Mr Justice Etherton:
- In these proceedings ("the Hubner Action"), the Claimant, Terence Daly, claims damages from the Defendant, Martin Hubner, on the ground that, on about 23rd June 1995 the Defendant, without the knowledge or consent of the Claimant, caused the entire balance standing to the credit of the Claimant's bank account with the Bank of Scotland's Jersey branch ("the Jersey Bank Account") to be transferred out of that Account and thereafter applied in accordance with the directions of the Defendant. By his re-amended Statement of Claim, the Claimant claims "restitutionary damages in a sum equal to the moneys had and received being the balance standing in his account with the Bank of Scotland's Jersey Branch prior to...[its removal on 23rd June 1995]".
- The Defendant does not deny that he procured the transfer of the balance of the Jersey Bank Account as alleged by the Claimant. The Defendant's Defence is that he was properly acting as a director of Imex Shipping Europe Limited ("ISEL") enforcing, through the Royal Court of Jersey, a judgment for US $555,000 obtained by ISEL against the Claimant on 5th March 1993 in action 1992 I No. 8938 in the Queens Bench Division of the High Court of Justice in England (" the ISEL Action"). The Claimant denies that the Defendant was, at the relevant time, a director of ISEL. He denies that the ISEL Action or the enforcement of the judgment obtained in that Action was undertaken with the authority of ISEL.
A Brief Procedural History
- The ISEL Action was commenced, on the instructions of the Defendant, purportedly acting as a director of ISEL, on 11th December 1992. ISEL was the Plaintiff and the Claimant was the Defendant. The substance of the claim was that the Claimant had wrongfully converted to his own use the sum of US $555,000 in ISEL's account at the St Petersburg branch in Florida, USA, of the First Union Bank ("ISEL's Florida Account"). Judgment in default of notice of intention to defend was obtained on 5th March 1993. The sterling equivalent of US $555,000 at that date was £382,758.62.
- Gardner Weller were the solicitors originally acting for ISEL in the ISEL Action. On 1st December 1993 solicitors acting for the Claimant wrote to Gardner Weller and alleged that the ISEL Action had been commenced and conducted without ISEL's authority. The letter stated that Defendant had no authority to act on behalf of ISEL and that the Claimant was the majority shareholder and a director of ISEL. On 29th December 1993 the Claimant applied in the ISEL Action for the judgment to be set aside. The grounds for the application were that the Claimant had not been served with a copy of the writ and so the judgment in default had been entered irregularly against him, and also that there was a defence on the merits. The application to set aside the judgment was dismissed in so far as it relied upon the allegation that the judgment in default had been irregularly obtained against the Claimant. The allegation that there was a defence on the merits and that the default judgment should be set aside on that ground was adjourned with directions for service of evidence.
- In June 1994 Gardner Weller ceased to act for ISEL. The Defendant retained Comptons, solicitors, to take over the conduct of the ISEL Action on ISEL's behalf.
- On 15th August 1994 the Claimant applied to strike out the ISEL Action on the ground that those purporting to act on ISEL's behalf in the conduct of that action had no authority to do so.
- In January 1995 the ISEL Action was transferred to the Chancery Division.
- On 23rd February 1995 Master Miller issued a certificate pursuant to section 10 of the Foreign Judgments (Reciprocal Enforcement) Act 1933 certifying that judgment in the ISEL Action had been obtained for US $555,000.
- On 7th March 1995 directions were given in the ISEL Action that there be tried as a preliminary issue on oral evidence the question whether the persons purporting to sue in ISEL's name had authority to do so. It was further ordered that, until that issue had been determined, all further proceedings in the ISEL Action, except for the purpose of the determination of the issue, be stayed. Discovery was ordered and also the exchange of witness statements. The issue was thereafter to be set down for hearing with a time estimate of 3 days. The preliminary issue has never been brought to trial.
- On 20th April 1995 the judgment in the ISEL Action was registered as a judgment of the Royal Court of Jersey pursuant to the Judgments (Reciprocal Enforcement) (Jersey ) Law 1960. On about 23rd June 1995, notice of registration of the judgment having been served on the Bank of Scotland by the Royal Court of Jersey, the Bank of Scotland transferred the balance of the Jersey Bank Account, after deducting expenses, to Crill Canavan, advocates purporting to act for ISEL. The total amount transferred was £110,030.02. The money was then dealt with in accordance with the instructions of the Defendant, Mr Hubner. He claims that the entire amount has been applied in meeting the expenses of a Mr Anthony Hunt in the process of tracing and recovering the money from the Claimant pursuant to an agreement between ISEL and Mr Hunt dated 20th November 1992.
- On 14th November 1995 ISEL was struck off the register of companies for failing to file annual returns. On 29th August 1997 ISEL was restored to the register on the application of the Claimant.
- On 10th February 1998 the Claimant issued a further summons in the ISEL Action to dismiss the Action on the ground that it had been brought without authority, and for the costs to be paid by, among others, Comptons.
- On 24th November 1998 the Claimant commenced the Hubner Action against the Defendant. In the original Statement of Claim, it was alleged, among other things, that the Defendant had no authority to instruct Comptons in the ISEL Action, and that the Defendant had fraudulently and/or without the authority or consent of the Claimant received the sum of £110,030.02 from the Jersey Bank Account and applied the same to his own use, and that the Defendant had wrongfully converted the sum of £110,030.02 to his own use and that the Claimant had thereby had suffered loss and damage.
- On 23rd April 1999 a further summons was issued in the ISEL Action by the Claimant against Gardner Weller and Comptons for wasted costs orders against them on the ground that they issued and continued the ISEL Action without proper authority. On 4th May 1999 Points of Claim were served by the Claimant, Terence Daly, in the ISEL Action in support of the costs claims against Comptons and Gardner Weller.
- The claims against Gardner Weller and Comptons in the ISEL Action for costs and also the substantive hearing of the Hubner Action commenced before me on the 1st May 2001. Mr Nigel Hamilton QC and Mr Andrew Marsden appeared for the Claimant, Mr Terence Daly. Mr Paul Parker appeared for Gardner Weller and Comptons. Mr Nicholas Berry appeared for the Defendant, Mr Martin Hubner. Due to other professional commitments Mr Hamilton QC was unable to attend the first two days of the hearing or the last week.
- At the beginning of the hearing I gave leave to amend the Defence in the Hubner Action. The substance of the amended Defence is that instructions were properly given in the ISEL Action by the Defendant as a director of and on behalf of ISEL; £110,030.02 was recovered from the Jersey Bank Account pursuant to the judgment obtained by ISEL in the ISEL Action; that judgment was never set aside, nor its execution stayed; those funds were recovered for the benefit of ISEL, the Defendant never having received or had applied for his benefit any part of them.
- During the course of the hearing I also gave leave to re-amend the Statement of Claim. The previous pleading was deleted in its entirety. In the new re-amended Statement of Claimant the allegations of fraud and conversion are no longer maintained, and the cause of action is restricted to an action for money had and received. Further, in the new pleading, the Claimant no longer maintains, as he had done until that time, that the money in the Jersey Bank Account did not derive from the US $555,000 previously in ISEL's Florida Account. The re-amended Statement of Claim alleges that the money in the Jersey Bank Account originated partly from ISEL's Florida Account, partly from the Claimant's own resources, and partly profits from investment of the mixed fund, and interest.
- On 10th May 2001, during the course of the hearing before me, the Claimant and Comptons and Gardner Weller reached a compromise in the ISEL Action, which was embodied in a Tomlin Order. Pursuant to that compromise, I dismissed the applicant's application to dismiss the ISEL Action, and I ordered that all further proceedings in the ISEL Action be stayed upon the terms in the schedule to the Order, save for the purpose of enforcing such terms. Thereafter the hearing continued solely as the trial of the Hubner Action, in respect of which this is the judgment.
The Difficulties Of Conducting The Trial
- In Counsels' presentation of the case of each party and in the evidence which has been given allegations and counter allegations of forgery, fraud, intimidation, assault and burglary abound. There is scarcely a company document relating to ISEL which is not challenged by one side or the other on the ground that it is a forgery or is otherwise invalid. Other documents are also said to have been forged. Each side accuses the other of having stolen documents through burglaries. The Claimant, the Defendant and some of the witnesses maintain that they have either been assaulted or subject to other intimidation. Indeed, during the trial, I was informed of an incident which had apparently taken place in the Royal Courts of Justice in which the Claimant and his son, Mr Stephen Daly, a witness for Mr Hubner, were involved in some kind of scuffle.
- Furthermore, my task in conducting the Hubner Action has not been made easier by the fact that the parties and their legal representatives have been unable to agree a single set of bundles or, despite my repeated requests throughout the trial, a single core bundle of the critical documents. I have been obliged to refer to sixteen bundles split into three different sets, one being those of the Claimant, one being those of the Defendant, and one set being those of Comptons and Gardner Weller. The latter set of bundles was also referred to by counsel for the Claimant and the Defendant after the case against the solicitors had been compromised. Additional documents were presented to the court during the trial.
- I have already referred to the extensive amendments to the pleaded case of each side during the course of the trial.
- The matters to which I have referred in the preceding three paragraphs added considerably to the difficulties of my task.
- I shall set out below a more detailed factual account of the background than I have given earlier in this judgment. I shall then comment on the witnesses called for each side, and, in particular, their credibility. I shall then state my findings on critical areas of fact which are in dispute between the parties. I shall then turn to issues of law and other related matters.
- This judgment is lengthy. On one view of the law, it would have been possible to determine the Hubner Action without attempting to resolve many of the disputes of fact between the parties. On the other hand, in order to assist the task of any other Judge, for example in future proceedings in the Companies Court or elsewhere, as to the ownership and management of ISEL, and in order to reduce the scope for any appeal or retrial, following appeal, I have considered it right to determine so far as practicable all the matters of fact which have been in dispute in the trial before me.
The Factual Background In More Detail
- It is convenient to reproduce here, even though it is disputed by the Defendant in numerous respects, one of the many accounts given by the Claimant as to the background to the incorporation of ISEL. The following is an extract from the Claimant's witness statement dated 8th October 1999 in the ISEL Action. It is a fairly lengthy extract, but it gives a good flavour of the Claimant's personality and his perception of his role in the early stages of the events which ultimately led to the ISEL Action and the Hubner Action. The Claimant has confirmed the truth of the statement both in the body of the statement and in his sworn oral testimony.
"1. My date of birth is 2nd August 1927. I have dual nationality both as an American Citizen and a UK citizen. I have been married twice. My first marriage was to Mary Daly by whom I had 2 children Ann and Stephen Thomas Daly. Stephen Daly was born on the 3rd March 1952. The first marriage ended in divorce and I married for a second time an American wife.
2. I have been a marine engineer for some 35 years. I lived in America between 1979 and 1992 and was concerned in the Ship Repair business, first of all as an employee for an American company and then I opened my own business at Tampa, Florida. I was originally in the Royal Navy and after I came out of the Navy I became a Marine Engineer in the Mercantile Marine and I gained some experience, largely on the outside, of Chartering Vessels but it was not until 1990 that I became involved in Chartering Vessels personally.
3. It so happens that my son also went into the Royal Navy. I saw little of him when he was young because I was travelling the world both in the Service and out of it. He was discharged from the Navy. He then did a spell in the Merchant Navy and thereafter drifted form job to job. He eventually decided that he wanted to be an actor. This was some time in the 1970s. He then went to live in London. I had very little to do with him over the years.
4. Whilst operating my own ship repair business in Florida I got involved with the Federal Government of the USA. In the early 1980s drugs started to flood into Florida and the Federal Authorities began to co-ordinate their efforts to combat this. In 1986 George Bush was instrumental in the setting up of the South Florida Task Force. I was recruited by the Task Force as an undercover Agent. It was my job to allow myself to be infiltrated into deals and to provide boats to carry Cocaine and Marijuana from Suppliers in Columbia, Panama, Jamaica, Belize, Cayman Islands and Haiti to Dealers in Florida under the strict control of the DEA (Drug Enforcement Agency and US Customs). This was under-cover work and was very dangerous but at the same time profitable. On the one hand I was paid by the Suppliers and Dealers for providing the transport, and then the Drugs Enforcement Authority gave me 25% in value of any property seized such as boats and planes plus a financial award as well, on conviction.
5. In 1991 I was approached by a man called Odell Scott who was a fellow mason in the Ship Repair business. I did not know previously that he too was connected with the DEA. He wanted me to get involved in a job. He told me that the job involved shipping cement out of Mexico to Taiwan. It was a job which required shifting some 1.2 m tonnes of cement per annum out of Mexico in 30,000 tonne ships at the rate of 4 ship loads per month. This involved chartering something like 30 ships and was a vast enterprise. I never knew why it had to be set up. Mexico had recently been fined 6 million dollars for dumping cement on the American market and perhaps there was some political reason for this deal having to be put in place. However I was informed that the people organising the cement deals were in the Federal system.
6. The carriage of cement needs ships with specialised handling equipment. In the old days cement was usually carried in old rust buckets but business had become a lot more specialised and in addition to the need to find ships with the appropriate handling equipment there was also a problem of insuring cement loads. The reason for this was that some years ago there had been a previous scam which had cost the insurers a lot of money. This had involved the delivery of many thousands of tons of cement to Lagos where it had all been delivered and then found to be a complete con, with the loss of many ships.
7. I made a few enquiries to see if the job could be done at all and came to the conclusion that it would be possible for me to arrange the transport of the cement. I went back to Scott and asked him for more details. He couldn't give them to me personally unless I committed myself to doing the job.
8. Having done so in about the first week of March 1991 I received a call from a person called Mike Davies from a company called MPI Enterprises located in Largo, Florida saying that he understood that I might be able to provide vessels for a cement deal. I told him I would only be interested when I knew all the facts concerning the types of vessels required and other information about the ports of loading and discharge to see whether these contracts would be feasible. I asked him whether he was involved in the shipping business. He said he wasn't. He told me that he didn't have the details I was asking him for but he was acting for other people who would supply me with them and he would get in touch with them immediately. This is confirmed in documents 2 and 3 which are faxes I received from him at the time. It seemed obvious to me that the Federal Agencies were pulling the strings because after a few searching questions about ships and shipping it was clear that Mr Davies did not know what he was talking about. I suggested to him that it would be better if I should call and see him to discuss the business but he made an excuse. The excuse he used is an expression which I have only previously heard used by Federal Agents. He told me he would keep in touch with me by fax and telephone until the deal progressed further. When he did make contact with me again it was mostly by fax and he told me the name of another individual from Boston with whom I should make contact namely Mr Fred McCarthy. He gave me his telephone number. After further telephone calls and fax transmissions Mr Davies seemed confident that I was getting on with the job. I decided that I would pay him an unexpected visit as he always seemed to be unavailable when I wanted to meet him in person. Particularly when I mentioned the fact that I would only proceed when I had some guarantee of payment to set this deal in motion. The address which appeared on his fax was Suite 17 Brian Diary Road, Largo in Florida, not far from my mother-in-law's address and in the same area where my wife was working. When I arrived at the address I thought I had made a mistake as the address listed as Suite 17 was a video store in a row of other small stores. There was no sign or indication of MPI Enterprises. I went into the video store pretending I was interested in what he had. I would describe it as being an adult movie store. There was nothing there to associate it with Major International Shipping the only person there was a large man who walked with a limp. When he asked me if there was anything I was interested in I told him I was looking form somebody called Mike Davies. He seemed to be caught unawares and I asked him if this was the office of MPI. He told me that MPI had a space at the back but Mike Davies was not there at the moment but he would get in contact with him for me. I told the man that I would be back in half an hour. I went and sat in my car which was at the far end of the row of shops. Within a few minutes another man turned up at the store. I went back into the store and the man who had just arrived was now sitting behind the counter. He asked me what I wanted. I explained that when I had first been contacted by Odell Scott that I had explained to him that I wanted £20,000 to set the deal up. Up to this point it had cost me a few hundred dollars in phone calls and faxes but I had still not received any money. I wanted some money as a sign of good faith from them. He told me he would pass the message on to Mr McCarthy (Mac) who would be in touch with me.
