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
		07/03/2013

The Honourable Mr Justice Stadlen :

1. The Claimant ("IG Index") is a well known company which specialises among other things in spread betting transactions. The First Defendant ("Mr Colley") was at all material times employed by IG Index as a senior shares dealer. The Second to Sixteenth Defendants were clients of IG Index who entered into various spread betting transactions with it. In this claim it is alleged that over a considerable period of time between September 2005 and September 2008 Mr Colley perpetrated a fraud against IG Index in concert with the other Defendants, in some cases through their agents. The purpose and effect of the fraud was to enable the other Defendants to place spread bets with IG Index at artificially low and thus false prices resulting in artificially high profits or low losses. The means used was the systematic fraudulent manipulation by Mr Colley of the trading prices offered by IG Index on certain US stocks, to which, as a senior trusted shares dealer he had access, by the insertion of false dividends which had not been announced and were not expected to be paid, the subsequent placing by the other Defendants of spread bets at prices which, by reason of the insertion of the false dividends, did not reflect the market prices, the retention of the false dividends in the IG Index price long enough to evade detection of the fraud by the two checks made which compared the IG Index price with the contract price, and the subsequent removal of the false dividends to enable the other Defendants to close the bets with the benefit of the true market price of the stocks.
2. As against Mr Colley, it is alleged that he occupied a position of trust and acted fraudulently and in breach of a fiduciary duty owed by him to IG Index as a senior employee to act honestly and in its best interests. As against the other Defendants it is alleged that they traded fraudulently at the false price and profited from the fraudulent activity of Mr Colley in respect of which they were acting in concert with Mr Colley of which they were aware and in which they willingly participated. It is further alleged that the sums by which they profited by the fraud were sums diverted from IG Index by reason of Mr Colley's breach of fiduciary or other duty owed by him to IG Index, and that the other Defendants were knowing recipients of such sums. One of the matters said to give rise to the inference that the client Defendants and Mr Colley were acting in concert was that Mr Colley could not otherwise profit from his fraudulent activity. In an interlocutory judgment. I held that amounted to an allegation that the profits made by the client Defendant would redound to Mr Colley's advantage.
3. As appears below, there was dispute between IG Index and some of the client Defendants as to what was the nature of the causes of action relied on against them, and whether they were good in law. In the Amended Particulars of Claim it is alleged that, as a result of the matters pleaded, IG Index has suffered loss and damage and IG Index claims against Mr Colley the sum of £1,242,190.43, said to be the total amount of money by which the other Defendants profited by reason of the fraudulent transactions. As against each of the other Defendants, IG Index claims the amount by which it is alleged that he or she profited and IG Index suffered loss by reason of the fraudulent transactions.
4. As against the client Defendants IG Index also have a claim in contract based on a term of the Spread Betting Customer Agreement by which it is alleged they had agreed to be bound. IG Index allege that under that term it had the right, either to void from the outset or to amend the terms of any bet containing or based upon a Manifest Error. A Manifest Error was defined as "any error that we believe to be obvious or palpable. In deciding whether an error is a Manifest Error we may take into account any relevant information including the state of the Underlying Market at the time of the error or any mistake in, or lack of clarity of, any information source or pronouncement upon which we based our quoted prices."
5. Where the opening level of the relevant bets was based upon an anticipated dividend, when no such dividend was in fact anticipated, it is alleged that the bets were based upon a Manifest Error. IG Index had decided that each of the relevant bets was based upon a Manifest Error. It is therefore alleged that it was entitled to, and has amended, the opening level of each relevant bet to that which would have been the correct opening level had the false dividend not been fraudulently entered by the First Defendant.
6. Originally there were 16 Defendants. By the time of the trial of the action IG Index had settled with, or obtained judgment against, all of them except Mr Colley, the Second Defendant ("Mrs Benn"), the Tenth Defendant ("Mr Osborn"), the Eleventh Defendant ("Mr Regan"), the Twelfth Defendant ("Mr Slaney") and the Thirteenth Defendant ("Mr Teller"). Mrs Benn is the mother of the Third Defendant ("Tom Benn") and Mr Teller is the son of the Fourteenth Defendant ("Mrs Teller") and the sister of the Fifteenth Defendant ("Ms Teller").
7. Details of the judgments and settlements available to the court at the time of the trial included the following. Judgment in default of a fully particularised defence in the sum of £197,317 and interest was obtained against Tom Benn. Judgment in default of a fully particularised defence was obtained against the 8^th Defendant ("Mr Goldstein") in the sum of £112,348 plus interest. Judgment was obtained against the Fifth Defendant ("Mr Cowan") in the sum of £22,263, against Mrs Teller in the sum of £20,204 plus costs and against Ms Teller in the sum of £56,151 plus costs. The action against the Fourth Defendant ("Ms Cooper") was stayed on terms that she agreed to pay IG Index £1500.

Spread Betting

8. It is convenient to set the scene by reference to the description of what is involved in spread betting given by Rix LJ in Spreadex Ltd v Battu [2005] EWCA Civ 855 at [2]-[3].

"Spread betting

Spread betting is not so much or not merely a bet, although it can be described as such, as a form of contract for differences. It enables a customer to take a position on a market (or an event) for a very small stake. Thus if the Dow Jones Index is, say, at 10,000, one can "buy" or "sell" the market at a spread around the index of, for the sake of example, 10 points either way, 9,990 to 10,010. If one buys, one is betting that the market will rise above 10,010. If one sells, one is betting that the market will fall below 9,990. If one buys and the market rises, one stands to gain £1 for every point that the index exceeds 10,010. If one sells and the market falls, one stands to gain £1 for every point that the index drops below 9,990. If, however, one calls the market wrong, then one will stand to lose £1 for every point that the index exceeds the spread point in the wrong direction. Thus if one sells at 10,000 with a sell spread point at 9,990, one will make £1 for every point the market falls below 9,990 and lose £1 for every point the market rises above 9,990. Until the bet or "trade" is closed, the gains and losses are merely "running" gains or losses. They are real enough, but constantly changing with every change in the index, and have not yet been fixed. Closing the bet will fix the position, win or lose. Unlike a classic bet, the customer can of course lose more than his stake. Indeed, on the example given, of a sale spread point of 9,990 when the market is at 10,000, if the market does not move an inch, the customer will lose £10 for every £1 staked. Nor, again unlike a classic bet, are his winnings fixed at the outset by an agreement on odds. In theory winnings based on rising markets are infinite (in practice of course they are not) and losses based on falling markets are limited only in so far as they cannot exceed the consequences of a fall in the index to zero.

Normally, of course, to gain by £1 for every rise (or fall) of a single point in a stock market index such as the Dow Jones would take an investment of significantly more than £1. In effect, one's £1 bet commands a position in the market significantly greater than the stake. In other words, there is a large element of gearing in the trade, and the situation is correspondingly volatile. Where the market in question is itself in a volatile phase, the risks become even greater. Thus, if the Dow Jones is capable of moving within a range of 100 or 200 points in a single day, the customer can be £100 to £200 richer or poorer per £1 stake within a matter of hours of his trade. On a trade of £100, those figures become £10,000 to £20,000."


9. IG Index described its carrying out of its spread betting business so far as relevant to this claim as follows in its Amended Particulars of Claim:

"The Claimant offers spread bets on, inter alia, the future price of individual US quoted stocks. As an example the Claimant might offer the quoted September 2009 price of "US Inc" as being 99-101 cents. The difference between 99 and 101 is the "spread". If a client considered that the quoted price of US Inc would rise the client would "buy" at 101 cents for a stake of e.g. £5 per point (cent). If a client considered that the quoted price of US Inc would fall the client would "sell" at 99 cents for a stake of e.g. £5 per point (cent).

The client is free to close out his bet at any time before the relevant settlement date. Thus, in the example above the client may have placed his "buy" bet on the 1st June 2009. If, by 1st August 2009 the underlying quoted price of US Inc has increased, then the offer for the September price will increase accordingly. Thus the price offered by IG on the 1st August 2009 for the September 2009 price may now be, e.g. 109 – 111 cents. The client can choose to close out his bet by "selling" at 109 for the same stake i.e. £5 per point. This would lock in a profit of £40 (8 point increase x £5). Conversely if the price offered on the 1st August 2009 had fallen to 89-91 the client may choose to crystallise his losses by selling at 89 for the same stake. This would lock in a loss of £60 (12 point fall x £5).

HOW THE CLAIMANT SETS THE PRICE

The price quoted by IG is made up as follows.

(1) The underlying quoted price of the stock on the day of the quote (on, for example, the New York Stock Exchange);

minus

(2) any dividend anticipated to be paid on the stock in the relevant period between the date of the quote and the date of settlement;

plus

(3) a small interest element.

For the purposes of this example, and for the purposes of these proceedings, the interest element can be ignored.

Thus if on the 1st June 2009 the quoted price of US Inc on the New York Stock Exchange is $1.05 per share and it is anticipated that the company will declare a dividend of 5 cents per share between the 1st June 2009 and the September settlement date the price would be $1 ("the mid price"). To this mid price would be applied the spread to give the offer of 99-101. Assuming there to be no change to the anticipated dividend, for each 1 cent rise (or fall) in the underlying quoted share price the mid price would rise (or fall) 1 cent.

The alleged fraud

10. IG Index alleges that Mr Colley systematically and fraudulently entered false dividends into its systems, thus lowering the mid price of various stocks. The other Defendants then fraudulently traded with IG Index at the false price. Mr Colley then removed the false dividend from the system, thus increasing the mid price to its proper level. The other Defendants then closed their bets at the higher price, thus making a profit, subject to any legitimate movement in the underlying price of the stock. The effect was thus that the other Defendants either made a false profit or falsely made a smaller loss than they would have done but for the fraudulent insertion and removal of the false dividend.
11. The details of the alleged fraud were pleaded in the Amended Particulars of Claim in the following terms:

"11 Colley was an experienced and trusted employee of IG. Part of his responsibilities involved setting and inputting the level of anticipated dividend for individual stocks.

12 Colley would select individual US stocks in which (usually) no other IG client held any position and in respect of which no dividend was anticipated in the relevant period.

13 Colley would then place a false anticipated dividend into the system for that stock ("the false dividend"). Again taking the example above if the underlying quote for US Inc on any particular day was $1.05 and no dividend was anticipated the mid price would be $1.05. If Colley inputted a false dividend of 5 cents the mid price would fall to $1.00.

14 After inputting the false dividend one of the other Defendants, acting in concert with Colley, would then place a "buy" bet on the stock at the lower price. Such bets were, usually, placed on the internet or mobile phone platform but occasionally by telephone call to Colley. Shortly thereafter Colley would remove the false dividend from the system. The mid price would revert to its proper, higher, level. The other Defendant would then close the bet for an immediate profit (subject, of course to any legitimate movement in the underlying price of the stock). In the example above the other Defendant would make a fraudulent profit of five times his unit stake (less the effects of the spread).

15 Colley employed sophisticated techniques to ensure that this simple fraud was not capable of being detected by IG. These techniques included the following.

i) Fraudulent activity was spread across 17 client accounts that were also active in other stocks, indices and Foreign exchange.

ii) On average there were a total of 3 fraudulent trades every 2 weeks and the average profit was £3,000.

iii) Accounts were rarely used for a fraudulent trade twice in close succession and no two accounts ever dealt on the same dividend change.

iv) Trades were mostly kept below the maximum automatic online size and therefore rarely went 'manual' for a dealer to check.

v) Trades were nearly always on stocks in which no other client had a position (who may have complained about the odd prices). Colley was able to check this data.

vi) Trades were always denominated in £ sterling and individually small. Through Colley's position of trust he frequently also reconciled the profit and loss on the US stocks.

vii) Individual trades were not large enough for Financial Dealing Director, Shares Dealing Director or Head of Equity Trading (or previously Financial Dealing Director or Risk Department) to see a need to investigate the Profit and Loss on the stock.

viii) Even if the trades were investigated the investigating dealer would have simply deleted the dividend and phoned the client with a position to tell them the opening level would be amended - clearly the other Defendant would agree to this as they were complicit in the fraud. There would be no trigger for the dealer to do anything else and he would naturally assume that the dividend being in the stock price was a simple data entry error.

ix) Dividend information was stored in 2 places - a spreadsheet and Xcon. Colley, as a senior trusted shares dealer, had access to both and fraudulently changed the dividend in both places. This circumvented the check to compare the dividend component of IG's dealing prices to the spreadsheet..

x) A comparison of information from Bloomberg to information held on Xcon for dividends payable in the next 5 days was performed. Colley circumvented this control by always entering a false dividend more than 5 days in the future. Through his position of trust he frequently had the responsibility to carry out these comparisons.

xi) The Shares Dealing desk performed an audit of trades performed throughout the day to determine if dealing prices for that day were in line with current valuation prices The audit was started each day at approximately 20:30 and completed by 20:45. Colley frequently performed the audit and usually placed the false dividend after 20:45.

xii) A wider audit was performed by a graduate trainee dealer each morning to (1) compare the price traded by the client to the current valuation on the asset concerned and (2) compare the price traded to other trades from other clients in that asset that day. Colley always used stocks with no other open positions to circumvent the second part of the check and the first part triggered no alarms as he left the false dividend in place until after the audit had been done. This meant that the other Defendant's trade and the current valuation were at very similar levels (especially as they dealt so near the close)."

12. In the original Particulars of Claim the case against Mr Colley was pleaded in these terms:

"By his actions as set out above the First Defendant was acting fraudulently.

"Further the First Defendant, as a senior employee of the Claimant, owed a fiduciary duty to the Claimant to act honestly and in the best interests of the Claimant. By his actions as set out above the First Defendant was in breach of the said duty."


13. The case against the second to fifteenth Defendants was pleaded as follows:

"18 In respect of each of the other Defendants there is annexed to these Particulars a spreadsheet listing all bets in which the individual defendant profited from the fraudulent activity of the First Defendant as set out above ("the relevant bets"). Each spreadsheet contains an explanation of the contents and sets out the extent by which the individual defendant profited from the fraud. The amount claimed from each of the Second to Fifteenth Defendants takes into account any balance due to any of these Defendants as a result of legitimate transactions between that Defendant and the Claimant and set off by the Claimant against the sums due as a result of the matters referred to herein.

19 The profit from any relevant bet would be credited to the account of the particular Defendant who placed the bet. The First Defendant could not profit from his fraudulent activity unless he was acting in concert with the particular Defendant. The Claimant avers that it is an irresistible inference that the other Defendants were acting in concert with the First Defendant.

20 Further the Claimant avers that the timing and nature of the relevant bets placed by the other Defendants, in particular the fact that the bets were opened shortly after the false dividend had been entered by the First Defendant and closed shortly after the false dividend was removed by the First Defendant, also indicates that the other Defendants must have been aware of the fraud being perpetrated by the First Defendant and must have been willing participants in that fraud.

21 Further the sums by which the other Defendants profited by the fraud were sums that were diverted from the Claimant by reason of the breach of fiduciary or other duty owed by the First Defendant to the Claimant. The other Defendants were knowing recipients of such sums. The Claimant relies upon the matters set out above in support of the allegation of knowledge."

14. Further details of IG Index's case were supplied pursuant to requests made by Mr Colley, Mr Regan and Mr Teller and his mother and sister.
15. The false dividends alleged to have been fraudulently entered into IG Index's systems by Mr Colley were said to be dividends entered into futures prices which were incorrect, in that no dividend was actually anticipated in the relevant period, or in that the anticipated dividend was lower than the false dividend inserted.
16. Details were given of the occasions on which it was alleged that Mr Colley selected stocks in which other IG Index clients (that is to say other than the customer Defendants) held positions. It was said that there were 111 transactions where other clients held positions in a Contract for Difference (CFD). However in all of those cases it was said that there were no other spread betting positions open in IG Index systems. Any client with a CFD position would see no change at any point to their profit and loss or any pricing change when the false dividend was added or removed. The unpleaded inference was that the fact that other clients held a CFD in respect of stocks chosen by Mr Colley to insert a false dividend into would not have alerted those clients to the fact that the false dividend had been entered.
17. Apart from that, it was said that of the 415 transactions involving false dividends there were only seven occasions when there was another client position which would have been temporarily affected by the alleged manipulation. Of those, one transaction was identified where there was an open daily spread betting position at the time of the insertion and deletion of the false dividend. However it was asserted that that position was unaffected by the insertion and removal of the false dividend (unless, it was explained at trial, the client traded). That is because the dividend would not expire on that day.
18. Two other occasions were identified in which a client had a spread betting future open for a different expiry date. In both cases it was accepted that the other clients would have seen their running profit and loss change when the false dividend was inserted and again when it was removed, increasing the chance that the client could call in and query the price. However it was alleged that in both cases the client closed out after the false dividend had been both inserted and removed so that neither of them saw any realised profit or loss as a result of the manipulation. The inference, as I understood it, was that there was a risk that the clients could have been alerted to the entry and removal of a false dividend if they had checked their running profit and loss between the date of entry and removal of the false dividend but that in the event they did not notice it, presumably because they did not check their running profit and loss between those dates.
19. Five other occasions were identified where other clients had spread betting positions open for the same expiry date as those in alleged fraudulent transactions. It was accepted that the other clients would have seen their running profit and loss change when the false dividend was inserted and again when it was removed increasing the chance that the client could call in and query price. However again in all five case it was said that the clients closed out after the false dividend had been both inserted and removed so that none of them saw any realised profit or loss as a result of the manipulation.
20. The truth of these further details was in due course attested to by one of IG Index's witnesses, Mr Gordon.
21. Mr Colley asked if it was alleged that before each of the allegedly fraudulent transactions he agreed with the relevant customer Defendant that in relation to that specific transaction he would input into IG Index's trading system a false dividend so causing the quoted price of the stock to fall and that the relevant Defendant would subsequently purchase the stock concerned. IG Index's response was that it did not know the precise details of how the Defendants operated the fraud between themselves and in particular the precise details of when or how any agreement was reached between Mr Colley and the customer Defendant or the precise details of such agreement. It was alleged that in each case Mr Colley would input a false dividend so causing the quoted price of stock to fall and that subsequently the relevant customer Defendant would purchase the stock concerned. It was said to be an irresistible inference from all of the pleaded circumstances that the relevant customer Defendant was acting in concert with Mr Colley and that both were participants in the fraud. In my judgment that amounted to an allegation first Mr Colley's insertion of false dividends and the subsequent placing by the client Defendants of bets at the reduced prices were fraudulent acts done pursuant to an agreement between them.
22. As to Mr Colley's ability to check whether no other client had a position on stocks into which he entered false dividends it was said that there were two methods for checking the data. The first and less accurate was to check the morning reports which contained a view of all open client and broker positions in all instruments offered by IG Index. It was correct as at a time on the previous night and could thus be out of date once live trading in the instruments in question started. The second was a real time database search called TCL, where queries were retuned either on screen or via an output to Excel to find out the number of IG Index's existing open client positions in a single US stock, which should take no more that 30 seconds and would be correct as of the point of output. Almost every IG Index employee had access to TCL so that as of September 2005 there would have been well over one hundred employees in a position to check that no IG Index customer had a position in a particular stock.
23. As to Mr Colley's choice of sterling denominated transactions it was said that such trades would have their profit and loss displayed in a separate line in a separate area of the P/L reports. The large P/L on a sterling denominated US stock would be expected to have an offsetting profit in the USD line. Due to time constraints it was only the really large unexpected P/L swings that would typically be investigated by a dealer due to the time taken to match up the different codes.
24. As to the allegation that individual trades were not large enough for various people to see a need to investigate the profit and loss on the stock, it was said that the financial dealing director, shares dealing director, head of equity trading and previous financial dealing director had discretion as to the criteria used in deciding whether to investigate a particular trade. IG Index takes exposure to risk on every product it offers. On any particular day there will be a profit or loss due to a combination of dealing spread or commission and market movement on the stock in question. The individual stocks to be investigated would typically be those which provided the biggest swing on profit or loss. IG Index offers dealing in over 7000 stocks and the largest profits or losses tend to come from those which have seen extreme volatility and/or a disproportionate volume of dealing from clients. A very general rule of thumb on US shares was that profits or losses of about £10,000 or more would require investigation. As to the Risk department it would review the P/L on new trades and the variants in the dealt price to the close of business price, starting with the largest P/L on the day and stock with approximately 15% variants. They would also review the system generated P/L to the calculated P/L, starting with the largest and with variants to actual or approximately £2,000-£3,000. It was alleged that Mr Colley knew the criteria adopted by each of the individuals to determine whether there was a need to investigate the profit and loss of a particular stock. He was a trusted and experienced dealer with over nine years of experience at IG Index. Reconciling profit and loss was a skill which he would have been told about very early in his IG Index career and he would not have been asked and allowed to do it if he was not capable of so doing. His ability to reconcile any P/L was specifically mentioned in his annual appraisal in 2003.
25. As to the allegation that Mr Colley had access to the spreadsheet and Xcon in which dividend information was stored it was said that at present there were 21 staff members with write Xcon permissions at the dividend level and that the spreadsheet could be accessed by almost all IG Index staff. It could be assumed that well over 100 people even in September 2005 would have been able to access it.
26. As to the check to compare the dividend component of IG Index's dealing prices to the spreadsheet, it was said that whenever dividend reconciliation was carried out IG Index made any changes to the spreadsheet and then matched those changes with Xcon. At first the check was performed on an ad hoc basis but over time it became a daily task usually performed by Mr Colley and one other shares dealer although all shares dealers knew how it worked. The comparison was performed at a quiet or well staffed time of the day usually but not always in the morning. The point when it moved from ad hoc to daily was not recorded but it was mentioned in Mr Colley's 2003 appraisal that it was a daily check.
27. As to the comparison of information from Bloomberg to information held on Xcon for dividends payable in the next 5 days it was said that that comparison would have been undertaken at the same time as the comparison between the dividend component of IG Index's dealing prices to the spreadsheet. This check had also become a daily check by 2003. IG Index would reconcile the announced dividends with its system settings and also look at any dividends within its systems settings which it believed were going to go Ex-Date over the next five working days and check if the market agreed with it.
28. As to the process by which any errors identified by IG Index as a result of this comparison or otherwise, it was said that if it was discovered that IG Index had a wrong system setting due to dealer or other manifest error it would decide whether to correct any deals which resulted from the wrong price under the terms of the customer agreement. If a dividend discrepancy between the prediction and the announced amount (or Ex-Date) was not considered to be significant in comparison to the price of this stock then the change would be made to the system settings and no positions would be adjusted. If the change resulted in a large change in the futures valuation price or a significant P/L swing for or against a client then it would adjust the opening level of the bet to account for the change in the dividend prediction. The decision whether or not to adjust positions was down to dealer discretion.
29. As to the daily audit to determine if dealing prices for the day were in line with current valuation prices it was said that at different times between September 2005 and September 2008 18 members of staff in addition to Mr Colley performed it from time to time. They were the financial dealings director, the head of equity trading and 16 shares dealers.
30. Of the audited changes to Xcon there were 22 transactions where the exact time was known when false dividends were added to IG Index's prices on the machine which only Mr Colley was logged into. Of those 22, 17 had the false dividend added after 20:45 p.m. and 5 before 20:45 p.m. There were also 393 transactions where there was no record of the exact time when the false dividend was added although the time of the bet was noted. (In due course, by the time of the trial IG Index had identified a total of 130 transactions where its audited data of changes to Xcon were alleged to have included the precise date, time and amount of the alleged insertion of a false dividend).
31. As to the wider audit performed by a graduate trainee dealer it was the first job performed by one graduate trainee each morning. The usual starting time was 7:30 a.m. or 8:00 a.m. so it would be expected to commence around that time. The only aspects of the check specifically reported were trades which looked as though they might potentially be at the wrong price. These would be reported to a senior dealer on the relevant day who would then investigate the price and deal with any which were believed to be wrong. Mr Colley would have been aware of the approximate time the check would be finished. In any event it was performed using valuations recorded overnight. Accordingly it was the time that the check was started that was relevant. As long as it had been started using system valuations which contained the false dividends the check would not have unearthed the future prices as being wrong.
32. In answer to a request from Mr Regan as to whether there were stocks in respect of which IG Index alleged that Mr Colley perpetrated a fraud in the manner set out in the Particulars of Claim which were not bet upon by any of the second to sixteenth Defendants, IG Index alleged that three other people, David Abrahmovich, Frederick Jeffcoate and Neil Rowe placed fraudulent trades. Details of those trades were set out in a spread sheet. It was said that no claims had been brought against Mr Jeffcoate or Mr Rowe because IG Index was able to recover the sums fraudulently gained from credit balances on their account. In relation to Mr Abrahmovich the sum of £1123.65 was said to be due and IG Index had decided not to pursue it.
33. In addition it was said that there was one occasion on which an innocent third party traded on the false price caused by the insertion of a dividend. Details of those trades were provided in a spreadsheet. Save as set out IG Index was not aware of any other persons.
34. On the third day of trial I gave permission to IG Index to amend its Particulars of Claim so as to rely on additional matters in support of the fraud allegations. At the same time I refused permission to amend so as to rely on two other categories of allegations in support of the fraud claim. The former were not controversial and were not opposed.
35. The matters in respect of which I gave permission were as follows. First in support of its case against Mr Colley IG Index relied on the matters set out in seven witness statements of present or former IG Index employees. With one exception those witness statements were dated September and October 2011. The exception was a supplementary witness statement of Mr Gordon dated 10 May 2012. Broadly speaking those witness statements covered the following principal topics: the circumstances in which the alleged frauds came to light and Mr Colley's response thereto; the steps taken by IG Index to investigate the alleged fraud and the results of those investigations; the way in which so far as relevant IG Index carried out its business with customers at the relevant times; the checks carried out by IG Index at the relevant times and in the case of Catherine Crowther, a paralegal employed by IG Index the alleged connections between various of the Defendants discovered by her.
36. In support of the contention that the second to sixteenth Defendants were willing participants in the fraud and were acting in concert with Mr Colley IG Index relied on two further matters. The first was the links between the various Defendants set out in Ms Crowther's witness statements and the material contained in the exhibits thereto. Second in respect of each of Mr Slaney, Mr Teller and Tom Benn whenever he placed one of the allegedly fraudulent trades no other person placed a trade. It was alleged that Mr Slaney placed fraudulent trades on 46 occasions, that Mr Teller placed 68 fraudulent trades on his own account, 56 on his sister's account and 7 on his mother's account – 141 occasions in all – and that Tom Benn placed 60 fraudulent trades on his own account and 15 on his mother's account – 75 in all. It was also alleged that apart from one occasion, on each of the 46 occasions when Mr Regan placed a fraudulent trade no other person placed a trade.
37. The inferences which I understood it was relied on as arising out of the absence of trades by other people on those occasions on which these particular client Defendants were alleged to have carried out fraudulent trades was that if it is proved that Mr Colley was involved in fraudulent transactions and that these were fraudulent transactions there would have been no point in them had there not been a complicit counter party and if there was nobody else who traded on that account it would have been a pointless fraud unless these three Defendants were in fact the intended accomplices and complicit in the fraud.
38. The two matters in respect of which I refused permission to amend were as follows. First IG Index sought to rely on what it described as a series of unexplained payments into Mr Colley's bank account and a series of payments into and out of the bank accounts of Mr Regan, Mr Slaney, Mr Teller and Mr Teller's mother Sally Teller. The second matter was an allegation that in relation to Mr Regan, Mr Slaney, Mr Teller and Tom Benn, on the 369 occasions in the case of Mr Regan and Mr Slaney, the 284 occasions in the case of Mr Teller and the 340 occasions in the case of Tom Benn when other customer Defendants (or the three other alleged fraudulent accomplices whom IG Index chose not to sue) placed bets following the sharp drop in price on a stock caused by the insertion of a false dividend, they did not do so. The inference as I understood it sought to be drawn from this allegation was that there could be no innocent explanation for the allegedly fraudulent bets which these three Defendants did place based on them having alighted upon the particular trades because they noticed the sudden drop in the price because if they had been so alert they would have spotted the sudden drop in price in relation to the other stocks on which the other co-Defendants traded.
39. The issue of amendment arose when Mr Mayall, who appeared on behalf of IG Index, raised of his own volition at the end of the first day of the trial the fact that he intended to rely in cross examination on inferences to be drawn from bank statements disclosed by some of the remaining client Defendants showing as against them that cash withdrawals were made from the banks after payments were received from IG Index, the inference being that those payments were made to Mr Colley as part of the fraud. He was anxious to know whether I was content that he should be able to do that on the existing state of the pleadings.
40. The matter was canvassed in argument on the second day of the trial and a number of matters emerged. They were that although the bank statements had been disclosed quite some time earlier the client Defendants had not been aware that it was intended to put to them that the inferences to be drawn from the particular cash withdrawals sought to be relied on by IG Index and their connection with the receipts from IG Index was that those monies or most of them were paid to Mr Colley. Two of the client Defendants indicated to me that in responding to those allegations if they were allowed to be relied on by IG Index they would wish an opportunity to respond by evidence in at least two ways. First by reference to bank statements for periods between the opening of their accounts which I understood in some cases went bank to 2003 and the beginning of the allegedly fraudulent transactions which began in most cases in 2005 for the purpose of showing that other cash withdrawals were made which could not have been connected with the alleged fraud, and second for the purpose of adducing evidence as to what the cash withdrawals that were made during the allegedly fraudulent transactions were in fact spent on. An example given was expenditure on building works for which invoices and evidence from a relevant builder might be forthcoming. It therefore seemed to me appropriate that in order that the matter could be clarified IG Index should produce a draft amended pleading identifying the matters on which it wished to rely.
41. It also emerged that Mr Regan and Mr Slaney, both of whom were employed, Mr Regan in the City and Mr Slaney as a fireman, had taken off that week and the following week as part of their annual leave so as to be present at the trial. Mr Regan did not wish his employer to know that these allegations had been made against him on the basis that they were not true and that even if he were to win at trial the fact of the allegations having been made against him would be unhelpful. Mr Slaney, who was not represented, indicated that it would be difficult to know when he could take further time off as holiday if there were to be an adjournment since the fire brigade has a system requiring applications for holiday to be made. They did not think it likely that they would be able to get the relevant material in time to enable them to rely on it and adduce it if the case were to proceed. A similar point was made by Mr Teller. In order to clarify matters I invited Mr Mayall to plead the relevant matters on which he sought to rely by way of amendment and that was done overnight.
42. In the draft pleading reference was made to a large number of payments into Mr Colley's bank account and into and out of the bank accounts of Mr Regan, Mr Slaney and Mr Teller on dates ranging from 2005 to 2008.
43. IG Index had had these bank statements by way of disclosure from Mr Colley, Mr Regan, Mr Slaney and Mr Teller from dates between January 2011 to March 2011. If the particulars which IG Index now sought to rely on had been pleaded within a reasonable period of time after receipt of the bank statements to allow them to be analysed the Defendants would in my view have had ample opportunity to prepare to rebut them.
44. As it was in my judgment the fact that disclosure had been sought of bank statements and that they were included in the trial bundle did not sufficiently identify to these Defendants the particular inferences that were going to be sought to be drawn from them. That appeared very clearly from one example. When Mr Mayall was going through the material de bene esse he identified in the case of one of the Defendants a pattern of withdrawing cash both from his bank and from an ATM cash-dispensing machine. Initially Mr Mayall submitted that it was IG Index's case that it was only the money coming from the bank that was said to give rise to an inference that that money was going to Mr Colley because the contrast was made between that on the one hand and the money withdrawn from the cash dispensers on the other which it was said it was to be inferred were used for his own personal expenses. However later in the argument Mr Mayall changed his submission and said that he wished to rely on a submission that the money withdrawn from the ATMs as well as the money withdrawn from the banks went to Mr Colley. That seemed to me to flag up the fact that even at that stage no clear case had been formulated by IG Index as to what inferences it was seeking to argue could be derived from those payments.
45. I gave careful consideration to whether it would be possible for IG Index to rely on the particular payments now sought to be relied on and the inference sought to be drawn form them without unfair prejudice to the Defendants by the Defendants seeking to gather material that they would wish by way of rebuttal by the end of the trial. That however was for the reasons given not realistic in my view. The choice therefore was between giving IG Index permission to rely on this material without the Defendants having a reasonable opportunity to gather evidence in rebuttal or to adjourn the trial or to refuse permission to amend. The first option would in my judgement have been unfair not least in circumstances where it was entirely IG Index's fault that the proposed allegations had not been pleaded before or flagged up in some other way. In other circumstances there might have been strong arguments that the appropriate course would have been to adjourn the trial on terms that IG Index should pay the costs of the adjournment. However that would not in my view have been just or consistent with the overriding objective. These were serious allegations which had been hanging over the Defendants for a long time. They had come to court to meet the allegations and any adjournment would probably have had to be for some considerable period of time given the difficulties of two of the Defendants to which I have referred and that would have been unfair not least on the other Defendants against whom the proposed amendments were not sought to be made. The option of a short adjournment was in my view too uncertain having regard to the difficulties to which I have referred which Mr Regan and Mr Slaney were likely to encounter. In those circumstances in my judgment the only fair course was to refuse permission in respect of the bank statement amendments.
46. However as I pointed out in the ex tempore interlocutory judgment which I gave it remained the case that a central part of IG Index's pleaded case against the Second to Fifteenth Defendants was that the profit from the allegedly fraudulent bets would be credited to the account of the particular client Defendant who placed it, that Mr Colley could not profit from his fraudulent activity unless he was acting in concert with the particular Defendant who placed the bet and that it was an allegedly irresistible inference that the other Defendants were acting in concert with him. That as it seemed to me involved two propositions. First that, assuming that Mr Colley was acting fraudulently by inserting and removing false dividends, unless there was a fraudulent counterparty there would be no mechanism by which Mr Colley's fraudulent manipulation of the price offered by IG Index arising out of the manipulation could be given effect to. Second that because Mr Colley could not profit from the fraudulent activity unless he was acting in concert with a particular Defendant the inference was that in some way the profit made by the client Defendant was a matter which would redound to Mr Colley's advantage. In effect it was an allegation that it was agreed that the client Defendant would make a payment or confer some other financial benefit on Mr Colley in return for being given the opportunity to benefit from his fraudulent insertion of false dividends.
47. What did not arise from that pleaded case in my judgment was an inference that the particular cash withdrawals from the four client Defendants which the amendments were sought were paid to Mr Colley. It was perfectly possible and the Defendants were entitled to assume that having got disclosure IG Index had taken the view that they could not establish that.
48. As to the second category of proposed amendments to which objection was taken, namely allegations that the named Defendants did not trade on the allegedly fraudulent bets placed by other Defendants these also in my judgment suffered from the defect that it would be unfair to allow IG Index to seek to rely on the inferences sought to be drawn without the identified Defendants having had a proper opportunity to prepare to rebut them. That would have involved detailed examination by them of the bets placed by other Defendants and a comparison with their own transaction history.
49. The fact that I refused permission to IG Index to amend so as to allege that particular payments were made by customer Defendants to Mr Colley does not alter that fact that IG Index remained entitled to rely on the allegations and inferences referred to in paragraph 45 above.
50. As to the second opposed category of amendments sought by IG Index, namely that the identified customer Defendants did not trade on each other's alleged fraudulent trades, in my judgment to have allowed those amendments would have been unfairly to deprive the customer Defendants of the opportunity of investigating them and responding thereto. Thus by way of example Mr Regan pleaded that he identified certain sectors of stocks when choosing which stocks to place bets on. If it were permitted to be pleaded against him that he did not bet on any of the 389 allegedly fraudulent transactions placed by other customer Defendants so as to undermine that defence and to suggest that his explanation for his selection of his allegedly fraudulent transactions, namely that he noticed the sudden downwards spike in IG Index's price, or that he had done research on the stock, was implausible, he would be deprived of the opportunity of identifying particular reasons why he did not bet on other customer Defendants' bets, such as that he did not like the particular stock on which the other Defendants placed bets or that there was some reason connected with the timing on which a particular stock was traded. It might have involved some very considerable analysis by him and/or his legal team to go through the 389 other trades for the purpose of preparing a defence. As with the cash payments, this was a matter which could have easily been identified by IG Index a long time before the trial and in sufficient time to enable the Defendants to respond. For the same reasons as in the case of the cash payment proposed allegations, I did not consider that it would be fair either to deprive the client Defendants of a reasonable opportunity of responding to these proposed new allegations or to adjourn the trial for what was likely to be a considerable period of time.
51. Again it remained a central part of IG Index's pleaded case that one of the matters giving rise to the inference that the 415 allegedly fraudulent transactions were indeed fraudulent was the fact that with a handful of exceptions the bets were in every case placed on stocks in which no innocent client had an open spread bet position. As I understood it this was relied on as giving rise to two inferences. First that Mr Colley deliberately chose stocks where his false insertion and subsequent removal of a false dividend so as to benefit his fraudulent counterparty would not be detected by any innocent client of IG Index who happened to have an open position on that stock and who might therefore notice an unexplained profit (or more likely loss) in their open position during the period between Mr Colley's insertion and removal of the false dividend with a consequential risk of a query to IG Index and an investigation of why the price had moved. The second was that if it were proved that Mr Colley fraudulently inserted and removed false dividends on the 415 transactions, since there would be no point in the fraud from his point of view unless it led to at least one customer placing a bet between the insertion and removal of the false dividend and then closing down the bet, the inference in each case must be that the only customer who placed a bet after the false dividend was inserted and then closed it out after the false dividend was removed must have been acting in concert with Mr Colley.
52. It is also the case that it remained a part of IG Index's pleaded case that one of the sophisticated techniques employed by Mr Colley to ensure that his fraud was not capable of being detected by IG Index was that accounts were rarely used for a fraudulent trade twice in close succession and that no two accounts ever dealt on the same dividend change. (Paragraph 15 (iii) of the Amended Particulars of Claim). It also remained part of the pleaded case that Mr Colley always used stocks with no other open positions to circumvent the second part of the check carried out each morning by a graduate trainee dealer which involved comparing the price traded by the client to other trades from other clients in that asset that day.

The defences to the fraud allegation

53. All six of the Defendants who contested the claims at trial denied any involvement in fraudulent activity on their part.

Mr Colley's Defence

54. Mr Colley denied that he took part in any scheme in collusion with any of the other Defendants or otherwise to manipulate the prices of stocks in IG Index's system and/or to take advantage of prices that had been the subject of such manipulation. He specifically denied that at any time during his employment with IG Index he knowingly entered "false" dividends into its systems or removed "false" dividends from them, whether fraudulently systematically or otherwise. He made no admission as to the trading activity of any of the other Defendants.
55. In addition he pleaded a number of particular points. Although he admitted that the price quoted on the relevant stock exchange, the existence and expected size of any anticipated dividend and an interest element all influenced the price quoted by IG Index for a particular stock, he denied that the IG Index price is simply (a) – (b) + (c) as alleged by IG Index. He averred that the price actually quoted by IG Index was a matter for judgment of the dealer concerned and took account of the level of demand being experienced by IG Index for the stock and on occasion the identity of the potential client to whom the price was being quoted.
56. Mr Colley averred that the setting and inputting of anticipated dividends for individual stocks was a responsibility shared by all of IG Index's shared dealers. It was not a function limited to Mr Colley alone or even to a small number of individuals on the dealing floor or an exclusive group of dealers. Rather since seats on the dealing desk were not allocated whichever dealer on the early shift happened to be seated at the position on the dealing desk in front of the Bloomberg terminal would be responsible for updating dividend information that day. Further changes to anticipated dividends on individual stocks frequently needed to be made during the course of the trading day and where that became necessary the changes could and would be input by any of the share dealers on the desk.
57. Mr Colley denied that he employed any of the so called sophisticated techniques pleaded by IG Index so as to ensure that the alleged fraud was not capable of being detected by IG Index. He also denied that the allegedly sophisticated techniques would have contributed to making the alleged fraud incapable of being detected by IG Index. He also averred that some of the checks and/or audits which it was alleged that he sought to circumvent would not in any event have detected manipulation of the sort alleged. He specifically averred that given the high volume of trades carried out each day by IG Index it would not in practice have been possible to check that no other client had taken a position in a particular stock during the course of the day. He denied that in the context of the types of trades routinely undertaken by IG Index all of the allegedly fraudulent transactions were small and he denied that he frequently reconciled the profit and loss on the US stocks. That was not a task he performed at any time during his employment with IG Index. As to the allegation that even if the trades were investigated the investigating dealer would simply have deleted the dividend and phoned the client to tell them the opening level would be amended to which the other Defendant would clearly agree as they were complicit in the fraud, Mr Colley averred that the dealer would have been unlikely simply to have deleted a dividend without further investigation and would not in all cases have phoned the client to inform him of any change. In practice on many occasions clients were not informed of changes to opening positions if the dealer took the view that the client was unlikely himself to notice that change.
58. Mr Colley denied that he fraudulently changed the dividend in a spreadsheet and Xcon to circumvent the check to compare the dividend component of IG Index's dealing prices to the spreadsheet. He averred that updates to dividend information were made by first entering the relevant information into an excel spreadsheet called "SuperDiv" and then copying and pasting the information from "SuperDiv" into IG Index's trading system, Xcon. In common with every other share dealer Mr Colley had access to both "SuperDiv" and Xcon. Only once the information had been transferred from "SuperDiv" to Xcon did any changes made affect the trading prices quoted by IG Index. It was common for the information in the "SuperDiv" to be pasted incorrectly, with the result that the live trading prices being quoted would be incorrect.
59. Mr Colley admitted that regular comparisons were carried out against dividend information on Bloomberg but averred that the comparison was with the information in "SuperDiv" not Xcon. He denied that he circumvented the control by always entering a false dividend more than five days in the future and that through his position of trust he frequently had the responsibility to carry out those comparisons.
60. Mr Colley admitted that daily audit of trades was performed each evening but denied that it was started each day at approximately 20:30 and completed by 20:45, that he frequently performed the audit and that he usually placed the false dividend after 20:45. He averred that in any event the audit would not have identified price manipulation of the sort alleged since the reference price used to carry out the audit would itself have contained the same error as the dealing price being checked.
61. As to the audit performed each morning Mr Colley admitted that it was performed but denied that it was performed by a graduate trainee.
62. Mr Colley denied that he was a senior employee of IG Index and that he owed IG Index the fiduciary duties alleged or any other fiduciary duties. He also denied that he was in breach of any fiduciary duty which he did owe.
63. Mr Colley denied that he was acting in concert with the second to sixteenth Defendants or any of them.
64. As to the loss allegedly suffered by IG Index Mr Colley denied that any such loss arose as a result of any breach of duty on his part. In addition he alleged that on IG Index's own case the relevant bets were based on a Manifest Error which entitled it under the terms of the Spread Betting customer Agreement with its clients to amend the opening level of each relevant bet to that which would have been the correct opening level without the false dividend such that even if he had breached his duty to IG Index as alleged it suffered no loss as a result.

Mrs Benn's Defence

65. Mrs Benn admitted that she held an account with IG Index which she averred she opened at the request of her son, Tom Benn. She further averred that on 5 August 2002 she granted a power of attorney to Tom Benn to do business with IG Index and for that purpose to open operate and close her account and to do anything contemplated by her customer agreement with IG Index. (At trial she said that this was a mistake because the power of attorney was in fact granted not to her son but to her husband.) She averred that she had no personal dealings with her account which was at all times operated by Tom Benn. At no time did she personally enter into any Spread Betting Transactions with IG Index. She was aware that Tom Benn carried out betting transactions as her attorney but was unaware of the size or nature of any bets placed by him.
66. Mrs Benn averred that she had no knowledge of the nature of Spread Betting or how IG Index sets the price. She denied that she traded fraudulently or that she acted in concert with Mr Colley and averred that she had no communication with him about any bets. She denied that she made a fraudulent profit. She denied that she was complicit in the fraud or that she was ever telephoned by an investigating dealer or that she agreed to the deletion of any dividend. She denied that she was aware of any fraud of Mr Colley and that she willingly participated in any such fraud. She further denied being a knowing recipient of any sums diverted to her from IG Index by reason of a breach of duty by Mr Colley.
67. Mrs Benn asserted that IG Index's case against her appeared to be based on actual knowledge of and participation in the fraud of Mr Colley. That allegation was denied. She also denied that she wilfully shut her eyes to the obvious or wilfully and recklessly failed to make enquiries which an honest person would make or that she was aware of any circumstances which ought to have made her suspicious that she had received fraudulently obtained profits or which would make it unconscionable for her to have retained the benefit or for her to have retained the benefit or to have paid it away for her own purposes or that she acted dishonestly or with want of probity in any way or that any loss was caused to IG Index thereby.
68. Mrs Benn averred that she had no reason and still has no reason to believe that her account was managed otherwise than honestly and legitimately by Tom Benn. She had and still has no reason to believe that Tom Benn had any dishonest dealings with Mr Colley with the intent to defraud IG Index.
69. Further or in the alternative Mrs Benn averred that she had changed her position in good faith and to her detriment in the belief that she was beneficially entitled to the profits from the betting transactions made by Tom Benn as her attorney. Those profits were paid into an Alliance and Leicester bank account in the joint names of herself and her husband and were then paid from that account to Tom Benn's bank account with the Royal Bank of Scotland. Mrs Benn had not herself been enriched by the payments and had parted with the money which she was alleged to have received in breach of fiduciary duty. She would not have parted with such money if she had been aware of IG Index's claim. It would thus be inequitable to require her to pay compensation or restitution to IG Index.

Mr Osborn's Defence

70. Mr Osborn averred that he is a qualified air conditioning engineer and was introduced to Mr Colley for the sole purpose of installing air conditioning equipment in his home. Apart from discussing that engagement and matters arising from it and exchanging social pleasantries on two or three occasions when he was at Mr Colley's home for the purpose of installing air conditioning equipment he had no dealings of any nature with Mr Colley. In particular at no time did he have any discussions with Mr Colley about spread betting or any other business matters.
71. Mr Osborn accepted that there was an account in his name with IG Index but averred that it was operated at all times by Mr Teller. He accepted that that account in his name was used to enter into various Spread Betting transactions with IG Index but apart from giving his relevant personal details to Mr Teller to enable him to open an account in Mr Osborn's name Mr Osborn had no dealings whatsoever with the account and was not even capable of logging in to it. He received periodical financial statements in relation to the account which he admitted he was incapable of understanding.
72. Mr Osborn averred that he had no knowledge whatsoever of the technicalities of spread betting or any other market transactions. To the limited extent that he acted at all he averred that he acted on the advice of Mr Teller. Mr Osborn averred that he had no knowledge of any business activities or status of Mr Colley other than that he was employed by IG Index.
73. Subject to a detailed examination of the relevant spread sheet Mr Osborn did not deny that he profited from the transactions identified in the spreadsheet annexed to the particulars of claim.
74. However he denied acting in concert with Mr Colley and did not admit that Mr Colley was in any way involved in the operation of the account in Mr Osborn's name, either directly or by way of advice. So far as Mr Osborn was aware the only person involved in operating that account was Mr Teller. If there was a fraud Mr Osborn was unaware of it. He put IG Index to proof that Mr Colley committed fraudulent acts and that the account operated by Mr Teller in Mr Osborn's name benefited in any respect from such alleged fraud.
75. Mr Osborn averred that he had no knowledge of the terms of the Spread Betting Customer Agreement and denied that he agreed to be bound by its terms.
76. In an Amended Defence dated 25 April 2012 Mr Osborn responded to the Manifest Error claim. He averred that when his contract with IG Index began it included the words: "In making such decision [i.e. whether there was a Manifest Error] we will act in our sole discretion, reasonably and in good faith." Although that sentence did not appear in the version pleaded in the particulars of claim, Mr Osborn averred that he had not received a written notice informing him of changes to the Agreement as required by Clause 24 thereof for an amendment to take effect. In any event he averred that in exercising its discretion in a matter with such significant and potential consequences (i.e. doubling his potential liability) there must be an implied term that IG Index should always act reasonably and in good faith.
77. Both versions of the Agreement defined a Manifest Error as "any error that we believe to be obvious or palpable". Given that IG Index did not itself detect the alleged fraud during the lengthy relevant period, Mr Osborn averred that unless he was aware of the fraud which he denied the error was neither obvious nor palpable. Accordingly IG Index could not claim that it was acting reasonably and in good faith if it contended that the error was obvious and palpable.
78. Mr Osborn averred that both versions of the Agreement contained a provision excluding any liability of IG Index for losses suffered by Mr Osborne in the absence of wilful default or fraud from IG Index. In the Particulars of Claim IG Index specifically alleged fraud by Mr Colley who was its employee at all relevant times. Mr Osborn averred that it follows that IG Index was at all relevant times vicariously liable for the fraud of its employee. Accordingly if Mr Osborn suffers any losses such as repayment of his profits two thirds of which were paid by him to Mr Teller, he averred that he had the right to set off any such losses against any monies which were found to be owing by him to IG Index.
79. Mr Osborn averred that the only money which he withdrew from the relevant account was the sum of approximately £24,000 which is the total by which he profited by dealing on the account. He further asserted a right to set off against any damages which he is found to be liable to IG Index such sum as IG Index may be liable for arising out of damage to Mr Osborn by reason of its vicarious liability in respect of any fraud perpetrated by Mr Colley and any contribution to any liability or damages arising out of IG Index's negligence. Such negligence included failing properly to supervise the activities of its employee Mr Colley by putting in place such systems or taking such other steps as would have been prudent to detect and thereby stop any fraudulent activity at an early stage. Mr Osborn further averred that he is entitled to credit for such sums as are recovered from Mr Colley in diminution of any damages which he was found to be liable for.
80. Mr Osborn averred that at all times and in all respects in relation to the matters alleged in the claim he was guided and advised by Mr Teller who operated the account without any reference to him and that he did not even know how to log into the account. He had complete faith in the expertise and integrity of Mr Teller whom he knew to be an experienced trader in the City and had no reason to believe had used his name for anything other than legitimate trading.
81. By way of re-amendment dated 30 May 2012 Mr Osborn alleged that Mr Colley had at all material times been both an employee of IG Index acting in the course of his employment and/or its agent acting within the scope of his agency. If IG Index succeeds in its claim against Mr Colley and Mr Osborn then Mr Osborn will suffer damages as a result of the fraudulent actions of Mr Colley.
82. Mr Colley's fraudulent actions were to systematically and fraudulently enter false dividends into IG Index's system thus lowering the mid price of various stocks and then to remove the false dividend from the system thus increasing the mid price to its proper level. Details were as set out in IG Index's Particulars of Claim. Mr Osborn averred that IG Index is vicariously liable to him for any damage sustained by him resulting from the fraudulent actions of Mr Colley.

Mr Regan's Defence

83. Mr Regan entered a short defence on 11 December 2009 in which he denied that acting in concert with Mr Colley he would place a buy bet at a lower price after Mr Colley input a false dividend and would then close the bet out for an immediate profit after Mr Colley removed the false dividend from IG Index's system.
84. He further denied that he was acting in concert with Mr Colley in any alleged fraudulent activity and put IG Index to proof of that allegation. He denied that he was aware of the fraud allegedly being perpetrated by Mr Colley and must have been a willing participant in it. It followed that he was not a knowing recipient of sums arising from fraud.
85. No admission or assertion was made as to Mr Regan's knowledge or expertise in spread betting.
86. An Amended Defence settled by Mr White of counsel who appeared for Mr Regan at the trial was served on 30 April 2012 shortly before the trial began.
87. It averred that all trading activity in furtherance of Mr Regan's betting account with IG Index was carried out at all times in good faith. It was averred that the allegation of fraud is wholly misconceived. It amounted to an assertion based on an inference that on 46 occasions Mr Regan dishonestly conducted trades in knowing association with Mr Colley. To place matters in context it was averred that Mr Regan had entered into an excess of 2500 separate trades.
88. It was averred that throughout the period in which the fraud was alleged to have taken place Mr Regan had no knowledge acquaintance or known association whether directly or indirectly with any of the other Defendants. Nor did he ever knowingly engage in any course of correspondence contact or dialogue with any of them directly or indirectly.
89. It was pleaded that Mr Regan "does not profess expertise on the nature of spread betting".
90. It was asserted that the claim against him was based on nothing more than the fact that during the 3 year period in which the fraud was said to have taken place Mr Regan carried out various trades on US stocks the majority of which IG Index alleged were stocks which contained an artificially manipulated mid price and a resulting inference that he must therefore have been a party to the fraudulent enterprise.
91. Mr Regan denied that any of the 46 allegedly fraudulent trades traded by him were in fact fraudulently traded by him. He denied that any of them was conducted by him in association fraudulently or otherwise with any of the other Defendants
92. Mr Regan did not admit that each or all of the 46 allegedly fraudulent trades in which he was said to have participated with knowledge of the fraud were carried out following the insertion of the false dividend. Nor did he admit that the insertion of a false dividend would result in an artificial manipulation of the stock price enabling the receipt of fraudulent profits upon closure of the position and thereafter a liability owed to IG Index in respect of all false profits. He did not admit that all the bets were carried out over stocks disclosing an artificially lowered mid price.
93. If IG Index was able to demonstrate that the insertion of false dividends took place in circumstances amounting to fraudulent conduct Mr Regan denied any dishonest dealings knowing awareness or complicity of any of the acts relied on against him.
94. Mr Regan required IG Index to reconcile its case with the one short trade identified among the allegedly fraudulent transactions.
95. IG Index was put to strict proof that the stocks alleged to have been fraudulently traded were all stocks in respect of which no dividend was anticipated within the relevant period. IG Index was put to strict proof that any or all of the stocks allegedly selected by Mr Colley for the purposes of fraud were in fact selected by him in furtherance of that fraud. IG Index was put to strict proof that Mr Colley inserted a dividend in the stocks in respect of which fraudulent conduct was alleged against Mr Regan in a dishonest or falsified manner, that Mr Regan profited from the insertion of a false dividend, that it resulted directly in the artificial reduction in price of the relevant stock, that that outcome was the intended effect at all times, that the insertion was carried out in furtherance of fraud to which Mr Regan was a party acting in concert with Mr Colley and that Mr Regan in furtherance of the fraud placed orders over relevant bets in knowing anticipation of dishonestly profiting from each respective trade which was expected to materialise upon closure of the position following the necessary upwards correction of the stock price.
96. Mr Regan made no admission as to the allegedly sophisticated techniques employed by Mr Colley in furtherance of the fraud.
97. Mr Regan averred that since opening an account with IG Index in 2003 he had placed a total of 2527 bets of which 1862 were entered into during the alleged currency of the fraud.
98. It was averred that if Mr Colley is held to have acted in breach of a duty of care owed to IG Index it follows that IG Index is vicariously liable for all loss arising out of his negligence. For that reason all loss occasioned by Mr Colley's act of negligence is irrecoverable as against Mr Regan. IG Index is unable to limit or exclude liability by seeking to recover that loss in part or whole against Mr Regan, such conduct being expressly prohibited by section 2(2) of the Unfair Contract Terms Act 1977, the Claimant being unable to satisfy the test of reasonableness.
99. IG Index was put to strict proof of the allegation that Mr Colley was under a fiduciary duty or other duty owed to it. It was denied that Mr Regan was in knowing receipt of sums diverted from IG Index by reason of the breach of fiduciary or other duty owed by Mr Colley to IG Index.

Mr Slaney's Defence and Counterclaim

100. Mr Slaney served a brief defence dated 22 October 2009. He averred that he had never knowingly taken part in any fraudulent activity from which he benefited financially. He further averred that he had traded for a number of years with a trusted and successful strategy of exploiting differences in volatile US stocks prior to and inclusive of trades which the Claimant was questioning. All he had ever done was to trade using IG Index's trading platform off the prices which they set.
101. Mr Slaney served a defence and counterclaim dated 24 February 2011. In it Mr Slaney denied that he fraudulently traded at a false price created by Mr Colley's entering of false dividends into IG Index's systems but made no admissions as to the details of Mr Colley's alleged fraud.
102. Mr Slaney denied that he profited from fraudulent activity by Mr Colley, was aware of Mr Colley's fraud, was a willing participant in it or acted in concert with Mr Colley. He made no admissions as to the fraudulent involvement of the other Defendants. He denied that the trades made by him with IG Index which were alleged to have been fraudulent were anything other than legitimate trades.
103. Mr Slaney averred that all sums claimed against him are sums for which IG Index would be liable to Mr Slaney in damages for negligence and/or breach of contract and/or wilful default and/or fraud. Reliance was placed on Clause 27(2) of the Spread Betting Customer Agreement by which it was alleged that IG Index was liable to its customers in respect of wilful default or fraud for any loss following a Manifest Error, it being IG Index's case that the matter on which it relies constituted fraudulent acts by Mr Colley. Alternatively he averred that IG Index is vicariously liable for the actions of Mr Colley which involved wilful default on his part. Alternatively he averred that IG Index was negligent in causing or permitting Mr Colley's acts to occur and/or was in breach of an implied term of the Spread Betting Customer Agreement to exercise reasonable skills and care in the provision of the contractual services provided by it whether by itself or through its servant or agent Mr Colley.
104. Mr Slaney counterclaimed such damages as would restore him to the sums which were debited to his account by IG Index after it amended the opening level of each of the bets he placed to what it contended would have been the correct level but for Mr Colley's insertion of allegedly false dividends. Any dividend deflation and/or changes to share prices were made he alleged by the negligence or wilful default or fraud of IG Index through Mr Colley.
105. He also counterclaimed for damages to compensate him for the loss of earnings for the time his trading account was suspended.
106. In a Reply to Mr Slaney's Defence IG Index averred that it can have no vicarious liability to him for any fraud or wilful default of Mr Colley to which Mr Slaney was a party.
107. In a Defence to his Counterclaim IG Index averred that the deflation was caused by the fraud and/or wilful default of Mr Colley acting in concert with Mr Slaney. It averred that the result of IG Index correcting the Manifest Error was that the true position was restored. Mr Slaney had not lost anything as a result thereof. In any event it averred that he cannot profit from his own fraud.

