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Cite as: [2012] EWHC 1438 (QB)

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		Neutral Citation Number: [2012] EWHC 1438 (QB)
		Case No: HQ09X00226

IN THE HIGH COURT OF JUSTICE
HH Judge Anthony Thornton QC

Royal Courts of Justice
Strand, London, WC2A 2LL

31 July 2012

B e f o r e :

Sitting as a judge of the High Court
____________________

Between:

	Travelnet and Tours Limited	Claimant
	and
	(1) Ismail Patel
	(2) Travelnet and Tours (UK Limted)
	(3) Travelish and Tours Limited	Defendant

____________________

Mr Evans QC instructed by S. Ali & Co, 19A Turnpike Lane, London, N8 OEP, DX 34705 Wood Green 2 represented the claimant
Mr Gavin Hamilton instructed by Hawkins Solicitors, 19 Tuesday Market Place, King's Lynn, Norfolk, PE30 1JW represented the defendants
Hearing dates: 8, 9 and 10 November 2011
____________________

HTML VERSION OF JUDGMENT
____________________

HH Judge Anthony Thornton QC:

1. Introduction

Parties. In 2008, Travelnet and Tours Limited (TTL) was based in Edgware Road, London and operated in the travel business providing tailor-made booking and travel management for social and business trips to the United Kingdom and other parts of Europe for wealthy clients who were principally based in the Middle East and the Indian sub-continent. A significant part of that business involved TTL in booking and paying for hotel accommodation for those clients and recovering the cost from them or their agent. TTL was wholly-owned by Mr Saleh Alsaieq ("SA"), was incorporated on 13 October 2003 and started trading on 1 April 2006. SA was one of its two directors and it was exclusively controlled by him. SA had operated this business for some years and TTL took it over as part of the overall re-organisation of his various businesses.

The first defendant ("IP") was originally employed by SA in 2001 but had had the misfortune to be taken seriously ill four weeks after he started work. He was re-engaged by SA in mid-2003 after he had recovered his health. He was appointed a director of TTL in 2006 when it started to trade and he effectively ran and managed the bookings, arrangements and client relations side of it. He had little direct involvement in the financial side of the business which was left to a book-keeper supervised by SA. IP had unsupervised contact with the money coming into TTL from the clients that he dealt with and with the payment of outgoings such as hotel and carhire charges. By 2007, he had fallen out with SA in a substantial way and decided to set up a new company that would operate in the same field as TTL. He incorporated two companies on 31 July 2008, the second defendant Travelnet Tours (UK) Limited which changed its name to Travelnet and Tours (UK) Limited on 18 August 2008 and changed its name again to Trevelish (UK) Limited ("TTUK") in February 2009 and the third defendant, Travelish Tours Limited which changed its name to Travelish and Tours Limited on 18 August 2008 and changed its name again to Travelish Limited in February 2009. Travelish Limited has never traded and it took no part in the action.

Initial claims. TTL's claims against IP and TTUK are brought because SA discovered in the period between October 2008 to January 2009 that IP was diverting money and custom from TTL to TTUK and himself. IP was, in effect, summarily dismissed by SA on 22 January 2009 when he and TTUK and Travelish Limited were all served with freezing injunctions that TTL had obtained without notice on 21 January 2009 in support of TTL's claims which at that time were put forward in the sum of approximately £500,000, a quantification that was based on an interim report dated 16 January 2009 prepared by TTL's accountant, Mr Qureshi of K S Consulting Ltd. These claims were further reported on in a final report prepared by Mr Qureshi dated 19 March 2009. They have since been the subject of detailed investigation by Ms Rawlins, a Forensic Accountant jointly appointed as a joint expert in these proceedings. In the light of that report, which had taken the Qureshi reports as its starting point, TTL's claims have been reduced to a total figure of approximately £308,000.

Claims in more detail. TTL's claims are of six types which are dealt with separately and are outlined in more detail later in this judgment. TTL had a turnover of approximately £1.5m in its first year of trading to 31 March 2007 and approximately £3.2m in its second year to 31 March 2008. The company had taken over that part of the business of its predecessor company that was concerned with European travel management for clients from the Middle Eastern and the Indian sub-continent that had previously been undertaken by Aljazeera Limited which was also wholly owned by SA and which had started to trade in 2000. TTL was, therefore, expanding rapidly in these first two years of operation. The business was almost entirely undertaken by IP by personal contact, by telephone and by email in the period between April 2006 and November 2008. IP's work involved him having close contact with TTL's clientele, a small number of whom he had introduced to TTL. The clients or their local agents would inform him of their proposed travel and tour arrangements and many would leave it to him to plan their itineraries, make the necessary bookings and chauffeur hire arrangements and, in many cases, to meet and accompany the clients during their stay. IP was based in TTL's office in the Edgware Road, London and much of his business was inevitably done by email and the invoices, bookings, billings and other arrangements were recorded by IP on a running daily information document and on TTL's server and hard copies of these documents were taken by IP and kept in files in the office. IP clearly had regular access to the contents of the server although he contended, to the vehement disagreement of SA, that he did not have password access to it. I find that he did have the password until SA changed it in late November 2008 and he also downloaded the documents he was concerned with onto a stick which he always retained in his possession and which he kept after he was dismissed. He therefore kept at home, and had unrestricted access to, all the documents relating to all transactions that he was involved in.

Although IP did not have authority to sign cheques, he was frequently given batches of blank signed cheques by SA who was often out of the office on business trips which involved lengthy absences from London. In this period, IP's dissatisfaction with SA and his disgruntlement at the continuing lack of a financial stake in TTL led him to set up his rival company. His intention to entice TTL's clients away from TTL can be seen from his initial choice of names for that company which were very similar to TTL's trading name. The initial name was Travelnet Tours (UK) Limited and this was soon changed to Travelnet and Tours (UK) Limited. Although the new company started to trade from IP's home on 31 July 2008, IP continued to work for TTL on an ostensibly full-time basis until early November 2008 and he was only finally excluded from working for TTL in January 2009. TTL's claim is based on IP siphoning off TTL's clients, earnings and receipts in the period from August 2007 to April 2009, initially to himself and, once TTUK had been formed, to both himself and to TTUK.