9. When Mr McCarthy did get in touch with me he referred me to somebody in Texas, Vance Williams of Vance Williams and Associates who passed me on to someone in Spain called George Kolar, he referred my to Nicholas Tee in London, from him to Nicholas Ingram in the Channel Islands and then Mr Ping Chen in New Mexico. From there I was referred to representatives of CEMEX in Mexico who were selling the cement and then later to Cheng Saint Trading Taiwan representing Universe Company the buyers of the cement.
10. By now I was being bombarded by faxes and telephone calls from all directions. It was taking a lot of time and becoming increasingly expensive. I told them I would only deal with one or two of them at most. This was agreed and I was instructed to deal with George Kolar in Spain and Vance Williams in Texas with Mr Chen in New Mexico as the buyer's representative. However, this did not stop the others calling to find out what was happening as everyone was interested in their share of the deal especially as they had all incurred expenses. CEMEX was know to me as being the primary producer of cement and a respectable organisation. I have no reason to believe that it was anything other than a bona fide deal. This arrangement was confirmed by a fax from George Kolar Associates in which the various interested parties are referred to at the bottom of the page.
11. On the 20th and 21st of May there was a joint meeting at the CEMEX office in Monterey, Mexico. Present were myself, George Kolar, Vance Williams, Ping Chen and representatives of CEMEX. They were working out the terms for the purchase of the Cement and I was there merely to provide the Shipping. There hammered out a contract over two days and later faxed me in Florida with details of the shipping requirements. These worked out at providing a minimum of 100 thousand tons a month from Mexico to Taiwan.
12. There was second meeting at Houston in Texas and there was disagreement. CEMEX wanted 4 million dollars in advance. I didn't need to get involved in that argument and left them to it.
13. I was then told that the purchaser had ceased to be Ping Chen who was now negotiating the purchasers of cement out of Peru.
14. Early in 1991 my son Stephen had turned up in America. He asked me what I was doing. I told him in general terms. He just turned up with a lady friend. He stayed at my house for as couple of weeks, coming and going as he wished and borrowing my car. I did not have a lot to do with him. However, he told me that he was working with a Solicitor in London forming Companies and doing Company searches amongst other things.
15. During 1991 Walton & Parkinson Insurance of London, who were the Brokers with whom I had been in touch in order to arrange insurance, told me that I would need a company based in the UK for them to deal with as a client rather than deal with me personally. They also started pressing me to show them the Contract of Affreightment so that they would know who the Contracting Parties were and all other necessary details of the cargoes etc. I had an American Company Imex Corporation which I could have used but I was told that this was not acceptable to the Insurers and I would have to form a UK company to be a contracting party. I decided I would ask my son Stephen to do this. I asked his mother to give me his name and address and I found that he was staying with a solicitor called John Daly in London.
16. Stephen told me that it would cost between £400/£500 to form a Company and he would need some further expenses on top of that so I sent him £1000. My instructions were to buy an off the shelf company for the necessary purposes. I gave him these instructions in July, and in August 1991 he told me that the Company had been formed. He apparently used Company Formation Agents called R & M Company Services Ltd to do the formation. In August he had asked me who would be the Directors of the Company. I told him it should be me and he could also be a Director as well. I told him that the Company Secretary was to be a girl called Gina Pola. The reason why I thought it would be a good idea for Stephen to be a Director was that he told me that as I was an American citizen it was necessary for there to be another Director who was a British Citizen. I was not unduly concerned about the fact that he was to be a Director because it was my intention from the very beginning to keep a very tight hold on what the company did and I had no intention of giving him any authority to do anything on the Company's behalf save under my strict direction.
17. Gina Pola and her family are British. They were living in Florida. She was an employee in my office in St Petersburg in Florida. From time to time she returned to England.
18. The position was that by August 1991 that I understood a company had been formed in the name of Imex Shipping Europe Ltd. and that it had two Directors and 1 Secretary. I did not realise at that stage that 2 Subscriber Shares had already been issued and I had not given any instructions at all about allotment of shares.
19. In August/September 1991 Stephen Daly came over to the USA. He called on me in St Petersburg and with him was a man called Martin Hubner and a Miss Christine Scrase who was described as being the latter's PA. I was aware that Stephen was bisexual and it seemed to me as though Hubner was as well and the relationship between the 3 guests was all rather odd.
20. Stephen had brought the company books out with him i.e., the Company Pack which had been bought from R & M Company Formation Services. I had not met Hubner before. He was introduced to me as a businessman involved in the production of films and a director of Hubner Films Ltd. It seemed as though he had been successful in that business and certainly I was more impressed with him as a businessman that with my son Stephen.
21. Hubner and Stephen talked to some Ship Brokers called Eggar & Forrester of London. This company had offered their services to run the whole shipping part of the deal. I had already talked to a Swedish friend Eric Persson about the shipping side. I had not fixed anything with Eric Persson. There was no reason why Stephen and Hubner should not make further enquiries to see just what Eggar & Forrester might be able to do.
22. They then returned to the UK and Hubner negotiated with Eggar & Forrester and the latter sent on to me lists of available ships in early 1992. However the vessels were unsuitable and the dates did not marry up with the needs of the Contract. I had other irons in the fire in addition to Eric Persson. I was also making enquiries of Lambert Brothers of London who had been recommended to my by Parkinson Insurance, and they seemed to be much more on the ball than Eggar & Forrester and better able to supply the right kind of vessels.
23. Sometime before November 1991 I cannot remember precisely when I received a Share certificate from the UK showing me as holding 510 shares in Imex Shipping Europe Ltd. This is dated 13th August 1991 and signed by Steve Daly, Martin Hubner and Christine Scrase as company secretary. It bears the company seal. This certificate was given to me by one of those three individuals. On 6th September I had also received a fax on Hubner Films papers stating that I had been issued with 510 shares and that Hubner & Stephen Daly had been issued with 244 shares each with 2 shares otherwise not accounted for. I now have in my possession the share certificate issued to Stephen Daly and myself at that time. All the documents I took with me from the company premises in St Petersburg. This was all of a very great surprise to me. I have given no authority for any shares to be issued and I immediately got in touch with Stephen and told him that we needed to meet to sort things out, to agree exactly who was going to hold what shares, and who were going to be the Officers of the Company. They came over together in October 1991 for some reason connected with Martin Hubner's film business. In addition they were also doing business with the City of St Petersburg and Manatee Port Authority in relation to port developments for cruise ships. This was unknown to me at the time as the correspondence was going direct to 2 Torrington Place and 77 Dean Street in London. I asked them to attend a meeting of the Company at St Petersburg on the 18th November 1991. We held a meeting of the Company and the business was conducted as duly minuted by Gina Pola in the company book which is in my possession. I believe those minutes were written up the same day by her.
24. The following shares were minuted:
Terence Daly 635
Stephen Daly 180
Martin Hubner 180
Gina Pola 5
1,000
A copy of these minutes were sent to R & M Company Services Ltd for filing at Companies House, which was something I understood had to be done. It was received by Companies House on 7th January 1992.
25. The consideration for the issue of these shares was not cash it was in effect a set-off against what Daly and Hubner were saying was owed to them in respect of all the trouble they'd been to. I regarded my shares as having been issued for the effort and money which I had put into the company. The new shares certificates were then issued."
- As I have said substantial parts of that statement by the Claimant are disputed by the Defendant . In his witness statement in the Hubner Action dated 13th October 2000, the Defendant gives a very different account of the background to and the respective roles of the Claimant and the Defendant in relation to ISEL. I set out here part of that witness statement of the Defendant, the truth of which was verified by the Defendant both in the statement itself and also in his sworn oral testimony.
"5. Imex was incorporated on 12th August 1991. It was registered at Companies House under number 2638449. It should not be confused with Imex Corporation Inc, which is a company that the Claimant said he controlled in the United States of America (although I believe it may not in fact exist). A further company, Imex (Europe) Limited, number 2606506 was incorporated on the 30th April 1991 and is a company with which I have no connection whatsoever.
6. I am a film director. My main activities are in the field of television commercials and promotional films. I have been a film director for twenty five years. In about 1991, I became interested in expanding my business horizons by the possibility of entering the shipping industry, namely the international bulk carrying of raw materials. My appetite for this venture had been wetted by Stephen Daly who was then an actor, but had served in the Royal and Merchant Navy. He told me that his father had some experience in shipping and had a number of useful contacts. I discussed the matter on a number of occasions with Stephen and other interested parties, and Stephen made me aware of a potentially lucrative contract for the shipping of cement from Mexico to Taiwan. He showed me faxes of this and other potential contracts relating to the shipping of coal, steel, etc. Even though I had no real experience in shipping, my first degree had been in Economics, and I was very interested in the proposals, because I felt I could contribute to the raising of funds and organising others contacts in London. Also it appeared that such a venture might prove to be very lucrative.
7. Stephen's father, the Claimant in these proceedings lived in St. Petersburg, Florida. Stephen and I flew out to meet him in Florida in about July 1991 to discuss various proposals. The Claimant told me that he had been a Chief Engineer on various vessels, but now had a business repairing ship's engines. We discussed his various proposals for the shipping of products/raw materials around the world, and it seemed that the shipping of cement would be our strongest bet. Also the Claimant implied that he may have a potential contract for the bulk carrying of cement. We therefore discussed this in more detail and in particular, how we could secure it. We reached agreement in principal. The essence of our agreement was that a company would be set up in England, which was to be called Imex (Shipping) Europe Limited. My role was to set up the company in London from my film offices at 77 Dean Street, London W1., to raise finance, open a bank account, establish contacts with shipping brokers such as Eggar and Forrester, international shipping lawyers, such as Clyde & Co., organise the setting up of a small office in St. Petersburg Florida, and get Lloyds Shipping Register "on line". I was also to write a business plan for potential investors and the raising of finance. The Claimant had no money and was therefore not going to invest anything in the venture. His role, therefore, was to use his contacts and knowledge of shipping, in order to secure the contract which related to the shipping of cement from Mexico to Taiwan. It was agreed that even though the company was set up in London, the three of us, that is, myself, Stephen, and the Claimant would give ourselves titles of President, Vice President etc. The allocation of shares in the company was to be decided later because the Claimant was not putting up any funds himself. The number of shares allocated to him would therefore depend upon the nature of the contract or contracts, if any, that were subsequently entered into by the company.
8. I returned to London. On 12th August 1991 I contacted R. M. Company Services Limited and purchased Imex. Attached to this statement is a bundle of documents relating to this transaction which include an invoice from R. M. Company Services Limited in the sum of £429.13, together with a copy of a credit slip showing that I paid for this by telephone, by means of my master card. I believe that I received in the post from R. M. Company Services Ltd a pack accompanying their letter to me of 12th August 1991. This included the Certificate of Incorporation, Memorandum and Articles of Association, shares/members book and stock transfer forms. Also included was a resolution stating that the original directors of the company had resigned as well as one stating that the original subscribers renounced their rights. Forms G287 (notice of registered office) and G288 (notice of change of directors and secretary) were included as well. The registered offices were to be 77, Dean Street, London W1. Control of the company was to be by myself and Stephen, but at this stage we did not have a contract to ship cement or any real investors, apart from myself. It was early days for this start-up company. We had no trading history or income. I had no further dealings with R. M. Services Limited, after this. Nothing further was decided and no forms were filed at Companies House at this point in August 1991.
9. I did nothing with the company papers, in the first instance. I did, however, arrange to open a bank account at Barclays Bank, Soho Square, London for Imex, account number 40496529. In to this account I paid the sum of £30,000.00 from my own funds as working capital for Imex. Through Stephen's contacts we also persuaded Roger and Stephen Tarrant to invest £20,000.00 and through my own contacts I persuaded Michael Peters to invest £5,000.00. Thus the total capital for Imex in the first instance amounted to £55,000.00. Of the company's officers I was the only one who had a financial stake. These investments were made on the strength of the potential cement shipping contract.
10. In August/September 1991 Imex did not have any trading business to transact, it had no income, and only had part of the working capital which was subsequently expended on office costs, furniture, travelling expenses, phones/fax and monthly payments to Lloyds Register 'on-line'. No management fees were paid. It was purely speculative. The fact that Imex was not in a position to trade, coupled with a certain degree of naiveté on my part in relation to the practicalities of company law, meant that no decision was made over the issue of the shares. This became, however, the subject of some controversy because the Claimant subsequently demanded a controlling interest which was not acceptable to myself or Stephen or indeed the other investors. I deal with the subsequent issue of shares below.
11. 12 ...
13. So, after incorporation nothing happened with Imex. No appointments were officially made, and no shares were issued. On a day to day basis, Stephen Daly and myself were acting directors. Together with Christine Scrase, my associate film producer, we ran the company, making decisions as appropriate, whenever anything needed doing. I opened a bank account and showed to the bank manager, Steve Allen of Barclays, Soho Square London, W1 the Memorandum and the Articles of Association. The joint authorised signatories were myself and Stephen Daly only. The Claimant retained a sort of consultancy role in the USA because he, amongst all of us, had some experience of shipping. We agreed that we should open a further bank account at the First Union Bank, St. Petersburg, Florida in Imex's name for the running of office expenses only. I arranged to transfer from the London account to the American account sufficient funds to enable the Claimant to do this. He had limited power to draw on the American account.
14. In November 1991 we had a meeting to discuss the allocation of shares. This took place at in St. Petersburg, Florida, USA, and present were myself, Stephen Daly, Christine Scrase, the Claimant and his girl friend Gina Pola. At this meeting, we tried to agree the allocation of shares. The Claimant tried to argue that he should have a controlling interest in Imex. This was not agreed and neither was it acceptable to those of us that had actually put up the money for the company - the Tarrants and Mr Peters included. This meeting broke up amid scenes of great acrimony and it was only the prospect of securing the lucrative cement contract that persuaded me to persevere with the project and not just abandon it there and then. So the decision not to allot any shares to the Claimant (let alone a controlling interest) was one taken quite deliberately - even though that may have been contrary to what had been discussed at the outset."
- A comparison of the two statements shows that there are major areas of disagreement between the Claimant and the Defendant as to the circumstances in which they first met, the roles which it was intended they should play in relation to the proposed cement shipment contract, the respective roles and interests of the Claimant, the Defendant and Stephen Daly in ISEL, and also as to the allotment of shares in ISEL. There are also disputes as to what money, if any, the Claimant and the Defendant respectively contributed to the company, and as to the intended use and control of ISEL's bank account in London and ISEL's Florida Account.
- What is clear is that, following the incorporation of ISEL on 12th August 1991, a bank account was opened, on the instructions of the Defendant, with Barclays Bank at Soho Square, London, and ISEL's Florida Account was opened on the instructions of the Claimant.
