England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		31 July 2008

Sir Charles Gray :

Overview

1. Over a period of months in 2003 the Claimant, Mr David Bampton, advanced substantial sums to a group of companies called Five Anchors Group ("FAG"). Most, if not all, of the companies within that group subsequently went into liquidation with the consequence that Mr Bampton has been unable to recover the sums he advanced.
2. Mr Bampton now seeks to recover the amount of those advances from the Defendants, who are firstly Mr Peter Rust, who was at that time a chartered certified accountant, and secondly Fordyce Curry & Co, the accountancy firm of which Mr Rust was the principal and also proprietor.
3. Mr Bampton's case is essentially that Mr Rust was negligent in the advice which he gave to him in connection with those advances and that he also made dishonest statements to him in connection with them. Mr Rust initially at least denied that either he or anyone else at Fordyce Curry gave any advice to Mr Bampton in relation to any investment. Mr Rust asserts that Mr Bampton obtained his advice in that regard from a Mr Keith Rodgers and his company Mountfield Services Limited ("Mountfield").
4. A somewhat unusual feature of the case is that both Mr Bampton and Mr Rust were charged with fraud. Mr Bampton pleaded guilty to 10 counts of using a false instrument as part of what is known as an "advanced fee fraud". He was also convicted by a jury of two further counts of conspiring to furnish false information. Mr Rust was convicted of money-laundering and the same two conspiracy counts of which Mr Bampton was convicted Mr Rust's convictions were later overturned by the Court of Appeal (Criminal Division). He was acquitted by the jury at his retrial.

The uncontroversial background facts

5. Mr Bampton spent many years working in computers. Having worked for several companies, he became self-employed in the 1990s. After a while he formed his own company, ACS Limited, which became very successful. Mr Bampton also traded under the name ACS. His business involved the supply and maintenance of computer systems, programmes and accounting software. Mr Bampton's evidence was that by the late 1990s until about 2004 he was making up to £500,000 per annum before tax.
6. In the late 1980s Mr Bampton appointed Fordyce Curry to act as accountants for his business and for himself personally. The firm assisted Mr Bampton to set up ACS Limited and thereafter prepared all accounts for the company and handled all aspects of its business. Mr Bampton's main contact at Fordyce Curry was a Mr Elias Poli, who was a manager at the firm. Prior to 2001 Mr Bampton's contacts with Mr Rust were few. He spoke to him on the telephone about twice a year about taxation matters or restructuring his affairs and in addition had the occasional meeting with him.
7. According to Mr Rust, Fordyce Curry had a hundred or so clients at that time. They included self-employed individuals, public and private companies and charities. About 25% of Fordyce Curry's business came from two companies, namely Trafalgar Commodities Limited ("Trafalgar") and Five Anchors Group UK Limited ("FAG UK"). I will describe the business of this group of companies and of its overseas associate companies later in this judgment.
8. In addition to managing the practice of Fordyce Curry, Mr Rust was in the habit of spending three afternoons per week working at the offices of FAG UK. His role was to give accountancy-related advice to companies within the FAG UK and to associated companies based outside the UK. His evidence was that he negotiated contracts for FAG with governments in Africa, met European banks and the IMF for FAG and also raised finance for FAG. The majority shareholder in all those groups was Mr (or Captain) Avram Moskovitch, who was also himself a client of Fordyce Curry. FAG UK paid Fordyce Curry about £300 per hour for Mr Rust's time at their offices. Fordyce Curry billed FAG UK for 13 hours of Mr Rust's time per month, although it was the evidence of Mr Rust that he frequently spent more time than that at FAG's offices.

Five Anchors Group

9. According to the evidence of Mr Rust, Five Anchors Group comprised two related sets of companies based in West Africa and in the UK respectively. The former set of companies ("FAG International") had numerous offshore subsidiaries, one of which was Clipper Marine Limited. The parent of this set of companies is said by Mr Rust to have been FAG International Corporation Limited. His evidence was that the turnover of this group was in its best years running at £14-15 million per annum. Most of the group's business was in Nigeria.
10. The set of companies based in the UK was made up of several companies most of which carried out service and procurement for the FAG International companies. The combined income of the FAG UK companies is said by Mr Rust to have been about £600,000 per annum over the period to 2000.
11. Because of the precariousness of the Nigerian currency, the FAG International companies were in the habit of invoicing their customers in US dollars. Although the FAG International had bank accounts in West Africa, particularly in Nigeria, its principal banker at the material times was HSBC. According to Mr Rust, most of the income of the FAG International companies was paid into the account of Clipper Marine Limited at the Isle of Man branch of HSBC.
12. Fordyce Curry was the accountant and auditor for all the FAG UK companies but not for the FAG International companies. It was Mr Rust who advised Mr Moskovitch to form FAG UK companies into a group.