Mr Teller's Defence and Counterclaim

108. In a defence and counterclaim dated 1 December 2009 Mr Teller denied that he was a party to any fraud, that he fraudulently traded at false prices following the fraudulent entering by Mr Colley of false dividends on IG Index's systems and that he acted in concert with Mr Colley. He denied that he was a knowing recipient of the profits of any fraud.
109. Mr Teller pleaded a defence and counterclaim broadly similar to that of Mr Slaney based on allegations that if IG Index's own case was true it was vicariously liable for the fraudulent actions of Mr Colley pursuant to Clause 27(2) of the Spread Betting Customer Agreement, and had vicarious liability for Mr Colley's actions or was in breach of an implied term of the agreement to exercise reasonable skill and care in the provision of its contractual services to Mr Teller.
110. In the Counterclaim Mr Teller alleged that the dividend deflation and changes alleged by IG Index were caused or permitted by its negligence or wilful default or fraud or breach of the implied term that it would exercise reasonable skill and care. He claimed to have suffered loss and damage in the amount of such sum as he would have received but for the dividend changes. He claimed such damages as will restore to him the sums which were debited to his account by IG Index after it amended the opening level of each of the bets placed by him to what IG Index contends would have been the correct level but for the allegedly false dividends. He averred that he acted at all material times in reliance on the truth of and accuracy of the information received from IG Index as to betting prices and as to the balance standing to his credit in his account with IG Index and changed his position as a consequence thereof by continuing to place further bets, calculating the risk by reference inter alia to the credit balance then stated to be due to him.
111. In a Reply and Defence to Mr Teller's Counterclaim IG Index averred that it can have no vicarious liability to Mr Teller for any fraud or wilful default of Mr Colley to which Mr Teller was a party.

IG Index's discovery of suspicious trades and Mr Colley's response to being confronted by IG Index with the allegation that he had entered false dividends

112. Mr Colley was employed by IG Index from 1999 to Sept 2008 as a Shares Dealer. According to him his duties consisted of taking spread betting and CFD deals from clients including CFD advisory clients, hedging IG Index's UK, European and US exposure by way of direct market access from a computer and telephone access via a broker and basic administration duties including setting up shares and adjusting dividends on IG Index's Xcon system.
113. The evidence of the discovery by IG Index of suspicious trades was given by three witnesses from IG Index. Gary Tibbs was a Share Dealing Director who ran the shares dealing desk. Mr Tibbs' boss was John Gordon, who was Shares Dealing Director and ran IG Index's shares dealing desk. Mr Gordon's boss was John Noble, who was a Dealing and Operations Director of IG Index.
114. Mr Tibbs said that on 25 September 2008 he noticed that a client had opened a bet on a US stock and closed it within a very short time and had made a surprisingly good profit on it. Because the stock was a sensitive one he looked into the account and the transaction more closely. It appeared from external information that the price at which the client had dealt was wrong. He reported to Mr Noble that a client had been dealing on a very good price just before the US markets had closed and it was agreed that they would both look into the matter. He then discovered that the IG Index price had dropped between 10 and 5 minutes before 9:00 pm just before the US market closed. He became suspicious that the price had changed for no apparent reason, the client having dealt shortly thereafter. Discussing it further with Mr Noble it was agreed that one potential explanation was that a dividend had been entered. It was agreed that they would check if any changes had been made to Xcon, the programme used by IG Index to enter dividend prices into its pricing system since if a dividend was entered that could cause a spike in the price.
115. Mr Noble's initial thought was that Mr Tibbs had uncovered a systems error. However as they looked at the client's account they saw that there had been other trades which were very similar and he could see a pattern to them. He considered that it was very unlikely that the same systems error would be made repeatedly on the same account and at that time became pretty positive that the matter was suspicious and fraudulent. It seemed to him clear that prices had been deliberately changed to allow that client to deal at favourable levels.
116. Mr Noble sought to establish who had altered the prices. He asked enquiries to be made of two IT department developers as to whether it was possible to identify who had logged in to alter the prices in the IG Index systems.
117. Mr Noble then had many meetings with Mr Tibbs and Mr Gordon in his office. It was very unusual for him to have that many meetings with him and his office was in plain view from Mr Colley sat at the trading desk.
118. Mr Gordon arrived at work on 25^th September 2008 at approximately 1pm and was quickly asked by Mr Tibbs to come to Mr Noble's office. Mr Tibbs told him that he believed that he had discovered that the spread betting futures prices on two shares products, US companies called Sonosite Inc (Sono) and Scansource Inc (SCSC) had been altered by Mr Colley the previous evening for what he believed to be the benefit of Clients 3182 (David Abrahamovich) and R9476 (Neil Rowe) respectively.
119. Mr Tibbs told Mr Gordon that he had discovered what he initially thought was an erroneous dealing price that morning, had asked all of the dealers present including Mr Colley if they knew how it had come about and that it was known to those dealers that he was investigating it.
120. He said that during his investigation he had found that the person responsible for changing the prices was Mr Colley, that the method was the insertion of large dividend values in the amount of 400 cents into their calculation and that Mr Colley had made the changes at 20:49:43 hours and 20:50:20 hours respectively. The only way a dividend could get into a published price was if someone manually typed it in and separately manually typed in a payment date known as "Ex" date, within a specific date range. One of those pieces of information alone would not cause a dividend to affect a futures price. They could be either manually typed into IG's pricing system itself or they could be manually typed into the spreadsheet and the values could then be copied and pasted into IG's pricing system.
121. Mr Tibbs could think of no logical explanation as to why someone would make such a change unintentionally in view of the fact that neither of the affected stocks had any previous history of ever paying a dividend to shareholders and had made no announcements that they would do so.
122. Mr Tibbs had also discovered that clients had dealt on the amended prices very soon after the changes at 20:53:12 hours 20:56:43 hours respectively and told Mr Gordon that he was suspicious that Mr Colley had inserted the dividends into IG Index's dealing prices specifically to reduce their value and make them cheaper for the benefit of those clients. After discussion with Mr Tibbs and Mr Noble it was decided that Mr Gordon should investigate the nature of the allegations. He said that he did not inform Mr Colley that he was under suspicion although his and Mr Tibbs' desk were situated a few feet from Mr Colley's and their meeting in Mr Noble's office would have been in full view of Mr Colley.
123. The next day Mr Noble was informed that it was Mr Colley who had altered the dividends in IG Index's systems. He then met Mr Gordon and understood that Mr Colley had explained to a colleague that he was ill and had left the premises. Mr Noble thought that he received that information at about lunchtime on 26 September 2008 and that during a meeting with Mr Gordon and one of the IT developers in his office he understood that Mr Colley had explained to a colleague that he was ill and had left the premises. There was an ambiguous passage in Mr Gordon's first witness statement, which he adopted as his evidence in chief, which might have given the impression that Mr Colley left the office on the afternoon of 25 September 2008 but when he was cross examined on that passage by Mr Colley at trial who put it to him that he in fact left the offices on the morning of 26 September 2008 Mr Mayall, of counsel who appeared for IG Index at the trial, on behalf of IG Index accepted that the correct date was indeed the morning of 26 September 2008. Because he and Mr Tibbs were busy dealing with the exceptional market volatility associated with the problems with Lehman Brothers Mr Noble asked Mr Gordon to concentrate on making enquiries and investigating the matter further. Mr Gordon advised him that from his initial enquiries he had found other clients' accounts which appeared to have been used for what Mr Noble described as the fraud and had ascertained that Mr Colley had in all cases which he had so far discovered changed the dividend.
124. Ms Bornor was the Head of Human Resources at IG Index. Ms Bornor said that on the morning of 26 September 2008 Mr Noble came to see her to explain that he suspected Mr Colley of fraud. He explained the details which in essence were that he suspected that Mr Colley had been fraudulently entering dividends onto IG Index's system. That would depress the price, a third party acting in concert with Mr Colley would then buy at that depressed price, Mr Colley would then remove the dividend which would have the effect of increasing the price and the third party would then close his position. If no other factors had occurred the third party would thus make a profit.
125. Mr Noble explained that he, Mr Gordon and Mr Tibbs had spent some time already investigating the manually corrected records and that the evidence was so far that all of the fraudulent activity had pointed to Mr Colley's sign-on and that so far there had been nothing to suggest that he had colluded with anyone else in IG Index. Ms Bornor said that she agreed with Mr Noble that they would meet Mr Colley to present him with the evidence and ask his explanation. Mr Noble returned to his desk and then advised her that Mr Colley had left the premises. She therefore attempted to call Mr Colley on his mobile telephone and being unable to speak to him left a message asking him to meet her that afternoon at 4 p.m.
126. Ms Bornor stated that from memory she would have made that call no later than about 12:30 p.m. and probably nearer 12 noon on 26 September 2008 because she sent a letter by courier to Mr Colley's home address asking him to attend a meeting that afternoon at 4 p.m. and she sent the letter at a time when she believed it would arrive at his home in Woodford Green, Essex in sufficient time for him to attend the meeting at 4 p.m.
127. In that letter to Mr Colley Ms Bornor wrote that during a recent investigation into a number of client accounts IG Index had discovered that there had been a consistent pattern of dividend adjustments to US stocks resulting in a number of identified clients dealing at incorrect prices.
128. She stated that IG Index had reason to believe that Mr Colley had made the relevant dividend adjustments and therefore needed to meet with him urgently as part of the investigation. She stressed that while this was a very serious issue they were still at the investigation stage and needed to understand what part if any he had played in the matter.
129. She said that she understood that Mr Colley had left the office suddenly earlier that morning with stomach cramps but if they subsided and he was able to come back to the office that afternoon to meet with IG Index they would appreciate the effort. She asked him to phone her on her direct line as soon as he received the letter stating that she had already left a message on his mobile phone voicemail to confirm or otherwise that he would be able to attend the proposed meeting at 4 p.m. that afternoon. Failing that she said that IG Index expected to see him at 9 a.m. Monday 29 September.
130. Ms Bornor wrote that Mr Colley was of course able to be accompanied by an IG Index employee at the investigatory meeting. Given the serious nature of the matter and the nature of his apparent involvement, whilst not prejudging the situation Ms Bornor wrote that she had to notify Mr Colley that he was temporarily suspended from all duties on full pay pending the meeting with him.
131. Ms Bornor said that she understood that Mr Colley called IG Index to say that he had a hospital appointment so that he could not attend either the 26 September 4 p.m. meeting or the 29 September 9 a.m. meeting. But he did not speak to her. Having not had a reply from Mr Colley, on Monday 29 September 2008 she again attempted to contact him via his mobile. Being unable to do so she left him a mobile voicemail to request that he met her at 9 a.m. on Tuesday 30 September 2008.
132. She confirmed this in a letter to Mr Colley dated 29 September 2008 in which she again confirmed that Mr Colley was able to be accompanied by an IG Index employee at the investigatory meeting.
133. She repeated that IG Index urgently needed to speak with Mr Colley in connection with its ongoing investigations into a number of client accounts and dividend adjustments to US stock. She wrote that, as advised to Mr Colley, IG Index had reason to believe that he had made the relevant dividend adjustments and as such they needed to meet up with him urgently as part of their investigation. IG Index needed to understand what part, if any, he had played in the matter. This was clearly a very serious situation and she had to warn him that if he was unable or unwilling to speak to IG Index that was likely to lead to the suspicion that he had been involved and was avoiding the investigatory meeting.
134. Mr Bornor stated that she received a telephone call from Mr Colley after he had received her letter of 29 September 2008 which she knew because he referred to it in the conversation. He told her that he could not attend that meeting on 29 September at 4 p.m. because he had a hospital appointment for a stomach problem. She said that she agreed with him that the meeting would take place 9 a.m. on 3 October 2008. She confirmed that in a letter dated 30 September 2008 in which she again confirmed that the meeting was to be in connection with IG Index's ongoing investigations into a number of client accounts and dividend adjustments to US stocks and that he was able to be accompanied by an IG Index employee at the investigatory meeting.
135. Meanwhile Mr Noble said that he was provided by Boris Levene and Oli Imre, two developers from IG Index's IT department, with two spreadsheets. He exhibited them to his first witness statement and they were adduced in evidence at trial. The first was a 3 page spreadsheet. He said that he was advised that it had been produced by querying IG Index's system to provide a list of trades on US stock futures which had been placed between 8 p.m. and 9 p.m., that is to say that in the hour leading to the close of the US markets. He was further advised that that list was then filtered to include only trades which had either been placed by Mr Colley or by the client dealing online. He described that as essentially a list of potentially suspicious deals.
136. He said that the latter spreadsheet gave details of the insertion of dividends into US stocks and of trades on the same stocks. He referred by way of example to entries dated 17 September 2008 which he said showed details of the insertion of a dividend and the client trading on the same stock. The time of the asserted dividend insertion was 20:53:10 hours and the timing of the client's opening trade was 20:57 hours.
137. Mr Noble said that it was apparent to him that a fraud had been repeatedly undertaken by Mr Colley and it was that which led to the decision that Ms Bornor would request Mr Colley to attend a disciplinary investigation.
138. It was common ground between Ms Bornor, Mr Noble and Mr Colley that they met at IG Index's offices on 2 October 2008. In important respects their evidence as to what occurred at the meeting was broadly similar. In other important respects it differed.
139. Both Ms Bornor and Mr Noble exhibited to their witness statements and adduced in evidence copies of what purported to be summary notes of the meeting prepared by Ms Bornor. It was headed Disciplinary Investigation – James Colley. The document was in the following terms:

" Date: 2 October 2008

Time: 12:00 noon

Attendees: James Colley, John Noble (Director, Financial Dealing), Jackie Bornor (Head of HR)

Summary Notes

JB introduced the meeting by confirming that this was a disciplinary investigation meeting and not a disciplinary meeting at this stage and that whilst JC had been given the right to be accompanied, he chose not to be.

JC confirmed that this was the case and stated that he was sorry to have messed JN and JB around in terms of moving the meeting.

JB advised that in line with the three letters that had been sent to JC, this was an investigation into suspected fraudulent activity that had been uncovered and there was evidence to suggest that JC had been involved – JN would go through the evidence and we wanted JC's feedback on that evidence.

JN highlighted several examples of where the settlement data had been altered (from August September 2008) and demonstrated how the amendments were all tagged to JC's log-on.

JN asked JC for his views on this and JC said that he didn't know what to say.

JB asked JC to tell the truth and again JC said that he didn't know what to say and said that he felt that he should have legal representation

JB confirmed that the situation that JC found himself in was an employment issue and within the disciplinary procedure – whilst he could be represented by an IG Index employee, it would be inappropriate to have a lawyer representing JC when actually what we wanted was his feedback and views on the evidence that JN had presented.

JC again stated that he didn't know what to say

JN outline that there were several options available including having the police involved.

JB confirmed that it was highly unlikely that JC would keep his job if it were to be found that he was involved in the fraudulent activity but there were options where we may be able not to involve the police if JC were to be honest and co-operate with the investigation.

Again JC said that he didn't know what to say and felt that he should have a lawyer involved.

JB confirmed that where we were at this stage was an internal disciplinary process and was very much connected with JC's contract of employment – if at the end of the investigations there was enough doubt of JC's honesty and subsequent lack of trust on IG Index's part, whether he co-operated or not, IG Index could bring his employment to an end and by not co-operating and making no comment it added to the evidence that we had. Equally, there was no apparent outrage or claims that he was innocent again for us to believe that the evidence was damning.

JN asked if JC had defrauded IG Index, if anyone else was involved, how much was it and how long it had been going on for.

Again, JC said that he didn't know what to say.

JB said that he should tell the truth, that it would be better in the long-run if he co-operated, especially if there was a possibility of not involving the police. JC needed to see if there was a possibility of him avoiding the police he should work towards that as the chances are that he would receive a prison sentence and this would not be viewed as a first offence – the first time that he changed the system would be the first offence – any subsequent time would be viewed as additional acts.

JC said that he felt uncomfortable about this and didn't know what to say as anything he did say might be the wrong thing – again JB advised him to tell the truth.

JB suggested that JC may wish to speak to JN on his own and the investigatory was adjourned at that point – 12:40 p.m."

140. Mr Noble confirmed that he agreed with the contents of Ms Bornor's attendance note. He said that Mr Colley's demeanour had changed completely from that of the person he had known for eight years. His typical character had always been ebullient, noisy and forthright. However he now looked sheepish, on edge and nervous.
141. He said that after Ms Bornor explained matters to Mr Colley in accordance with her notes he put before Mr Colley the second spreadsheet to which I have referred above provided to him by Mr Levene and Mr Imre which he had been advised filtered the first spreadsheet to include only trades which had either been placed by Mr Colley or been placed by the client dealing online which gave details of insertion of dividends into US stocks and trades on the same stocks by clients. It is a three page document in which entries for 23 dates between 19 June 2008 and 24 September 2008 were arranged under a series of un-headed columns. In each case in the left hand column were a number of entries on the same date. The entries in the next column were of times. In the case of each set of dates the times for the first and subsequent entries excluding the last entry, were at various times between 20:49 hours and 20:58 hours. In each set the time of the last entry was a few minutes after the time of the preceding entries ranging from 20:52 to 20:58. There was one exception to which I refer shortly.
142. The entry in the next column was a series of letters which Mr Noble said identified the US stock concerned.
143. In the next column the entry in all but the last line was either idl GL Last Amount or idl GL Last Date or idl GFinal Date. In each case in the last line there was a letter and 4 digit number which according to Mr Noble identified the account of the client making the trade. In one case (19 June 2008) there were two entries with two separate client account numbers. In the second one the entry in the time column had a time which was 12 minutes before the dividend insertion times but also added "2006". The entries in the next column were not explained by Mr Noble. In the next column in every entry except in each case the last line which had the client account number was written "James Co at IGPC 3034 (Unknown)". Mr Noble said that this showed that the person entering the dividend was Mr Colley (his username in IG Index's systems being James Co and IGPC 3034 identified the computer terminal which was used to enter the dividend). There were two further columns which were unexplained by Mr Noble.
144. Mr Noble said that Mr Colley would understand from that spreadsheet that it recorded dates the dividends had been inserted into stocks, that the person inserting those dividends was Mr Colley and the dates and times and the identity of the clients who had traded within minutes of the dividend being inserted. He said that from memory he thought that Mr Colley just looked at the document for some time but said nothing about the spreadsheet and its contents. He said that Mr Colley repeated many times that he did not know what to say and that he said that he thought he needed a lawyer. After a while he thought that Ms Bornor said that the meeting was going nowhere and would Mr Colley like to talk to Mr Noble more informally outside of the disciplinary investigation environment.
145. Ms Bornor said in evidence that on the morning of 26 September 2008 Mr Noble came to see her to explain that he suspected Mr Colley of fraud. He explained the details of the fraud as being in essence that Mr Colley had been fraudulently entering dividends onto IG Index's system. That would depress the price, a third party acting in conjunction with Mr Colley would then buy at that depressed price, Mr Colley would then remove the dividend which would have the effect of increasing the price and the third party would then close his position. If no other factors had occurred the third party would then make a profit.
146. Mr Noble told her that he Mr Gordon and Mr Tibbs, the heads of desk, had spent some time already investigating the manually corrected records and that the evidence was so far that all of the fraudulent activity had pointed to Mr Colley's sign-on and that so far there had been nothing to suggest that he had colluded with anyone else in IG Index. They agreed that they would meet Mr Colley to present him with evidence and ask for his explanation.
147. Ms Bornor said that Mr Noble then returned to his desk and advised her that Mr Colley had left the premises. She therefore attempted to call him on his mobile phone and being unable to obtain him left a message asking him to meet her that afternoon at 4 p.m. She then sent the letter to which I have referred. She said that she understood that Mr Colley called IG Index to say that he had a hospital appointment so that he could not attend either of the two meetings proposed in her letter, namely at 4 p.m. on 26 September or 9 a.m. on 29 September. He did not speak to her.
148. On 29 September 2008 she said that she again attempted to contact Mr Colley via his mobile and being unable to do so left a mobile phone voicemail to request that he met her at 9 a.m. on Tuesday 30 September 2008 which she confirmed in the letter dated 29 September 2008 to which I have referred.
149. Ms Bornor said that she received a telephone call from Mr Colley after he had received her letter of 29 September 2008 in which she said he could not attend the meeting that afternoon at 4 p.m. as he had a hospital appointment for a stomach problem. She agreed with him that the meeting would take place at 9 a.m. on Friday 3 October 2008 (that was an error she meant Friday 2 October 2008). She confirmed that in the letter dated 30 September 2008 to which I have referred. However on the morning of 2 October 2008 Mr Noble told her that Mr Colley would be coming into the building at 12 noon. He duly arrived at 12 noon in reception and she and Mr Noble met Mr Colley in a meeting room on the 7^th floor. Ms Bornor said that Mr Colley apologised for not coming in earlier but explained that it was to do with him being unwell and having to go to hospital. He produced a sick note from Dr Sundaram dated 30 September 2008 which said that Mr Colley was suffering from acute stress reaction and would be unable to attend work from 29 September 2008 for a week.
150. Ms Bornor said that she began the meeting by explaining that it was a disciplinary investigation to investigate suspected fraudulent activity that had been uncovered and that there was evidence to suggest that Mr Colley was involved. She said that Mr Noble explained to Mr Colley what had been discovered. She said that he provided him with several examples where settlement data had been altered from August to September 2008 and how those amendments had all been tagged to Mr Colley's computer log on details. She said that she recalled that Mr Noble placed before Mr Colley a spreadsheet showing that information.
151. Ms Bornor said that she recalled that Mr Noble asked Mr Colley for his views on this and that Mr Colley simply said that he did not know what to say. She said that she then asked Mr Colley to tell the truth and again he simply said that he did not know what to say. She said that she was explaining to him her view that this looked very suspicious and that the police might become involved and asked for his explanation. She asked him to tell the truth and again he simply said that he did not know what to say. He then said that because she had mentioned possible police involvement and the possibility of prison he thought that she was intimidating him and that he felt that he should have legal representation.
152. She said that that turned out to be the pattern of the meeting. She and Mr Noble were asking questions and Mr Colley's only answers were that he did not know what to say and that he felt that he should have legal representation. Accordingly by 12:40 p.m. it seemed to her that they were taking the matter no further and she suggested that perhaps it might be sensible if Mr Colley had a discussion with Mr Noble outside of a formal disciplinary investigation setting. Accordingly they left to have their discussion.
153. Ms Bornor said that her recollection was that at the beginning of the meeting she got the impression that Mr Colley thought that his job was still recoverable, that he would be told off and that he would go back to his job. However during the meeting as he received more information from Mr Noble and was shown the spreadsheets he started to look worried and at the end looked ashen and she thought that he was sweating. Her overall impression of the meeting was that Mr Colley was in receive mode, that is to say that he wanted to listen to what Mr Noble and Ms Bornor had to say, learn what information they had but then just say "I do not know what to say".
154. She said that she remembered thinking at the time that the circumstances around the disciplinary investigations were most odd. She had been in human resources since 1984 and undertaken many investigations in relation to employee's conduct and she thought that this was the only occasion where an employee concerned had not had a "story", that is to say their version of events as to what had occurred. She also found it very unusual that at no time did he say that he had no knowledge about what was being discussed and that at no time did he deny any involvement or say that he was innocent.
155. When he came to give evidence, Mr Colley said that on his last day at IG Index, which I took to be 26 September 2008, he was sitting at the desk next to Mr Tibbs and mentioned to him that he had a bad stomach ache at about 7:45 a.m. At around 9 a.m. he asked Mr Tibbs if he could go home and to the doctor. Mr Tibbs agreed and Mr Colley passed all his deals over to him and left for home.
156. Mr Colley said he went straight to the doctor then to the hospital for a blood test and was later that day told to spend a week away from the office.
157. Mr Colley said that he received a voicemail at around midday from Ms Bornor asking him to return to the office while he was either at the hospital or at the doctor. He returned the call advising her of his situation later that day. She was very unsympathetic and told him it was important that he returned to the office to discuss allegations about the dividend movement. He made an appointment for later that week which he could not make and eventually made another appointment for Friday morning, which I took to mean Friday 2 October 2008 which he attended.
158. In his account of the meeting on 2 October 2008 at the offices of IG Index in his witness statement, which he adopted as his evidence in chief, Mr Colley said that Ms Bornor accused him of "everything previously mentioned", which I can only take to be a reference to his earlier statement that she had requested him to return to the office to discuss allegations "of the dividend movements". Mr Colley said that Ms Bornor threatened him by saying that if he did not tell the truth the police would become involved and he would likely go to prison. He asked if she was threatening him at which point Mr Noble took over by saying that she was not and apologising.
159. He said that Mr Noble then passed him a pile of A4 paper, put it in front of him and asked if what was on the sheets was altered by him. He said that as part of his job for the last seven or so years had been to amend dividends he could not answer Mr Noble and asked if he could take the papers away to have a look through them. He said that Mr Noble snapped at him saying that he could not and snatched the papers back.
160. When he was cross examining Ms Bornor Mr Colley put it to her that he had been given a 2 inch thick pile of paper. Ms Bornor did not accept that and said that there were only 2 to 3 pages. She said that Mr Noble allowed Mr Colley time to look at the sheets. She denied that Mr Noble snatched it back and denied that Mr Colley had asked to take the papers away. All he had said was: "I don't know what to say" and "I should have legal representation".
161. When he was cross examined Mr Colley said that he disagreed with Ms Bornor's note of the meeting as an accurate record of how the meeting went. He did however agree that he neither accepted nor denied anything put to him in the meeting. He also agreed that Mr Noble put a pile of paper in front of him. However he said that he asked to see the documents and take them away and look through them, to which Mr Noble responded that he could not and took them back. Mr Noble had accused him of making the changes in the documents and made allegations of fraud against him. Ms Bornor made it clear that the police would be involved and he would be likely to go to prison.
162. Mr Colley said that after Mr Noble took the papers back the meeting became repetitive. He accepted that he continued neither to accept nor deny the allegations. How he asked rhetorically could he accept or deny something when he did not have a chance to look through the papers? He specifically denied being shown the spreadsheets exhibited to Mr Noble's witness statement in landscape form. He said that that was not what was put in front of him.
163. When Ms Bornor said that all Mr Colley said was "I don't know what to say" and "I should have legal representation" Mr Colley in cross examination asked her what she expected him to say. To that Ms Bornor said that this was an internal disciplinary hearing. They had not decided that Mr Colley had done anything wrong. They were looking for evidence and therefore she would have expected someone to say either that they were innocent or that they had done it. She denied threatening Mr Colley. She merely explained that if people were found to be guilty the police could be involved. She denied threatening him with prison. She did however explain that in her experience if someone had embezzled money the police did not see it as the first time because there would have been hundreds of attempts.
164. Ms Bornor accepted that when she mentioned that in her experience there had been occasions when the police and prison had been involved Mr Colley said that she was intimidating him. She said that she was merely explaining her past experience and that IG Index had not concluded that Mr Colley had done anything wrong at that point.
165. She said that she would expect Mr Colley to explain what involvement he had in the alleged behaviour. He did not say that he did not do it and he did not say that he did. The purpose of the disciplinary process was to hear Mr Colley's side of the story. Ms Bornor said that Mr Colley was not sweating at the start of the interview but he was as it went on.
166. Mr Colley in his evidence said that the reason he was sick and unable to attend the first proposed disciplinary meetings was because he had just split up with his partner who had taken his step-daughter.
167. Mr Noble said that he and Mr Colley went for a walk three times around the block of IG Index's office. He said that Mr Colley was very uncommunicative, jumpy and nervous. He thought that he was in genuine distress and turmoil. The nearest comparison he could make was when one is talking to someone one knows well who has recently suffered a bereavement.
168. He said that he spent some time explaining to Mr Colley that the evidence against him was irrefutable and that the best thing to do would be for him to admit his crimes and attempt to recover the money. He said that Mr Colley asked on a number of occasions how much IG Index thought was missing and how many clients were involved. He said that he thought that Mr Colley was trying to gauge how much IG Index knew and what evidence it had. Mr Noble said that he told him nothing beyond vague terms like "a significant sum" and "numerous clients".
169. Mr Noble said that Mr Colley did not openly admit what he had done but certainly did not deny it either and that his questions about how much was missing implied guilt to Mr Noble. He said that he asked Mr Colley if he still had the money to which he replied "I haven't got it", which Mr Noble described as ambiguous. In the end it was agreed that Mr Colley would go away to think and come back the next day at 11 a.m.
170. Mr Noble said that at no point did Mr Colley deny that he was involved or give any explanation for the information which Mr Noble had provided to him.
171. Following a conversation between Mr Noble and Ms Bornor in which Ms Bornor said that it seemed irrefutable that there were grounds for immediate dismissal of Mr Colley she said that she drafted a letter of dismissal.
172. Ms Bornor exhibited to her witness statement and adduced in evidence a letter dated 2 October 2008 addressed to Mr Colley at his home address headed "Immediate dismissal due to gross misconduct". In the letter she confirmed that IG Index had decided to terminate Mr Colley's contract due to gross misconduct.
173. In the letter she said that as discussed with Mr Colley IG Index had collated and reviewed substantial data and objective systems evidence and on the basis of that as well as Mr Colley's own lack of any alternative explanation, IG Index had concluded that he had engaged in multiple fraudulent transactions resulting in theft of company funds over an unspecified timescale but believed to be over a number of years. His last day of service would be that day and he would not be paid any notice period. Any annual leave owed to Mr Colley would be held and credited against the money he owed IG Index.
174. The letter said that if Mr Colley did not agree with the decision he could appeal in writing within five working days to the IG Index legal director. She also informed Mr Colley that IG Index would be notifying the FSA of his dismissal. Ms Bornor referred to the fact that Mr Colley owned 3128 IG Group Holdings PLC shares and stated that IG Index would expect that he would agree to sell them and have the money raised sent to IG Index as a further contribution towards the outstanding balance. To that end she enclosed a draft letter addressed to the CAPITA registrars instructing them to sell the shares registered in Mr Colley's name and to have the resultant cheque sent to IG Index. She asked him to sign and send the letter to CAPITA.
175. Ms Bornor said that as for sending the letter she heard nothing further from Mr Colley.
176. Mr Noble said that following his conversation with Mr Colley outside the IG Index office Mr Colley did not turn up the following day but instead called him claiming more illness and arranging to meet him the following Monday 6 October 2008. On that day Mr Colley turned up and they had two short conversations again outside the office. Mr Noble said that by that stage IG Index had sent demands to the clients concerned for immediate payment and that Mr Colley would have been aware of how much they owed. It is not clear to me on what basis Mr Noble considered that that necessarily followed.
177. Mr Noble said that the first conversation was along the lines of Mr Colley asking if IG Index could avoid the police being involved in the matter, again with no admission of guilt. Mr Noble said that he felt he could not answer and so returned to the office to consult with colleagues. He said that they advised him that they could not say that the police would not be involved but that he could say that IG Index would be less inclined to pursue the matter vigorously if the money was returned. He said that he relayed the message to Mr Colley that IG Index would be less inclined to pursue the matter if it got its money back quickly. He said that Mr Colley walked around the corner to make a phone call and then asked for written confirmation from IG Index that they would not involve the authorities. Mr Noble said that he told Mr Colley that IG Index would not comply with that request whereupon the conversation ended abruptly.
178. Mr Colley in his witness statement said that he and Mr Noble spent an hour walking round in circles, Mr Noble continually telling him how serious the accusations were and that if he did not admit and pay every penny back to IG Index he would be in serious trouble. He said that he felt very threatened with everything that Mr Noble said to him. He asked Mr Noble if he would be able to return to the office for work to which Mr Noble said no. He said that he then waited outside the building while Mr Noble went back into the office to check what the procedure was and whether he could return. After around 10 minutes Mr Noble came back outside confirming that he could not return and that he would receive a letter in the post. He then left and went home.
179. Mr Colley said that the next day or so he received a letter confirming his termination of employment and asking him to sell his remaining IG Index shares and return the funds to IG Index. He said that he attended a meeting with an employment solicitor and also spoke with several people on a helpline "but none could help me complexity [sic] of the dismissal]".
180. In cross examination Mr Colley said that he was being unjustly accused and sacked. He believed at the time that there had been a mistake. However he accepted that he did not say at the time that it was a misunderstanding. When it was put to him that despite being sacked for gross misconduct and told that he was involved in a huge fraud he did nothing about it, Mr Colley said that he saw a criminal lawyer about the allegations because fraud, the police and prison had been mentioned. However he accepted that he did not appeal against the termination of his employment for gross misconduct. He said that he did not see an employment lawyer until 8-12 weeks later whereupon he was told that it was too late. He accepted that he received the termination letter of 2 October 2008 which gave him 5 working days to appeal against his dismissal but said that he did not recall seeing that in the letter. He was asked why if it was a huge error he did not write to say that it was monstrous that he had been sacked. His reply was that he had several conversations with Mr Noble. However he did not suggest to Mr Noble in cross examination that he had any conversation after receiving the 2 October 2008 letter in which he challenged the dismissal. He did not accept that the reason he did not appeal against the dismissal was that he knew that he had been rumbled. He said that in hindsight he would have seen an employment lawyer sooner.
181. In re-examination, which took the form of Mr Colley at my invitation making any additional points by way of evidence that he wished arsing out of the evidence and questions in cross examination, Mr Colley said that the fact that he had no story at the meeting with Ms Bornor and Mr Noble showed that he was not aware of what was being said against him.
182. Mr Mayall in his closing submissions submitted that if Mr Colley had been innocent of any fraudulent activity he would have asserted his innocence and would at the very least have appealed against his dismissal for gross misconduct. In his written closing submissions Mr Colley agreed that he did not seek the help of an employment lawyer until around 3 months after leaving IG Index he received a claim against him for a large sum of money, at which point he realised that this was a civil claim. That was the first time he met an employment lawyer who advised him that it was too late to pursue his employer. He had sought the help of a criminal lawyer as he believed that fraud allegations were very serious due to Ms Bornor saying that he could be going to prison.
183. As appears from the evidence cited above the points of difference between Ms Bornor and Mr Noble on the one hand and Mr Colley on the other were limited. They principally concerned whether, as Ms Bornor and Mr Noble said, Mr Colley was shown the few sheets exhibited to Mr Noble's witness statement or as Mr Colley said he was shown a thick pile of paper which he asked to take away and was snatched back by Mr Noble and whether, as Mr Noble claimed Mr Colley asked him if IG Index could avoid the police being involved and whether Mr Noble told him the best thing to do would be to admit his crimes and attempt to recover the money, to which Mr Colley responded, not by denying that he had committed any crimes but asking how much money was involved and how many clients were missing.. In so far as there were differences in their accounts of events I accept the evidence of Ms Bornor and Mr Noble both of whom I found to be honest and reliable witnesses not just on this aspect of their evidence but generally.
184. Even if one were to give Mr Colley the benefit of the doubt and accept that the reason for his abrupt departure from IG Index on the morning of 26 September and his remaining away from the office until the meeting of 2 October had nothing to do with noticing the intense activity between Mr Tibbs and Mr Noble and the subsequent letters asking him to attend urgently to explain what part if any he played in the dividend adjustments which had come to light, it is in my judgment striking that at no point either before, during or after the second October meeting did he deny even in the most general terms any involvement in any kind of untoward or fraudulent behaviour.
185. Mr Colley was an experienced senior trader who had been at IG Index for many years. As early as the letter of 26 September 2008 he was put on notice that IG Index had discovered a consistent pattern of dividend adjustment to US stocks resulting in a number of identified clients dealing at incorrect prices and that IG Index had reason to believe that he made the relevant dividend adjustments. I accept Mr Noble's evidence that Mr Colley would have understood from the spreadsheet exhibited to his witness statement which he showed Mr Colley that it recorded dates on which dividends had been inserted into stocks, that according to the spreadsheet the person recorded as having inserted the dividends was recorded as having used his username and that clients had traded on those stocks within minutes of the dividends being inserted. I accept Mr Noble's evidence that Mr Colley looked at the document for some time but said nothing about its contents other than to repeat many times that he did not know what to say and that he thought he needed a lawyer.
186. Indeed not only did Ms Bornor's notes record Mr Noble highlighting several examples of where settlement data had been altered from August and September 2008 and demonstrating how the amendments were all tagged to Mr Colley's log-on and Mr Colley responding to Mr Noble's request for his views by saying that he did not know what to say but Mr Colley himself in evidence did not challenge that aspect of the evidence of Ms Bornor and Mr Noble. Indeed in his own evidence in cross examination he agreed that he did not accept or deny anything at the meeting despite saying that Mr Noble accused him of making the dividend changes and alleging fraud. He accepted that he repeatedly did not accept or deny what was being put to him.
187. I do not accept that he was not given a chance to look at the few sheets of paper which Mr Noble and Ms Bornor say he was shown. However even if, as he asserted, he was not given a chance to look through the papers which Mr Noble placed in front of him, the answer to his rhetorical question in evidence: " how could I accept or deny something I did not have a chance to look through?", is in my view that he could and might reasonably have been expected at the very least to say that whatever might turn out to be the explanation for the documents the one thing he could assure Ms Bornor and Mr Noble of was that he had not been involved in any kind of untoward, dishonest or fraudulent behaviour and had not colluded dishonestly with any clients of IG Index. It must in my view have been very clear to Mr Colley, by the time of the meeting from the contents of the letter he had received and in the meeting from what was said by Mr Noble and Ms Bornor, that evidence had emerged giving rise to suspicions at the very least that he had been involved in entering false dividends with the result if not the aim of benefiting clients. If, as was his case at trial, Mr Colley was entirely innocent of any fraud and had not colluded in any way with clients to benefit them at the expense of IG Index, in my view there was no good reason why he could not and would not have protested his innocence even in the most general terms.
188. This conclusion is fortified by consideration of the fact that he had been notified in the letter dated 26 September 2008 that he was temporarily suspended from all duties pending his meeting with IG Index and that in the letter dated 2 October 2008 he was informed that IG Index had decided to terminate his contract due to gross misconduct, having concluded that, in part as a result of Mr Colley's own lack of any alternative explanation, that he had engaged in multiple fraudulent transactions resulting in theft of company funds over an unspecified timescale believed to be over a number of years and that if he did not agree with the decision he could appeal in writing within five working days.
189. The adverse consequences flowing to Mr Colley from his silence in terms of his employment rights could hardly have been more serious or more clearly spelled out.
190. Again making all allowances for feelings of anxiety arising out of the mention of the police and prison and a desire not to incriminate himself or give detailed answers without the benefit of legal advice and more time to look at the evidence, I find it hard to escape the conclusion that, if Mr Colley genuinely believed that he had done nothing wrong, had been involved in no fraudulent transactions and had not colluded with IG Index's clients, he would have made some attempt either at the meeting or following receipt of the letter dated 2 October 2008 to assure IG Index and put on the record that he had done nothing wrong and nothing that justified terminating his employment of several years for gross misconduct.
191. It is also in my view striking that when walking round the block with Mr Noble Mr Colley's response to being told that the evidence against him was irrefutable and that the best thing he could do was admit his crimes and attempt to recover the money was to ask on a number of occasion how much IG Index thought was missing and how many clients were involved. However anxious he may have been about the implications in terms of possible involvement of the police, it is not easy to see why, if Mr Colley was entirely innocent, he would not at least have denied any wrong doing and protested that he could not admit to crimes he had not committed.
192. In my judgment Mr Colley's response to being confronted with the evidence unearthed by IG Index and being asked for an explanation and then being dismissed for gross misconduct based in part on his refusal to provide an innocent explanation is an important piece of circumstantial evidence supporting IG Index's case that Mr Colley had indeed been involved in fraudulent insertion of dividends designed to enable certain IG Index clients to trade at artificially beneficial prices to the detriment and at the expense of IG Index.

Did a fraud take place?

193. In his closing submissions Mr Mayall posed and sought to answer in the affirmative three questions: Did a fraud take place? Was Mr Colley responsible for the fraud? Were the other Defendants who protested their innocence at the trial and the other alleged accomplices involved in the fraud? Although they were posed and addressed as three discrete questions it was apparent in his suggested answers that there was at least some overlap between them.
194. In particular heavy reliance was placed on the proximity in timing between the insertion of many of the allegedly false dividends and the placing of bets on the relevant stocks by one or other of the client Defendants (or the other persons identified who were not sued) and the proximity and sequence of the timing of the removal of the allegedly false dividends and the closing of the bets by the relevant Defendant.
195. This reflected the fact that a central plank in IG Index's case against the client Defendants was the fact that if as alleged Mr Colley fraudulently inserted and removed false dividends for a dishonest purpose the only means by which such a dishonest purpose could be given effect to was by clients acting in concert with Mr Colley placing and closing bets having been tipped off by Mr Colley that at particular times the IG Index price on a particular stock would be artificially depressed and then restored. Only in that way would it have been possible for any financial value to be transferred from IG Index to anyone else. Since it was not alleged and there was no evidence that Mr Colley himself placed bets at the artificially depressed prices and then closed them out the inference was that he must have been acting in concert with clients who did.
196. I flag this point up at the outset because it is necessary when considering whether each of the three allegations has been proved to bear in mind that whereas some of the evidence relied on in support of each of them is discrete some of it is not. There is no reason why the same evidence should not be capable of supporting more that one of the allegations and no reason why one or more of the allegations if proved should not itself be capable of supporting one or more of the other allegations. But it is necessary to guard against bootstrap arguments.
197. The main evidence relied on by IG Index in support of its allegation that there was fraud perpetrated over a three year period was adduced and explained by Mr Gordon. He made three witness statements, which, subject to some corrections and clarification, he adopted as his evidence in chief at trial. Exhibited to those witness statements and thus subsequently adduced into evidence at trial were a series of spreadsheets representing the fruits of his investigations following the initial investigations carried out by Mr Tibbs. Because of their size and unwieldy nature most of them were adduced electronically and accessed at trial via computers made available to the parties by IG Index.
198. The cornerstone of IG Index's case that a fraud was committed against it was evidence that false dividends had been entered into its pricing system and subsequently removed. By false was meant entries which purported to reflect dividends which had either been announced or were anticipated to be payable on a share during the period covered by the futures price offered by IG Index in circumstances where in reality no such dividend had been declared or could reasonably have been anticipated by the person making the entry as likely to be declared either at all or in the entered amount.
199. Some of the spreadsheet evidence adduced by Mr Gordon took the form of original historical audit data retrieved by IG Index's IT department from its retained systems. Some took the form of forensic compilations prepared by Mr Gordon, comprising a mixture of data derived from IG Index's systems, other external sources such as Bloomberg records of US stock cash prices and summaries of particular consequences flowing from the original primary material designed to highlight particular features of that material.
200. The central spreadsheet to which most frequent reference was made at trial was entitled "Colley Master Detail Sheet May - 12". In its original form this was exhibited to Mr Gordon's first witness statement dated 17 October 2011. It was subsequently exhibited in updated and amended form to Mr Gordon's second witness statement dated 10 May 2012 under the title "Colley Master Detail Sheet May -12".
201. The Colley Master Detail Sheet May – 12 contained details of 415 spread bets on US shares futures where Mr Gordon said that it was clear from overnight evaluation that dividends had been inserted and removed and that clients had benefited from those changes in the period between 9 September 2005 and 22 September 2008. Not all of those dividend changes to IG Index's pricing system were auditable by IG Index's IT Department. The reason for that was explained by Mr Cloke, a technical manager of IG Index's Financing Pricing Systems.
202. Mr Cloke explained that the Finance Pricing System was responsible for producing finances for all of the financial instruments offered by the IG Group. Such instruments included shares quoted on stock exchanges around the world. The pricing system received prices from third parties such as stock exchanges and applied specific algorithms to them to calculate the prices of the IG instruments. Those algorithms had a number of configurable parameters which were configured for each individual instrument. They included the dividend amount and dividend date for shares.
203. The pricing system had a Pricing Database that stored information about each instrument including all of the configuration parameters. Each instrument had a unique record in the pricing database.
204. The primary mechanism for managing the pricing system configuration data was a software program called Fin Tool which ran on PCs. When Fin Tool was started the user had to log in. To do that they had to enter their password which was required by company policy to be kept secret. Before running Fin Tool the user would also have logged into the PC with the same password. All updates made to the configuration data in the pricing database from Fin Tool were logged into a separate Audit Database. That Audit Database was stored separately from the pricing system and access was strictly limited.
205. Every update to the configuration of instruments in the pricing system resulted in an audit record being written to the Audit Database. The audit record contained the name of the instrument being updated (such as an individual US stock), the field being updated (which would include a dividend), the new value for the field, the date and time of the update, the name of the person who applied the update and the name of the PC from which the update was applied. The first three of those described the specific update applied to the pricing system. The remaining items were meta-data which provided supplementary information about the update which was not stored in the Pricing System: who made the change, from which PC and at what time.
206. By examining audit records it was possible to determine exactly what any particular person had done and when it was done. Mr Cloke said that every update to the configuration data held in the pricing database would result in an audit record being written to the audit database. Only configuration updates would result in audit records being written: there was no other mechanism that could lead to audit records being written. Thus an audit record would exist if and only if a configuration parameter was updated.
207. Mr Cloke said that the audit database is managed entirely separately from the pricing system. Once created, audit records may be considered immutable. It is not possible for a user of the pricing system, such as a dealer, to alter or manipulate them. To alter audits within the database would require specific knowledge, software and permissions and the software and permissions are only available to a very limited number of members of staff who are responsible for insuring that the database works correctly. It was not possible for dealers to have the required permissions. Further the people who may have the software and permission do not have an understanding of what the audits mean.
208. Mr Cloke said that there is a mechanism for querying the database to produce reports on the audit data. That does not change the database but just gets information from it.
209. Backups of the audit database are made periodically. A backup is a copy of the database made at a specific point in time that may be referred back to in the future. These backups are encrypted and stored on magnetic tape to facilitate off site storage as is standard practice in the industry. As encryption is used a secret key similar to a password is needed to read and understand data from the backups. Without the correct key the backup is unreadable.
210. The number of audit records grows significantly over time as routine configuration updates are made to the pricing system during the normal course of business. Old audit records are periodically removed from the audit database to limit the number present in the database at any time to preserve the performance of the database. Thus there is no complete audit history available in the current on-line audit database.
211. To retrieve the audit records relevant to this case Mr Cloake said that backups from a number of tapes were required. The secret keys required to read data from a small number of backup tapes had been lost rendering those backups unreadable and thus not all of the audit data covering the period in question was available. Single isolated audits were not missing by themselves. Rather it was all audits over a specific period of time such as a month. The audit report provided for this case was extracted from the audit database. The criteria for audits being included in the report were that the audit related to an update of a dividend amount or dividend date made to a share instrument in the pricing system. No other criteria or filtering were applied.
212. I refer to Mr Cloke's evidence in some detail for two reasons. First it explains why of the 415 spread bets details of which appeared in the Colley Master Detail Schedule May – 12, there were only 130 for which audit data showing details of the date, time Ex-Date and amount of the allegedly inserted dividend was available. Second because some of the Defendants challenged the authenticity and/or reliability of the detailed information adduced by IG Index. It was not always clear whether these challenges were intended to suggest deliberate falsification or self serving selection of data or merely its unreliability. Significantly Mr Colley, when cross examining Mr Gordon, expressly stated that it was not his case that IG Index knowingly doctored material placed before the court. I deal with this in more detail below but indicate at this stage that, having heard Mr Cloke, Mr Gordon and Mr Blair Wright, the Head of Microsoft Services of IG Index who also gave evidence, I am quite satisfied that they all gave truthful and honest evidence which was designed to assist the court. I have no doubt that none of them set out to select information in a slanted or one-sided way or to omit potentially unhelpful information so as to provide a misleading or false picture to the court. Although it is unfortunate that the audit data was limited to 130 of 415 alleged insertions of false dividends. I am satisfied that in relation to those 130 insertions the data was authentic and reliable.
213. In order to understand the significance in this case of the insertion and removal of dividends in the pricing system by which IG Index offered spread bets in shares to customers, it is necessary to understand the process by which IG Index arrived at the prices it offered to customers. Mr Gordon described this process in terms which broadly mirrored IG Index's pleaded case as referred to earlier in this judgment. Thus he said that IG Index made spread betting prices on shares futures by taking a live price from a stock exchange, then adding an adjustment for interest, subtracting the sum of all dividends expected to be paid by the company in question before the expiry date of the bet and then finally adding a dealing spread to that futures price.
214. He illustrated the process by an example. Thus if on 1 January 2006 Vodafone was trading at 200p at the London Stock Exchange (LSE), UK interest rates were 5% and Vodafone was known to be paying a dividend of 10p to investors who owned shares on 21 February 2006, the March futures prices which had an expiry date of 14 March 2006 would have been calculated as follows:

"P + i – D = F"

where F is the futures price, P is the price of Vodafone on the LSE, D is the amount of dividend known to be paid between 1 January 2006 and the expiry date and i is the interest value of 200p at 5% for the time between 1 January 2006 and the expiry date (72 days).

215. Numerically that was

"200 + (5% x 200 / 365 x 72) – 10 = 191.97"

216. Thus on 1 January 2006 the March Vodafone futures price was 191.97, which would be rounded up to 192. IG Index would then wrap a dealing spread of say 2 points around that number and offer it to its clients to either buy or sell at a price of 191-193. All shares futures are priced in pence (or equivalent in other trading currencies) and clients deal in a stake size per "point" (pence in that example) movement. Thus a buy bet of £10 per point of March Vodafone would be made at 193 and every penny increase above the dealing price of 193 would yield the client £10 profit and every penny reduction below that price would yield a £1.10 loss. Assuming that the LSE price of Vodafone did not change at all and that interest rates remained unchanged IG Index would expect the futures price to reduce by 5% x 200 / 365 = 0.027 each day as the number of days to expiry reduced.
217. On 21 February 2006 when Vodafone had paid out its dividend, IG Index would stop subtracting 10p from its futures price but the LSE price would be expected to drop by 10p in line with the dividend and trade at 190p.
218. The futures price on 21 February 2006 would thus be

"190 + (5% x 190 / 365 x 21) – 0 =190.55"

219. As time progressed towards the expiry date the futures price would eventually come down to 190p. Thus the amount and date of dividend included within a shares futures price could have a big impact on the resulting value and it was important that the dividend values and dates held within IG Index's prices should mirror the actual values and dates that companies like Vodafone used.
220. Mr Gordon described the method by which IG Index's futures prices offered to clients were updated to reflect announcements of dividends by companies in respect of whose shares IG Index offered spread bets, the anticipation by IG Index of future dividends in respect of such shares and the removal from a price of dividends once they had been paid.
221. It was typically a two stage process involving SuperDiv and Xcon. Xcon was the name of IG Index's pricing system which calculated the prices at which IG Index offered 7000 shares futures markets for spread betting clients of which approximately 2000 were on US shares. Xcon was effectively an enormous calculator which took in a live price feed (P in the formula referred to above) from an exchange via a price supplier such as Reuters or LSE. That value got altered according to the P + i – D = F formula which required constant settings such as the number of days to expiry, the interest rate for a specific trading currency and the dividend dates and amounts expected of the company in question.
222. Those constants were maintained by shares dealers who all had access to Xcon. Other price making dealers on different desks at IG Index also had access to Xcon but would never be expected to make changes to shares prices. The dividend information was unique for every stock and required daily reconciliation by a shares dealer to maintain the accuracy of IG Index's prices. IG Index quoted US shares futures up to 9 months in advance. Thus for example if the date was 1 January 2006 IG Index would be making prices for March 2006, June 2006 and September 2006 futures.
223. That meant that IG Index had to include dividend dates and values for the time period of 1 January 2006 to the expiry of the furthest future, in this example 19 September 2006. The time when a company confirms the date and amount of the dividend, usually 1-3 weeks before the date it becomes effective, is known as the Ex-Date, that is to say the date at which a shareholder must own shares in order to be entitled to the dividend. That is the date on which the amount of dividend would normally be expected to be deducted from the exchange price.
224. Since IG Index had to make prices up to nine months in advance and the dividend dates and amounts were not confirmed until a few days before expiry, the vast majority of dividend information held within Xcon were predictions rather than reproduced market data and it was a daily task for one of the shares dealers to find all dividend announcements relating to the shares offered by IG Index and then reconcile that information with the predictions which had previously been entered into Xcon. The same dealer would also remove any dividends from which the Ex-Date had passed since they no longer contributed to a futures price and replaced them with a far-dated prediction for upcoming futures.
225. There were six "cells" (three pairs) in which dividend information could be entered and each pair would allow for a date and a value so that the next three dividends for shares futures could be stored within Xcon. The US shares which pay dividends (approximately half of IG Index's data set) almost all pay four times per year – once per quarter – where each payment is roughly equally spaced. If a company has paid ten cents for the previous six dividends it is very likely that it will try to pay ten cents for the next one or possibly a small increase which it would then try to maintain thereafter.
226. The average price of US-listed shares was around $29 – $30 in 2005 to 2008 and average dividends for those companies which paid them would usually be two or three cents up to around 30 cents. Anything over 50 cents would usually have the one off status of a special dividend which would occur for a very specific reason and would not be repeated.
227. The cyclical and consistent nature of US dividends made it relatively easy to predict the dates and amounts of dividends for the next three futures contracts.
228. The method used by IG Index to predict the next dividend was simply to replicate the amount on the nearest weekday in the future to the corresponding Ex-Date of the most recent equivalent dividend.
229. If IG Index had a predicted Ex-Date of 10 September 2008 and a predicted dividend of ten cents and at the beginning of September 2008 the company announced to the market that it was going to pay ten cents to shareholders on 11 September 2008 then part of the maintenance job would be to find the announcement and adjust the date in IG Index's system from 10 to 11 September 2008. That would make no difference to IG Index's forward price on the day of the adjustment but would ensure that Xcon stopped subtracting ten cents from the futures price on the correct day.
230. If the announced amount differed from the predicted amount then IG Index would correct the predicted amount to make it agree with the market confirmation.
231. The method used to reconcile the data in relation to dividends on 2000 or so US stocks was via spreadsheets which linked to Bloomberg pricing systems. IG Index kept a record of all shares futures offered on a spreadsheet called SuperDiv and the Bloomberg identifying code was recorded against every share. The cells in SuperDiv which contained dividend information had to be input by a person. That is to say they were not linked to other sources which could update them automatically. A second spreadsheet called DivCheckUS&OZ was able to look at the list of US and Australian stock identifier codes from SuperDiv and effectively ask Bloomberg the question "for each of these stocks what, if any, dividends have been confirmed to the market and what is their Ex-Date and amount?" If Bloomberg produced announced dividend data then the DivCheckUS&OZ spreadsheet would reference that data against that held in SuperDiv and if there was a discrepancy between SuperDiv's prediction and DivCheckUS&OZ's confirmed data that would be highlighted for the dealer.
232. The dealer would then go to SuperDiv and make any required changes to the dividend prediction by typing in the new, confirmed information where the existing predicted information was located.
233. SuperDiv also had logic within it that highlighted an Ex-Date that had passed to alert the checking dealer that the dividend needed to be replaced by a new prediction. Once SuperDiv had been updated and saved the information was copied and pasted into Xcon via a reconciliation spreadsheet. It was only when it was updated in Xcon that IG Index's prices would update.
234. In order to copy SuperDiv information and paste it into Xcon the format of the information needed to be sorted into a specific style and that was done by use of a spreadsheet called SDivtoCalcToolCheck which the reconciling dealer knew how to use. That job of dividend maintenance was done by all shares dealers and ideally was to be done daily although when the markets were busy it was sometimes left for a day.
235. SuperDiv was an excel sheet on a computer drive to which many people in IG Index had access on their computers. Alterations to dividend information on SuperDiv could only be effected by typing in individual data as to the amount of dividend and Ex-Date for individual shares. By contrast, changes to Xcon could be effected either by typing in individual data relating to dividend amounts and Ex-Date (whether for purposes of insertion or deletion of dividends) in relation to individual shares, or by copying and pasting data from SuperDiv. In the latter case it was possible to transfer data from SuperDiv to Xcon in respect of more than one share at a time by bulk copying and pasting.
236. The live price feeds of current cash prices for individual shares were taken from exchanges such as Reuters, the LSE or S&P. Bloomberg was never used for live price feeds. The live price feeds were fed directly into Xcon and were not typed into SuperDiv. Underlying share prices were not typed into SuperDiv. The only data typed into SuperDiv were information relating to dividends and other stock information such as ID codes, the currency the stock traded in and the name of the stock. Bloomberg was never used as a source of live stock prices for feeding into Xcon. It was only used to reconstruct prices and for market and dividend information. Any errors in the price feed would not be typed into SuperDiv and thus if there were errors in data typed into SuperDiv and copied and pasted therefrom into Xcon such errors could not be attributable to pricing errors in the live feed coming from an exchange but had to be errors related to dividend information.
237. The Colley Master Detail Sheet May 12 relied on by IG Index at trial contained details of 415 spread bets on US shares futures in respect of which Mr Gordon stated that it was clear from overnight valuations that dividends had been inserted and removed and clients had benefitted from those changes in the period from 9 September 2005 to 22 September 2008.
238. Those spread bets fall into two broad categories. The first category comprised 130 spread bets where a subsequent audit by IG Index's IT department of data recorded as having been entered into Xcon revealed precise details of the amount of the dividend and the Ex-Date inserted into Xcon, the date and precise time on which they were inserted, the date and precise time on which, in most cases, the dividend was deleted from Xcon and the user name and terminal used by the person making the entries into Xcon.
239. The audited information provided by IG Index's IT department was contained in two spreadsheets (exhibits 4 and 5 respectively) exhibited to Mr Gordon's first witness statement. It was accepted by Mr White on behalf of Mr Regan that so far as Mr Regan was concerned the details contained in those exhibits were accurately recorded in the Colley Master Detail Sheet May 12. Initially Mr Gordon said that he did not think that it was possible to get an audited log of historical changes to Xcon beyond a few days but the IT department told him that they could retrieve it for the previous three months. Exhibit 4 identified dividend changes to Xcon in the 3 months leading up to 25 September 2008. These included details in respect of 35 alleged false dividends. Subsequently in 2011 the IT department uncovered further historical changes going back a further year from July 2007 to July 2008 which were set out in Exhibit 5. These included details in respect of a further 95 alleged false dividends.
240. In addition to the audited information drawn from Exhibits 4 and 5 the Colley Master Detail Sheet May 12 also set out, in relation to the 130 spread bets in the first category as well as in relation to the 285 spread bets where there was no such audited information, details of the times and dates on which those bets were opened and closed and details of the prices of the bets as well as details of IG Index futures prices as well as market cash prices for the relevant US stocks at the close of the market on the days when the client Defendants' bets were placed and subsequent dates.
241. The second category of spread bets referred to in the Colley Master Detail Sheet May 12 comprised 285 transactions where no audit information was supplied by IG Index's IT department. In the case of those transactions there was no primary historic evidence of the date, amount or times of the insertion or removal of dividends from Xcon.
242. In respect of those transactions IG Index's case in relation to the insertion and removal of false dividends was explained by Mr Gordon broadly as follows.
243. He said that it is possible to identify the amount of the false dividend in respect of each transaction and the date on which it was partially or wholly removed from IG Index's price by comparing the cash and futures price of the relevant stock over a period of time. Any discrepancy between the two, other than small amounts referable to interest, could only be explicable by the presence of a dividend. The date on which the cash and futures prices merged must be the date on which the dividend was removed. There is no other explanation for the merger.
244. As to the date on which the dividend was inserted Mr Gordon inferred that the date was the same date on which the relevant client Defendant (or one of the three other alleged fraudulent clients who were not sued) placed their bet. The fact that it was inserted no later than the date on which the relevant client defendant placed their bet was proved by the fact that the closing cash price for the relevant stock on that day was significantly higher (by an amount that could only be explained by a dividend having been inserted into IG Index's futures price) than the price at which the client placed the bet and the IG Index futures closing price on the day the bet was placed. While it could not be excluded that the dividend was inserted on an earlier date, the inference that it was inserted on that date derived principally from the following strands of evidence.
245. First of the 415 transactions there were six or seven in respect of which another client of IG Index held a position in the same stock on the day before the allegedly fraudulent trade. That enabled Mr Gordon to check the overnight IG Index valuation against the cash price which in each case revealed no discrepancy between the two other than explicable by interest. On the day of the allegedly fraudulent trade there were reports both for the allegedly fraudulent trade and the innocent trade. A comparison between the cash and futures prices showed that the false dividend had been inserted on the day of the two trades. If that was the case not only in respect of those randomly identifiable trades for which there was no audit information but also in respect of the 130 trades in respect of which there was audit information, it is to be inferred that in respect of those trades where it was not possible to pinpoint the date of insertion in either of those two ways the date was likewise the same as the date of the Defendant client's trade.
246. Mr Gordon was confident that the further information supplied by IG Index referred to earlier in this judgment as to the number of the 415 allegedly fraudulent trades in respect of which other innocent clients had open positions was correct. If the difference between the cash and futures price moved by more than one day's interest that must be caused by a dividend being inserted or removed from the price. If a real dividend went ex-dividend on that day IG Index would stop subtracting it from its futures price and would therefore expect to see the difference between the cash and futures price change to reflect that. The change would be the amount of the dividend removed and one day's interest.
247. In effect the inference depended on (1) it being accepted that in respect of the 130 cases where there was audit information the only rational explanation for the fact and timing of the dividend insertions and removals was that they were part of a systemic fraud and (2) the proposition that since there was evidence in respect of the 285 trades that obviously false dividends were inserted either on or before the day which the allegedly fraudulent bets were placed and removed before they were closed, the strong likelihood is that they too were part of the same fraud and are likely to have followed the same pattern.
248. The second strand of evidence on which Mr Gordon based his inference was the historical information obtained by the audit in respect of the 130 transactions. Where there was audit evidence of the actual time of the insertion of the dividend on the vast majority of occasions the dividend was inserted very shortly before the relevant market closed. It was unlikely that Bloomberg would announce a dividend shortly before the close of the relevant market. Mr Gordon said that, at least in respect of UK stocks, he would expect announcement of dividends before the market opened. Thus the large scale insertion of dividends at those times was for that reason extremely unlikely to have been done for the honest purpose of updating Xcon to reflect genuine new dividend announcements from the relevant companies.
249. Further, as already mentioned, where there was audit evidence of the actual time of the insertion of a dividend the evidence showed that on the vast majority of occasions the bet at the manipulated price was placed within a matter of seconds or minutes of the dividend being inserted and before the market closed. That, it was said, strongly suggested that the person placing the bet was aware that the insertion was to be made and was waiting for it to be done before placing the bet.
250. Taken together the insertion of dividends shortly before the close of the US market and the placing of a bet by one of the client Defendants shortly after the insertion of a false dividend also pointed, so IG Index submitted, to the false dividends having been inserted at a time calculated to minimise the risk of an innocent trader placing a bet on the effected stock at the artificially depressed price. Mr Gordon said that shares dealers did not have their own list of dealing clients so that if a client spotted an error, including a pricing error, and brought it to IG Index's attention there was no guarantee that a specific dealer would receive the call. Concentrating the insertion of the false dividends and the subsequent placing of bets at the favourable artificially depressed prices by the client Defendant in a brief window of time before the close of the US markets was, it was submitted by IG Index, calculated to minimise the risk of the fraud coming to light as a result of questions raised by innocent clients. In addition IG Index relied on the following matters as supporting the inference that the insertion and removal of dividends (whether proved by the comparison of cash and futures prices in the case of the 285 bets or the combination of that comparison and the audited information in the case of the 130 spread bets) were part of a dishonest fraud.

