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
		10/07/2009

Mr Justice Tugendhat :

1. The Claimant is the publisher of the People newspaper, among other titles. Between 1992 and August 2008 the defendant's husband ("Mr Horton") was employed by the Claimant. Immediately before his dismissal he was the Sports Editor, which is a senior position in the newspaper. In that position he had the power to authorise payments to individuals in respect of information received relating to stories to be published. In 1985 he married the defendant ("Mrs Horton") she was born in 1957 and had worked as a chef since leaving school. About four years after they were married she stopped working as a chef and started to work in a florist shop, trading under the name Wymans Bloomin Lovely. That was a business that she and Mr Horton set up together. That business continued until about 2003, when the lease expired and she stopped full time work. Meanwhile, in 1996 Mr and Mrs Horton had their first and only child. She will be 13 later this year.
2. Between 11 October 2000 and 8 August 2008 Mr Horton dishonestly procured the payment by the Claimant to various accounts held or controlled by himself, by Mrs Horton, and by friends and relatives of theirs, of a total sum of at least £371,880. By her solicitors' letter dated 2 June 2009 Mrs Horton has admitted that payments totalling £128,910 were made to accounts in the name of the florist business, and in different versions of her married and maiden names, as follows:

i) Wymans Bloomin Lovely No 2 Account LA Horton [Mr Horton] and TBJ Horton T/A ("the Wymans account"): £15,380

ii) TB Harding: £36,470

iii) Miss T Harding: £15,805

iv) T Harding: £61,255.

