants were acting as agents for BMW. It is always possible to suggest improvements to a pleading after it has been put under the spotlight for days on end in court. Nevertheless the case which BMW had to meet was abundantly plain and I reject the contention that it was inadequately pleaded.
125. As to argument (vii), I readily accept that Eco was acting as agent for Wharf. This is not, however, a case in which the corporate structure overrides any personal liability. Sadly, this is a case in which the directors of Wharf and Eco were collaborating in a dishonest scheme to make a personal profit at the expense of Ludsin, without Ludsin knowing the true facts. Against that background they cannot escape personal liability by sheltering behind the corporate veil. Both Mr Maggs and Mr Balfour received clear advice from Forsters that they were under a duty to disclose the two-tier structure and the differential to Ludsin. They chose to ignore that advice. Mr Balfour's conduct is even more shocking, since he was a director of Eco and allowed the investors whom Eco solicited to be misled.
126. Mr Tager submits that Doctor Shadrin, unlike Eco, was not authorised by the FSA to give financial advice. That does not in my view mean that he was not acting as agent for BMW. Dr Shadrin was, as the judge found, complicit with BMW in a scheme whereby crucial facts would be withheld from Ludsin.
127. At this point I should refer to BMW's second ground of appeal. This is that BMW disclosed the true nature of the transaction to other investors who were not introduced by Eco. That is evidenced by transaction notes. In my view this argument gets BMW nowhere. The fact that BMW may have been honest towards other investors does not mean that they were honest towards Ludsin.
128. Furthermore this argument does not assist BMW on causation. The fact that other investors were prepared to put up funds with knowledge of the two-tier structure and the differential is irrelevant. Mr Lisitsin gave evidence that he would not have been prepared to invest in the project if he had known of those matters. The judge accepted that evidence.
129. Let me now draw the threads together. For the reasons set out above I reject BMW's second and fourth grounds of appeal. I would uphold the judge's conclusion that BMW are liable as principals for the fraudulent representations made by Eco and Doctor Shadrin.
130. That disposes of the main issues which have been argued on this appeal. I can deal more briefly with the other grounds of appeal.
Part 9 – The other grounds of appeal
131. The fifth ground of appeal advanced by the first and second defendants is that the claimant's loss was caused not by the fraudulent misrepresentations, but by Mr Lisitsin's refusal to make or authorise further investment in the project, when requested to do so in 2009. This conduct could either be viewed as breaking the chain of causation or as the claimant's failure to mitigate its losses.
132. I reject this contention. When pressed in argument Mr Bishop very fairly accepted that under the claimant's original agreement to invest there was no obligation to put up further funds upon request. Many problems arose between 2005 and 2009. There was no reason why Mr Lisitsin or Ludsin should throw good money after bad. Furthermore the request for further funding was coming from the very people who had deceived the claimant. I therefore reject this ground of appeal.
133. The first and second defendants' sixth ground of appeal is that in assessing damages the judge failed to give credit for certain sums which the claimant received from Forsters. These sums were paid pursuant to a settlement agreed in February 2011.
134. In the course of the appeal a number of documents were handed up concerning the settlement, all of which had been before the trial judge. It is clear that in February 2011 Ludsin settled a number of claims which it had against Forsters. Some of those claims were assigned to Ludsin by the liquidator of SFPL. Ludsin was bringing other claims against Forsters in its own right. The judge held that only £600,000 of the settlement money paid by Forsters were referable to Ludsin's claims against the first to fifth defendants in the present action. I am quite satisfied that the judge was entitled to make this finding.
135. Mr Tager for BMW adopted all of the first and second defendants' grounds of appeal, but did not advance any separate submissions on these matters.
136. In the result, therefore, I would dismiss the first and second defendants' sixth ground as well as their fifth ground of appeal.
137. That disposes of all the individual grounds of appeal which have been argued. It is now time to draw this judgment to a conclusion.
Part 10. Conclusion
138. The skeleton argument of the first and second defendants begins with the following introductory paragraph:

"This is an allegation of fraudulent misrepresentation against respected figures in the London business community causing the Claimant (Respondent to this application) to lose £2 million. It is made against men of impeccable antecedents and reputation by a Russian former oil trader."

139. Mr Lisitsin is indeed a former Russian oil trader. He had money to invest and he expected those with whom he dealt to act honestly. The comments made about the other parties to this action in the paragraph quoted above are hardly warranted in the circumstances of this case.
140. For the reasons set out in Parts 5 to 9 above I would uphold the judge's finding that all five defendants acted dishonestly. They have committed the tort of deceit and are liable to the claimant for damages in the sum of £1.4 million.
141. If my Lady and my Lord agree, this appeal will be dismissed.

Lord Justice McFarlane:

142. I agree.

Lady Justice Arden:

143. I also agree.