This background gives rise to six different types of claim:

(1) Paris fee notes (Type I). It is alleged that IP appropriated sums totalling £27,585 from TTL. These sums were by payments made to, or intended for, TTL for services in Paris on behalf of clients and they were in fact appropriated by IP for his personal use.

(2) Cheques drawn in IP's name or in the name of his nominees (Type II). It is alleged that IP appropriated sums totalling £37,540 by drawing cheques on TTL's account to himself or in favour of his nominees.

(3) Choices Estate Agents cheques (Type III). It is alleged that IP collected and deprived TTL of refunds of deposits for certain tenancies from TTL's letting agents totalling £5,793.38.

(4) Diversion of TTL's client receipts (Type IV). It is alleged that IP personally collected, or made arrangements for the diversion to himself or for his own benefit, debts due to TTL totalling £92,708.

(5) Appropriation of TTL's money (Type V). It is alleged that both IP and TTUK took £195,118 of TTL's funds by misappropriating receivables and that IP hid this misappropriation by under-recording and mis-recording monies that were both received by TTL and paid out to TTL in the records he kept of the transactions he was involved in. A further sum of £17, 287 is also claimed under this Type.

(6) Interest (Type VI). TTL claims interest on such sums as it recovers in these proceedings. TTL claims compound interest or equitable or Law Reform Act interest at a higher rate than would normally be awarded on debts on any sums it is awarded on the basis of IP's breach of his fiduciary duty owed to TTL as its director and, against both IP and TTUK, on the basis of fraud or misappropriation of its property.

2. History of Claims.

SA's initial suspicions. SA's suspicions about IP first arose in September 2008. He had left London on 23 August 2008 for an overseas business trip and, as was his habit, he provided IP before he left with ten signed blank cheques for IP to use on TTL business whilst he was away. On 9 September 2008, on his return, IP brought him further blank cheques for signature explaining that he had already used up the ten blank cheques he had been given just over two weeks previously. SA signed the cheques that IP had given him which had been made out to various payees in the total sum of £127,000.

SA was surprised at this apparently unusually heavy use of blank cheques. He inspected the counterfoils and discovered that four had been made out to a company he had not heard of called Chauffeur on the Net. On asking IP about this company, SA was informed by IP that this was a chauffeur company that was registered for VAT. IP reminded SA that he had instructed him a few weeks previously that the chauffeuring companies that IP should use had to be registered for VAT unlike one that he had used previously. SA was not mollified by IP's reassurance since IP also informed him that this chauffeuring company was owned by the same Mr Osman who had owned the company that had not been registered for VAT that SA had previously instructed should not be used.

Mr Qureshi instructed. SA then instructed TTL's accountant, Mr Qureshi, to check whether Chauffeur on the Net was registered for VAT and, on 15 September 2008, Mr Qureshi informed him that the VAT number provided by that company as its VAT number was not genuine. SA then instructed Mr Qureshi to carry out a full investigation of the financial affairs of TTL including an investigation into the cheques and their counterfoils that had been written or received by TTL. He also instructed TTL's bank to provide to Mr Qureshi copies of the cheques that had been drawn on the company's account in the period 1 January 2007 – 30 August 2008.

Mr Osman. SA called Mr Osman to a meeting with him on 1 October and asked him why the four invoices on TTL's files that had been sent on behalf of Chauffeur on the Net did not have that company's telephone number on them. Mr Osman replied that the invoices he was shown by SA were not the invoices sent by his company to TTL but were invoices made up by IP with a different layout to his company's invoice and, unlike that company's genuine invoices, IP's made-up invoices did not have the company's telephone number on them. SA did not, at that stage, confront Mr Osman with the information he had that the VAT number purportedly held by Chauffeur on the Net was false.

SA was informed by Mr Osman at this meeting that IP had recently set up two companies with very similar names to TTL and proved this to SA by showing him the registered entries for TTUK and Travelish and Tours Limited on the Companies House website. Mr Qureshi, at SA's request, also carried out a search and established that IP and IP's wife were the two directors of both companies which had been incorporated on 31 July 2008.

IP's lack of co-operation. SA then instructed IP on various occasions on 10 and 11 October 2008 to pass over to him all the paperwork in his possession relating to client orders and payments made by or on behalf of clients. These instructions were not complied with and no paperwork was ever subsequently handed over by IP. However, on 13 October 2008, SA discovered that IP had deleted from TTL's server all information that IP had placed on TTL's server. This information included cash reconciliations for the period between 1 April 2008 and 30 November 2008, debtors' and other day to day information, sales and commission invoices, TTL's receivables, clients' and hotels data and email security questions.

During the course of a number of meetings that SA had with IP over the next four weeks, IP informed SA that he had been backing up data on a USB stick but he repeatedly refused to hand over this stick to SA or to TTL's book keeper. On 25 November 2008, SA changed the password for TTL's accounting system which meant that IP no longer had access to it. SA declined thereafter to permit IP access to this system or to provide him with the new password.

SA's own investigations. Whilst Mr Qureshi was undertaking his financial investigations, SA conducted his own enquiries with the assistance of Mr Fouad Ahmed ("FA") who had a similar role to IP in SA's other travel company that was exclusively concerned with organising Haj pilgrimages to Mecca. These investigations threw up significant concerns and suspicions about IP's activities in four specific areas in addition to more general concerns about his activities over the previous twelve months. These four specific areas were:

(1) Hiring of cars. It appeared that there had been false invoicing in relation to, and diversion of funds through, three car hire and chauffeuring companies: Sardar Coaches, Luxury VIP and Chauffeur on the Net over a lengthy period;

(2) Y & S Furniture. It appeared that three payments were recorded as having been made to a furniture supply company which had in fact been made, or diverted via an intermediary, to IP.