- In November 1991 there was a meeting in Florida attended by the Claimant, the Defendant, Stephen Daly, Christine Scrase, and possibly Gina Pola. There is no agreement between the parties as to what, if anything, was agreed at that meeting.
- On 11th February 1992 a contract of affreightment was made between ISEL, described in the contract as "the Owners", and "UBE Trading Company Limited/ Universe Company Limited" described in the contract as "the Charterers". Those descriptions of the contracting parties do not seem entirely appropriate, since ISEL never owned any ships, and UBE Trading Company Ltd ("UBE") was the purchaser of the cement which was to be transported by ships procured by ISEL. The seller of the cement was an entity called CEMEX which was not a party to the contract of affreightment. Under the contract of affreightment ISEL agreed to transport the cement cargoes purchased by UBE ( from CEMEX) out of Guaymas, Mexico, to an international port in Taiwan. The initial period of the contract was from April 1992 to March 1993, during which period ISEL was to transport the cement in bulk from the loading port at a fixed flat freight rate of US $18.50 per metric tonne. Thereafter the contract would be automatically renewed and extended for successive six month periods until written notice of cancellation was given by either party to the other. The contract provided for two shipments every three months. Each shipment was for 30,000 metric tonnes. Clause 7 of the contract of affreightment provided for payment of the freight cost to be made by irrevocable letter of credit.
- The contract of affreightment was a substantial contract. Whether or not ISEL could carry it out at a profit would depend upon the costs of transportation. The contract was signed at ISEL's offices in St. Petersburg Florida. The contract was signed by the Claimant on behalf of ISEL. Both before and after the contract of affreightment was signed the Claimant, the Defendant and Stephen Daly pursued enquiries as to suitable ships for transportation of the cement. In this connection, enquiries were made of Eggar Forrester Ltd, of Middlesex Street, London E.1., ship-brokers. The initial enquiries were handled within Eggar Forrester by William Gault, who was at that time in the sale and purchase department. Subsequently, the matter was taken over by Christopher Lewis, who was in Eggar Forrester's chartering department.
- For a short period prior to 8th April 1992 the Claimant stayed at 2 Tollington Place, London, N4, which was the address of Stephen Daly's flat. The Defendant alleges that, following the incorporation of ISEL, most, if not all, of ISEL's statutory and other books and documents were kept at Stephen Daly's flat.
- On about 8th April 1992 the Claimant, accompanied by a Mr Keith Maxwell, and without the knowledge or consent of the Defendant or Stephen Daly, attempted to persuade the Soho Square branch of Barclays to change the bank mandate for ISEL's account there by removing the authority of the Defendant and Stephen Daly to deal with the account and substituting the Claimant and Mr Maxwell as signatories for the account. The bank refused to do so.
- The Claimant's evidence is that, pursuant to demands made by him on about 8th April 1992, the Defendant and Stephen Daly agreed to resign from their directorships of ISEL. This is disputed by the Defendant and Stephen Daly. The Claimant's evidence is that, by this time, he had become thoroughly exasperated by the incompetent attempts of the Defendant and Stephen Daly to obtain suitable ships for transportation of the cement.
- In response to the unilateral attempt by the Claimant to change the bank mandate in respect of ISEL's account at Barclays' Soho Square branch and, according to the evidence of the Defendant, because he had become alarmed at the conduct of the Claimant in seeking to negotiate and procure ships at a freight charge that would result, in his view, in economic disaster under the contract of affreightment, the Defendant wrote the Claimant a letter dated 9th April 1992. In that letter, the Defendant demanded that the Claimant cease his attempts to control ISEL and to secure a ship for the purposes of the contract of affreightment. The Defendant also stated in the letter that, should the Claimant wish to sell his shares, only their par value could be considered.
- In a fax dated April 14th 1992 from UBE to the Claimant in Florida, Mr Hasegawa of UBE said as follows:
"RE: REMITTANCE FOR M.V. "BARKALD"
FURTHER TO OUR TODAY'S TELECOM, WE CONFIRM THAT WE WILL REMIT US $555,000 TO YOUR DESIGNATED BANK BY TT REMITTANCE ON 16TH APRIL ...
FROM NEXT SHIPMENT, WE WOULD LIKE TO ASK YOU TO CHANGE THE STIPULATION OF PAYMENT FOR FREIGHT COSTS AS FOLLOWS;
100% (ONE HUNDRED PER CENT) PAYMENT OF FREIGHT COSTS SHALL BE MADE TO THE DESIGNATED BANK WITHIN FIVE DAYS AFTER COMPLETION OF LOADING".
- On 15th April 1992 the Claimant sent a fax to Mr Hasegawa stating, among other things, the following:
"Thank you for your fax of April 14 , 1992. Please confirm that you have remitted T/T to the amount of USD £555,000 to FIRST UNION NATIONAL BANK, FLORIDA to expedite vessels arrival Guaymas to meet Laycan dates."
- Also on 15th April 1992 the Claimant sent a fax to a Mr Davis Lee, of Cheng Saint Trading, in the following terms:
"Please find enclosed letter to UBE Trading along with fax from Owners and Agents in the Panama Canal. Please inform Mr Vincent Lu the necessity to have these funds from UBE in position, in order to facilitate speedy transit through the Panama Canal, or otherwise delay could be caused which would effect vessels ETA Guaymas."
Mr Vincent Lu was a manager at Universe, which was acting as UBE's Taiwanese agent.
- The Claimant explains this exchange of correspondence in the following way. He says that he had procured the ship MV Barkald ("the Barkald") to carry out the first shipment from Guaymas to Taiwan. The Barkald was on the opposite side of the Panama Canal from Guaymas, and he was concerned that funds should be in place before the Barkald proceeded through the Canal. If funds were not in place speedily, there would be a delay, with adverse financial consequences, in the arrival of the Barkald at Guaymas for loading the shipment. The Claimant's case is that it was necessary for the US $555,000 to be transferred by telegraphic transfer since UBE/Universal were not able to provide a letter of credit in time.
- It is not in dispute that the US $555,000 was remitted by UBE to ISEL's Florida Account. By fax dated 16th April 1992 from UBE to the Claimant, the Claimant was informed as follows
"Re: freight payment for M.V. Barkald
PLEASE BE INFORMED THAT WE HAVE MADE PAYMENT OF FREIGHT COST FOR M.V. BARKALD TODAY...."
- The Defendant relies upon documents, which on their face appear to be a bank statements of the First Union Bank, showing that US $554,975 was credited to ISEL's Florida account on 16th April 1992. Those bank statements also show that on 21st April US $500,000 was withdrawn from the Account. The statements show that on 24th April 1992 US $110,000 was credited and a sum of US $112,500 was debited from the Account. By the close of business on 27th April 1992 only US $4,782.33 remained in ISEL's Florida Account.
- The Claimant maintains that the document, which appears on its face to be a bank statement of First Union Bank for the period 13th April 1992 to the 30th April 1992 showing the transactions on ISEL's Florida Account for that period, as described in paragraph 41 above, is a forgery.
- The Claimant's explanation of what happened to the US $555,000 transmitted by UBE to ISEL is as follows. He alleges that when the Barkald arrived at
Guaymas another ship, which had been chartered on the instructions of the Defendant and Stephen Daly, also arrived at the same time. That was the Ga Chau. His evidence is that the Defendant and Stephen Daly had acted improperly and without authority in chartering the Ga Chau, and the consequence of the arrival of both ships together was to cause delay and confusion. He said that it took some time to sort out the problem, and he himself had to travel to Mexico to assist. He says that he was required to pay a substantial sum in order to pay off the Ga Chau. He says the Barkald did eventually load. His evidence is that UBE, or those acting on its behalf, took the view that there had been a mess-up and this was likely to recur, and UBE threatened to terminate ISEL's contract altogether. He says that in the end he had no alternative but to "surrender the operation of the Affreightment Contract to Cheng Saint Trading Co. who for all practical purposes became the principals on the Affreightment Contract in the place of [ISEL]". Critically, the Claimant also maintains that, having expended part of the US $555,000 in expenses associated with the contract of affreightment, including the payment of US $175,000 to Atlantic Bulkers in respect of the Ga Chau, he was told both by Mr Lee on behalf of Cheng Saint Trading, and by a person acting on behalf of the United States Federal Government, that he could keep the balance of US $309,000 for himself. The Claimant's case is that Mr Lee was acting on behalf of and had authority to deal with the balance of the £555,000 as agent for UBE/Universal. The Claimant relies, in particular, upon a fax from Mr Lee of Cheng Saint Trading dated 2nd May 1992 stating, among other things, the following:
"AT THE MOMENT, WE SUGGEST THAT YOU THAT'S WE TAKE OVER YOUR POSITION TO KEEP GOING THIS TRANSACTION, WE CONFIRM THAT YOU KEEP THE BALANCE OF US DLR OF 309,000. I'LL TAKE THE RESPONSIBILITY TO COVER THE DIFFERENCE. ALSO PLS SEND A LETTER NOMINATE THAT'S YOU, IMEX WOULD LIKE LET CHENG SAINT TRADING CO., LTD. TO PERFORM THIS COA CONTRACT WHICH BE SIGNED BETWEEN YOU AND UBE TRADING ON MARCH 26, 1992 IN TOKYO JAPAN.
IF YOU CAN ACCEPT OUR SUGGESTION, THEN PLS SEND THE LETTER TO US, I'LL SIGN AND SEND BACK TO YOU, THEN YOU HAVEN'T ANY DUTY AT ALL..."
- The events and the explanation of the Claimant, which I have summarised above in relation to the receipt of the US $555,000 and its subsequent expenditure and application, are set out as follows in a witness statement of the Claimant in the ISEL Action dated 8th October 1999.
"37. I returned to Florida and had to arrange quickly for the first ship which was to load at the Mexican port between the 16th and 19th April. Olav Raustol had a ship available. Details were sent to CEMEX and UBE and approved according to the Contract of Affreightment. The ship he was going to load was the Barkald, this was after various other alternatives had been offered. The Barkald was waiting on the Caribbean side of the Panama Canal and would make the passage through the Canal only when it could produce a letter of credit to the Master. The Company was due to be paid by a letter of credit granted by UBE. I needed to be able to assure the Master on either the 12th or 13th April that the letter of credit was in position in accordance with the contract of affreightment. Discussions continued by telephone but on the 15th April 1992. I wrote to Cheng Saint Trading enclosing a copy of the letter I sent to UBE emphasising the necessity of having the funds in position. UBE responded on the 14th April. It is important to emphasise we were crossing the date line and UBE were a day behind Imex. Their letter of the 14th April 1992 confirms that they will remit US dollars 555,000 to the designated bank on the 16th April. For some reason UBE could not get a letter of credit issued because they'd left it too late immediately before the weekend. The letter of credit had to be in place 5 days before the ship was loaded. Eventually a wire transfer was arranged which is confirmed by letter and I was able to confirm to the master of the Barkald that everything was in order and the ship then went through the Panama Canal, arriving at the Mexican Port at much the same time as a second vessel.
38. Unknown to me, and unknown to CEMEX and UBE, Atlantic Bulkers of London said that they had been ordered by Imex Shipping to provide a vessel and the vessel was there waiting at Mexico. This was the Ga-Chau. If they were not to be used they required 15 days hire and 15 days bunkering which was going to cost US $175,000 in all. It was highly embarrassing to have 2 vessels standing off waiting to load and I had to get rid of the Atlantic Bulkers' vessel and had to pay the US $175,000 they demanded. The fact of having 2 vessels side by side meant that everything had ground to a halt. The longer that position remained the greater the penalty charges and the hire costs would be. Every day the Barkald was at port and not loading it was costing US $8,500. I therefore had no choice but to resolve the position as quickly as possible. I anticipated that we would be responsible for any vessel which was held up because of the duplication of ships. I could only assume that the second vessel the Ga-Chau had been chartered by Stephen and Hubner without any authority.
39 - 40....
41. The US $555,000 dollars was transferred into an account which I had opened in the name of Imex Shipping Europe Ltd with a St Petersburg bank. After paying out Atlantic Bulkers I paid out other company debts due in respect of this load, ending up with a balance of approximately US $300,000 remaining on the account.
42. I then had to explain to UBE and Universe why there had been a mess -up with 2 ships having apparently been chartered. The Taiwanese took the view that I had screwed things up and was likely to do so again. They threatened to cut Imex out of the Contract altogether and I was compelled to negotiate with them. In the end I had no alternative but to surrender the operation of the Affreightment Contract to Cheng Saint Trading Co. who for all practical purposes became the principals on the Affreightment Contract in the place of Imex.
43. This valuable contract was lost to Imex and I found from enquiries I had made that the Atlantic Bulkers vessel had been chartered from England.
44. I managed to negotiate in writing with Cheng Saint Trading Co. that Imex should receive 50 cents per tonne being US $15,000 approximately per ship load for a period of a year on all cement that was shipped from Mexico to Taiwan. This 50 cents a tonne would have represented a considerable amount of money. Also Cheng Saint Shipping Co. agreed that Imex could keep the balance of US $555,000 US dollars."
- The matter was put in the following way in a witness statement of the Claimant in the Hubner Action dated 18th September 2000.
"12. I arranged for the first voyage to be undertaken by a ship known as the MV Barkald, a general purpose bulk carrier to be chartered and to proceed to the Port of Guaymus in Mexico for loading. The Barkald was a ship owned by the Norwegian Shipping Company and particulars of her class and other classes of suitable bulk carriers are in Part 1 of my trial bundle. I submitted details of the Barkald to Universe, they approved it. I am afraid that copies of communications relating to the acceptance of the Barkald do not seem to have survived, but all these documents are the same for each vessel. On 13th April I wrote to CEMEX the Mexican cement suppliers advising them of details of the Barkald. On the 14th April 1992 Universe Company confirmed that they would remit US $555,000 US. On receipt of these funds the Barkald was on the eastern side of the Panama Canal and ready to pass through the Panama Canal. I gave instructions to the owners of the ship for the Barkald to proceed to Guaymus. Immediately on arrival at Guaymus on the 23rd April 1992 the Barkald should have commenced loading but it didn't.
13. Unbeknown to me the Defendant and my son Stephen Daly chartered a vessel called Ga Chau, sometime around the end of March or beginning of April 1992. They did not tell me that they had chartered a vessel. The vessel's Laycan details were not sent to Universe Corporation as provided by the contract of the 11th February. The Universe had no knowledge of the vessel. They were entitled under the contract of 11th February to approve the vessel or reject it. They did neither because they did not know of the vessel. Ga Chau arrived at and berthed at Guaymus, the cement loading dock before the Barkald. Due to what the Defendant and/or Stephen Daly had done two ships were in dock at Guaymus at the same time. The owners of the Ga Chau, Atlantic Bulkers Ltd were charging charter at US $8,500 per day. I immediately made the decision to pay off Atlantic Bulkers and this cost US $175,000 US for 19 days charter hire and bunkers from 6th April 1992. All this happened on top of the fact that I had previously fallen out with my son and the Defendant over their attempts to purchase two bulk carriers for US $10,000,000/US $12,000,000 US, money which the company did not have. Following my trip to the Far East when I visited Hong Kong, Taiwan and Japan between the 22nd and the 27th March 1992 I flew to London. During my visit to Japan I signed a COA agreement as was required by the contract of affreightment dated 11th February 1992. It was when I reached London I discovered that the Defendant and my son had been trying to purchase two ships. They were old and unreliable and were not suitable for the carrying of bulk cement. I stopped their attempts to purchase these ships. We fell out in no uncertain terms. I told the Defendant and my son to get out of the company and to resign their directorships.