The size of the dividend inserted

251. Mr Gordon stated that more than 60 per cent of the companies in respect of which dividends were inserted and removed on the US shares on which the 415 spread bets were placed had never paid a dividend to their shareholders. He had found no evidence of those companies having made any announcement that they intended to pay dividends on the occasions relating to their input into IG Index's pricing system. Further the average share price of the US stocks concerned was 4450 cents. The average dividend entered into those prices was 4450.67 cents, 9.9% of the average price. Mr Gordon said that dividends yields of that scale were very rare in the financial markets and any experienced shares dealer would know that. The overwhelming majority of US dividends were in the range of 2 cents to 30 cents.
252. No evidence was adduced by the Defendants to contradict this part of Mr Gordon's evidence and I accept it as true and accurate.. It is in my judgment critical evidence. The anticipation or announcement of dividends formed an integral part of the calculation by IG Index of the prices which it offered its clients for spread bets on US stock futures. The insertion into those futures prices via SuperDiv and Xcon of massively inflated dividend prices which bore no relation either to the history of the individual US stocks concerned or to the general level of US stock dividends can only have been done by mistake or deliberately.
253. Mr Gordon said that there was no reason why Bloomberg would have wrongly suggested that the companies concerned were about to pay large dividends on so many occasions and then withdraw that information. IG Index's dividend reconciliation process relied on Bloomberg information to alert the dealer who conducted the evening's price reconciliation check as to which companies had announced pending dividend payments. Even if Bloomberg had on all those occasions made the errors which ultimately found their way into Xcon, the dealer would have had manually to type both the dividend Ex-Date and the dividend amount into SuperDiv in order for it to form part of the evening's price reconciliation check. The information would then have to be either manually typed or pasted into Xcon. Mr Gordon said that it would be very unusual and grossly unprofessional for an experienced dealer manually to type in dividend values of an average of 440 cents, in circumstances in which it was well known that the overwhelming majority of US dividends were in the range of 2 cents to 30 cents without questioning the number. Further there were many examples of the insertions into Xcon being done at a time when no other stock dividends were being updated which points to them having been deliberately either typed or pasted into Xcon individually rather than as part of a bigger process.
254. The position is most dramatically illustrated by reference to the 130 trades in respect of which there was audited information as to the actual amount and Ex-Date inserted into Xcon. The large majority of dividends inserted were in respect of US shares which did not pay dividends. In the handful of cases where real dividends were paid by the stock in question after the allegedly fraudulent bet was placed the dividends were a small fraction of the amounts entered into Xcon. They ranged from 3 cents to 48.9511 cents. That was in contrast to the dividends entered into Xcon which in the case of those shares ranged from 350 to 600 cents. Moreover the actual dividend Ex-Dates were different. It was suggested on behalf of the Defendants at trial that the amount of false dividend inserted in Xcon could be a simple error, for example by misplacing the decimal point. However that suggestion was inconsistent with the handful of cases in which the US stock in question did actually pay a dividend after the allegedly fraudulent bet was placed. Thus by way of example in respect of one trade (number 256 in the Colley Master Detailed Sheet May 12) the dividend inserted into Xcon was 500 cents, whereas the dividend actually paid on the next date following the placing of the relevant bet was 48.9511 cents.
255. In order to find their way into Xcon both the dividend amount and the Ex-Date had to be entered into both SuperDiv and Xcon. For the reasons given the likelihood of so many glaringly incorrect dividend amounts and Ex-Dates being manually typed into a document by a shares dealer without the error or at least oddity being obvious to him or her is in my judgment very small. This gives rise to a very strong presumption that whoever entered the 130 dividends for which there is audited information into SuperDiv was aware that the dividends being typed in were obviously incorrect and very significantly overstated if not completely wrong in the sense that no dividend was likely to have been either anticipated or announced at all. Taken together with the absence of any evidence of any dealer either having queried these inserts with Mr Gordon, Mr Tibbs or anyone else or having corrected the insertions before inserting them, this in turn in my view leads to a strong presumption that the insertions were made deliberately. There was in my judgment no evidence which rebutted that presumption. On the contrary there was a large amount of evidence which supported it.
256. It is in theory possible that the person who subsequently transferred the incorrect information from SuperDiv into Xcon was not the same person who entered the information into SuperDiv. If those transfers had been effected by means of pasting it might be that the entry of the incorrect dividend information into Xcon was done by mistake.
257. In practice however there is in my view no realistic scope for such a hypothesis. In respect of no fewer that 126 of the 130 insertions for which audit evidence was available it showed that the insertion into Xcon was made manually and not by means of a paste. Thus the same logic leads to the conclusion that there is a strong presumption that whoever entered the incorrect dividend information into Xcon did so both knowingly and deliberately. Moreover that would still leave unexplained why the false dividends were entered manually into SuperDiv in the first place unless deliberately and if deliberately, what purpose was served unless it was to be a precursor to changing Xcon.
258. Neither Mr Colley nor any of the client Defendants was able to offer any plausible explanation as to why such obviously false dividend information was or even might have been entered into Xcon other than deliberately or why, if it was entered in error, the error occurred on so many occasions and was not either noticed or queried with management or corrected.
259. If the false dividend information inserted into Xcon and thus into the futures prices offered by IG Index to its customers on the relevant US stocks was known by the person inserting it to be incorrect and was deliberately inserted, it raises the inevitable question: why was the false information inserted? IG Index submitted that the only rational answer to that question is that it was done for the purpose of artificially depressing the price offered by IG Index on the relevant US stocks to enable a client to place a bet at the artificially depressed price, thereby benefiting to the extent by which the insertion of the false dividend depressed the price. I accept that submission. It is again in my view telling that neither Mr Colley nor any of the client Defendants was able to provide a plausible alternative answer to that question (although of course they did not accept that the false information was deliberately entered into Xcon).

The timing of the insertion

260. I have already referred to the fact that in respect of the 130 trades where there was audit evidence of the actual time of the insertion on the vast majority of occasions the dividend was inserted very shortly before the relevant market closed. This is significant in more than one respect.
261. First because, as Mr Gordon said, it was unlikely that Bloomberg would report the announcement of a new dividend shortly before the close of the market, the timing of the insertions support the inference that the amounts inserted into Xcon did not in fact reflect actual dividend announcements. Second for the same reason it supports the inference that the person who entered the dividends must have been aware of that fact and thus, given the large number of occasions on which false dividends were entered and the absence of evidence of the person who entered them having queried the information with management, the person who entered the information must have done so intending to enter false information.
262. Third it is at the very least consistent with the insertion of the false dividend having been part of a dishonest plan to enable a dishonest concert party to place a bet at the artificially depressed price caused by the insertion. By limiting to a few minutes the period of time in which an innocent client of IG Index might spot the artificially depressed price the putatively dishonest inserter of the false dividend might thereby hope to minimise the risk of the fraud being detected. Alternatively if an innocent client by chance placed a bet on a US stock after the insertion of the false dividend at the artificially depressed price there was also a risk that he might notice the unexplained contrast with the underlying cash price and raise the anomaly with IG Index. If the bet placed was a sell bet he would have an obvious interest in doing so. Even if it were a buy bet he might do so if he were an honest person. A client with an existing open buy bet on the relevant stock who spotted the dramatic fall in the futures price might be alarmed at the sudden increase in his downside exposure were he to check the cash price and discover, as he would, that there was no equivalent drop in the underlying market cash price, he might very well contact IG Index and alert them to the anomaly. It is for the same reason, said IG Index, that almost all the stocks chosen for the fraud were stocks in which no existing innocent client had an open position which could be affected by the insertion of the false dividend.
263. In the event there were only a handful of allegedly fraudulent bets placed following the insertion of a false dividend which were placed on stocks on which bets were also placed by clients not alleged by IG Index to have been involved in the fraud. IG Index had particular submissions in relation to some of them to which I refer below. More generally however, IG Index's submission on this point was that, while it accepted that even in a short window the alleged fraudster was taking a chance that an innocent client might place a bet at the artificially depressed price during the short window of time, the risk was a very small one and much smaller than would have been the case if the insertion of the false dividends had been made soon after the opening of the US market. If the insertion of a particular false dividend did come to light, either prompted by an enquiry by an innocent client or otherwise, the remedy (assuming that it was indeed fraudulent) would be for the dishonest client who had placed the bet at the artificially depressed price immediately to agree that the contract price should be adjusted when, as Mr Gordon said would be the normal practice, he was contacted by a dealer who had been asked to investigate the anomaly and told that the futures price which he had been offered had been incorrect.
264. This general point is allied with the evidence as to the timing of the removal of the false dividends to which I refer below. There were two aspects to that. First on the vast majority of occasions the dividend was left in the IG Index quoted price overnight. That IG Index submitted was necessary in order to avoid the false dividend being picked up in either of the two overnight IG Index checks. Second, and relevant in the present context, where there is audit evidence of the actual time of removal it shows that on the vast majority occasions the dividend was removed before the US market opened the following working day. That would lessen the chances of any other innocent IG Index client trading on the manipulated price and thus, in the same way as timing the insertion of the dividend the previous way to within a few minutes of the close of the US market, lessen the chances of detection.

The choice of the stocks

265. Mr Gordon stated that on only seven of the 415 occasions on which allegedly fraudulent bets were based after the insertion of a false dividend could the insertion of the false dividend have affected an open position of any IG Index client. He confirmed the accuracy of the further information supplied by IG Index pursuant to a request by Mr Colley dated 30 November 2009, to which I have referred earlier, which included details of the seven occasions.
266. He accepted that in those cases the other clients would have seen their running profit and loss change when the false dividend was inserted and again when it was removed, thereby increasing the chance that the client could call in and query the price. However in the case of the two occasions where the other client had a bet open for a different expiry date he said that the client closed out after the false dividend had been both inserted and removed from which he inferred that neither of them saw any realised profit or loss as a result of the manipulation.
267. As to the five occasions when there were open positions for the same expiry date the further information stated that in all five cases the clients closed out after the false dividend had been both inserted and removed so that none of them saw any realised profit or loss as a result of the manipulation.
268. In relation to the transactions referred to in Rows 282, 283, 284 and 285 of the Colley Master Detailed Sheet May 12 in his second witness statement dated 10 May 2012 Mr Gordon stated that the false dividends which had been inserted were removed between the client dealing and the overnight valuations running. However in giving oral testimony he said that he no longer believed that to be the case. When he wrote it it was based on inferences he drew from a comparison between the closing cash and futures prices of the relevant stocks. However the audited information showed that in fact the dividend had been removed the next day.
269. There was some probing by Mr Colley in his cross examination of Mr Gordon on this. There was no definitive explanation by Mr Gordon as to the apparently contradictory indications from on the one hand a comparison of the closing cash and futures prices on the day the dividend was inserted on this transaction and on the other the audited information showing that the dividend was removed not between the client dealing and the overnight valuations but the following day. The original spreadsheet contained estimated false dividends of 400 cents and 300 cents based on the dealing price and the overnight cash valuation. The audited information showed that the false dividends were actually 500 cents and 300 cents and were then removed the following morning.
270. In his second witness statement Mr Gordon said that the only explanation he had as to how the overnight valuations could imply no dividend was that an offsetting negative dividend value could have been input in a different box and then removed the following day. However there was no audit evidence of that. What was clear was that the cash valuations on those two stocks on the day the dividend was inserted were different to that shown by Bloomberg, which suggested that the price feed was either genuinely wrong or had been manipulated that evening. The overnight valuations on both stocks had futures prices well in excess of that expected by interest alone suggesting a negative dividend was present somewhere in IG Index's price. Based on the primary evidence of the audit information Mr Gordon did not believe that the dividend was removed on the night of the placing of the allegedly fraudulent bet. As to why the IG Index valuation on the day of the trade was incorrect he could only speculate that it was because the cash price was incorrect. As to the futures price containing a premium far in excess of the cash price even though the cash price was wrong the only way that could have happened was if there had been a negative dividend inserted. As to why a fraudster would have put in both a false positive and a false negative dividend Mr Gordon said that if it had been done when the innocent party dealt it might have been an attempt to conceal the fraud. The innocent party might have dealt on the false positive dividend and then queried it with IG Index to which the fraudulent dealer might have responded by trying to offset the false positive dividend with a false negative dividend.
271. Mr Gordon said that he did not decide which clients would be sued and which would not, the inference being that he could not rule out that the allegedly innocent client was in fact also part of the fraud. It might well have been that the reason he was not sued was because it was an isolated bet in respect of which Mr Mayall said that the benefit attributable to the false price was only £99. Significantly Mr Gordon pointed out that even in the case of the transactions identified in Rows 282-285 the audited information showed that the removal took place after 11:00 a.m. on the day of removal (the day after the dividend was inserted) which is consistent with the general point referred to below that the dividends were left in the IG Index price until after the second of the two price checks to which I refer below was likely to have been completed. Since the dividends were shown by the audited information to have been added a few minutes before the market closed there was only a small window of opportunity for the putatively innocent clients to have noticed any change to their profit and loss. While these transactions were not fully explained they did not in my judgment undermine the force of the general points made on this topic by Mr Gordon and IG Index.
272. Mr Gordon confirmed that in respect of the 111 transactions referred to in the Further Information supplied by IG Index where other IG Index clients held a position in a Contract for Difference any client with a CFD position would see no change at any point to their profit and loss or any pricing chart when the false dividend was added or removed.
273. Thus of the 415 transactions involving the insertion of allegedly false dividends there were only seven occasions when there was another client's position which would have been temporarily affected by the manipulation.

The timing of the bets

274. Of the 130 transactions where there was audited information as to the date time and amount of the insertion of an allegedly false dividend, the primary evidence showed that on the vast majority of occasions the bet placed by the allegedly dishonest client at the manipulated price was placed within a matter of seconds or minutes of the dividend being inserted. IG Index submitted that that strongly suggested that the person placing the bet was aware that the insertion was to be made and was waiting for it to be done before placing the bet.
275. The sheer volume of occasions in which the audited information shows a bet being placed within a very short time of the insertion of a false dividend is very striking. Taken on its own it is of course not conclusive proof that the person placing the bet had been told in advance that the dividend would be inserted and selected both the individual stock and the time at which to place a bet on it so as to benefit from the artificially depressed price created by the insertion. The proximity of the time at which the dividend was inserted and the bet was placed may in any individual case have been fortuitous. Alternatively the bet may have been placed because the client noticed the downward spike in the price and saw it as a buying opportunity. At its lowest in my judgment it calls for an alternative plausible explanation as to why the bet was placed. In this context it is important to bear in mind that on the one hand a person placing a bet after a false dividend was inserted who was unaware of the false insertion would have no reason to appreciate that the price represented a bargain in the sense that the underlying cash price had not also fallen by an equivalent amount unless they had the cash price open on a screen. On the other hand if they were aware of the underlying cash price, an experienced spread better might be expected to assume that there was some mistake since the size of the discrepancy was almost always very significantly greater than could be explained by the insertion of a genuine dividend announcement or anticipated dividend. If he did believe the discrepancy was caused by a genuine dividend insertion it would not logically constitute a bargain.
276. If the person placing the bet did not have the cash price open on a screen, the natural assumption on seeing a sudden drop in the futures price offered by IG Index would be that it reflected a similar drop in the underlying cash price of the relevant stock. As in the case of ordinary shares listed on stock exchanges a drop in the futures price of a stock would not necessarily show that the lower price was a bargain. It would depend on why the market had taken a negative view on the stock in question and a decision to place a bet might be expected to be based on some background knowledge of the stock in question so as to reach an informed view as to whether the sudden drop in price represented a good buying opportunity or not.
277. It is also necessary to bear in mind that there was evidence that there tends to be a particular market volatility in futures prices in the period leading up to the closing of the market at the end of the day and there may be clients of IG Index as of other spread betting firms who see that volatility generally as an opportunity to buy.
278. However set against that is the sheer volume of transactions in which the bet was placed within a matter of minutes or sometimes seconds of the false dividend being inserted and the lack of any obvious rational reason to regard a sudden unexplained price drop as a buying opportunity. It is for those reasons important when considering whether individual client Defendants had been tipped off in advance that a false dividend would be inserted what alternative explanations they had for why they happened to place their bets on the stocks on which the dividends were inserted on several occasions shortly after the dividend was inserted.
279. In relation to the 285 spread bets where there was no audited information as to the date time and amount of the dividend inserted Mr Gordon explained how he arrived at the conclusion that the dividends were inserted on the same day as the relevant bet was placed by the client Defendants after the dividend was inserted. His starting point was the information given to him by Mr Tibbs on 25 September 2008 to which I have referred that he had discovered that large dividend values in the amount of 400 cents had been inserted into the prices offered by IG Index for 2 US stocks a few minutes before bets were placed on them by Mr Abrahamovich and Mr Rowe respectively. The dividend had been inserted at 20:49:43 hours and 20:50:20 hours respectively and the bets on the amended priced had been placed at 20:53:12 hours and 20:56:43 hours respectively.
280. Mr Tibbs in his evidence stated that his suspicions were initially aroused by noticing a US stock which had been opened and closed within a very short period, from memory a day, which had made a surprisingly good profit. Having checked with Bloomberg he found that there were no Ex dividend dates and nothing unremarkable which could explain the anomaly. He then looked at the IG Index graph which shows the IG Index price adjusted for dividends and interest for that stock and found a downward spike in the price for which there was no apparent reason. On discussing it with Mr Noble they agreed to see if any changes had been made to Xcon since one potential explanation would be that a dividend had been entered. Mr Noble contacted someone in IT, possibly Mr Imre, and later that day Mr Tibbs was told that a dividend had indeed been inserted into the price using Mr Colley's login details.
281. The dates, times and amounts of the 400 cents dividends inserted into the two US stocks concerned were confirmed in the Xcon audit information.
282. Mr Gordon said that Mr Tibbs could think of no reason why someone would insert 400 cents dividends into the two US stocks concerned unintentionally in view of the fact that neither of the affected stocks had any previous history of ever paying a dividend to shareholders and had made no announcement that they would do so. The fact that the prices of the two US stocks had been reduced by 400 cents or points for no obvious reason made Mr Gordon suspicious that there was an intention to remove those dividend values while the client positions were still open thus increasing the valuation of the futures prices by 400 points in each case. He decided to investigate whether any previous bets made by those two clients had been subject to advantageous insertions of dividends and if so if they had profited by subsequent removal of those dividends.
283. Mr Gordon adopted a twin track approach. He looked at US shares futures which had been opened during the last 15 minutes of the market trading session on dates when the two clients had opened bets. He compared the difference between the closing stock exchange cash prices of the underlying stocks as supplied by Bloomberg on the days the positions were opened against IG Index's closing futures prices at close of business on the same days. He then compared the difference between the cash and IG Index futures price on the day on which the bets had been opened against the difference between the two prices on the following days. If no dividends had been inserted and then subsequently removed he would have expected those price differences to change only by the value of one days interest each time. In fact some much bigger differences emerged
284. Mr Gordon also requested a log of changes to dividend values within Xcon and found 5 examples of bets made by those two clients where the difference between the exchange price and IG Index's futures price changed dramatically on the day after the clients had opened their bets.
285. Details of the relevant figures were adduced in evidence. In effect the inference which Mr Gordon drew from the contrast between the large difference between the closing cash price and the closing IG Index futures price on the dates on which the bets were placed and the substantial reduction of that difference as at the close of business the following day was corroborated by the Xcon audited information showing the insertion of substantial dividends into the IG Index price shortly before the bet was placed and the removal of the dividend shortly after the bet was closed the following day.
286. Mr Gordon widened his searches of past dealings to all times of the day for those two clients and also to all of IG Index's clients with similar dealing patterns on US shares futures comparing closing cash and futures valuations to see if anyone had benefited from similar dividend insertions and removals. Whenever a new client appeared he did a search of their entire previous dealing history to see if any spread betting markets had been subject to similar manipulation but only US shares appeared. It was from that investigation based on comparing the difference between cash and IG Index's futures prices at close of business on the dates on which suspicious bets were placed against the diminishing differences on subsequent dates that Mr Gordon produced his list of 415 allegedly fraudulent transactions on which this claim is based.
287. Mr Gordon was challenged by Mr White on behalf of Mr Regan on the evidential basis for his conclusion that not only the 130 transactions for which there was audited information as to the amount date and time of the insertion and removal of dividends, but also for the 285 transactions where that information was not available, the false dividends were inserted before the client Defendant (or other three allegedly dishonest clients) placed their bets. In particular he put to Mr Gordon that evidence of a difference between the cash and futures price at the close of business was not the same thing as evidence of a difference between the cash and futures price at the time at which a bet was placed. It was only the latter and not the former which, in the absence of audited information as to the time a dividend was inserted, which could conclusively prove whether, at the time a bet was placed, the futures price had already been artificially depressed by a prior insertion of the dividend.
288. Mr Gordon's answer to that was as follows. First, as previously mentioned, there were six or seven transactions in which other clients had open positions in the relevant stocks and where it was possible to tell that there was no false dividend in the futures price the night before the allegedly fraudulent bet was placed. The fact that on the day the fraudulent bet was placed there was a substantial difference between the closing cash and futures price demonstrated that the false dividend must have been inserted on that day. Second although Mr Gordon accepted that on IG Index's case there must have been a disparity at the time every fraudulent bet was placed between the cash price and the bet price if a false dividend had been inserted before the bet was placed, he acknowledged that the differences between the cash and futures prices relied on in the Colley Master Schedule May 12 were as at the close of business on the day the bet was placed rather than at the time the bet was placed.
289. However he stated that when in 2008 he embarked on his exercise of looking for disparities between the cash and futures prices he was able in a number of instances to refer to the cash price at the time the bet was placed. He could not recollect how many such cash prices at the time the bet was placed he saw. Nor could he recollect why he had not included the cash price at the date the bet was placed in respect of those transactions.
290. However he said that the inferences which he drew by comparing the difference between the cash and futures price at close of business were not only born out and corroborated in respect of the 35 transactions where the IT department was able to provide audited information for the date of dividend insertion in the three months leading up to 25 September 2008. In addition when the audit information for the additional 95 transactions going back over the previous three years were made available to him in 2011, the false dividends which had previous been revealed by his comparison of the cash and futures prices at the close of business were consistent with the information as to the false dividends inserted contained in t he audited Xcon information.
291. Thus in effect the reliability of the inference to be drawn from the comparison between the cash and futures prices at the close of business on the date the allegedly fraudulent bets were placed was emphatically demonstrated by the fact that in the 130 cases where it was possible to check the inference against the historical primary evidence of the date and amount of the dividend inserted the inference was proved to be correct.
292. If the 130 occasions on which the primary evidence showed that the false dividend was inserted before the allegedly fraudulent bet was placed were fraudulent bets, given that in the case of the other 285 transactions the disparity between the cash and futures price at the close of business can only have been explained by the insertion of a dividend at some point before the close of business on that day and given that such a dividend did not in any case reflect an actual announced or reasonably anticipated dividend, if the choice is between the false dividend having been inserted fortuitously after the fraudulent bet was placed or before it was placed by design, the implausibility of the former provides further support to the inference that in respect of the 285 cases no less than in the case of the 130 transactions the false dividend was inserted before the allegedly fraudulent bet was paced.
293. When he first drew up his list of 415 allegedly fraudulent transactions Mr Gordon said that his inference of fraud were drawn partly on the primary evidence of the insertion of false dividends on the first 35 transaction for which audited information was available, secondly on the lack of other clients having positions on the individual stocks on which the allegedly fraudulent bets were placed (thus suggesting the absence of a genuine market motive for the bet having been placed and an intention to minimise the risk of detection) and thirdly on the handful of cases to which I have referred where other clients did have positions on the affected stocks before the date of the allegedly fraudulent trades where it could be established that there had been no false dividend in the IG Index futures price on the day before the alleged fraudulent bet.
294. This was in addition to the exercise to which I have referred whereby Mr Gordon compared the difference between the cash and the IG Index futures price at the close of business on the dates on which the 415 bets were placed (as well as the difference between those prices on subsequent dates leading up to the point at which they converged thereby leading to the inference that the false dividend was removed). Although when he did the exercise in 2008 there were a number of transactions where he was able to contrast the difference between the cash and the IG Index futures price at the time the bet was placed, he did not at that time see the cash price at the time the bet was placed in respect of all 415 transactions and the figures included in the Colley Master Schedule May 12 were confined to the cash and IG Index futures prices at the close of business.
295. On 28 May 2012 at the conclusion of the evidence Mr Gordon made a third witness statement exhibiting a new spreadsheet entitled "Historical Cash Prices". This schedule was adduced in evidence with the agreement of Mr White on behalf of Mr Regan, Mr Slaney and Mr Teller and with no objection from the other Defendants.
296. Mr Gordon explained that on 24 May 2012 he contacted Reuters Data Systems to enquire if it was possible to retrieve historical pricing information for intra day price movements or "ticks of US equities". He was told that it was possible and that the software had been purchased by IG Group's financial charts developers. He found the identification codes for each of the stocks used in the 415 bets and used the software, called Thompson Reuters Tick History, to find the Bid and Ask prices of the underlying stock at the time of booking the 415 bets the subject of the Colley Master Detailed Sheet – May 12. Those values were summarised in the historical cash prices spreadsheet. Mr Gordon added in the spreadsheet a column called "open level w/o Spread" which was the client's dealing price with IG Index's spread removed. Those prices he said were invariably significantly below the corresponding Ask value at the time and the number of points, or cents, below the Ask price was summarised in a column called "FUT Below Cash at Deal Time (cents)".
297. He also included a column called "Real Div In Future (cents)" where Bloomberg data suggested a genuine dividend should have been included in the relevant futures price by reference to the size of such a dividend. That and the remaining information in the spreadsheet was taken from the Colley Master Detailed Sheet – May 12 spreadsheet. A final column called "False Div in Price?" was based on a formula which looked at the discount of the future price below the cash price and said "yes" if that must have been achieved by the presence of a dividend of a higher value than could reasonably have been expected.
298. The information contained in this schedule was in my judgment hugely significant. To the extent that it identified the underlying cash price of the relevant US stocks at the time all 415 allegedly fraudulent bets were placed, it was based on primary historical evidence. The comparison between the underlying cash price at the time the bets were placed and the IG Index futures price at that time entirely corroborated and supported IG Index's case and Mr Gordon's evidence that very substantial dividends had already been inserted into the IG Index futures price at the time the bets were placed. It thus removed any room for doubt that in relation to the 280 transactions where there was no audited primary evidence of the time and date of the insertion of the false dividend the false dividend had already been inserted by the time the false bets were placed. The inferences which Mr Gordon had drawn from the comparison of the cash price and the IG Index futures price as at the close of the US market were wholly corroborated by the same contrast based on primary historic evidence as at the time the bets were placed.
299. With only one exception in every case the IG Index futures price was below the underlying cash price at the time the bet was placed and in almost all cases the discrepancy was measure in hundreds of cents mostly about 300, 400 or 500 cents.
300. Taking all this evidence together I am left in no doubt that not only in respect of the 130 bets where there is evidence of the time and date at which the false dividend was inserted into Xcon but generally in relation to all the bets identified by Mr Gordon, with the possible exception of one or two, substantial dividends were entered into Xcon which did not reflect either announced or genuinely anticipated dividends and which it must have been and was obvious to the person inserting them did not reflect either announced or genuinely anticipated dividends.
301. Again taken together this evidence in my judgment point overwhelmingly to the likelihood that the person who entered the false dividends did so deliberately. While it cannot be excluded that in individual cases the client placing the bet may not have been aware that a false dividend had been inserted, the evidence in my judgment points strongly to the likelihood that the purpose of the insertion of the false dividends was to enable particular clients to place bets at the artificially depressed price created by the insertion of the false dividend and that that is what in fact occurred.
302. These conclusions are further supported by the evidence to which I now turn as to the fact and timing of the removal of the dividends but are not dependent on them. In my judgment it is clear that the dividends were false, that they were deliberately inserted to depress the IG Index futures price and that the overwhelming likelihood is that the reason was to enable particular clients to benefit financially by placing bets at the artificially depressed prices. The evidence shows that that is what occurred on the overwhelming majority of occasions, in very many cases either minutes or seconds after the false dividend was inserted.
303. The overwhelmingly likely, if not the only rational explanation for the deliberate insertion of large false dividends on so many occasions was that it was dishonestly done for financial gain. Since the only way in which the person in IG Index who inserted and then removed the false dividends could realise a financial gain would be by a client placing a bet at the artificially depressed price and then closing it after the price was restored to its true market value by the removal of the dividend the expectation would be that one would find evidence of such bets having been opened after the dividends were inserted and closed after they were removed. The audited information demonstrates that this is what occurred on 130 occasions so far as the insertion is concerned (and 125 occasions so far as the removal is concerned). The historical cash prices spreadsheet shows that that is what occurred on all 415 bets, with one possible exception, so far as the opening of the bets coming after the insertion of the dividends is concerned and with another exception where the price was artificially raised and the bet was a sell rather that a buy.
304. The fact that on all but a handful of occasions the false dividend was inserted in a stock on which no other client had an open position and that in very many cases the dividend was inserted and the bet was placed shortly before the close of the US market in my judgment provide strong support for the conclusion that the false dividends were dishonestly inserted to benefit particular clients in that both facts made it objectively less likely that the false insertion of the dividend and the subsequent placing of the bet by a client who was intended to benefit there from would be detected.
305. The fact that neither of these facts ruled out the possibility of detection does not in my judgment detract from the support which they give to IG Index's case that the dividends were dishonestly inserted to benefit particular clients. As I have already indicated it does not follow from this analysis that on every occasion on which a bet was placed after a false dividend was inserted and then closed after the dividend was removed that the client in question had been tipped off in advance that the dividend would be inserted and then removed and was thus party to a dishonest plan. It does however in my judgment follow from the strong likelihood that the person inserting the false dividends did so both deliberately and dishonestly that the strong likelihood is that most of the 415 bets were placed by clients who had been tipped off and were thus party to a dishonest plan. That is because the only way in which any financial benefit could be obtained from the dishonest insertion and removal of false dividends was by a client placing a bet after the insertion and removing it after the removal and on all but one case the only person who placed such a bet was one of the client Defendants or the other three alleged accomplices.
306. Since there were only two occasions out of the 415 on which more than one client placed a bet at the manipulated price it follows in my judgment that there is a strong likelihood that at least in most, if not all, cases the person placing the bet had been alerted to the insertion of the false dividend. That is because assuming that the insertion and removal of the dividend was part of a fraud in order for the fraud to work there would have to be a bet placed by an accomplice. It would be very surprising if on hundreds of occasions on which a false dividend was falsely inserted and removed for the purpose of enabling a client accomplice to place and remove a bet at artificially favourable prices no such bets were placed by a client accomplice but by chance a bet was placed by one innocent client.
307. Of the two occasions on which more than one person traded at the manipulated price, one involved two clients (Mr Regan and Mr Rowe) who IG Index alleged were part of the fraud. That was on 19 August 2008 as recorded in lines 403 and 404 of the Colley Master Detailed Sheet – May 12).
308. The only other occasion was on 23 October 2007 when in addition to Mr Goldstein who IG Index submit was the intended accomplice, a client who IG Index submit was innocent (client reference SC666) placed two bets at the allegedly manipulated price. These were trades in respect of which the audited information showed that a false dividend of 300 cents was entered into Xcon at 20:51:13 hours on 23 October 2007 on a US stock which had not previously declared a dividend. At 20:55:02 hours on 23 October 2007 Mr Goldstein placed a bet on the stock. At 20:55:45 hours a client with the reference SC666 placed a bet on the same stock. Although the dividend was removed at 11:03 hours the next morning on 24 October 2007, a comparison of the cash and futures prices as at the close of business showed that the futures price was significantly larger than the cash price. IG Index submit, with force in my judgment, that it is likely that the placing by client SC666 of two small trades almost immediately after Mr Goldstein placed his bet was an unexpected and unwelcome development for the fraudulent dealer and that, while it is not possible to ascertain exactly what action he took, it is likely that he took some corrective action since the overnight valuations showed that there must have been a negative dividend in the futures price which was corrected by the removal of the false dividend the following day.
309. There is thus in my judgment force in IG Index's submission that in order for bets placed by any of the client Defendants to be innocent there has to be the coincidence of that Defendant happening to trade at the manipulated price as well as the coincidence of the intended accomplice for some reason failing to trade. Of course the position in relation to any individual client Defendant needs to be considered individually in the context of the evidence as to the particular bets placed by that Defendant and the evidence given by him as to why and the circumstances in which he came to place the bet. However part of the background against which it is in my judgment not only legitimate but necessary to consider the evidence in each individual case is the general conclusion which I reach that there was a course of conduct over a period of three years in which a person or persons in IG Index dishonestly inserted and removed false dividends to enable accomplice clients to place trades at artificially depressed prices and that in hundreds of cases that is what occurred.
310. There was one anomalous transaction in which Mr Regan placed a bet on 29 May 2008 a minute before the close of the US market. The price at which he dealt was significantly lower than both the cash price and IG Index futures price when the market closed. If IG Index's checking system was working properly that discrepancy should have been picked up by the morning price check on 30 May 2008. That is indeed what happened as is evidenced in an email from Ms Bradshaw to Mr Colley and his colleague Mr Eastell in which the dealing price was identified and Ms Bradshaw said that the opening price (which Mr Gordon said was a reference to the price at which the bet was placed) looked a lot lower than any level the stock was on FT.com which was the cash price Mr Colley responded to Ms Bradshaw saying "not correct, I think it's a dividend problem and sorting them out…". A comparison of the cash and futures prices at the close of business on the two days following the placing of the bet showed that on the immediately following day the futures price traded at a significant discount to the cash price suggesting the insertion of a dividend whereas on the next following day there was virtually no difference between the cash and futures price at close of business thereby suggesting that the dividend was removed.
311. Although there is no audited information on these transactions, IG Index submit, with force in my view, that it appears that the false dividend was removed before the overnight valuations. Even though there was only a minute between the placing of the bet and the close of the market that would appear to be a rational explanation for the difference between the price at which the bet was placed and the futures price at close of business. They further submit, again with force in my view, that the inference to be drawn from the contrast between the cash and futures closing prices on the following two days is that rather than sorting out the problem by contacting the client and correcting the price at which the client dealt to reflect the closing price, Mr Colley instead reinserted the dividend on 30 May thus apparently removing the profit made by the client and bringing the IG Index price back in line with the price at which the client dealt and then the next day reinserted the dividend so as to restore the fraudulent profit for the benefit of the client. The bet was closed on 6 June 2008 resulting in a significant profit. Mr Gordon's historical cash prices spreadsheet showed that the price at which Mr Regan placed his bet at 20:59:01 hours on 29 May 2008 was at a 490 cents discount to the cash price at that time. This strongly support the inference contended for by IG Index that a false dividend had been inserted before Mr Regan placed his bet and that for some reason it was removed before the market closed. While the reason for that removal is not clear in my judgment this transaction, while anomalous supports rather than undermines IG Index's case.

The removal of the false dividends and its timing

312. There are three aspects of the fact and timing of the removal of the false dividends which were inserted which are relevant to the question whether the insertion and removal of the dividends was fraudulent. First if the false dividends were inserted dishonestly in order to benefit accomplice clients who were tipped off to place bets after the insertion it would be necessary for the IG Index futures prices to be re-adjusted by the false dividends being removed before the client closed out their bets in order for the benefit to be realised. Second the evidence was that there were two checks routinely carried out by IG Index employees, one in the evening and the second the following morning. If the false dividends were removed before these checks were carried out there was a significant risk that the discrepancy between the artificially depressed prices at which the clients placed their bets and the IG Index futures prices would be detected. It would thus be surprising if the person who inserted the false dividend, assuming the insertion to have been dishonest, removed the dividend before the two checks were likely to have been carried out. Third the sooner the dividend was removed after the completion of the second check the smaller was the risk of other innocent clients placing bets at the artificially depressed price with a consequent risk of questions being asked.
313. As to the first point, Mr Gordon said that of the 130 transactions for which there was audited Xcon information there were 125 in respect of which it was possible to identify the removal of the dividend and the actual date and time on which it was removed. This information showed that the removals took place before the clients closed their bets, with one exception when the dividend was partly removed before Mr Regan closed the bet.
314. In relation to the remaining 290 transactions for which there was no primary evidence as to the dividend having been removed or the date and time of removal the fact that the dividends were removed and the date or dates on which they were removed (some were removed in stages) are established by the difference between the cash and IG Index futures prices on the day or days following the insertion of the dividend. Quite apart from the fact that the reliability of that approach is emphatically corroborated by the fact that in the 125 transactions where there was primary evidence of the fact and date of the removal of the dividend the same conclusion is established by that approach, I accept the evidence of Mr Gordon that there is no other or no other plausible explanation for the disappearance of substantial differences between the cash and IG Index's futures prices other than the removal of a dividend. Again just as in the case of the 125 transactions so in the case of the 290 transactions (save for the exceptions to which I have referred above) the dividends were removed before the bets placed by the alleged accomplice clients were closed. It is striking that this pattern was the same for those transactions where Mr Gordon inferred the date of removal from the reconvergence of the closing cash and IG Index futures price as it was in respect of those transactions where the Xcon audit information precisely identified the date or removal.
315. Both the fact that the dividends were removed and the fact that they were removed before the bets were closed lend significant further weight in my judgment to IG Index' case that the insertion of the dividends and their removal were done dishonestly with a view to benefiting accomplice clients. If the dividends had not been withdrawn before the client closed their bet the client would be unable to realise the benefit of having opened the bet at the artificially depressed price created by the dividend insertion.
316. Further Mr Gordon gave evidence as to the number of insertions and removals of dividends for which there was Xcon audited data which were not altered by a bulk paste. The audit data revealed 130 occasions on which a dividend was inserted and 125 on which a dividend was removed. Of the 130 insertions Mr Gordon believed that only 3 were entered into Xcon as part of a bulk paste, that is to say where the alterations were copied and pasted from SuperDiv into Xcon at the same time. Of course, as already mentioned, even in those cases the alterations would have to have been entered manually in each case into SuperDiv, which could not have been done without the person making the insertion focussing on the size of the dividend whose size made it glaringly anomalous and the Ex-Date, for which there was unlikely to have been a legitimate source. He also said that in the large audit of Xcon changes set out in exhibit 5 to his first witness statement (which covered the three years between July 2005 and July 2008) 73% of the insertions into Xcon were done at times when no other stock dividends were being updated, suggesting that they must have been deliberately either typed or pasted into Xcon individually and not as part of a bigger process.
317. Mr Gordon said that the audited information identified 125 occasion on which a dividend was removed of which he said about 40 were done as bulk pastes. In order to remove a dividend from Xcon it would be necessary to change the amount of the dividend to 0 but there would be no need to change the Ex-Date.
318. In respect of those cases where the dividend was not removed as part of a bulk paste the inference is that the person removing the dividend would have been likely to notice the size of the dividend being removed which, for reasons discussed, should have struck them as anomalous. In relation to the insertion of dividends Mr Gordon said that it would be necessary for the dividend to be inserted not only in Xcon but also in SuperDiv in order to avoid detection by the two daily checks. It was not clear whether this was also the case in relation to the removal of dividends so as to avoid detection of the disparity between the price at which an accomplice client closed a bet and the futures price at the close of business on the day on which the bet was closed. If that was also the case it would further support IG Index's case since alterations to SuperDiv had to be effected manually.
319. It was put to Mr Gordon in cross-examination by Mr Slaney that the trades where alterations were made as part of a bulk paste should be excluded from the claim on the basis that if the incorrect information had been inserted into SuperDiv by mistake those errors would have been replicated by the mass paste into Xcon. Mr Gordon rejected that out of hand. In those cases the size of the dividends and the fact that they were in round numbers as well as the times of the insertions followed the same pattern as those which were not part of a bulk paste and were all done on days when Mr Colley was working. This latter point is an example of the point I flagged up earlier namely reliance by IG Index on evidence that Mr Colley was involved in at least some fraudulent transactions in order to support an inference that other transactions were also fraudulent and reliance on the fact that at least 130 false dividends were inserted by the same person, Mr Colley, to support the inference that the insertions are unlikely to have been done by mistake and are thus likely to have been done deliberately and therefore dishonestly.
320. Mr Gordon also pointed to the fact that the times of the insertion of the dividends, mostly 10 minutes before the market closed whether entered manually or pasted by Mr Colley, and the times and dates of removals of the dividends, usually the morning after the insertion at a time which would have bypassed the dealer checks, followed the same pattern as those transactions which the Xcon audit information showed were directly attributable to Mr Colley.
321. Mr Gordon also referred to the fact that in respect of the bulk paste transactions as well as the others the size of the bets which benefited from the false dividends were at a level which generated a profit of more than £1000 but less than £10000. He said that what he described as a fat finger error check conducted in the morning would investigate profit and loss on non-major US stocks over £10000. The inference was that in both cases the level of the bet and the false dividend were pitched so as to avoid detection in that way.
322. There is in addition the more general consideration of the lack of any explanation other than chance error as to why on all 415 transactions, including the 290 for which there was no audited information, dividends should have been removed on so many occasions in a size that could not be related to any sensible or historic dividend changes. Moreover once it is accepted that the dividends which were inserted could not have reflected actual announcements of dividends or reasonable forecasts thereof and must therefore have been known to be false by the person who inserted them, the unlikelihood of dividends in the same amount having been removed on so many occasions purely by error is in my judgment enormous. If they were removed deliberately because the person removing them understood that they were false then unless they were removed dishonestly as part of the fraud, it is in my view very unlikely that on none of the 415 occasions on which they removed would the standard operating procedure referred to below have been followed.
323. The second aspect of the removal of the dividends is that Mr Gordon's evidence was that in order for the false dividend not to be picked up by either the overnight check or the check performed the following morning it would have to be left in the IG Index futures price overnight. On the vast majority of occasions that was what happened
324. There was evidence from Mr Gordon that there were two daily checks which were routinely done both of which would have highlighted a bet placed at a significant discount to the IG Index closing futures price if the false dividend was removed before the checks were carried out but would not be highlighted if the dividend was removed after the checks were carried out.
325. The first check was done by shares dealers searching all shares futures in which IG Index's clients held positions and then reconstructing the prices using different price feeds to those which were part of the account valuations. IG Index's system price feed suppliers for shares were usually Reuters or LSE but never Bloomberg. The dealer would therefore use a spreadsheet with Bloomberg feeds to create futures prices by applying the same interest rates used by the internal pricing system (Xcon) and by taking dividend information for the SuperDiv spreadsheet.
326. The resulting prices would then be compared with the valuations of IG Index's clients positions and discrepancies would be investigated. If there was a difference it would have to be either because the Bloomberg price feeds differed from the Reuters price feeds (which would be very unusual as both took their values from the relevant stock exchange) or because different dividends were being applied. The daily dividend maintenance job involved the dealer reconciling SuperDiv and then pasting those values into Xcon so in theory they should be identical. Thus if an Xcon price contained a large dividend which should not be there it would be highlighted by this check unless SuperDiv had also been updated with the same dividend. (Spreadsheets like SuperDiv could not be audited in hindsight for changes made to them). When the original dividend manipulation had been discovered on 25 September 2008 Mr Gordon knew that both Xcon and SuperDiv contained the same 400 cent dividends on the transaction which he investigated because he saw the dividend entries in SuperDiv at the time. The fact that the evening check, which Mr Gordon himself did on many occasions, never revealed the dividend insertions demonstrated that in addition to their inclusion in Xcon they must also have been manually typed in SuperDiv. It was the act of updating both systems and retaining the dividend insertions until the checks were completed which made the incorrect prices bypass the check.
327. The second check for incorrect prices was done by a dealer who was rarely a shares dealer and was normally a young graduate. This involved taking all the previous days' bets and checking to see if they had been entered into IG Index's systems at prices which were different to IG Index's internal valuations. Thus if IG Index had been pricing the FTSE Index at between 5000 and 5100 over the course of the day and a client had dealt at 4500 the deal would stick out and be likely to be investigated. Also if a client deal had been struck at a price which was out of sequence to those preceding and following it that would also be investigated. Thus if FTSE deals had gone through at 5000, 5010, 5015, 5008, 5090, 5011, 5028 then the 5090 deal would attract attention.
328. This check did not check shares futures prices against underlying cash exchange prices. It was a check to see if client deals had been struck at values which differed significantly to IG Index's prices. If a client bought on a shares futures which contained a 400 cent dividend that dealing price would be checked against IG Index's valuation which would also contain a 400 cent dividend as long as it was still present in Xcon a the time of the check. The check was always performed early in the mornings. In order for a deal to appear worthy of investigation due to the subsequent removal of a large dividend the dividend would need to be removed on the same day as the opening deal or before that check took place. On the 130 deals where there is audit information as to the time and date of the insertion or removal of dividends none were removed on the same day they were inserted. Of the remaining 285 deals the process of comparing the closing futures price against the closing cash price showed that, with the exceptions referred to earlier, all had the dividend removed at least one day after the insertion.
329. Neither of these checks was designed to check for any disparity between IG Index's futures price or the price at which a client placed a bet on the one hand against the underlying cash price on the other. Nor did either check involve comparing the two. Thus although such a comparison would have highlighted the presence in both the IG Index overnight futures price and the price at which a client dealt of an anomalous large discount to the underlying cash price there was in practice no material risk of such a check being carried out. Thus the real risk of detection lay in removing the false dividend before the two routine checks were carried out rather than the reverse. This is well illustrated by the one occasion referred to earlier on which a dividend was removed before the market closed on the day on which it was inserted and was picked up the following day on a check.
330. Mr Gordon thought that the morning check by the junior dealer would normally be done by about 10:00 a.m.
331. The third relevant aspect of the removal of the dividends was that in the vast majority of occasions the dividend was removed on the day following the insertion and, in respect of those transactions for which the audited information identified the actual time of removal, before the US market opened. As to the former in particular after April 2006 almost all the dividends were removed the following day. Again it is striking that this same pattern applied not only where the actual date was identified by the audit information in respect of the 130 trades but also where Mr Gordon inferred the date of removal by comparing the cash and futures closing prices.
332. The significance of this point is that it lends some weight to IG Index's case that the person responsible for the fraudulent insertion and removal of dividends took care to minimise the risk of innocent IG Index clients dealing at the artificially depressed prices and thus giving rise to a risk of detection. It is to that extent the mirror image of the point that very many of the dividends were inserted and very many of the allegedly fraudulent bets were placed shortly before the close of the market. Mr Mayall accepted that, just as in the case of the handful of transactions where an existing innocent client held and open position on a stock into which an allegedly fraudulent dividend was inserted there was a risk of detection, so in the case of those dividends which were removed after the US market opened the following day and in some cases two or more days thereafter, the person responsible for the removal was taking an unnecessary risk of an innocent client spotting the price drop and contacting IG Index. In respect of all those transactions where either because of the timing of the insertion or removal of the dividend or because an existing client held an open position there was a risk of detection Mr Mayall submitted that taken together the evidence as to the timing of the insertions of the dividends, the proximity between the insertions and many of the bets placed, the proximity between the timing of the insertion and the closing of the market, the selection of stocks on which in all but a handful of cases no other client either had an open position or placed a bet, the lack of removals on the day of the insertion, the fact that most dividends removed the following day were removed before the US market opened all point very strongly to a systematic pattern of a course of conduct designed to avoid detection. The fact that there were some occasional lapses is a matter to be taken into account but does not demonstrate that the inferences to be drawn from the overall pattern are wrong. In my judgment that submission was well founded.

The failure to correct or void bets placed at prices which benefited from the insertion of false dividend

333. If the false dividends were inserted and removed due to a pricing error rather than deliberately and dishonestly IG Index submitted that because of the large size of the false dividends they would have been bound to be spotted by the person inserting and/or removing them. If spotted at the time of insertion the person would have declined to insert the false dividend without checking whether the dividend was justified, and since it never was, would not have inserted it. If spotted at the time of removal. That would have led to a standard operating procedure for correcting the IG Index futures price, notifying senior management with a view to considering whether to cancel the bets placed or to adjust the contract price. There was no evidence of this correction procedure having been implemented in any of the 415 transactions. The strong inference, so it was submitted, particularly given the need to type dividend alterations manually into SuperDiv, was that since the size of the insertions and removals would have made it obvious to the person inserting and/or removing them that they were false, the reason why no attempts were made to correct the contracts was that the insertions and removals were part of a dishonest deliberate course of conduct.
334. Those submissions were supported by the evidence of Mr Gordon and Mr Abbas Ramdewar, a shares dealer employed by IG Index. Mr Gordon said that with any process which required manual input or maintenance there is an ever present risk of error. Errors experienced by IG Index's clients fell mainly into two categories: input error when a deal was agreed at the correct price but the dealer typed in the wrong data during the booking process or pricing error when there was something wrong with the price provided to the client and the resulting deal got booked at the price quoted. A pricing error would usually be caused by a failure of one of IG Index's price leads or possibly one of the constants that contributed to a price calculation being wrong. Input error was usually easily solved by listening to the recorded phone call or looking at the online deal logs and correcting the booking details to the agreed values. With a pricing error the correct price at the time of the deal would need to be reconstructed using the correct constituent parts of IG Index's price at the time of the error. If an open deal needed to be corrected the deal was simply deleted and replaced by a correct version. If a closed deal needed a price correction then the profit or loss attributed to the deal containing the error needed to be adjusted to account for the correction. That was done by either adding or removing funds under client's cash ledger and those funds transfer being processed by IG Index's back office staff.
335. A dealer requesting a cash correction to be made had to fill out a form which was exhibited to his first witness statement which required approval by a senior member of staff. Mr Tibbs and Mr Gordon were the employees on the shares desk who were able to approve cash corrections.
336. Generally if a client made a small amount of money as a result of an error IG Index would often allow them to keep it as a gesture of good will or if a running bet was losing a small amount of money they might allow the client to cancel the bet. If the client made any significant amount of money as result of the error IG Index would exercise its right to force the client to accept the correct price.
337. Staff who made errors would be expected not to repeat the same mistake and repeated mistakes of the same to type could lead to disciplinary action. Errors were very rare and in twelve years on the dealing desk he could not recall a dealer being disciplined for repeated errors.
338. If a dealer discovered an error or one was brought to their attention by a client they would be expected to bring it to the attention of their line manager. The first thing they would do was to ensure that any pricing error was fixed and then they would check to see if any clients had dealt on the wrong price. If a client was found to have dealt on a wrong price one of the options described above would be offered and that decision would usually be taken by the senior staff member who would normally approve cash corrections.
339. On 125 audited occasions where Mr Colley was shown to have removed large dividends from shares futures, Mr Gordon said that if Mr Colley believed those dividends to have been wrongly included in the futures prices he would have been expected to check to see if any clients had dealt on the wrong prices and then reported the situation either to Mr Gordon or to Mr Tibbs. Mr Colley was a very experienced dealer with full understanding of the method by which shares futures prices were constructed and would have known that removal of those dividends without an alteration to the opening levels of the affected bets would have resulted in the clients making running profits to which they were not entitled.
340. The latter point specifically referable to Mr Colley is a further example of an evidence based point which relies to some extent on Mr Colley's involvement in the insertion and/or removal of false dividends in support of IG Index's case that the insertions and removals were part of a dishonest course of conduct. However even if the person removing the dividends was another dealer using Mr Colley's log in password, the same logic would apply and to that extent the point is not dependent on Mr Colley having been the person who removed the dividends.
341. Cross examined by Mr White Mr Gordon said that the failure to correct was one of the important aspects of the evidence which gave rise to the inference of fraud. Whoever removed the false dividends should then have searched the system to see if any client had dealt and benefited from false dividend and then applied the correct procedure for correcting any such bets. The absence of any corrective measure implied that there must have been fraud because it implied that the person removing the dividend had knowingly allowed a client to benefit from the presence of a false dividend in his contract price with IG Index.
342. There was one example in the evidence of an IG Index employee contacting a client following the discovery that he had placed a futures bet on a US stock following the insertion of a false dividend. It took the form of the transcript of a telephone conversation between an employee called Emma from IG Index and Mr Regan. It was not one of the 415 transactions the subject of this claim. The conversation took place on Monday 8 May 2006 and recorded Emma as telephoning Mr Regan to inform him that that morning's IG Index checks had revealed that there was a wrong dividend of 5 dollars instead of 9 cents on a US stock on which he had taken out a position the previous Friday. She offered either to put Mr Regan in at the correct level that he should have gone in adjusted for the correct dividend or to cancel the bet altogether whichever he preferred. Mr Regan asked her to cancel it. I refer to this incident again when considering the case against Mr Regan.
343. Mr Ramdewar confirmed that if a client dealt on a price with an incorrect dividend the client's opening price would have to be adjusted. He would identify clients who had dealt on the stock with the incorrect dividend using a programme called Wintegrate TCL. If the client's position was still open once he had re-input the correct dividend he would amend the deal by cancelling the original deal and opening a new one with the correct opening price. If a client had managed to profit from the insertion of an incorrect dividend he would always either need to complete a cash correction form or adjust the client's position accordingly.
344. If the dividend which had been incorrectly inserted had caused a substantial adjustment to any clients not only would he send an email to all the dealers on the floor including sales traders because he would expect clients to call and the dealers and the sales traders would need to be able to explain the situation to the clients but he would also report it to his line manager. Having regard to the substantial alteration to the client's position they might take the view that they would need to contact the client to explain the situation.
345. Mr Ramdewar also said that he would be extremely careful about inserting a large dividend of say 400 cents into IG Index's system. That is because a 400 cent dividend or one of a similar size was most unusual. He would therefore check very carefully before making the adjustments. He had never made such an error. However if he did and discovered it he would immediately correct the situation as set out above. There were no circumstances under which he would not correct the client's position and he would also report it not only to the dealers and the sales traders but also to his line manager.
346. It was not suggested by Mr Colley that in respect of any of the 130 transactions where the audited Xcon information showed that dividends had been inserted by somebody using his username or the 125 occasions on which dividends were removed by somebody using his username he took any steps to correct the IG Index futures price or notified his superiors or contacted clients with open positions on the relevant stocks. Nor did any of the client Defendants suggest that in respect of the trades on which they had placed bets which are the subject of the claim anyone approached them from IG Index with a view to changing or cancelling the bets. Nor were any of the 415 transactions which are the subject of the claim either corrected or cancelled.
347. I accept the evidence of Mr Gordon and Mr Ramdawar on this aspect of the case and accept IG Index's submissions as to the significance of the failure by the person or persons who inserted and removed the false dividends to take steps to correct them.