SA also personally undertook an informal internal audit of TTL's finances in 2008 using the copies of the cheques he had been provided with by TTL's bank and other financial information he could obtain from documents still accessible in TTL's server and files. These researches appeared to show that:

(1) There had been a substantial drop from approximately £420,000 to £140,000 in TTL's VAT inputs between TTL's last quarter ending in November of 2007 and the corresponding period in 2008; and

(2) TTL's bank balances dropped from its approximate figure of £400,000 throughout 2007 and the early part of 2008 to a figure of £10,029.29 on 19 December 2008 for no apparent reason.

On 27 November 2008, IP suggested that he and SA should split and was not prepared to discuss anything else including SA's suspicions about his financial dealings and on 4 December 2008 again refused SA's request to hand back all copies of TTL's data that he had taken and to return all monies he had collected from TTL's clients that was in his possession. Finally, in a meeting on 5 December 2008, he proposed that he should leave with no further liabilities or entitlements and that SA should hand TTL over to him having settled its outstanding liabilities and tax liabilities. This offer was refused by SA.

Qureshi report. Mr Qureshi reported in two stages. His first initial report was dated 16 January 2009 and his second and final report was dated 19 March 2009. His final report confirmed with more detail his findings and recommendations contained in his interim report. These findings were that, in summary, IP had appropriated TTL's money and business in the respects summarised above in a total sum that was approximately £500,000 and that the apparent substantial and sudden drop in TTL's sales had been caused by IP syphoning off a substantial quantity of business from TTL and putting it through TTUK or other third party sources controlled by him.

Initial procedural steps. On receipt of the Qureshi interim report, SA acted speedily and, with the assistance of his legal team, arranged for TTL to obtain interim without notice freezing injunctions over IP's, TTUK's and the second defendant's assets in an order dated 21 January 2009 as varied in orders dated 6 February 2009.

The initial claim was fully pleaded and was based on the Qureshi interim report. The claim was pleaded on the basis that IP, as a director of TTL, owed fiduciary duties to TTL and as a trustee of TTL's assets including sums owed to it and its choses in action. It was also pleaded on the basis that IP was liable to TTL in equity for any breaches of trust and loss of trust assets that he was responsible for. Recovery was sought from IP and TTUK in equity as damages or for equitable recovery of the loss identified in the Qureshi report. In the defence dated 17 March 2009 that was served on behalf of both active defendants, IP contended that he was a partner with SA of TTL's profits and/or was entitled as the other director of TTL and by agreement with SA to 50% of the profits earned by TTL. The defence contended that SA had agreed with IP to the effect that IP was to be and to act as a full director of TTL and share equally in its profits with SA but that, in fundamental breach of that agreement, he had been excluded from involvement in any of the affairs of the company or from a share of any of its profits. The breaches of fiduciary duty were all denied and no loss was admitted.

Rawlins Report. By an order dated 21 September 2010 made by Master Leslie, it was provided that the parties should jointly instruct a forensic accountant from the list of three such accountants provided by TTL's solicitors. The parties selected Ms Rawlins and her instructions were defined in the order as being:

"To act as a single joint expert to report on the issues of loss and damage in paragraphs 5 to 7 of the Amended Particulars of Claim."

The parties instructed Ms Rawlins in accordance with that direction. She qualified as a chartered accountant in 1989 and is a partner in the London office of RGL, an international firm of charted accountants specialising in forensic accountancy work. Ms Rawlins prepared her detailed report, a supplementary report and her answers to questions posed by both TTL and IP on the basis of documents that she had access to. She listed these documents in a schedule to the main report and, in relation to documents that were subsequently supplied to her, she identified them in the relevant additional documents that she prepared. Her reports made it clear that she was solely concerned with the financial aspects of the claim and was not concerned with liability. Ms Rawlins's two reports and her answers were adduced into evidence at the trial and, in conformity with the practice for jointly appointed experts provided for in CPR 35, she did not attend the trial. However, as was intended by the order dated 21 September 2010, the expert evidence provided by Ms Rawlins's reports and answers was adduced at the trial.

3. General Approach to C's Claims

Lack of objectivity. IP's case at the trial included an attack on TTL's case to the effect that it was based on the Qureshi reports which were not reliable since Mr Qureshi was SA's friend and personal accountant and his reports were neither objective nor impartial. However, I cannot accept this attack on TTL's case for these reasons:

(1) Mr Qureshi had performed accountancy services for TTL for several years and was familiar with TTL's business and its financial systems and records. He was the obvious and natural professional for SA to instruct in order to investigate SA's suspicions of financial irregularity by IP in relation to the hotel and travel arrangements that IP had been involved in. Mr Qureshi was independent of TTL and there was no evidence that his relationship with both TTL and SA was other than that of an accountant acting for a client in a professional capacity.

(2) Mr Qureshi's reports, although prepared in a short period of time due to the intense pressure of time that he was instructed to work to, are objective, factually based and contain appropriate lists of the sources of information on which their contents and conclusions are derived. It was both acceptable within the rules of pleading and appropriate for TTL's claim when pleaded to incorporate the interim report into the pleading and to rely on its conclusions as the basis of the pleaded claims.

(3) Most importantly of all, the court had appointed Ms Rawlins to report on all aspects of loss and damage and that inevitably required her to report in detail upon the Qureshi reports. Ms Rawlins complied with her instructions to the full so that her reports and their contents superseded the Qureshi reports as the basis of TTL's claims.

(4) At the trial, TTL sought to advance its entire claim including those parts of its original claims that Ms Rawlins had advised had not been fully established for the purposes of an audit. However, its entire claim was advanced on the basis that it had been established on the balance of probabilities in reliance on the relevant contents of the Rawlins reports.

(5) Mr Qureshi's interim report was placed in the trial bundle as part of the pleadings and as a document that was referred to by Ms Rawlins but it was not formally adduced as evidence.