3. There is a balance claimed of £7,790 which Mrs Horton did not admit. The reason for the non-admission is that, in the case of this sum, there is no surviving bank statement relating to her account which shows receipt of the money. The bank had destroyed statements for the relevant period before being required to produce them for the purposes of this litigation. However, there is evidence from the Claimant's records that the money was paid in the same way as later payments, and on the balance of probabilities I find that the £7,790 was paid to accounts controlled by the claimant.
4. In these proceedings the Claimant seeks restitution of those sums from Mrs Horton. The claim is made alternatively on the bases commonly known as knowing receipt, knowing assistance in a fraudulent breach of trust, and the common law claim of money had and received.
5. On 2 September 2008 Mr Horton consented to judgment being entered against him in the sum of £371,880. On 19 September 2008 Mrs Horton petitioned for divorce. On 13 October 2008 she made an application for ancillary relief including, in particular, a property adjustment order in respect of both the matrimonial home at Roslyn Gardens in Romford, and an apartment in Spain. On 21 October 2008 the Claim form in these proceedings was issued.
6. It is common ground that the claims are all subject to a limitation period of six years. There is an issue as to whether payments received up to that date are statute barred. The figure in question is a total of £32,050. It is made up of £25,705 credited to the T Harding account between 11 October 2000 and 7 June 2002, and £6345 credited to the Miss T Harding account between 7 June 2002 and 7 October 2002. During the hearing I gave permission for the Defence to be amended to raise a limitation defence and for a Reply to be served pursuant to the Limitation Act s.32, alleging that the claimant could not with reasonable diligence have discovered that the payments made before 21 October 2002 had been made dishonestly.
7. Mrs Horton did not admit a further £15 which had originally been claimed by the claimant to have been paid into the Wymans account. That claim has been abandoned.
8. The execution of the fraud was simple. Mr Horton set up a number of accounts for Mrs Horton and other members of her family. No claims are made against the other members of the family. They disposed of the money in accordance with Mr Horton's instructions.
9. The Claimant has kept detailed records of payments made in respect of contributions. The records show account codes and other details. From September 2000 the records of the Claimant show that Mr Horton would approve payments about four or five times a month to Mrs Horton as payee, who is referred to by account codes derived from her maiden name, and enter a fictitious description of the reason for the payment. The description would be a reference to a sporting event or story. The limit to the amount which Mr Horton was authorised to approve, without referring the matter to a higher level, was £500. All but two of the approved payments made to Mrs Horton between September 2000 and April 2006 were for sums of less than £500. In general they were for sums ranging between £75 and £480. The Claimant made payment monthly. The monthly payments were generally between about £1,500 and £2,400. This carried on for seven years until it was detected in the course of checks carried out by the Claimant.
10. Initially the payments were made by cheque. The cheques were addressed to Mrs Horton in her maiden name of Harding, and posted to the address of her mother Mrs Harding. She is now an elderly lady. She has lived not far from the offices of the Claimant for many years. Mr Horton would visit his mother- in-law regularly on his way to or from work. Mrs Harding would leave the letter addressed to her daughter out for him to collect. He would then pay the money into one of the accounts in her name. Later money would be paid by posted cheque to the Wymans account and the paperwork would be sent by the Claimant addressed to Wymans at the home address of Mr and Mrs Horton Roslyn Gardens in Romford, Essex.
11. The evidence of Mr and Mrs Horton is that in their marriage, as in many, the financial affairs were handled by the husband. But in the case of Mr and Mrs Horton Mr Horton handled every letter which was not obviously personal, such as a birthday card, and Mrs Horton never saw, still less opened and read, any of the letters addressed to her or Wymans in the manner described.
12. There are few issues in this action. Mrs Horton has admitted over 1600 such fraudulent payments were made. She has admitted that cheques were made in her favour under three different names namely T B Harding, Miss Harding and T Harding. These are set out above and I will refer them to them as the Teresa Payments. They were made in January 2001 to May 2007. Mrs Horton admits that between October 2006 and August 2008 fifty separate payments were made into the Wymans account. She denies that she knew of these payments, or that she was dishonest. She admits that she provided no goods or services to the Claimant that would have entitled her to see any such money from the Claimant. Her case is that she assumed that all the money which funded the family, and which was received into her account, originated from the salary, or other legitimate money, earned or saved by Mr Horton. She knew that he was a senior sports journalist with a good salary and an expense account but she did not know what he earned.
13. Mrs Horton's substantive defence to the claim for money had and received is that whatever money was received into her bank accounts has been innocently spent, mainly on day to day living expenses, and that she has accordingly changed her position in circumstances where it would not be just for the court to order restitution against her. At the same time, her case is that, following the commencement, and during the continuation of, these fraudulent payments, there was no change in the living standards or expenditure of herself or the family such as to give rise to any suspicion on her part that she and Mr Horton were receiving money to which they were not entitled. She attributed any increase in their standard of living to increases in Mr Horton's salary.