Evidence of connections between the Defendants

348. I turn to a further important factor relied on by IG Index in support of its case, namely the evidence of alleged connections between Mr Colley and certain of the client Defendants and the other three allegedly dishonest clients who were not sued and the connections between the client Defendants and the other allegedly dishonest clients themselves. IG Index relied on this in support of the allegation that there was a fraud, the allegation that it was Mr Colley who perpetrated the fraud and the allegation that that the client Defendants and other allegedly dishonest clients participated in it. In considering the evidence on this point it is necessary to consider separately what if any support this factor gives to each of these three allegations.
349. As to whether there was a fraud at all IG Index submitted that the fact that there was evidence of connections between the person who can be shown to have inserted and removed respectively 130 and 125 false dividends and a number of clients who placed bets which benefited from the insertions and removals supports the inference that the insertions and removals of false dividends were not done by mistake but deliberately in order to benefit accomplice clients. Taken together with the fact that in almost all cases no other IG Index clients placed bets after the dividends were inserted, the connections make it less likely or plausible that the fact that particular clients placed bets between the insertions and removals from which they benefited was an innocent coincidence or the result of bona fide investment decisions. If there was a fraud bets would have to be placed by accomplices of the inserter in order for the fraud to be effective. In principle I accept that submission subject to the qualification that it is not of itself conclusive and that the strength or weakness of the submission is likely to be affected by whether it is possible to conclude in respect of individual client Defendants or other allegedly dishonest clients that they were in fact participants in a fraud. It was not IG Index's case that because there was a fraud it must follow that any client who placed a bet on a stock on which a false dividend was inserted must have been party to the fraud. It thus accepted that it was in principle possible for a client to have placed a bet on such a stock by chance or for some legitimate reason and indeed in respect of at least one transaction it accepted that that is what happened.
350. As to whether if there was a fraud it was perpetrated by Mr Colley, IG Index also submitted that when a false dividend was inserted it would be a remarkable coincidence if, on the assumption that Mr Colley was not the fraudster, there is evidence that the only person who profited on a large number of occasions from the insertion of false dividends was closely connected or connected to him and there is no evidence that they were closely connected or connected to any other dealer. A fortiori if more than one of the persons who profited on a number of occasions was closely connected to Mr Colley and/or were connected to each other and not to any other dealer. I accept that submission, subject again to the observation that it is not in itself conclusive but merely supportive of IG Index's allegation.
351. As to the individual allegations that particular client Defendants and the three other allegedly dishonest clients participated in the fraud IG Index made two submissions. First where there was evidence of such connections in relation to a particular Defendant it made it less plausible that that client placed their bets between the insertion and removal of false dividends by chance or for some reason other than because they had been tipped of by Mr Colley that he would be inserting and then removing the dividends and the times and dates on which he would do so. I accept that submission again subject to the observation that it is not conclusive. It is merely one of the factors to take into account. It is obviously of particular importance in this context to take into account and assess the evidence of individual client Defendants as to how and why they came to place their bets.
352. This raises the question of the significance or lack of significance of the absence of evidence of such connections in the case of any particular Defendant. Plainly if as a matter of fact there was no connection between a particular client Defendant and either the dishonest inserter and remover of false dividends or between that Defendant and other allegedly dishonest clients who benefited from similar transactions that would point very strongly if not conclusively against that particular client Defendant having been party to a fraud. It does not of course however follow from the fact that IG Index was unable to identify evidence of any such connection that it did not exist. It is a commonplace in many financial frauds that the victim is unable to point to a smoking gun and must prove its case by inference to be drawn cumulatively from different strands of circumstantial evidence.
353. Plainly however where there is evidence of such connections it in principle adds to the strength of the case against an individual client Defendant. Where there is no such evidence it makes IG Index's case more dependent on the weight that can be attributed to the other strands of circumstantial evidence on which it relies.
354. This leads to IG Index's second submission, namely that even in the case of individual Defendants where there is no evidence of such connections the fact, if it is accepted, that there is evidence of such connections in respect of other clients support its case indirectly in the sense that once it is established that there was a fraud perpetrated by Mr Colley and that almost all the relevant bets were placed by clients connected or closely connected to him, it renders less speculative or implausible that a particular client in respect of whom there is no evidence of such connections but who placed bets which benefited from the insertion and removal of false dividends was also a party to the fraud and that there were such connections of which evidence has not come to light. I accept that submission but again subject to this important caveat that plainly where there is no evidence of such connections it is necessary to be particularly astute to guard against falling into the error of tarring all clients Defendants with the same brush. There was one client who placed a bet which benefited from a false dividend who IG Index accepted may have been innocent although even in that case Mr Gordon had his doubts.
355. The various alleged connections were adduced into evidence by Ms Catherine Crowther a paralegal employed by IG Index. She claimed that there existed between various of the Defendants (and third parties who had connection with other Defendants) relationships ranging from being friends to being related and being girlfriends or former girlfriends. Not all of these claims withstood scrutiny and not all were still contended for by IG Index by the end of the trial. Some, however, were either admitted by the relevant Defendant or Defendants to be true or were proved to be true.
356. Ms Crowther said that she took steps to look for evidence of connections between Mr Colley and the clients who benefited from the 415 transactions. In doing so she obtained Mr Colley's emails from the IG Index archive system and searched the address James.Colley@igindex.co.uk between December 2006 and October 2008.
357. She exhibited to her first witness statement a number of personal emails between Mr Colley and a Ms Alexandra Nitka who appeared from their contents to be a friend of his. Between 25 May 2007 and 7 August 2007 there were four references to "Ad" or "Adam" in terms which made it clear that he was a mutual friend. On 25 May 2007 Mr Colley wrote that he was in a flat "near Ad". In an email dated 6 July 2007 he wrote "Ad had an interview at GFI yesterday". Ms Nitka replied: "Adam??!? He getting back to the city… he said that he would do, James, I found the FUNNIEST pictures of him from the LIFFE floor, him posing on the roof terrace in his Gucci belt and tight trousers. When I scan them I will forward them to you, you will laugh SO much!!!". Mr Colley relied: "Yeah, tight trousers. Nice. I reckon he'll get the job, Credit Derivatives".
358. In her first witness statement which was dated 18 October 2011 Ms Crowther said that she believed that "Ad" was Adam Teller.
359. Ms Crowther also exhibited email exchanges dated 23 July 2007 between Mr Colley and Ms Mia Pearlman. She said that Ms Pearlman was Mr Colley's ex girlfriend but that it appeared that they remained very close. She said that Ms Pearlman had a property business in Marbella in Spain to which there was reference in an earlier email. In the emails Mr Colley and Ms Pearlman appeared to discuss a planned visit by Mr Colley to Marbella. In answer to a question as to who he was thinking of coming with Mr Colley replied that it would be "me, Adam (who was there two week back) a couple of others from Merrill Lynch and Ben Rossfield. Do you remember Ben?" As can be seen the terms and context of that email suggest that the Adam referred to was a mutual friend of Mr Colley and Ms Pearlman and that Mr Colley was planning to go on holiday with 4 people, one of whom was Adam and another of whom was Mr Rossfield. Mr Rossfield is the 16^th Defendant. He placed 111 bets during the period of the alleged fraud of which 21 benefited from having been opened after the insertion of a false dividend and closed after its removal.
360. The two bets for which there was Xcon audit information showed that the bets were placed within minutes of the insertion of a very large false dividend. In respect of all but four of the bets the false dividend was removed the day after insertion, the remaining four having been removed the next day.
361. Shortly after being accused of benefiting from Mr Colley's fraudulent activities Mr Rossfield offered to settle IG Index's claim on terms that he paid £25,000 within two weeks and thereafter £1,000 every four weeks for a period of five months. It is in my judgment probable that Mr Rossfield was an accomplice of Mr Colley and that he both benefited and was intended by Mr Colley to benefit form the insertion and removal of false dividends in respect of the 21 transaction relied on by IG Index.
362. Ms Crowther in her witness statement stated that Mr Teller was friends with Mr Colley and Mr Rossfield.
363. In his witness statement dated 18 November 2011 Mr Colley referred to IG Index having made a point of accusing him of being in close contact and friends with all the Defendants. In relation to Adam Teller he stated: "I attended a driving experience day with a car dealership in Brentwood Essex. Several other people from my area attended this day and Adam Teller was the only other driver attending who was invited by this dealership". In relation to Mr Rossfield Mr Colley stated: "I had no contact with this Defendant and do not know him. He was a friend of an ex girlfriend of mine from many years ago. I believe Ben is also a contact of Teller's". In a witness statement dated 15 November 2011 Mr Teller did not respond to the assertion by Ms Crowther that he was friends with Mr Colley and Mr Rossfield.
364. Cross examined by Mr Mayall Mr Colley admitted that he knew Mr Teller outside work. He said that he had been introduced to him by Alex Nitka whom he used to date and that he met Mr Teller when he worked on the LIFFE trading floor in about 1996. However he denied that they were friends. He was an acquaintance and a client. If he saw him out where he lived in London or on a Friday night in bars in the City he would chat with him. He confirmed that Mr Teller was the "Ad" and the "Adam" referred to in the email exchanges with Ms Nitka to which I have referred. He further said that they lived in the same area and they were both part of a close knit group of people who knew each other and would drink and eat in similar places.
365. As to the reference to going on holiday with Mr Teller in Marbella, Mr Colley confirmed that he was meant to go on holiday to Marbella with Mr Teller who was a friend of the organiser. In the event he did not go and the holiday was planned as a stag party for 25-30 people.
366. Mr Colley also confirmed that Ms Pearlman was a former girlfriend of his and a good friend who knew Mr Teller from circles in which they moved. He accepted that as referred to in his email exchange with Ms Pearlman he had been going to stay in Marbella with Mr Rossfield on the same occasion as with Mr Teller. However he denied that he knew Mr Rossfield and said that he had no contact with him. He lived in his area in Essex, he knew of him and had met him but would not class him as a friend. Mr Rossfield he said was a friend of Adam Teller and Ms Pearlman.
367. Mr Colley confirmed that when he wrote his witness statement he had seen Ms Crowther's first witness statement and the emails referring to "Ad". It was put to him that he had hoped that he could deny that "Ad" was Mr Teller. He denied that. However when asked why he had not admitted in his witness statement that "Ad" was Mr Teller and that he knew him and was a friend of his with whom he went on holiday his answer was that he had used in his witness statement the points suggested by his then solicitors Mischcon de Reya.
368. When it was put to him that his witness statement was designed to give the impression that he had only met Mr Teller once at a driving experience day with a car dealership Mr Colley said that he did not in his witness statement say that he had only met Mr Teller once. He said he did not know what to include. If he knew the allegations against him he would have said more and he knew that he would be able to give more evidence at court. As for Mr Rossfield Mr Colley confirmed the truth of what he said in his witness statement, namely that he did not know him and had no contact with him. He said that he knew of him, he had met him but was not close to him as a friend. They lived in the same area in Essex. Mr Rossfield was a friend of Mr Teller and Ms Pearlman. He had met Mr Rossfield but would not class him as a friend. He distinguished between knowing someone and knowing of them.
369. Mr Teller served a witness statement dated 15 November 2011 which made no reference to Ms Crowther's first witness statement or the evidence referred to by her in reliance on the statement that he was friends with Mr Colley and Mr Rossfield.
370. Cross examined by Mr Mayall Mr Teller in contrast to the testimony of Mr Colley accepted that he was a friend of Mr Colley, although not a close one. He said that he knew Mr Colley well from his home area. Asked why he did not refer to this in his witness statement, Mr Teller said that he did not know what to include in it and he had no lawyer at the time. However he accepted that he realised that Mr Colley was alleged by IG Index to be a fraudster and that the allegations against Mr Colley would be more likely to be true if it could be established that he Mr Teller were an accomplice. However he said that he was always going to tell the court about these matters. He did not in his testimony deny Ms Crowther's assertion that he was friends with Mr Rossfield.
371. I am satisfied that Mr Colley and Mr Teller were indeed friends at the time of the alleged fraud as were Mr Colley and Mr Rossfield and Mr Rossfield and Mr Teller. I am also satisfied that in his witness statement Mr Colley deliberately set out to play down the extent of his relationship with Mr Teller and Mr Rossfield, well understanding the adverse inference which IG Index were seeking to draw against him from those friendships and indeed the other connections referred to in Ms Crowther's first witness statement. I am also satisfied that Mr Teller deliberately refrained from responding on his witness statement to Ms Crowther's assertions as to his friendship with Mr Colley and Mr Rossfield
372. Both Mr Colley and Mr Teller were sophisticated men with considerable experience of spread betting and I have no doubt that it was not lost on either of them that it would significantly strengthen IG Index's case against both of them if it were established that they were friends with each other and in the case of Mr Colley that he was friends with Mr Rossfield and indeed that there were other connections between Mr Colley directly or indirectly and other IG Index clients who benefited from the alleged frauds.
373. Moreover in my judgment the fact that in his witness statement Mr Colley sought to downplay the extent of his connection with Mr Teller and in the witness box denied that they were friends and that his account of his connection with Mr Rossfield in his witness statement was false or bordering on false seriously undermined his reliability as a witness of truth. It dos not of itself prove that Mr Colley was engaged in fraud and I remind myself that innocent people sometimes lie or dissemble in a misguided attempt to strengthen a just defence. However in my judgment the strength of the evidence pointing to Mr Colley having perpetrated a fraud against IG Index is very powerful and both Mr Colley's witness statement and his evidence were conspicuous in my judgment for the absence of a plausible just defence.
374. Ms Crowther adduced evidence to show that Ms Nicola Jeffcoate was a former girlfriend of Mr Colley. They lived together at 10 Grove Cottages, Ms Jeffcoate witnessed Mr Colley's signature on a deed of covenant with IG Index and was nominated to received 40% of any lump sum paid via the IG Index death benefit scheme in a form signed by Mr Colley on 14 January 1999.
375. Ms Crowther said that she believed that Frederick Jeffcoate is Nicola Jeffcoate's father.
376. In evidence Mr Colley accepted that Mr Jeffcoate was his then girlfriend's father but said that he did not know that Mr Jeffcoate had an account with IG Index.
377. In fact the evidence in relation to Mr Jeffcoate's transactions was very striking. He opened his account with IG Index in March 2008. Between June and September 2008 the Colley Master Schedule May 12 shows that there were nine transactions on his account in which Mr Jeffcoate benefited from the insertion and removal of false dividends (although it may be that two or three of the entries represented single bets). Those transactions were on five different US stocks. Before his allegedly dishonest bets commenced there were only eight deals on Mr Jeffcoate's account. During the period of the allegedly fraudulent bets there were a total of 41 deals. The six transactions for which there was audited information identified Mr Colley's PC number 3034 as the PC number from which the false dividend was added, the PC having been logged in under Mr Colley's details. The dividends were removed either the day after they were inserted or the day after that.
378. When these statistics were put to Mr Colley he could offer no explanation other than pure coincidence as to why his girlfriend's father happened to profit on nine transactions on which false dividends had been inserted and removed. He did not accept that it was intrinsically unlikely and said that most IG Index dealers knew the larger active clients on their desk. However he had to accept that he would not consider Mr Jeffcoate to be a large customer.
379. Although Mr Colley did not accept that it was most unlikely that his girlfriend's father should by chance have happened to place nine bets on US stocks into which Mr Colley had by mistake inserted and then removed false dividends out of a total of 41 bets placed during this period, he was unable to offer any plausible explanation as to why that was not most unlikely.
380. In my judgment the evidence in relation to Mr Jeffcoate provides powerful support to IG Index's case both that the insertion and removal of false dividends was deliberate and dishonest and that it was Mr Colley who dishonestly inserted and removed them. It is in my judgment probable that Mr Jeffcoate was an accomplice of Mr Colley, albeit on a small scale, and that he both benefited and was intended by Mr Colley to benefit from the insertion and removal of false dividends in respect of the nine transactions relied on by IG Index. If the insertions and removals were done by Mr Colley, it is in my judgment very unlikely to have been an innocent error if the only IG Index client to benefit by placing bets on the relevant stocks was his girlfriend's father. If the insertions were dishonest it is in my view more likely that the person who did the insertions was a dealer whose girlfriend's father placed the bets which benefited from them rather than any other dealer.
381. Ms Crowther exhibited to her first witness statement and adduced in evidence an email dated 9 December 2005 from sales@babiesbaskets.com to Mr Colley at his work email address. It acknowledged an order for £159 worth of baby gifts which had been placed by Mr Colley. The gifts were to be addressed to Mr and Mrs Slaney at 14 Rowney Gardens, Dagenham Essex. Copies of an entry from the land registry showed that Christopher Slaney was a lessee of that property on a long lease commencing on 12 July 2004. The message/greeting which, according to the email, had been asked for was: "congratulations to both of you! Best wishes, James, Nicola and Georgia. xx."
382. In his witness statement Mr Colley said that his partner at the time when he worked at IG Index knew Mr Slaney's partner. When they gave birth to a child Mr Colley said that his partner asked him to send a present on her behalf. In cross examination Mr Colley said that he did not know Mr Slaney and that it was pure coincidence that Mr Slaney placed bets which benefited from the insertion and removal of false dividends. When it was put to him that he had sent a present when Mr Slaney's child was born Mr Colley said that he did not send it to Mr Slaney but rather to Mr and Mrs Slaney. His then partner was a friend of Mr Slaney's wife from the gym they both went to. He accepted that £159 was not cheap but said that he remembered that his partner paid him back. There was no connection between him and either Mr or Mrs Slaney. The only connection was between Mrs Slaney and his then partner.
383. I was left with the distinct impression that both Mr Colley and Mr Slaney were at pains to downplay the nature and extent of the connection between them. £159 is by any standards a large amount of money to spend on a baby gift and the fact that the wording of the greetings message included Mr Colley and the child of him and his then partner as well as his then partner suggests both a reasonably close friendship and one which was not confined to Mr Colley's then partner and Mr Slaney's wife. However even if the friendship was confined to Mr Colley's ex partner and Mr Slaney's wife the nature and extent of that friendship which it is possible to infer from the email in my judgment leant considerable weight to IG Index's case that it is extremely unlikely that Mr Slaney should by chance rather than by prior arrangement with Mr Colley have placed 46 bets which benefited from the insertion and removal of false dividends or that the insertion and removal of those dividends should have been done by someone other than Mr Colley.
384. It was not in issue between the parties that Mr Osborn was a friend of Mr Teller. In his witness statement whose truth he confirmed in oral testimony Mr Osborn said that he had known Mr Teller socially for several years when he was going out with one of his partner's best friends. They saw each other regularly during 2004 and went away on holiday together at Christmas 2004. It was Mr Osborn's case that Mr Teller approached him and suggested that he could make some money if he allowed Mr Teller to open an account with IG Index in Mr Osborn's name which Mr Teller would operate for him. I refer to this aspect in more detail when considering the case against Mr Osborn. None of this was disputed by Mr Teller.
385. Ms Crowther exhibited an exchange of emails between Mr Colley and Ms Jeffcoate on 24 October 2007 in which Ms Jeffcoate said: "… van just pulled up with frostbite UK on it is that Tommy?" to which Mr Colley relied: "yes it is. Can you go in and check all his okay with him. You may need to check the positioning with him. And they need to straighten the air-con unit in our bedroom too."
386. Based on this exchange of emails Ms Crowther asserted that Mr Colley was a friend of Mr Osborn's. Mr Mayall relied on the fact that Mr Colley had it is to be inferred previously referred to Mr Osborn to Ms Jeffcoate by his first name "Tommy".
387. Mr Osborn vehemently denied that he was a friend of Mr Colley. He was a qualified air conditioning engineer and was introduced to Mr Colley by his friend Mr Teller. That was some months after Mr Teller helped him to open his account with IG Index. Mr Teller phoned him to say that a friend of his required some air conditioning work and was it alright to give the friend Mr Osborn's telephone number which he agreed to. He didn't say who the friend was. He then received a call from Mr Colley and visited his house to give him a quote.
388. Out of interest he asked Mr Teller where Mr Colley worked and was told that he worked at IG Index but he had not idea in what capacity. His only other contact with Mr Colley was when he met him on site on one or two occasions when there only discussions were about the work he was doing for him. He had no discussion with Mr Colley about anything else.
389. As to the reference to "Tommy" in the email Mr Osborn said that he is mostly known as Tommy and when he turns up for a job or a meeting he normally introduces himself as Tommy. That does not mean that he is a personal friend of the person he has introduced himself to. Mr Colley in evidence confirmed that Mr Osborn had been recommended to him first by a builder on site doing work at his house and then by Mr Teller.
390. I accept Mr Osborn's evidence that he was not a friend of Mr Colley and that the explanation of the reference to his first name in the email is as he explained it.
391. The fact that Mr Teller was a friend of Mr Osborn does not anymore than the fact that he was the brother and son respectively of Ms and Mrs Teller; add anything in my judgment to IG Index's case in so far as it is based on inferences to be drawn from connections direct and indirect between Mr Colley and the clients who benefited from the 415 transactions. That is because it is accepted by all parties that Mr Teller placed all the bets on the accounts in the names of Mr Osborn and his mother and sister on their behalf. I do, as I have indicated, accept that the friendship between Mr Colley and Mr Teller does support IG Index's case in the respects and for the reasons I have given. In so far as some of the transactions which benefited from the insertion and removal of false dividends were placed by Mr Teller on the accounts of Mr Osborn and Mr Teller's mother and sister that fact in my judgment does provide further support for IG Index's case in that it increases the unlikelihood that the bets placed by Mr Teller on those other accounts as well as on his own which benefited from the insertion and removal of false dividends all benefited therefrom by coincidence or by the fact that he happened in each case to identify them as potentially profitable bets to place. It also increases the unlikelihood that the insertions and removals were made by someone other than Mr Colley.
392. Mrs Benn in oral testimony said that she met Michelle Dove, the seventh Defendant, once and that she knew that she had at some time been a girl friend of her son, Tom Benn the third Defendant. She also said that she knew Annie Cooper, the fourth Defendant who she said had also been her son's girlfriend. When cross examining Mr Colley Mr Mayall put to him an extract from a witness statement dated 15 November 2011 signed by Ms Dove. He said that no one had objected to it being in the trial bundle. He put to Mr Colley that based on this extract Ms Dove was Tom Benn's girlfriend and that she had met Mr Teller. Mr Colley said that he had read the witness statement and saw that she said that Tom Benn knew Mr Teller.
393. I was not told whether Ms Dove's witness statement had been served by her or by IG Index, but judging from the format it appears to have been the latter. Although there are provisions under the CPR for a party to rely on a witness statement of a person who is not called to give oral evidence it is a condition of such reliance that the party intending to rely on the hearsay evidence must, when he serves the witness statement, inform the other parties that the witness is not being called to give oral evidence and give the reasons why the witness will not be called. (CPR 33.2(2)(a)(b)). I was not told that IG Index had so informed the other parties and I infer that it did not do so because had it considered that it had satisfied the requirements for relying on Ms Dove's witness statement as hearsay evidence I would have expected Mr Mayall to rely on the contents of her witness statement not only in relation to the extract shown to Mr Colley but more generally. He did not do so. Accordingly I ignore for the purposes of this judgment the contents of Ms Dove's witness statement.
394. It is however the case that Ms Crowther stated that Mr Teller was friends with Ms Cooper and Mr Rossfield and that Mr Rossfield was friends with Mr Benn, Ms Cooper, Mr Teller and Ms Teller. In support of this statement she disclosed entries on the Facebook pages of various of the Defendants and the other alleged fraudulent clients showing that, within the Facebook context and language, Mr Teller was friends with Mr Rossfield, Mr Rossfield was friends with Mr Benn, Ms Cooper, Ms Teller, Mr Abrahamovich and Ms Pearlman who was a friend of Mr Colley and to whom I have referred earlier, and that Mr Rowe was friends with Mr Teller, Mr Rossfield and Mr Abrahamovich as well as Ms Nitka who was friends with Mr Colley and to whom I have referred earlier.
395. Neither in his witness statement nor when he gave evidence did Mr Teller challenge Ms Crowther's statement that he was friends with Ms Cooper, Mr Rowe, Mr Abrahamovich, Mr Rossfield and Ms Nitka. Ms Crowther exhibited to her first witness statement a number of further Facebook entries which showed that the ninth Defendant Mr Ilett was friends with Mr Teller, that Mr Teller was in addition friends with the wife of the fifth Defendant Mark Cowan, Mr Rowe and Mr Abrahamovich who are alleged by IG Index to be parties to the fraud and Ms Nitka who was friends with Mr Colley. In addition Ms Teller, Mr Teller's sister, was friends with Mr Rossfield, who in turn was friends with Tom Benn, Ms Cooper, Mr Teller, Ms Teller, Mr Abrahamovich and Ms Pearlman. Mr Rowe was friends with Mr Teller, Mr Rossfield, Mr Abrahamovich and Ms Nitka.
396. There was some discussion during the trial as to what weight if any should be attached to the fact that certain of the Defendants and the other three alleged dishonest clients were Facebook friends of each other and/or Mr Colley. I accept the submission of the Defendants that it cannot be inferred from the fact that people are Facebook friends that they are friends in the general sense of having a friendship. Nonetheless in the present context it seems to me that what is material is that the Facebook evidence shows that there was at least some connection between various of the Defendants and other alleged dishonest clients even if it went no further than that they knew of each other and/or had friends or acquaintances in common. To that extent I consider that that evidence goes some way to providing further support for IG Index's case as to the unlikelihood of the insertion and removal of false dividends having been done by someone other than Mr Colley, or having been done by Mr Colley by mistake and that the insertions and removals were intended to and did benefit accomplice clients by enabling them to place bets at a favourable price. In all these cases it must be remembered that (1) if the dividends were inserted by someone other than Mr Colley it is remarkable that the only client who placed a bet was connected directly or indirectly to Mr Colley and there was no evidence of connections with other IG Index dealers and (2) if Mr Colley inserted the dividends dishonestly to benefit accomplice it is remarkable that the real accomplice did not place a bet and the only person who did just happened to be connected to Mr Colley.
397. However the position in relation to Ms Cooper and Ms Dove in my judgment goes further. Mrs Benn's evidence was that they were both former girlfriends of Tom Benn. That direct evidence of a very close connection between three more of the clients who placed bets which benefited from the insertion and removal of false dividends in my judgment adds to the unlikelihood of all those favourable bets having been placed other than as a result of a tip off from the person inserting and removing the dividends. I repeat the comments I made in relation to Mr Teller placing bets on behalf of Mr Osborn, and his sister and mother. Moreover this must be seen in the context that Tom Benn allowed judgment to be entered against him in default of a fully particularised defence in the sum of no less than £197,317. It does not seem to me unreasonable given the size of that default judgment and the serious nature of the fraud allegations made against Tom Benn to draw, in the absence of any alternative explanation, adverse inferences as to his involvement in the alleged fraud. Moreover there was a large number of bets placed by Tom Benn where there was audited information identifying Mr Colley's computer as being the source of the insertion and removal of dividends. Also striking in this context is the fact that during the period in which she is alleged to have placed dishonest bets, Ms Dove placed only eight bets in all with IG Index, no fewer than three of which benefited from the insertion and removal of false dividends. As to Ms Cooper it is also striking that of the three bets placed on her account which benefited from the insertion and removal of false dividends, audited information showed that in respect of two of them the insertions and deletions were made on a computer logged in under Mr Colley's details and in both cases the dividends were inserted two or three minutes before the bet was placed and removed the following day.

Conclusion on whether there was a fraud

398. I am wholly satisfied that the 415 allegedly false dividends were false and fraudulently inserted with a view to enabling particular clients who were friends of or connected to the person who inserted them to place bets at the manipulated price caused by the insertion of the false dividend and to realise a dishonest profit by closing the bet after the false dividend was removed.
399. It is in my judgment abundantly clear on all the evidence that the false dividends were inserted and removed not by coincidence or by error but deliberately and dishonestly. I have referred to the relevant evidence and arguments. By way of summary and again in no particular order it is in my judgment clear beyond argument that the dividends were false in the sense that they did not reflect either dividends that had been announced or dividends that were reasonably anticipated. Mr Gordon's evidence on this point was utterly compelling and not seriously challenged. The fact that the insertions had to be manually inserted into SuperDiv before being inserted into Xcon shows that the person doing the insertion must have noticed both the wholly disproportionate size of the dividends and inserted an Ex-Date which did not in truth exist. It defies common sense to suppose that on no fewer than 130 documented occasion a dealer or dealers could have entered such false data without realising that it was false.
400. The fact that the false dividends were inserted on no few than 130 occasions by a person using only one username and by inference password makes it all the more fanciful in my judgment to suppose that these hugely and obviously inflated false dividends were on every occasion inserted in error without the person inserting them being aware that they could not possibly be accurate. That is so irrespective of whether the person doing the inserting was Mr Colley or an anonymous person using his username.
401. In my judgment it further beggars belief that 130 mistakes were repeated also by mistake when the audited Xcon information shows that the equally obviously wrong dividends were subsequently removed with no follow up action to investigate and contact clients who had dealt an the false price. In my judgment the overwhelming inference is that the person removing the false dividend no less than the person inserting it must have been aware that the dividends were false.
402. Mr Gordon said that if a pricing error was discovered by a share dealer there was a set procedure. First he would correct the price and then establish if a client had dealt at the false price. The client agreement would allow IG Index to force the client to accept a change to the contract price but if it was only a small difference IG Index would as a gesture of good will give the client a choice of either voiding the contract or keeping it. He would expect a dealer who discovered a pricing error to wonder how the false dividend got into the pricing system. He would expect the person who discovered it to report it as very unusual unless they got the client to agree to change the price. It would in the main be unusual enough to be reported to Mr Gordon because of the size of the erroneous dividends. There were in this case 415 false dividends removed, 125 of them in circumstances where the detail of the size and date of the removal was proved by audited information. Yet the contract price of the bets which benefited from the initial dividends having been inserted was in no case amended nor was there any evidence of the dealer who removed the false dividend having reported the matter to Mr Gordon or Mr Tibbs or having initiated any enquires or investigations. It is again in my judgment not credible if the removals were done by mistake, that on so many occasions either the mistake was not noticed or if it was noticed for some innocent reason the dealer neither altered the contract price nor reported the matter nor investigated it.
403. Further and closely allied to the last point the very fact that in respect of 125 of the 130 documented transactions the false dividend as removed as well as inserted by a person using the same username strongly suggests that it is inherently extremely unlikely that identical false dividends were entered by mistake and then removed by mistake by the same person.
404. I also consider that the evidence of the timing both of the insertions and removals of the false dividends lends strong support to the dividends having been dishonestly inserted and removed to benefit accomplice clients. In particular the proximity between the insertion of the dividend and the placing of the relevant bet on so many occasions in circumstances where the person placing the bet stood to benefit financially and where there was almost always only one person placing the bet makes it inherently unlikely that on each occasion the bet was placed either by chance or for some independent legitimate investment reason. That is particularly so given that the only common factor to all the bets which made them attractive was the insertion of a false dividend. There was no corresponding drop in the underlying price of the shares and the no reason why an innocent client who happened to notice the price drop were regard that fact in itself as a good buying opportunity. (This unlikelihood is very significantly increased in my view by the fact that on very many occasions the person placing the bet was shown to be a friend of the person whose username was used to insert and remove the dividend. However as mentioned above this is an additional point supporting a conclusion which does not depend on it.
405. The other timing points are also in my judgment compelling. In particular the fact that in almost every case the bet was closed only after the dividend was removed is very powerful evidence. If there was a fraud it could only work if the dividend was removed before the bet was closed. If there was no fraud it is an astonishing coincidence that in almost all cases the lucky placer of the bet did not close the bet until the dividend was removed and then in most cases closed the bet soon after it was removed.
406. It is also striking that almost none of the false dividends were removed on the same day on which they were inserted. That had the consequence that they would not be and indeed in almost every case were not detected by either of the two checks which could only detect a contract price affected by the insertion of a false dividend if the false dividend was removed on the same day. If neither the insertions nor the removals were deliberate and dishonest it is a remarkable coincidence that the falsity was in every case removed presumably because it was noticed but in no case noticed or removed on the same day as the insertion.
407. The fact that very many of the false dividends were inserted and the consequential bets placed shortly before the close of the US market provides some, but in my judgment less, support for the conclusion that there was a fraud. It is certainly consistent with the fraudster having wished to minimise the chance of an innocent client placing a bet on the relevant stock after the dividend had been inserted thus giving rise to a risk of the innocent client raising the matter with IG Index leading to enquiries which might reveal the fraud. However this must be seen in the context that on not a small number of occasions the dividend was left in the price after the opening of the US market the following day, thus giving rise to a similar risk of an innocent client placing a bet at the distorted price. Indeed in some cases the dividend was left in for more than one day. It is however the case that on very many occasions the dividend was removed the next day and on many occasions before the US market opened.

If there was a fraud was Mr Colley responsible for it?

408. Logically this question raises two further questions. (1) Was it Mr Colley who made the insertions and removals of the false dividends? (2) If so, was he aware that the dividends were false and did he deliberately insert and remove them in order to enable clients to bet at beneficially depressed prices?
409. In relation to the first question IG Index's case proceeds incrementally. It starts with the 130 transactions for which there is audited information which identifies the dates and times on which false dividends were inserted and removed. Of these the information showed that all 130 insertions of false dividends were made from a terminal which, according to Mr Gordon, was logged into using Mr Colley's IG Index username and password. The same was the case in relation to the 125 removals of dividends for which there was audited information.
410. In order to enter information into Xcon it was necessary first to log in to a computer using a username and password and then to log in to Xcon again using a username and password.
411. Mr Cloke said that the audit record contained the date and time of any update, the name of the person who applied the update and the name of the PC from which the update was applied. By examining the audit records it is possible he said to determine exactly what any particular person has done and when it was done. As previously mentioned he said that it is not possible to alter the audit records without specific knowledge software and permissions which were not possible for dealers to have.
412. No effective challenge was mounted to that evidence or to reliability of the audit information and I am satisfied that it is both accurate and reliable.
413. Mr Gordon said that on every occasion where he had audited evidence of the identity of the terminal user who inserted the 130 false dividends it was shown to be Mr Colley. Each terminal had to be logged in in order to be usable and that was done by an employee using a personal username and password. The username and password were initially issued by IT security staff and the password was then chosen and changed by the employee themselves. The password expired after 3 months and 14 days before that expiry the employee was prompted to change it. Every employee was aware that their password must not be divulged to anyone including IG Index's IT security department and the characters of a password were not displayed on the screen when they were being typed. The password policy had been in operation for many years and he adduced in evidence a copy of IG Index' password security policy confirming the above and an email dated 23 July 2003 to all UK employees enclosing copies of it and asking them to read the policy.
414. Cross examined by Mr Colley, Mr Gordon said that some PCs with access to Bloomberg dividend information had login details that anyone could use and a password which was known to most members of the dealing desk. The Bloomberg machine was used to make initial dividend changes on SuperDiv. Therefore persons changing dividends on SuperDiv would not reveal their username and password. However critically Mr Gordon said that he was certain that the Bloomberg machine did not have an Xcon application and that dividends could only be changed on Xcon by revealing the PC on which the changes were made. SuperDiv was not audited but Xcon was. Log in details of the shared Bloomberg machine which had Bloomberg prices on it would be known to everyone who used it. By contrast login details of dealers' personal machines should never be revealed to anyone else.
415. Mr Colley put to Mr Gordon that most people on the shares dealing desk knew his password. Mr Gordon said that he did not know it and he could not imagine why anyone else would.
416. The spreadsheet prepared by Mr Gordon containing a summary of the audited Xcon information in relation to the 130 inserted dividends identified in each case the terminal from which the changes were made as 3034 and the username as jamesco@igpc. When he gave evidence Mr Colley accepted that jamesco@igpc was his username and that in respect of the 130 occasions on which the audited information showed that dividends had been inserted from terminal 3034 with the username jamesco@igpc the person who inserted the dividends was either Mr Colley or someone using his password and username. If the dividends on those 130 occasions were inserted fraudulently he accepted that he was in the frame. If it was someone else using his username and password Mr Colley said that it was impossible for him to suggest who that was. In his witness statement he said that passwords were known amongst dealers on the desk meaning that it was quite easy to place deals on anyone else's desk PC. That evidence was contradicted by that of Mr Gordon.
417. There are in my judgment a number of factors which point to the very strong probability that the person inserting the 130 false dividends and removing the 125 false dividends as revealed by the audited information was Mr Colley rather than some other dealer. In no particular order they include the following.
418. First it is very striking that among those who placed bets which benefited from being made after false dividends were inserted by someone using Mr Colley's username and password and being closed after the dividend was removed by someone using his username and password were Mr Jeffcoate, the father of Mr Colley's partner, his friend Mr Teller with whom he planned to go on holiday and who also placed bets on three accounts run by Mr Teller on behalf of his mother, his sister and the fifth Defendant Mark Cowan, Mr Rossfield another friend of Mr Colley with whom he planned to go on holiday and Mr Slaney, who was at it lowest married to a friend of Mr Colley's partner.
419. If the false dividends were deliberately inserted and removed by someone who realised that they did not reflect genuine announced or anticipated dividends the only rational explanation is that the purpose was to benefit a client who would place a bet on the relevant stock. In all these cases with one exception there was no evidence of any other clients placing bets on the relevant stocks. There are thus two possibilities. Either the person who placed the bet was the person intended to benefit or not only was the person who placed the bet not intended to benefit but for some unexplained reason the person who was intended to benefit by the anonymous fraudster failed to do so. Of these two possibilities it is in my view abundantly clear that the former is by far the more probable. That being so the inference must be that the person who dishonestly inserted and removed the false dividends intended to confer an illegitimate financial benefit on among others the father in law of Mr Colley's partner, two friends of Mr Colley's with whom he planned to go on holiday, another friend of Mr Colley's with whom he planned to go on holiday, and the husband of a friend of Mr Colley's partner. In my judgment it would be fanciful to conclude that another anonymous dealer somehow obtained Mr Colley's username and password and used them to make dishonest insertions and removals of dividends in order to benefit a series of people with such close personal connections to Mr Colley rather than for the benefit of his or her own friends or relations.
420. Further I prefer the evidence of Mr Gordon to that of Mr Colley on the question of whether passwords used by dealers to access Xcon were, as suggested by Mr Colley, widely known to other dealers. Although the clear policy document prohibiting dealers from disclosing their passwords to anyone else is not conclusive on whether that policy was adhered to, I prefer the evidence of Mr Gordon to that of Mr Colley on this question both because I consider it inherently more likely but also because in general terms I considered Mr Gordon to be a truthful and reliable witness whereas I considered Mr Colley to be an unreliable witness who on a number of issues in my view either did not tell the truth or sought to evade difficult questions.
421. There was in addition crucial evidence which pointed to the probability of the person who inserted and removed the false dividends in the 285 transactions as well as the 130 transactions having been Mr Colley. Ms Crowther examined IG Index's personnel records for the period between September 2005 and September 2008 during which the allegedly fraudulent transactions took place to see if any false dividends were inserted on days when Mr Colley was out of the office. Copies of the records were exhibited to her first witness statement and adduced in evidence. They showed that there were only four days when false dividends were inserted on which, according to the records, Mr Colley appeared not to have been in the office. Moreover on making further enquiries Ms Crowther identified evidence suggesting that Mr Colley was in fact in the office on those four dates. Thus on 7 October 2005 Mr Colley was shown as having a half day annual leave. His shift started at 4:30 p.m. and allegedly fraudulent bets were placed at 5:42 p.m. and 7:56 p.m. On 27 August 2008 the records showed that Mr Colley was on a half day annual leave but did not indicate whether he took the morning or afternoon off. However the email archive showed that Mr Colley sent his first work email at 1:47 p.m. and his last at 9:29 p.m. suggesting that he took the morning off work and was at work in the afternoon/evening shift. The allegedly fraudulent bets were placed on that day at 8:55 p.m. and 8:56 p.m.
422. On 21 June 2007 an allegedly fraudulent bet was placed at 8:54 p.m. but the holiday records stated that Mr Colley was on annual leave all day. However Ms Crowther found 13 emails both work and personal sent by Mr Colley on that date including in the afternoon and evening which suggest that he was in the office. Similarly on 26 November 2007 allegedly fraudulent bets were placed at 8:57 p.m. and 8:55 p.m. whereas the holiday record showed Mr Colley on annual leave all day. However Ms Crowther found 10 emails sent by Mr Colley from his work email address on that day including one sent at 8:28 p.m., again suggesting that he was at work that day.
423. It is right to point out that in respect of the last two days the email evidence suggests that at least on those two days the holiday records were inaccurate. That raises the question whether the holiday records may more generally have been inaccurate. However Ms Bornor said that her department coordinated holiday leave policy and insured that details of all holiday records were maintained with particular reference to the area in which Mr Colley worked. The holiday details were extremely accurate. They had to be because there were different shifts and everyone had to ensure that there was sufficient manning for each shift. Her understanding with regard to the area in which Mr Colley worked was that the rota was planned at least one week in advance on a spreadsheet. If someone wanted a holiday they sent an email to the coordinator. If someone booked a holiday and then changed it they had to correct the entries. Otherwise they would be logged as having a holiday which in fact they had not had.
424. In addition Mr Gordon collated the dates, in respect of the transactions on which it was known that dividends were removed (all 415 transactions) and on which it was known when the dividend were inserted (the 130 transactions for which there was Xcon audit information) and made the assumption (for reasons referred to earlier) that the remaining 285 client dealing dates were the same as the dates on which dividends were inserted. That produced 482 separate dates on which it was known or inferred that dividends were inserted or removed from IG Index's pricing system.
425. Mr Gordon investigated which of the shares dealers were in the office on each of those 482 days. The criterion he used to determine if someone was in the office was whether or not they processed at least one client deal on that date. Dealer initials were recorded against every deal processed. A deal could only be processed if the dealer was logged in under their own password and if they left the machine logged on and unattended for more than 10 minutes the screen would go blank and require the dealer's password to unlock it. That meant that if a dealer had their initials logged against any deal on a particular day they must have been in the office on that day.
426. The exercise carried out by Mr Gordon resulted in a list of the 482 dates covering a period of 3 years showing the number of times when each of the 19 dealers employed by the shares dealing desk was known to be working. The list showed that Mr Colley was the only dealer who was present on every occasion and that the dealer with the second largest number of attendances was absent on 54 occasions.
427. Another dealer, Mr Paul Eastell, who was shown together with Mr Colley to have done the dividend reconciliation job between September 2005 and September 2008 on the vast majority of occasions was absent from the office on 84 of the 482 dates when false dividends were shown or inferred to have been inserted or deleted.
428. Mr Gordon also said that on every occasion where evidence was available the log in details and password of the terminal which made the price changes were those of Mr Colley and that on each of those occasions there was evidence that Mr Colley was working in the office.
429. Taken together in my judgment this evidence provides further very strong support to the conclusion that in respect of the 130 transactions for which there was Xcon audit information the person who used Mr Colley's username and password to make the dividend changes was indeed Mr Colley and not an anonymous other dealer and that in respect of the other 285 transactions it was also Mr Colley who made the dividend changes. Although the two instances in which the holiday records were shown to have been inaccurate raise a question as to whether there may have been other inaccuracies, it is striking that Mr Gordon's evidence that Mr Colley was the only dealer present on all 482 dates when dividend insertions or removals were proved by direct primary evidence or, as I accept, by inference to have been made Mr Colley was the only dealer present is not dependent on the accuracy of the IG Index holiday records.
430. I also take into account in this context Mr Colley's conduct when confronted with the evidence that false dividends had been inserted and removed by someone using his username and by inference his password. Making all possible allowances for the natural stress and anxiety which anyone might feel on being asked by their employer to explain suspicious and apparently dishonest transactions executed by someone using their username and by inference password, I find it striking that at no time either before Mr Colley's meeting with Ms Bornor and Mr Noble or thereafter did Mr Colley protest his innocence. At no point did he deny knowingly entering and removing false dividends or even deny in the most general terms that he had been dishonest. He certainly did not at that meeting suggest that someone else must or may have been using his username and password. He had worked at IG Index at a senior level on a good salary for nine years and yet did nothing to contest his summary dismissal for dishonesty.
431. However I am satisfied that the insertion and removal of the dividends was done deliberately and dishonestly even without reliance on the connections between Mr Colley and the alleged accomplice clients and the connections between the clients. That said I do also consider that the fact that on so many occasions the people who benefited from the false insertion and dividends placed by someone using Mr Colley's username and password were close friends of his does provide further evidential support for the conclusion which I have already reached for other reasons that the insertions and deletions were dishonestly done in order to benefit clients. Since there is no evidence that either Mr Colley or any other dealer placed bets which benefited from the insertion and removal of false dividends it would be necessary for the fraud to work, if there was a fraud, that friends of the fraudster would place bets at the artificially depressed prices created by the insertion. The fact that that is in my judgment precisely what the evidence shows happened makes it far more likely in my judgment that the false dividends were deliberately and dishonestly inserted and removed than that they should on so many separate occasions have been inserted and removed by error.
432. A further factor which contributes to my conclusion that Mr Colley dishonestly entered and removed false dividends to benefit clients was the manner in which he dealt with his friendships with the alleged client accomplices. In his witness statement he completely ignored Ms Crowther's statement that she believed that Frederick Jeffcoate was the father of his girlfriend and his account of his connection with Adam Teller was in my view deliberately misleading as was his statement that he had no contact with Mr Rossfield and did not know him. I am satisfied that this was designed to avoid any conclusion that any false dividends entered and removed using his username were designed to benefit his friends. Nor do I consider that that attempt to mislead was motivated by a fear that an otherwise good defence might be wrongly undermined. As I have mentioned before Mr Colley neither in his witness statement nor in cross examination gave any plausible innocent explanation for the many matters to which I have referred which were relied on by IG Index in their case against him. His denial in the witness box that he was a friend of Mr Teller was not even supported by Mr Teller and was in my view deliberately untruthful, as was his sophistic denial that he knew Mr Rossfield.
433. I was struck by the failure by Mr Colley either in his witness statement or his oral testimony to provide any plausible or realistic explanation for why he inserted and removed the false dividends when he did, on the assumption that it was he and not an anonymous dealer who inserted and removed them, other than dishonestly to benefit clients who had been tipped off by him in advance.
434. Mr Colley spent a lot of time questioning the reliability of the spreadsheets prepared by Mr Gordon and the audited Xcon information, not in my judgment to any material effect. However the basic facts, when one stands back and looks at them, are very simple and very stark. On 130 occasions massive dividends were inserted into US stocks. They were so high that it would have been obvious to any experienced dealer that they could not possibly reflect any dividend announced by the company and could not reasonably be anticipated by anyone in IG Index. Assuming that it was he who inserted the dividends he typed them into SuperDiv on no fewer than 130 occasions and then transferred them into Xcon. On every occasions a client placed a bet at the artificially depressed price and either the next day or a few days later in all but five cases Mr Colley, assuming it was him, removed the dividend but did not take any or any effective steps either to change the price at which the client had bet or to initiate investigations or enquiries or report the matter to his superiors.
435. IG Index's case that the 285 transactions for which there was no Xcon audit information were also dishonestly perpetrated by Mr Colley was in my judgment also proved overwhelmingly by the evidence.
436. No effective challenge was made to the legitimacy of the inference which Mr Gordon said could be drawn as to the dates on which the false dividends in those cases were removed by comparing the cash and futures price on successive days. Nor was any effective challenge made to the legitimacy of the inferences which he said he could be drawn as to the date by which the false dividends had been inserted, namely again a comparison of the cash and futures prices at close of the US market on the date on which the client placed their bet.
437. Moreover the reliability of these inferences was in my judgment hugely supported by the fact that in the case of the second 95 transactions for which IG Index's IT department provided Xcon audit information in 2011 the inferences drawn by Mr Gordon by comparing the cash and futures prices were proved to be correct. Thereafter it was critically confirmed by the schedule comparing the cash prices of the 415 stocks at the time the bets were placed.
438. Once it is accepted that the 130 dividends for which there was audited Xcon evidence were dishonestly inserted and removed and that it was Mr Colley who dishonestly inserted and removed them, it would again in my judgment defy common sense to suggest that the false dividends which were inserted and removed on the 285 occasions for which there was no Xcon primary evidence were inserted and removed by mistake rather than dishonest design or that they were inserted and removed by someone other than Mr Colley. The basic pattern was the same in respect of the 285 transactions as it was in the case of the 130. That is to say a massive and obviously false dividend was inserted and then removed for no good reason. A client derived financial benefit by placing a bet at the artificially depressed priced caused by the insertion of the dividend and then closing the bet after the dividend was removed. The friends of Mr Colley who placed bets which were among the 130 for which there was Xcon audited information were also among those who placed bets which benefited from the 285 transactions.
439. Ms Crowther exhibited to her first witness statement and there were adduced in evidence various documents relevant to Mr Colley's financial position. They were designed as I understood them to suggest that Mr Colley showed an interest in expensive cars and foreign houses and on one occasion boasted of having made more money in a week than he was paid for a year in circumstances in which neither his salary at IG Index nor his earnings from a sandwich shop which he jointly owned would account for substantial income. Mr Colley in his witness statement referred to several large amounts transferred into his main bank account which he said were mainly from a mortgage facility he was using to renovate his home. He said that many of the smaller amounts hitting his account came from the betting he offered to other IG Index employees and from the café he owned in East London. He said that the amounts also came from long term savings accounts which he had for several years and from premium bond certificates. Most money being transferred from one account to another was so transferred either to gain extra interest or because it was needed for the refurbishment of his home.
440. Just before he commenced cross examining Mr Colley, Mr Mayall told me that he did not propose to ask Mr Colley questions about his bank account even though he submitted that he would have been entitled to do so because they were trailed in Mr Colley's witness statement. In his closing submissions Mr Mayall did not refer to or rely on the evidence as to Mr Colley's financial position adduced by Ms Crowther and did not submit that there was direct evidence that Mr Colley had received money from any of the other Defendants or the other three alleged fraudulent clients.
441. In his closing submissions Mr Colley submitted that IG Index decided not to bring up the question of his bank accounts at the trial because there were no grounds for discussion, no money in his accounts that were unaccountable and no money which could be cross referred to any of the other Defendants' bank accounts.
442. It was a pleaded part of IG Index's case that Mr Colley was acting in concert with the clients who benefited from his dishonest insertion and removal of false dividends. As against Mr Colley IG Index did not rely in support of its allegation that he was acting fraudulently on an explicit allegation that money was paid to him by the clients who benefited from his fraudulent activity and with whom he acted in concert.
443. On the other hand as against the other Defendants one of the matters pleaded in support of what was said to be an irresistible inference that they were acting in concert with Mr Colley was the allegation that Mr Colley could not profit from his fraudulent activity unless he was acting in concert with the particular Defendant. It is in my judgment implicit in that allegation that it was agreed between the client Defendants and Mr Colley that he would and that Mr Colley did in some way profit from the fact that the clients who placed the bets were acting in concert with him by payments or the conferring of other financial benefits from them to him.
444. As appears above I am wholly satisfied that Mr Colley acted dishonestly in inserting and removing false dividends in order to enable particular clients to benefit financially by placing bets at the artificially depressed prices created by the insertions of dividends which were subsequently removed. In reaching that conclusion I have proceeded on the basis that IG Index adduced no evidence to prove that particular identifiable sums of money were paid by any of the other Defendants or the three other alleged accomplices to Mr Colley.
445. I have of course considered carefully whether the absence of such evidence having been adduced undermines the inferences to be drawn from the other evidence to which I have referred to such an extent as to make it impossible safely to conclude to the requisite standard of proof that Mr Colley acted dishonestly and fraudulently. In my judgment it does not. That is principally for three reasons. First in my judgment the generality of the other evidence is overwhelming. Second it does not follow from IG Index's inability to adduce evidence of particular payments from Mr Colley's alleged accomplices to Mr Colley's bank accounts that no payments or other financial benefits were made by them to him. In my judgment it is probable that they were Third it is not necessary in order for IG Index to succeed against Mr Colley for it to prove that the friends (or relatives of friends) whom he enabled to benefit by placing bets at artificially depressed prices shared some of their profits with him. While that would be the most obvious motive for Mr Colley's dishonest conduct it could also have been motivated by a desire simply to confer benefits on his friends. Of these three reasons the latter is the one on which I place least weight. As to the second it would not be surprising if, as part of the precautions taken to avoid detection or subsequent proof of fraud, Mr Colley had been paid by his accomplices in cash or in some other way than traceable payments into his main bank accounts.
446. Moreover it does not follow from the fact that because IG Index left it too late to rely on the specific bank debits and credits identified in its draft Amended Particulars of Claim that they could not have shown payments having been made by client defendants to Mr Colley if IG Index had pleaded them in good time. In my judgement the nature of the fraud carried out by Mr Colley, the length of time over which it was perpetrated, the large number of fraudulent bets which were placed and the substantial profits which were created in the hands of his client accomplices make it very unlikely that Mr Colley would have carried out the fraud, with all the adverse consequences in the event of detection, unless it had been agreed with the client accomplices that they would and unless in fact, at least in most cases, they did make payments to or confer other financial benefits on him in return for being given the opportunity to profit from the fraud.

Conclusion in relation to Mr Colley

447. For all the reasons I have given I am satisfied that it was Mr Colley who inserted and removed the dividends on the 415 transactions which are the subject of this claim. I am satisfied that the dividends were false in the sense that they did not reflect either announcements by the relevant companies of dividends which were to be paid or genuine estimates by IG Index or anyone else of dividends which would be announced in the future. I am satisfied that when he inserted the false dividends Mr Colley was aware that they were false in the sense just referred to and that when he removed them he was aware that the removals did not reflect any actual change in relation to real dividends. I am satisfied that he made the insertions and removals dishonestly with the intention that particular clients who were either friends of his or relatives of friends of his friends would thereby be enabled to place bets at the artificially depressed prices created by the insertion of false dividends and to close the bets after the prices had risen by reason of the removal of the dividends thereby resulting in unwarranted fraudulent financial benefit to them. I am satisfied that in order to enable those particular clients to place and close bets at favourable prices Mr Colley communicated to them (or to the person placing a bet on their behalf) the name of the US stock into which he had inserted or was going to insert a false dividend and the date and time on which he had removed or was going to remove it. I am satisfied that in acting as he did he acted in concert with the clients whom he wished to benefit and agreed with them that they would make payments or confer benefits on him in return for being given the opportunity to make unwarranted and fraudulent profits.
448. In reaching this conclusion I bear in mind that although the standard of proof is the balance of probabilities it is in the nature of things that it is inherently unlikely that any particular person will act dishonestly and that fraud is usually less likely than negligence or innocent mistake and for that reason it is necessary to look with particular care for compelling evidence which satisfies the requisite standard of proof. Having said that I emphasise that in my judgment the evidence pointing to these conclusions is overwhelming.
449. There was no dispute between the parties as to the requisite standard of proof and the correct approach to the quality and nature of evidence required to satisfy it. In re H. & Others (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 at 586D-H Lord Nicholls held:

"The balance of probability standard means that the court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probabilities. Fraud is usually less likely than negligence…built into the preponderance of probabilities standard is a generous degree of flexibility in respect of the seriousness of the allegations. Although the result is much the same this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established."

450. In Re B (Children) (Sc) [2008] EWCA Civ 28T Lord Hoffmann in a speech with which two other members of the House agreed, cited with approval the passage from the speech of Lord Nicholls which I have cited. He added that the time had come to say, once and for all, that there is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not. (para 13).
451. Lord Hoffmann referred to the second sentence in the passage from Lord Nicholls' speech cited above and emphasised the words "to what ever extent is appropriate in the particular case". He added:

"Lord Nicholls was not laying down any rule of law. There is only one rule of law, namely that the occurrence of the fact in issue must be proved to have been more probable than not. Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities. If a child alleges sexual abuse by a parent, it is common sense to start with the assumption that most parents do not abuse their children. But this assumption may be swiftly dispelled by other compelling evidence of the relationship between parent and child or parent and other children. It would be absurd to suggest that the tribunal must in all cases assume that serious conduct is unlikely to have occurred. In many cases, the other evidence will show that it was all too likely. If, for example, it is clear that a child was assaulted by one or other of two people, it would make no sense to start one's reasoning by saying that assaulting children is a serious matter and therefore neither of them is likely to have done so. The fact is that one of them did and the question for the tribunal is simply whether it is more probable that one rather than the other was the perpetrator." (para 15)

452. I have applied these principles in determining whether the allegations against Mr Colley have been proved. I have also applied them in determining whether the allegations against the other defendants have been proved. In particular on all issues where a question arises whether particular conduct was dishonest or fraudulent on the one hand or innocent on the other I have proceeded on the basis that it is inherently more likely to have been innocent. However on the question of whether the false dividends were inserted by Mr Colley or by someone else it is in my judgement clear on the evidence that someone inserted them. The question for me is whether it is more probable that Mr Colley inserted them rather than some other anonymous person. Having said that, however, I wish to emphasise that in my judgement on this latter question no less than on the other questions which I have had to consider, the evidence pointing to the allegations against Mr Colley being true was very compelling.
453. I reiterate that it does not follow from these conclusions that every one of the bets placed on the 415 transactions which are the subject of this claim were placed by someone who was an accomplice of Mr Colley and who had been alerted by him that he was going to insert or had inserted a false dividend. Although one of the factors which in my judgment points strongly towards the conclusions which I have reached that Mr Colley perpetrated a series of dishonest transactions over a three year period was the evidence of his friendships with several of the other Defendants and his direct or indirect connection with others of them, IG Index itself accepted that it does not follow from the fact that Mr Colley dishonestly inserted false dividends that every client who placed a bet on a stock into which he had inserted a dividend did so dishonestly as a result of having been alerted by Mr Colley that he had done or would do so. It is therefore necessary to consider the case against each of the other Defendants separately on its own merits. It does however follow, in my judgment, that since, as I hold below, Mr Colley's conduct was a breach of his contractual and/or fiduciary duties to IG Index and was a fraud on IG Index that he is liable to compensate IG Index for all losses resulting from bets placed by clients which benefited from his false insertion and removal of dividend whether or not the client was an accomplice and participated in his fraud.