Mr Bampton sets up Litton Consultants

13. As I have said, the time came when Mr Bampton also made substantial loans to FAG UK. It is necessary for me to go back in time in order to describe how it came about that Mr Bampton began to invest the money he had made out of his computing business.
14. According to Mr Bampton, a meeting between himself and Mr Rust took place early in 2001. The purpose of the meeting was for Mr Bampton to obtain advice from Mr Rust as to the best way of his acquiring an offshore property. He had visited Dubai and was keen to purchase property there as a future home for himself and his wife. Mr Bampton's evidence was that Mr Rust advised that the best course was for him to acquire an offshore company. Mr Bampton says that Mr Rust recommended a Mr Keith Rodgers of Mountfield Services as a suitable person for Mr Bampton to contact to arrange the acquisition of an offshore company. According to Mr Rust, Mountfield is a company which sets up and administers offshore companies. It had historically sourced loans for FAG. Mr Rust says that Mr Rodgers played a significant role in the administration of loans made to FAG and that he was a signatory of the bank account of Clipper Marine (a FAG International Subsidiary).
15. Mr Bampton gave evidence that at this same meeting Mr Rust also gave him advice about making secured investments pending his finding a suitable offshore property to purchase. Mr Rust told Mr Bampton, according to the evidence of the latter. that he had a number of other clients who had spare money and also wished to make secured investments. Mr Bampton's evidence was that Mr Rust told him that these funds could be invested in secure short and long-term worldwide investments. He gave him two examples of ways in which secured investment might be made. Both examples involved lending money to companies which had bought goods but who needed finance in order to ship and insure them. The loans would be secured on the cargoes and repaid on delivery. According to Mr Bampton, Mr Rust also told him that, since there was a pool of funds, he could arrange for his funds to withdrawn from an investment within a week.
16. Mr Bampton said that Mr Rust charged him £5,000 for the advice given at this meeting, which according to Mr Bampton lasted about two hours. He claimed that he was invoiced for the advice but the document he relied on has the reference of Mr Poli on it, rather than Mr Rust, and purports to be for consultancy advice for the year to 31 March 2001. Mr Rust advised Mr Bampton to contact Mr Rodgers of Mountfield about setting up an offshore company.
17. Mr Rust initially denied in paragraph 61 of his witness statement having given Mr Bampton any advice to Mr Bampton in relation to any loan or to have discussed with him any loan. His case is that neither he nor any of his staff at Fordyce Curry provided any investment advice. No advice was given by anyone at that firm in relation to the setting up and/or administration of offshore companies. Mr Rust denies having at any stage provided anyone who loaned money or who was seeking to lend money with investment advice. Mr Rust's evidence was that, if any clients sought advice in relation to offshore companies, he would refer the client to Mountfield. According to Mr Rust, it was Mr Rodgers of Mountfield who advised or suggested to Mr Bampton what investments should be made. If a client wanted investment advice, he would forward such a client to MJ Mac Investment Management.
18. However, in the course of cross-examination Mr Rust accepted that in early 2001 he had asked Mr Rodgers if he had any clients who had money to lend. At the suggestion of Mr Rust he contacted Mr Bampton, who telephoned Mr Rust on his car phone. According to Mr Rust, Mr Bampton asked him about the company to which the funds would be going. Mr Rust answered that the sum of £40,000 would be going to a subsidiary of FAG International, which he described as a company working in West Africa with representative offices in London. Mr Rust said that he was the service accountant of the UK group of companies, i.e. FAG UK. Mr Rust also told Mr Bampton that the overseas company worked for the Nigerian Ports Authority and had various contracts for hydrographic and other work. Mr Rust agreed that he gave Mr Bampton quite a good bill of health in the course of this conversation.
19. Mr Rust also accepted that there was no discussion as to the risk of making a loan. He accepted that he was aware that FAG UK was in need of loans because of cash flow difficulties it was having at that time. Mr Rust did not inform Mr Bampton that the interest on the money lent would come from Clifford Marine (a subsidiary of FAG International). Nor was there any discussion about security for Mr Bampton. Mr Rust nevertheless maintained that he was not giving Mr Bampton advice.
20. Mr Bampton thereafter lent or invested the sum of £40,000 through Mountfield, whose Mr Rodgers transferred the money to Clifford Marine. As will appear hereafter Mr Bampton denies that he was told the name of the borrower at this point in time or that he was informed about the nature of its business.
21. Mr Rodgers subsequently set up an offshore company named Litton Consultants. Mr Bampton now accepts (contrary to his case at his criminal trial) that he was at all material times the beneficial owner of Litton. He paid Mr Rodgers £3,500 per year to cover the registration of Litton and his time administering that company. However, Mr Bampton insists that Mr Rodgers had never given him any investment advice. Mr Rodgers simply followed his instructions with regards to share purchases and sales. His only dealings with Mr Rodgers related to the buying of shares and arranging a mortgage on a property which was purchased by Litton. Mr Bampton says he has never met Mr Rodgers.
22. Mr Rodgers was not called to give evidence in person by either party. However, the papers in the case include two faxes from Mr Rodgers dated November 8^th 2007 and January 16^th 2008. In those faxes Mr Rodgers says that the only dealings that Mountfield had with Mr Bampton were the administration side of his company and that it would appear that any investment would have been instigated by Mr Bampton. Mr Rodgers further says in the second of the two faxes that he had no dealings or knowledge of what Mr Bampton or his company decided to invest in; investments decisions were made by Mr Bampton.
23. It appears that Mr Rodgers is probably resident outside the jurisdiction, although he is conspicuously careful to avoid giving any indications of his present whereabouts. Hearsay notices have been served in respect of the two faxes. In my view, however, little, if any, weight should be given to this evidence (if that is the right word) from Mr Rodgers.