14. On the 9th April 1992 I returned to Florida. On my return to Florida I never expected that I would do any further business with the Defendant or my son again.
15. On the 1 May 1992 I received from Atlantic Bulkers Limited three banking days notice that they were withdrawing from the charter.
16. Cheng Saint Trading Company Limited acting on behalf of Universe Corporation got to hear of the confusion at Guaymus. They opted to take over the contract from me. They offered to allow me to keep the US $309,000 US remaining under the contract. I refer to their fax to me of the 2nd May 1992. I responded, unfortunately my letter of response has been lost in circumstances which I will explain later in this statement at paragraph 21. The contract between Universe and Imex Shipping therefor came to an end. I used US $175,000 of the US $555,000 to pay off Atlantic Bulkers. The agreement that I reached with Cheng Saint trading Company entitled me to keep the balance of the money. I did not pay for the charter of the Barkald which did sail in April 1992 with approximately 30,000 tonnes of cement to Taiwan."
- The Claimant, consistently with his account in the witness statements I have set out above, maintains, as I have said, that the document which purports to be a bank statement of the First Union Bank showing the transactions on that account for the period 16th April to 27th April is a forgery. Only that explanation would be consistent with his evidence that he took the US $309,000 for himself after having received an assurance by fax from Mr Lee of Cheng Saint Trading on 2nd May 1992 that he could do so.
- For his part, the Defendant maintains that the whole account of the Claimant as to why he needed to receive the US $555,000 by telegraphic transfer on 16th April 1992 and what he then did with the money, and the authority he then says he received to retain the balance of US $309,000 for his own purposes, is a tissue of lies. The Defendant's case is that the Claimant carefully stage managed events so as to defraud UBE of its money and also to defraud ISEL and the Defendant and Stephen Daly.
- The Defendant relies upon documents filed at Companies House purportedly signed by the Claimant and Gina Pola dated 21st April 1992 recording the resignation of the Claimant and Gina Pola on that day as director and secretary of ISEL respectively. The Claimant, for his part, maintains that those documents are forgeries.
- By letters dated 30th April 1992, addressed to the Claimant as "President" of ISEL, the Defendant and Stephen Daly each gave notice of their resignation as vice president and director of ISEL. In their letters they offered 180 shares each for purchase by the existing shareholders of ISEL. The parties agree that no share transfer forms were ever completed in respect of any such shares.
- The Defendant claims that the US $555,000 received from UBE into ISEL's Florida Account or a substantial part of it, including, at the very least, the US $309,000 which the Claimant maintains he was authorised to keep for his own purposes, passed though a series of bank accounts maintained by the Claimant, including an account of the Claimant at the Fortune Savings Bank in Florida and an account of the Claimant with the Bank of Scotland at Dunoon, and ultimately found its way into the Jersey Bank Account.
- The Claimant's explanation of the origin of the funds in the Jersey Bank Account has changed from time to time. His position initially was that the money in the Jersey Bank Account had nothing whatever to do with and was not derived from any part of the US $555,000 in ISEL's Florida Account. In a letter of 12th January 1993 (incorrectly dated 1992) from the Claimant to the manager of the Jersey branch of the Bank of Scotland, the Claimant said:
"The major deposit of $200,000.00 USD originated from a bank draft drawn on or about May 4, 1992 from Fortune Savings Bank, Florida, from my long standing personal account containing the proceeds of sale of 20 acre prime commercial land and dwellings, as well as monthly deposits from my directorship and salary as a marine consultant which amounted to $100,000.00 USD per year. Deposited in the Bank of Scotland, Dunoon to purchase property from the United States Naval Base vacated in 1992, which was being offered by The Ministry of Defence in Dunoon."
In response to that letter the manager Mr Wood wrote on the 13th January 1993 as follows:
"You advise that the major deposit of US $200,000 originated from a bank draft from Fortune Savings Bank, Florida. These funds were drawn from your own personal account, which was of long standing, containing the proceeds from the sale of 20 acres of prime commercial land and dwellings, as well as monthly deposits from your directorship and salary as a marine consultant. Perhaps the simplest course of action is for you to instruct your American bankers to confirm these facts to us by way of a tested telex message. Alternatively, if you would prefer, we would be happy to make contact with them at no expense to your goodself, if you could provide us with the necessary letter of authority and full bank details."
No such confirmation was ever sent to the Bank of Scotland from the Claimant's American bankers, nor did the Claimant ever provide the Bank of Scotland with the necessary letter of authority and full bank details.
- In a Statement of Truth dated 9th June 2000 in the Hubner Action the Claimant, so far as material, stated as follows:
"The money taken from the Claimants bank account in Jersey was transferred into the Claimant's bank account from the Claimant's account at the Dunoon Branch of the Bank of Scotland. The money was transferred by the Claimant himself. The same money was originally transferred into the Dunoon branch of the Bank of Scotland by the Claimant from his personal account at the Fortune Bank, Florida. The amount transferred was US $200,000. The date of the transfer from the Fortune Bank to the Bank of Scotland was August 1992.
The funds in the Claimant's personal bank account at the Fortune Bank was capital accumulated between 1983 and 1986 as a result of two registered marine businesses in Florida owned by the Claimant. The money represents income and capital from the disposal of those businesses. ...
The funds in the bank account in Jersey in my name were funds earned as a result of hard work in the 1980s..."
- In a letter in support of his application to set aside the judgment dated 3rd May 1994 the Claimant said:
"As stated in my previous letter the funds in the Bank of Scotland Jersey, have nothing to do with the Imex Shipping Europe Ltd, Bank of Scotland Dunoon branch records will show the origin of these funds. There are no records showing that there was any money T/T from Imex Shipping Europe Ltd or on my own account for that matter.
These funds originated from payments to me from my work as an undercover agent for the US Drug Enforcement Agency and the US Customs Services for whom I had been engaged from 1986 as part of the South Florida Task Force. Formed specially by George Bush....."
- In an affidavit sworn by the Claimant in the ISEL Action on 12th January 1994 the Claimant said as follows:
"The money referred to in the Statement of Claim was paid into an account in the name of the Plaintiff Company at the St Petersburg Branch of the First Union Bank in Florida and was thereafter issued quite properly by the Company in accordance with the terms of the contract with UBE. I have not withdrawn any of the money for my own use."
- On 20th May 1994 Mr Patrick Benson swore an affidavit on behalf of ISEL setting out the results of his investigation and enquiries as to the ultimate destination of the US $555,000 received in ISEL's Florida Account, and in particular the Claimant's dealings with that money for his own account. Following, and in response to, Mr Benson's affidavit, the Claimant swore an affidavit on 27th June 1995 in the ISEL Action in which he accepted, for the first time, that he had withdrawn part of the US $555,000 for his own use. He said:
"It is wrong to say that I have not withdrawn any of the money for my own use. What I meant to depose was that I had not withdrawn any of the money for my own use without proper authority which I always considered that I had. I considered that I had the authority from the Plaintiff Company because of the position I had as majority shareholder and the sole director. I also believed I had the authority of UBE through their representative Mr Davis Lee of Cheng Saint Trading Company Limited ...."
The position as pleaded in the re-amended statement of claim in the Hubner action is a follows:
"6.3 after resignations by the Defendant and Stephen Daly of their directorships of ISEL on 30th April 1992 and following the loss by ISEL of the Cement Contract, the Claimant procured the payment of certain expenses incurred in the connection with the Cement Contract from the First Union Account. After payment of those expenses a balance was left of approximately US $250,000;
6.4 having paid the expenses incurred in connection with the Cement Contract and following advice received from certain persons, the Claimant procured the transfer of the entire balance in the First Union Account to his own bank account with Fortune Bank, Florida ("the Fortune Bank Account");
6.5 immediately prior to that transfer the balance in the Fortune Bank Account was approximately US $60,000 that balance having been derived from, inter alia, the Claimant's private ship repairing businesses and in respect of services provided by him to the United States Government;
6.6 thereafter, the Claimant procured the transfer of approximately US $200,000 from the Fortune Bank Account to an account held by him with the Bank of Scotland's Dunoon branch ("the Dunoon Account");
6.7 the balance in the Dunoon Account was invested in US $ and DM and, due to currency fluctuations, the funds increased in value;
6.8 thereafter the Claimant transferred substantially the entire balance in the Dunoon Account to an account in his name with the Bank of Scotland's Jersey branch, the said Jersey Bank Account. That was a sterling account the balance being approximately £100,000; and
6.9 thereafter the moneys held in the Jersey Bank Account earned interest so that by June 1995 the balance was some £110,000.
7.0 Consequently, the moneys held in the Claimant's Jersey Bank Account represented partly moneys deriving from ISEL, partly moneys deriving from the Claimant's own resources, partly profits from investment of the aforesaid in foreign currency and partly interest on the same."
- In his oral evidence in chief in the trial, the Claimant said that about US $60,000 was already in his Fortune Bank account when part of the US $555,000 was transferred from ISEL's Florida Account. In cross examination, however, he initially said that in April 1992 he had about US $80,000 in his account with Fortune Bank and First Union Bank from shipping and other work with the Federal Government. Subsequently, in further cross examination, he said that there was about £60,000 in his Bank of Scotland Dunoon account in connection with a property he was negotiating.
- During the course of the trial reference was made to a letter which was admitted by the Claimant to have been written by hand by him in about March 1993 to the Defendant and Stephen Daly . In the course of that letter he said:
"Incidentally you did not think I was stupid enough to put all the money I got for the contract in one bank".
- After the conclusion of the Claimant's oral evidence his counsel conceded on his behalf that all the money in the Jersey Bank Account was derived from the US $555,000 paid by UBE into ISEL's Florida Account.
- Sometime in May 1992, that is to say very shortly after the receipt by ISEL of the US $555,000 and its disposal by the Claimant, the Claimant shut down ISEL's office in St Petersburg and, with the assistance of Gina Pola, put into store all the office equipment, furniture and papers removed from the office. Attempts by the Defendant and Stephen Daly to contact the Claimant or to trace him were unsuccessful.
- There is a conflict of evidence as to whether the Claimant was wanted by the US federal police in connection with a fraud committed on UBE or Universal by reason of the way the Claimant had procured and subsequently dealt with UBE's payment of the US $555,000. For the reasons I give later in this judgment, I am satisfied that he was wanted by the FBI in connection with a charge of wire fraud as a result of a complaint made by or on behalf of UBE in connection with the US $555,000. The FBI, like the Defendant and Stephen Daly, was unable to trace the Claimant's whereabouts. It seems likely that the Claimant and Gina Pola went to England.
- Between May and September 1992 the Defendant was introduced to a Mr Anthony Hunt. The Defendant asked Mr Hunt if he would assist in tracing what had happened to the US $555,000. Mr Hunt employed the services of a private investigator, Mr Patrick Benson. In September 1992 there was a meeting at Mr Benson's flat attended by, among others, Stephen Daly and the Defendant. Acting on the hypothesis that none of ISEL's shares had ever been properly allotted, other than the two subscriber shares, and that the Defendant was the sole beneficial owner of ISEL, having personally instructed and paid the fees of the formation agents responsible for ISEL's incorporation, the Defendant purportedly caused to be issued ten shares in ISEL to himself and ten shares to Stephen Daly. On 15th October 1992 there was a purported EGM of ISEL at which the Defendant was appointed a director, and Stephen Daly was appointed director and secretary.
- On 20th November 1992 ISEL, purportedly acting by the Defendant and Stephen Daly, purported to enter into a written agreement with Mr Hunt by which ISEL agreed to pay Mr Hunt 50% of any money recovered from the Claimant derived from the US $555,000, after payment of Mr Hunt's fees and expenses.
- Gardner Weller were then instructed to act on behalf of ISEL. On 7th December 1992 they caused the writ in the ISEL Action to be issued. Those proceedings then took the procedural course that I have already set out above.
- On 21st July 1992 the Claimant was arrested at Weymouth ferry port. He was in due course charged with going equipped to cheat and making untrue statements to obtain a passport.
- On 20th January 1993 a warrant, not backed for bail, was issued by Scunthorpe Magistrates Court for the arrest of the Claimant in connection with the charges for which he had been arrested.
- In March 1993 Gina Pola was arrested by the FBI when she returned to the USA, and when she was apparently attempting to retrieve some documents from the storage facility to which I have already referred. She pleaded guilty to the charge that on or about March 2nd 1993 in the Middle district of Florida she
"having knowledge of the actual commission of a felony cognizable by a court of the United States, to wit, wire fraud..... did conceal the same by removing pertinent documents from a storage facility which were used in the commission of the wire fraud, and thereafter giving false statements to the Federal Bureau of Investigation (FBI) in order to protect the whereabouts of Thomas Daly , who was wanted by the FBI, and did not as soon as possible make known the same to some judge or other person in civil or military authority under the United States."
She was convicted and sentenced on 2nd August 1994 to 24 months probation.
- In connection with the charge against her, Gina Pola was represented by an attorney, Mr Polli. She entered into a plea agreement dated 31st March 1994, the material parts of which (for the purpose of the Hubner Action) are as follows.
"9. Factual Basis
Defendant is pleading guilty because defendant is in fact guilty. The defendant certifies that the defendant does hereby admit that the facts set forth below are true, and were this case to go to trial, the United States would be able to prove those facts beyond a reasonable doubt:
Facts
Captain Vincent Lu, a representative of Universe Company Limited (UCL) , and Davis Lee, a representative of UBE Trading of Japan (UBE) entered into a contract with CEMEX of Monterrey, Mexico, for the sale of 370 metric tons of cement. Subsequently Lu needed to secure a carrier to ship the cement from Mexico to Taiwan. Lu was referred to Imex Shipping Limited (IMEX) that purportedly had offices in London, England and St. Petersburg, Florida. On or about February 11, 1992, Lu and Lee met with IMEX representatives, including Thomas Daly (Daly), Daly's son Stephen Daly (Stephen), and Martin Hubner in St. Petersburg, Florida. The Florida office of IMEX consisted of Daly and his girlfriend, Gina Pola who was the receptionist and secretary at IMEX. Lu subsequently contracted with Daly for the shipment of the cement.
Upon his return to Taiwan, Lu received several facsimiles from IMEX, including a letter purporting to be from Eggar Forrester (Eggar) of London, England, confirming for UCL and UBE that they (Eggar) were acting as brokers for IMEX and guaranteed 100 percent the performance of IMEX.
On April 6, 1992, Lu received a facsimile from IMEX which stated that IMEX had two vessels available to transport the cement for UCL. This facsimile was signed by Gina Pola. On April 7, 1992, Lee received a facsimile from IMEX which advised that a vessel had been selected for the transport of the cement and would be in port in Mexico on April 19, 1992. This facsimile was also signed by Gina Pola.
Afterwards, Daly telephoned Lu and told Lu to wire transfer the funds immediately to a bank in St. Petersburg, Florida. Based on representations of Daly and Pola, along with the guarantee from Eggar, a highly reputable shipping company, on April 16, 1992, UCL and UBE wire transferred US $554,975.00 from Tokyo, Japan to IMEX account number 14964003074 at First Union National Bank, located in St. Petersburg, Florida.