There is, therefore, no basis to the criticisms levelled against the alleged lack of both objectivity and impartiality of Mr Qureshi.

Rawlins report. The approach taken by Ms Rawlins in preparing and presenting her reports was fully explained in those reports. The reports had been prepared in a way that ensured that they fully complied with the provisions of both CPR 35 and the Practice Direction to CPR 35 that are applicable to jointly appointed experts and no objection taken to the reports standing as jointly appointed expert's reports. Ms Rawlins's general approach may be summarised in this way:

(1) Ms Rawlins was given access to, and she or her assistant inspected all of, TTL's relevant documents in its possession in both electronic and hard copy form that related to the claims being presented. She met IP both in his own capacity and as the representative of TTUK and TTL. She and her assistant were also given access to, and inspected, the accounting records of TTUK. Due to time constraints, Ms Rawlins did not review accounting records and bank accounts of any other company or party than TTL, TTUK and IP.

(2) Ms Rawlins then took each item of claim in each Type of claim individually and reported on each item by placing each item into one of four categories with a supporting commentary explaining her conclusions and annexing particularly relevant documents to support those conclusions.

(3) The four categories of claim were as follows:

(a) Category A. This category contained items of claim which Ms Rawlins considered to be supported from an accounting viewpoint following her review.

(b) Category B. This category contained items of claim which Ms Rawlins considered to be likely to be supported from an accounting viewpoint.

(c) Category C. This category contained items which Ms Rawlins required further information to assist her to determine whether money had been appropriated. Items in this category were, however, items which she assumed on balance had been appropriated based on the information currently available to her.

(d) Category D. This category contained items which Ms Rawlins required further information to assist her to determine whether money had been appropriated. Items in this category were, however, items which she assumed on balance and not been appropriated based on the information currently available to her.

Ms Rawlins, in applying an accountancy point of view to her investigations, was seeking to establish for each item of claim whether there was a documentary audit trail which verified each component part of that item so that she could establish whether the loss claimed had resulted from IP and/or TTUK appropriating that item. That is, of course, a different standard from the required standard that the court has to adopt in determining liability. The court has to consider the entirety of the evidence presented and decide whether the claim for each item has been established on the balance of probabilities. The trial was correctly conducted by both parties by analysing whether the evidence and opinions of Ms Rawlins, weighed with all the other evidence adduced at the trial, established that that item of claimed loss had been established on the balance of probabilities. It followed that items in Ms Rawlins' Categories A and B were likely to lead to findings by the court that those items had been established by TTL on the balance of probabilities and in Category D that TTL had not established its case unless there was cogent evidence in addition to Ms Rawlins' report available to enable the opposite conclusion to be reached. Items in Category C remained fully in the balance and could only be resolved by a careful review of all the evidence. If liability for the item could still not be established by TTL after that review, that item of claim would be dismissed.

A further, and vital, factor had to be taken account of by the court. It was clear, and I have held, that IP removed or destroyed a significant but unknown quantity of documents in order to cover up his appropriation of TTL's money. Furthermore, TTL did not know what documents had been destroyed or remained undisclosed so that it only had knowledge of, and access to, documents in this category if IP chose to disclose them or to explain that he had failed to disclose them. This meant that an evidential burden was placed on IP to provide an explanation for any item of claim which he disputed and a lack of an explanation from IP for any such item could count against him and should be weighed in the balance in the final reckoning particularly if no reason was given for not being able to provide an explanation. In fact, IP did not provide a detailed explanation for any of the disputed items and his defence amounted to generalised assertions that TTL had failed to prove its case.

IP locked out of server access. SA locked IP out of his access to the server in late November 2008 and IP complained that that had the effect of preventing him from preparing a proper defence to the items of claim. However, Ms Rawlins was able to obtain access to all available documents that were retained on the server or in TTL's files and IP was able, had he chosen to do so, to have the same access on application to TTL's solicitors or to apply to the court through the discovery process for such access. There is, therefore, nothing to this complaint.

4. General Approach to D's Defence

IP's ill-will and admission of wrongdoing. It was clear from IP's evidence that he continued to harbour extreme animosity towards SA which he admitted to when being cross-examined. He justified his adverse views of SA by repeated reference to the way he considered he had been treated in being shut out from any profit-sharing arrangement and in being retained on a very low salary even after he had been appointed a director of TTL. I have concluded that there was no evidence of any agreement that IP would be SA's partner or would share in its profits. It was therefore not relevant to any issue that the court had to decide to consider whether there was any justification in IP's views about the unfair and unjust way that he had been treated save to reach a generalised conclusion that there was clearly an opposing view. What is clear is that IP's views about SA were so firmly held that he was unable to consider his past actions in an objective way and that he justified such wrong-doing as he admitted to as being a reasonable way of obtaining the payments which he had been denied but was entitled to.

IP's interference with documents and discovery shortcomings. I have already concluded that IP removed and destroyed a significant number of documents relating to sales and costs in order to cover up evidence of his appropriation of TTL's money. He also failed to provide full discovery of all the relevant bank statements of every account that he, his wife and all other associates held and it remained unclear how comprehensive the disclosure of TTUK's relevant documents had been. It was clear from the evidence adduced during the trial that IP had extensively interfered with, destroyed and removed TTL's documents. Moreover he never provided an explanation of what had been removed and of what further disclosure he could give but had not given.

Assessment of IP's evidence. In assessing IP's evidence and his case generally, I was bound to take account of his bias and lack of objectivity, his admitted or clearly established wrongful appropriation of TTL's money, his personal justification for those actions, his underhand and unco-operative behaviour with regard to TTL's documents and his shortcomings in the disclosure process.

5. D's Partnership Claim

Issue. IP's defence pleaded that he had expressly agreed with SA in March 2006 that he would receive half the profits of TTL and that he would hold or be allotted half the shares in TTL. It was also pleaded that IP was considering legal proceedings in relation to his unpaid profit shares or dividends in TTL. No such proceedings, whether by way of fresh proceedings or counterclaim, ever materialised.