14. The Claimant submits that the account given by Mr and Mrs Horton is incredible and that it is proper to infer that she did know, or wilfully shut her eyes to the fact, that Mr Horton was requiring her to deal with money in her accounts, and the Wymans account, in a way that was not consistent with it being his honest earnings. Further, the Claimant submits that there was conspicuous improvement in the standard of living of the family following the commencement of the fraudulent payments. The improvements included the move from a much smaller house to the house at Roslyn Gardens, which required a mortgage in excess of £200,000 over and above the proceeds of sale of the previous home. The family went on at least three holidays which were more expensive than holidays they had in the past, namely two to Dubai and one to Israel. In addition their daughter was educated at a fee paying school from an early age, which coincided approximately with the commencement of the fraudulent payments. Finally all this was possible, notwithstanding that Mrs Horton had stopped work at the florist shop in 2003, and thus for the first time in her adult life ceased to earn an income of her own.
15. Mrs Horton gave a description of herself and her relationship with her husband over financial matters. He took control of all financial matters. She is a person who struggles with paperwork. He handled the mortgage, all household bills, insurance and the like. She did the shopping. She saved money out of her earnings (when she did earn) for holidays, and she took care of their daughter. When the post arrived she would put it on the side and Mr Horton would deal with it. If there was something like a birthday card she would open it straight away or he would give it to her later. Mr Horton did not keep any paperwork in the house that he did not need. After he had received and dealt with the post he would shred the papers. She never looked at a bank statement. When she worked at the florist shop the work was very demanding, seven days a week, and she handed the paperwork for the business to an accountant to prepare the accounts and VAT returns. As bills came in she would put them in a bag to hand over to the accountant. She did not draw a great deal from the business, perhaps £100 a week.
16. There were a number of reasons why she stopped the business when she did. One was that Mr Horton was not happy at the amount of her time that it took up. He wanted her to spend more time with their daughter. Moreover, the lease was about to come to and end, and a new lease would be at an increased rent. The location of the business had become less favourable in that a double yellow line had been placed outside, and then railings, making it more difficult for customers to stop. When they discontinued the business Mr and Mrs Horton did not discuss the financial implications of that. Mr Horton told her that he would look after her. He did so by crediting money to her account. She also used a credit card. She said, and I accept, that she is not a materialistic person, in the sense that she did not buy a lot of clothes and shoes.
17. For part of the period in question, it was not Mrs Horton who spent the money that went from the Claimant into her account. At irregular intervals Mr Horton would ask her to make out cheques payable to him on her accounts. Sometimes he did this monthly, or more often, and sometimes less often than monthly. The amounts were generally in significant round figures, usually about £1,000 to £2,000, but sometimes as little as £350. While giving evidence she was shown some of these cheques in the form of the copies kept by the bank. They are all signed by her. In some cases the name of the payee, Mr Horton, is written by her. In some cases the sum to be paid is also written by her. In many cases the payee, or the sum to be paid, or both, are written in a different hand. Her evidence is that she sometimes signed the cheques in blank and gave them to Mr Horton. On other occasions she filled them in completely herself, in accordance with his directions. This is the case with the cheques drawn on the Teresa accounts. These were held originally by Woolwich and later by Barclays.
18. When the florist business ceased, it maintained two accounts. One of those was for Interflora, and has played no part in these proceeding. The other one had left in it a small sum of money. Mrs Horton said she thought that it might be needed for a VAT payment. So the account was kept open. Subsequently, the account was put to use for ordering flowers from former trade suppliers, for the purpose of charitable events, such as raising money at the school. No profit was made on that sort of transaction. The money was paid into the account from the proceeds of sale, and out of the account to pay for the flowers.
19. Mrs Horton said that she was not aware of payments going into that account between 2006 and 2008.
20. Mr and Mrs Horton said that the flat in Spain had been bought in the 1980s. It was a modest apartment. They had done some works on the floors, the kitchen and the bathrooms in the late 1980s or early 1990s. They had not had to do any works to Roslyn Gardens, except to renew windows and doors at a cost of £7,000 to £8,000. One reason why they had bought it was that it was in good condition.
21. Most of their holidays after their daughter was born were spent in the apartment in Spain. Because they had already bought it, the cost of these holidays was little more than the costs of the flights. Living expenses were cheaper in Spain than in England.
22. Mrs Horton said that it was only after August 2008 that she learnt that Mr Horton had made payments to other members of her family. They included an uncle, who died, and for whom her sister was executrix.
23. In cross-examination Mr Parfitt asked questions about a number of the cheques and other financial documents which have been produced by the banks. To almost all these questions Mrs Horton answered that she did not know, could not remember or had no idea. These answers, taken separately, would have been plausible up to a point. They would have been plausible, in particular, insofar as they relate to events up to eight years ago. But, even for the early period, there are a number of surprising circumstances, if Mrs Horton is to be believed. Mrs Harding also gave evidence.
24. Mrs Horton, and her mother, said that her mother never mentioned to Mrs Horton that letters were regularly being received at her mother's address addressed to Mrs Horton in her maiden name, and that Mr Horton would collect these. It would be surprising if Mrs Harding never mentioned these letters to her daughter, who had left home so many years before. It is not surprising that a wife should give cheques from time to time to her husband, without a query, when asked by him. But the cheques in this case include some for substantial sums of money, where the cheque has been fully completed by Mrs Horton. For example she wrote cheques payable to him in her own hand as follows: on 24 August 2004 for £650; on 20 September for £1200; on 19 October for £1000; on 7 November for £1200 and on 20 January 2005 for £1000. She also wrote one cheque for school fees on 19 September 2005 in the sum of £1730. That is the only cheque for school fees that she wrote. There are no other cheques for school fees amongst the cheques produced by the bank, nor any evidence as to how the school fees were actually paid.