Several days later, Daly told Lu that IMEX had secured the services of the ship Gaucho, and that the Gaucho was in port in Mexico awaiting loading instructions. Lu learned that this information was untrue. Lu also learned from Eggar that they had not guaranteed the performance of any such contract with IMEX, and that they (Eggar) had never done business with Daly or IMEX.
In late April, 1992, a UBE representative told Stephen that the US $554,975 was wired to St. Petersburg, Florida, per Daly's instructions. A short time later, Daly transferred these funds into other accounts for his own personal use.
On May 1, 1992, Daly and Pola rented storage unit K-18 at U-Stor St. Petersburg, located in St. Petersburg, Florida. Daly and Pola put an automobile and household goods in the storage unit.
On May 3, 1992, Daly faxed a letter to Mr Hasegawa of UBE advising that due to bad health he was no longer able to fulfill his obligations pursuant to the contract, and that he (Daly) will return funds less expenses to UBE. On the following day, Pola and Daly fled to England.
On or about June 4, 1992, Special Agent Tim Gorman of the Federal Bureau of Investigation (FBI) spoke to Pola's sister, Sally Stewart, and informed her that he was looking for Pola and Daly. Investigation revealed that Pola and Daly cancelled their scheduled return to the United States because of their fear of arrest by the FBI. Nevertheless, in July, 1992, Pola and Daly secretly entered the United States and retrieved various IMEX documents from the storage facility.
In March, 1993, Pola and Daly surreptitiously returned to the United States under the false names of Jones (Pola) and King (Daly). While in St Petersburg they went to the storage facility and removed additional IMEX documents. During this same trip, Special Agent Gorman caught Pola removing additional IMEX documents. Agent Gorman questioned Pola as to the whereabouts of Daly. Pola stated that she had not seen Daly for two-three months and that she did not know his whereabouts. Subsequently, Pola was placed under arrest and transported to Pinellas County Jail.
On the following day, Pola finally admitted that she was sharing a house with Daly in Pasco County at the time of her arrest. She also admitted that she lied to protect Daly from the FBI. By the time the agents received this information, Daly had fled the house. Daly remains a fugitive at this time.
10. Entire Agreement
This plea agreement constitutes the entire agreement between the government and the defendant with respect to the aforementioned guilty plea and no other promises, agreements or representations exist or have been made to the defendant or defendant's attorney with regard to such guilty plea.
11. Certification
The defendant and the defendant's counsel certify that this Plea Agreement has been read in its entirety by (or has been read to) the defendant and that defendant fully understands its terms."
In the plea agreement Gina Pola expressly acknowledged that she was pleading guilty freely and voluntarily, without reliance upon any discussions between the attorney for the government and herself and her attorney, and without promise of benefit of any kind, without threats, force, intimidation or coercion of any kind. She further acknowledged that she understood the nature of the offence for which she was pleading guilty, and its elements, and that she had the right to plead not guilty and the right to be tried by a jury with the assistance of counsel. Gina Pola signed the plea agreement as did her attorneys.
- The Claimant was in due course remanded at HM Prison The Wolds on charges of going equipped to cheat and untrue statements to obtain passports.
- The Defendant alleges that on 6th May 1995 the Claimant, while on remand in The Wolds, signed and entered into an agreement of compromise, which acknowledged, among other things, that the Claimant had no further claims against ISEL or its solicitors and that he had no legal or beneficial interest in ISEL, and that ISEL's solicitors Comptons had been instructed with due authority for and on behalf of the company ("the Compromise Agreement"). The Claimant maintains that he did not sign the Compromise Agreement and his signature is a forgery.
- On 9th June 1995 the Claimant was convicted at Grimsby Crown Court
of going equipped to cheat and attempting to obtain passports by deception. He was given a custodial sentence.
- As I have already said, on about 23rd June 1995, in execution of the judgment obtained in the ISEL Action, the Bank of Scotland transferred £110,030.02, being the balance of the Jersey Bank Account, to Crill Canavan, purportedly acting on behalf of ISEL on the instructions of the Defendant.
- By letter dated 11th July 1995 Comptons, purportedly acting on behalf of ISEL, wrote to the Claimant's solicitors stating that ISEL was treating the Compromise Agreement as at an end by virtue of the Claimant's repudiation of the agreement.
- From April 1992 until ISEL was struck off the register of Companies on 14th November 1995 a bewildering number of documents were sent to Companies House, by or at the direction of the Claimant and the Defendant respectively, purportedly recording appointments or resignations of various people as directors and secretary of ISEL and also purportedly recording the allotment of shares and changes in the registered office. There were also purported annual returns and company resolutions. Each one of those many documents is attacked by one side or the other on the ground that it contains false information or forged signatures or for some other reason.
- ISEL was, as I have said, restored to the Register on 25th August 1997, on the application of the Claimant .
- On 24th November 1998, as I have said, the Claimant commenced the Hubner Action .
The Witnesses
- At the trial oral evidence was given, in support of the Claimant's case, by the Claimant himself and also by Ms Helen Chandler and Mr Samuel Ramage. Oral evidence, in support of the Defendant's case, was given by the Defendant himself and also by Mr Anthony Hunt, Mr Stephen Daly, Mr Patrick Benson, Ms Anne Daly, and Mr William Gault.
The Claimant
- The Claimant gave evidence over several days during the trial. I formed the view that he was untrustworthy and unreliable and that I could place no weight whatever on his testimony, save where it is corroborated by other credible evidence. In forming this view of the Claimant and the quality of his evidence, I wish to make clear that I have disregarded certain prejudicial matters I was urged to take into account by those acting for or in support of the Defendant . Mr Benson, for example, sought to draw my attention to a list of alleged convictions of the Claimant, details of which Mr Benson said had been obtained from the Police National Computer. Those offences were said to include, between 1944 and 1978, housebreaking, selling or retaining uncustomed goods, deception, theft of a motor vehicle and obstructing the police. Even if such evidence was true, which I do not consider I am in a position to judge since the alleged convictions were never put to the Claimant in cross examination, they would be irrelevant to the specific matters on which I am asked to adjudicate. I take no account of them.
- Further, questions put to the Claimant in cross examination were designed to suggest that the Claimant 's account of his connections with, and activities on behalf, of the Federal Drugs Authority of the United States and, possibly, other Federal agencies, was a flight of his imagination. The Claimant's evidence in respect of those connections and activities is set out in affidavits and witness statements made by him. In addition, during the trial, he declined to answer a number of questions on the basis that the matter was "classified", presumably because he felt that the matter in question appertained to the activities of a Federal agency. I am content to decide this case on the hypothesis (but without deciding the point) that the Claimant 's connections with the Drugs Enforcement Authority and other United States Federal agencies are not fictitious, or at least not fictitious in their entirety.
- On the other hand, it is perfectly clear that on a range of issues the Claimant has told blatant and deliberate untruths, and it is these which have led me to the conclusion as to his credibility which I have stated above. I give some of the more prominent examples in the following paragraphs.
- I have already set out earlier in this judgment the inconsistent statements made from time to time by the Claimant in explaining what use he has made for his personal benefit of the US $555,000 received from UBE by ISEL, and of the relationship between that money and the funds in his Jersey Bank Account. The history of those inconsistent statements may be summarised as follows. At the outset, in order to enable him to deal with the funds in the Jersey Bank Account, the Claimant told the manager of the Bank of Scotland, Jersey Branch, that the funds in the Jersey Bank Account were derived entirely from the Claimant's own labour and capital. The Claimant made a statement to the same effect, supported by a statement of truth, in the Hubner Action itself as late as June 2000. Mr Marsden frankly admitted that there was no proper explanation for that untrue statement. In the ISEL Action, a similar statement was made in the letter sent by the Claimant in support of his application to set aside the judgment. In his sworn statement in the ISEL Action dated 12th January 1994 he said that he had not applied any of the US $555,000 for his own use. All those statements were plainly and deliberately untrue. In the ISEL Action, the Claimant's initial position that he had not applied any of the US $555,000 for his own personal benefit was only corrected after Mr Benson had given sworn evidence of the results of the investigation he had conducted into the disposal by the Claimant of the US $555,000. It is, frankly, remarkable and deplorable that it was not until several days into the trial before me, after the Claimant's oral evidence had concluded, that the Claimant eventually acknowledged, through his counsel, that all the money in the Jersey Bank Account was derived from the US $555,000 originally paid by UBE into the ISEL's Florida Account.
- Documents were sent to Companies House, by or at the directions of the Claimant, showing that a Sidney Rodgers and Alister (sic) Jones were appointed directors of ISEL. They appear on a number of other documents filed at Companies House purportedly in the capacity of ISEL's directors. It is perfectly clear that they are entirely fictitious, in the sense that there never were any such two people who agreed to be or acted as directors of ISEL. They were invented by the Claimant to create the impression that he was conducting the affairs of ISEL in a legitimate fashion. The evidence that they were fictitious persons is overwhelming. The Form 288 filed at Companies House which purports to record the appointment of Mr Jones as a director of ISEL is dated 6th June 1993 and purports to bear the signature of Mr Jones. It contains a statement that Mr Jones is a marine engineer of British nationality. His address is stated to be 2807 26 N St, St Petersburg, Florida, USA. I accept Mr Hunt's evidence that he made enquiries of the address, and arranged to be driven to it, but it does not exist. Despite extensive enquiries, no evidence has been found by the Defendant that Mr Jones has ever existed in fact. Mr Jones has given no evidence, whether by way of affidavit, witness statement or oral evidence, in the ISEL Action or the Hubner Action.The Claimant gave evidence, in cross examination, that Mr Jones is now dead, but he has given no information as to when, where or in what circumstances the death took place; and he has provided no independent corroboration of Mr Jones' existence.
- The Form 288 filed at Companies House which purports to record the appointment of Mr Rodgers as a director of ISEL is dated 14th July 1993 and purports to bear his signature. It contains a statement that he is an engineer and has British nationality. His address is given as 1 Rock Cottage, Ardentinny, Dunoon Argyle, Scotland. In cross examination, however, the Claimant said that Mr Rodgers lived in St Petersburg, Florida. Mr Rodgers's address at 1 Rock Cottage, Dunoon, is also shown in a return of an allotment of shares which was purportedly signed by Mr Jones and was dated 21st June 1993. This document purports to show Mr Rodgers as having 200 shares in ISEL and Mr Jones as having 143 shares. 1 Rock Cottage, Ardentinny, Dunoon was the residential address shown for the Claimant's wife Sandra Daly in a Form 288 recording the appointment of Mrs Daly as secretary of ISEL on 20th December 1993. In his oral evidence, the Claimant confirmed that his wife Sandra stayed at that address. There is in evidence a letter dated 1st April 1993 to the Claimant from Mr Wood, the manager of the Bank of Scotland, Jersey branch, addressed "c/o Rodgers, Rock Cottage, Ardentinny, nr Dunoon, Argyle". The alleged address for Mr Rodgers given in other company documents is The Farriers, Cotleigh, Honiton, Devon. That was an address at which the Claimant himself stayed at one point in time. In cross examination, the Claimant had no explanation as to why the residential address given for Mr Rodgers was Rock Cottage, Dunoon or The Farriers. Despite the Claimant's evidence that Mr Rodgers is still alive, Mr Rodgers has not given any evidence by way of affidavit, witness statement or oral evidence in the ISEL Action or the Hubner Action. Nor has the Claimant provided any independent corroboration of Mr Rodgers's existence.
- In his seventh affidavit in the Imex Action the Claimant said that both Mr Jones and Mr Rodgers were properly appointed directors and were genuine people who existed. He said that, at the time of their appointment, they were in the United States. He said that he spoke with them on the telephone. They both
agreed to become directors and they authorised him to sign the Forms 288 on their behalf, which he did. In cross examination, however, he said that he was not sure if he signed using their names, and he thought that the forms were faxed to him. In a letter written by the Claimant's solicitors dated 6th April 1995 to the Legal Aid Area Office, it was conceded that the Claimant had indeed signed the forms filed in Companies House in the names of Mr Rodgers and Mr Jones.
- In his oral evidence the Claimant said that Mr Rodgers was a Federal Agent. He said that Mr Jones and Mr Rodgers were "classified". Comptons wrote a letter to the Claimant's solicitors dated 4th April 1995 asking in clear terms for proof "without further prevarication or delay" of the existence of Mr Rodgers and Mr Jones. No such proof has ever been provided.
- In his oral evidence the Claimant persisted in maintaining that in 1992 he and Gina Pola had only a "social relationship", and that she was not his girl friend. This, however, conflicts with what is stated in Gina Pola's plea agreement, and also the clear evidence of his daughter Ms Anne Daly and others. It was plainly untrue.
- The Claimant accepted, in cross examination, that he has used a variety of names. He said that, although his name is Terence, he has used Terence Thomas. He changed his name by deed poll to Colin Terence McCloud on 6th November 1992. At that time he was on bail in England. He claimed that he subsequently changed his name back again, although the document effecting this was not put in evidence. He said that he used the name Thomas when in the United States working under cover for Federal Agencies. Mr Benson gave evidence, as a result of his enquiries and researches, that, in addition to Terence Daly, Terence Thomas Daly, Tim Daly, Thomas Daly, and Terence McCloud, the Claimant has also used the names Terence Quillin, Thomas Donnachie and Tim Highlander.
- It is not in dispute the Claimant was convicted in 1995 of going equipped to cheat and making untrue statements to obtain passports, for which he was given a custodial sentence.
- The Claimant maintained in his oral evidence that he was never wanted in the USA by the FBI for wire fraud, and that he was never a fugitive from justice there. His persistence in this account was remarkable. It flies in the face of the plea agreement of Gina Pola. Furthermore, there is in evidence an affidavit sworn by Michael E Askew, a licensed private investigator in the state of North Carolina, USA, sworn on 17th May 1994. Mr Askew swears that there was a federal warrant for the arrest of Thomas Daly for wire fraud, which was confirmed both by the US Marshal's Office in Tampa, Florida and by the Assistant US Attorney in Tampa, and that there is no doubt that Thomas Daly is the same as the Claimant. The Claimant has never put in evidence any statement by or on behalf of the US authorities to the effect that he is not and never was the subject of a federal warrant of arrest in connection with wire fraud.
- In addition to denying the authenticity of the First Union bank statement showing the dispositions on ISEL's Florida Account in the period 16th April 1991 to 27th April 1992, the Claimant challenged the authenticity of other bank documents that were put in evidence by the Defendant. These included documents relating to the opening of various bank accounts, including ISEL's Florida Account, on the instructions of the Claimant. The Claimant never explained why anyone would wish to forge such documents and in particular why the Defendant should wish to make or procure such forgeries. His refusal to accept the authenticity of those documents, and in particular his signature on them, lacked any credibility whatever.
- There are other important areas of the evidence in the Hubner Action in respect of which I found it impossible to believe the Claimant. I shall deal with these in detail later in my judgment .
Mr Ramage
- The Claimant relied upon the oral evidence of Mr Ramage principally to undermine the authenticity of the Claimant's signature on the Compromise Agreement. He also gave evidence which implicated Mr Benson in a burglary of the premises in which the Claimant was living in November 1992. The Claimant maintains that many relevant documents were stolen in the course of that burglary. Mr Ramage was volatile and excitable when giving his evidence under cross examination. I found his evidence of limited value.