Discussion and Conclusion. Despite extensive evidence about his views of SA and the reasonableness of his claim to half of TTL's shares and profits, he produced no evidence to support his claim that there had been any discussion, let alone agreement, with SA on these matters and SA denied that any such discussion had taken place. I conclude that IP's allegations on these matters were not established and should be ignored.

6. Type I Claims

Claims. TTL claims a total of £27,565.00 which is made up of what are pleaded as four specific withdrawals in cash that were made from TTL's account by IP. These withdrawals, or alleged withdrawals, came to light during Mr Qureshi's investigations and were originally reported as being part of a much larger sum of missing cash receipts which IP was suspected of having expropriated. IP was asked for an explanation for this apparently missing sum. In answer, he explained that these were not missing and appropriated cash receipts but were cash withdrawals that he had made to pay for car hire services that he had arranged for TTL's clients who were staying in Paris. These sums were, therefore, withdrawn from TTL's account for the legitimate purpose of paying for services on behalf of TTL's clients. IP also contended that these withdrawals or payments were matched by receipts from the agents of the clients paid by way of reimbursement or payment for TTL's services that had been procured by IP for its clients. It follows that IP had the evidential burden of proving that these withdrawals were for a legitimate purpose given his admission that he did withdraw from TTL a sum or sums totalling £27,565.00. If IP failed to establish the facts he alleged in justification of the withdrawals, TTL would succeed in establishing its Type 1 claims.

Details of the alleged expropriation. Mr Qureshi prepared a list of what appeared to be missing cash receipts when preparing TTL's accounts for the year ending 31 March 2008. SA was asked to provide details of these missing cash receipts. In relation to four of these items identified by Mr Qureshi, IP contended that they were not cash receipts at all but were cash payments he had made to purchase chauffeur-drive car services for Middle Eastern clients on two different trips to Paris and for putting the chauffeur in funds to pay for the client's shopping items whilst in Paris. These services were provided by Concierge de Paris. These payments were alleged by IP to have been reimbursed by payments from the clients' agent, Omeir Holidays.

According to IP, clients of TTL from the Middle East were in London and made a sudden decision to go to Paris immediately for a visit and for shopping. As with many affluent Middle Eastern clients, they asked IP to make the arrangements and provide them with cash for their shopping trip and to pay for these services on their behalf. The chauffeur-driven cars were provided in Paris by Conciege de Paris and IP paid for these services in cash payments that were made to their representative who happened to be in London. The use of cash was necessitated by the company's insistence on being paid with cleared funds before providing the cars, the payments had to be made instantaneously but IP had no access to cleared funds since SA was abroad. IP therefore drew out cash from his own account and paid it over to the Concierge de Paris representative. His evidence was to the effect that the invoices relating to these payments were with TTL. The payments included remuneration for the chauffeur-drive car service and cash for the chauffeur to pay for the clients' shopping. IP also pointed to two sales invoices which he contended had been sent to Omeir Holidays to claim reimbursement for these services.

Evidence of dishonesty. Ms Rawlins sought to verify these alleged payments to Concierge de Paris by asking TTL to instruct Paris-based English solicitors to investigate the authenticity of the receipts and also sought to verify the invoices allegedly sent to Omeir Holidays for reimbursement. These researches suggested that neither the alleged purchases by TTL nor the alleged receipts by TTL were genuine. In summary:

(1) The two invoices appeared to relate to 2 separate payments rather than 4 as originally alleged by IP. Moreover, although these 2 invoices totalled 40,720€, being the Euro equivalent and the same overall total of the sums allegedly drawn out by IP in sterling, nonetheless these sums bore no relationship with the 4 payments alleged by IP.

(2) The two invoices appeared to be forgeries since the name of the street of the car hire company's address was incorrectly spelt as "Auberviller" whereas the correct spelling was "Aubervilliers". Moreover the invoices did not comply with the mandatory requirements that a French supplier of services had to provide when invoicing a client since the receipts were not numbered, the type of corporation supplying the services was not identified and the date on which payment was due was not given.

(3) The address was of a residential block of flats in which it was unlikely that the offices of a chauffeur car hire company would be located.

(4) The stated email address on the receipts could not be identified as being in existence using standard Windows DOS commands, albeit that the check was carried out four years after the purported dates of the receipts.

(5) The second invoice is dated 10 August 2007 but related to "Goods bought from Paris for guest – Date: 11 September 2007". This is an obvious error.

These invoices and receipts are, therefore, obviously false and I conclude that they must have been produced in a dishonest attempt to manufacture supporting documents in order to give the appearance of an authenticated receipt to justify the appropriated payments as being genuine payments for car hire services.

Conclusion – Type 1. IP's explanation to explain away the apparent missing payments to TTL was bogus and was one that was based on manufactured and false documents. The only explanation for such dishonesty can be that it was an attempt to cover up misappropriated payments. TTL succeeds in establishing this item totalling £27,565.00.

7. Type II Claims

Claims. The Type II claims are for repayment of sums allegedly misappropriated by IP from TTL by arranging for cheques to be drawn by TTL payable to four different payees who were ostensibly suppliers of car hire services or goods to TTL but were, in reality, used to pay IP or someone unconnected with TTL sums that TTL was not liable to pay, thereby benefiting IP and unjustly enriching him. The total sum claimed, which is the total of 19 cheque payments, is £37,540.

Payments to TET. Two payments were made to TET, on one cheque stub the payee was stated to be "A Sadar Coaches" ("ASC") and one to be "Luxury VIP Coach Service" ("LVC"). IP admitted that these two payments, for £1,700 on 30 August 2006 and £2,200 on 9 July 2007 respectively, were made to his son's school to pay school fees and must be repaid to TTL. His admission was in these terms:

"The payment to TET represented schools fees for my son. There were two payments and I made them in desperation because at the time I was very short of money and I was not prepared to compromise my son's education. I was mindful of the fact that thousands of pounds that I was owed in profit share which I had been promised but not paid, and I was despairing as to keeping up the school payments. I made the payments and I accept liability to account for this sum for the above reasons."