25. If Mrs Horton thought that all the money that was paid into her account came from Mr Horton's salary, it might have been expected that there would come a point when she would ask why it was necessary for her to repay the money to him with such frequency and in such large amounts. She said that she never had any such thought. She said she never checked, before writing the cheques, to see whether there were sufficient funds in the account to meet these cheques. She left that to Mr Horton. She said she did not ask for any explanation and did not question anything. They had lived together for 25 years and she trusted him entirely.
26. In about October 2005 the pattern of dealing with the money paid by the Claimant changed. So, for example on 5 October 2005 the sum of £1050 was credited to one of Mrs Horton's accounts in her maiden name, and on 7 November £1250 was paid out to Mr Horton. A variety of other cheques were issued in the meantime for sums of £100 or less, apparently for ordinary living expenses. Then the credits of between £1,000 and £2,000 from the Claimant continue. Instead of the money being paid out to Mr Horton soon after being paid in, it is paid out in smaller cheques by Mrs Horton. Again she states that she saw nothing suspicious in the increased level of her expenditure which this appears to represent.
27. On 8 December 2007 (about 18 months before Mr Horton's dismissal) Mrs Horton wrote a cheque payable to herself for the sum of £800. It was drawn on the Wymans account. The entire cheque is in her handwriting. The bank has also produced the paying in slip, which is dated 10 December 2007. She said she wrote the cheque, but she had no idea why. She was asked where the cheque book was that she had used, but she said she had no idea. She agreed it was strange, but she could not answer. She said she did not remember. She was asked by Mr Parfitt if she had a conversation with Mr Horton about this. She said she did not have a conversation with him. Mr Parfitt suggested that was incredible. This was not a case of Mr Horton asking her to sign, or make out, a cheque payable to him, as had happened on earlier occasions. It was Mrs Horton making out a cheque to herself. When pressed by Mr Parfitt, Mrs Horton said categorically that she did not have a conversation with Mr Horton. She said she had no idea why she did it, she had no recollection of doing it and she could not explain it.
28. At the end of her evidence, I asked Mrs Horton about this again. She replied to me that she probably would have had a conversation with Mr Horton. She began to show signs of distress. She did not admit that she actually had had a conversation with Mr Horton. Still less did she say what had transpired between them.
29. There is another payment in slip in respect of a cheque for £300. It is in Mrs Horton's handwriting. She initially wrote her name as the account holder giving her maiden name, and then she crossed it out and put her married name. She said she had no memory of this. She could not explain why she thought there was money in the Wymans account to fund the cheque she had written. She said that she did not follow the bank statements and did not look at them.
30. On 8 July 2008, just one month before Mr Horton was dismissed, Mrs Horton wrote a cheque in the sum of £500. She could offer no explanation for this.
31. I am forced to conclude that Mrs Horton has not been frank with the court. She first gave the description of herself as the unquestioning wife who signed blank cheques to her husband eight years ago, in circumstances which she cannot now remember. In the period of a year or more before Mr Horton's dismissal she accepts she wrote out cheques to herself, which were paid into her own account, sometimes by herself personally going to the bank. But she gives no explanation of why she did this, or of what made her think that there would be money in the Wymans account, or where it might have come from. The business had been closed for many years by this time. These two descriptions of her activities are not reconcilable. In the early years it was perhaps just credible that Mrs Horton might have overpaid money to her from his salary, and might have asked her to pay back the excess from time to time. But Mr Horton is a woman who earned her own living before being married, and carried on the florist business for a number of years after she married. She is not an incapable person. I do not believe she failed to notice that the payments to her husband could not continue to be explained by erroneous overpayments out of his salary. Nor could there be any good reason for Mr Horton to pay money from his salary into the Wymans account, and then for her to have to write cheques to herself in order to transfer it into her own account. Either she actually knew what was happening, or she closed her eyes to the obvious fact that Mr Horton was engaged in money-laundering.
32. It makes no difference which it is. Either way Mrs Horton was dishonest. She knew she had no right to receive the money into any account of hers, or into the Wyman's account. She knew that she was assisting Mr Horton in a fraud.
33. If I had believed Mrs Horton's evidence that she remembered nothing about any these payments, she would have faced serious difficulties in her defence of change of position. She was a volunteer, so she could only succeed in that defence if she discharged the burden of proof which lay upon her. She was at pains to stress that she noticed no change in the family lifestyle. There was no attempt by Mr and Mrs Horton to give a full account of how the family paid for the mortgage, the holidays and the school fees. Mr Horton told me that some of the school fees were paid for by Mrs Horton's sister out of money she received from the Claimant and held for him.
34. Mr Horton was asked about the security measures in place at the Claimant's offices. So too was Mr Partington, who gave evidence for the Claimant. The limitation defence arose late. There was very little material before the court. Mr Horton said that there were audits throughout the seven years, when he was asked to explain who the payments he authorised were for. He said almost any answer would suffice. What he meant was that the Claimant's auditors were to blame for not suspecting him of fraud all along.
35. In these circumstances the Claimant has no difficulty in satisfying me that time did not begin to run until the discovery of the fraud in August 2008. There is no basis for Mrs Horton's submission that the Claimant could, with reasonable diligence, have discovered it earlier. So none of the claim is statute barred.
36. It follows from my finding of fraud that the Claimant is entitled to succeed on all its claims and to recover compound interest on its claim.