Mr Bampton's "investments" or "loans"

24. The evidence of Mr Bampton is that he made some relatively minor investments in the 1990s after taking advice from Mr Rust. As I have said, Mr Rust denies ever having given such advice. Subsequently, according to Mr Bampton, he began investing on a more substantial scale.
25. The loan or investment of £40,000 by Mr Bampton is evidenced by a manuscript note from Mr Rodgers to Mr Bampton dated 27.3.01 which reads:

"Please find contract note for share purchases. Peter has placed £40,000 at 12%, paid monthly".

"Peter" is presumably Mr Rust and it is he who is said to have placed the £40,000. There are other references to "Peter" in several other documents emanating from Mr Rodgers at about this time: see for example the notes from Mr Rodgers to Mr Bampton dated 7 February 2001 (B/46/247) and 28 September 2001 (B/46/239).

26. Also in evidence is a manuscript document in the handwriting (so it would appear) of Mr Rodgers. It is undated but is said by Mr Rust to be an "early statement for Litton (31.01.01)". It records the receipt by Litton of US$444,710.46. Mr Bampton explained from the witness box that this comparatively large sum represented the proceeds of trading which he had carried out in the US in share options. Mr Bampton said that he had made a handsome profit of the sale of the share options which he had in a US company called Forefront Technologies Inc, which was taken over by another company called NCR. There is no reference to this profit in the tax returns of Mr Bampton (or his businesses) because the profit was made offshore and remained offshore when it was transferred to Litton, as the manuscript document indicates.
27. The significance of this document, as it appears to me, is that it indicates that out of the monies received by Litton, US$193,993.33 was applied to purchase shares and US$200,000 was applied to what is described as "loan investment $200,000 to 31.3.01 at 12% interest paid at the end of term US$6000".
28. Pending his acquisition of an offshore property, Mr Bampton said that he transferred further funds to be invested in secure worldwide investments which he claims that Mr Rust had told him about. These transfers were, according to Mr Bampton, made by various routes: initially monies were transferred indirectly via Litton or Mountfield and later payments were made directly into the client account of Fordyce Curry. It is apparent from Fordyce Curry's client account ledgers that (as Mr Rust accepts) Mountfield was the vehicle by which very substantial monies were transferred to Fordyce Curry by investors or lenders other than Mr Bampton. A large proportion of these monies appears to have been invested in FAG by way of short-term high-interest loans.
29. Mr Bampton insisted in his evidence that he had no knowledge at the time of the fact that all of the money advanced directly or indirectly by him was being used for unsecured loans to FAG. He does, however, accept that by 2001 he was aware that FAG was one of Fordyce Curry's largest clients and that Mr Rust spent a number of afternoons in FAG's offices each week.
30. The advances which are the subject of this action were all made in 2002 and 2003. Mr Bampton did accept that he had made earlier advances which had not been repaid. He accepted that these unpaid loans or investments had not been included in the present action. The explanation which he gave was that to have done so would have complicated matters. This may be because the earlier loans were made through Litton whose documents are apparently not now available to Mr Bampton.
31. It is common ground that the following transfers were made by Mr Bampton and that the monies were advanced to FAG at rates of interest ranging from 12% to 30% per annum:

August 2002 … £100,000

August/September 2002 … £50,000

October 2002 … £10,000

December 2002 … £154,000

December 2002 … £20,000

June 2003 … £29,674.40

June 2003 … £17,521.72

June 2003 … £29,970

June 2003 … £49,975

June 2003 … £19,975

July 2003 … £17,953.75

July 2003 … £10,000"

The total monies loaned or invested was £534,213.79. This is the amount claimed by Mr Bampton in the action.

Loans made to FAG by other clients of Mr Rust

32. Mr Rust was asked in the course of his cross-examination about other clients of Fordyce Curry who lent money to FAG. He accepted that clients of the firm lent monies totalling hundreds of thousands of pounds but not millions. Mr Rust was initially reluctant to say what clients of Fordyce Curry other than Mr Bampton lent money to FAG. He agreed that one such was Mr David Bell, the proprietor of a firm called ET Commercials, a longstanding client of Fordyce Curry. Mr Rust said that he had told Mr Bell that he might be able to get him a good rate of interest, if he was interested in lending money. Mr Rust accepted that Mr Bell lent FAG £485,000 in July 1998. Mr Rust denied having given any investment advice to Mr Bell. That loan was repaid on time by FAG but, according to Mr Rust, Mr Bell continued to make loans to FAG which got up to about £650,000. Mr Rust said that Mr Bell was continuing to lend money to FAG as late as June 2004 at which time the monies lent totalled £500,000.
33. Although initially Mr Rust had some difficulty in recalling the identity of other clients of his firm who had lent money to FAG, he accepted that the other lenders included Trafalgar. That company lent money to FAG via Mountfield. Mr Rust gave evidence that he raised the question of a loan to FAG with the Managing Director of Trafalgar in 2002, telling him that he had a client who needed short-term funding and asking if Trafalgar wanted to earn some decent interest rates. Mr Rust accepted that he did not tell Trafalgar how serious the cash shortage affecting FAG was at that time. Trafalgar lent substantial sums to FAG International, Clipper Marine and to Mr Moskovitch personally.
34. Other clients of Fordyce Curry who lent money to FAG were Mr and Mrs Chalfin. Their loans were made through a nominee company, which made payments into the firm's client account. Asked how that came about, Mr Rust explained that he had gone to see the Chalfins who were having problems with their then bankers, HSBC. Mr Rust said that he had a client who was paying quite good interest rates on monies lent. According to Mr Rust, Mr Chalfin eventually said he was interested in doing something. Mr Rust believes that the initial conversation took place in September 2002. Mr Rust said that no mention was made at this meeting of the identity of the borrower. He explained that Mr Moskovitch was doing business in Italy with Mr Chalfin at that time and he did not want Mr Chalfin to know that it was FAG which was to be the borrower. Mr Rust agreed that he had told Mr Chalfin that he had a number of clients who had invested in the same borrower.
35. Mr Chalfin was called to give evidence on behalf of Mr Bampton. He said that in January 2000 his wife and himself had sold their controlling interest in their then company. Their insurance broker, Mr Mac, advised them to consult Mr Rust since he was an accountant who had made a specialisation of tax avoidance. Following this recommendation, in early 2001 the Chalfins engaged Mr Rust to deal with the accounts of another company which they controlled. According to Mr Chalfin, in mid to late 2001 Mr Rust approached him with a view to obtaining monies for investment. At that time he was not interested.
36. Thereafter Mr Rust periodically mentioned the availability of an investment and an extremely good rate of return. In or about October 2002 Mr Rust came to see Mr Chalfin to see whether he would invest money with him to purchase ships. According to Mr Chalfin, Mr Rust told him that he had a number of private investors and he explained that there would be a guaranteed 12% return post tax. Mr Chalfin's evidence is that at that meeting no mention was made of any company or individual and his understanding was that Mr Rust was asking for the money personally. Mr Chalfin believed that he was advancing the money to him. He was unaware that FAG was involved in the transaction. Mr Rust gave evidence that he did not disclose the name of the borrower to Mr Chalfin because at the time Mr Chalfin was doing business with Mr Moskovitch in Italy who did not want Mr Chalfin that it was FAG which was the borrower.
37. On the advice of Mr Mac, Mr Chalfin obtained a guarantee from Fordyce Curry. The Chalfins initially loaned a total of £500,000. Repayments were made regularly and promptly.
38. In the autumn of 2003 Mr Chalfin received a telephone call from Mr Rust who said that he needed a temporary loan of £50,000 for a period of one month. Mr Chalfin did not believe that he was lending the money to FAG, notwithstanding that Mr Rust gave him the account details of Fordyce Curry by a letter bearing FAG's letterhead. In November 2003 Mr Rust called Mr Chalfin to say he needed a further £50,000 short-term. Mr Chalfin says that he still had no idea that the money was being lent to FAG. The earlier loan had still not been repaid. Because the loans had not been repaid a meeting took place between Mr Rust and Mr Chalfin in November 2004, when Mr Rust promised that the full amount owed to Mr Chalfin would be repaid over the next few months. This did not happen and accordingly the Chalfin's nominee company has commenced proceedings against Mr Rust, his firm and FAG claiming repayment of the sums advanced, namely £600,000, plus interest.
39. In cross-examination Mr Chalfin explained that, at the time when he made the loans, he thought that Mr Rust was an honest man and he trusted him. Mr Rust was dealing with all the Chalfin's companies at that time. His insurance broker, Mr Mac, had described Mr Rust as successful and honest. According to Mr Chalfin, Mr Rust did not disclose the fact that the monies were being lent to a client of his firm. There was no mention of FAG. Asked about a receipt which he had signed confirming receipt of £25,000 "in respect of funds due from Five Anchors Group Ltd", Mr Chalfin said that he had signed the document in his car and that he had not noticed the wording on the document. He returned the receipt to Mr Rust and was not provided with a copy.
40. Mr Rust was asked in cross-examination about what other clients of his firm had invested in FAG. He said that there were others than those I have mentioned but he could not remember their names. He accepted that one other client was named Walcott, who lent £60,000 to FAG in late 2001 or 2002. He agreed that he had told Mr Walcott that the borrower was someone he (Mr Rust) knew very well and he trusted. He also told Mr Walcott that the client was a company trading in West Africa which had a cash flow requirement but which was not in financial difficulties.
41. Other clients of Mr Rust who he accepted had lent money which went to FAG were, firstly, Mr Awoyee of Patten Holdings Limited and, secondly, Mr G.K. Dennis, an elderly man, who in July 2003 lent £45,000 which also went to FAG.