IP did not explain why he decided, when writing the name of the supposed payee on the counterfoil, to use ASC and LVC as the two names to use. There is clearly no defence to the claim for repayment of these two sums.

Payments to Mr Mapara. There were 6 cheques drawn in the name of Mapara, one being in the name of A Mapara and five being in the name of I Mapara. On the counterfoil, three were described as having been made out to LVC and 3 to ASC. 3 of the cheques – 1 LVC and 2 ASC - were dated September or October 2007 and three – 2 LVC and 1 ASC- February or March 2008. SA contended that TTL did not know or do business for anyone by the name of Mapara other than someone who was IP's cousin, Mr Adam Mapara, who some time previously, TTL had arranged a visa for to travel to Saudi Arabia. TTL also contended that it did not do business with either LVC or ASC and that these cheques were paid to IP's cousin as IP's nominee.

IP contended that these payments were made to individual drivers, I Mapara and A Mapara, who were self-employed and whose services were arranged through LVC and ASC who were agencies that booked owner/drivers. He also contended that he had obtained reimbursement from the client's agents for these car hire payments. He provided Ms Rawlins with 8 receipts which he stated were receipts for such reimbursement payments.

Ms Rawlins found that the 8 receipts provided by IP totalled £3,120 out of a total of £30,375 paid as car hire (that is the total of £34,275 that the cheque counterfoils purport to evidence payments for car hire less the sum of £3,900 IP admitted as having been paid to IP's son's school). She also found that there was no way of matching these receipts to any of the disputed cheques and the receipts were not dated. The only way of attempting a match was by reference to unverified and unverifiable annotations placed on each receipt by IP which provided the cost of the service included in the payment and the cheque number. There was no obviously consistent mark-up for profit or administration charges and no way of checking whether the link was a genuine one or was one invented or created by IP.

Conclusion. IP had the opportunity which he did not take to explain the obviously suspicious features of his explanation and the documents that he had put forward as evidencing that explanation. For example, he did not explain why the counterfoils were in the name of two companies with a name apparently linking them to car or coach hire yet the cheques were made out to the alleged self-employed drivers. If these were genuine payments for services, the payee's name on the cheque and on the counterfoil should be the same. Furthermore, he was unable to explain why he continued to use ASC as one of the hire agencies after September 2006 despite receiving explicit instructions from SA not to use that company because it was not registered for VAT nor did he explain why the invoices did not show a telephone number on them. These instructions were given after Mr Qureshi had informed SA of his concerns about the authenticity or lawfulness of these invoices having spotted them whilst preparing TTL's accounts. LVP was also not registered for VAT purposes. It showed itself as being registered in France but was not registered there either. Neither company could have been operating as a genuine car hire agency lawfully without being registered for VAT since the nature of their business was such that their turnover would have exceeded the maximum turnover permitted to an unregistered company.

I conclude that these payments were not bona fide payments for car hire services but were disguised payments for IP's own purposes, in effect money laundering of money being expropriated from TTL.

Payment to Khidmah Travel. There was one cheque for £725 dated 5 August 2008 made out to I Patel with the counterfoil made out to Khidmah Travel. IP was able to point to an invoice from Khidmah for airline tickets for £725 dated 5 August 2008 and that the email address shown on the invoice as being Khidmah's email address was genuine. Despite Ms Rawlins's continuing doubts as to this payment, I find that it has not been proved to have been a bogus payment or a misappropriation of TTL's funds. This is because the payee's name on the cheque was IP's name. This finding is based on my application of the balance of probabilities and is made with some hesitation since IP failed to produce to Ms Rawlins, despite her request, any of his bank statements showing that he had withdrawn this sum from his bank on or about 5 August 2008 to make a cash payment to Khidmah and he provided no explanation as to why Khidmah was being paid in cash.

Payment to Y & S Furniture. There was one cheque for £2,540 dated 7 May 2008 made payable, according to the name on the counterfoil, to have been a firm of furniture suppliers in Stoke Newington, London called Y & S Furniture ("YSF") and, according to the name on the cheque, to I Patel. IP contended that this was reimbursement to himself for cash he had paid out of his own pocket to enable furniture to be delivered from London to Warton near Preston, Lancashire to enable two flats to be furnished and occupied by TTL's clients who were overseas students studying in the Preston area. The travel and accommodation for these students was arranged with TTL through an agent. The sum in question included the cost of the furniture and a delivery charge of £450 which IP said he had paid to the driver in cash and which he had drawn from his own account. To reimburse himself, he had prepared a TTL cheque for the full sum which had been made payable to himself and paid that into his account and had then withdrawn sufficient cash to pay both the supplier and the deliverer in order to discharge TTL's liability for the cost and delivery of the furniture.

It became clear from Ms Rawlins's investigations that YSF had prepared an invoice for 6 groups of items furniture for £2,090. The firm provided TTL with a copy of this invoice which was considered by Ms Rawlins. YSF's manager, Mr S Ravat, explained in two letters that he sent to TTL's solicitors how this invoice was prepared. The invoice had been written out on a blank invoice taken from a book of blank invoices of a type which can be bought from any stationer and which he had first stamped with YSF's name and address. This was the way that he invoiced all of YSF's clients. He sent a copy of YSF's copy of this handwritten invoice to TTL's solicitors which he had signed on the original copy with the words "paid cash". He also confirmed, and provided confirmatory evidence in the form of his relevant bank statement, that he had been paid for this lot of furniture as invoiced.