- As regards the authenticity and validity of the Compromise Agreement, that Agreement is not relied upon as a defence to the Claimant's claim. I deal specifically with issue of the authenticity and validity of the Compromise Agreement in more detail below.
- As regards Mr Benson's involvement in the burglary in November 1992, I did not find Mr Ramage's evidence on this compelling. I shall deal with this in more detail when considering the credibility and quality of Mr Benson's evidence.
- Mr Ramage gave oral evidence of a distressing burglary in his own premises. He said that, in the course of it, he was beaten by a professional criminal and his wife pushed against a radiator. He said that this attack had resulted in his suffering broken ribs and the loss of his front teeth. He said that only a document box only had been taken from his premises. He suggested that the burglary and the assault were in some way or another related to the ISEL Action or the Hubner Action. On the other hand, he stated that he did not believe that either Mr Benson or the Defendant was behind the attack. It is unclear, in those circumstances, who he did think was behind the attack and what was its relevance to the proceedings before me.
Miss Chandler
- The Claimant called as a witness Miss Helen Chandler, who was formerly employed by solicitors acting for the Claimant. She was called to give evidence primarily in order to swear to the receipt of a hand written letter from Gina Pola dated 29th March 1994. That hand written letter was relied upon by the Claimant as explaining why Gina Pola signed the plea agreement, namely so that she could return home as soon as possible. The letter says that the allegations made against the Claimant are untrue and that he acted in the best interests of ISEL, and that Stephen Daly and the Defendant had been engaged in fraudulent activities using ISEL. Gina Pola said in the letter that Stephen Daly and the Defendant had attempted to bribe her to hand over company documents, which she refused to do. She said that she had been in the United States for 13 months and no charges had been brought against her. She said that there was a plea bargain "in the works" which her attorney strongly advised her not to accept. She said that she might accept a misdemeanour plea just so that she could return home. She said that her attorney had advised her that she should take this to trial to prove her innocence, "but as I've more or less been held hostage in the United States for the past year a trial could take another year or two to even get started, so for me to make a plea agreement to return home seems like my only choice."
Miss Chandler was a manifestly honest witness, and gave evidence that she had indeed received the letter dated 29th March 1994.
The Defendant
- I formed the view that the Defendant was, for the most part, an honest and straight forward witness. I had, however, serious reservations about the reliability of his evidence on the issue of whether any shares had been allotted in ISEL and what steps had been taken to appoint directors of ISEL. Putting it at its best, I found his recollection to be seriously deficient as regards those matters. I shall deal with this in more detail later in my judgment.
Mr Hunt
- Mr Hunt has been a property developer for some 20 years. Before that, he was a surveyor and auctioneer. In his oral evidence, he described himself as an investor in start-up businesses: a venture capitalist on a small scale. His involvement in the process of tracing and recovering such part of the US $555,000 as was taken by the Claimant for his own purposes is curious. He was candid in admitting that he hoped to make a profit on his involvement, as a result of his written agreement with ISEL of 20th November 1992. He was not involved in the day to process of tracing and recovering the money, which was delegated to Mr Benson. Accordingly, I found his evidence of little assistance in resolving the issues before me.
Mr Benson
- Mr Benson gave evidence on behalf of the Defendant . He is a private investigator. He was retained by Mr Hunt to investigate the disappearance of the Claimant and the balance of the US $555,000 in April and May 1992. His involvement in the affairs of ISEL and in the ISEL Action and the Hubner Action has some unusual features. There is no doubt, in my mind, that he has from time to time exercised a lack of judgment in relation to his conduct. He has on occasions crossed the line between professional investigation and personal involvement in the morality of the issues, as he has perceived them. He has accepted in evidence, for example, that he was responsible for placing a poster on the door of the offices of the Claimant's then solicitors Crosse & Crosse which was headed "£10,000 reward". The poster had a photograph of the Claimant. The text of the poster was follows:
"£10,000 REWARD
TERENCE DALY
(Born 2.8.1927)
TERENCE DALY, ALSO KNOWN AS TIM OR THOMAS DALY, AND LAST HEARD OF LIVING IN THE DEVON AREA WITH GINA POLA, IS WANTED IN THE UNITED STATES FOR A WIRE FRAUD COMMITED BY HIM AND POLA IN 1992.
DALY AND POLA ARE CONVICTED CRIMINALS AND KNOWN TO USE A NUMBER OF FALSE NAMES AND IDENTITIES.
A REWARD OF £10,000 (TEN THOUSAND POUNDS) WILL BE PAID FOR INFORMATION WHICH LEADS TO THE ARREST AND CONVICTION OF DALY FOR THE WIRE FRAUD.
FOR FURTHER INFORMATION, IN THE STRICTEST CONFIDENCE,
CONTACT:
MR PAT BENSON
0836 686642"
At the very bottom of the poster there was added in typescript the following:
"PUBLISHED AND DISTRIBUTED BY SIDNEY RODGERS C/O
CROSSE & CROSSE 17 CASTLE STREET EXETER EX4 PU"
That typescript was intended to be an ironic comment on the use, as I have found, of the fictitious Mr Rodgers by the Claimant. The reference to Crosse & Crosse was presumably part of the same ironic comment.
- Furthermore, there was put in evidence a letter addressed to the Claimant 's wife at an address in Devon which contained only the words "Peugeot 306 Diesel Estate (Green) S608 NOD" The letter was not signed and there was no handwriting of any kind on it. Mr Benson admitted the letter was written by him. It appears to have been intended to intimidate or frighten Mrs Daly.
- Furthermore, evidence was given of a typed letter dated 12 May 1995 to " MR TERENCE "ARTHUR" DALY" at The Wolds Prison, purportedly from Sidney Rodgers " director of various companies and well known to legal trade". The letter was headed
"JONES & RODGERS
THE JAGUAR SPECIALISTS
DILLON COTTAGE
COPPLESTONE
DEVON "
The typescript of the letter clearly indicates that it emanated from an office that was occupied by Mr Hunt and Mr Benson. Mr Benson denied that he was responsible for the letter. On balance I consider it likely that he was the author of it, taking into account his admitted responsibility for the "wanted" poster and the unsigned letter to the Claimant's wife.
- In my judgment, the affixing of the "wanted" poster to the door to the offices of Crosse & Crosse, the letter to Mrs Daly and the letter dated 12th May 1995, to which I have referred above, were all inappropriate for a professional investigator, and indicate a crossing of the line between professional involvement and personal judgment. Mr Benson frankly admitted, in cross examination, that he has a personal dislike for the Claimant, whom considers to be a criminal and thoroughly dishonest, and to whose use of public funds to conduct litigation, including the present proceedings, Mr Benson objects. I add, in this context, that proceedings have been taken in the past by the Claimant against Mr Benson. They have been dismissed.
- In addition to those matters, the Claimant and his advisors have sought to undermine the credibility of Mr Benson, and thereby directly or indirectly to undermine the Defendant's case, by implicating Mr Benson in the burglary of the Claimant's then residence in November 1992 and by denying that Mr Benson successfully procured the Claimant's signature to the Compromise Agreement during a visit to the Claimant at the Wolds prison in 1995. I reject both these allegation, on a balance of probabilities. While I consider that Mr Benson has lost a certain independence of professional judgment in the conduct of his investigations, I am satisfied that he is a person who is essentially honest and would not prejudice his livelihood and standing by committing a criminal act of the kind suggested.
- So far as concerns the Compromise Agreement, for the reasons set out in more detail later in this judgment, I find that, on a balance of probabilities, the Agreement was indeed signed by the Claimant at The Wolds Prison on 6th May 1995.
- So far as concerns Mr Benson's involvement in a burglary of the premises at which the Claimant was living in November 1992, the evidence advanced in support of the allegation falls far short of satisfying me on a balance of probabilities. The evidence relied upon is, for the most part, the evidence of Mr Ramage and Ms Anne Daly. In his witness statement Mr Ramage alleges that Mr Benson admitted to Mr Ramage that he had arranged for the Claimant's home to be broken into and that this was actually carried out by Stephen Daly and an unnamed friend, while Mr Benson was waiting down the road for the burglars to complete their burglary. He says that Mr Benson later showed him some of the items stolen in the burglary, including three passports in the names of Daniel Daly, Charles Daly, and Thomas Daly. He states that Mr Benson paid Stephen Daly and his friend to carry out the burglary.
- I have already mentioned the excitable and somewhat ill-tempered manner in which Mr Ramage gave his evidence, particularly under cross examination. Mr Benson pointed out, in relation to Mr Ramage's evidence, that it was hardly likely that he, Mr Benson, had in his possession the three passports in the names of Daniel Daly, Charles Daly and Thomas Daly since these would have been in the custody of the police as the evidential basis for the arrest of the Claimant in July 1992 and the charges for which he was convicted in 1995.
- Furthermore, I find it impossible to conclude, having heard Mr Benson giving his evidence and in the light of the other facts and matters in this case, that Mr Benson would ever have disclosed to Mr Ramage that he had procured the burglary, paid Stephen Daly and someone else to execute it, and that he was waiting down the road for them to complete the crime.
- Ms Anne Daly also gave evidence concerning the burglary in November 1992. She made two witness statements. In the earlier of the two statements she said that, following the burglary, she saw at Mr Hunt's home property that belonged to her father and Gina Pola. This included jewellery that belonged to her father, and credit cards in the name of Gina Pola. She said that there were papers strewn about. In her oral testimony, however, she accepted that the only basis for saying that her father's property was seen by her at Mr Hunts' home was that she had seen a man's ring there and there were also things belonging to Gina Pola, and she drew her conclusion bearing in mind that Gina Pola and her father were living together as man and wife.
- In her second statement Ms Daly said that she wished to retract her earlier statement which had been prepared by the Claimant's solicitors. In her second statement she said that she did not know anything about the burglary that took place in her fathers property in November 1992, and that she did not know who did it.
- In the light of Ms Daly's oral evidence, and the inconsistencies between her two witness statements, and the circumstances under which she says that she signed the first witness statement, I can place no great weight on her evidence with regard to the alleged involvement of Mr Hunt or Mr Benson in the burglary.
- The Claimant stated in a witness statement dated 18th September 2000 that he had received repeated telephone calls from Mr Benson bragging about the burglary, and that those calls were recorded on tape. No tape, however, was produced to the court. Further I understand that the police investigated the burglary, and have never charged Mr Benson in connection with it.
- It must be recalled that Mr Benson had only become involved in ISEL's affairs in about September 1992. The first meeting of the interested parties with himself was in about the third week in September 1992. The affairs of the company were not, so far he was concerned, regularised until the purported EGM on the 15th October 1992, when the Defendant and Stephen Daly were purportedly appointed directors. Moreover, the agreement between ISEL and Mr Hunt, by which Mr Hunt was to be paid his expenses and possible share of the proceeds of the investigation, was not finalised until 20th November 1992, that is to say, after the burglary on 16th November 1992. It does not seem to me to be credible that Mr Benson would have put at risk his livelihood and reputation by carrying out a serious criminal act at a time when the remuneration of Mr Benson's principal, Mr Hunt, had not been formally agreed.
- Finally, although I have commented adversely on Mr Benson's lack of judgment as his involvement with ISEL and the Claimant progressed, I have no reason to believe that, at the outset of his involvement with the affairs of ISEL he did not have a normal professional approach to his investigation.
- In conclusion, I reject the suggestion or allegation that Mr Benson was in any way involved in or procured the burglary at the Claimant's residence in November 1992. In my judgment, Mr Benson was essentially an honest witness. Certainly, where his evidence conflicts with that of the Claimant, I have no hesitation whatever in preferring that of Mr Benson.
Stephen Daly
- Stephen Daly is the son of the Claimant. He gave evidence on behalf of the Defendant. His memory was extremely poor on some issues, especially the initial discussions about the allotment of shares in ISEL. I formed the view, however, that generally he was an honest and credible witness.
Ms Daly
- I have already commented on the evidence of Ms Daly. For the reasons I have given, I found her evidence of no real assistance.
Mr Gault
- Mr Gault, who was involved in the affairs of ISEL in 1992 as an employee of Eggar Forrester Ltd, shipbrokers, gave evidence on behalf of the Defendant . He was a patently honest witness.
Gina Pola
- Finally, in relation to the evidence given at the trial, I should say something about Gina Pola. The Claimant, as I have already said, sought to undermine the significance of Gina Pola's plea agreement in United States by relying upon the contents of the hand-written letter from Gina Pola to Miss Chandler dated 29th March 1994. Notwithstanding that a witness summons was served on Miss Pola, she failed to appear at the trial to give evidence. Following a suggestion by me, a letter was sent to her by the Claimant's solicitors during the trial urging her to change her mind and come to court since, if she did not, it would be within my powers to issue a bench warrant for her arrest. She failed to respond to that letter. In all the circumstances, since she was not available for cross examination, I consider that I can place no weight whatever upon her letter of 29th March 1994 insofar as that letter is relied upon by the Claimant to undermine the plea agreement, which Gina Pola and her attorneys signed, and which was the basis for her conviction and sentence in the United States for offences connected with the US $555,000 paid by UBE into ISEL's Florida Account at the request of the Claimant.
The Owners And Directors of ISEL.
- A considerable part of the trial was taken up with the issue of whether there has ever been any valid allotment of shares in ISEL and whether any directors have ever been validly appointed to act on its behalf. In the context of the Hubner Action, the significance of these issues is that the Claimant denies, but the Defendant maintains, that the Defendant had authority, as a director of ISEL, to initiate and conduct the ISEL Action and to enforce the judgment obtained in that Action against the assets in the Claimant's Jersey Bank Account.
- The position taken by the Claimant on the question of the allotment of shares in ISEL has not always been consistent, and the submissions made on his behalf by Mr Marsden at the trial have not been entirely easy to follow. The Claimant's evidence is that there was no agreement as to the allotment of any shares at the time of and immediately after the incorporation of the ISEL on 12th August 1991. He says that a share certificate for 510 shares in his favour (in which he is described as Thomas Daly) and a certificate for 244 shares in favour of Stephen Daly, both dated 13th August 1991, which were in evidence, were completed and signed without his knowledge or agreement. Mr Marsden, on his behalf, submits that the only agreement reached between all the relevant parties was at a meeting in November 1991, when it was agreed that the Claimant should have 635 shares, the Defendant and Stephen Daly should each have 185 shares, and Gina Pola should have 5 shares. A return of allotment of shares dated 20th April 1992, however, which was filed at Companies House shows the Claimant as having 701 shares, Stephen Daly as having 10 shares, the Defendant as having 20 shares, Gina Pola as having 7 shares, the Tarrant Group as having 10 shares and Cheng Saint Trading Group as have 250 shares. That form was signed by Gina Pola, and must have been prepared and filed on the instructions of the Claimant. There is also in evidence a resolution of an EGM of ISEL called on the 12th November 1992 and purportedly chaired by the fictitious Mr Jones, recording that the Claimant and his wife had 995 shares in ISEL and Gina Pola had 5. The resolution was purportedly signed by Mr Jones as chairman and director. A letter dated 25th June 1994 from Mrs Daly to Comptons and ISEL described the Claimant's wife as "majority shareholder". On the other hand, in his evidence at the trial, the Claimant admitted that he had made entries in what he considered to be ISEL's Register of Members and Share Ledger showing the issue of 510 shares to himself, 244 to the Defendant and 244 shares to Stephen Daly. He also stated at the trial that his understanding was that he had been validly issued with 510 shares in ISEL.