Mr Bampton's criminal wrongdoing

42. I have referred in paragraph 4 above to Mr Bampton's criminal convictions and to the fact that Mr Rust was also prosecuted but ultimately acquitted. Mr Bampton includes in his witness statement a detailed account of how he says he became involved in the advance fee fraud.
43. According to Mr Bampton, his involvement arose out of a meeting he had with Mr Rust in about May 2003, when Mr Rust mentioned that he had a client who has asked him to arrange banking facilities for his investment funds with a respectable UK bank. The client was not a UK citizen and so could not himself open such an account. It subsequently turned out that Mr Rust's client was a Mr Ajami who was based in Lagos, Nigeria, who wanted a UK account to enable his investors to deposit US dollars in order to purchase goods in Europe for shipment to Nigeria. Mr Bampton was to receive substantial commission for his assistance.
44. Mr Bampton duly opened a US dollar account at Barclays' Isle of Man branch into which various sums were paid from May 2003 onwards. Mr Bampton's account is that he kept Mr Rust informed about what was happening and did what Mr Rust requested him to do. Some of the payments out of the Isle of Man account were paid into Fordyce Curry's client account. The ledger shows that over this period very substantial sums were paid into that client account by individuals who occupied or had occupied senior positions with the Nigerian Port Authority.
45. It would overload this judgment to go into the details of the various transactions which took place. It is sufficient to say that at the end of June 2003 Barclays asked Mr Bampton about the source of the incoming funds. He then says that he in conjunction with Mr Rust produced false invoices designed to conceal the true source of the funds. Thereafter Mr Bampton took elaborate steps to conceal what had happened by producing various false instruments. When the police became involved, Mr Bampton, as he accepts. told detailed and intricate lies in the course of several interviews under caution. Those interviews have been included in the trial bundles in this action.
46. At his criminal trial Mr Bampton pleaded guilty to 10 of the 16 counts against him. He contested two counts because they alleged conspiracy but was convicted by the jury. As I have said, Mr Rust was acquitted at a retrial. Mr Bampton gave evidence for the prosecution at the retrial.