There was considerable and understandable suspicion about this transaction for two reasons. Firstly, Ms Rawlins was unable to confirm that the cheque drawn on TTL had been used indirectly to pay YSF for furniture supplied to, and reimbursed by, TTL's client since she was not shown an invoice or receipt from TTL's client, Unique Choice that showed that that client paid or was invoiced for this furniture. Secondly, TTL did not have YSF's handwritten invoice in its files. Instead, it had a word processed document in the form of an invoice which had YSF's name and address at the top and was addressed to TTL and which reproduced the entire list of furniture that YSF had invoiced TTL for with the addition of a single item: "Delivery to Preston £450". IP explained that he had produced this second invoice so as provide TTL's files with a single invoice which included the item for delivery. That explanation lay uncomfortably with the fact that, in two previous similar transactions that had not involved a delivery charge, SA had also reproduced YSF's handwritten invoice with a similar word processed document.

Conclusion. Ms Rawlins had an understandable doubt that the cheque drawn on TTL had genuinely been used to discharge TTL's liability to pay for furniture supplied by YSF. However, subsequent evidence produced at the trial did help to resolve that doubt in IP's favour. In particular:

(1) There was direct evidence of two previous similar transactions involving the supply of furniture by YSF to TTL. In each case there had been a second invoice prepared on a TTL template and evidence that payment of the sum invoiced was legitimately discharged by TTL by cheque payments drawn on its account. The only difference was that the cheques in each of these two transactions were drawn on YSF

(2) Ms Rawlins had not been provided with any evidence that TTL had been involved in arranging lettings of flats in Preston for any of its student clients. However, IP produced evidence at the trial that there had been two lettings in Warton. The evidence was in the form of an email from someone based in a letting agency in the Preston area which provided the address of the two lettings in question and those addresses corroborated IP's evidence.

Given the evidential uncertainty surrounding this item, I conclude on the balance of probabilities that TTL has not proved that this particular withdrawal from its account was for a purpose unrelated to TTL's transactions. This particular claim is dismissed.

Overall conclusion – Type II. TTL's Type II claims succeed to the extent of £34,275.

8. Type III Claims

Claims. There are two outstanding claims against IP for the payment of deposits that had been paid to a letting agency by TTL in relation to lets that TTL had arranged for its clients. Originally, 7 deposits totalling £5,793.38 had been paid by the letting agency but not received by TTL. However, as a result of post-hearing disclosure properly made by TTL's solicitor, it is clear that 5 of those deposits are not claimable from IP and that that part of the claim is withdrawn. Furthermore, a sixth deposit, claimed in the sum of £157.92, was in fact a sum due from TTL to the agents who discharged that liability by deducting an equivalent sum from one of the other deposits that had originally been the subject of this Type III claim. What this evidence shows, however, is that all six cheques were paid into a Barclays account held by IP and were recovered when Barclays repaid these sums since the cheques had been paid into his account by IP and his account credited and the cheques cleared despite the cheques being made payable to TTL.

However, there remains one unreturned deposit in the sum of £1,231.64 which TTL's post-trial disclosure shows is properly claimable from IP since that sum was paid into his personal account held with HSBC and it has proved impossible to recover that payment from that bank.

Conclusion. The claim for £1,231.64 succeeds. The balance of the claim would have succeeded had Barclays not repaid the cheques payable to TTL that IP, without explanation, had deliberately paid into his account.

9. Type IV Claims

Pleading issue. The sums claimed as Type IV claims had been added to by Ms Rawlins' report, albeit not by a substantial amount. Objection was taken to TTL's entitlement to claim these additional sums but they had been referred to and fully particularised in Ms Rawlins' report and it had been clear for many months that they were being claimed by TTL. I therefore reject this objection and approach the Type IV claims on the basis of, and to the extent set out in, Ms Rawlins' principal report.

Claims. In the revised claims set out in Ms Rawlins' report, there were 9 separate items of claim totalling £92,707.95. Each item of claim was based on the allegation that there was evidence of an overall sum due to TTL from a client or an agent of a client in the period of claim which had not been paid by that client or agent to TTL since there was no evidence of the relevant payment being made either during that period or subsequently. IP's only response to those items of claim was to assert that he had not received any of the sums in issue and that they were either doubtful debts or had in fact been received by TTL or were never invoiced or remained unpaid and were still recoverable by TTL.

Individual Claims. I will deal with the items of claim in the same order as they are dealt with in Ms Rawlins' report:

(1) 5 Category D claims. Ms Rawlins had reviewed TTUK's accounting records and had not identified any receipts or bankings from these five clients. She also pointed to the absence of any confirmation from the respective clients that the sums in question had been paid and as to who the payments had been made to. Since no further evidence was adduced about these items of claim by TTL, these claims are not established and are rejected.

(2) Map Holiday – claim for £19,050. Ms Rawlins concluded that £16,381 of this claim was due to TTL, had not been appropriated by TTUK and could not be linked with TTUK or be shown to have been appropriated in any other way. No further evidence was produced by TTL and, in conformity with Ms Rawlins' opinion, this claim is not established and is rejected.

(3) Map Holiday – claim for £2,669. Ms Rawlins was not shown any evidence that this sum was due from Map Holiday or that any part of it had been appropriated. She concluded that this was a Category D claim and, in the absence of any further evidence, this claim is not established and is rejected.

(4) Al Mulla – claim for £5,388. IP accepted that he appropriated this sum through TTUK and the claim against both defendants is, in consequence, established.

(5) Dunya – claim for £14,752. Ms Rawlins concluded that it was likely that this sum had been appropriated by TTUK. She was able to establish that a sum of £14,752 was paid into TTUK's account in three tranches on 15, 24 and 25 September 2008 and that that sum was the same as the total of 18 TTL invoices that were dated on various dates between 11 June and 15 August 2008. Ms Rawlins suggested in her report that TTUK should provide confirmatory documents to support its bald statement to her that these 18 invoices related to cancelled bookings and that the payments for those bookings had been held against future reservations but no such confirmation was ever received. I conclude that this claim is established against both IP and TTUK.