IG Index's primary case against Mr Teller

454. It follows from what has gone before that in assessing the merits of the claim against Mr Teller, as with the case against the other Defendants, I proceed on the basis that I am satisfied that Mr Colley perpetrated a very large number of dishonest insertions and deletions of false dividends over a three year period in order to enable particular friends of his or their relatives or friends, to benefit financially by placing bets at the artificially depressed prices created by the insertion of the dividends and closing the bets after they were removed.
455. Mr Teller placed bets with IG Index on his own account and on the account of his mother, his sister, Mr Osborn and Mr Cowan.
456. Mr Teller placed 78 bets on his own account, 56 on his sister's account, 7 on his mother's account, 7 on Mr Cowan's account and 12 on Mr Osborn's account which appear in the Colley Master Detail Sheet May 12. It is IG Index's case that all of those bets were placed by Mr Teller dishonestly on US stocks into which he was told by Mr Colley that he had inserted or would insert a false dividend. It is alleged that the bets were all placed after the dividends had been inserted and that they were all closed after the false dividends had been removed by Mr Colley, the inference being that Mr Teller had been alerted by Mr Colley as to the dates and times when the false dividends had been or would be inserted and removed. It is alleged that Mr Teller was acting in concert with Mr Colley and willingly participated in the fraud perpetrated by him, that he traded fraudulently at the false prices created by the insertion of false dividends and that he profited from the fraud.
457. As appears from the Colley Master Detail Sheet May 12 all these bets were placed on US stocks on dates when as I have found there was either direct evidence that false dividends had been inserted before the bets were placed or that is to be inferred and the bets were closed after there was either direct evidence that the dividends had been removed or that was to be inferred.
458. In assessing whether when he placed these bets Mr Teller had been alerted by Mr Colley that he had inserted or would insert false dividends it is necessary to have regard to all the relevant evidence and background circumstances. In my judgment that evidence and those circumstances include the fact that in every case the dividend inserted and subsequently removed was a false dividend in the sense to which I have referred, that Mr Colley deliberately and dishonestly inserted false dividends not only on these 160 occasions but on 415 occasions, that his purpose in doing so was to enable particular clients who were either his friends or friends and relatives of his friends to place bets at the artificially depressed prices thereby created and that it was a feature of Mr Colley's modus operandi generally that he selected US stocks on which in most cases no innocent client had an open position, that the dividend was almost never removed on the same day on which it was inserted, and that the dividend was often inserted shortly before the close of the US market, it is also relevant that taking all 415 transaction which are the subject of this claim, the bet was often placed within a few minutes of the false dividend being inserted and that the bet was almost always closed after the dividend was removed and that on almost every occasion the only person who placed a bet on a stock into which Mr Colley inserted a dividend before the dividend was removed was a person who was either a friend of Mr Colley's, a friend or relative of such a friend or a person with whom he was direct or indirectly connected, and that with exceptions no other IG Index client placed a bet on that stock
459. Most of these elements were present in all of the 160 bets placed by Mr Teller and many of them were present in all of them. Mr Teller was a friend of Mr Colley with whom he planned going on holiday. Mr Teller introduced Mr Osborn to Mr Colley. On all the dates on which Mr Teller placed bets on his own account for which there was Xcon audited information Mr Teller placed the bets on the same day as and after Mr Colley inserted the false dividend. On most of those occasions he placed the bet a few minutes before the US market closed and in a significant number he placed the bet within a few minutes of the false dividend having been entered. None of the dividends was removed on the same day on which they were inserted and on all but five occasions the dividends were removed the next day by which time the disparity between the contract price at which Mr Teller placed his bet and the restored IG Index futures price would not have been detected by the two IG Index checks to which I have referred. All the bets placed by Mr Teller on his account were closed after the false dividend was removed thereby locking in the profit created by his having placed the bet at the artificially depressed price caused by the dividend having been inserted.
460. A similar pattern was repeated in respect of the bets placed by Mr Teller on his sister's account. All three of the seven bets placed by Mr Teller on his mother's account for which there was Xcon audit information were placed after the dividend was inserted, on one occasion within seven minutes of the insertion. All the dividends were removed the day after they were inserted before the bets were closed.
461. No Xcon audit information was available for the six bets placed by Mr Teller on Mr Cowan's account. However the dividends were all removed between one and three days after they were inserted and before the bets were closed. No Xcon audit information was available for the 12 bets placed by Mr Teller on Mr Osborn's account. However none of the dividends was removed on the date on which it had been inserted and on all but two occasions it was removed the following day.
462. On none of the 160 bets placed by Mr Teller on his own account and the other accounts on which he placed bets did any other client of IG Index place a bet on the same US stock after the false dividend was inserted. It follows that if, as I have found, Mr Colley inserted false dividends in order to enable identified clients to benefit by placing bets at the artificially depressed prices, if Mr Teller (or the person on account he placed the bets) was not the person who Mr Colley intended to benefit then not only did Mr Teller happen to be the only innocent IG Index client who happened to placed a bet on the relevant stock on all 160 occasions on which Mr Colley had inserted a false dividend, but also on all 160 occasions the person who Mr Colley did intend to benefit by placing such a bet for some unknown reason failed to do so.
463. In my judgment it is self evident that this is intrinsically extremely unlikely to have happened.
464. It is against that background that I assess Mr Teller's evidence as to how he came to place these bets. In his witness statement Mr Teller said that he thought that he opened his IG Index account in 1999. He decided to trade with IG Index as they were the most popular spread betting firm at the time and spread betting attracted him because he was able to leverage his bets. He would watch and trade a wide range of financial products, futures, UK and US equities, currencies, commodities and indices. Between 1999 and 2008 he traded a huge amount of diverse products. He would trade over the phone, by the internet or by mobile. He would trade at any time of the day. All prices he traded on were executed in good faith based on the prices he saw in front of him. He would always try and limit his risk by using stop losses and calculate the most he was willing to use on relevant bets.
465. He said that IG Index's spread sheet clearly showed that the length of time between his opening and closing of trades would vary a great deal as it would with his entire trading history. It included losing as well as winning trades. Mr Teller said that he had no knowledge of the fraud alleged by IG Index. He did not believe that he traded at incorrect prices or prices that were subject to manipulation. In oral testimony he amended his witness statement to say that the money he withdrew on the allegedly fraudulently US trades represented only 1 per cent of his entire trading history with IG Index.
466. In cross examination Mr Teller gave an account of his approach to placing futures bets with IG Index and in particular the allegedly fraudulent bets which I found to be evasive, implausible and deliberately untrue.
467. He accepted that he was a sophisticated trader and would endlessly look at stocks. At work he would sometime have eight screens open and a price feed. At home he had two or three screens.
468. However despite being a sophisticated trader he claimed that before this case he thought that IG Index's futures price was made up only of cash plus interest plus the IG Index spread. He claimed to be unaware that the futures price made allowance for the fact that, unlike the purchaser of an underlying share, a placer of a futures bet could not receive any dividends declared on the share because he would not receive the share itself. His response that he was unfamiliar with dividends was in my judgment wholly implausible.
469. Mr Mayall put it to Mr Teller that if it was anticipated that a dividend would be paid before the expiry of a futures contract and he had to pay the same price for the futures contract as for the underlying stock you would be a fool to enter the futures contract because you would miss out on the dividend. He therefore put it to Mr Teller that he knew that the futures price included an allowance for dividends. Mr Teller denied that, which in my view was a deliberate lie, as was his response to Mr Mayall's proposition that if there was no difference between the way in which the cash and the futures prices were made up no-one would place a futures bet because they would not get the dividend. Mr Teller's response that he was unaware of that and did not understand how dividends worked was in my view wholly implausible, even allowing for the fact that there are other advantages of spread betting as empowered with buying shares such as leverage and lack of capital gains tax.
470. Mr Teller was asked about a sample bet placed by him on a US stock, codename ARTC at 20:49:03 hours on 30 July 2007. It was one of the trades on the Colley Master Detail Sheet May 12 which he placed for which there was Xcon audited information as to the date and time of the insertion of the dividend. A dividend of 500 cents was inserted at 20:41:40 some 7½ minutes before Mr Teller placed the bet. The audit information showed that the stock was one which did not pay dividends. The dividend was removed at 10:20:15 the next morning before the US market opened and Mr Teller closed his bet three days later.
471. Asked why he placed the bet Mr Teller said that it was hard to remember a specific trade. In principle that struck me as perfectly plausible. However his explanation as to the approach he adopted to the selection of stocks on which he placed bets generally was in my view implausible, inconsistent and untrue.
472. He said that he traded on quite a few US stocks and looked for the biggest price movers because they moved for a reason. If a stock was up 20% you would look at it and you might short it on the ground that it had been over bought. Towards the close of the US market he would look for stock with the biggest downward movement on the day because there was a good chance that the next day the price would bounce back. Such stocks might be oversold due to news. He would go through the US stock list on the IG dealing platform on the IG website looking through the list of losers or the stocks with the biggest potential fall. The stocks were listed alphabetically A – E, F – I etc. He flicked through 2,000 stocks. He said he was not sure if he could see the cash prices and said that cash prices were irrelevant because he was trading future.
473. He accepted that there was no list of losers on the IG Index website so that he had to go through all 2,000 stocks listed looking for the stocks with the biggest downward price movement.
474. Since there were only about 7½ minutes between the 500 cent drop in the price caused by the insertion of the false dividend and the time when he placed the bet it followed that he would have had only 7½ minutes in which, scrolling down 2,000 shares to notice the price drop on ARTC and then to form a view as to whether to place a bet on it. There were other trades about which Mr Teller was not but could have been asked in which the gap between the insertion of the false dividend and his placing of the bet was even shorter. Thus for example on 3 January 2008 he placed a bet on a US stock at 20:57:37 only 45 seconds after a 500 cent dividend was inserted at 20:56:52. In that case he would have had 45 seconds within which his exercise of scrolling through 2,000 shares picked up the dramatic price fall if that was really the explanation for how he came to notice it. The explanation was in my view wholly implausible.
475. The implausibility was compounded by the evidence Mr Teller gave as to what he would do before deciding whether to place a bet on a stock which his trawl had picked up as having had a sharp drop in price. At first he said that he used to compare the futures price offered by IG Index with those offered by two other futures operators, Finspreads and World Spreads with whom he also had accounts. He said that he had those prices open at the same time as the IG Index prices. Sometimes he said that the spread betting price offered by one operator could be out of line with those offered by others. The clear implication in my view was that he was suggesting that his reason for selecting the particular stocks on which he noticed a sharp drop in the IG Index price was that he checked the price offered on the same stock by Finspreads and World Spreads and saw that the sharp downward movement of the IG Index price was not mirrored in the Finspreads and World Spreads prices.
476. When Mr Mayall pointed out the complete implausibility of IG Index offering a price 5 dollars cheaper those offered by World Spreads and Finspreads, both of whom took their underlying cash price from Bloomberg so that the only difference in prices offered between the firms was the spread, Mr Teller floundered. His first response when Mr Mayall put it to him that if the different operators offered wildly different prices people would arbitrage was to say that he was sure they did. Faced with the implausibility of that answer, Mr Teller changed tack. When it was put to him that it was not probable that there would be a 5 dollar difference in the spread offered by IG Index and the other operators, Mr Teller said that he might not have compared the IG Index price with those offered by the other spread betters. Instead he might have looked at the percentage change in the IG Index price on the day in the particular stock that he was looking at. At this point Mr Mayall put it to Mr Teller that he was making it up as he went along, which in my judgment accurately described Mr Teller's evidence. When it was put by Mr Mayall that there was no time to check the change in IG Index prices, Mr Teller changed tack again and said that price comparison was only one way of trading. There were many others. One method he used was to look at CNBC and to do research on particular stocks. When it was pointed out by Mr Mayall that if the reason he selected all the nearly 80 stocks on his own account which benefited from the insertion of false dividends was because of what he saw on CNBC and had nothing to do with the downward spike caused by the false dividend it was a coincidence that he happened to get the benefit of the downward spike in price. To that Mr Teller replied that he would have seen the downward spike. Asked if he was saying that for each of the 160 allegedly fraudulent bets placed on his account and the others on which he traded the reason he placed the bets was because he saw the downward spike Mr Teller said that it was. He then said it was probably only a small number of those which he checked against Finspreads and World Spreads. When it was put to him that that answer was ridiculous because the other operators might offer a better price than IG Index, Mr Teller changed tack again and said that sometimes the other operators would not accept a bet due to its size. When it was put to him that he would nonetheless look to check the prices offered by Finspreads and World Spreads Mr Teller said that he would not. He said that it never struck him as odd that there were huge disparities in prices between those offered by Finspreads and World Spreads and the IG prices. He said that he knew that lots of mistakes can happen in the market. He also said that he never compared the IG Index futures price against the underlying cash price because the cash price was always delayed on the Internet. Again I found that implausible and inconsistent with his evidence that at work he would have open eight screens and a price feed and at home two or three screens.
477. Mr Teller gave no plausible explanation as to why the mere fact that the futures prices of the 160 stock which he selected had gone down sharply led him to believe that the price would go up again rather than continue to go down. Nor was he able to come up with any reason why, if Mr Colley had fraudulently entered false dividends on the 160 bets which Mr Teller placed and he was not an accomplice of Mr Colley, on none of them did the intended accomplice place a bet. He did not accept that that would be highly improbable but was unable to explain why that would not be highly improbable.
478. When asked why his mother and sister and Mr Cowan had not contested the claims against them Mr Teller said that "we paid up for a number of reasons". As earlier mentioned IG Index obtained judgment against Mr Cowan in the sum of £22,263, against Mrs Teller in the sum of £20,204 plus costs and against Ms Teller in the sum of £56,151 plus costs, a total of nearly £100,000 and costs. If there had been a reason other than a recognition that there was no substantive defence to the claims one would have expected Mr Teller, who by his answer indicated that he was aware of the reasons, to have said what it was.
479. In written closing submissions Mr Teller purported to explain why the claims against his mother and sister and Mr Cowan were not contested. He said that the proceedings had put a huge strain on his family, which is why "we" got to the point that "we" had to take a view as a family on various accounts. He wished they could have fought the claim all the way and although confident there was always that uncertainty of coming out victorious, coupled with other things "we as a family" had to take into account. It was a huge claim against the family so his parents made a commercial decision to settle his mother's account of £16,295. "We" understood that that amount with interest and costs added to it would jump very quickly. His parents also decided to settle his sister's account of £45,285. He said that decision was based on a couple of key reasons. First, his sister was then teaching in Israel and "we" did not think it was fair in many ways to bring her back for a trial due to the stress and time off etc. Also his sister has a history of anorexia and depression which she suffered for years and "we" did not want to put any strain on her or unsettle her in any way. Thirdly, "we" chose to settle Mr Cowan's account of £18,245. Although the account was in Mr Cowan's name it was fully Mr Teller's responsibility and there was always the risk of losing a trial and he did not want that hanging over Mr Cowan and his wife and two children. It was not fair. He did not want him potentially receiving any judgment or dragging him into a trial in relation to something he had nothing to do with. His complete lack of funds which were thrown towards his legal costs meant that his parents settled those claims from their own funds.
480. These were all self-serving explanations, which Mr Teller could have given when asked to provide them under oath. He did not to do so. Nor did he call his parents or Mr Cowan or his sister to testify to them. They were not capable of being tested or challenged by IG Index in cross-examination and I do not accept them.
481. Mr Teller's evidence left me in no doubt that there was no innocent explanation for why he placed and closed 160 bets which benefited from the insertion and removal of huge false dividends and that his oral testimony was a transparent and unsuccessful attempt to disguise the fact that the true reason was that he had been alerted by Mr Colley that he would insert or had inserted false dividends on particular US stocks at particular times on particular days and thereafter that he had removed or would remove the false dividends on particular days and times. I am completely satisfied that Mr Teller was acting in concert with Mr Colley in a deliberate dishonest and fraudulent course of conduct which was designed to defraud and succeeded in defrauding IG Index by enabling Mr Teller to place bets below the true market price.
482. Mr Teller in cross-examining Mr Colley asked him if Mr Teller had ever paid Mr Colley cash before, during or after the alleged fraud. Although technically this was cross-examination it was in reality a friendly full toss which Mr Colley had no difficulty despatching to the boundary by answering that he did not. By asking the question Mr Teller demonstrated in my judgment that it was clear to him, and in my view to all the parties, that it was a part of IG Index's case that the client Defendants agreed to and did make payments to or confer benefits on Mr Colley in return for being given the opportunity to make unwarranted and fraudulent profits at IG Index's expense. The same is true in my view of the fact that Mr Colley asked Mr Osborn in cross examination if Mr Osborn had ever given him money (to which the answer was no). As I have already indicated in the context of my findings in relation to Mr Colley, I have taken very carefully into account and weighed in the scales in favour of Mr Teller that IG Index did not adduce any direct evidence of payments directly or indirectly from Mr Teller to Mr Colley. However, in my judgment the weight attributable to the absence of such evidence is insufficient to outweigh the strength of the evidence to which I have referred, which leaves me in no doubt that Mr Teller was an accomplice of Mr Colley with whom he acted in concert in placing the 160 bets which are the subject of this claim, knowing that because of Mr Colley's insertion and removal of false dividends the bets would defraud IG Index. When Mr Osborn gave evidence he said that whenever he paid Mr Teller, pursuant to his agreement to pay him two thirds of the profit on any bet placed by Mr Teller on Mr Osborn's account, he always did so in cash at Mr Teller's request. Since profits on spread betting were tax-free and there was no obvious legitimate reason why Mr Teller would wish to be paid in cash, that evidence contributed to my conclusion that Mr Colley's denial that Mr Teller ever paid him cash was probably untrue. However even if it was true, I consider it probable that in one way or another Mr Teller conferred made payment to or financial benefits on Mr Colley in consideration of his enabling him dishonestly to place bets with IG Index at artificially depressed prices and did so pursuant to agreement with Mr Colley.
483. I find that when he placed the 160 bets which are the subject of the claims against him, his mother, his sister, Mr Osborn and Mr Cowan. Mr Teller did so dishonestly and in concert with Mr Colley, having been informed by Mr Colley in advance that he had inserted or would insert large false dividends which did not reflect announced or genuinely anticipated dividends, together with the times and dates and that when he closed them he did so having been told by Mr Colley that he had removed or would remove the false dividends together with the dates and times. I find that he participated with Mr Colley in a fraud designed to enable him to profit by placing bets with IG Index at prices which were below those which IG Index would have offered without the insertion of false dividends and below those which reflected the underlying cash market prices of the stocks. I find that he did so in pursuance of an agreement with Mr Colley that they would do so and that it is likely that as part of that agreement he agreed to make payments to or confer other financial benefits on Mr Colley and subsequently did make payments or confer other financial benefits on him in return for being given the opportunity to place bets at manipulated prices at the expense to IG Index. I find that when he paced the bets Mr Teller was trading fraudulently and that he was a willing participant in Mr Colley's fraudulent activities.

IG Index's primary case against Mr Slaney

484. As with Mr Teller, in assessing the merits of the claim against Mr Slaney, I proceed on the basis that I am satisfied that Mr Colley perpetrated a very large number of dishonest insertions and deletions of false dividends over a three year period in order to enable particular friends of his or their relatives or friends to benefit financially by placing bets at the artificially depressed prices created by the insertion of the dividends and closing the bets after they were removed.
485. Mr Slaney was a fire officer with the London Fire Brigade. He said in his witness statement that he had no formal training in the financial markets and no great understanding of the terminology used in them. He explained the strategy he used from when he opened his account with IG Index to when it was suspended in late 2008. In doing so he said that since he had not traded seen or used IG Index's trading platform for almost 3 years he was doing so from 3 year old recollections.
486. After spending some time practising with a paper portfolio he applied for a limited risk deposit account with IG Index in August 2000. Shortly after opening the account he made a deposit of £1,000 or £2,000. Initially he traded on any stock which he felt would move in a positive manner trading mostly in buy or up bets. They were not limited to but mainly concentrated in more stable UK stocks.
487. Over the years he refined that approach and mainly traded on stocks which moved quickly so that a bet could be closed out more quickly realising a profit sooner and freeing up any capital he had for the next trade. He said that he also sometimes traded in a manner not reliant on underlying causes in the market to make its share price move up or down. He said that live share price graphs of individual stocks in more volatile markets offered by IG Index's pure dealing trading platform showed that in the peaks and troughs created from shares being bought and sold there was an underlying median price to which it would almost return. If the peak or trough was great enough to beat IG Index's spread costs and the spike was not related to an obvious underlying cause in the market he would sometimes trade on those differences to realise a very quick profit. Those exploitable variables appeared to be at their greatest at the open or close of a given market.
488. I observe that implicit in both these approaches was an element of research either into the individual stock under consideration or into the market on which Mr Slaney reached an informed view either as to the reason why the stock had gone down or as to its prospects of going back up.
489. Mr Slaney said that after his initial deposit he never needed to make any more because he would just trade from profit made on previous trades. He said that the 46 trades alleged by IG Index to have been fraudulent represented less than 5% of his trading activity on the assumption that he made no more than 1,000 trades. In fact one of the spreadsheets showing the number of deals placed by the 18 alleged accomplice clients showed that in the period before his first allegedly fraudulent bet Mr Slaney placed 492 bets and in the period during which he placed the 46 allegedly fraudulent bets he placed a total of 166 bets.
490. Mr Slaney placed 46 allegedly fraudulent bets. They were all placed after the insertion of a false dividend and closed after the removal of the dividend. On 5 of the 46 bets the dividend was removed two days after it was inserted. The remainder were removed the next day.
491. Xcon audited information was available for 11 of the 46 transactions. On 10 of the 11 bets the dividend was removed before the opening of the US market the following day. The dividends inserted on all 11 were in each case a round figure ranging from 350 cents to 600 cents. All but one of the 11 stocks on which Mr Slaney placed his bets had never declared a dividend. On all 11 occasions the false dividend was inserted within 10 minutes of the close of the US market and on 10 of those occasions Mr Slaney placed his bet after a gap ranging between 2 and no more than 5 minutes after the insertion of a false dividend. On none of those occasions or the other 36 occasions did any other IG client place a bet on the relevant stock after the false dividend was inserted.
492. Mr Slaney in his oral testimony was unable to offer any remotely plausible innocent explanation for how he came to place 10 bets within 2 to 5 minutes of the insertion of a false dividend in circumstances when no other IG Index client did so or how if he was not the intended accomplice he came to place no fewer than 46 bets on stocks on which a false dividend had been entered in circumstances in which not only did no other IG Index client place such a bet but in particular the intended accomplice of Mr Colley failed to do so.
493. Mr Slaney's evidence on how he came to place these bets was in my judgment incredible and I did not believe it.
494. Like Mr Teller when asked about a particular bet which he placed just over 4 minutes after the insertion of a false dividend Mr Slaney said that he could not remember why he placed the bet. Again as with Mr Teller that was not surprising and I drew no adverse inference from his failure to remember.
495. He answered the question in general terms saying that there must have been a spike in the market. Generally he decided to bet either because he felt from information on the internet that a stock was a good buy or if he observed a particular stock in more detail and there was a big spike in the share price when he was on the IG screen he might buy it. It was always based on some kind of information. Generally when he placed a bet he looked at the IG Index screen. He had no financial feeds open but might have looked at the Internet. He used to trade at home.
496. Asked how he would select what to look at on the IG Index screen Mr Slaney said that if it was based on information he had seen on a website he would go straight to the IG Index trading platform and use the search facility or search for a stock manually and it would come up. He had no formula. It was just based on what he read on the internet. He tried to find stocks which would realise a quick profit.
497. He said that he was mainly interested in US stocks because in his experience they moved more quickly. He readily agreed that of course he did not have all 2000 US stock prices quoted by IG Index open on his screen in front of him.
498. He said that at any time he might have either one stock open on the IG Index screen or numerous stocks. If it was the latter, he said that the IG Index screen showed a number of stocks at a time, the 2000 US stocks being listed alphabetically.
499. Asked if he could remember how many stocks the IG Index screen showed Mr Slaney answered: "No, it was definitely 20, 30, 40, I can't remember, I can't remember off hand". To ensure I recorded his answer accurately I asked: " On the screen it showed 20 to 40 at a time. Is that what…?" Mr Slaney replied: "Yes. You could either narrow it down to look at individual stock or (pause) in fact it was probably more than 40 I couldn't say with any certainty." When Mr Mayall put it to him that at any one time he would be looking at a maximum of 40, Mr Slaney said that there could be more than 40 he did not want to take it as gospel but he agreed that he was able to look at a number of stocks. He said that if he bought a stock a few minutes after the price came down after a dividend had been inserted, if it was not one which he had researched and had gone into the IG Index screen to buy, he was saying that he bought it because he just happened to notice the price drop on the IG Index screen.
500. Mr Slaney accepted that unless he had researched a particular stock and was going into the IG Index screen to buy that specific stock because he thought it was a good buy, if his reason for buying it was that he noticed the downward spike in the IG Index price he could only notice that if it happened to be one of the 20 or 40 stocks which was on the IG Index screen at that time. "I am in total agreement". If the screen was not open on the page on which the relevant stock appeared he would not know about the spike. He was asked if he was saying that it was a coincidence that on the 46 times when a false dividend was inserted into a US stock he happened to be on the page on which that stock appeared. He said that that was what he was saying. When it was put to him that he was a very lucky man Mr Slaney said that he thought he was. It was thus pure chance that on each of the 46 occasions when there was a sharp downward spike in the price of a US stock caused by the insertion of a dividend he happened to have either the alphabetical page on which that stock appeared open or the page which showed only details of that stock open. As Mr Mayall pointed out to him if there were 40 US Stocks listed on each alphabetical page, given that there were 2000 US Stocks offered by IG Index there was only a one in fifty chance of the relevant page showing the stock with its downward spike being open at any given moment. If there were only 20 stocks listed per page there was only a one in a hundred chance. If Mr Slaney had open a page having only the details of one stock there was only a one in 2000 chance of that page being open at the time of the downward spike in that stock.
501. Mr Slaney also said that if he saw a huge price drop on an individual stock on the alphabetical list he could go into that individual stock in greater detail. In that case in order to see the graph showing the price movement of the individual stock on the day he would only get that one stock on the screen.
502. On Mr Slaney's evidence if he saw a sharp downward spike in the price of the US stock he would buy it. There are only two ways in which he could become aware of such a downward spike. Either he had open one of the pages listing US stocks in alphabetical order. Or he had open the page showing the individual stock. If it was the latter the chances against Mr Slaney happening to have open the page showing only that relevant stock were 2000 to 1 against. If it was the former the chances depended on how many stocks appeared on any one page. In a written response to Mr Mayall's closing written submissions Mr Slaney did not take issue with the proposition that he had placed all of his 46 bets as a result of seeing the downward spike in the futures price. However he challenged the submission that he had accepted in his evidence that only between 20 and 40 of the 2000 US stocks quoted by IG Index would be shown on any particular screen page on the IG Index screen. He said that in his evidence he had said that he could not remember and that it was possibly that amount.
503. I have set out Mr Slaney's evidence on this above. In the light of his response to Mr Mayall's submission I have listened carefully more than once to the tape recording of his evidence on this.
504. It is right to say that Mr Slaney in his testimony said that he could not remember and later qualified his initial answer by saying that it was probably more than 40 names per page. However it was striking that his initial answer was that there were definitely 20, 30 or 40 names per page. I had the impression that when, after a pause, he changed his evidence to say that it was probably more than 40 that was prompted not by a better recollection but rather by a realisation of the extreme improbability of him having had open on the screen, on no fewer that 46 separate occasions, the one page out of a possible 50 on which appeared a US stock into which a false dividend had been inserted leading to a shard downward spike in the price.
505. It was also striking that when Mr Mayall put to Mr Slaney the odds against him having had open the page containing the relevant stock if it had only 20 or 40 out of the 2000 US stocks quoted by IG Index, Mr Slaney did not suggest that the number of stocks per page, was probably or even might have been significantly larger. If for example it had been 70 to 1000 or even more than that, I consider it unlikely either that Mr Slaney would have given the original testimony he did or that he would not have corrected that testimony to give some such indication.
506. As I have said I found Mr Slaney's evidence on how he came to place the 46 bets incredible and I did not believe it. His general suggestion that he would sometimes trade on peaks or troughs if they were not related to an obvious underlying cause in the market did not strike me as a realistic explanation for his decision to place those bets which the evidence shows he placed a few minutes after the insertion by Mr Colley of a false dividend. Nor in his testimony did he suggest in respect of those trades that within those few minutes he undertook relevant market research or that he happened to have undertaken it in advance.
507. It is right that Mr Slaney said that on occasion he bought stocks not because he noticed a downward spike but because of prior internet based research. However it is in my judgment overwhelmingly unlikely that on so many occasions Mr Slaney would have placed bets on US stocks on which Mr Colley had inserted false dividends for no reason other than that he happened by chance to have open on the IG Index screen in the relevant window of time, which was often very short, the very page on which either the individual stock appeared on its own or on which it appeared with however many other US stocks appeared in the relevant alphabetical page which listed IG Index's US stocks. Mr Slaney was driven to accept that he had no explanation other than that he was a lucky man. I did not believe that he believed that explanation or had any serious expectation that I would believe it either.
508. It was pointed out to Mr Slaney that on almost every occasion the false dividend was removed the following day. He accepted that on such occasions the resulting profit would appear on his IG Index account the following day and in the handful of cases where the dividend was removed two days later it would show up the day after. Asked whether he spotted these large profits overnight on the 46 trades Mr Slaney was evasive. He said that he had a stop loss and sometimes checked his profit and loss and sometimes did not. As was pointed out to him a stop loss would limit the downside risk of a further drop in the price but would not be a reason for not checking to see whether he had made a profit.
509. Like Mr Teller, Mr Slaney said that he did not know how dividends affected the futures prices and did not understand how futures prices worked. As with Mr Teller I did not believe that evidence. Mr Slaney had on his own evidence spent some time practising with a paper portfolio before opening his IG index account and managed to trade so successfully that he was always able to use his profits to finance further trades and never had to deposit more collateral with IG index. He was sufficiently well informed to understand the utility of a stop loss and he said that he did a certain amount of market research. Nor did I find convincing his evidence that it was unlikely that he noticed in respect of any of the 46 trades that despite the fact that he made a large profit the underlying cash price had not changed so as to explain that profit because he did not understand how futures worked.
510. When asked if he could think of any reason why on every occasion when he placed a bet after Mr Colley fraudulently manipulated the dividend (assuming that was the case) he placed a bet but the intended accomplice did not, Mr Slaney was only able to say that the trades happened very quickly. That did not engage with the question. At the end of his evidence Mr Slaney was asked if it was his case that he placed the 46 bets because of his research on the individual stocks or because he noticed the downward spike in the price or that he could not remember. At that stage he said that it could be either one. If he traded very soon after the downward spike in the price then his reason for placing the bet would have been the visual stimulus i.e. noticing the spike as opposed to an informed process based on information available on the internet. Although that answer appeared to be more limited that the general answer referable to all 46 trades to which I have referred earlier, it remained fundamentally implausible and incredible for the reasons I have given.
511. As with Mr Teller the unsatisfactory nature of the evidence given by Mr Slaney did nothing to undermine but on the contrary gave further substantial support to the inferences to be drawn from the other evidence to which I have referred (both in relation to Mr Colley and in relation to Mr Slaney) that when he placed his 46 bets and then closed them out he was acting in concert with Mr Colley who had informed him in advance that he had inserted or would insert false dividends on particular days and at particular times and subsequently that he had removed or would remove them on particular days and at particular times. It supports the conclusion which I reach that Mr Slaney was a dishonest accomplice of Mr Colley engaged in a fraudulent course of conduct designed to defraud and successful in defrauding IG Index by enabling him to place bets at artificially depressed prices.
512. I accept IG Index's submission that, despite Mr Slaney's attempt to downplay his connection with Mr Colley (which he did not disclose in his witness statement) the connection was more than merely casual. The fact that IG Index did not find any further evidence of a connection between Mr Colley and Mr Slaney does not mean that it was limited in the way claimed by Mr Colley and Mr Slaney. But even on the basis of the evidence of the email referring to the purchase of presents for Mr Slaney's new born baby and the accompanying message, and the admitted friendship between Mr Slaney's wife and Mr Colley's former partner and the significant price of the presents, there is compelling evidence to support the inference that Mr Slaney was indeed the intended beneficiary of the financial advantage intended to be conferred by Mr Colley on the person whom he intended to place bets after he inserted 46 false dividends on the stocks on which Mr Slaney placed his bets.
513. Both Mr Colley and Mr Slaney made the point that Mr Colley was unlikely to have sent incriminating emails from his work email address if he was engaged in a fraud. However, as pointed out by IG Index, Mr Colley did not send any email on his work address to any of the alleged accomplices or receive any email from them. The few references to the alleged accomplices found by Ms Crowther appeared only in social emails to third parties and the possibly unsolicited email to Mr Colley from the baby gift supplier. That is consistent with Mr Colley being careful not to leave an incriminating email trail on his work email address but, as not infrequently happens with frauds carried out over a long period of time, making a few small mistakes.
514. Like Mr Colley, Mr Slaney in his closing submissions challenged the reliability of the financial information relied on by IG Index. Indeed he went further and suggested that IG index deliberately withheld information which they could access because it contained statistics which did not help its case or was in direct conflict to what IG Index was trying to set out to prove statistically. I entirely reject that suggestion.
515. It is true that some of the Xcon audited information was not available at trial but I am satisfied that the reason for that, as explained by the relevant witnesses from IG Index's IT department, was entirely innocent. It is also the case that Mr Gordon in his second witness statement and in oral testimony made a number of minor corrections to the information contained in the various spreadsheets which he adduced in evidence. Again I saw nothing sinister in that.
516. As previously said I am satisfied that the Xcon audit information was both authentic and reliable and that the information contained in the various spreadsheets adduced by IG Index and Mr Gordon in particular were prepared diligently and in good faith. In my judgment their reliability was not undermined in any substantial way such as would render them unreliable in respects material to the issues which I have to decide.
517. In his closing submissions Mr Slaney relied on a number of matters which were not in evidence to support the submission that he had so much to lose, if he had engaged in the fraud as alleged should it be discovered, that nobody in his position would agree with Mr Colley to embark on such a fraud. He said that he started his employment with the Fire Brigade in 1995 and at the time of the alleged fraud would have served 14 years which is almost exactly half way through his career. His daughter was born in December 2005, the date of his first alleged trade being September 2005. He said that the bank statements he provided showed that in the three years prior to any alleged involvement in fraud he had earned £141,000 and was therefore financially secure. If he had got involved in the alleged fraud he would be risking not only losing his career in the Fire Brigade but also the pension he had paid into for 14 years plus a very real risk of going to prison and not being able to see his wife or new-born daughter. If he had given Mr Colley a cut of 50% of his profits on the allegedly fraudulent trades he would have been left with £85,000, £46,000 short of what he would have been earning by himself legitimately.
518. Mr Slaney was a litigant in person and I am content to accept at face value the facts (as distinct from the assertions) to which he referred which I have just set out. I have indeed taken very carefully into account the inherent unlikelihood of a man in Mr Slaney's position embarking on a fraudulent course of conduct such as is alleged against him. I place it on the scales in his favour and have given it anxious consideration and no small weight. However, I am driven reluctantly by the weight and strength of the evidence on the other side of the scales, not excluding my judgement as to the unreliability, implausibility and untruthfulness of much of his testimony, that he did indeed engage in a fraudulent course of conduct with Mr Colley as alleged by IG Index.
519. As in the case of Mr Teller, IG Index adduced no direct evidence of any payments of money directly or indirectly by Mr Slaney to Mr Colley. I repeat the observations which I made as to this in the case of Mr Teller. In short I took this very much into account as a factor weighing in the balance in favour of Mr Slaney. However, it is outweighed by the strength of the evidence against Mr Slaney to which I have referred. As in the case of Mr Teller, it is in my judgment a probable inference from all the other evidence which has led me to conclude that Mr Slaney was an accomplice of Mr Colley when he placed the bets which are the subject of this claim, that he probably conferred some financial benefit directly or indirectly on Mr Colley in return for the profits he was able to make through the fraudulent bets.
520. I find that, when he placed the 46 bets which are the subject of the claim against him, Mr Slaney did so dishonestly and in concert with Mr Colley, having been informed by Mr Colley in advance that he had inserted or would insert large false dividends which did not reflect announced or genuinely anticipated dividends, together with the times and dates and that when he closed the bets he did so having been told by Mr Colley that he had removed or would remove the false dividends together with the dates and times. I find that he participated with Mr Colley in a fraud designed to enable him to profit by placing bets with IG Index at prices which were below those which IG Index would have offered without the insertion of false dividends and below those which reflected the underlying market cash prices of the stocks. I find that he did so in pursuance of an agreement with Mr Colley that they would do so and that it is likely that as part of that agreement he agreed to make payments or confer other financial benefits on Mr Colley and subsequently did make payments to or confer other financial benefits on him in return for being given the opportunity to place bets at manipulated prices at the expense of IG Index. I find that when he placed the bets Mr Slaney was trading fraudulently and that he was a willing participant in Mr Colley's fraudulent activities.