FAG's financial state

47. I return to the question of FAG's financial state. It is apparent form the report by the liquidator of FAG Limited that FAG UK diversified its activities in the later 1990s and invested substantial sums in new areas of activity. Those new projects all proved to be non-profitable. The position worsened between 2000 and 2002. Mr Rust accepts in his witness statement that FAG UK run into cash-flow problems in about 2000 and consequently had to raise a number of loans. By contrast in his oral evidence Mr Rust claimed that the real financial difficulties within FAG arose rather later in 2001.
48. Mr Rust attributes the problems besetting FAG UK to a change of government in Ghana where FAG International had a valuable water supply contract; problems with a pipeline contract with Chevron; a change of government in Nigeria which resulted in suspension of payments due under a construction of contract there and the purchase of a vessel which turned out to be unable to operate. Although Mr Rust did not mention it in his witness statement, part of the problems confronting FAG over this period appear to have arisen because a government enquiry commenced into corruption allegedly taking place within the Nigerian Port Authority, which had historically been a major source of revenue for FAG International. One outcome of this enquiry was that a Mr Bello Gwandu was removed from his post as Managing Director of the Authority in October 2001.
49. Mr Rust explained that by 2003 the situation had been exacerbated by the fact that income generated by companies within FAG UK was being absorbed by the FAG International companies. By 2003 the bank accounts of those UK companies were considerably overdrawn and the bankers wanted to reduce the facility of approximately £2.5 million which had been advanced to them.
50. In September 2003 Mr Rust on behalf of Fordyce Curry signed the auditors report to the shareholders of FAG UK for the year ended 31 December 2002. Its debts stood at over £2.3 million. The report stated that the debtor (Clifford Marine) was in negotiations (with the Port Authority) to settle the balance, creating what the report describes as "a fundamental uncertainty". The going concern assumption made in the report was said to be dependent on continuing support from bankers and shareholders.
51. In the event FAG UK's bankers, HSBC, removed their support in May 2003 when FAG reached the extent of its facilities. HSBC, according to the liquidator's report froze FAG UK's accounts at that time.
52. The evidence of Mr Rust is that, due to the cash-flow difficulty, he personally had advanced a series of short terms loans to FAG UK over the period from late 2002 until 23^rd April 2004. These loans were made by him interest-free. He says that the purpose of the loans was to meet was to meet pressing bills and salaries at that time. The loans were paid out of his private bank account at HSBC. By 31 December 2003 Mr Rust says that he was owed £157,841.97 by FAG UK. Since the end 2003, Mr Rust says he has lent a further £20,000 to FAG UK and £48,000 to Mr Moskovitch personally.

Mr Bampton takes action

53. Mr Bampton was unaware at the time that Mr Rust had been lending money to FAG, as had many other clients of his (see paragraphs 32-41 above). Nor did he know at the time that the client account of Fordyce Curry was repeatedly overdrawn because clients' funds were improperly being paid over to FAG. So much is apparent from the bank statements for the main client account and the linked money manager account and the handwritten ledger relating to the client accounts. It is to be noted that all this was going on at the time when Mr Bampton advanced the monies which are the subject of the present proceedings.
54. According to Mr Bampton, it was not until late July or early August 2003 that he realised that all of his so-called investments through Mr Rust had gone to FAG. This happened when Mr Bampton asked Mr Rust to make available to him some of his investments because he need money to finance the purchase of the property in Dubai. Mr Rust told him that the funds were not available because FAG was still having what Mr Rust described as "cash problems". Mr Rust strongly challenges Mr Bampton's claim to have been unaware of the destination of the monies he advanced.
55. A meeting was arranged between Mr Bampton, Mr Rust and Mr Moskovitch. It was agreed that a formal agreement was required. At Mr Rust's request the agreement was to comprise all the funds which had been sent to his firm's client account. Mr Booth, a solicitor introduced by Mr Rust, drew up an agreement on behalf of Mr Bampton. In the draft agreement Mr Bampton's loans are said to amount to £160,100 plus $214,675. The borrower is identified as FAG UK, which acknowledge receipt of the monies and agrees to repay them by 31 October 2003. The draft further provides for FAG UK to give security by means of a charge over its assets.
56. Mr Booth gave evidence that Mr Rust telephoned him to seek the deletion of the reference to security. Mr Booth did so. Despite his chasing FAG UK the agreement was never signed. Mr Rust dismisses the loan agreement as nothing more than a fiction to serve his own purposes.
57. The relationship between Mr Rust and Mr Bampton ended in or about late 2003 or early 2004. FAG UK went into liquidation in June 2005. According to the report of the liquidator the total deficiency was nearly £5 million.
58. The instant proceedings were commenced in October 2006.