- The Defendant's case is that no shares in ISEL were ever allotted, other than the two subscriber shares. The Defendant contends, however, that those two subscriber shares were held on trust for the Defendant beneficially, since he instructed and paid the formation agents R M Company Services Limited, for the setting of the company. Although the share certificate for 510 shares in favour of the Claimant and the share certificate for 244 shares in favour of Stephen Daly, both dated 13th August 1991 and to which I have already referred, bear the signature of the Defendant, the Defendant maintains those certificates are invalid and were not based on any agreement.
- Behind these submissions on the allotment of shares in ISEL there lies a more general disagreement as to the respective contribution to the affairs of ISEL of the Claimant and Defendant. The Claimant maintains that he was responsible for obtaining the contract of affreightment. In a witness statement filed on 18th September 2000 the Claimant states that "The contract was to be mine and it was to be my company's. It was my expertise and nobody else's that put together the contract for the delivery of the cement". He said that he was involved in extensive travel, and office administration expenses. In his oral evidence in chief the Defendant said that he personally paid some US $17,000 into ISEL, and "the principals" put in some US $75,000. His evidence was that he sent Stephen Daly £1000 to pay for, among other things, the setting up of ISEL.
- On the other hand, the case for the Defendant is that the Claimant had no money, and needed investment for start-up costs. Those costs included the costs associated with maintaining the offices of ISEL in Florida and in London, travel expenses and, generally, expenses for obtaining and negotiating the contract of affreightment. The Defendant maintains that Roger and Stephen Tarrant put in £20,000, the Defendant put in at least £20,000 and a Mr Michael Peters put in £5,000.
- It is clear, in my judgment, that it was never intended or envisaged that either the Claimant, on the one hand, or the Defendant, on the other hand, would have sole control and ownership of ISEL. In this connection, I accept the evidence of the Defendant and Stephen Daly that the Claimant did not appear to have any money, and needed investment for start-up costs. The Claimant himself said, in cross examination, that he did not have "financial strength". He said that the "cement principals", whom he subsequently explained to be the buyers and sellers of the cement, "provided the funds to get the company going". That is not credible and is not supported by any contemporaneous documentation. I accept the evidence of the Defendant and Stephen Daly that the Claimant pressed them to find more investors. I accept that substantial sums were put into ISEL by the Defendant and other investors, and that those funds were used to defray all the early expenses of ISEL, including rent and other costs associated with the offices in Florida and London, travel expenses and other expenses associated with obtaining and negotiating the contract. I also accept that the Defendant conducted some of the negotiations leading to the contract of affreightment. In particular I accept his description of his role in conducting the meeting held on 11th February 1992 in Florida when the contract of affreightment was signed. On the other hand, I reject the suggestion in the Defendant's evidence that the Claimant was simply an employee and representative of ISEL. The Defendant would undoubtedly have recognised the fact that the contract of affreightment could not be obtained without the involvement of the Claimant. I find that, in obtaining the incorporation of ISEL, and instructing the formation agents in that connection, the Defendant was not acting solely on his own behalf, but rather he was acting on behalf of and as agent for his other co-venturers, that is to say the Claimant and Stephen Daly, as well as himself. He was the agent of his co-venterers, the Claimant and Stephen Daly, notwithstanding that he spent his own money, as I find, rather than the £1,000 sent by the Claimant to Stephen Daly, for the incorporation of ISEL.
- I find that on 13th August 1991 the Defendant and Stephen Daly caused share certificates to be issued for 510 shares in favour of the Claimant, and for 244 shares in favour of each of the Defendant and Stephen Daly. As I have said, two share certificates, for 510 shares in favour of the Claimant, and for 244 shares in favour of Stephen Daly, were put in evidence. It is clear that they were originally dated 6th August 1991 and were subsequently amended to read the 13th August 1991. The share certificate in favour of the Claimant purports to bear the signatures of the Defendant, Stephen Daly, and Christine Scrase. The share certificate in favour of Stephen Daly purports to bear the signatures of Ms Scrase, the Defendant and the Claimant.
- The Claimant's evidence, as I have said, was that the signature which purports to be his on the certificate in favour of Stephen Daly is a forgery.
- The Defendant's evidence in relation to the two share certificates dated 13th August 1991 has changed from time to time. Originally, in an affidavit sworn by the Defendant on 14th September 1994 in the ISEL Action, the Defendant said that the share certificate in favour of the Claimant for 510 shares was forged, and he did not sign it. Subsequently, in his written and oral evidence, the Defendant's position was that he did sign the two certificates dated 13th August 1991, but he did not initial the alterations, including in particular the alteration of the date of the certificates from 6th August to 13th August 1991. The Defendant's later evidence, and his evidence at the trial, was to effect that the certificates were a "dry run". He accepted at the trial that he completed the blank spaces in the body of the two Certificates. His evidence, as I have already said, was that there was never any agreement between himself, Stephen Daly and the Claimant as to the shares to be allotted in ISEL. At the trial, he was unable to give any explanation as to why he completed the share certificate for 510 shares in the name of "Thomas Daly".
- The evidence of Christine Scrase in relation to the two share certificates dated 13th August 1991 has also changed over time. In an affidavit sworn by her on 10th October 1994 in the ISEL Action, she stated that she did not sign the share certificates. She pointed out that she was not appointed a director or secretary of ISEL until 17th May 1993. She also said that she did not meet the Claimant until 17th September 1991. However, in her first witness statement in the ISEL Action dated 3rd March 2000, she stated that she did sign the share certificate for 510 shares in favour of the Claimant on 6th August 1991, in the expectation that she would be formally appointed ISEL's company secretary in due course. She went on to say that the apportionment could not be agreed between the parties, and the position remained unresolved. Her evidence was that she did not initial the alterations to the share certificates, and that her initials were forged. She says that no formal appointment was ever made of directors of the company or a company secretary.
- Stephen Daly's evidence was that he had no recollection of the shares certificates being completed or signed. He did not, however, assert that his signature on the shares certificate in favour of Thomas Daly was a forgery.
- There has been put in evidence, as I have said, a book which purports to be the ISEL's Register of Members and Share Certificates and its Minute Book. The Claimant's evidence was that this register, together with other company documents, and the share certificate in his favour for 510 shares, were delivered to him at about the time of the meeting in Florida in November 1991. The book contains pages with blank share certificates, which can be detached from the book leaving a counterfoil. Four share certificates have been removed from the book. The counterfoils purport to show that certificates were completed in favour of the Claimant for 635 shares, the Defendant for 180 shares, Stephen Daly for 180 shares, and Gina Pola for 5 shares. These were the share allocations which the Claimant maintains were agreed at the meeting held in November 1991. The book includes a note of that meeting, which states that the meeting was held on the 18th November 1991. It does not, however, indicate that Christine Scrase was present, although the evidence of the Defendant was that she was present. No share certificates corresponding to the counterfoils have been put in evidence. As I have mentioned earlier in this judgment, there are entries in the Register of Members showing the allotment of 510 shares to the Claimant, 244 shares to each of the Defendant and Stephen Daly, all of which shares were recorded as having been acquired on the 13th August 1991, and 5 shares to Gina Pola, which are stated to have been allotted to her on 18th November 1991. The Claimant's evidence at trial was that he had personally made all those entries in the Register of Members at some time after December 1993.
- Those representing both the Claimant and the Defendant agree that the two share certificates dated 13th August 1991, for 510 shares for the Claimant and 244 shares for Stephen Daly respectively, were not taken from the Register in evidence. The water marks on those share certificates and on the counterfoils do not match. This means that there must have been another Register which has not been produced in evidence.
- The court has had the benefit of expert evidence from a handwriting analyst Ms Jacqueline Sawyer. In her report dated 14th November 1994 she expresses the opinion that the signatures of the Defendant and Ms Scrase on the two original share certificates dated 13th August 1991 are genuine, and the signature of Stephen Daly is probably genuine. In reports dated 3rd April 2001 and 10th April 2001, she expresses the opinion that the initials to the amendments on the share certificates which purport to be those of the Defendant and Ms Scrase were written by those persons, and it is highly probable that Stephen Daly's initials were written by him. She said that she was unable to form a reliable opinion as to whether the Claimant's initials were written by him. It should be noted that she was not, apparently, asked to express a view as to whether the signature of the Claimant on the share certificate in favour of Stephen Daly was genuine.
- There were sent to Companies House a series of documents dated 12th August 1991 which record the appointment of the Claimant, Stephen Daly and the Defendant as directors of ISEL, the resignation of one of the subscribers to the memorandum, Violet Cohen, as director, the appointment of Gina Pola as secretary, and the resignation of R M Company Services Limited as secretary, and the change in the address of the registered office to 77 Dean Street, London W1, which were the office premises from which the Defendant carried on his business as a film producer. Endorsements on those forms indicate they were received at Companies House in London on 19th August 1991. The position of the Claimant in relation to these documents is that they are all false, other than the form notifying the change of the registered office. The Claimant says that the signatures of the Claimant and Gina Pola on those documents are forgeries. Remarkably, the Defendant's case is also that those documents are false, save for the notification of the change in the address of the registered office. The Defendant says that he has no recollection of signing or authorising any such documents, and accordingly his signature on them must have been forged. If both sides are to be believed, the documents undoubtedly sent to the Companies Registry by the 19th August 1991, that is to say very shortly after incorporation of ISEL and the date of the two original share certificates in evidence, were completed without proper authority by some unidentified third party, for purposes which have never been explained, and that unidentified person forged the signatures of the Claimant, the Defendant, Stephen Daly and Gina Pola on those documents.
- In her report dated 10th April 2001 the handwriting expert, Ms Sawyer, expresses the opinion that the signatures of the Defendant and Stephen Daly on the various forms dated 12th August 1991 recording changes in the directors and secretary of ISEL and which were filed at Companies House on 19th August 1991 were genuine or very probably genuine in three instances.
- I have formed the view that I can have no confidence in the evidence of the Claimant or the Defendant or Stephen Daly or Ms Scrase in relation to the allotment of shares in ISEL or the appointment of its directors or secretary.
- I have already indicated above that I can place no confidence in the evidence of the Claimant, save where independently corroborated. His evidence and actions in relation to the entries in the Register of Share Members and Minute Book are both confused and confusing. On the one hand, he maintains that there was never any agreement as to the allotment of shares prior to the meeting in November 1991. On the other hand, the entries which he personally made in the Register of Members record allotments which correspond to the two share certificates dated 13th August 1991. His evidence at the trial was that the Register which has been put in evidence was among a number of company documents that were brought by Stephen Daly to the United States in about November 1991 and were thereafter retained by the Claimant in the United States and that the two original hare certificates dated 13th August 1991 were among those documents. On the other hand, in his witness statement in the Hubner Action dated 18th September 2000 he said that he had held the share certificate for 510 shares since 13th August 1991. He has also failed to explain the four certificates which were apparently detached from the Register, and which have never been produced in evidence.
- So far as concerns the Defendant's case on the allotment of shares, its credibility is seriously undermined by the significant changes in the evidence of the Defendant and Ms Scrase concerning their signatures on the original share certificates dated 13th August 1991, presumably in response to the expert evidence of Ms Sawyer. It is further undermined by the expert evidence that they wrote their initials by the amendments on those certificates. The Defendant's case in relation to the documents dated 12th August 1991 sent to Companies House, recording the changes in the directors and secretary of ISEL, is seriously undermined by Ms Sawyer's expert opinion as to the authenticity of the signatures of the Defendant and Stephen Daly on those documents.
- It seems to me that both the Claimant and the Defendant, and those giving evidence in support of them, have either consciously or unconsciously attempted to reconstruct from time to time events surrounding the allocation of shares in 1991 and the decision to appoint directors and a secretary of ISEL in order to meet their own perceived tactical ends in this litigation. I have come to the following conclusions on what took place, as regards those issues, on a balance of probabilities.
- I find that share certificates, including the two share certificates dated 13th August 1991 which were put in evidence, were signed by the Claimant, the Defendant, Stephen Daly and Ms Scrase prior to ISEL's incorporation. This was the evidence of Ms Scrase in her first witness statement in the ISEL Action dated 3rd March 2000. That witness statement explains why the share certificates were signed by Ms Scrase as company secretary. It was originally anticipated that she would be the company secretary, but, on ISEL's incorporation, Gina Pola was appointed the company secretary at the insistence of the Claimant. The conclusion that the certificates were signed before ISEL's incorporation is also consistent with the latest evidence of the Defendant, who now accepts that he completed the body of the certificates including, it must be inferred, the original date 6th August 1991.
- So far as concerns the Claimant's signature on the share certificate dated 13th August 1991 in favour of Stephen Daly, I find that the signature is genuine. There was no reason why, in those very early days, either the Defendant or Stephen Daly should have sought to forge the signature of the Claimant. My conclusion is consistent with the fact that the Claimant himself made entries in the Register of Members and Minute Book of ISEL recording the allotment of shares in accordance with the certificates dated 13th August 1991 in favour of himself and Stephen Daly. I further find that he signed the certificate before ISEL's incorporation. That is consistent with the placing of his initials on the share certificate by the alterations. For this purpose, it does not matter whether his initials were made by himself or by someone on his behalf: it is probable that they would only have been placed there if he had been shown prior to 13th August 1991 as a signatory to the share certificate.
- I further find that there is another Register of Members for ISEL, from which the two original share certificates dated 13th August 1991 were detached. I find that in addition to the two share certificates in favour of the Claimant for 510 shares and Stephen Daly for 244 shares, there was a further share certificate completed and signed for 244 shares in favour of the Defendant. This would be consistent with the corporate plan faxed to the Claimant by the Defendant in September 1991, to which I refer below.
- I find that it was the intention of the Defendant and Stephen Daly that the three certificates, that is to say the two share certificates put in evidence and another for 244 in favour of the Defendant, should be effective after the incorporation of ISEL. In this connection, I find that the Defendant and Stephen Daly and Ms Scrase initialled alterations to the dates of the certificates following ISEL's incorporation on 12th August 1991. This is in accordance with the views expressed by the expert, Ms Sawyer. I find that the body of each of the three share certificates was completed by the Defendant, no later than 13th August. This is consistent with the initialled alterations, including the change in the date from 6th August 1991 to 13th August 1991. I further find that details of the share allotment of 510 shares to the Claimant, and 244 shares to each of the Defendant and Stephen Daly were entered in ISEL's original Register of Members. All these conclusions are consistent with the corporate plan, showing the proposed Imex Group, which was prepared by the Defendant and faxed to the Claimant in September 1991. It seems to me also consistent with the reality of the position at the time. The share allotment of 510/244/244 reflected what I find to have been the intention and expectation of the Defendant and Stephen Daly that the Claimant would have a controlling interest in ISEL. I find that they assumed that he would be satisfied with 51%; and having giving him 51%, they split the remaining shareholding between themselves (dealing with the two subscriber shares in the manner described below). I find that it was not until after the proposed corporate plan had been sent to the Claimant, in September 1991, that they became aware that the Claimant wished to have more than 51% of ISEL and that he objected to the balance of the shares being divided between the Defendant and Stephen Daly. Furthermore, these conclusions are consistent with the legal presumption of ownership of the shares reflected by the two original share certificates dated 13th August 1991: Companies Act 1985. s.186.