IG Index's primary case against Mr Regan

521. Mr Regan placed 46 allegedly dishonest bets. Xcon audit information was available for 11 of them. On all 11 Mr Regan placed his bet shortly after the insertion of a dividend. In 10 of them the dividend was inserted within 11 minutes of the close of the US market. The 11^th was inserted at 17:49:22 on Christmas Eve, when the US market closes early.
522. All 11 bets were placed within a matter of minutes after the insertion of the dividend. The longest gap was 9 minutes, the shortest gap was 1 minute. There were 3 gaps of 1 minute, 1 gap of 2 minutes, 3 gaps of 3 minutes, 2 gaps of 4 minutes, 1 gap of 7 minutes and 1 gap of 9 minutes.
523. The dividends inserted on the 11 stocks were all in large numbers ranging between 350 and 600 cents. Seven of the relevant stocks had not declared a dividend before and on the other four the amount of the next real dividend paid by the stock in question after the allegedly fraudulent bet was placed ranged from 3.33 cents to 15 cents. On all 11 occasions the dividend was removed the following day before the opening of the US market, save in the case of the dividend inserted on Christmas Eve which was removed before the opening of the US market on the day after Christmas. All but one were removed by someone using Mr Colley's computer reference. In respect of the 35 bets for which there was no Xcon audit information, Mr Gordon calculated, using the methodology to which I have referred, that large dividends ranging from about 200 to 600 cents were inserted on the date the bet was placed. The dividends were removed two days after insertion on 8 occasions, 3 days after insertion on 1 occasion and the next day on all the others. On 26 occasions bets were placed in a stock which had not declared a dividend before and in the remaining cases the next dividend announced after the date on which the bet was placed ranged in size from 3 cents to 52.5 cents.
524. On 45 of the occasions on which Mr Regan placed an allegedly fraudulent bet, no other IG Index client traded at the manipulated price.
525. IG Index accepted that, alone of the alleged accomplice clients, it was unable to adduce any evidence of any connection between Mr Colley and Mr Regan. That does not of course mean that there was no such connection, direct or indirect, but it is undoubtedly an important factor which distinguishes the case against Mr Regan from the cases against the other defendants and I have borne it very well in mind.
526. In his Defence Mr Regan denied any knowledge acquaintance or association either directly or indirectly with any of the other Defendants and denied ever having knowingly engaged in any course of correspondence, contact or dialogue with any of them whether directly or indirectly.
527. In his Amended Defence, which was settled by Mr White, Mr Regan asserted that IG Index's case depended solely on an unwarranted inference that because Mr Regan placed bets on stocks which contained an artificially manipulated price from which he profited he must have been a party to a fraudulent enterprise.
528. Mr Regan signed two witness statements, the first undated, the second dated 27^th April 2012. In the first he said that he followed a wide range of shares and indices such as the FTSE and the Dow Jones on Bloomberg and Google. He executed the trades by telephone, internet and a mobile application at any time throughout the day. Many trades made a profit and many made a loss.
529. He said that the trades executed by him where it was alleged that there had been fraudulent manipulation had been executed by him in good faith, that he was not aware of any manipulation and that he did not execute them for any reason other than that he thought that the price would move in a direction that would result in a profit.
530. Those where manipulation was alleged were a very small percentage of the total trades executed by him. Many of his trades, including some where fraudulent manipulation was alleged, resulted in a loss. He had a young family who he supported and he would never consider putting himself in jeopardy by involving himself in any kind of fraudulent activity.
531. In his second witness statement Mr Regan said that the only time he had ever spoken to Mr Colley was after he received a letter from him, two weeks after receiving IG Index's writ, in which he denied any wrong doing and suggested that Mr Regan's solicitor should contact his. He rang Mr Colley who said that he did not know what was going on, that he had lawyers and this should be sorted out. Mr Regan told Mr Colley that he did not understand why he had been served with court papers.
532. Mr Regan said that he had worked in the City of London since joining Barclays Stock Brokers in 1993 in a back office capacity. He was responsible for account reconciliation and settlements. He got an SFA Registered Representatives qualification which entitled him to provide regulated financial advice.
533. Since that job he had always worked within the financial markets and almost always within the operations sector of the industry ensuring the smooth settlement of financial instruments. He had worked and become very familiar with all types of UK and US equities, gilts, unit trusts, foreign exchange, soft commodities and futures and options transactions.
534. Most of his career had been spent in the back office departments of financial institutions. He had spent a small part of it trading foreign exchange but would not consider himself an experienced trader. However, as a result of working in the financial markets he had become familiar with the sort of work which traders or market analysts carry out and considered himself to be reasonably familiar with the financial markets. In 1996 he worked at Cazenove where his principal job was to book and settle US equities trades executed for clients on the NYSE and NASDAQ exchanges. Another part of his job involved collecting market data from other investment banks, Reuters Bloomberg and other publicly available materials to prepare daily reports for the equity trading desks concerning foreign exchange and other market and company news affecting international currency rates. He said that as a result he learned to assimilate and digest large amounts of market data in a short period of time.
535. In particular he said that understanding US equities, familiarity with the financial market and movements across various market indices including the NYSE and NASDAQ was an important part of his job. As part of his function in settling US trades he would see which US securities were being dealt and which trades resulted in profits or losses. He noticed that the most successful clients would focus on specific market sectors. In particular a number of Cazenove clients made large returns by successfully trading US securities in respect of technology, life sciences, natural resources and the healthcare sectors. As a result he became more aware of the potential to make profits by buying and selling shares across specific sectors within the US equities markets particularly those which displayed greater levels of volatility such as those just mentioned and therefore had the ability to generate significant returns or losses.
536. In 2003 he took a job at TRX Futures, a firm of commodities brokers, where he saw first hand how specialist firms which focussed on specific sectors or products were able to make profits, often against the market trends. He said that he learnt from that an important lesson, namely, that focussing on certain markets and being expert in them was a sensible way of making money.
537. Mr Regan said that he opened his trading account with IG Index just after he left Cazenove and decided to put into practice what he had learned in the previous few years. He opened his account with IG Index on 24 February 2003 with a deposit of £2000. He knew about IG Index because a member of his then weekend football team mentioned that he was involved in spread betting and had an account with them.
538. Before opening his account at IG index Mr Regan said that he considered one other spread betting company. When searching which spread betting firm to open an account with he saw that different spread betting companies would offer different spreads on the shares and indices which they traded. He went with IG Index because their spreads seemed more attractive than the competitor which he was also researching at the time.
539. Mr Regan said that he left TRX in August 2004 and joined Barclays Capital in September 2004 where he still worked at the time of the trial. His role there had been mainly in relation to the settlement of margin calls against futures and options trades as well as cash and collateral management.
540. Mr Regan said that the method he employed in placing his bets with IG Index was to focus on certain market sectors particularly where there was the potential for volatility in the pricing of certain stocks. All of his research came from either web-based research or the usual sources of stock market news such as Bloomberg.
541. In selecting which stocks to bet on he would typically conduct online research using websites like MSN Money, Yahoo Finance and searching out stock names on Google. Trying to apply the lessons he had learned at Cazenove he would focus either on indices bets, i.e. whether a particular market index would be up or down on a particular day's trading or on US listed companies involved in those sectors which he thought there was scope for profits – specifically Medical Science, Health Care, Pharmaceuticals and Natural Resources. Those particular industries were relatively straightforward to track and he would spend large amounts of time keeping those sectors or specific companies working in those sectors under review.
542. When considering placing bets in certain sectors he would use the websites referred to and MSN Stock Scouter and search for the top-rated stocks in each sector. He would spend many hours of his working day and also during his own time keeping appraised of market movements in those particular sectors. He estimated that he would usually spend at least 8 hours a day, sometimes more, sometimes less, monitoring market movements using those websites and Bloomberg which he could access from work. The websites he monitored gave him details of recent price movements of each stock and would rate each stock.
543. Over time he found that the MSN Stock Scouter site was the most useful tool for choosing US stocks. It rated stocks from 1 to 10 using a system of advanced mathematics to determine a stock's expected risk and return. He would go online and Stock Scouter would provide information as to top-rated stocks in each of the sectors he was interested in.
544. He would focus on US technology, Natural Resources and Healthcare sectors. Every so often he would select other sectors. For example automotive or property related stocks but that wasn't his focus. When he selected those sectors it was usually because he had read something in the press which pricked his interest.
545. Once he identified a stock he was interested in he would see whether the price of that particular stock was going up and if he felt comfortable he would place a bet with IG index in the direction he felt that the stock would move. When he placed a spread bet following his Stock Scouter research it was simply because he felt that the relevant equity would increase in value. He said that he did not look at dividend details or other market announcements. That information had already been priced into the Stock Scouter analysis.
546. Mr Regan said that he would also bet on indices movements. Most of his indices bets were on whether the FTSE 100 or Dow Jones indices would rise or fall over the day. His decisions on whether to go long or short on those bets were based on economic and market news due on the day such as interest rate decisions, unemployment figures and the market's reactions to such events.
547. During the time he held his IG Index account he typically bet long on stocks and both long and short on indices. He did not accept the allegation by IG Index that the increase in bet size he made during the period he held his account was indicative of fraudulent betting. In 2003 spread betting was new to him and the wider UK. With his growing confidence and understanding of spread betting his bets increased in size in corresponding fashion.
548. Mr Regan exhibited to his second witness statement and adduced in evidence a table which he prepared setting out the bets he made on US companies during the time he placed bets with IG Index. There were 84. He said that during the period between September 2004 and 2008 while he was working at Barclays Capital he created a spreadsheet of the US stocks he was interested in which was linked to Bloomberg so that live prices would be displayed in the spreadsheet for the stocks and indices he was monitoring at the time. In oral testimony he said that there were also UK stocks on his spreadsheet. He had identified potentially interesting stocks through researching Stock Scouter and added and removed stocks from the spreadsheet on a regular basis. The price monitoring spreadsheet grew organically over time. He said that approximately 2 or 3 years before his witness statement which was dated 27 April 2012 Barclays were undergoing a budgetary review which resulted in Bloomberg being removed from his work computer. At that point he deleted the price monitoring spreadsheet as it became redundant without the live price feed of Bloomberg and he had ceased spread betting at that time. He said that he no longer had a copy of it. It was held on his work computer which he now no longer had access to and which he believed was re-formatted some time ago as a result of routine IT maintenance at Barclays Capital.
549. When using Stock Scouter or his linked spreadsheet Mr Regan said that he would also review prices quoted on the IG Index website. When his research identified a particular stock of interest he would compare the price on the open market with the price quoted on the IG Index website. If there was a differential whereby the price on IG Index was lower than quoted elsewhere he would place a bet whereby he knew he would be up if the price of the stock increased. He spent significant amounts of time each working day comparing prices of stocks which he was researching with the IG Index,
550. Mr Regan said that a large proportion of his bets were made on the internet using a computer or the application on his mobile phone. At work he predominately used his mobile phone because accessing betting websites was strictly prohibited. However, on larger bets for example UK stocks he would usually make those over the telephone. He spent large parts of each day keeping a close eye on the stock markets and would be in front of computer terminals for his entire working day which would keep him appraised of the markets. When he got home in the evening he would spend large amounts of time researching them as well. He would often spend his evenings in front of his laptop, reviewing any difference between prices quoted on the IG index website and prices quoted elsewhere.
551. Given his interest in betting on the American Markets, both on the market indices and on individual stocks, he found the best time to look at them was in the evening shortly before the US markets closed at 9 o'clock as that was a time when prices would often fluctuate and there were good deals to be had and profitable bets to be made if you kept an eye on the market movements. That also meant he would follow the markets from home on a regular basis.
552. While at Barclays Capital he had remote access to his work PC which allowed him to have access to Bloomberg and the linked spreadsheet so that he could check live prices from home in the same way as he could in the office. He kept himself up to date with various companies he was monitoring and would try and spot any noticeable fluctuation in the price. He would regularly act on price changes whether it was a positive or negative movement. It wasn't possible for him to monitor all markets all of the time so that he was not able to spot every opportunity.
553. In his witness statement Mr Regan responded to a worked example of a bet he made identified by IG Index in response to a request for further information from Mr Colley dated 12 August 2010. He made the bet at 20:57:49 on 31 August 2008 betting £10 per point on Hornbeck Offshore Services at a price of $3789.35 using his IG Index account. He did not accept that the example demonstrated that he made a fraudulent bet on a manipulated price knowingly and in concert with Mr Colley.
554. He said that it was extremely difficult for him to remember specific trades nearly five years earlier but set out to explain to the best of his ability how he came to place the bet on that particular stock. He would first have searched the Natural Resources industries on MSN Money using the Stock Scouter. He would have considered the rating of those companies listed with a high score usually not looking at companies with a score below 9 or 10. On that occasion he would have identified that Hornbeck Offshore Services scored highly on the Stock Scouter and would have added the stock to his watch list in MSN Money and to his personal spreadsheet. He could not confirm the date that he would have done that before making the bet but it would probably have been days before hand. He would then have undertaken more web based research on the company before deciding to continue to monitor it.
555. In this instance he would have been at home monitoring his spreadsheet and the price for Hornbeck Offshore Services amongst other stocks using his office based Bloomberg account and his IG Index account. He would have noticed that the price on IG Index had moved downward. In that instance he simply made the bet on the strength of research he had previously undertaken into the company. He made bets on the prices indicated by IG Index and would have no reason to suspect that the price in that case had been fraudulently manipulated, if indeed it had been.
556. More generally, he was aware that IG Index offered in excess of 7000 shares futures for customers to spread bet on of which he knew 2000 were US shares futures. In the case of each of the alleged fraudulent bets he said that he made his selection based on internet research through which he was well placed to spot any opportunities in the market. He did not appreciate that IG Index had made a mistake in quoting certain stocks at prices which were below market. He knew from his own experience of working in the financial markets that often different institutions quote different prices for the same stocks. He also knew that different spread betting firms have different spreads. He knew from previous dealing with IG Index that it had a large back office team which actively monitored all bets and had an internal system for contacting clients as soon as a Manifest Error was identified. He was contacted by IG Index on two or three occasions when Manifest Errors had been made in prices quoted for the stocks he had bet on and made corrections to the bets accordingly. He exhibited and adduced into evidence transcripts of three voicemail conversations, one of which I have referred to earlier. He was not notified by IG Index that the bets the subject of these proceedings were made on prices containing Manifest Errors and no corrections were made.
557. Mr Regan said that he had no dealings with Mr Colley or any of the other Defendants and had no idea until the proceedings were first threatened that the prices of the relevant stocks had been manipulated in any way. He did not know and had never known any former or current employee of IG Index and there was no way that he could have known that the prices quoted by IG Index at the time of the bets he made had been manipulated if they had been. Nor did he know or had he ever known any of the other Defendants. Any transactions undertaken by any of the other Defendants on the same stocks as those on which he had bet which were alleged by IG Index to be fraudulent were entirely coincidental.
558. Mr Colley in cross-examination denied knowing that Mr Regan worked in the Financial Sector and said that he had never met him.
559. In evidence in chief Mr Regan said that he did not remember each of the 46 allegedly fraudulent bets and when in his witness statement he said in relation to the worked example of his bet on Hornbeck Offshore Services that he would have first searched the Natural Resources industries on MSN Money using the Stock Scouter he said that that was how he researched all the US stocks on which he dealt, not just the 46 specific allegedly fraudulent bets.
560. In cross examination Mr Regan was picked up on the reference in his second witness statement to every so often selecting other sectors such as the automotive. It was suggested to him that this was an illustration of the fact that he had tailored his witness statement by going through the 46 allegedly fraudulent bets which he had placed and pretending that they were in areas which he was interested in. In his evidence in chief Mr Regan had corrected the reference to automotive and said that it should have read financial. He explained that when he reviewed the stocks in which he dealt when preparing his witness statement he did it quickly and noticed that he had placed a bet in Phelps Dodge. He did not think it was one of the 46 allegedly fraudulent bets. He mistakenly thought that it was a stock in Dodge cars but in fact it was in mining. He said that when in his witness statement he said that he would select other sectors it was not because he thought that he had done so. Rather he had looked at the stocks in which he dealt throughout the whole of his account with IG Index and mistook Phelps Dodge as a car company. However, he maintained that he had been interested in the sectors described in his witness statement and that every now and again he had read some news online about stocks which pricked his interest. It was put to him that the reason he had written in his witness statement that every so often he would select other sectors such as the automotive was that he needed to come up with an explanation for why he had bet on a stock which was not in the few areas on which he said he focussed. If that had really been the basis of his stock selection he would have realised that the automotive sector was not one of the other sectors he from time to time selected. Mr Regan denied that.
561. Mr Regan was cross examined about one of the 46 allegedly dishonest bets which he had placed for which there was Xcon audit information. The bet was placed on 17^th September 2007 at 20:55:58 in stock code number MTSC, a dividend of 450 cents had been added on the same day at 20:54:20, 1 minute and 38 seconds earlier. The actual dividend paid on that stock on the next dividend date after Mr Regan placed his stock was 15 cents paid on 2 January 2008 with an Ex-Date of 12 December 2007.
562. Asked how he decided to bet on MTSC Mr Regan said he believed it was in the Medical Sector, one of those which he was interested in following. He could not remember what it did other than that it was in the Medical Sector. It was put to him that it makes computer based testing equipment for testing materials. Mr Regan said he could not remember every stock in which he dealt. He said that he would have researched on the internet using MSN Money, Yahoo Finance and Googled the stock name leading him to the company website which would have shown what it did. He placed the bet because he thought it would go up and had followed it and other companies in that sector.
563. Asked if he placed the bet just because he thought the stock was good value, Mr Regan said that he would have looked at graph charts, ratings and recent news and would also have looked at cash prices.
564. Asked if his decision to bet on the stock was influenced by the fact that a few seconds earlier the futures price showed a sharp downward spike, Mr Regan said that if he saw a good opportunity to trade on a price which was lower than the cash price he would have bet on it.
565. Mr Regan accepted that he could only have seen the downward spike in the IG Index futures price if he had been logged onto the IG Index website and looked at the quoted futures price for that particular stock. He also accepted that the cash price shown on any website which he was looking at would not have changed and that he was looking at cash prices.
566. He said that if he followed stocks he looked at the cash prices on a spreadsheet or a watch list and if he saw the IG futures price was lower than the cash price he would deal.
567. Mr Regan said that he looked at the prices of a dozen stocks at the same time. When he placed this bet he was logged onto his spreadsheet which showed the live cash price of all the stocks he followed. He did not have 12 screens but had a watch list with all 12 stocks showing at once.
568. Mr Regan was pressed on his understanding of the significance of the difference between an IG Futures price and a cash price. His evidence on this was in my judgment unsatisfactory. At first he accepted that he did not expect the IG futures price to differ from the cash price ignoring dividend and interest. If the futures price on the IG website was lower than the cash price he would not know why that was but if he saw a difference between the two on a share on his watch list he would buy it. However, despite being pressed hard on this, he was unable to offer any rational or plausible explanation either as to what might account for the difference, other than the announcement or expectation of a dividend, or why the fact of a difference between the cash price and the futures price would of itself lead him to think that the futures price would go up resulting in a profit unless it was because he knew that the difference was accounted for by a dividend and the dividend would subsequently be removed.
569. He accepted that on the MTSC bet at 20:53 the cash price on Bloomberg and the IG futures price would have been almost identical and that at 20:54 the futures price plummeted whereas the cash price would have remained the same and that he could see that.
570. Mr Regan accepted that on all the allegedly fraudulent trades for which there was audited information a dividend was always added a few minutes before the close of the market and he placed his bet between the insertion of the dividend and the close of the market. He was pressed by Mr Mayall very hard to explain why he placed the bets when he did, whether it was because he noticed a sudden drop in the futures price as compared to the cash price and if so why he thought that the existence of such a price differential would be likely to result in a profit falling. It was put to him that since the only explanation for a large difference between the cash and the futures price could be the insertion of a dividend there could be no rational reason to regard that as a buying opportunity unless he knew that the dividend was going to be removed.
571. I was very struck by a number of features of Mr Regan's response to these questions. He appeared to me reluctant to answer questions the answers to which would show that Mr Mayall's points were correct. There were frequent long pauses between the question and his answer which I had a clear impression were the result of Mr Regan realising that a truthful answer would be unhelpful and either being reluctant to provide that answer or searching for a more helpful answer. On a number of occasions it was in my judgment clear that his answers were evasive or deliberately avoiding answering the question because he realised that there was no answer consistent with his evidence and his protestation of innocence. He also gave completely different answers to the same critically important questions.
572. These impressions were reinforced by the fact that in my judgment Mr Regan was unable to offer any plausible or credible answer to the logical force of Mr Mayall's points. Mr Regan accepted that it was his practice to have open at the same time live cash prices for the stocks whose futures prices he was looking at on the IG website. If he realised that any material difference between the cash and futures price on a particular US stock must or at the very least was likely to be the result of a dividend being built into the IG Index futures price, he would have had no reason to interpret the price difference as a potential source of profit. If, as was the case in all the allegedly fraudulent bets which he placed for which there was audited information as to the date size and time of the inserted dividend, the dividend ranged between 3.5 and 6 dollars, one would have expected an experienced trader such as Mr Regan accepted that he was who carried out extensive research into the history of the US stocks in which he was interested, as Mr Regan said he did, to realise that dividends of such a size were entirely out of keeping with the level of dividends normally expected on US stocks. Further and in particular one would have expected him to be aware that seven of them had never declared a dividend, or at least to check and quickly discover that fact.
573. On that hypothesis Mr Regan would be likely to have realised that a false dividend had been inserted into the IG Index futures price. Unless on eleven separate occasions he considered that such large false dividends had been inserted by mistake and that by chance he happened to have them open in the few minutes between the dividend being inserted and the market closing, not something which Mr Regan said he thought, the only rational way in which Mr Regan could have thought that he could benefit from the price differential would be if he knew or had reason to believe that the dividend would be removed.
574. If by contrast Mr Regan did not appreciate that the only, or the only realistic explanation for the sudden widening of the gap between the cash and the IG Index futures price was the insertion of a dividend, he was unable to offer any explanation as to why he was likely to benefit from that differential. He may of course have had sound or unsound reasons for thinking that the particular US stocks on which he bet would be likely to increase in price for reasons based on his research of the relevant stocks or the markets in which they operated, as was his evidence. But that would not provide an explanation as to why he placed the bets he did when he placed them. If one proceeds on the assumption that there is no financial benefit in placing a futures bet on a particular US stock after the price has been adjusted to reflect the announcement of a dividend rather than at any other time, one is left with the striking fact that Mr Regan happened to place eleven bets within minutes of the insertion of obviously false dividends for no apparent financial benefit unless he was aware that the false dividends were going to be removed.
575. Given that Mr Regan said that at any one time he had only twelve stocks on his watch list, and that IG Index offered futures prices on 2,000 US stocks, the likelihood of that having happened by chance is in my judgment so remote as to be far fetched. That unlikelihood is in my judgment compounded if one takes into account the evidence, which I have accepted, that Mr Colley dishonestly inserted false dividends with a view to benefiting particular accomplice clients on all 415 occasions which are the subject of this claim including the 35 bets placed by Mr Regan for which there was no audited information and the 11 for which there was. If there was no rational innocent reason for Mr Regan to think that there was extra profit to be made by placing a bet shortly after the opening up of a gap between the cash and futures price, in my judgment it beggars belief to suppose that he did so on no fewer than 46 occasions.
576. In my judgment the substantial unlikelihood of that having happened is made the more unlikely by two further factors. The first is that on all but one of the 46 bets no other IG Index client placed a bet with the benefit of the insertion of the false dividend. Thus not only was Mr Regan the only innocent IG Index client on 45 separate occasions to happen to place a bet on the relevant stock after the false dividend was inserted but in particular on all 45 occasions for some unexplained reason Mr Colley's intended accomplice failed to place a bet, thereby rendering pointless Mr Colley's dishonest insertion of the false dividend.
577. The second factor is a consideration of Mr Regan's trading history with IG Index. Mr White on behalf of Mr Regan emphasised that Mr Regan placed over 2,500 trades during the years in which he had an account with IG Index which he submitted placed the 46 allegedly fraudulent trades in context, by which I took him to mean, as did Mr Teller, that it renders less implausible the possibility that the 46 bets which happened to be placed and closed on dates which benefited from the insertion of a false dividend are explained by coincidence rather than dishonest collaboration with Mr Colley. While in principle I see the force of that point and it is a matter to be borne in mind and weighed in the balance it has to be set against a more detailed analysis of those 2,500 or so trades. (I also observe in passing that there is nothing in my judgment intrinsically implausible in a client who has placed a very large number of innocent bets over a long period of time having chosen to place a number of dishonest bets. That is a separate point from the one which I understood Mr White to advance).
578. Mr Regan placed 665 deals before the commencement of the alleged fraud and 1862 deals during the period of the alleged fraud. One of the striking features of those trades is that 768 were on an English energy company Desire Petroleum, 622 on Encore Oil PLC another UK energy company, 194 on the Wall Street Index, 182 on a UK company, 90 on another UK energy company, 55 on the FTSE 100 Index, 36 on another UK energy company and 36, 34, 20, 20, 16, 16, 16, 14 and 12 on other UK stocks. None of these is alleged to have been a fraudulent bet and it is not alleged that a false dividend was placed on any of them. In fact most of these figures include both opening and closing of bets and in particular some of the trades on Desire Petroleum and Encore Oil UK could have been autorolls in which futures bets could be rolled forward. That however could not have been the case with the Wall Street bets.
579. The number of bets placed by Mr Regan on US stocks was very significantly smaller, both in aggregate and as regards bets placed on individual stocks. There were fewer than 300 trades on US stocks.
580. In relation to Mr Regan's bets on US stocks 36 of the 95 US stocks traded are allegedly fraudulent trades involving the insertion and removal of false dividends. The vast majority of Mr Regan's trades on US stocks, both those alleged to be fraudulent and otherwise, involved only 2 trades and the largest number of trades on a particular US stock was 14 or 15.
581. Particularly striking in my view is the fact that during the period of the alleged fraudulent trades covering a 3 year period between September 2005 and September 2008 Mr Regan placed 54 bets on US stocks of which no fewer than 11 can be shown to have been placed within minutes of the insertion of a false dividend and 35 I have found were entered after it can be inferred that a false dividend was placed by Mr Colley and closed before the false dividend was removed. Thus although undoubtedly Mr Regan did place a number of none-fraudulent bets on US stocks both before and during the period when false dividends were inserted, they represented only a modest proportion of his overall trading and not only did he, alone of all IG Index clients, place bets which benefited from the insertion of false dividends on 46 US stocks, but no fewer than 85% of his bets on US stocks during this period were placed on stocks into which Mr Colley had placed a false dividend on the same day as the dividend was inserted and after it was inserted.
582. Coincidences do of course happen in the real world as do unlikely and even extremely unlikely events. I have no reason to doubt that Mr Regan with his long experience in working in the city and his record of a large volume of trading with IG Index did, as he said, engage in thorough research into possible stocks to bet on. However having listened to and watched Mr Regan very carefully as he gave his evidence I was satisfied that he was not giving a truthful account either of his understanding as to how IG Index calculated its futures prices or as to his reasons for placing bets on the stocks which benefited from the insertion and removal of false dividends.
583. Mr Regan said that before placing the allegedly fraudulent bets he was logged on to his spreadsheet which showed the live cash price of all the stocks he was following and in particular would follow a selection of 12 stocks on his watch list on the IG website. He thus had before him at the same time the live IG futures price and the live underlying cash price for the stocks. He said in relation to his bet on MTSC about which he was asked that he placed the bet because he thought the stock would go up having followed both it and other companies in its sector. However he also said that if, when he was logged onto the IG Index website, he saw that the futures price on one of the stocks on his watch list was lower than the cash price he would place a buy bet on it.
584. He was asked by Mr Mayall about his understanding of what would account for a futures price being lower than a cash price. At first he said that he understood that a futures price will usually mirror the cash price and that if there is a dividend in the futures price the futures price will be to that extent slightly lower than the cash price and that it would be slightly higher than the cash price because of interest. He also accepted that he would not expect the IG Index futures price to differ wildly from the cash price leaving aside dividend and interest.
585. It would seem to follow logically that his reaction on seeing a very sharp fall in the IG futures price compared to the cash price would be to assume that it reflected the insertion of a very large dividend. That of course is precisely what IG Index submitted he knew had happened because he had been tipped of by Mr Colley. However when it was put to him that the futures price and the cash price of MTSC having been almost identical at 20:53 the sudden plummeting of the futures price at 20:54 can only have been to a dividend, Mr Regan said that it could have been due to something else and he did not know why it would go down and become lower than the cash price. That answer was problematical for Mr Regan. First, if true, it would not provide a rational explanation for him deciding to place a bet if he saw a difference between the IG futures price and the cash price. If he did not know what accounted for it, there was no logical reason to suppose that it would be reversed. It was also inconsistent with the evidence he had just given that he understood that the futures price usually mirrored the cash price with the presence of a dividend making it slightly lower and the interest factor making it slightly higher and his evidence that he would not expect the futures price to differ wildly from the cash price ignoring dividend and interest.
586. This prompted Mr Mayall to seek confirmation from Mr Regan that he was not suggesting that he did not know how IG's futures price was made up. Mr Regan did confirm that he was not suggesting that but then proceeded to say that he did not know the reason why the IG Index futures price would be lower than the cash price, an answer which I found difficult to believe. In re-examination Mr Regan completely reversed his evidence and said that between September 2005 and October 2008 he did not on any of the very large number of shares on which he placed bets know that IG Index calculated its futures prices by incorporating a dividend. He said he only became aware of that later.
587. Not least because Mr Regan had worked specifically at TRX Futures in their back office booking futures trades, that his role at Barclays Capital had been mainly in relation to the settlement of margin calls against futures and option trades and that he had in his career worked and become very familiar with all types of future transactions that answer was in my view unbelievable and I did not believe it. A moment's thought reveals that unless a futures price is discounted to reflect the fact that the person placing a bet will not receive any actual dividends paid by the company before the expiry of the futures contract price, it would be to that extent less profitable to place the futures bet rather than buy the underlying share. It is of course true that there are other advantages of spread betting including leverage and the lack of capital gains tax but the point is nonetheless so fundamental to the difference between spread betting and buying shares that it would be very surprising if a man who spent many years working in the City including in particular on a job specifically involving futures was unaware of it.
588. It would be even more surprising if that person placed over 2,500 spread bets over several years, as Mr Regan did, and was as thorough as Mr Regan said he was in his approach to carrying out detailed research before placing his bets.
589. The inference to which in my view that evidence gives rise, namely that Mr Regan was aware that dividends were a component of the calculation by IG Index of its futures price, was strongly supported by an important piece of contemporaneous evidence. As mentioned above there was one occasion when Mr Regan was telephoned by an IG Index employee about a bet he had taken the previous working day on a US stock. As the transcript of the conversation shows, the employee could not have been more explicit. She said that checks that morning had shown that there was a wrong dividend amount in the stock which Mr Regan bought. IG Index were accounting for a fiver dollar dividend instead of a 9 cent dividend. Mr Regan's response was not one of bewilderment as to the relevance of that information to his bet. He simply said "oh dear". When the employee pointed out that there was quite a big difference of 491 points so that the price IG Index was throwing out on the Friday evening was "quite substantially palpable". Again Mr Regan simply replied: "Sure", again suggesting that he understood both that the futures price was discounted to reflect an anticipated or announced dividend and that if an incorrect and excessively large divided had been included in the price that would have artificially reduced it.
590. The position was made yet more explicit by the employee when she offered him a choice between IG Index putting him in "at the correct level that you should have gone in, adjusted for the correct dividend" or cancelling the bet altogether. Again the adjustment of the futures price to reflect the correct dividend was made explicit. Again Mr Regan's response indicated that he well understood the significance. He asked the employee to cancel the contract.
591. If, as Mr Regan said in re-examination, he did not understand between September 2005 and October 2008 that IG Index calculated its futures prices by incorporating dividends, one would have expected him to challenge the right of IG Index to deprive him of the benefit of the price at which he had placed his bet. At the very least one would have expected him to ask for an explanation as to why the fact that there was a wrong dividend in the US stock on which he had placed his bet "corrected" the futures price which he had been offered.
592. When that was put to Mr Regan he said that all he could remember was that the employee said that IG Index had made a mistake on a dividend, that she would have to put Mr Regan back into the deal at a worse price and so she was asking him if he wanted to cancel the deal or go in at the worse price.
593. Pausing there I observe that Mr Regan accepted that he had an actual recollection of this conversation and that the employee told him that because IG Index had made a mistake on a dividend the price would have to be adjusted if he wished to proceed with the bet. The conversation took place on 8 May 2006 and six years later Mr Regan said that he remembered being told in May 2006 that because IG Index had put in a wrong dividend into a futures price on which he had bet he could only proceed with the bet at a worse price. Even if he had been unaware before that conversation that IG Index calculated its futures prices on US stocks by reference to announced or anticipated dividends, it is crystal clear both from the transcript of the conversation and Mr Regan's own recollection of it that he became aware of it as a result of that conversation.
594. All but nine of the forty-six allegedly fraudulent bets placed by Mr Regan, and all eleven of those for which the Xcon audited information shows that he placed the bets within minutes of the insertion of huge false dividends at prices well below the cash prices reflecting those insertions, took place after that telephone conversation. In my judgment it beggars belief that, as he claimed in re-examination, when Mr Regan placed those bets he did not know that IG Index calculated its futures prices by incorporating dividends.
595. I am satisfied that Mr Regan's evidence in re-examination on this point was deliberately untrue and that the reason he gave that untrue evidence was that he well understood how damaging to his case were the answers he gave to contrary effect in cross-examination. If in fact he understood that IG Index's futures prices were discounted to reflect announced or anticipated dividends below the cash prices, there would be no prospect of any additional profit (over and above any future increase in the underlying cash price of the stock) as a result of placing a bet shortly after a divergence between a futures price and a cash price unless he knew that false dividends had been inserted and would be removed before he closed the bets. That completely undermined the plausibility of his testimony that if he saw such a divergence he would place a bet or, to use his graphic expression, "pounce".
596. Indeed that testimony was in my judgment also deliberately untrue. Mr Regan was pressed several times to explain why such a divergence would represent a buying opportunity with the prospect of profit and was unable to provide any satisfactory explanation. Indeed his claim in cross-examination that he did not understand what accounted for such divergences itself rendered implausible his claim that he would see such divergences as an opportunity for making profit. If he did not know the reason why IG Index's futures price suddenly dropped below that of the cash price, what reason did he have to suppose that the divergence would subsequently disappear?
597. Since, as I am satisfied, Mr Regan well understood the connection between the announcement or anticipation of dividends and reductions in IG Index's futures prices, a number of consequences flow. First it undermines his evidence that the reason he placed bets shortly after the sharp drop in the price following the insertion of a false dividend was because he would have seen the sharp drop as an opportunity to make extra profit beyond that which he anticipated based on his market research of the prospects for the underlying price of the stock. Second it renders even more unlikely the possibility that forty-six of the fifty-four bets which he placed on US stocks during the period of the alleged fraud just happened to be placed on stocks shortly after the insertion of large false dividends by coincidence. It is telling that 69.5% of the allegedly fraudulent forty-six bets were placed between 20.50 p.m. and 20.59 p.m. compared to only 12% of his bets on US stocks which are not alleged to have been fraudulent.
598. Third it strongly supports the inference that Mr Regan well understood that the reason why the IG futures prices on the eleven US stocks for which there is Xcon audit information suddenly dropped by huge amounts was because a dividend had been inserted of a size far greater than could possibly reflect genuine dividends announced by the relevant company or anticipated for it. Again in my judgment it beggars belief either that Mr Regan did not draw that conclusion or that he thought that on so many unrelated occasions on so many different stocks huge false dividends had been entered by mistake with no chasing contact from IG Index such as happened in May 2006 and that the mistakes were corrected the following working day or shortly thereafter again with no attempt by IG Index to change his contract price to stop him benefiting from the mistake. Indeed Mr Regan did not suggest that he thought that the sudden sharp downwards spikes in the futures prices were the result of the insertion of large dividends by mistake.
599. Fourth this in turn in my judgment strongly supports the inference that when Mr Regan placed his allegedly fraudulent bets he well knew that a false dividend had been deliberately and dishonestly inserted and that it would be removed shortly thereafter and that that was the reason why he placed his bets. Fifth it also supports the clear view which I formed as he gave his oral testimony that he was being deliberately evasive, trying to avoid answering difficult questions and giving untruthful answers in order to avoid having to admit that he had been tipped off that Mr Colley had inserted or would insert false dividends and then remove them in order to enable him to benefit financially by placing bets at artificially depressed prices and closing them when the dividend had been removed.
600. In fact the transcript of Mr Regan's telephone conversation with the IG Index employee on 8 May 2006 suggests that he was already aware by that time of the fact that IG Index calculated its futures prices by reference to dividends. Were it otherwise his ready and almost docile agreement to foregoing the benefit of the bet he had placed the previous Friday would be an unexpected response. His first explanation for that response was that when the call came he was sitting next to his director. If that was the case one might have expected him to ask the IG Index employee to ring back rather than forego a profitable bet.
601. When pushed by Mr Mayall to explain why he would not still be content to proceed with the bet at a price reflecting the actual dividend given that he would have believed that the company would do well and the stock price would go up for that reason, Mr Regan said that he could not remember the particular trade and volunteered the possibility that the underlying cash price had gone down over the weekend. While that possibility cannot be ruled out, in my judgment the more likely explanation is that put to Mr Regan by Mr Mayall, namely that this was another occasion on which Mr Regan placed a bet following the insertion of a false dividend by Mr Colley, that, unlike the others, the anomalous price had been spotted by the employee and, as would be expected if that was the case, Mr Regan readily agreed to cancel the contract to avoid the risk of further damaging enquiries by IG Index.
602. However even if that is not the correct explanation for why Mr Regan responded as he did to the telephone conversation, and even if he had not understood the significance of dividends in the IG Index futures price before it, that does not affect my conclusion that he was aware of it at the very latest as a result of that conversation and I emphasis that my conclusion that that was the case and the consequences which in my view follow from it is not dependent on my view as to Mr Regan's understanding of the position before the conversation and as to the likely explanation of why he placed that particular bet.
603. What is in my view also significant about Mr Regan's response to Mr Mayall's suggestion that the reason he agreed to cancel the bet was that he knew he had been found out was that he asserted that when he placed the bet he did not know why the futures prices were lower than the cash prices. As I have already observed that rendered implausible his earlier evidence that if he saw a difference between the IG futures price and the cash price of a stock on his watch list he would place a buy-bet. Indeed Mr Regan agreed that if he saw a drop in the differential between the prices there would be no reason to bet if the differential was to do with a dividend but when asked what else could cause such a drop he admitted that he did not know. When it was put to him that if he did not know what caused the drop that would not be a reason to place a bet there was a long pause and Mr Regan was only able to repeat that if he saw a difference between the futures and the cash price he would pounce.
604. Again asked why he would pounce his only response was to say that he would have thought that the IG futures price had the potential to recover but when asked why that was, given that the cash price had not changed, he again had to accept that he did not know. Again he merely repeated that if he saw that a futures price was lower than the cash price he would have bet on it and he did. When asked again how that would make him money Mr Regan's answer was that he would look at historical prices and if the analysts said that the stock would go up because it was a good stock and the charts showed that the stock was on the way up he would buy it. That of course was no answer to Mr Mayall's question because, as he pointed out to Mr Regan, that had nothing to do with the difference between the cash and the futures price. To this Mr Regan responded that you would expect the cash and the futures prices to be in line and therefore if there was a differential he would have bet.
605. This sequence of questions and answers was characteristic of the unsatisfactory nature of Mr Regan's oral testimony. It was in my judgment perfectly clear that he well understood the significance of Mr Mayall's questions and that he had no plausible innocent answers to them. Accordingly he was reduced to giving inconsistent answers, long pauses before answering questions, failing to address the substance of points being put to him and on occasion giving inconsistent answers and answers which in my judgment were untrue.
606. Mr Regan at one point in his evidence said that although he bought because he thought that stocks would increase in value, if in addition there was a difference between the cash and futures price that would compound his reason for placing a buy bet. There is of course in principle no reason why someone might not have two cumulative reasons for placing a futures bet. However the fact that Mr Regan may have had a market based reason for selecting a particular stock as one which was likely to perform well, does not address the critical question as to why he placed bets on such stocks in such large numbers shortly after large drops in the futures price which were not mirrored in equivalent drops in the cash price. Mr Regan did not suggest that this was pure coincidence. He specifically claimed that if he spotted a difference between the cash and futures price he would for that reason place a bet if the stock was on his watch list. He thus relied by way of explanation of his having placed bets on stocks whose futures price had just sharply declined not on mere coincidence but on a positive policy on his part to pounce when he spotted a gap between the IG Index futures price and the cash price.
607. For the reasons which I have given I regard that explanation as inherently irrational and implausible and I was satisfied having heard him given evidence that that was not the real explanation. He was never able to answer the question why a difference between the futures and the cash price would be a sensible reason to think as he claimed that he did, that he would for that reason be likely to profit.
608. Mr White in his closing submissions on behalf of Mr Regan relied on the decision of Andrew Smith J in Camerata Property v Credit Suisse Securities (Europe) Ltd [2011] 1 C.L.C. 627. He submitted that it remains good authority for the requirement for expert evidence in circumstances where a claimant pleads its case in fraud on the basis that conduct which is apparently innocent in fact gives rise to an inference of fraud because it is in some way out of the ordinary or exceptional. He submitted that the court does not have statistical evidence, let alone expert evidence, for the proposition that a habitual user of IG Index's services who fortunately alights upon favourable prices in a number of instances is in fact so fortunate that his conduct can be said to be exceptional or unusual. The court thus has no reference point from which to draw the inferences which IG Index invites it to draw. He relied by way of analogy on what he said were Andrew Smith J's successive rejections of an inferential case in Camerata as a result of the absence of expert evidence at paragraphs 189, 210, 212, 213 and 218 of the judgment. He added that the late production of evidence said to justify the inference did not plug the gap but simply widened the chasm. I took that to be a reference to the schedule showing the cash prices of the allegedly fraudulent bets at the time at which they were placed exhibited to Mr Gordon's third witness statement.
609. I am unable to accept Mr Whites submissions, nor can I detect any support for them, let alone binding support, in the judgment of Andrew Smith J in Camerata.
610. First, as just pointed out, Mr Regan's evidence was not that his decisions to place the bets which are the subject of this claim, had nothing to do with the sudden sharp downward spike in the IG Index futures price shortly before he placed the bet. To that extent he was not relying on an argument based on coincidence but making a positive case that if he saw a difference between the futures and cash price on a stock on his watch list he would pounce. For the reasons given I reject that evidence as implausible and untruthful. It is not possible to ignore the fact that Mr Regan gave that evidence which in my judgment was untruthful when assessing the likelihood or unlikelihood of the possible explanations for why he placed the bets he did when he placed them.
611. Second in considering the alternative possible explanations for why Mr Regan placed the allegedly fraudulent bets when he did it is necessary to take into account the fact, as I find it to be, that the evidence points overwhelmingly to the probability that Mr Colley inserted and removed false dividends within a short time frame knowingly and dishonestly in order to enable accomplice clients of IG Index to place bets which would benefit there from.
612. Nor is it possible to ignore when assessing the likely explanations the fact that all 46 of the allegedly fraudulent bets placed by Mr Regan were placed on US stocks on which I have found that Mr Colley inserted and subsequently removed such false dividends and that on all but one of them Mr Regan was the only IG Index client to place a bet which benefited form the false dividend.
613. If, as a I find, Mr Colley's purpose in inserting and removing those dividends was to enable an accomplice or accomplices to benefit by placing a bet after the dividend was inserted and closing it before it was removed, it is in my judgment inherently unlikely that he would have done so on 46 occasions (or at least 45) without an accomplice ever having placed the intended bet. (Mr Gordon appeared ambivalent as to whether the other client who bet on the 46^th occasion did so innocently). That unlikelihood is the more unlikely given that, as I have found, on large numbers of other occasions when Mr Colley inserted false dividends other client accomplices did place bets which benefited therefrom.
614. Mr White is right that what he described as statistical improbability plays a part in IG Index's case: IG Index offered futures prices on 2000 US stocks. Mr Regan during the period of the alleged fraud placed 54 bets on individual US stocks. 46 of them were on stocks on which IG Index have adduced evidence that Mr Colley inserted and removed false dividends. He placed those bets in addition on each case on the very day that Mr Colley inserted the dividend and closed the bet after he had removed the dividend. Moreover he did so, according to his own evidence, by use of a watch list containing no more than 12 US stocks at any given time. On only two of those stocks did Mr Regan place a second bet on another date. Thus on each occasion when he placed one of the 46 bets, it could not have happened unless the US stock on which he bet happened to be one of the 12 of the 2000 US stocks quoted by IG Index which was on his watch list. In my judgment the proposition that that is extremely unlikely to have occurred by coincidence does not require expert statistical evidence to prove. It is in my judgment self evidence. A fortiori the proposition that it is even more unlikely that on at least 10 occasions Mr Regan had his watch list open within a few minutes of Mr Colley having inserted a false dividend in one of the 2000 stocks quoted by IG Index which was on his watch list of 12.
615. Nor in my judgment does it require expert evidence to conclude that it would be inherently unlikely that if, as he at times suggested, a sharp divergence between the cash and futures prices represented a good buying opportunity, on 45 separate occasions Mr Regan should by coincidence have been the only IG Index client to place a bet on a US stock which benefited from the insertion and removal of a false dividend by Mr Colley. Nor do I consider that it requires expert statistical evidence to conclude that it is inherently unlikely that by chance 85 % of the bets placed by Mr Regan on US stocks during the period when he is alleged to have placed fraudulent bets (46 out of 54) should have been placed by coincidence on stocks and on days on which Mr Colley had inserted and then removed false dividends.
616. The general proposition accepted by Andrew Smith J relied on by Mr White is in my judgment of no assistance to him and of no relevance to the issues with which I am concerned. At paragraph 189 he held:

"No expert evidence was adduced about whether the views held or expressed by Mr [S-A] were views that a banker in his position might reasonably have held and expressed. … They rely upon the observation of Butler-Sloss LJ in Samson v Metcalf Hambleton [1997] 57 Con LR 87, [1998] 26 EG 154 [1998] PNR 542, 549 B in which she said that "… a court should be slow to find a professionally qualified man guilty of a breach of his duty of skill and care towards a a client (or a third party) without evidence form those within the same profession as to the standard expected on the facts of the case and the failure of the professionally qualified man to measure up to that standard. It is not an absolute rule… but, less than in an obvious case, in the absence of relevant evidence the claim will not be proved". I take and accept that as a general observation that, in the absence of expert evidence, the court will have the less material from which it can conclude that there was professional negligence (or gross negligence) and so will be less likely to conclude that negligence is proved, but this neither excuses the court from examining the evidence it has nor imposes a higher standard of proof upon the Claimants in professional negligence cases where there is no expert evidence. That said, I have, as a I shall explain, found it impossible to uphold some parts of Camerata's contentions without expert evidence to support them."

617. By contrast no issues arise in this case as to the standard of skill and care expected to be shown by a professionally qualified man to a client or otherwise. In any event, even in such a case, as Andrew Smith J pointed out, the absence of expert evidence neither excuses the court from examining the evidence that it has nor imposes a higher standard of proof where there is no expert evidence.
618. The issues on which Andrew Smith J in that case held that he was unable in the absence of expert evidence to draw particular inferences related to whether movement in certain CDS spreads reflected concern in the markets about Lehman's standing as a counterparty. I derive no assistance from that judgment.
619. Mr White also relied on Camerata as supporting his submission that the evidence relied on by IG Index in explaining how its futures were priced was substantially diminished in default of accompanying expert evidence. In the absence of expert evidence he challenged any weight that might otherwise be placed on IG Index's evidence both in respect of its case against Mr Regan on statistical improbability and in seeking to rely on pricing calculations in "imputing [Mr Colley] with conduct for all un-audited" instances of dividend removal.
620. As to how IG Index arrived at its futures prices I heard detailed evidence from Mr Gordon which I accepted. Despite lengthy cross examination by more than one Defendant I was satisfied that his evidence was honest, truthful and accurate. As I have indicated in so far as Mr Colley challenged it (more in submissions and cross examination than in evidence) I preferred the evidence of Mr Gordon.
621. As to the method by which Mr Gordon calculated the dates on which false dividends were removed (by comparing the difference between futures and cash prices on successive days until they merged) it struck me as logical and sound and no effective challenge was made against it. Mr Gordon and Mr Colley, although obviously not independent could both reasonably be described as expert in this area, having each spent many years implementing IG Index's futures pricing policy. In so far as Mr Colley differed in his account of how IG Index calculated its futures prices, suggesting that it was more an art than a science, again I preferred the evidence of Mr Gordon.
622. As to the evidence of the cash prices on the 415 stocks at the times on which the 415 bets were placed, I have already mentioned that this evidence was adduced with Mr White's agreement on behalf of Mr Regan. Contrary to Mr White's submission, in my judgment it dealt a devastating blow to the Defendants' cases in relation to the 285 bets for which there was no Xcon audited information Mr Gordon had relied in the Colley Master Schedule May 12 in support of his assertion that the bets were placed on the same day on which the false dividends were inserted and after they were inserted on inferences to be drawn from a comparison of the futures and cash prices as at close of business. The point was taken by Mr White among others that this might not be a reliable reflection of the difference between the cash and futures prices at the time the bets were actually placed. The new evidence adduced demonstrated that, on the contrary, they were a reliable guide because they reflected similar large discrepancies between the cash and futures prices at the times the bets were placed.
623. In his closing submissions Mr White challenged a number of other aspects of IG Index's case. In particular he submitted that the position of Mr Regan can be clearly distinguished from that of all the other Defendants for the following reasons. First there was no evidence that he knew or had associations with any of the other Defendants. Second there was no evidence of any financial transactions passing between him and any other Defendant. Third he was the only client Defendant to trade in immediate succession to a co-Defendant on the same stock. Fourth he was the only Defendant to "bet short" on a stock. Fifth he was the only Defendant to have closed his position on a trade before the removal of the allegedly false divided. Sixth half of his allegedly fraudulent trades were carried out on the same day on which another Defendant made an allegedly fraudulent trade. Almost half were in immediate succession in time to those of the other Defendant.
624. I have already drawn attention to the fact that there was no evidence of any connection or friendship between Mr Regan and Mr Colley either directly or indirectly through other allegedly fraudulent clients. I have also indicated that it is a factor which I weighed in the scales. Indeed it is the factor which I had at the forefront of my mind both during his evidence in the trial and in my review and consideration of that evidence and the submissions of Mr Mayall and Mr White. It undoubtedly does place him in a different category from the other alleged client accomplices (with one or two exceptions who did not appear at the trial and for when the evidence of connection to Mr Colley or other Defendants was weak or shown to be unreliable). Plainly if Mr Regan had such a friendship or connection it would significantly strengthen the case against him, as in my judgment it did in the case of Mr Slaney and Mr Teller. If he did not it would significantly weaken it if not render it hopeless.
625. However the fact that IG Index was unable to find evidence of such a friendship or connection does not mean that it did not exist. It is not uncommon for large scale frauds to be conducted with great care being taken to avoid detection. There are in this case in my judgment aspects of the way in which Mr Colley perpetrated the fraud which show that he took considerable care to minimise the risk of detection: the selection of relatively obscure US stocks, the selections of stocks on which for the most part other IG Index clients did not hold open positions, the timing of the insertions and removals of dividends so as to minimise the risk of the insertions being picked up by the two checks to which I have referred by the frequent insertion of false dividends and placing of bets by accomplice clients shortly before the close of the US market and the removal before the opening of the US market the following day so as to reduce the risk of innocent IG Index clients placing bets with the benefit of the false dividend.
626. It would not therefore be surprising if Mr Colley had sought to avoid leaving evidence at IG Index connecting him to his accomplices or those to whom they were connected. Indeed there were no emails to or from Mr Colley's work email address passing between Mr Colley and any of the alleged client accomplices. The only email evidence relied on by IG Index against Mr Slaney was an email to him from a supplier of baby gifts. The only reference to Mr Osborn was a reference to "Tommy" in an email to Mr Colley from his then partner. The only references to Mr Teller were references to "Ad" and Adam" in emails between Mr Colley and two of his former girlfriends and the only reference to Mr Rossfield was in a single email from him to his former girlfriend.
627. To put this factor into perspective it is pertinent to observe that but for the apparently unsolicited email to Mr Colley from the supplier of baby gifts there would have been no evidence available to IG Index of any connection between Mr Slaney and Mr Colley, and yet for all the reasons I have set out in my judgment Mr Slaney was in my judgment one of Mr Colley's accomplices who dishonestly placed bets having been tipped of by Mr Colley as to the insertion and removal of false dividends. This illustrates that while the lack of evidence of a connection between Mr Regan and Mr Colley is undoubtedly an important factor to weigh in the scales, it is not decisive and must be weighed against the evidence on the other side of the scales to which I have referred.
628. The sense in which the absence of any evidence of a connection or a friendship between Mr Colley and Mr Regan means that the case against Mr Regan is weaker than it would have been had there been such evidence is that it deprives IG Index of the argument that it would be an extraordinary and very unlikely coincidence that of all the 80,000 or so IG Index clients who could have placed bets which benefited from the insertion and removal of false dividends on the 46 occasions on which Mr Regan did the only person who did so could be shown to be a friend of Mr Colley.
629. As to the lack of direct evidence of any money changing hands from Mr Regan to Mr Colley the position is the same as in relation to Mr Slaney and Mr Teller. Plainly if there had been such evidence it would greatly have strengthened the evidential case against Mr Regan. However, for the same reasons as in the case of Mr Teller and Mr Slaney, the absence of such evidence is in my judgment by no means determinative or consistent with the truth of the case again him. I have set out in some detail the circumstances in which IG Index sought at the beginning of the trial to rely on evidence of payments out of the accounts of various of the alleged accomplices including Mr Regan and the reasons why I refused to allow IG Index to amend its case late in the day to rely on particular payments. However as already mentioned it was always a central part of IG Index's pleaded case against the client Defendants including Mr Regan that the profit generated by the insertion of false dividends by Mr Colley would be credited to the account of the particular Defendant who placed the bet; that Mr Colley could not profit from his fraudulent activity unless he was acting in concert with the particular Defendant and that it is an irresistible inference that the other Defendants were acting in concert with Mr Colley. It was in my judgment implicit in that allegation that it is to be inferred that it was agreed between Mr Colley and the accomplice clients that the accomplice would make payments to or confer financial benefits on Mr Colley and that he subsequently did so in return for the opportunity to derive unwarranted and fraudulent profits at she expense of IG Index.
630. It is in my judgment a reasonable inference to draw from a finding that any particular client Defendant was an accomplice of Mr Colley in the sense that he placed and closed bets in concert with Mr Colley having been told that he had inserted or would insert and had removed or would remove dividends on particular dates at particular times, that Mr Colley was given some financial benefit by that accomplice out of the profits which that accomplice realised. While if there had been specific evidence of payments that would have strengthened the inference that Mr Regan was indeed an accomplice, its absence does not in my judgment either show that he was not an accomplice or make it unlikely that he was an accomplice.
631. As with the other Defendants I also repeat the observation that, although personal profit would be the most likely motive for Mr Colley to have embarked on his fraudulent conduct, it does not follow that there may not have been cases in which he chose to confer a financial benefit on a friend without requiring compensation, although for the reasons I have given it is in my judgment probable that it was agreed that Mr Colley would receive payment or other financial benefit and that he did so.
632. As to Mr White's other points of distinction referred to above, in my judgment while relevant they do little to undermine IG Index's case against Mr Regan. It is correct that there was one occasion on which two of the alleged accomplices traded on the same stock: Mr Regan and Mr Rowe. In the context of 415 bets the fact that only 2 were placed by alleged accomplices on the same stock on the same date does not in my view detract from the force of the point that it is striking that the general pattern is consistent with an intention to avoid drawing attention to possible links between accomplice clients and suspicious bets.
633. As to the short bet this in my judgment carries little weight. Not only is it an isolated instance, but the inference to be drawn from a comparison between the cash and futures price is that a negative rather than positive dividend had been inserted by Mr Colley. The effect would thus be the same as placing a buy bet into which a positive dividend had been inserted. It is in any event, as Mr Mayall submitted, not inconsistent with Mr Colley having inserted a negative dividend by mistake and having told Mr Regan that on this occasion he should place a sell bet rather than a buy bet.
634. As to the submission that Mr Regan was the only client Defendant to have closed a position on a trade before the removal of a false dividend, this was only partly correct. The trade concerned was placed on 3 October 2005 and although it is right that Mr Regan closed the bet before the dividend was fully removed, it had been partly removed before he closed.
635. A similar point made by Mr White was that on one of the 46 allegedly fraudulent bets Mr Regan incurred a substantial loss. While factually correct, that is not inconsistent with it having been a fraudulent bet. It merely shows that the market movement in the underlying stock against the stock was greater than the benefit obtained by Mr Regan by virtue of the insertion of the fraudulent dividend. It is not a necessary part of IG Index's case that the accomplice clients in every case realised a cash profit by virtue of placing their fraudulent bets. Rather it is its case that they resulted either in a profit or in a smaller loss than would have been the case but for the benefit attributable the insertion and removal of the false dividend.
636. It is correct that 23 of the allegedly fraudulent 46 bets placed by Mr Regan were placed on the same day as another alleged accomplice client placed an allegedly fraudulent bet and that about half of them were placed shortly after the other client placed their bet. Mr White submitted that this was inconsistent with the allegation in paragraph 15 (iii) of the Amended Points of Claim that one of the sophisticated techniques employed by Mr Colley to ensure that the fraud was not capable of being detected by IG Index was that "accounts were rarely used for a fraudulent trade twice in close succession". This point does not in my view much assist Mr Regan because the allegation as I understood it was directed at the infrequent occurrence of two bets being placed in close succession by the same accomplice client on the same account.
637. Mr White had a separate submission based on the fact that half of Mr Regan's 46 bets took place in circumstances where a co-Defendant fraudulently traded on a separate stock in quick succession. He suggested that it could perfectly possibly be that Mr Colley in conducting his fraud provided the intended purchaser and partner in the fraud with a range of stocks to deal on and that that would account for the circumstances in which Mr Regan innocently traded on manipulated stock where Mr Colley's true accomplice had elected a different stock. This was in my view clutching at straws. First it does not address the implausibility of Mr Regan's explanations of why he chose to bet on those stocks after the false dividends were inserted. Second it is in my view inherently improbable that Mr Colley would complicate his fraud by inserting and removing more false dividends than he needed to achieve his aim and it would be out of character with the pattern of all the other fraudulent insertions of false dividends.
638. Mr White made a number of other points which in my judgment did not much advance Mr Regan's defence. Thus he pointed out that on 14 of the occasions when Mr Regan placed an allegedly fraudulent bet there was an anticipated dividend within the relevant period. There were indeed, as I have already printed out in the context of the 11 trades for which there was Xcon audit information, occasions on which Mr Regan placed a bet on a US stock which subsequently paid a dividend within the expiry period of the futures contract. However as in the case of those 11 bets, so more generally in the case of those for which there was no audit information, the size of the real dividend and the disparity between it and the false dividend inserted by Mr Colley was so great that in my judgment there is no material difference between those instances and the instances where the US stock had never paid or announced a dividend. In both cases it is in my judgment obvious that the dividend inserted was a false one and that that would have been obvious both to Mr Colley and to an experienced spread better, particularly one who placed a significant number of bets following the insertion of such a large dividend which was removed shortly thereafter.
639. Mr White submitted that IG Index provided no raw data to support the allegation that trades were nearly always on stocks in which no other client had a position who might have complained about the odd prices. In fact the evidence to that effect was provided in further information supplied by IG Index which Mr Gordon confirmed in evidence that he compiled and which he verified. Allied to this Mr White submitted that the fact that of Mr Regan's 46 trades there were 8 where there were two working days between the insertion and removal of the dividend and one where there were three working days was evidence of innocent conduct in that what he described as those prolonged periods showed an indifference to a prolonged exposure to the risk of innocent clients trading on the same stock.
640. There is in my view some force in the point that the longer the gap between the opening of the US market (by which time the two relevant checks would have been done) and the removal of the dividend the greater was the risk of an innocent client placing a bet on a relevant stock. However on the majority of occasions the dividend was removed the day after it was inserted and the general pattern was that the timing of the removals of the dividends, albeit to a lesser extent than the timing of their insertions, was consistent with a plan designed to combine leaving the dividend in the price long enough to avoid detection by the two relevant checks with minimising the period of time in which there was a risk of an innocent IG Index client placing a bet on the relevant stock.
641. Mr White pointed out that IG Index had not adduced evidence to support the allegation in paragraph 15(vi) of the Amended Points of Claim that Mr Colley, through his position of trust, frequently reconciled the profit and loss on the US stocks, the inference being that that hampered IG Index's detection of the alleged fraud. That allegation was abandoned.
642. Mr White submitted that Mr Gordon had said in evidence that he had limited his search for fraudulent trades to US stocks and that he had been to Mr Regan by what Mr White called the twist of fate that his investigation into Mr Rowe's trading activity identified a single stock on which both Mr Rowe and Mr Regan placed bets. He submitted that that twist of fate was the primary basis on which the Claimant sought to incorporate Mr Regan within the alleged fraud.
643. That submission was factually incorrect. Mr Gordon in his first witness statement said that having started his investigation by looking at past dealings of the two clients, Mr Rowe and Mr Abrahamovich whose suspicious trades had been noticed by Mr Tibbs on 25 September 2008, he widened his searches to all IG Index clients with similar dealing patterns on US shares futures. Whenever a new client appeared he searched their entire previous dealing history to see if any other spread betting markets had been subject to similar manipulation but that it was only US shares which appeared. In oral testimony Mr Gordon confirmed that whenever a new client was shown to have dealt in a similar dealing pattern on US shares futures as Mr Rowe and Mr Abrahamovich he looked at all the other markets that client might have dealt in and did not confine his search to US shares.
644. In any event IG Index's case against Mr Regan is not in any way dependent on the circumstances which gave rise to his having been identified by Mr Gordon as a suspected accomplice.
645. I have carefully considered all of Mr White's written and oral submissions but they do not in my judgment dent the strength of IG Index's case against Mr Regan. As Mr Regan gave his oral testimony I had the strong impression of a witness who was prevaricating, evasive, reluctant to answer awkward questions and giving inconsistent and on important issues untruthful evidence. Having recorded those impressions as he gave his evidence, I revisited his testimony after the trial more than once not only by reference to my notes of what he said but by listening to the tape recording of his testimony, important parts of it more than once. That process served to reinforce my initial impressions. Moreover the more I considered both the detail of the evidence and argument relied on against Mr Regan and by Mr Regan the more satisfied I became that he placed the futures bets having been tipped off in advance by Mr Colley as to the details of the stocks into which he had inserted or would insert false dividends including dates and times and from which he had or would remove them including dates and times in order that Mr Regan could place bets on those stocks to realise a dishonest profit.
646. I am satisfied that Mr Regan was an accomplice of Mr Colley with whom he was acting in concert and that he assisted Mr Colley in defrauding IG Index by entering into futures contracts with IG Index at deliberately manipulated prices. I am satisfied that it is probable that in return for being afforded by Mr Colley the opportunity to profit from Mr Colley's dishonest insertion and removal of false dividends Mr Regan agreed to confer some financial benefit directly or indirectly on Mr Colley and subsequently did so.
647. I find that, when he placed the 46 bets which are the subject of the claim against him, Mr Regan did so dishonestly and in concert with Mr Colley, having been informed by Mr Colley in advance that he had inserted or would insert large false dividends which did not reflect announced or genuinely anticipated dividends, together with the times and dates and that when he closed the bets he did so having been told by Mr Colley that he had removed or would remove the false dividends together with the dates and times. I find that he participated with Mr Colley in a fraud designed to enable him to profit by placing bets with IG Index at prices which were below those which IG Index would have offered without the insertion of false dividends and below those which reflected the underlying market cash prices of the stocks. I find that he did so in pursuance of an agreement with Mr Colley that they would do so and that it is likely that as part of that agreement he agreed to make payments or confer other financial benefits on Mr Colley and subsequently did make payments to or confer other financial benefits on him in return for being given the opportunity to place bets at manipulated prices at the expense of IG Index. I find that when he placed the bets Mr Regan was trading fraudulently and that he was a willing participant in Mr Colley's fraudulent activities.

IG Index's primary case against Mr Osborn

648. I have referred earlier, in the context of dealing with the alleged connections between Mr Colley and his alleged accomplices, to the evidence as to the connection between Mr Osborn and respectively Mr Colley and Mr Teller and my findings thereon. In short it was not an issue between the parties that Mr Osborn was a friend of Mr Teller whom he had known socially for several years when he was going out with one of his partner's best friends. They saw each other regularly in 2004 and went away on holiday together at Christmas 2004. I accepted Mr Osborn's evidence that he was not a friend of Mr Colley and that his connection with Mr Colley was that he was recommended to him to do some air conditioning work at his house by a builder and then by Mr Teller. It was also accept by all relevant parties that Mr Teller placed all the bets on the accounts in the names of Mr Osborn as well as of his mother and sister and Mr Cowan on their behalf.
649. I have also found that when placing the allegedly fraudulent bets on his own account and those of his mother his sister, Mr Osborn and Mr Cowan, which are the subject of this claim, Mr Teller was acting dishonestly and in concert with Mr Colley who tipped him off as to the insertion and removal of false dividends to enable Mr Teller to place bets which make an unwarranted fraudulent profit.
650. IG Index's primary case against Mr Osborn was that he was also acting in concert with Mr Colley in that he either knew of the fraud being perpetrated by Mr Teller in concert with Mr Colley or at the very least suspected fraud and deliberately turned a blind eye to it.
651. In his witness statement and in oral testimony Mr Osborn denied both those allegations. He said that he was a 32 year old self-employed air conditioning engineer who left school at the age of 16 without any GCSE's or other qualifications.
652. While on holiday together Mr Teller was discussing City trading with other people. Mr Osborn said that he asked him if there was a way in which he could make some extra money by buying and selling stocks and shares with his guidance because he knew nothing about the City or trading in stock and shares.
653. Some time later Mr Teller approached him and said that there might be a way for him to make some money out of the stock markets. He gave him a very brief outline of what turned out to be IG Index's operation and said that one of the advantages of investing through IG Index was that all profits were tax free. He added that if Mr Osborn opened an account in his name Mr Teller would operate it for him. Indeed he even said that he would open the account in Mr Osborn's name and that all he needed to do was sign the form and give him some personal details including details of his bank account. He said that in return for Mr Teller opening and operating the account for him Mr Osborn would give him two thirds of any gain he received and Mr Teller would pay him two thirds of any losses. Mr Osborn said that there was nothing more to it than a friend helping him make a few a pounds here and there. At the time his partner had given up her work as a film and television make up artist because she was pregnant with their first child and a few extra pounds would come in handy.
654. He said that he and Mr Teller proceeded to open the account in Mr Osborn's name and Mr Teller paid in the first pounds £4000 to open it. He said that Mr Teller continued to operate the account and he admitted that he had no idea whatsoever as to what he was doing. He said that even if he had known what he was doing he would not have begun to understand it.
655. Mr Osborn said that the net gain from the account with IG Index was £22,305.37 which they split two thirds to Mr Teller and one third to him.
656. Mr Osborn said that it never crossed his mind that Mr Teller was anything other than a successful businessman who understood how to make money on the Stock Exchange. It did not cross his mind that anything improper was going on As far as he knew Mr Teller was a perfectly respectable successful and wealthy businessman with special experience and expertise in the City.
657. Mr Osborn said that he had no knowledge or understanding of the stock market let alone the type of operation carried on by IG Index. He did not read either of the preliminary documents, namely the Risk Disclosure Notice of March 2003 or the Spread Betting Customer Agreement of September 2004. If he had tried to read them he could not have understood them as he has subsequently looked at them and cannot make head nor tail of them. He reiterated that he had no discussions with Mr Colley about anything other than his air conditioning system when he installed it. He was introduced to Mr Colley some months after Mr Teller helped him to open the account with IG Index. His only contact with Mr Colley was the initial visit to his house to give him a quote and when he met him on site on one or two occasions when their only discussions were about the work he was doing for him. After the initial visit when he telephoned Mr Teller to thank him for the introduction he asked him out of interest where Mr Colley worked and Mr Teller told him that Mr Colley worked at IG Index but he had no idea in what capacity. I have earlier in this judgment stated that I accept Mr Osborn's evidence that he was not a friend of Mr Colley.
658. In oral testimony Mr Osborn confirmed the truth and accuracy of his witness statement which he said he had reread carefully that day. However, on the question of what was agreed between him and Mr Teller as to responsibility for any losses incurred on transactions on the account which Mr Teller was to place on his behalf, he gave a different answer. Mr Osborn said that Mr Teller told him that he had made money by spread betting and the like. Mr Osborn said that if there were an opportunity he would want a piece of it. Mr Teller said that he already had an account. Mr Teller put up money for Mr Osborn to open an account and said that he would open it in Mr Osborn's name. Mr Osborn would be able to keep one third of any gains, giving Mr Teller two thirds of any gains. However, whereas in his witness statement he said that Mr Teller had told him that he would pay Mr Osborn two thirds of any losses, in oral testimony he said that Mr Teller agreed that if there were any losses on the account he, Mr Teller, would cover all of them.
659. Mr Osborn said that he did not think this odd. He looked at it as a friend doing him a favour. It was Mr Teller who suggested opening an account for Mr Osborn. Mr Osborn was asked why Mr Teller did not simply place additional bets on his own account for Mr Osborn and give him the proceeds. Mr Osborn said that he did not know but he trusted Mr Teller and thought he knew what he was doing. It was Mr Teller's suggestion to open an account for Mr Osborn. Mr Osborn said that he did not ask why there was a need to open a second account and denied that he thought it was dodgy. It was put to Mr Osborn that unless the bets were guaranteed to make money the arrangement was too good to be true. Mr Osborn said he did not think so at the time. As far as he was aware, there were losses as well as gains on the account. He did not think there was anything fishy going on. Nothing triggered any alarm and he had no doubts. He accepted that over three years he made £7,000 which was money for nothing.
660. Mr Osborn was asked if he told his partner about the arrangement, namely that if he won he won, but if he lost Mr Teller lost. He said that he did and that his partner said the same as he did, namely that it was a good idea and they both trusted Mr Teller. Again Mr Osborn denied that he turned a blind eye to Mr Teller being up to no good or having the attitude that if he could make money it was not his problem if Mr Teller was up to no good.
661. Mr Osborn said that he gave Mr Teller his two thirds of the approximately £22,000 profits which were generated on his account in cash. Mr Teller asked him for cash and Mr Osborn did not ask him why he wanted cash. He said it did not seem to him untoward and his partner thought nothing of it, even though he did not normally draw out large sums of cash from the bank.
662. Mr Osborn was shown the online account opening form sent to IG Index to open his account. He accepted that it was not true, as recorded on the form, that he had earnings of £50,000 and savings of £20,000 at the time. He denied having given that information to Mr Teller who he said filled out the form for him in his absence. Nor was the declaration that he had read the risk disclosure notice and customer agreement true.
663. Mr Teller, when he came to cross-examine Mr Osborn, did not challenge any of the evidence to which I have referred. Mr Osborn accepted that when Mr Teller placed bets on his behalf with IG Index, IG Index would in good faith accept the bet thinking that it was Mr Osborn placing the bet. He also accepted that if he lost a bet he would be responsible for paying IG Index, who would look to him for payment. He authorised Mr Teller to deal with IG Index on his behalf and gave him carte blanche to do whatever it took and whatever was necessary.
664. Mr Colley asked Mr Osborn just as Mr Teller had asked Mr Colley, if he ever gave Mr Colley money, to which, as Mr Colley did in answer to Mr Teller, Mr Osborn said: no. Mr Colley on the other hand gave Mr Osborn money for the air-conditioning.
665. In re-examination and in answer to a question from me, Mr Osborn said that he did not see the Internet application report to IG Index before it was filled out. Mr Teller asked him for his address, bank details and previous address over the telephone.
666. So far as Mr Teller is concerned, Mr Osborn's evidence supported IG Index's general case against him. His request to be paid in cash was certainly consistent with a desire to avoid a paper trail which could support a suggestion that Mr Teller was using Mr Osborn's account to place dishonest bets. It provides some support to the inference that Mr Teller paid cash to Mr Colley to enable Mr Colley to benefit from the fraudulent bets placed by Mr Teller on his own account and those other accounts on which he placed bets.
667. The unchallenged fact that Mr Teller knowingly inserted false information about Mr Osborn's earnings and savings, plainly it is to be inferred so as to induce IG Index to accept him as a client, is in my view clear evidence of dishonesty. It was a knowingly false representation of fact made on behalf of Mr Osborn which was designed to induce IG Index to accept Mr Osborn as a customer and to allow him to open a spread betting account and was relied on by IG Index, I infer in agreeing to do so.
668. As to Mr Osborn's state of mind I have thought long and hard. I was not persuaded that he knew that Mr Teller was in effect placing one way bets on his account or that he had been or would be told by Mr Colley information on certain of the bets which would result in a dishonest guaranteed profit (or smaller loss) irrespective of whether the underlying cash price of the stock in question subsequently rose or fell.
669. There is no evidence that Mr Osborn had any experience or background in buying or selling ordinary shares, let alone trading in complex instruments such as futures. I have already indicated that I accept that he was not a friend of Mr Colley and I do not consider it likely that Mr Colley informed Mr Osborn about his insertion and removal of false dividends. Indeed there is no evidence that Mr Colley was aware that Mr Teller was placing same of the fraudulent bets following his insertion of false dividends, other than on his own account.
670. The question which I have found difficult is whether, as Mr Mayall suggested, Mr Osborn suspected that Mr Teller was using his account in a way and for a purpose which was dishonest and deliberately turned a blind eye, deliberately choosing not to ask Mr Teller if his suspicions were correct lest he confirmed that they were.
671. There were undoubtedly a number of suspicious features. Why should Mr Teller agree to share any profits made on the account while shouldering all of the losses? If Mr Teller wished to enable Mr Osborn to benefit from his trading skills or market research as a favour to a friend, why did he need to go through the complication of opening a separate account in Mr Osborn's name, when he could achieve the same result by placing more money than he otherwise would on bets on his own account and giving Mr Osborn a proportion of the profits? Why, if there was nothing dodgy about the arrangement, did Mr Teller ask to have his share of the profits paid in cash?
672. The question is whether these features caused Mr Osborn to suspect that Mr Teller was using Mr Osborn's account to engage in a fraud of the kind which in my judgment he did engage in or any other kind of fraud against IG Index.
673. As I have mentioned, Mr Osborn in his witness statement said that the arrangement was that he would have to bear one third of any losses, but in the witness box said that Mr Teller agreed that he alone would shoulder all losses. On its face either of these arrangements are to my mind suspicious. On the other hand, it could be said that the version given by Mr Osborn in the witness box was if anything more suspicious and that the fact that he volunteered that less favourable version was itself an indication that he was giving truthful evidence.
674. I am sceptical as to Mr Osborn's denials, but in the final analysis am not satisfied on the balance of probabilities that he did suspect that Mr Teller was using his account dishonestly either in the way in which, in my judgment, he did, or in some other way. Mr Osborn's evidence is consistent with a naïve and trusting person having taken at face value a gift horse offered by a much richer friend who was a sophisticated and apparently successful city businessman who was trying to help him out and not having the guilty state of mind which I have described.
675. I am satisfied that when he placed the 12 bets on behalf of Mr Osborn on Mr Osborn's account which are the subject of this claim, Mr Teller did so dishonestly, having been informed by Mr Colley in advance that he had inserted or would insert a large false dividend and would subsequently remove it. Although, as indicated before, there is no Xcon audit information in relation to any of these 12 bets, in all but two of them the false dividend was removed the day after it was inserted. Half of the bets were placed on US stocks which had never declared a dividend and the dividend next declared on the other six ranged in size from three cents to 52.5 cents. For all the reasons why I have held that Mr Teller acted dishonestly in placing the bets which he did on his own account and those of his mother, his sister and Mr Cowan, I am satisfied that Mr Teller placed these 12 bets dishonestly in concert with Colley.
676. IG Index have two fall-back cases against Mr Osborn.
677. The first is that when he dishonestly placed bets with IG Index on behalf of Mr Osborn Mr Teller was acting as his agent within the scope of his authority and is thus responsible for the losses suffered by IG Index as a result of the fraud. The second is that the prices on which the bets were placed were the result of manifest error and that IG Index are entitled under the customer service agreement with Mr Osborn to substitute for them the prices which would have been obtained but for Mr Colley's insertion of the false dividends. I refer to these arguments below.