(6) Dunya – claim for £15,792. TTL established that a total of £15,792 was due to it from Dunya during the relevant period which it had not received and Ms Rawlins established that 5 sums totalling £15,792 had been received by TTUK from Dunya on 19 October 2008. Since neither TTUK had provided details of the invoices against which these payments were made and Dunya refused Ms Rawlins' request to provide copies, I conclude that this claim is established on the balance of probabilities against both defendants.

(7) Sultan – claim for £16,597. TTUK's records showed that a sum of £12,560 was received in cash from Sultan and IP accepted that this sum was accountable to TTL. This part of the claim for £16,597 is established against both defendants.

(8) Sultan – claim for £4,037. TTL's records do not show that this sum, being the balance of the claim for £16,597, was paid to TTL but do show that it was due and accountable to TTL. There is, however, no evidence that this sum was received by TTUK. The defendants did not attempt to explain away this claim by showing, for example, that this part of TTL's claim for payments from Sultan was not due from Sultan or that there was a satisfactory explanation for why it had not been collected from Sultan by TTUK. Such an explanation was to be expected from IP given that he had admitted that the apparently related payment of £12,560 that had been made by Sultan intending it to be made to TTL had been appropriated by TTUK and that he was liable to reimburse TTL for £12,560. In deciding this part of this claim, I take into account that neither IP nor TTUK provided any explanation even though an explanation was called for by Ms Rawlins. I conclude that this claim is established on the balance of probabilities against both defendants.

Conclusion. Claims totalling £5,388, £14,752, £15,792, £12,560 and £4,037 are established against each defendant severally.

10. Type V Claims

Claims - general. Mr Qureshi's report identified that IP and TTUK had appropriated a large sum from TTL in the period between 1 April 2008 and 30 November 2008. This became clear when IP's debtor's ledger and daily information records for this period were compared with the receipts and hotel payments paid into and out of TTL's bank as recorded in its bank statements. This analysis gave rise to two related claims which Ms Rawlins valued as follows:

(1) Money due and paid to TTL and appropriated by IP and TTUK: £143,352.

(2) Loss of profit by the re-direction of sales intended for TTL to TTUK: £18,156.

Appropriation of money due and paid to TTL. IP was principally involved in that part of TTL's business that involved it booking and paying for hotel accommodation and related services for its clients and then recovering that expenditure with a mark-up for its own profit from the clients for whom the bookings and payments had been made. This was a highly profitable business since clients settled promptly on receipt of TTL's invoice, under-recovery from clients was rare and the recoverable profit or mark-up for TTL was consistently about 13%. When Mr Qureshi prepared his two reports in early 2009, he discovered that IP and TTUK had apparently appropriated a large amount of money from TTL that it had received from these clients in the period between 1 April and 30 November 2008.

Mr Qureshi reached this conclusion by comparing information provided to him by IP for this period with information that he obtained from interim accounts for the same period that he had prepared. IP's information was provided in the form of the daily information that he had prepared on a day-by-day basis during that period. This daily information was, or should have been, an accurate running record of receipts and purchases made up on a daily basis as each of TTL's hotel transactions were undertaken for TTL's clients. Mr Qureshi's separately prepared interim accounts for the same period were based on TTL's sales receipts and purchases as recorded in its bank accounts.

The interim accounts showed that IP's daily information had under-recorded sales or client receipts (i.e. payments made by clients to TTL to reimburse it for the payments that it had made to hotels for those bookings) and purchases (i.e. payments made by TTL to those hotels for those bookings). In particular, there were a large number of payments that TTL had made to hotels out of its bank account which were not recorded in the daily information and for which Mr Qureshi could not identify client receipts. The extent of the under-recording of client receipts was far less than the under-recording of hotel payments so that TTL's gross profit as revealed by the interim accounts was greatly depressed from the gross profit revealed by the daily information. Mr Qureshi also discovered that there were debts recorded as still being due to TTL which the relevant clients advised had in fact been settled and that there were also payments advised by clients as being been paid which TTL had no record of receiving. These discoveries pointed to the deliberate falsification of the daily information so as to hide significant diversion of receipts away from TTL by depressing the value of purchases and the level of receipts.

Mr Qureshi concluded, by comparing purchases as shown in TTL's bank statements with IP's declared level of receipts and profit level, that the extent of TTL's under-recovery, and hence IP and TTUK's appropriation, to have been £195,118.

Ms Rawlins adopted a different method of ascertaining whether any, and if so what, appropriation had occurred. She undertook a straight comparison between receipts and purchases as revealed by TTL's bank account and assumed that TTL's profit margin or mark up on payments was 13% which was its average profit margin over the previous four years. This revealed a shortfall of £143,352. This method relied on two assumptions which she considered to be reasonable. Firstly, all TTL's client had been promptly invoiced for their respective sales and all those invoices had been settled promptly by the client once received. Secondly, TTUK had not appropriated entire transactions where neither the relevant sales nor the relevant purchases had passed through its account. The first assumption was justified by TTL's method of invoicing and the nature of its clientele and the second assumption, if incorrect, merely omitted from the claim further unclaimed appropriations from TTL.

Ms Rawlins also examined the accounting records that TTUK provided to her and her assistant. These were highly irregular in a number of material respects in the period in question in 2008. In particular:

(1) TTUK received £17,948 from two companies, Sultan and Almulla. These appropriations have been already been dealt with in the Type IV claims.

(2) The majority of purchase invoices were photocopies and many of these invoices were missing such essential items as the name of the addressee, relevant tax dates, accounts receivable numbers and guest arrival and departure dates. Further, when original invoices from the same hotel supplier in TTL's possession were compared with photocopied invoices in TTUK's possession purporting to come from the same hotel, many showed variations of style, content or format which further cast doubt on the authenticity of the invoices in TTUK's possession. The overall conclusion was that the extent of these anomalies was such as to throw into question the authenticity of all of the invoices in TTUK's possession.