The statements of case

59. It does not appear to be necessary to embark on a detailed analysis of the pleadings. I say that because Mr Andrew Thomas, who appears for Mr Bampton, and Mr Imran Mahmood, who appears with Mr Benjamin Douglas-Jones for Mr Rust and his firm, accept that the outcome of the case will ultimately depend on my finding as to the respective credibility of the two protagonists.
60. Moreover it is now common ground that Mr Bampton did advance monies in the amounts pleaded in the Amended Particulars of Claim and that those monies, albeit that most of them were initially paid into the client account of Fordyce Curry, were in fact loans to FAG UK. It is not suggested that the loans were not repayable by FAG UK or that any of them in fact have been repaid.
61. In those circumstances the issues which arise for decision are whether Mr Rust gave financial advice to Mr Bampton or omitted to give advice to him which he ought to have given. If so, the further question arises is whether Mr Rust was guilty of breach of an implied term of his retainer by Mr Bampton or alternatively was guilty of breach a duty owed to him at common law. There is a further or alternative claim in deceit: Mr Bampton alleges that Mr Rust made false and fraudulent representations to him in relation to the monies advanced. Particulars of dishonesty are set out in paragraph 18 of the Amended Particulars of Claim. An alternative case is pleaded that the statements were made negligently.
62. The Defence denies that Mr Rust gave any investment advice to Mr Bampton. It was Mr Rodgers who gave investment advice. The statement of case contains a detailed refutation of Mr Bampton's claims that is was Mr Rust who proposed the making of short-term secured loans or who made the representations claimed. The Defendants deny that Mr Bampton was ignorant of the identity of the borrower or that he was unaware of FAG's financial problems. In short negligence and deceit are denied.
63. I do not overlook that in the statements of case Mr Bampton relies on section 327 of the Financial Services and Markets Act, 2000 and on the Chartered Certified Accountants Investment Business Regulations. It does not appear to me that the legislation or the Regulations add materially to the common law claims. I understood both parties to accept this.

The law

64. There was little discussion about the law and no dispute as to the relevant principles. It was agreed that the relevant principles are to be found in Chapter 15 of the 6^th edition of Jackson and Powell on "Professional Liability". I accept that, where a financial practitioner recommends as suitable for an investor, such a recommendation carries with it implicit representations that (i) the nature of the investment has been carefully considered by the practitioner; (2) the investor's needs have been carefully considered by the practitioner and (3) the investment, viewed objectively, meets those needs.

Conclusions – preliminary observations

65. Both Mr Thomas and Mr Mahmood accepted that the outcome of the case turns on my view of the credibility of the parties. In addressing this question, I bear very much in mind the fact that there are recorded against Mr Bampton criminal convictions involving systematic fraudulent activities about which he persistently lied to police officers. Mr Rust on the other hand succeeded with his appeal against his original convictions and was acquitted at his retrial. It follows that he is a person of good character.
66. It is not, however, suggested and could not be suggested that the fact of Mr Bampton's convictions is dispositive of the outcome of this case. I have to bear in mind that, after trying to conceal his wrongdoing by telling persistent lies to the police, he did plead guilty to most of the charges of dishonesty against him. In the course of the present trial, he made no bones about his criminality and he appeared to me to be contrite about it.
67. It is inevitable in a case of this kind that I take account of my impression of the parties as they gave their respective accounts from the witness box. It was obvious to me that Mr Bampton is a highly intelligent man who has made a great success of his businesses in the sphere of IT. He is plainly very interested in making money but he did not strike me as someone who is or was at the time of his dealings with Mr Rust particularly sophisticated in financial and investment fields. That appeared to me to emerge clearly from his attempts to explain from the witness box the difference between secured investments and secured loans. Mr Bampton's expertise lay in the field of computers at least in the period of his dealings with Mr Rust. As to the reliability of his evidence, it appeared to me that he was trying to give a truthful account of events as he remembered them.
68. Mr Rust has spent 9 months in prison for crimes the second jury found that he did not commit. His professional career has been brought to an end. He appeared to me to be embittered by what has happened to him which is scarcely surprising. In assessing his reliability as a witness I make every allowance for that fact. I have to say, however, that he appeared to me to be an unreliable witness. He was combative and sometimes evasive when answering questions. I thought that he did on occasion falsely claim not to remember matters which he then recalled in considerable detail.
69. In the course of the case I heard a good deal of evidence about the clientele of Fordyce Curry and was taken in some detail through the client account ledger. Many of the firm's clients were Nigerian companies or individuals. Substantial sums are recorded as having been received into the account. I was unimpressed with Mr Rust's attempts to explain what the payments were or why they were paid to Fordyce Curry. He allowed the client account to go into overdraft and he appears to have paid money into the client account from his own private account. He plainly had a very close relationship with Mr Moskovitch and his companies. Indeed Mr Moskovitch is said to have described him as having been in effect acting as Finance Director of FAG. In these respects Mr Rust struck me as someone who was prepared to sail close to the wind.