IG Index's primary case against Mrs Benn

678. Mrs Benn is the mother of Tom Benn, the second defendant. Tom Benn entered a very brief defence denying the allegations against him including that he was acting in concert with Mr Colley and averring that he did not even understand what was meant by entering a false dividend. However despite the gravity of the fraud allegations against him and the size of the claim against him, he allowed judgment to be entered against him for the whole sum claimed in the Particulars of Claim of £197,317 plus interest of £42,988.07 making a total of £240,305.07 in default of complying with an Order to serve a fully particularised defence and list of documents. He had liberty to apply to set aside or vary the order but did not do so.
679. When Mrs Benn gave evidence she confirmed that Michelle Dove, the seventh defendant and Annie Cooper the fourth defendant were former girlfriends of her son.
680. I have already referred to the evidence that Mr Rossfield, the sixteenth defendant, was a friend of Mr Colley with whom he was going to go on holiday. Miss Crowther adduced evidence that Mr Rossfield was a Facebook friend both of Tom Benn and Annie Cooper as well as of Adam Teller, Mr Teller's sister, Mr Abrahamovitch and Ms Pearlman, who, as I have referred to, was a friend of Mr Colley.
681. I am satisfied that Tom Benn was an accomplice of Mr Colley and that he acted in concert with Mr Colley in his fraudulent course of conduct. I am satisfied that when he placed and closed the sixty bets on his own account with IG Index which are the subject of this claim he did so having been alerted by Mr Colley that he had inserted or would insert a false dividend together with the time and dates and that he had removal or would remove them together with the time and dates. As with the other client defendants I take into account, in assessing whether Tom Benn, when he placed and closed the bets, did so in concert with Mr Colley after having been tipped off by him as to the details of the insertions and removals of the false dividends the fact that on all 60 of Mr Benn's bets, it is clear either by direct Xcon audit information or by inference that the bets were placed after the insertion of huge and obviously disproportionate dividends and closed after the dividends were removed. A number of them were placed a few minutes before the markets closed and a few minutes after the insertion of a false dividend and most of the dividends were removed the following day, in many cases where Xcon audit information was available before the US market opened.
682. Nearly two thirds of the bets were on US stocks which had never declared a dividend and as to the balance the size of dividends paid on the next date within the expiry period of the bet ranged from 1.875 cents to no more than 29 cents. By contrast most of the dividends inserted were between 350 and 500 cents.
683. All but five of the dividends were removed the day after they were inserted. Of the bets for which there was Xcon audit information almost all were placed within 10 minutes of the close of the US market and a few minutes after the insertion of the false dividend. On none of the sixty bets did any other IG Index client place a bet after the false dividend was inserted so that if Tom Benn was not the accomplice whom Mr Colley intended to benefit by placing a bet at the artificially depressed price caused by the insertion of the false dividend, for some unexplained reason and by coincidence the true accomplice did not place a bet on any of those sixty occasions. As already explained in my judgment that is inherently extremely unlikely.
684. This evidence points in my judgment overwhelmingly to the conclusion that Tom Benn was a dishonest accomplice of Mr Colley in the operation of his own account. That conclusion is in my judgment further supported by the obviously adverse inference which I draw from the fact that he allowed a default judgment of nearly a quarter of a million pounds to be entered against him in a case alleging fraud.
685. That is the context in which the case against Mrs Benn falls to be considered. I have absolutely no doubt that Mrs Benn was wholly ignorant of Mr Colley's fraud, her son's participation in that fraud and the fact that, as I find, her son used her account to place additional bets in furtherance of that fraud.
686. According to Mrs Benn, the truthfulness and reliability of whose evidence I fully accept, it was Tom Benn her son who persuaded her to open an account with IG Index and gave her the account opening application form and operated the account on her behalf. Her husband, Tom Benn's father, who also gave evidence, said that Tom Benn worked in City financial markets on LIFFE and had two or three jobs in the city in six years.
687. In her first witness statement she adopted the contents of her defence as her evidence. She said that she opened the account with IG Index at the request of her son and that she had no personal dealings with her account which was at all material times operated by her son. She never personally entered into any spread betting transactions with IG Index. She was aware that Tom Benn carried out betting transactions on her behalf but was unaware of the size or nature of any bets placed by him. She denied any knowledge actual or indirect of any aspect of the fraud and any communication with Mr Colley or anyone else about the entry of any false dividends.
688. In her witness statement she said that she gave her son a power of attorney. This led IG Index to rely on that power of attorney positively in support of an alternative contractual claim against her. However in her oral testimony she corrected her witness statement saying that having looked at the power of attorney she saw that in fact it had been made out in favour of her husband. She said that that was an honest mistake and I accept that evidence. At the trial IG Index abandoned any claim against her based on any Power of Attorney.
689. In the witness box she accepted that she signed the declaration on her application form that she had read the Notice of Risk Disclosure and the Spread Betting Customer Agreement but said that in fact she had not read those documents and would certainly have not understood them if she had.
690. She said that she was stupid to sign the declaration which she did not read and said she did so only because she trusted her son implicitly. She was not thinking clearly because her father had died unexpectedly and she was absorbed in doing a midwifery course at the time.
691. Mrs Benn said that she knew that her son had his own account with IG Index and she handed over the operation of her account to him. She authorised him to do anything in connection with her account.
692. When he asked her if he could open an account in her name she said that she asked her son if this was all legal and above board to which he replied that it was. She told him that she was content to allow him to operate the account on her behalf so long as she did not have to have anything to do with it and did not want to hear anything about it. She did not want to gain anything from it.
693. She accepted that as far as IG Index were concerned any bets placed on the account were placed by her or a person to whom she had given a power of attorney. In fact she forgot that she had filled in her husbands name on the power of attorney and assumed that it was in favour of her son. However it was not her husband who did the spread bets. It was all done by Tom Benn. She was happy for that to happen because she considered that there was nothing untoward. She had nothing to do with the money in her family all of which was dealt with by her husband.
694. As I have indicated I accept the truthfulness of all her evidence.
695. Mrs Benn's husband said in evidence that he assumed that it was his son who put up the money for the account. Neither he nor his wife profited from it. He confirmed that his wife told their son that they did not want to gain or lose from the account. Mr Benn accepted that he and his wife knew that if there were loses on the account IG Index would look to his wife but he trusted his son. He accepted his assurance that, although legally IG Index would come as a first call to his wife because it was her name on the account in the event of any losses, his son would reimburse them. He was relatively wealthy for a 22 year old young man having had the city career to which I have referred. They had very little contact with their son who had left school at 16 and moved out of the family home.
696. Mr Benn said that the account made profits and he would withdraw money from the Alliance & Leicester Bank and put it into his son's RBS account often in cash in sums such as £1000 to £2500. He did not think it strange that his son asked for payments to be made in cash. Although they were large by Mr Benn's standards they were not large by his son's who was relatively wealthy.
697. Fifteen bets were placed by Tom Benn on his mother's account. There was no Xcon audit information for any of them. Nine of the fifteen bets were placed on US stocks which had never declared a dividend and the remaining stocks declared dividends on the next dividend date within the expiry period ranging from 2 to no more than 10 cents. On all but three of the bets false dividends of between 300 and 500 cents were inserted, on all but three occasions the dividend was removed the next day and on all occasions it is to be inferred for the reasons explained earlier in this judgment that the bets were placed after the dividend was inserted and closed after it was removed. On none of these bets did any other IG Index client place a bet on the relevant US stock after the false dividend was inserted so that if Tom Benn was not the accomplice who was intended by Mr Colley to benefit by placing bets on these stocks the intended accomplice by coincidence and for no apparent reason failed to do so on each occasion.
698. I am satisfied that on all the twelve bets placed on Mrs Benn's account which are the subject of this claim, Tom Benn placed the bets on her behalf, and that when he did so he was doing so dishonestly and in concert with Mr Colley having been alerted by Mr Colley that he had inserted or would insert a false dividend together with the date and time and that he had removed or would remove the dividend together with the date and time. I am satisfied that it is likely that Tom Benn agreed to make and did make payments to or to confer and did confer other financial benefits on Mr Colley in exchange for being given the opportunity to make unwarranted profits on bets placed on relevant stocks.
699. I am also satisfied that Mrs Benn was entirely ignorant of any wrong doing in the operation of her account or the placing of these particular bets by her son, that she was not acting in concert with Mr Colley and that she had no knowledge of or participation in the fraud, for which her account was used by her son.
700. As in the case of Mr Osborn, IG Index have two alternative claims. The first is that Mrs Benn is liable for the fraud of Tom Benn acting as her agent within the scope of his authority. The second is under the Customer Service agreement on the basis that the contract prices on the relevant bets were the product of a manifest error which entitles IG Index to substitute the prices at which the bets would have been placed and the contracts entered into if Mr Colley had not inserted the false dividend.

IG Index's causes of action against Mr Colley

701. IG Index's pleaded case against Mr Colley is that by his actions he was acting fraudulently and was in breach of a fiduciary duty owed by him to IG Index as a senior employee to act honestly and in the best interests of IG Index. In essence the actions referred to were the systematic and fraudulent entering of false dividends into IG Index's systems, thus lowering the mid price of US various stocks and then removing the false dividend from the system, thus increasing the mid price to its proper level after the other defendants (and three other accomplices) who were acting in concert with him fraudulently traded at the false price from which they derived an unwarranted profit by closing the bets at the higher price created by the removal of the dividends.
702. It was pleaded as against the other defendants that Mr Colley could not profit from his fraudulent activity unless he was acting in concert with the particular defendant who placed the bet at the artificially depressed price from which it was said to be an irresistible inference that they were acting in concert with Mr Colley. I have already indicated that in my judgment it is implicit in that allegation that it was agreed between Mr Colley and his accomplices that he would derive and did derive a financial benefit from the fraud by way of payments to or conferring of other financial benefits on him by the other defendants and accomplices.
703. I have found that the principal factual allegations against Mr Colley are proved. He was engaged in a systematic and fraudulent course of conduct whereby he entered false dividends into IG Index's systems with the intention and effect of enabling accomplice clients, to place fraudulent bets at the false prices. He then removed the false dividends from the system with the intention and effect of thereby enabling his accomplices to close their bets at the higher prices thus making unwarranted profits (or smaller losses than would have resulted in any event from genuine movements in the underlying prices of the stocks). I have found that it is to be inferred that Mr Colley was acting in concert with accomplices who placed bets with IG Index on the stocks into which and from which he entered and removed false dividends either on their own accounts or, as in the case of Mr Teller and Tom Benn, in the accounts of friends or relatives whose accounts they operated.
704. I have further found that it is to be inferred that on those occasions Mr Colley alerted his accomplices that he had inserted or would insert a false dividend in a particular US stock including the date and time of the insertion and that he had removed or would remove the false dividend and the date and time of the removal.
705. I have also found that it is probable that Mr Colley agreed with his accomplices that he would receive financial benefit from his accomplices in return for enabling them to derive financial benefit by dishonestly and fraudulently placing bets at prices which they knew had been dishonestly manipulated by Mr Colley for the purpose of enabling them to do so. Unless an accomplice placed a bet at the manipulated price and closed it after the dividend was removal there was no point in Mr Colley inserting the false dividend. Unless the accomplice conferred some financial benefit on Mr Colley there was no way in which he could benefit from his fraud.
706. Among the actions pleaded by IG Index as constituting fraudulent action by Mr Colley and a breach of his fiduciary duty to IG Index to act honestly and in its best interests is the allegation in paragraph 14 of the Amended Particulars of Claim that:

"…After inputting the false dividend one of the other defendants, acting in concert with Colley, would then place a "buy" bet on the stock at the lower price. "

As already mentioned in a Request by Mr Colley dated 30 November 2009 for Further Information Mr Colley asked whether it is alleged that prior to each of the transactions referred to in the spreadsheet annexed to the Particulars of Claim Mr Colley agreed with the relevant defendant that, in relation to that specific transaction: (1) Mr Colley would input into IG Index's trading system a false dividend, so causing the quoted price of the stock to fall; and (2) the relevant defendant would subsequently purchase the stock concerned."

707. In its reply to that request IG Index responded:

"IG Does not know the precise details of how the Defendants operated the fraud between themselves and, in particular, the precise details of when or how any agreement was reached between Colley and the other Defendants or the precise details of such an agreement. The steps set out in paragraphs 3.1 and 3.2 of the Request did take place. As is made abundantly plain in the Particulars of Claim it is IG's case that it is an irresistible inference from all of the pleaded circumstances that the relevant other Defendant was acting in concert with Colley and both were participants in the fraud."

708. Mr White on behalf of Mr Regan in his opening skeleton argument referred to that reply and, correctly in my judgment, understood it as a positive assertion that each Co-Defendant would necessarily have established contact with Mr Colley in advance of his price reduction in co-ordinating and bringing into effect their fraudulent activity.
709. IG Index pleaded that the nature of the claim was as follows:

"10. The Claimant avers that the First Defendant systematically and fraudulently entered "false" dividends into the Claimant's systems, thus lowering the mid price of various stocks. The other Defendants then fraudulently traded at the false price. The First Defendant then removed the false dividend from the system, thus increasing the mid price to its proper level. The other Defendants then closed their bets at the higher price thus making a profit (subject, of course to a legitimate movement in the underlying price of the stock)."

710. It is thus clear in my judgment that part of the pleaded case not only as against the client Defendants but also against Mr Colley was that not only Mr Colley's insertion of the false dividends but also the subsequent purchase of the stock concerned by the client Defendants constituted steps in a fraud in which both Mr Colley and the client Defendants participated and that those steps were taken pursuant to a fraudulent agreement between them.
711. For the reasons which I have given I find that, subject to one qualification, these allegations have been proved to the requisite standard of proof. This was a fraud carried out by Mr Colley against IG Index. It involved the active participation not only of Mr Colley but also of the persons who placed the relevant bets. It was a necessary part of the fraud, without which it could not have been effective, that Mr Colley informed the relevant accomplice that he had inserted or would insert a false dividend and would then remove it and secured the agreement of the relevant accomplice to place and close a bet on the relevant stock at times which would benefit from the artificially depressed price created by the false insertions. In my judgment this involved not only Mr Colley informing the accomplice of the details of his intended or accomplished insertion and removal of dividends but also securing the accomplice's agreement to place and close bets on the relevant stock at times which would benefit from his price manipulation. Without such agreement not only would Mr Colley derive no benefit from his dishonest manipulation but he would expose himself unnecessarily to a risk (albeit reduced by his attempts to minimise it) of detection if an innocent IG Index client placed a bet while the false dividend was in the price, with no corresponding prospect of gain for him.
712. I also find that in practice it is probable that the fraudulent activity in which both Mr Colley and the persons placing the bets participated was carried out pursuant to agreement between them for an additional reason. It is in my judgment improbable that Mr Colley would have embarked on such a large scale systematic fraud with the inevitable adverse consequences to him which would flow from detection unless he gained financial profit from the fraud. The only way in which he could secure such profit would be by agreeing in advance with the persons placing the fraudulent bets that in return for Mr Colley providing them with the opportunity of placing fraudulent bets resulting in profits to them they in turn would confer on him directly or indirectly some financial benefit, thereby in effect sharing the profits resulting from the fraud.
713. The qualification to which I have referred is that where the person placing the fraudulent bet placed it not on his own account but on an account of a friend or relative which he operated, such as Tom Benn on his mother's account and Mr Teller on Mr Osborn's account, I do not find that it is probable that the dishonest agreement was made between Mr Colley and the person on whose account the bet was placed. That is because there is no evidence of such an agreement and it does not arise in my judgment as a necessary or probable inference from the evidence. On the contrary in the case of Mr Osborn and Mrs Benn I have found that they were unaware of the fraud. In my judgment there is no logical reason why Mr Colley should have been made aware by Mr Teller that he was going to place a dishonest bet on someone else's account which he operated on their behalf rather than or in addition to on his own account. Nor is there any logical reason why Mr Colley should have sought Mr Teller's agreement to do so. The only inference to which the evidence in my judgment gives rise is that Mr Colley agreed with Mr Teller that Mr Teller would place a fraudulent bet with IG Index at the manipulated price and that he would receive some financial benefit thereafter. The same applies as regards Tom Benn and Mrs Benn.
714. As to the duty owed by Mr Colley to IG Index as a senior employee it was described by IG Index in the Amended Particulars of Claim as a fiduciary duty to IG Index to act honestly and in its best interests. In Mr Colley's Defence it was denied that he owed IG Index the fiduciary duties alleged or any other fiduciary duty.
715. Mr Colley's Defence was settled by counsel but by the time of the trial he was a litigant in person. It is thus not surprising that he did not challenge the formulation of the duty which he was alleged to owe to IG Index or make legal submissions thereon. There was no legal argument on the point at the trial.
716. Although Mr White on behalf of Mr Regan did not accept that Mr Colley owed a fiduciary duty to IG Index I was not assisted by any developed argument or authority on this point either by Mr Mayall or Mr White.
717. Before the Companies Act 2006, which provided a statutory code of duties for company directors, company directors were held to owe fiduciary duties to the company. However the circumstances in which an employee may owe a fiduciary duty to his employer are much more circumscribed.
718. Although there is no general fiduciary duty owed by all employees to all employers by reason only of the fact of employment, circumstances may arise in the context of an employment relationship, or arise out of it, which, when they occur, will place the employee in the position of a fiduciary. Such circumstances may include the undertaking by an employee of specific tasks or functions pursuant to his contract of employment which place him in a situation where in addition to his contractual obligations there are imposed on him fiduciary duties to his employer. It is necessary in any case to identify the particular duties undertaken by the employee and to ask whether in all the circumstances he has placed himself in a position where he must act solely in the interests of his employer.
719. The fraud which IG Index alleged and which I have found Mr Colley perpetrated involved him using his privileged position as an employee of IG Index entrusted with the responsibility (along with others) of updating the futures prices which IG Index quoted and which it offered to its clients as the basis on which it would accept bets, to manipulate IG Index futures prices on particular US stocks to enable Mr Colley to profit thereby by alerting client accomplices to his manipulation of the prices with a view to enabling them to place bets at the artificially depressed prices and to close them at the restored prices after the false dividends were removed and also with a view to such persons either paying or otherwise conferring a financial benefit on Mr Colley in return for being given the opportunity to realise fraudulent and unwarranted profits from which Mr Colley would also profit. It also involved Mr Colley informing those clients of IG Index that he had inserted or would insert false dividends and the dates and times thereof and that he had removed or would remove them and the dates and times thereof. It also involved Mr Colley agreeing with his accomplices that in return for him providing them with the opportunity to make fraudulent and unwarranted profits at the expense of IG Index they would pay him or confer some other financial benefit on him which I have held probably occurred in most cases. All this was done behind IG Index's back and using means designed to prevent IG Index from finding out that Mr Colley was inserting and removing dividends in concert with its clients to enable them to place bets with IG Index at prices which, had IG Index known the truth, it would not have been prepared to accept and which would result in loss to IG Index and profit to the clients.
720. In theses circumstances I do not have any doubt but that Mr Colley by the conduct to which I have referred and which I have found was acting in breach of fiduciary duties owed by him to IG Index. Although he would in my judgment be liable to account to IG Index for any profits which he made as a result of those breaches, the relief sought against him by IG Index is damages for breach of his fiduciary duties. In my judgment IG Index is entitled to that relief.
721. It is in any event trite law that an employee owes a duty to his employer to act in good faith and with fidelity. Thus even if I were wrong to hold that Mr Colley's conduct constituted breaches of a fiduciary duty owed by him to IG Index, in my judgment, ignoring the epithet "fiduciary" in the Amended Particulars of Claim, he did owe IG Index a duty to act honestly as alleged in the Amended Particulars of Claim. For the reasons I have given I am satisfied that by his conduct as I have found it he was in breach of that duty and IG Index is entitled to damages for breach of that duty.
722. It follows from the findings which I have made that Mr Colley by his conduct was in breach of that duty and that IG Index is entitled to recover from Mr Colley damages to compensate it for loss and damage which it suffered as a result of those breaches.
723. In Amended Particulars of Claim IG Index alleged that as a result of "the matters of aforesaid" it has suffered loss and damage. In my judgment the "matters of aforesaid" include the allegations that by his conduct Mr Colley was in breach of the duty he owed IG Index, that by those actions he was acting fraudulently and that both his conduct and that of the client Defendants constituted a fraud in which they all participated pursuant to agreements that they would so act including agreements that the client Defendants would confer financial benefit on Mr Colley.
724. It is sufficient for IG Index to succeed in recovering damages against Mr Colley that it can establish that the losses which it suffered were the result of Mr Colley's breaches of the duty which he owed to IG Index. It is in my judgment clear that IG Index has indeed suffered loss and damage as a result of those breaches.
725. In Mr Colley's Defence it was pleaded that no particulars or comprehensible particulars had been provided by IG Index of the loss said to have been suffered as a result of Mr Colley's alleged breach of duty subject to a denial that any loss suffered by IG Index arose as a result of a breach of duty on the part of Mr Colley it was therefore said that he was not in a position to plead to the allegation that IG Index had suffered loss and damage "as a result of the matters of aforesaid".
726. It was also pleaded further or in the alternative that on IG Index's own case under the terms of the Spread Betting Customer Agreement it has a contractual right to void from the outset or amend the terms of any bet containing or based on a Manifest Error, that the relevant bets were based on a Manifest Error and that IG Index was entitled to and has amended the opening level of each bet to that which would have been the correct opening level without the false dividend. Accordingly it was alleged that even if Mr Colley had breached his duty to IG Index as alleged IG Index has suffered no loss as a result.
727. It is sufficient in order for IG Index to recover damages from Mr Colley that it can be shown that it has suffered loss as a result of the breaches which I have found of the duty which he owed IG Index. In principle as it seems to me the nature of that loss is prima facie the difference between the contract price on each of the 415 bets which are the subject of this claim and the price at which the bet would have been placed but for the insertion by Mr Colley of a false dividend. I include in the 415 bets the one bet which IG Index accepts was placed by an innocent client following the insertion by Mr Colley of a false dividend since it was a foreseeable and natural and obvious consequence of his breach of duty that IG Index would suffer loss as a result of any bet placed by a client at the artificially depressed priced cause by the insertion by Mr Colley of a false dividend, irrespective of whether that client was or was not a fraudulent accomplice of Mr Colley.
728. From that prima facie measure of loss there must be deducted in my judgment any sums recovered by IG Index from any of the persons on whose accounts the bets were placed.
729. It does not seem to me to follow automatically that even if IG Index was entitled to rely on the Manifest Error clause to void or amend the terms of the 415 bets and has, as it pleaded, amended the opening level of each relevant bet to that which would have been the correct opening level had the false dividend not been fraudulently entered by Mr Colley, that IG Index has for that reason suffered no loss as a result of Mr Colley's breach of duty.
730. By the time IG Index discovered the fraud and Mr Colley's breach of duty all the 415 bets had been closed and the relevant debits and credits on the account holder's accounts had been affected.
731. IG Index has brought proceedings against all but four of the persons who placed or on whose accounts there were placed the 415 bets seeking to recover its losses either as damages or pursuant to the Manifest Error clause. The four exceptions are Mr Rowe, Mr Abrahamovich and Mr Jeffcoate and the one client who placed a bet who IG Index accept was an innocent client. The first three were said by Ms Crowther not to have been included as defendants in the proceedings because sufficient funds were claimed by IG Index from their accounts which meant that they did not owe any monies to IG Index. It follows that IG Index has suffered no loss resulting from the bets placed by those three clients. The losses resulting from the bet placed by the sole innocent client are in principle in my judgment in the same position as those suffered as a result of the other 411 bets.
732. As to the remaining 411 bets which are the subject of these proceedings it no more follows in my judgment from the fact that IG Index have asserted a right to amend the contract price under the Manifest Error clause that it has suffered no loss than it does from the fact that it has brought proceedings seeking to recover damages against the persons on whose accounts the bets were placed damages for fraud.
733. In either case the losses caused by Mr Colley's breach of duty would only be reduced if and when IG Index recover money from individual defendants pursuant either to judgment or compromise. In the latter case it would be for Mr Colley to show that the terms of settlement did not constitute a reasonable mitigation by IG Index of its loss. No such allegation has been made by Mr Colley.
734. In the Amended Particulars of Claim IG Index claim against Mr Colley the sum of £1,242,190.43. There was not at the trial sufficient time to go into questions of quantum. Accordingly it is not clear to me how that sum was calculated. It should in principle be possible for IG Index and Mr Colley to agree the amount of damaged to which IG Index is entitled from him applying the principles which I have set out above. Failing such agreement it will have to be resolved by me following further arguments.
735. As to the other legal bases on which IG Index claim to be entitled to recover damages from Mr Colley they add nothing in practice to IG Index's entitlement as I have found it to damages for breach of duty. Their relevance is principally in the context of IG Index's causes of action against the other remaining Defendants to which I now turn.

IG Index's causes of action against Mr Regan, Mr Slaney and Mr Teller

736. The pleaded allegations against these three Defendants as well as the other client Defendants included the following allegations. They fraudulently traded at the false price created by the systematic and fraudulent insertion by Mr Colley of false dividends into IG Index's systems. They closed their bets at the higher price created by Mr Colley's removal of the false dividends thus making a profit subject to any legitimate movement in the underlying price of the stock. In placing a "buy" bet on the stock at the lower price after Mr Colley input the false dividend they were acting in concert with him. IG Index does not know the precise details of how they operated the fraud with Mr Colley between themselves and in particular the precise details of when or how any agreement was reached between them and Mr Colley or the precise details of such agreement. However it is an irresistible inference from all of the pleaded circumstances that they were acting in concert with Mr Colley and both he and they were participants in the fraud. Each individual Defendant profited from the pleaded fraudulent activity of Mr Colley on the bets listed in the spreadsheet annexed to the Amended Particulars of Claim which set out the extent by which each individual Defendant profited from the fraud. The amount claimed from each of them took into account any balance due to any of them as a result of legitimate transactions between him and IG Index and set off by IG Index against the sums due as a result of the matters pleaded. The profit from any relevant bet would be credited to the account of the particular Defendant who placed it. Mr Colley could not profit from his fraudulent activity unless he was acting in concert with the particular Defendant. It is an irresistible inference that the other Defendants were acting in concert with him. The timing and nature of the relevant bets, in particular the fact that they were opened shortly after the false dividend had been entered by Mr Colley and closed shortly after the false dividend was removed by him also indicated that the other Defendants must have been aware of the fraud being perpetrated by Mr Colley and must have been willing participants in that fraud. In further support of its contention that they were willing participants in the fraud and were acting in concert with Mr Colley IG Index relied on the contents of its witness statements and the fact that, apart from one occasion in the case of Mr Regan, whenever they placed one of the allegedly fraudulent trades no other person did so. Further the sums by which they profited by the fraud were sums that were diverted from IG Index by reason of the breach of fiduciary or other duty owed by Mr Colley to IG Index. They were knowing recipients of such sums. IG Index relied on the pleaded matters in support of the allegations of knowledge. As a result of "the matters aforesaid" IG Index has suffered loss and damage IG Index then claimed against Mr Regan, Mr Slaney and Mr Teller the sums of £191,940, £176,017.50 and £290,164 respectively.
737. As against each of Mr Regan, Mr Slaney and Mr Teller I have made the following findings of fact. When they placed the relevant bets they did so dishonestly and fraudulently, having been told by Mr Colley that he had inserted or would insert a false dividend together with the time and date of the insertion. Before they placed the bets Mr Colley dishonestly inserted a false dividend. In placing the bets they were acting pursuant to an agreement with Mr Colley that he would dishonestly insert false dividends into IG Index's pricing system to enable them to place bets at the manipulated price from which they would make an unwarranted and fraudulent profit by closing out the bet after Mr Colley removed the false dividend. After the bets were placed Mr Colley removed the false dividends and informed them that he had or would do so together with the time and date of the removal. After the false dividends were removed they closed the bets resulting in fraudulent profits (or smaller losses than would otherwise have resulted) at IG Index's expense. Part of the agreement was that they would confer on Mr Colley a financial benefit in return for him giving them the opportunity to place fraudulent bets at manipulated prices from which they would derive unwarranted profits. It is probable that they did confer such benefits on him. By their conduct they were willingly and knowingly participating in a fraud perpetrated by Mr Colley against IG Index. The profits which they made, or the smaller losses which they made, as a result of placing bets on the manipulated prices were the intended results of their dishonest conduct and the fraudulent activity in which they and Mr Colley jointly and willingly participated pursuant to their agreement with Mr Colley. Their actions and those of Mr Colley were dishonest and were part of a fraudulent scheme which was designed to and did enable them to defraud IG Index. Mr Regan, Mr Slaney and Mr Teller were aware of the fraud being perpetrated by Mr Colley against IG Index and were willing participants in that fraud.
738. Before considering any legal analysis I observe that it would in my judgment be surprising if those findings of fact did not lead to some liability on the part of Mr Regan, Mr Slaney and Mr Teller to IG Index as a result. Indeed it would in my judgment represent a serious lacuna in the law if they did not.
739. Neither Mr Slaney nor Mr Teller was represented at the trial and addressed no legal argument on IG Index's causes of action against them. Such argument as was advanced was advanced by Mr Mayall on behalf of IG Index and Mr White on behalf of Mr Regan. It was unfortunate that in part because of time constraints not of Mr Mayall's making I was given only limited assistance by counsel in closing submissions by way of developed legal submissions and authorities.
740. It is in my judgment clear that one of the legal consequence of the findings which I have made is that each of Mr Regan, Mr Slaney and Mr Teller is liable to IG Index by reason of having dishonestly assisted Mr Colley in his fraudulent conduct which itself constituted a breach by him of a fiduciary duty owed to IG Index. Indeed it went beyond assistance and, as pleaded they willingly participated themselves in the fraud. For present purposes however what is relevant is that, by placing bets at the artificially depressed prices created by the insertion by Mr Colley of dividends which they knew to be false the details of the timing of which he had informed them of in advance, and thereafter closing the bets after the removal by Mr Colley of the false dividends at times and dates of which he had informed them in advance, these three Defendants dishonestly assisted Mr Colley in his fraudulent breach of his fiduciary duty to IG Index.
741. I am satisfied that all the necessary ingredients for such liability have been established. Mr Colley's conduct constituted fraudulent breaches of a fiduciary duty owed by him to IG Index. These three Defendants were fully aware at the time of his conduct and fully aware that it was dishonest and a fraud on IG Index. They understood that the purpose of Mr Colley's conduct was to defraud IG Index and to enable them and him to make fraudulent profits as a result of it. By agreeing to receive from Mr Colley and act on information as to when he would insert or had inserted false dividends and would remove or had removed them, and by then actually acting on that information by placing bets at the dishonestly depressed prices and closing them when the prices had been restored, they were dishonestly assisting Mr Colley's fraudulent breach of fiduciary duty. Their subsequent receipt of the monies resulting from that conduct and their agreement to confer financial benefit on Mr Colley and their actual conferring of financial benefit on him so as to enable him as well as to profit from his fraudulent breach of fiduciary duty further dishonestly assisted Mr Colley's fraudulent breach of fiduciary duty.
742. As appears above in my judgment it is also clear that all the factual allegations necessary to support these findings and conclusions were made in the Amended Particulars of Claim.
743. It follows that in my judgment each of Mr Regan, Mr Slaney and Mr Teller is liable to IG Index by reason of having dishonestly assisted Mr Colley in his fraudulent breach of fiduciary duty and IG Index is entitled to recover from them damages for losses which it has suffered as a result. It is my understanding that in such circumstances the claimant would ordinarily be entitled to an account of profits, but that is not the relief sought by IG Index in the Amended Particulars of Claim. It may be that in practice there is no difference in outcome. The profits made by the Defendants are measured in the case of each relevant bet by the difference between the opening level of the bets and the level it would have been but for the insertion of the false dividend. The loss suffered by IG Index on each bet is the loss resulting from having accepted bets into which false dividends had been inserted.
744. The measure of that loss is likely to be the difference between the price at which the bet was placed and the price at which it would have been accepted by IG Index but for the insertion of the false dividend. Although the damages to which IG Index is entitled should place it in the position in which it would have been but for the tort and is not a contractual measure of damages, in practice the loss suffered by IG Index is that it has paid out money representing the false dividends or received less than it should have done by reason of the false dividends.
745. At the trial Mr White indicated that Mr Regan and his legal team were not clear as to the precise quantum of those differences claimed by IG Index. There was no time to deal with matters of quantum at the trial. Accordingly I would hope that the details of the sums to which IG Index would be entitled on this basis can be agreed between IG Index and Mr Regan and his team, Mr Slaney and Mr Teller. If there is a disagreement I should be told the basis of it.
746. Mr Mayall in oral closing submissions also submitted that the Defendants are liable to IG Index in damages for the tort of fraud. In the light of my holding that they are liable in damages for dishonest assistance in Mr Colley's fraudulent breach of fiduciary duty in practice this head of claim would appear to add nothing of substance. However in deference to the (brief) submissions on this by Mr Mayall and Mr White and also because it arises in the context of IG Index's claims against Mr Osborn and Mrs Benn I now turn to that claim.
747. Mr White submitted that in the absence of a misrepresentation of fact there could be no claim for damages for fraud or deceit.
748. Mr Mayall in closing oral submissions submitted that proof of a fraudulent misrepresentation is not a necessary precondition of establishing an entitlement to recover damages for loss suffered as a result of fraud. For reasons which were not in any way the fault either of IG Index or Mr Mayall, his time for making closing oral submissions was circumscribed. One of the casualties was the development of legal submissions. Accordingly I invited him to let me have after the close of the trial authorities in support of that submission.
749. Together with his additional authorities Mr Mayall enclosed the following passage from the Thirty Second edition of Snell on Equity to which he directed my attention:

"Honesty is said to be a "duty of universal obligation. This obligation exists independently of contract or of special obligation [whenever] a man intervenes in the affairs of another". So, for instance, despite the absence of a representation by agent to principal, the rule in equity, as at common law, is that "any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal." Another example might be the so called "accessory liability" of a person who assists dishonestly in a breach of trust."

750. The quotation in that passage is from the speech of Viscount Haldane in Nocton v Lord Ashburton [1914] AC 932 at 954, an authority on which Mr Mayall had relied in oral submissions. Viscount Haldane stated:

"Derry v Peek simply illustrates the principle that honesty in the strict sense is by our law a duty of universal obligation. This obligation exists independently of contract or of special obligation. If a man intervenes in the affairs of another he must do so honestly, whatever be the character of that intervention. If he does so fraudulently, and through that fraud damage arises, he is liable to make good the damage. A common form of dishonesty is a false representation fraudulently made and it was laid down that it was fraudulently and if the Defendant made it knowing it to be false, or recklessly, neither knowing nor caring whether it is false or true, that is fraud in the strict sense." (Emphasis added).


The words highlighted suggest that fraudulent misrepresentation is not the only circumstance in which liability for fraudulent intervention in the affairs of another may rise.

751. Mr Mayall also cited an extract from the speech of Lord Wright in a case sent to me by Mr White, after the end of the hearing, Bradford Third Equitable v Borders [1941] 2 All ER 205 at 220-221:

"The case against the appellants must, even as amended, depend on fraud, and nothing else: I fully agree that fraud may assume many disguises and wrappings, but the court will always look at substance, and, if it finds the wicked intent and consequent damage will give effect to its findings. As Sir Horace Davey QC is reported to have said in his argument in Derry v Peek at p 339:

Fraud never has been and never will be exhaustively defined, the forms which deceit may take being so many and so various. There is a negative characteristic: it must be something which an honest man would not do; not merely what a logical or clear-headed man would not do."

752. Lord Wright said that the crucial question in that case was whether the appellant's secretary, for whose fraud, if there were fraud, the appellants would be liable acted dishonestly. The context of that case was a claim that the appellant building society was liable to the purchaser of a house, who bought it in reliance on a fraudulent misrepresentation in a brochure issued by builders, because its representative must have known of the representations and their falsity and their effect in inducing the purchaser to buy the house from the builders and obtain a loan from the appellants so that they were knowingly availing themselves of the builders' fraud and reaping its fruits. Thus the context in which those remarks were made was one in which the fraud from which it was alleged that the building society through its representative knowingly availed itself and from which it reaped its fruits was a classic case of fraudulent misrepresentation on the part of the builders.
753. The dicta of Viscount Haldane in Nocton v Ashburton and Lord Wright in Bradford are undoubtedly expressed in wide terms
754. Mr Mayall had earlier relied, in oral submissions, in support of the proposition that a claim in fraud is not dependent on proof of a fraudulent misrepresentation, on the well known case of Lloyd v Grace Smith and Co [1912] AC 716. In that case a widow who owned two cottages and a sum of money secured on a mortgage, being dissatisfied with the income derived therefrom, consulted a firm of solicitors and saw their managing clerk, who conducted the conveyancing business of the firm without supervision. Acting as the representative of the firm he advised her to sell the cottages and induced her to give him instructions to sell the cottages and to call in the mortgage money, and for that purpose, to give him her deeds and also to sign two documents which were neither read over nor explained to her and which she believed she had to sign in order to effect the sale of the cottages. Those documents were in fact a conveyance to him of the cottages and a transfer to him of the mortgage. He then dishonestly disposed of the property for his own benefit.
755. Earl Loreburn summarised the facts as follows:

"The appellant Mrs Lloyd had bought some property and thus had come to know of the Defendant, a solicitor. She had doubts about having got her money's worth and went to the Defendant's office to enquire. When there she saw one Sandals, the Defendant's managing clerk, and was induced by him to give him instructions to sell or realise this property, and for that purpose to give him the deeds and to sign two documents which she neither read nor knew the tenor of, which put into Sandal's possession her interest therein. She gave him the deeds as the Defendant's representative. Having got them and the signed documents, he dishonestly disposed of this lady's property and pocketed the proceeds. That is the whole story as it is either found or admitted because it was incontestable. It is clear in my mind from the simple facts that the jury ought to have been directed if they believed them to find for the plaintiff. The managing clerk was authorised to receive deeds and carry through sales and conveyances, and to give notices on the Defendant's behalf. He was instructed by the plaintiff, as the representative of the Defendant's firm – and she so treated him throughout – to realise her property. He took advantage of the opportunity so afforded him as the Defendant's representative to get her to sign away all that she possessed and put the proceeds into his own pocket. In my opinion there is an end of the case. It was a breach by the Defendant's agent of a contract made by him as Defendant's agent to apply diligence and honesty in carrying though a business within his delegated powers and entrusted to him in that capacity. It was also a tortious act committed by the clerk in conducting business which she had a right to conduct honestly and was instructed to conduct on behalf of his principals." (page 724).

756. The case is most commonly cited as authority for the proposition that a principal is liable for the fraud of his agent if it is committed while the agent purports to act in the course of business such as he was authorised or held out as authorised to transact on account of the principal. For present purposes Mr Mayall relied on it as an example of a case in which liability for fraud was not dependent on proof of a fraudulent misrepresentation.
757. According to the report of the case the solicitor left the room taking with him the two deeds of the cottages which he had asked the widow to bring with her and returned with two documents which he asked her to sign. They were not read over or explained to her and she signed them without reading them believing that they were something she had to sign for the sale which he had advised her she should effect could be proceeded with. In fact the documents were a conveyance by the widow to the solicitor of one property and a transfer by her to him of the mortgage on another property.
758. As a matter of analysis it might be said that there was a representation by conduct that the documents which the solicitor placed in front of the widow were documents authorising the legitimate sale of her properties to third parties which is what he had advised her she should do. That representation induced her to sign what were in fact conveyances to him. It could also be said that there was created between the solicitor and the widow a fiduciary relationship giving rise to a fiduciary duty which he breached. However neither of those analyses was referred to by Earl Loreburn or identified as a necessary ingredient in the tort committed by the dishonest solicitor for which his principals were held liable.
759. The dicta and decision in Lloyd v Grace Smith and Co do in my judgment provide support for Mr Mayall's submission that damages may be awarded for fraudulent conduct even in the absence of proof that the loss was suffered as a result of the Claimant being induced to enter into a contract in reliance on a misrepresentation.
760. That interpretation of Lloyd v Grace Smith and Co is in my judgment supported by a passage in the judgment of David Steel J in Petrograde v Smith [2000] CLC 916 which is one of the authorities Mr Mayall sent me in response to my invitation to send me authorities in support of his submission that proof of a fraudulent misrepresentation is not a necessary precondition of establishing an entitlement to recover damages for loss suffered as a result of the fraud. I refer to the preceding paragraph in that judgment below. In paragraph 20 Steel J stated:

"20. The decision of the House of Lords in Armagas v Mundogas was solely concerned with the principles applicable to vicarious liability for deceit. Having cited Lloyd v Grace Smith and Co [1912] AC 716 for the proposition that the absence of authority is not decisive in showing that conduct is not within the course of employment, Lord Keith observed (at p.82 D-E; 99, 205):

This dictum… may have some validity in relation to torts other than those concerned with fraudulent misrepresentation, but in my opinion it has no application to torts of the latter kind, where the essence of the employer's liability is reliance by the injured party on actual or ostensible authority."




761. Steel J cited Lord Keith's dictum in support of his conclusion in the previous paragraph of his judgment which I set out below that a claim based on bribery is not a species of deceit but a special form of fraud where there is no representation made to the principal of the agent let alone reliance. As it seems to manifest error it was implicit in Lord Keith's observation that he considered that the tortious liability in Lloyd v Grace Smith and Co was not based on the tort of deceit and did not depend on proof of a fraudulent misrepresentation. It is in my judgment also clear that that is how Steel J understood Lord Keith's observation.
762. The fraudulent conduct in which Mr Teller, Mr Slaney and Mr Regan engaged included using their accounts as a vehicle for defrauding IG Index. By placing bets after Mr Colley had to their knowledge dishonestly entered false dividends and closing them after to their knowledge he had removed them they defrauded IG Index and dishonestly intervened in its affairs. Their liability to IG Index as a result of that conduct was analogous to that of the solicitor's clerk in Lloyd v Grace Smith and Co. The act of the clerk in getting the widow to sign away all that she possessed and put the proceeds into his own pocket was held to be a tortious act committed by the clerk.
763. In my judgment the same principle applies here. In my judgment IG Index is entitled as against each of Mr Teller, Mr Slaney and Mr Regan to damages for loss suffered as a result of the fraudulent conduct in which I have held he engaged. As already mentioned I do not consider that this adds anything in practice to my conclusions on dishonest assistance.
764. As to a claim based on knowing receipt of sums diverted from IG Index by reason of the breach of fiduciary or other duty owed by Mr Colley to IG Index, Mr White submitted that IG Index had failed to establish the nature of the duty owed to IG Index and in what circumstances a breach has arisen and losses have been suffered referable to the breach. He also submitted that IG Index failed to identify any evidence of knowing receipt of funds.
765. He relied on the well known passage from the speech of Hoffman LJ in El Ajou v Dollar Land Holdings PLC [1993] 3 All ER 717:

"This is a claim to enforce a constructive trust on the basis of knowing receipt. For this purpose the plaintiff must show first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the Defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the Defendant that the assets he received are traceable to a breach of fiduciary duty."

766. El Ajou was a case on constructive trust. One of the ingredients which Hoffman LJ held to be a necessary condition for enforcing a constructive trust on the basis of knowing receipt was proof that the plaintiff's assets were disposed of in breach of fiduciary duty. In that case the requirement was satisfied because the plaintiff's fiduciary agent was bribed to give certain Canadians over Dollars US 10 million of his money in return for worthless shares.
767. In paragraph 21 of the Amended Particulars of Claim it was alleged that the sums by which the client Defendants profited by the fraud were sums which were diverted from IG Index by reason of the breach of the fiduciary or other duty owed by Mr Colley to IG Index. It was alleged that the client Defendants were knowing recipients of such sums IG Index relied on all the matters previously pleaded in support of the allegation of knowledge.
768. I have held that Mr Colley's conduct constituted a fraudulent breach of fiduciary duty owed to IG Index. I have held that the profits made by each of Mr Teller, Mr Slaney and Mr Regan were the result of that fraudulent breach of fiduciary duty and it follows from everything I have found that each of them knew that the profits they made resulted from Mr Colley's breach of fiduciary duty.
769. Mr Colley was not involved in or responsible for accepting the bets dishonestly placed by each of Mr Teller, Mr Slaney and Mr Regan on behalf of IG Index and it was the entering into of those contracts and the subsequent payments made to them in settlement of the bets when they were closed which led to IG Index transferring funds to Mr Teller, Mr Slaney and Mr Regan. I was not assisted by any submissions on this head of claim by Mr Mayall. I have asked myself whether in these circumstances it could be said that there was no disposal of IG Index's assets in breach of fiduciary duty or knowledge by these three Defendants that the money they received were traceable to a breach of fiduciary duty.
770. In my judgment, subject to one qualification, that could not be said. Mr Colley acted dishonestly and fraudulently in inserting the false dividends and then removing them and in alerting each of these three Defendants that he had done or would do so and acted in concert with them when they dishonestly placed and closed the bets on the manipulated prices which led to the profits when the bets were closed and the payments made by IG Index to them.
771. In those circumstances in my judgment in so far as the relevant bets led to profit attributable to the false insertion of dividends which were paid by IG Index to these three Defendants they were knowing recipients of assets traceable as representing IG Index's assets which were disposed of in breach of fiduciary duty.
772. The qualification relates to any bets in which because of the underlying movement in the relevant US stock between the date the bet was placed and the date on which it was closed the relevant Defendant made a loss. Even though the loss was lower than it would have been but for the insertion of a false dividend and the breach of fiduciary duty it is not immediately apparent to me that any assets of IG Index were disposed to them. That does not of course mean that in the case of such bets IG Index is not entitled to recover damages to compensate it for the fact that but for the insertion of the false dividend there would have been a greater loss and it would have been entitled to receive a larger payment. Nor would it affect a claim for an account of profits for dishonest assistance, albeit there is no such claim in this case.
773. In view of my conclusions as to the other claims against these Defendants on which IG Index had succeeded, it may be that IG Index see no advantage in seeking to recover under the head of knowing receipt any sums in respect of any such bets which resulted in loss. That is a matter for them. I refer to matters of quantum below.
774. There are two further matters to which I should refer. First in brief written closing submissions which accompanied the authorities for which I had asked at the end of the trial hearing Mr Mayall submitted that the "surreptitious dealing" principle referred to in Snell would clearly apply in this case in any event. He submitted that surreptitious dealing or bribery is defined very widely and relied on the following passage from the judgment of Andrew Smith J in Fiona Trust v Privalov [2010] EWHC 3199:

"70. The claimants finally assert claims on the basis that bribes were paid by Mr Nikitin or companies associated with him to Mr Privalov, Mr Borisenko, Mr Skarga and Mr Izmaylov. English law takes a broad view of what constitutes a bribe for the purposes of civil claims. It considers that a bribe (or 'secret commission' or 'surreptitious payment') has been paid where '(i) …the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) …he makes it to that person knowing that the person is acting as the agent of the other person with whom he is dealing; and (iii) …he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person's agent': Industries and General Mortgages Co. Ltd v Lewis, [1949] 2 AER 573 at p.575G. Thus, a bribe is 'a commission or other inducement which is given by a third party to an agent as such, and which is secret from his principal': Anangel Atlas Compania Naviera SA v Ishikawajima-Harima Heavy Industries Company Limited, [1990] 1 Lloyd's LR 166 at p.169.

71. 'When an agent receives or arranges to receive by way of bribe or secret commission in the course of his agency from a person who deals or seeks to deal with his principal, the agent is liable to his principal jointly and severally with that person (1) in restitution for the amount of the bribe or secret commission; or (2) in tort for any loss suffered by the principal from entering into the transaction in respect of which the bribe or secret commission was given or promised, and the bribe, if it was paid, is held on trust for the principal and the person who pays or promises the bribe is also liable in restitution and damages to the principal: Bowstead and Reynolds on Agency (2010) 19^th Ed. at 6-084. The principal may also require either the agent or the briber to give an account of profits."

775. Mr Mayall submitted that if, as alleged by IG Index, Mr Colley received payment from the other Defendants or their agent then that would clearly amount to payment of a bribe (or "secret commission" or "surreptitious payment"). He submitted that there are many examples of this type of fraud where there is no representation affording a cause of action in modern times. That it is a type of actionable fraud not involving a representation (dishonest or otherwise) he submitted was made clear by David Steel J in Petrograde v Smith [2000] CLC 916:

"19. I now turn to the issue of vicarious liability. The first point taken by the defendants was that bribery is a species of the tort of deceit and, so the argument ran, Alpina would only be liable in tort (or presumably in respect of the alternative cause of action in restitution) by reason of the actions of Mr Van der List and Mr Tissot if its employees were acting within their actual or ostensible authority: Armagas Ltd v Mundogas SA [1986] AC 717: (1986) 2 BCC 99, 197. It was not suggested by the claimants that the two employees of the defendants were acting within their authority in tendering the bribes. Indeed it is not easy to envisage an agent having actual, let alone ostensible authority to proffer bribes. The short answer is that the claim based on bribery is not a species of deceit but a special form of fraud where there is no representation made to the principal of the agent let alone reliance. I am unable to accept the suggestion that there is to be discerned an implied representation that 'the transaction is at arm's length with no secret profit'. To the contrary, the whole premise of the cause of action in fraud is that no representation has been made to the principal: 'the real evil is not the payment of money but the secrecy attending it': see Shipway v Broadwood [1899] 1 QB 369 per Chitty J at p.373." (Emphasis added)

776. Mr Regan's solicitors took objection to the service by Mr Mayall of these short written submissions after the end of the trial hearing. In a letter dated 11 June 2012 they wrote that Mr Mayall neither sought my permission to file further written submissions nor was any reference made to the prospect of further written submissions. They said that they were concerned that IG Index sought to serve as well as Mr Mayall's authorities, written submissions on material points of law that had not featured in previous pleadings or skeleton arguments, in circumstances in which no leave had been granted and no provision had been made for any of the Defendants to file submissions in reply. Their concern was that I should disregard the submissions since they had the effect of significantly widening the basis upon which the claim was put against Mr Regan. By way of example the authorities on bribery were said to be wholly unrelated to any claims or arguments advanced either in the pleadings or at trial.
777. I have given anxious consideration to the contents of that letter. As I have indicated, it was an explicit part of the pleaded case that it was an irresistible inference that the client Defendants were acting in concert with Mr Colley because without them placing bets following his insertion of false dividends there was no way in which he could profit from his fraud. I have also indicated that in my judgment it is implicit in that allegation that it was alleged that the client Defendants placed their bets pursuant to an agreement with Mr Colley on terms that they would confer a financial benefit on him in return for being given the opportunity of making unwarranted profits at the expense of IG Index. I have also mentioned that I made this conclusion clear in my interlocutory judgment given on the first day of the trial when I said that I considered it to be implicit in the Particulars of Claim that IG Index were alleging that in some way the profit made by the client Defendants would redound to Mr Colley's advantage.
778. I would add that Mr Mayall made no secret during the trial that it was IG Index's case that Mr Regan, Mr Slaney and Mr Teller made secret payments to Mr Colley. That was the basis on which he indicated his intention to cross-examine them on their bank accounts to show that particular payments had been made. Although I refused permission to IG Index to rely on individual payments on the ground that it had left too late the identification of particular payments said to have been secret payments or the sharing of profits, in refusing leave to amend. I emphasised that it had always been and remained part of IG Index's case that it is to be inferred that in some way the profit made by the client Defendants would redound to Mr Colley's advantage, that being implicit in the allegation to which I have referred that the profit from any relevant bet would be credited to the account of the particular Defendant who placed it and that Mr Colley could not profit from his fraudulent activity unless he was acting in concert with the particular Defendant and that it is an irresistible inference that the client Defendant were acting in concert with Mr Colley.
779. That this was IG Index's case was in my judgment obvious to all those who participated in the trial as is evidenced by the fact to which I have referred that Mr Teller asked Mr Colley in cross examination whether he had ever paid him cash before, during or after the alleged fraud and that Mr Colley asked Mr Osborn if Mr Osborn had ever paid him.
780. It is also the case as I have mentioned that the fact that Mr Mayall's time for making closing submissions was circumscribed was no fault of his or IG Index. Indeed he had particular time difficulties in responding to the written and oral closing submissions of Mr White which were at least in part contributed to by Mr White.
781. However the fact remains that there is no explicit allegation of bribery in the Amended Particulars of Claim, still less a claim for damages for the tort of bribery. Nor was there any reference to bribery or to an entitlement by IG Index to damages for the tort of bribery by Mr Mayall in his oral or written submissions before the end of the hearing. Indeed the unsuccessful amendments for which I refused leave sought to introduce a series of allegations as to unexplained payments into Mr Colley's account and various payments into and out of the accounts of Mr Regan, Mr Slaney and Mr Teller which were introduced as being facts and matter relied on by IG Index in support of its contention that these Defendant were willing participants in the fraud and were acting in concert with Mr Colley.
782. In other words both in that unsuccessful application for permission to amend to pleaded specific payments but also in the answer to the request for further information to which I have referred in which IG Index asserted that without the client Defendants placing bets there was no way in which Mr Colley could profit from his fraud, the reliance sought to be placed by IG Index on the implied allegations that payments were made to Mr Colley was not in order to found a separate claim for damages for the tort of bribery but rather as evidence to support the factual allegation that the client Defendants were acting in concert with Mr Colley and participating in his fraud so that their placing and closing of bets cannot have been innocent but must have been based on having been tipped off by him about the fact and timing of the insertion and removal of false dividends and thus must have been dishonest.
783. I do not think that the Defendants thought at the trial that they were dealing with a claim for damages for bribery. Indeed I do not think that IG Index had such a claim in mind by the end of the trial hearing. The bribery cases were only sent to me in response to my invitation to Mr Mayall to send me any further authorities on which he relied to support his contention, which he had supported in oral submissions, by reference to Lloyd v Grace Smith and Co and Nocturn v Ashburton, that the tort of fraud does not require proof of a fraudulent misrepresentation. Although there is in my judgment some support for that proposition in Petrograde, as I have indicated, and in that context Mr Mayall was entitled to rely on that line of authority, had I not asked for further authority there is no indication that IG Index would have relied on those authorities in support of a free standing or discrete cause of action founded on damages for the payment of bribes. In short prior to the written closing submissions the issue of whether payments were made by the other Defendants to Mr Colley featured in the case not as the basis for an additional free standing cause of action entitling IG Index to damages but as a disputed matter of evidence going to the question of whether Mr Colley was acting in concert with the client Defendants.
784. I do not consider in those circumstances that it would be fair to the Defendants or in the interests of justice for me to treat the existing pleading as including a claim for damages for the tort of bribery and adjudicating upon such a claim. None of these three Defendants had an opportunity of advancing detailed submissions as to why such a claim is not open to IG Index on the pleadings and/or as to why even if it were it should not succeed or as to why IG Index should not be given permission to amend its pleading to rely on this additional cause of action. Of no less importance is the knock on effect on the position of Mr Osborn and Mrs Benn. They too had no opportunity of advancing any submissions on these matters.
785. If this had been the only cause of action open to IG Index the position might have been different. As I have indicated the findings of fact which I have made are very serious and it would offend ordinary notions of justice if despite such findings IG Index were entitled to no relief and these Defendants were entitled to retain the benefit of what I have found to be their dishonest conduct. Had that been the position there might have been an argument for reopening the hearing and having a pitched battle on whether IG Index would need permission to amend their pleading in order to assert a claim for damages for the tort of bribery if so whether such permission should be given and whether in any event it is too late for IG Index to raise a new cause of action. Even then I would have been very reluctant to adopt such a course. Mr Colley, Mr Slaney, Mr Teller and Mrs Benn are litigants in person and Mrs Benn was assisted by a McKenzie friend. Mr Regan is an individual and ranged against them is a very large sophisticated Spread Betting company which has had a long time to formulate its claims.
786. As it is I have held that in the facts which I have found Mr Teller, Mr Slaney and Mr Regan are liable to IG Index by reason of their fraudulent conduct, their dishonest assistance of Mr Colley's fraudulent breach of fiduciary duty and their knowing receipt of assets traceable as representing IG Index assets which were disposed of in breach of fiduciary duty. I have also held that Mrs Benn and Mr Osborn are liable to IG Index independently of any liability arising out of the payment by respectively Tom Benn and Mr Teller as their agents of bribes to Mr Colley. In those circumstances a formal ruling that any of the Defendants is liable to IG Index in damages for the tort of bribery would make no practical difference to the parties or to the financial consequences flowing from the findings of fact which I have made.
787. The second matter to which I should refer is this. It strikes me that many of the findings of fact which I have made might support a claim for unlawful means conspiracy. However no such claim was advanced by IG Index either in its Amended Particulars of Claim or in oral or written submissions. There was no reference to the tort of unlawful means conspiracy by any party at the trial. In particular there was no pleaded allegation of an intention to injure IG Index. Nor were allegations to that effect put to any of the Defendants.
788. In those circumstances it does not seem to me that as matters stand it is open to me to adjudicate on any question whether any of the Defendants is liable to IG Index for damages for that tort.
789. As with the tort of bribery any claim for damages for unlawful means conspiracy would in the light of the conclusion I have reached as to the other fraud based causes of action add nothing of practical or financial significance to the parties.

The claim against Mr Regan Mr Slaney and Mr Teller based on Manifest Error

790. These claims are not pleaded as alternative claims to IG Index's primary claims based on fraud. They fall to be considered against the background of the findings of fact which I have made in considering these claims. I have found that Mr Colley dishonestly and fraudulently inserted and removed false dividends from the IG Index futures prices on which they dealt, that those false dividends did not represent announced or actually anticipated dividends, were substantially and obviously larger than could reasonably have been expected, were inserted on US stocks which either had never declared dividends or where the next declared dividend was substantially lower than the false dividend.; and that each of these Defendants acted in concert with Mr Colley pursuant to an agreement to perpetrate fraud on IG Index and that when they placed their bets with IG Index which are the subject of the claims against them they knew that the prices on which they dealt were lower than the prevailing market prices referable to the underlying cash price and lower than they would have been but for the dishonest insertion by Mr Colley of a false dividend which they knew he would and which he did remove before they closed their bets.
791. IG Index's pleaded case against all the Defendants other than Mr Colley was that they agreed to be bound by the terms of the Spread Betting Customer Agreement in force between the parties at the time the Particulars of Claim was served and it was averred that previous versions of the agreement in force at any material time contained clauses that were not materially different.
792. Mr Regan in his Amended Defence averred that the terms and conditions applicable to and binding on him were those which were provided to him on 7 February 2003 upon registration of his membership and predated the version of the Manifest Error Clause set out in the Amended Particulars of Claim. He did not accept that it did not contain clauses which were materially different to those in force at the time of the Amended Particular of Claim. At the trial Mr Mayall accepted that the relevant version binding on Mr Regan was that contended for by Mr Regan. I set out below a version of the Manifest Error clause designed to highlight the differences between the version set out in the Amended Particulars of Claim and the version set out in Mr Regan's Amended Defence which represents the version in force at the time Mr Regan signed up with IG Index and which Mr Mayall at the trial accepted is the version which governed the contractual relationship between IG Index and Mr Regan. Passages in italics are taken from the version set out in the Amended Particulars of Claim and passages highlighted in bold reflect wording in the earlier version in force when Mr Regan signed up and applicable to him. The remainder of the text is common to both versions. It follows that the version which governed the relations between IG Index and Mr Regan is everything that is not in italics.

"Manifest Error

(1) We reserve the right to void without your consent from the outset or to amend the terms of any Bet containing or based upon a manifest error. If, in our discretion, we choose to amend the terms of any such Manifestly Erroneous Transaction, the amended level will be such level as we reasonably believe would have been fair at the time the Transaction was entered into. A "Manifest Error" is any error that we believe to be obvious of palpable. In deciding whether an error is a Manifest Error we may take into account any relevant information including without limitation the state of the Underlying Market at the time of the error. Or any mistake in a lack of clarity of, any information source or pronouncement upon which we base our quoted prices. In making such a decision we will act in our sole discretion, reasonably and in good faith. Any financial commitment that you have entered into or refrained from entering into in reliance on a Bet with us will not be taken into account in deciding whether or not there has been a Manifest Error.

(2) In the absence of wilful default or fraud we shall not be liable to you for any loss, cost, claim demand, or expense following a Manifest Error. In the event that a manifest error is made by any information source, commentator or official upon whom we reasonably relay we shall not, in the absence of wilful default or fraud, be liable to you for any loss, cost, claim, demand or expense. Following a Manifest Error we may decide to void the Bet, or, at your request, we may agree to amend the terms of the bet to what we believe would have been fair and reasonable at the time it was entered."

793. In their Defences neither Mr Slaney nor Mr Teller admitted that the terms of the Spread Betting Customer Agreement current at the material time contained the term set out in the Material Error clause pleaded in paragraph 23 of the Amended Particulars of Claim. The version of the agreement disclosed by Mr Slaney contained as Term 26 a Manifest Error clause in the same terms as that disclosed by Mr Regan and averred by Mr Regan to be applicable and binding on 7 February 2003 when he registered for membership and agreed by IG Index and Mr Regan to be the term to which he was subject in this claim. In the absence of any other evidence to the contrary it is in my judgment probable that that is the form of the agreement and Manifest Error clause applicable to the bets placed by Mr Slaney which are the subject of this claim.
794. The version of the Manifest Error clause contained in the agreement disclosed by Mr Teller was in the same terms as that agreed by IG Index and Mr Regan to apply to him and as disclosed by Mr Slaney save that it included in the first sentence the following words highlighted in bold: "we reserve the right to void ab initio or, at your request, to amend the terms of any Bet containing or based upon a Manifest Error." That version of the Agreement was dated November 1999, Mr Teller opened his account in December 1999 and in the absence of other evidence in my judgment it is probable that the manifest error term contained in the version of the agreement disclosed by Mr Teller is the one applicable to the bets which are the subject of the claim against him.
795. In the Amended Particulars of Claim IG Index alleged that:

"25. In circumstances where the opening level of the relevant bets was based upon an anticipated dividend when no such dividend was anticipated the bets were based upon a Manifest Error i.e. an error that was, in the reasonable belief of the Claimant, obvious or palpable. The Claimant has decided that each of the relevant bets was placed upon a Manifest Error.