"Secured investments"

70. Mr Bampton's case is that Mr Rust proposed to him that he should make "secured investments". This provoked much debate about the meaning of that phrase. I do not think anything turns on that issue. It is incontrovertible that Mr Bampton made unsecured loans. A loan is not the same thing as an investment. As I have said, Mr Bampton did not appear to have had a clear understanding of the distinction. But that does no in my judgment have any bearing on the outcome in this case.

The advice and representations given and made by Mr Rust

71. The initial stance adopted by Mr Rust was that as no time did he give any investment advice to Mr Bampton and that, if any client of his sought investment advice, his practice was to refer them to Mr Mac of MJ Mac Investment Management. Accordingly he denied having given such advice to Mr Bampton in the early 1990s (see paragraph 15 above) or in early 2001 (see paragraph 17 above). However, as I have recorded at paragraph 18 above, Mr Rust made important concessions in the course of his oral evidence. It appears to me to be clear that, in giving that information to Mr Bampton, Mr Rust giving investment advice. It is immaterial whether or not Mr Rust named FAG as the bower; he was plainly recommending that client of his as being someone suitable for Mr Bampton to lend money to. It seems that Mr Rust does not regard giving that information about a prospective borrower as being "advice"; in that I think he is wrong.
72. The fact that Mr Rust did advise Mr Bampton, both in early 2001 and subsequently to lend to FAG, is in my judgment borne out by the evidence of what he told other clients who lent money to FAG. I have given details of those other clients at paragraph 20 to 41 above. Of these other clients the most significant are the Chalfins who, according to the evidence of Mr Chalfin, were approached several times by Mr Rust soliciting money for FAG (see paragraphs 35 to 38 above). The very fact that so many clients lent so much money to FAG is of itself indicative of the fact that Mr Rust must have been encouraging his clients to lend to FAG. I note in addition that Mr Rust told the police in interview that he had been "raising finance" for FAG from clients including Trafalgar..
73. I reject Mr Rust's evidence that Mr Bampton received investment advice from Mr Rodgers of Mountfield. Mr Bampton denied having done so. The documentary evidence, so far as it bears on this issue, does not bear out Mr Rust's claim: see for example the various notes from Mr Rodgers to Mr Bampton which refer to "Peter", i.e. Mr Rust.

Mr Rust's liability in negligence and/or deceit

74. The loans which are the subject of this claim were made in 2002 and 2003. The question is therefore whether a practitioner in the position of Mr Rust carefully considered the suitability in all the circumstances of Mr Bampton making those loans. Whatever may have been the position before2002, there can in my view be no doubt whatever n the evidence that by 2002 the financial position of both FAG UK and FAG International had deteriorated to the point where it was highly imprudent for Mr Bampton to be continuing to lend money to FAG.
75. I base that conclusion on the evidence which I have summarised in some detail at paragraphs 47 to 52 above. It is supported by the evidence of Mr Rust himself. As the effective Finance Director (so Mr Moskovitch described him) Mr Rust cannot and does not claim to have been unaware of FAG's financial problems. They were plainly far from being temporary cash flow difficulties.
76. I have no hesitation about finding that, in permitting Mr Bampton to continue to make loans to FAG and in failing to warn him of the scale of the indebtedness, Mr Rust was in dereliction of the duty which he owed to Mr Bampton as his client. The criticisms of Mr Rust's conduct are compounded by the fact that he and his firm were so intimately connected with FAG and the fact that he had personally lent large sums to FAG.

Conclusion

77. For the above reasons I am satisfied that the claims against Mr Rust and Fordyce Curry in both negligence and deceit are made out. I did not understand Mr Mahmood to be pursuing on behalf of his client the contention that the borrower was FAG International rather than FAG UK. In any event I accept that the evidence established that the loans were made to the UK company.
78. It follows that there must be judgment in favour of Mr Bampton for the sum claimed.