26. The Claimant was entitled to and has amended the opening level of each relevant bet to that which would have been the correct opening level had the false dividend not been fraudulently entered by the First Defendant.

27. Term 8 (9) of the Customer Agreement provides as follows:

(9) Upon closing a Bet:

(a) you will pay us the difference between the Opening Level of the Bet and the Closing Level of the Bet multiplied by the Stake if the Bet is:

(i) a Down Bet and the Closing Level of the Bet is higher than the Opening Level of the Bet; or

(ii) an Up Bet and the Closing Level of the Bet is lower than the Opening Level of the Bet; and

(b) we will pay you the difference between the Opening Level of the Bet and the Closing Level of the Bet multiplied by the Stake if the Bet is a:

(i) a Down Bet and the Closing Level of the Bet is lower than the Opening Level of the Bet; or

(ii) an Up Bet and the Closing Level of the Bet is higher than the Opening Level of the Bet.

Unless we agree otherwise, all sums payable by you pursuant to Term 8(9)(a) are due and payable immediately upon the Closing Level of your Bet being determined by us and will be paid in accordance with Term 15. Sums payable by us pursuant to Term 8(9)(b) will be settled in accordance with Term 15(3).

28. Previous versions of the agreement in force at any material time contained clauses that were not materially different."

29. As a result of the amendment to the opening level of each of the relevant bets the other Defendants have become liable to pay to the Claimant the amount equivalent to the difference between the actual opening level of each relevant bet and the amended opening level multiplied by the Stake. This sum is the same as the amount by which the other Defendants profited from the fraudulent trades as set out in the spreadsheets."

796. The Defences of Mr Regan, Mr Slaney and Mr Teller and the submissions of Mr White raised a number of reasons why it was said that the Manifest Error clauses relied on by IG Index against them did not make them liable to pay IG Index the amount equivalent to the difference between the actual opening level of each relevant bet and the amended opening level multiplied by the Stake. It is convenient to deal with those points which remained live by the end of the trial together.
797. In February 2009 IG Index's solicitors wrote to each of Mr Regan, Mr Slaney and Mr Teller a letter asserting that IG Index was entitled to amend the opening level of each of the bets the subject of this claim to that which would have been the correct level were it not for the insertion by Mr Colley of false dividends. It said that the price quoted by IG Index is made up as follows: "The underlying quoted price of the stock on the day minus any dividend anticipated to be paid on the stock in the relevant period plus a small interest element." The letter stated that IG Index was in the letter amending the opening level of each of the bets to that which would have been the correct level were it not for the false dividend.
798. Mr Slaney and Mr Teller admitted that IG Index amended the opening levels of their relevant bets. The point was not addressed in Mr Regan's Defence but I find based on the letter to him dated 12 February 2009 from IG Index's solicitors that it did in his case as well.
799. It is necessary at this stage to address what in my judgment is a fatal flaw in IG Index's claim against Mr Teller under this head. In the version of the Manifest Error clause which I have held applied to him, IG Index did not reserve an unqualified right to amend the terms of any bet containing or based upon a Manifest Error. The right was qualified. It was "to void ab initio or, at your request, to amend the terms…". (Emphasis added). IG Index purported to amend the relevant bets in its solicitors' letter dated 3 February 2009. That purported amendment was not made pursuant to or as a result of any request made by Mr Teller. In those circumstances in my judgment no right to amend on the part of IG Index had arisen. In principle and subject to any contentions or submission to the contrary, IG Index might have been entitled to exercise a right to void the bets. Had it sought to do so it may well be that Mr Teller would have requested it instead to amend the bets and would have been entitled to do so under the second sub-clause of the Manifest Error clause. However that is not what happened. In those circumstances this head of claim as against Mr Teller in my judgment fails. In so far as the following parts of the judgment under this section address arguments raised by IG Index and Mr Teller in relation to the claim against him they would only arise if I were wrong in this conclusion and I address them on that basis.
800. All three Defendants denied that their bets contained or were based upon a Manifest Error. Mr Regan did not admit that the price of a particular stock was structured in part on the insertion where applicable of an "anticipated dividend". Further none of the three Defendants admitted that, if the pricing of a particular stock was structured in part on the insertion where applicable of an anticipated dividend that on the relevant bets, no such dividend was in fact anticipated.
801. As to that I am wholly satisfied that the futures prices on US stocks quoted by IG Index were calculated in the way set out in IG Index's letters referred to above. The formula, which included the element of discounting for any dividend announced or anticipated to be payable before the expiry of the relevant bet, was explained and confirmed by Mr Gordon in his evidence which as I have indicated I accept. As to the insertion of false dividends in the bets which are the subject of the claims against these three Defendants I have found that they were inserted by Mr Colley and that they were false in the sense that the relevant US company had not announced a dividend and no dividend in the amount inserted or anything remotely approaching that level was anticipated by IG Index or Mr Colley to be payable before the expiry of the relevant futures prices at which the bets were placed.
802. Next the three Defendants submitted that even on the factual assumptions which I have found to be correct, the relevant bets did not contain and were not based upon a Manifest Error. Mr White on behalf of Mr Regan made a number of points. First he relied on the decision of Thomas J as he then was in Invensys Plc and Others v Automotive Sealing Systems Ltd [2002] 1 All ER 222. He submitted that Thomas J in considering the meaning which should be attributed to a Manifest Error stated: "Manifest means in ordinary language plain and obvious". Mr White submitted that there was no evidence of a plain and obvious error in this case because there was no evidence by reference to objective market data as to what the actual true price of the underlying stock was at the time each bet was placed.
803. This latter point was in my judgment proved to be wrong by the evidence which I have accepted that the contract price of the bets was based on a price in IG Index's futures pricing system which was distorted by a false dividend which had not been announced and was anticipated. In any event it fell away in my judgment when IG Index adduced into evidence the schedule showing the cash prices of the underlying stocks at the time the relevant bets were placed. Implicit in that submission of Mr White appeared to be an acceptance that in considering whether the opening level of the bets were based on a Manifest Error it was permissible to have regard to extrinsic evidence.
804. However Mr White in closing submissions relied on a passage in the judgment of Stanley Burnton LJ in Axa Sunlife Services Plc v Campbell Martin Ltd and Others [2011] EWCA Civ 133 which supporting the proposition that an error cannot be manifest if in order to demonstrate the error it is necessary to cross refer to extrinsic data.
805. The Manifest Error clause with which Thomas J was concerned in Invensys was in an agreement between parties appointing an expert to make an expert determination on a dispute under a sale and purchase agreement. The agreement for the expert determination provided that the decision would be "final and binding except in the case of Manifest Error." The first question which Thomas J identified as being before the court was whether it was only permissible to look at the determination itself to decide whether there was Manifest Error. On that question he said that little authority had been found. (paras 1 and 2).
806. Thomas J described the first question as the material which could be examined for the purpose of deciding whether there was a manifest error in the determination. It was the vendors' contention that he should only consider the expert's determination itself. The purchasers contended that he should look at the further correspondence between the purchasers and the expert and the documents referred to in that further correspondence and in the determination.
807. Thomas J held that in construing the terms of reference to the expert in that case, although it was clear that the parties desired finality, they provided for the exception of "Manifest Error" in a determination which was to contain reasons. Therefore they must have contemplated an examination of the reasoning of the determination to see if it disclosed any Manifest Error. The purchasers contended that there were two Manifest Errors. The expert had misunderstood the parties' submissions and wrongly concluded that the purchasers had accepted a certain treatment of the transactions. It was on the basis of that clear and obvious misunderstanding that the expert had decided in favour of the vendor. Second the expert had clearly misconstrued the original contract. It was obvious that he should have determined the final external debt-cash balance issue in a different way on the proper construction of the original contract.
808. Thomas J held that the court should consider not just the expert's original determination but the further reasons given by him for it and also the specific documents referred to in those further reasons. He held that it was obviously impossible to examine whether there was in fact a Manifest Error in the determination without reference to the specific paragraphs of the relevant submissions and the specific documents referred to in the further reasons. As it was not possible to determine whether there was a Manifest Error without examining the submissions and documents expressly referred to he considered it permissible to examine them. (paras 17-21).
809. Thomas J referred to his judgment in Galaxy Energy International Ltd v Eurobunker SpA [2001] 2 All ER (Comm) 912 in which he had to consider an agreement which provided that a certificate of inspection under an oil sale contract was to be final and binding save in the case of fraud or Manifest Error. He cited paragraph 16 of his judgment which he said set out some principles which were not seriously in dispute:

"… (ii) Even if the certifier admits that he has made a mistake, the court should uphold the finality of the certificate… (iii) The exception of Manifest Error should be construed in this commercial context. (iv) "Manifest" meant in ordinary language "plain and obvious". (v) the manifest error must relate to the certificate or the procedure that led to the making of the certificate; for example it would be a Manifest Error if a plain and obvious mistake of transcription had been made or a plain and obvious error had been made in testing or in sampling or in mixing the samples. (vi) in deciding whether there was a Manifest Error the court should take into account the technical knowledge that parties would have about the testing procedure."

810. In Axa the Court of Appeal was concerned with the effect of certain provisions in the standard form of agreements entered into between Axa and its appointed representatives. They included clause 5 which provided for the payment of commission on the sale of products provided that the premium was received and for the claw back of commission if a customer cancelled his purchase of a product. Clause 5.5 provided: "Any decision that we make on your entitlement to commission under clause 5.1 or upon any calculation by us of commission due or repayable under this clause 5 shall, save for Manifest Error, be final and conclusive and binding on you." Paragraph 1.6 of Schedule 4 to the agreement provided: "A statement or certificate signed by or on behalf of us as to all or any part of the monies due to us from you under the terms of this Schedule shall, save for Manifest Error, be final and conclusive and binding on you."
811. Stanley Burnton LJ referred to those two clauses in his judgment as follows:

"[72] We had no submissions on the meaning or effect of clauses 5.5 of the Agreement and clause 1.6 of schedule 4. However, the expression "Manifest Error" in the present context is not as unambiguous as might at first seem. "manifest" may mean "apparent on the face of the document" as where the document is a certificate under clause 1.6 of schedule 4. If so, it may be difficult to see how any error could be manifest in that sense. I think, therefore, that "manifest" in this context has the wider meaning of "obvious".

[73] I would expect the Appointed Representative to be able to keep track of the commission payable on policies and other financial products it sold pursuant to Agreement, and on commission claw backs resulting from its clients cancelling or terminating policies. If so, it would have no difficulty in itself calculating its Commission Earnings, and from that in making the calculations set out in Schedule 4. It should therefore be able to demonstrate that any statement or certificate signed by Axa for the purposes of clause 1.6 of that schedule, if incorrect, is subject to a Manifest Error. In my view therefore clause 1.6 is a reasonable provision for the purposes of UCTA.

[74] For similar reasons I consider clause 5.5 to be reasonable. A failure of Axa to pay commission on a policy taken up by a client of an Appointed Representative which is brought about will be an obvious, and therefore manifest error on the part of Axa. Any incorrect calculation of commission will similarly be challengeable as subject to such error: any such calculation will be obviously wrong."

812. The other two members of the Court of Appeal agreed with Stanley Burnton LJ, Rix LJ adding:

"I also agree that the conclusive evidence clauses, clause 5.5 and paragraph 1.6 of the Schedule, are reasonable, given the exception for manifest error. If there has been an error, the Defendants ought to be able to show that it is an obvious one. If they cannot, it is fair that disputes between the parties are limited. If there still remains a dispute as to whether an error is manifest or not the court would resolve it." (para 108).

813. I would make the following observations. It is in my judgment clear that in Axa the Court of Appeal held that in determining whether there was a manifest error under either of the clauses under consideration the court was not prevented from having regard to extrinsic evidence. On the contrary Stanley Burnton LJ made the explicit point that if "manifest" meant "apparent on the face of the document" it might be difficult to see how any error could be manifest in that sense. For that reason in the context he was considering "manifest" had the wider meaning of "obvious". He held that it would be open to an appointed representative to demonstrate that a statement or certificate signed by Axa for the purposes of clause 1.6 of the Schedule was subject to a manifest error by reference to records of the commission payable on policies it had sold and commission claw backs resulting from cancellation or termination of policies. Similarly in relation to clause 5 incorrect calculations of commission could be challenged as subject to error if Axa failed to pay commission on a policy taken out by a client of an appointed representative. A failure to pay such commission would be an obvious and therefore manifest error on the part of Axa.
814. In my judgment the effect of the decision in Axa is to precisely the opposite effect to that contended for by Mr White. I also consider that, although the decision was confined to the particular context of that case, Thomas J's dicta in Galaxy Energy International as well as his actual decision in Invensys support the proposition that in an appropriate context it is not only legitimate but necessary in deciding whether there has been a manifest error to look beyond the document or instrument said to contain it. It is particularly noteworthy that one of the clauses considered in Axa related to calculations.
815. In Ilg Capital Ll c v Van Der Merwe and another [2008] EWCA Civ 542 the Court of Appeal approved the conclusion of Lewison J, as he then was, who had rejected an argument based on manifest error. Lewison J referred to the decision of Thomas J in Ivensys and held that he was undoubtedly right to say that since the contract in that case provided for the expert to give reasons the parties must have contemplated that those reasons could be examined to see whether any manifest error had been made.
816. In this case the clause with which I am concerned defined Manifest Error. IG Index reserved the right to void from the outset or amend the terms of any bet containing or based upon a Manifest Error which was defined as "any error which we believe to be obvious or palpable." Further in deciding whether an error was a Manifest Error IG Index was entitled to "take into account relevant information including the state of the Underlying Market at the time of the error." The additional words "without limitation" and "or any mistake in or lack of clarity of, any information source or pronouncement upon which we base our quoted prices contained in IG Index's current terms and conditions" were not included in the agreements which I have held or it is has been agreed were applicable in the case of Mr Regan, Mr Slaney and Mr Teller. Further in making a decision as to whether an error was a Manifest Error as defined the clause further provided that IG Index "would act in our sole discretion, reasonably and in good faith." Further any financial commitment that the client had entered into or refrained from entering into in reliance on a Bet with IG Index would not be taken into account in deciding whether or not there had been a Manifest Error.
817. It is in my judgment clear on the express wording of the relevant clauses that in considering whether IG Index was entitled to decide that the terms of the bets placed by these three Defendants contained or were based upon a Manifest Error, regard must be had to the fact that it was entitled to take into account in deciding whether there was a manifest error any relevant information including the state of the underlying market at the time of the error.
818. This is entirely consistent with the approach adopted by the courts in the two cases to which I have referred. It also, in my judgment, accords with common sense. It would be difficult, if not impossible, in many, if not most, cases where incorrect information had been inserted into bets accepted by IG Index, to determine whether they were incorrect, and if so, whether they were the result of manifest error if the issue could only be determined by reference to the terms of the bet itself or the document in which it was contained.
819. Any doubt on the matter, in my judgment, is resolved by the fact that IG Index had the right to amend the terms of any bet which not only contained a manifest error, but was "based upon" a manifest error. That, of itself, in my judgment makes clear, as in any event in my judgment is obvious, that the pricing of IG Index futures bets was based on underlying information. If there was an error in any of that underlying information, it would be impossible to determine whether or not the terms of a bet were based on an error in any of that underlying information, and if so, whether it was a manifest error, purely without reference to the language or contents of the bet without reference to and consideration of the underlying information.
820. The fact that the IG Index futures price contained in the bets did not itself in terms refer to the formula by reference to which the price was calculated does not, in my judgment, assist the defendants or justify the conclusion that no regard can legitimately be had to the underlying information by reference to which the price was calculated.
821. I have held that these three defendants well knew and understood that the prices of the bets which they placed were calculated by reference to discounting for dividends. That followed not only from the fact that Mr Colley told them that he had inserted or would insert a false dividend into IG Index's price for the precise purpose of affecting the level at which they would themselves be able to bet with IG Index. It is also, in my judgment, something that would have been obvious to them as experienced clients of IG Index. The critical role of dividends in the pricing of stock futures was, in my judgment, as I have explained, obvious.
822. But even if the Defendants did not know how IG Index calculated the futures prices which they accepted when they placed bets, that would not, in my judgment, affect the conclusions which I have reached. The manifest error clauses made clear that, in deciding whether an error was manifest, IG Index was entitled to take into account any relevant information, including the state of the underlying market at the time of the error.
823. All three defendants submitted that the fact that the errors relied on by IG Index went undetected by IG Index, in some cases for years, demonstrated that they could not be obvious or palpable. I cannot accept that submission. The reason the errors went undetected was because the information against which the levels at which the Defendants' bet were or would have been checked by IG Index in the ordinary course was deliberately falsified by Mr Colley's dishonest insertion and removal of false dividends into IG Index's pricing systems and the timing thereof. Once the level of the bets is compared to the underlying cash prices at the times they were placed, or once the futures price at the close of the US market is compared to the cash price at that time, the errors are, in my judgment, both obvious and palpable. One definition of palpable is "plain to see or comprehend". Once a comparison is made between the terms of the bets and the underlying cash prices at the time they were placed, which is, in my judgment, plainly relevant information, the error in the level of the bets is both obvious and plain to comprehend. Similarly, once one compares the level of the IG Index futures price before and after the insertion of the false dividends (both of which are, in my judgment, plainly relevant information) or once one examines the Xcon audit information on the 130 insertion of false dividends, which in my judgment is also relevant information, it is obvious that the prices shown in Xcon on which the bets were based contained manifest errors.
824. Mr White relied in this context on the decision o the Court of Appeal in Ilg Capital to which I have just referred. In that case Lewison J stated: "A "Manifest Error" is one that is obvious or easily demonstrable without extensive investigation". Waller LJ with whom the other two members of the Court of Appeal agreed expressed the view that Lewison J's conclusion on manifest error was clearly right.
825. In my judgment this does not assist Mr White. As I have indicated in my judgment once the level of the bets is compared to the underlying cash price at the times they were placed or once the futures price at the close of the US market is compared to the cash price at that time the errors are both obvious and palpable. The same is true in relation to the other comparisons to which I have just referred.
826. The fact that the errors relied on by IG Index went undetected by it in some cases for years does not in my judgment show that they were not obvious or easily demonstrable without extensive investigation. But for the fraudulent and dishonest timing of the removal of the false dividends which ensured that they remained concealed during the two relevant checks made by IG Index, the errors in the relevant bet prices would have been obvious and easily demonstrable without extensive investigation. That is well demonstrated by the incident to which I have referred in which an IG Index employee telephone Mr Regan the next working day after an apparently false dividend had been inserted to inform him that there had been an error. But for the fraudulent insertion and temporary retention of the false dividends in IG Index's pricing systems in which I have held each of Mr Teller, Mr Slaney and Mr Regan dishonestly connived the manifest errors would probably have been revealed easily and quickly. They would not have required extensive investigation to identify. They are easily demonstrable by the comparisons to which I have referred. Even without knowledge of the IG Index futures price formula the sheer size of the discrepancy between the level of the bets and the underlying cash prices showed and shows that the bet levels were obviously wrong. There was no other rational explanation for the disparities.
827. Mr White's next argument was that IG Index could not rely on the manifest error clauses because, in making the decision that the errors were manifest errors, they failed to comply with their contractual obligation to act in good faith. That was put on the basis that consideration of liability under the manifest error clause only falls to be considered where fraud is not proved. In those circumstances, it would be unconscionable and artificially inconsistent with IG Index's own belief that the price differentials were the product of fraudulent manipulation and not human error for IG Index to invoke the manifest error clause. I do not accept that argument. First, it proceeds on the premise that "fraud is not proved". IG Index would be entitled to claim under the manifest error clauses even if, notwithstanding my findings that Mr Regan, Mr Slaney and Mr Teller acted fraudulently and dishonestly in concert with Mr Colley and participated with him in his fraudulent scheme, there were no legal bases or cause of action resulting in their liability to IG Index as a result of their dishonest conduct. As it is I have held that there are such legal bases and causes of actions. The premise is therefore not applicable. It has been proved that Mr Colley fraudulently inserted false dividends and that the Defendants knew that and acted in concert with him.
828. Second, and in any event, IG Index is not, in my judgment, precluded from being entitled to judgment under the manifest error clauses against these defendants, by reason of the fact that it is entitled to recover from them under one or more cause of action based on their dishonesty. Further, and in any event, it does not lie in the mouths of these three defendants to submit that IG Index was not entitled in good faith to decide that the bets which they placed contained and were based on manifest errors on the ground that the cause of the errors was deliberate dishonesty on the part of Mr Colley of which they were aware when they placed their bets, and indeed in which they had colluded pursuant to dishonest agreements.
829. Allied to the last submission was the indication in Mr Regan's defence that IG Index was put to strict proof that the insertion of an intentionally false dividend can be characterised as a manifest error within the meaning of the manifest error clause. In his written closing submissions on behalf of Mr Osborn, Mr Seifert, a solicitor who acted as Mr Osborn's McKenzie Friend and whom I happily and gratefully permitted to make representations on his behalf, explicitly said that Mr Osborn did not seek to argue in the circumstances of his case that the mistake was not palpable or obvious. His agent Mr Teller was aware of it if the fraud against him was proved. That, in my judgment, was a sensible and realistic concession. In ordinary language, an error has a number of definitions. They include "a mistake" and "a measure of the estimated difference between the observed or calculated value of a quantity and its true value". Mistakes are most frequently made inadvertently. However, the common expression "a deliberate error" illustrates, in my judgment, that an error is not necessarily restricted to a mistake made by inadvertence or oversight.
830. In the current context, I readily accept that the kind of error which, on an objective construction of the term in its context, the parties are likely to have contemplated as being the most likely to arise, would be an error resulting from some kind of inadvertence or oversight. However, I also consider that the parties are to be taken as having intended that an obvious or palpable error in the price of a bet and/or on which it was based, which was deliberate rather than the result of oversight or inadvertence, would fall within the definition of manifest error.
831. The contrary argument is based on the notion that the parties cannot have contemplated or intended that IG Index should be able to rely on its own fraud in creating an error for the purpose of invoking the clause. I do not accept that argument. The clauses provided that in deciding whether an error was a manifest error, IG Index would act reasonably and in good faith. There seems to me no element of unreasonableness or bad faith in IG Index seeking to amend the terms of the bets so as to prevent clients benefiting from a wholly unwarranted profit resulting from Mr Colley having dishonestly inserted false dividends into the IG Index price. That is, of course, particularly so in the context of clients who, as these three defendants, were aware of and colluded in the insertion of the false dividends. But even in the case of a wholly innocent client, I would reach the same conclusion. The purpose of the manifest error clause, as it seems to me, was to entitle IG Index to insist on dealing with its clients on the terms which reflected the normal basis on which it calculated its futures prices. If the false dividend had been inserted by clerical error, an innocent client would stand to make an unwarranted profit and IG Index an unwarranted loss without the exercise by IG Index of its right to void or amend under the manifest error clause. The same would be the case if the false dividend were inserted by some third party who managed to hack into IG Index's computer. The same, in my judgment, is the case if, as happened here, the false dividend was inserted by a dishonest employee of IG Index. In all three examples, the profit which the client would make as a result of the error would be wholly unwarranted and there is, in my judgment, no reason why it should be assumed that the parties intended or contemplated that the in the latter example the client should be entitled to retain the unwarranted windfall.
832. The fact that it was contemplated by the parties that an error could be a manifest error even if it was the result of a deliberate fraudulent or dishonest act is, in my judgment, supported by the second sub-clause of the manifest error clauses, which proceeded on the assumption that a manifest error might result from wilful default or fraud.
833. I would add that the conclusion which I have reached does not lead to a result in which it could reasonably or fairly be said that IG Index will profit from the fraud of its employee, Mr Colley. The result of the bets placed by clients who bet following the insertion by Mr Colley of false dividends is that IG Index would suffer financial loss by the amount of the false dividend. The effect of invoking the manifest error clause is simply to protect them from that loss.
834. In his opening skeleton argument, Mr White relied on the Unfair Contract Terms Act 1977 in the event that Mr Regan were held to be otherwise liable to IG Index under the version of the manifest error clause contained in IG Index's current Spread Betting Customer Agreement as set out in the Amended Particulars of Claim. In that event he submitted that the manifest error clause was unfair within the meaning of the Act. Since, as I have indicated, Mr Mayall accepted on behalf of IG Index that the version of the Manifest Error clause applicable to Mr Regan, so far as the bets the subject of this claim are concerned, was not that contained in the Agreement as set out in the Amended Particulars of Claim that issue does not arise.
835. Mr Slaney and Mr Teller, in their defences, alleged in identical terms that, if Mr Colley's alleged acts involved fraud or wilful default on his part, IG Index is vicariously liable for those actions and liable to them pursuant to term 27(2) in respect of wilful default or fraud for any loss, cost, claim, demand or expense following a manifest error. They alleged that the sums claimed against them are thus sums which IG Index would itself be liable for to them in damages for wilful default or fraud. In the premises, IG Index was precluded from pursuing such claims.
836. They also alleged in counter-claims that any dividend deflation or changes to share prices were made inter alia by the wilful default or fraud of IG Index through Mr Colley. They counter-claimed such damages as would restore them to the sums which were debited to their account by IG Index after it amended the opening level of each of the bets to what IG Index contended would have been the correct level but for the allegedly false dividend.
837. Those contentions and claims are, in my judgment, wholly misconceived. I have found that Mr Colley acted fraudulently and dishonestly in inserting false dividends to enable Mr Slaney and Mr Teller, among others, to place bets to their benefit as a result. That fraudulent conduct led Mr Slaney and Mr Teller to make not losses, but unwarranted profits. The manifest error which resulted from Mr Colley's fraud caused them to enjoy unwarranted profits and not losses. If IG Index were ordered to pay them damages to restore to them the sums debited to their account by IG Index after it amended the opening level of the bets to what it contended would have been the correct level but for the false dividends, the order would have the effect of allowing them to retain the profits they made as a result of the fraud.
838. Whatever else may be its effect, term 27(2) of the Manifest Error clause certainly did not, in my judgment, preclude IG Index from relying on its right to amend the terms of their bets on the basis of manifest error. Nor did it impose any liability on IG Index to them for any loss following the manifest errors. They suffered no such loss. Nor did they suffer any loss as a result of Mr Colley's fraud or wilful default. It follows that IG Index cannot be vicariously liable to them for any such loss. Nor did they suffer loss for which they are entitled to be compensated as a result of the exercise by IG Index if its right to amend the bets under the Manifest Error clauses.
839. Mr Slaney and Mr Teller also alleged in their defences in the alternative that, if Mr Colley's conduct as alleged by IG Index occurred but did not involve fraud or wilful default, IG Index, in causing or permitting them to occur, was negligent or in breach of an implied term of the Spread Betting Customer Agreement to exercise reasonable skill and care in providing contractual services by itself or through Mr Colley. IG Index was liable for that negligence and/or breach of contract, and term 27 was unenforceable under the 1977 Act "for the reasons pleaded above." They counter-claimed, in the alternative, that if the dividend deflation and changes to share prices were made by IG Index not through wilful default or fraud of IG Index through Mr Colley or otherwise, they were made by the negligence of IG Index through Mr Colley or otherwise. They, accordingly, counter-claimed the same damages. Again, this does not arise because I have found that Mr Colley's conduct did involve fraud and wilful default in the sense of breach of the duties he owed to IG Index. The 1977 Act does not therefore arise. I observe, in any event, that as pleaded in the Reply, no reasons were given by Mr Slaney or Mr Teller as to why the manifest error clause was unenforceable under the 1977 Act.
840. Mr White, in his opening skeleton argument, appeared to run a similar argument in support of a submission that, in the event that Mr Regan was cleared of any fraudulent wrongdoing, he relied on the words "in the absence of wilful default or fraud we shall not be liable to you for any loss, cost, claim, demand or expense following a manifest error" in clause 26(2) of the Manifest Error clause "in recovery against IG Index of all costs and expenses incurred in defending the proceedings". Mr Regan did not bring a counter-claim. I was therefore not clear to what end this submission was advanced. In any event, Mr Regan has not been cleared of any fraudulent wrongdoing, and has suffered no loss as a result of Mr Colley's conduct or the manifest error to which it led.
841. Mr Regan in his Amended Defence submitted that two provisions in the Manifest Error clause are unenforceable under the 1977 Act. First it was said that the clause purported to exclude or restrict IG Index's liability for negligence. That was presumably a reference to the second sub-clause. That clause was said to fail to satisfy the requirement of reasonableness imposed by the Act by virtue of Mr Regan having dealt with IG Index as a consumer, IG Index having made the contract in the course of its business and the agreement comprising IG Index's written standard terms of business.
842. I did not understand that contention. It was no part of Mr Regan's defence either to IG Index's primary claim based on fraud or to its alternative claim based on the Manifest Error clause that any liability he had to IG Index was extinguished by reason of IG Index's negligence towards him. In any event as appears in what I say in relation to the claim against Mr Osborn I do not find that Mr Colley's ability to perpetrate his fraudulent scheme without detection and IG Index's failure to detect the fact that the relevant bets were placed at artificially depressed prices resulted from negligence on the part of IG Index in the way in which it operated its supervision of him and/or its systems. Moreover, even if I had that would not avail Mr Regan, Mr Slaney or Mr Teller both because what caused them to place their bets was not an innocent belief that they represented IG Index's bona fide futures prices but the fact that they knew that they did not, and also because the result of placing their bets was not to cause them loss but, on the contrary, unwarranted profits.
843. The second provision alleged by Mr Regan to be unenforceable under the 1977 Act was described as the fact that the Manifest Error clause "purported to entitle IG Index to render a contractual performance substantially different from that which was reasonably expected of it, alternatively in respect of the whole or part of its contractual obligations to render no performance at all."
844. This was not spelled out in any further detail. I took it to be a reference to the fact that under the Manifest Error clause IG Index reserved the right to void or amend the terms of any bet containing or based upon a Manifest Error. Section 3(2)(b) of the 1977 Act provides that as between contracting parties where one of them deals as consumer or on the other's written standard terms of business, as against that party the other cannot by reference to any contract term claim to be entitled to render a contractual performance substantially different from that which was reasonably expected of him or in respect of the whole or any part of his contractual obligation to render no performance at all except insofar as the contract term satisfies the requirement of reasonableness.
845. IG Index has not purported to exercise the right conferred on it by the Manifest Error clause to void the relevant bets from the outset. Accordingly the restriction on the right to claim to be entitled to render no performance at all except insofar as the term satisfies the requirement of reasonableness does not arise. However in my view voiding a bet would not involve rendering no performance by IG Index of its contractual obligation since once the bet was voided there would be no contractual obligation to perform. In any event for the reason set out below the right to void in these circumstances satisfied the requirement of reasonableness.
846. In my judgment the exercise by IG Index of the right conferred on it by the Manifest Error clause to amend the terms of the relevant bets on the ground that they contained and were based upon a Manifest Error did not mean that it was claiming to be entitled to render a contractual performance substantially different from that which was reasonably expected of it. I do not consider that under the Spread Betting Customer Agreement IG Index was reasonably expected to contract at a price which was artificially depressed by reason of the insertion of a false dividend. That would be the case even if the client were unaware of the insertion of the false dividend. A fortiori where the client not only was aware of it but acted in concert with the person who inserted it.
847. Further, if I were wrong in that conclusion, in my judgment the provision in the Manifest Error clause reserving the right to void or amend the terms of any bet containing or based upon a Manifest Error satisfied the requirement of reasonableness. In my judgment it was entirely reasonable for IG Index to be free to void or amend the terms of a bet containing or based upon a Manifest Error. Otherwise IG Index would be exposed to the risk of loss and the client would stand to profit from a Manifest Error. I observe that its right to decide that an error was a Manifest Error was subject to an obligation to act reasonably and in good faith. In my judgment these conclusions apply a fortiori where either the client or the person authorised by the client to place the bet (as I have found to be the case with the bets placed by Mr Teller on behalf of Mr Osborn and Tom Benn on behalf of his mother) was aware at the time the bets were placed that the levels at which they were contracting with IG Index were distorted and artificially depressed as a result of the dishonest insertion by Mr Colley of false dividends.
848. Finally in the Amended Defence it was contended that the Manifest Error clause of the Agreement in force at the time of the Amended Particulars of Claim was not binding on Mr Regan by reason of the Unfair Terms in Consumer Contracts Regulations 1999. It was contended that by virtue of regulation 5(1) the clause was unfair, being a contractual term not individually negotiated which, contrary to the requirement of good faith, caused a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of the consumer and as such was not binding on Mr Regan. No particulars were given in support of that contention.
849. In his opening skeleton argument Mr White made it clear that Mr Regan relied on the 1999 regulations only if, which he denied, the applicable Manifest Error provision was that contained in the version of the Agreement current at the time of the Amended Particulars of Claim. The court was referred to the Amended Defence for a more detailed and particularised basis upon which Mr Regan challenged the fairness of the Manifest Error clause in the current version of the agreement under the 1999 regulations. But as I have indicated no such details or particulars were in fact provided.
850. The short answer to this point is that it was accepted by Mr Mayall on behalf of IG Index that the version of the Agreement current at the time of the Amended Particulars of Claim was not the one which applied to Mr Regan.
851. In the skeleton it was submitted that the clause in the agreement is intrinsically one sided providing IG Index with a contractual provision which operated as an unfettered mechanism to pass loss to the client in circumstances where the client had neither the right nor authority to do so. As I have indicated it was accepted by Mr Mayall in closing submissions that the applicable agreement and therefore the applicable Manifest Error clause as between IG Index and Mr Regan was that which was provided to him on 7 February 2003 on registration of his membership. The clause in that agreement contained the last sentence in the second sub-clause which is set out above in bold. In my judgment properly construed that sentence conferred a right on the client to require IG Index at his request to amend the terms of the bet to what IG Index believed would have been fair and reasonable at the time it was entered. I do not consider that the conferring of a right to amend on IG Index rendered the clause in the 2003 Agreement unfair, contrary to the requirement of good faith or such as to cause a significant imbalance in the parties' rights and obligations to the detriment of the clients. In any event it was not contended by Mr White that the Manifest Error clause in the version of the agreement which was binding on him was unfair and not binding on him by reason of regulation 5(1).
852. Accordingly there is in my judgment no merit in any of these contentions.
853. In his written closing submissions Mr White made two further submissions. First he submitted that the Manifest Error clause was a significantly one-sided abuse of a dominant contractual position. IG Index was seeking to engage in a one-way bet. If a user of its services made an error, manifest or otherwise, they could not have a refund. However, if IG Index made an error, moreover with the right unilaterally to deem there to have been an error, it could exit from the deal. In my judgment there is no merit in that submission. First IG Index did not seek to void the relevant bets. Second as already stated I do not consider that in exercising its right to amend the terms of the relevant bets IG Index was claiming to be entitled to render a contractual performance substantially different from that which was reasonably expected of it. Third the fact that the contract conferred no equivalent right on the client to amend the terms of a bet in respect of which it had made an error does not in my judgment mean that the Agreement failed to satisfy the requirement of reasonableness. The prices at which IG Index dealt with its clients were set by IG Index following its pricing formula. It is in my judgment obvious that there was no realistic equivalence between the risk to IG Index that the terms of a bet might contain or be based on a Manifest Error made by it and the risk to the client that the terms of the bet might contain or be based on a manifest error made by the client. The fact that the contract did not confer on the client a right to amend in the latter scenario did not in my judgment render the contract unreasonable.
854. For all these reasons in my judgment IG Index was entitled as against Mr Slaney and Mr Regan to amend the opening level of each relevant bet to that which it believed would have been fair and reasonable at the time it was entered had the false dividend not been fraudulently entered by Mr Colley. As to the precise quantum of the amounts to which IG Index is entitled under these claims again I would hope that this matter could be agreed between the parties. Failing that I will have to resolve it. As against Mr Teller IG Index was not entitled to amend the relevant bets and its claim against Mr Teller under this head fails.

IG Index's causes of action against Mr Osborn

855. As mentioned earlier when rejecting IG Index's primary claim against Mr Osborn I am not satisfied that IG Index have proved to the requisite standard of proof that Mr Osborn acted dishonestly or knew that greater profits or smaller losses were or would be realised on the relevant bets placed on his account and on his behalf by Mr Teller as a result of the dishonest insertion by Mr Colley of false dividends into the IG Index futures price.
856. IG Index's first alternative claim is that Mr Osborn was nonetheless responsible for the fraud of his agent Mr Teller to the same extent as if it was his own fraud. I did not take Mr Mayall to be submitting that if, as I have found, IG Index failed to prove that Mr Osborn acted dishonestly or knew about Mr Colley's dishonest insertion of false dividends, Mr Osborn would be liable to IG Index by reason of knowing receipt of funds diverted form IG Index by reason of Mr Colley's breach of fiduciary duty to IG Index. Rather I took him to submit that Mr Osborn would be liable in damages to IG Index for losses caused by the dishonest and fraudulent acts of Mr Teller.
857. In very helpful and succinct written submissions Mr Seifert on behalf of Mr Osborn accepted that Mr Teller was Mr Osborn's agent in relation to the operation of his account with IG Index. He also accepted that Mr Teller was acting within the scope of his authority which was to operate Mr Osborn's account with IG Index. Although Mr Osborn did not authorise Mr Teller to use his account to defraud IG Index he accepted that the case law is clear that that does not enable an innocent principal to escape the consequences of the fraudulent acts of his agent – see Lloyd v Grace Smith and Co and the discussion in Nathan v Dollars and Sense Ltd [2009] 1 LRC 496 at paras 29 – 49.
858. Mr Seifert appeared to proceed on the basis that he accepted that if it were proved that Mr Teller's conduct was fraudulent Mr Osborn would be liable to IG Index for the loss resulting therefrom (subject to the defences referred to below). That appeared to be on the basis that Mr Teller's fraudulent acts were using Mr Osborn's account to defraud IG Index and that using Mr Osborn's account with IG Index was within the scope of his authority.
859. For the reasons set out earlier in my consideration of the causes of action against Mr Teller, as well as Mr Slaney and Mr Regan, one of the bases on which I have held that Mr Teller is liable to IG Index in damages is that IG Index suffered loss and damage resulting from his fraudulent conduct. That conduct included dishonestly using his own account as a vehicle for defrauding IG Index. By placing bets after Mr Colley had to his knowledge dishonestly entered false dividends and closing them after to his knowledge Mr Colley had removed them Mr Teller defrauded IG Index and dishonestly intervened in its affairs. Mr Teller's liability to IG Index as a result of that conduct was analogous to that of the solicitor's clerk in Lloyd v Grace. The act of the solicitor's clerk in getting the widow to sign away all that she possessed and put the proceeds into his own pocket was held to be a tortious act committed by the clerk. Because it was committed by him in conducting business which he had a right to conduct honestly and was instructed to conduct on behalf of his principals, his principals were held to be vicariously liable for it..
860. In my judgment the same principle applies here. In so far as Mr Teller used Mr Osborn's account to defraud IG Index in the same way as he did when he placed bets on his own account in my judgment he was committing a tortious act. In using Mr Osborn's account which he had a right to use honestly and which he was authorised by Mr Osborn to use to place bets, just as the solicitor's clerks principals were vicariously liable to the widow for the losses caused by his fraudulent conduct in Lloyd v Grace Smith, so Mr Osborn is liable to IG Index for the fraudulent conduct of Mr Teller.
861. In my judgment Mr Seifert was right to accept that although Mr Osborn did not authorise Mr Teller to use his account to defraud IG Index that does not enable Mr Osborn, albeit he was an innocent principal, to escape the consequences of the fraudulent acts of his agent. Late in the day Mr Seifert drafted a counterclaim contending that if IG Index succeeds in its claim against Mr Colley and in whole or in part against Mr Osborn then Mr Osborn will suffer damage as a result of the fraudulent acts of Mr Colley. It was alleged that IG Index is vicariously liable to Mr Osborn for any damage sustained by him resulting from Mr Colley's fraudulent actions Mr Mayall did not oppose permission to amend.
862. In his written closing submissions Mr Seifert submitted that Mr Colley's job included the setting and inputting of anticipated dividends for individual stocks and their removal so that in inserting and removing false dividends Mr Colley was acting within the scope of his authority. He submitted that although both the leading cases (Lloyd v Grace Smith and Co and Nathan) are based on common law principles the language used in both of them has a flavour of equity, as he said, one would expect, in placing liability on one or other innocent parties. He relied on the dictum of Lord McNaughton: "I must say that it would be absolutely shocking to my mind if Mr Smith were not held liable for the fraud of his agent in the present case." (Penultimate paragraph). In Nathan Blanchard J at para 44 cited Holt CJ with approval: "It is more reason that he, that puts a trust and confidence in the deceiver, should be a loser, than a stranger."
863. Mr Siefert submitted that in this case the fraud involved two innocent principals, two fraudulent agents and two innocent losers. Mr Osborn he submitted is an innocent loser if he is required to pay IG Index more than the sum of £7,500 which he freely admitted that he innocently received from the fraud. That I take to be based on Mr Osborn's evidence that he only retained one third of the profits realised on his account. In his analysis Mr Seifert submitted that fraudulent agent A, Mr Colley, enlisted the support of fraudulent agent B, Mr Teller, in defrauding innocent principal A, IG Index. In pursuance of that joint fraud with agent A, agent B tricked innocent principal B, Mr Osborn, into lending his name to agent B thereby putting innocent principal B at great risk. That risk has now materialised with a very large claim for damages against innocent principal B. In order to succeed in its claims he submitted that IG Index must show among other things that the two guilty agents abused the trust of their innocent principals. Both Mr Osborn and IG Index put their trust and confidence in a deceiver. He therefore submitted that the loss should be apportioned between both principals equally.
864. Alternatively he submitted that IG Index is vicariously liable for the fraudulent actions of its agent Mr Colley. That he submitted should be reflected in the level of damages awarded to IG Index against Mr Osborn who was an innocent party. The damage suffered by Mr Osborn would not have arisen were it not for the fraudulent actions of IG Index's employee Mr Colley.
865. Attractively as they were argued, I cannot accept these submissions. First there is no evidence that Mr Colley was aware that Mr Teller would place bets on Mr Osborn's account as distinct from his own. There is no evidence that Mr Osborn was the target of any fraud on the part of Mr Colley or even on the part of Mr Teller. It does not follow from Mr Osborn's evidence that he agreed to pay two thirds of the profits on the account to Mr Teller that Mr Teller intended to defraud Mr Osborn or not to return that money should IG Index look to Mr Osborn. On the contrary Mr Osborn's evidence was that Mr Teller agreed that he would indemnify him against all losses.
866. There is no evidence that Mr Osborn has sought to be indemnified by Mr Teller against the sums claimed against him in this action by IG Index, let alone that Mr Teller has declined to do so. He has certainly not brought contribution proceedings against him.
867. As things stand Mr Osborn has suffered no loss. On the contrary he has only profited from the fraud. An order requiring him to pay damages to IG Index in respect of the losses incurred on his account by reason of the fraud would merely have the effect of requiring him to give up those profits.
868. I would add in this context that, as I have already observed, Mr Osborn freely admitted that he delegated to Mr Teller the filling out of his application form to register him as a client of IG Index and authorised him both to fill it out and to submit it. He also freely admitted that the application contained false information inserted by Mr Teller as to Mr Osborn's income and savings. It is in my view plain that that was done by Mr Teller to induce IG Index to accept Mr Osborn as a client and that it succeeded in doing so. Although this only emerged in the course of Mr Osborn's evidence towards the end of the trial and did not from the basis of a freestanding claim against him, it is in my view difficult to see what defence Mr Osborn could have had to a claim by IG Index that he is liable to it in damages resulting from a fraudulent misrepresentation made by his agent within the scope of his authority which was intended to and did induce IG Index to accept Mr Osborn as a client. Again it would be hard to see what answer Mr Osborn would have had to a claim by IG Index to recover by way of damages caused by that misrepresentation the sums it lost by reason of the bets placed on his account which benefited form the false dividends.
869. As it does against the other Defendants IG Index also has a contractual claim against Mr Osborn pursuant to its asserted right to amend the opening level of the relevant bets under the Manifest Error clause. In his Amended Defence Mr Seifert submitted on behalf of Mr Osborn that the relevant version of the Spread Betting Customer Agreement was the one disclosed by IG Index which was in force when Mr Osborn's contract with IG Index began. Mr Mayall did not take issue with that. That version which was dated September 2004 was in the same terms as that which governed the contractual relationship between Mr Regan and IG Index.
870. In the Amended Defence it was asserted that given that IG Index did not itself detect the alleged fraud during the lengthy relevant periods, unless, which was denied, Mr Osborn was aware of the fraud the error was neither obvious nor palpable. Accordingly it was asserted that IG Index could not claim that it was acting "reasonably and in good faith" if it contended that the error was obvious and palpable.
871. By the time of his closing written submission Mr Seifert said that Mr Osborn did not seek to argue in the circumstances of his case that the mistake was not palpable or obvious, apparently on the basis that his agent Mr Teller was aware of it if the fraud was proved. For the reasons I have given earlier when considering this argument as it was advanced by Mr Teller, Mr Slaney and Mr Regan, in my judgment the errors relied on by IG Index as against Mr Osborn were palpable and obvious. I emphasises that that conclusion is not dependent on the finding which I have made that Mr Teller was aware of the mistake and indeed through his dishonest conduct partly responsible for it.
872. Mr Seifert suggested that a clause of this nature which could at least double a customer's liability should not be in such small print and should probably be highlighted in bold print. The court was invited to consider the possible impact of the 1977 Act. This is not an attractive submission given that Mr Osborn on his own evidence neither read the Agreement nor, had he done so, would have understood anything in it. Leaving that aside, I do not consider that there is anything in this point which was not developed any further by Mr Seifert.
873. Mr Seifert prayed in aid the first sentence of the second sub-clause of the Manifest Error clause: "In the absence of wilful default or fraud we shall not be liable to you for any loss, cost, claim, demand or expense following a Manifest Error". He submitted that that could only mean that if there was a fraud on the part of IG Index it should be liable for losses, costs etcetera incurred by a customer. IG Index was clearly vicariously responsible for the fraud of its employee Mr Colley and could not therefore properly pray in aid the provisions of the Manifest Error clause to more than double Mr Osborn's damages.
874. I do not accept that submission. I am not persuaded that the sentence cited has the effect of imposing on IG Index liability for losses, costs claims demands or expenses following a manifest error that it would not otherwise have by reason of any such wilful default or fraud. The clause was merely purporting to exclude any liability for any loss cost claim demand or expense following a Manifest Error in the absence of wilful default or fraud. The former is not in my judgment necessarily implicit in the latter.
875. In any event, as I have already held, in my judgment Mr Osborn has not proved that he has suffered any loss as a result of the fraud of Mr Colley, let alone any loss for which IG Index is vicariously responsible.
876. For these reasons in my judgment IG Index was entitled as against Mr Osborn to amend the opening level of each relevant bet to that which it believed would have been fair and reasonable at the time it was entered.
877. As to the precise quantum of the amounts to which IG Index is entitled under these claims again, as with the other Defendants I would hope that this matter could be agreed between the parties. Failing that I will have to resolve it.

IG Index's causes of action against Mrs Benn

878. As mentioned earlier when rejecting the primary claim against Mrs Benn I am satisfied that she was entirely ignorant of any wrongdoing in the operation of her account or the placing of the relevant bets by her son, that she was not acting in concert with Mr Colley and that she had no knowledge of or participation in the fraud for which her account was used by her son.
879. IG Index's first alternative claim is that Mrs Benn was nonetheless responsible for the fraud of her agent Tom Benn to the same extent as if it was her own fraud.
880. Mrs Benn's position in my judgment is the same as that of Mr Osborn with one exception. That is that, unlike Mr Osborn who said that Mr Teller agreed that he would retain one third of the profits made on his account as a result of the bets placed by Mr Teller on it, Mrs Benn told her son that she did not wish to retain any profits made by him on her account. Unfortunately for Mrs Benn in my judgment that is not a material distinction which assists her in resisting IG Index's claim. Like Mr Osborn she benefited from the fraudulent bets placed by her son on her account to the detriment of IG Index.
881. In my judgment there is no legally material difference as between her position and that of Mr Osborn. For the same reasons as in that case of Mr Osborn in my judgment she is liable to compensate IG Index for the loss suffered as a result of the fraud carried out by her son on her account.
882. In her defence it was pleaded that she had changed her position in good faith and to her detriment in the belief that she was beneficially entitled to the profits from the betting transactions made by her son acting pursuant to a power of attorney to manage her account which she conferred on him. In fact, as mentioned at the trial Mrs Benn accepted that she did not confer such a power of attorney on her son. Nonetheless she did authorise him to do anything necessary in connection with the operating of her account. It was pleaded that the profits made on the bets were paid into an Alliance and Leicester bank account in the joint names of herself and her husband and then paid from that account to Tom Benn's account with the Royal Bank of Scotland. She had not herself been enriched by the payments and has parted with the money which she is alleged to have received in breach of her fiduciary duty. She would not have parted with such money if she had been aware of IG Index's claim. It would in the circumstances be inequitable to require her to pay compensation or make restitution to the Claimant.
883. Mrs Benn was not legally represented at the trial and this contention was not developed by her. Leaving aside the fact that Tom Benn acted pursuant to oral authority rather than a written power of attorney, the fact that Mrs Benn has parted with the profits made on her account through the fraudulent bets placed by her son by giving them to her son does not in my judgment constitute a defence to IG Index's claim that she is liable to it in damages as a result of the tortious fraudulent acts of her son. Apart from anything else on Mrs Benn's evidence she has a good claim to receive from her son any money she has paid him. There is no evidence that she has asked him to do so or that he cannot or will not do so.
884. As to the contention that it would be inequitable to require Mrs Benn to compensate IG Index because she would not have parted with the profits she made if she had been aware of IG Index's claim, I do not accept it. Her liability to compensate IG Index for the losses it had incurred arises out of her vicarious liability for the fraud of her son which caused them. Just as in the case of Mr Osborn there is no evidence that Mr Colley was aware that Tom Benn was using Mrs Benn's account to place any of the fraudulent bets following his insertion of false dividends.
885. IG Index also has a claim against Mrs Benn pursuant to its asserted right to amend the opening level of the relevant bets under the Manifest Error clause. In her defence it was not admitted that IG Index's current Manifest Error clause applied to her and IG Index was put to proof of the terms of the agreements in force at all material times. In her application to open an account Mrs Benn declared that she had read the version of the Spread Betting Customer Agreement dated November 2001 and consented to be bound by its terms in respect of her dealings with IG Index. In the absence of any other evidence in my judgment that is the Agreement governing her relations with IG Index. The Manifest Error clause was in the same terms as that applicable to Mr Regan save that in the first sentence in place of the words "from the outset" there appeared the words "Ab initio". In my judgment nothing turns on that distinction. Like the other Defendants Mrs Benn in her Defence denied that if there was an error it was a Manifest Error. For the reasons already given I do not accept that contention.
886. Further or in the alternative it was contended that the effect of the first sentence of the second sub-clause of the Manifest Error clause is that IG Index is liable for any loss to Mrs Benn following a Manifest Error caused by the wilful default or fraud of its employee Mr Colley for which it is vicariously liable. She will have suffered loss by reason of the wilful default or fraud of IG Index if she is required to pay it profits which she made in consequence of the Manifest Error caused by Mr Colley's fraud or wilful default. She has paid those profits to her son with the result that she would suffer loss if she has to repay them to IG Index. She is therefore entitled to set off the amount of profits she is asked to repay to IG Index which she has paid to her son.
887. This is the same argument in effect as that which I have rejected in the case of Mr Osborn and I reject it in the case of Mrs Benn for similar reasons.
888. Next it was contended in her Defence that it was an implied term that IG Index must act reasonably in exercising its right to amend the terms of a bet on the basis of a Manifest Error and it would be unreasonable not to take into account her change of position in having paid money to her son. That was said not to be covered by the right of IG Index not to take into account any financial commitment that the customer has entered into or refrained from entering into in reliance on a bet. I do not accept that submission. In my judgment there is no material difference between giving away the profits made on a Bet and using them to discharge a commitment so far as the reasonableness of IG Index's right not to take it into account is concerned. IG Index had no way of knowing the use to which its customers would put any profits made on bets placed as a result of a Manifest Error and it was entitled in my view to ignore such matters. Bets may be closed within minutes of being placed and before any Manifest Error comes to light. The protection afforded to IG Index by the Manifest Error clause would be undermined if it were dependent on the customer having retained the profits at the time the error was discovered. In any event in this case the reason it was not discovered earlier was entirely the fault of Mrs Benn's son who was her agent.
889. Finally in her Defence Mrs Benn contended that if the current version of the Agreement pleaded in the Particulars of Claim applied to her, which she did not admit, the Manifest Error clause contained in Term 27 thereof was not binding on her by virtue of regulation 5(1) of the 1999 Regulations in that it was unfair, being a contractual term not individually negotiated and which contrary to the requirement of good faith caused a significant imbalance in the parties' rights and obligations arising under the agreement to the detriment of the consumer.
890. As I have held that the version of the agreement in force at the time of the pleading was not that which governed the relations between IG Index and Mrs Benn that defence does not arise. That is of particular significance since the first ground on which it was contended that the Manifest Error clause in the current version of the Agreement was unfair was that it enabled IG Index to amend the terms of the Bet unilaterally where it believed there had been a Manifest Error with no corresponding right being given to the consumer.
891. The current version did not include the last sentence in the version applicable to Mrs Benn, Mr Regan and others to which I have referred. In my judgment properly construed that last sentence did confer on the client a right to require IG Index to amend the terms to what it believed would have been fair and reasonable at the time the bet was entered following a Manifest Error. IG Index's right to amend was not in my judgment unfair or contrary to the requirement of good faith and did not cause a significant imbalance in the parties' rights and obligations.
892. I would add for completeness that had it been contended that the Manifest Error clause in the November 2001 Agreement which I have held applied in Mrs Benn's case, was unfair for the other reasons relied on in her Defence on the assumption that the current version was applicable, I could see formidable difficulties in the path of such an argument. However since it was not contended and since no arguments were addressed on these points either by IG Index or Mrs Benn it does not arise.
893. In her Defence Mrs Benn contended that by seeking to exclude or restrict liability in reliance on the second sub-clause of the Manifest Error clause for breach of an implied term that it would exercise reasonable care and skill in the provision of services IG Index has sought to exclude all strict liability for its own breach of contract and that that provision does not satisfy their requirement of reasonableness in section 3(2) of the 1977 Act. That contention is in my view misconceived. IG Index did not rely on the second sub-clause to exclude or restrict its liability for breach of any implied term. Nor in my judgment was it in breach of any such implied term.
894. It was further contended that by seeking to exclude its liability for negligence and/or in relying on a Manifest Error, where such error has been caused by the negligence of one of its employees IG Index was seeking to be entitled to render a contractual performance substantially different from that which was reasonably expected of it contrary to section 3(2)(b)(i) of the 1977 Act and the Manifest Error clause did not satisfy the requirement of reasonableness in that respect. Again I do not accept that contention. IG Index did not seek to exclude its liability for negligence nor was the Manifest Error caused by the negligence of one of IG Index's employees. It was caused by Mr Colley's dishonest conduct but for the reasons I have already given. In my judgment the Manifest Error clause was apt to cover a Manifest Error in such circumstances. By seeking to amend the level of the bet to that which would have operated but for the Manifest Error in my judgment it cannot be said that IG Index was seeking to be entitled to render a contractual performance substantially different from that which was reasonably expected of it. On the contrary what was reasonably expected was that the parties should contract at the level which would have applied but for a Manifest Error.
895. It follows in my judgment that IG Index was entitled to amend the opening level of each relevant bet to that which it believed would have been fair and reasonable at the time it was entered. As to the precise quantum of the amounts to which IG Index is entitled under this claim I would hope that the matter could be agreed between the parties. Failing that I will have to resolve it.
896. In a letter to the court dated 13 May 2012 Mrs Benn said that as a result of incapacity she has decided to take early retirement. Her husband is 65 years old and working part time they have already spent a significant slice – over £6,000 of their savings on legal advice in this matter. They still have a large mortgage to repay on their flat. They own a 14 year old Vauxhall Astra and live very simply.
897. I have considerable sympathy for Mrs Benn and the position into which she has been placed by her son. I do not know what is the financial position of Tom Benn. It may be that IG Index have brought these proceedings in the hope that he will stand behind his mother in meeting any judgment made against her. It is of course a matter for IG Index whether and to what extent it may wish to enforce the judgment against her.

Relief and quantum

898. I have indicated in respect of each claim which I have held succeeds the nature of the relief to which it entitles IG Index. As mentioned earlier there was no focused discussion about quantum at the trial hearing. Mr White on behalf of Mr Regan raised questions as to the calculation of the sums claimed by IG Index against Mr Regan. Different figures were at different times referred to by IG Index. This may result from the evolving nature of IG Index's acquisition of evidence to identify precise details of the false dividends. I would hope that the relevant figures can be agreed between the parties. If there are any points of disagreement they should be identified together with brief explanations as to any points at issue.
899. As I have indicated it is a matter for IG Index whether it wishes to pursue a claim based on knowing receipt in respect of any bets which resulted not in payments to the relevant Defendant when the bets were closed but rather in the receipt by IG Index of smaller sums than would have been the case but for the insertion of false dividends. If IG Index wishes to do so I should be given in brief form the relevant figures and arguments on both sides.
900. As against Mr Slaney and Mr Regan I have held that IG Index's claims for damages for knowing assistance and fraud and its claims for knowing receipt have succeeded. I have also held that its claims based on amendments to the relevant bets succeed. The latter claims were not pleaded as alternatives to the former claims. However in practice there is likely to be a substantial overlap. Again I hope these matters can be resolved by agreement between the parties. Failing that I should be told in brief form the nature of any unresolved issues together with any supporting arguments.
901. As regards Mrs Benn and Mr Osborn IG Index has succeeded both in its claims for damages for vicarious liability for the fraud of their agents and also in its claims based on the amendment of the relevant bets pursuant to the Manifest Error clauses. I repeat my observations as regards the claims against Mr Regan and Mr Slaney.
902. As regards the claims against Mr Teller, since I have held that the claim against him based on the purported exercise of a right to amend under the Manifest Error clause fails, it would appear that the only outstanding issue is one of quantum. I would hope that that can be agreed between the parties. Failing that I should be told of any unresolved issues together with brief explanation and argument.
903. As regard the claim against Mr Colley I have held that he committed fraudulent breaches of fiduciary and other duties owed by him to IG Index and is liable to compensate it in damages for the loss it has suffered as a result. I would hope that any issues relating to quantum can be agreed between the parties. Failing that I should be told of any unresolved issues together with brief explanation and argument.
904. These matters can be addressed at the handing down of this judgment.