- So far as concerns the two subscribers shares, no completed stock transfer forms have been produced in evidence. The Claimant, by Mr Marsden, submitted that, on a balance of probabilities, stock transfer forms in respect of the two subscriber shares had been completed in favour of the Claimant. Mr Berry, on behalf of the Defendant, submitted that, if stock transfer forms had been completed, they would have been completed in favour of the Defendant and Stephen Daly respectively. I find that, on the balance of probabilities, the two subscriber shares were transferred on about 13th August 1991. Stock transfer forms were supplied by R M Company Services Ltd to the Defendant under cover of a letter dated 12th August 1991. Those stock transfer forms would have been already competed by R M Company Services Ltd and Violet Cohen respectively, leaving the identity of the transferees blank. The instructions in the letter of 12th August 1991 were quite explicit:
"The Stock Transfer Forms should be completed by inserting the full names and residential addresses of the proposed transferees on each form. The Stock Transfer Forms should be retained with the company documents and not filed at the Companies Registration Office."
The probability is that those instructions were followed. That is consistent also with my conclusion that it was the intention of the Defendant and Stephen Daly that shares should be allotted on 13th August 1991. As to whether the stock transfers were made in favour of the Claimant or the Defendant and Stephen Daly, I consider, on a balance of probabilities, that they were completed in favour of the Defendant and Stephen Daly respectively. As Mr Berry pointed out, since the statutory books and records of ISEL found their way into the possession of the Claimant, it is likely that the Claimant would have produced the stock transfer forms if they had been in his favour. It should be noted, in this connection, that the Claimant confirmed in his oral evidence that no share certificates were stolen from the property in which he was residing in November 1992; and he gave no indication that anything in the nature of stock transfers had been stolen.
- Save as regards the share certificates in favour of the Claimant, the Defendant and Stephen Daly for 510 shares, 244 shares and 244 shares respectively, I find that no other share certificates were ever issued. I also find that no agreement was ever reached as to any other division or allotment of ISEL's shares. In particular, I do not accept the evidence of the Claimant that a concluded agreement was reached in November 1991 for a different share allocation. I prefer the evidence of the Defendant to that of the Claimant on this point, and I find that the November 1991 meeting was acrimonious and ended without agreement.
- Accordingly, I hold that on 13th August 1991 the Claimant, the Defendant and Stephen Daly became shareholders in and members of ISEL, within the definition of "members" in the Companies Act 1985 section 22.
- I find that the forms filed with Companies House on 19th August 1991 were sent by or on the instructions of the Defendant and Stephen Daly. That is consistent with the evidence of the handwriting expert. It is also consistent with the acceptance by the Defendant that one of the forms, which was dated and sent the same day as the others and was received by the Companies House on the same day as the others, was a genuine document signed by him, namely the Form 287 giving notice of change in the address of the registered office. It is highly improbable, to say the least, that, of a single batch of documents dated and filed on the same day, only one was genuine and authorised and all the others fabricated by some unknown, unspecified person pursuant to some unfathomable scheme.
- Whether or not the Claimant participated in the initial decision for those appointments, recorded in the forms filed with Companies House on 19th August 1991, it is clear that by his subsequent conduct he affirmed and ratified them. So far as concerns the holders of the two subscriber shares, their intention that the Claimant, the Defendant and Stephen Daly should be appointed directors was made clear in a letter from R M Company Services Limited dated 12th August 1991. The letter also confirmed that R M Company Services Limited and Violet Cohen would resign their appointments as directors and secretary of the company upon its incorporation.
- Accordingly, I find that the Claimant, the Defendant and Stephen Daly were appointed directors of ISEL and Gina Pola was appointed its secretary in August 1991.
- I find that the Claimant and Gina Pola resigned as a director and secretary respectively of ISEL on 21st April 1992. Forms 288 to that effect dated 21st April 1992 and bearing their signatures were filed at Companies House in May 1992. The Claimant's evidence is that he never intended to and never in fact resigned as a director of ISEL. On the other hand, he accepted in oral evidence that the signatures on the two Forms 288 dated 21st April 1992 and filed at Companies House looked like his signature and that of Gina Pola. The weight of the evidence is in favour of the documents and the signatures on them being genuine. The Claimant's own case (which is denied by the Defendant ) is that on about 8th April 1992 he had demanded the resignations of the Defendant and Stephen Daly as directors of ISEL and they had agreed. They certainly tendered their resignations on 30th April 1992. It is therefore unclear what purpose would have been served by the Defendant or Stephen Daly creating false documents showing the resignations of the Claimant and Gina Pola as at 21st April 1992 and sending them to Companies House in May 1992, after the date on which the Defendant and Stephen Daly themselves resigned as directors. Furthermore, as Mr Berry pointed out, and as I elaborate later in this judgment, by close of business on 21st April 1992 the US $555,000 had been received into ISEL's Florida Account and had been withdrawn from that account by the Claimant. In early May 1992 the Claimant and Gina Pola closed down ISEL's premises in St. Petersburg, and had disappeared. In those circumstances their retirement from the company as at 21st April 1992, in an attempt to disassociate themselves entirely from it, once the US $555,000 had been withdrawn from ISEL's account, makes sense.
- On 30th April 1992 the Defendant and Stephen Daly resigned as directors of ISEL. It is clear that at that date they were unaware of the resignation of the Claimant as a director, since their letters of resignation of that date are addressed to the Claimant as President of ISEL. This is not, in my view, inconsistent with my finding that the resignations of the Claimant and Gina Pola on or about 21st April 1992 were valid and effective. In view of the involvement of the Claimant in the removal of the US $555,000 from ISEL's account on 21st April 1992, it is understandable that the Claimant would not have notified the Defendant and Stephen Daly of his intention to resign.
- I should mention as an aside, at this point, that Mr Marsden relied upon the letters of resignation of 30th April 1992 as support for his submission that there was never any agreement to allot shares in ISEL, other that the agreement said by the Claimant to have been reached in November 1991. In this connection, Mr Marsden placed weight on the offer contained in the letters of resignation of the Claimant and Stephen Daly to sell their shareholdings, stated to be 180 shares each, to the other shareholders. It was the Claimant 's evidence that the November 1991 meeting resulted in the an agreement that the Defendant and Stephen Daly should only receive 180 shares each in ISEL. I accept, however, the explanation given by the Defendant and Stephen Daly that the shareholdings of 180 mentioned in their letters of resignation reflected some communication that they had received from the Claimant. Their evidence was that, at this time, in view at what had taken place in relation to the US $555,000 received from UBE, they were in a state of extreme concern and agitation about their own position and wished to sever their links with ISEL as quickly as possible. They were fully aware that the Claimant was not content with the share allocation of 510/244/244 which, as I found, had been effected on 13th August 1991 and was reflected in the Imex corporate plan prepared and sent in September 1991 to the Claimant. That had been the cause of the acrimonious debate at the meeting in November 1991. It is entirely understandable, in those circumstances, that in order to extricate themselves from ISEL as soon as possible they should not seek to revive further, probably insoluble, debate about whether or not the original allotment of shares was proper or appropriate, but they should proceed on the hypothesis, apparently decided upon by the Claimant and communicated by him to them, that they should have only 180 shares each.
- I would observe that the letters of resignation of the Defendant and Stephen Daly of 30th April 1992 are consistent with their holding the belief and understanding at that time that they had been appointed directors of ISEL and had been allotted shares in that company.
- The shares allotted to the Defendant and Stephen Daly were never transferred to the Claimant; nor was any legally enforceable agreement to sell them to the Claimant ever concluded. There was, for example, never any agreement as to the price to be paid for the shares in accordance with the terms of their letters of resignation.
- It follows from the conclusions which I have reached in relation to the allocation and allotment of shares and the appointment and resignation of directors that, after 30th April 1992, there were no duly appointed directors of ISEL; and any purported allotment of shares in the company or any purported appointment of directors after that date was not decided upon at any duly convened meeting of the shareholders or by unanimous agreement of all the shareholders outside any such meeting. Any such allotment of shares and any such appointment of directors was invalid.
- For the sake of completeness I find that the statutory books and other documents relating to ISEL were not delivered to the Claimant in or before November 1991, as the Claimant alleges. I find that, on a balance of probabilities, they were kept by the Defendant and Stephen Daly in Stephen Daly's flat at 2 Tollington Place, and were taken from there by the Claimant on about 8th April 1991. This would be consistent with the timing of the Claimant's attempt to change the bank mandate in respect of ISEL's account at the Soho Square Branch of Barclays Bank.
Dealings By Claimant With The US $555,000.
- I have already set out earlier in this judgment the Claimant's explanation as to why he requested the US $555,000 from UBE and in what manner he dealt with it. The essence of his case in his witness statement in the Hubner Action dated 18th September 2000 and at the trial was that, having expended a substantial part of the US $550,000 for the purposes of the contract of affreightment, and also, with the consent of UBE, in paying for the Ga Chau, he was expressly authorised by Mr Davis Lee to retain the balance for his own benefit. The Claimant submits that, in giving that authorisation, Mr Lee was properly acting on behalf of UBE. The Claimant relies upon the fax from Mr Lee dated 2nd May 1992, to which I have referred earlier in this judgment.
- Mr Marsden submitted that the US $550,000 was never the property of ISEL in the sense it being within the power of ISEL to do whatever it wished with the money. Mr Marsden contended that all that ISEL was entitled to receive under the contract of affreightment was US 50 cents per tonne of cargo. He submitted that UBE retained the power to direct the manner of dealing with the US $555,000 and it was entirely within the power and authority of UBE, acting by Mr Lee of Cheng Saint Trading, to permit the Claimant to retain for his personal benefit all or any part of that money.
- In my judgment the Claimant's explanation as to why he requested payment of US $555,000 and why he was entitled to retain for his own benefit a substantial part of it is factually inaccurate, and, in relation to the right to apply it for his own benefit, legally insupportable. I find that the manner in which the Claimant dealt with the US $550,000 was dishonest and intended to defraud UBE, ISEL, and also the Defendant and Stephen Daly.
- Mr Benson expressed the view that the Claimant's request to UBE for payment of the US $555,000 was a deliberate ploy by the Claimant, as part of a preconceived scheme to defraud UBE, to circumvent the terms of the contract of affreightment, which required payment to be made by letter of credit. I am not entirely satisfied that, in requesting payment of the US $555,000, the overriding intention of the Claimant was dishonestly to circumvent the obligation in the contract of affreightment for payment by letter of credit. Both the Defendant and Stephen Daly gave evidence that, when they had visited Japan in March 1992, UBE had mentioned the possibility of the first payment being made by telegraphic transfer rather than by letter of credit. That UBE was content and indeed wished to pay by telegraphic transfer rather than letter of credit is supported by a letter from the Defendant and Stephen Daly to Mr Steve Allen of the Soho Square Branch of Barclays Bank dated 31st March 1992. In that letter they say that, as soon as a ship had been fixed, they would receive a telegraphic transfer for US $555,000 in their account. They said that UBE had suggested that method of payment, rather that by letter of credit.
- I am, nevertheless, satisfied that, by about the second week in April 1992, the Claimant had conceived a scheme for defrauding UBE as well as the Defendant and Stephen Daly. On 8th April 1992 the Claimant had attempted, without notice to the Defendant or Stephen Daly, to gain control of ISEL's bank account at the Soho Square Branch of Barclays Bank. This was unsuccessful. The Claimant gave evidence that he was driven to that course, and also to demand the resignations of the Defendant and Stephen Daly, as a result of their attempts to purchase or lease unsuitable ships. I do not accept his evidence on this matter. The evidence of Mr Gault, then working for Eggar Forrester, was that the Claimant was involved at that time in the discussions with Eggar Forrester for the hire of ships. His evidence was that the Defendant, the Claimant and Stephen Daly had all been involved in enquiries of Eggar Forrester and that, as the discussions moved in the direction of chartering a ship rather that purchasing one, the Claimant took a lead in the discussions. Mr Gault gave no indication of any disagreement between them or that the Defendant and Stephen Daly had behaved in an incompetent or improper manner in any respect. Indeed, I accept the evidence of the Defendant and Stephen Daly that, at that time, there was no argument between the Claimant and the Defendant or Stephen Daly, and there was no request by the Claimant for the resignations of the Defendant or Stephen Daly. On the contrary, I accept the evidence of the Defendant and Stephen Daly that they were increasingly concerned at the conduct of the Claimant in seeking to discuss and negotiate with others the chartering of ships at rates that were uneconomic and would be bound, or alternatively very likely, to result in a substantial loss under the contract of affreightment. It was that concern, together with the attempt by the Claimant unilaterally to change the mandate for ISEL's account at the Soho Square Branch of Barclays Bank, that led to the letter from the Defendant to the Claimant dated 9th April 1992, in which the Defendant stated that the Claimant should relinquish all attempts to control ISEL and to secure a ship for the UBE deal. The Defendant also stated in that letter that, should the Claimant wish to offer his shares for sale, their par value only could be considered. The Defendant's letter of 9th April 1992 contains no reference whatever to any allegation by the Claimant of incompetence on the part of the Defendant or Stephen Daly or to any request or demand by the Claimant of the Defendant and Stephen Daly that they resign as directors of ISEL. Its terms are more consistent with there having been no such request and are not at all consistent with an agreement, as alleged by the Claimant, that the Defendant and Stephen Daly would resign as directors.
- In addition to attempting to obtain control of ISEL's London bank account, I find, as I have already said, that the Claimant took the company books and other documents from Stephen Daly's flat on about the 8th April 1992. This was part of a plan by the Claimant to obtain control of and to be able direct all ISEL's affairs.
- Further, I accept Stephen Daly's evidence that the explanation given by the Claimant that the Claimant had hired the Barkald, and that, without the Claimant's knowledge or approval, the Defendant and Stephen Daly had hired the Ga Chau, causing confusion at the port in Mexico, which led to the loss and transfer to Cheng Saint Trading of the contract of affreightment, is a tissue of untruths. Stephen Daly pointed out that, if the Claimant did hire the Barkald, then his motives for doing so could not have been in good faith, since it was on the wrong side of the Panama Canal and it would have been commercial nonsense to use it for loading at Guaymas in Mexico. Stephen Daly gave evidence, which I accept, that it would have been impossible for the Defendant and Stephen Daly to hire the Ga Chau. If the Ga Chau was hired, it must have been by the Claimant, since only the Claimant had the money (i.e. in ISEL's Florida Account) to pay the deposit of US $112,500 for hire of the Ga Chau. It is to be noted that the sum of US $112,500 was paid by the Claimant out of ISEL's Florida Account on 24th April 1992. The confusion, if there was any, was caused entirely by the Claimant, and to further his own scheme.
- I accept the evidence of the Defendant and Stephen Daly that they were told that UBE had received a document which purported to come from Eggar Forrester in support of a request for the transfer of money from UBE to ISEL's Florida Account. The Defendant and Stephen Daly gave evidence that the Defendant received a telephone call to that effect some time in the third week in April 1992 from the chairman of Eggar Forrester. The evidence of Mr Gault was that he was shown a copy of a letter, purportedly written on Eggar Forrester note paper, which had his signature at the bottom, but which he knew had not been written by him. His evidence was that it was clearly a forgery because his signature had been transposed from an original letter that he had written on to a letter which he was certain he had not written, and a line was clearly visible above his signature. The plea agreement made by Gina Pola also referred to a letter from Eggar Forrester confirming that Eggar Forrester guaranteed the performance of ISEL, which letter Eggar Forrester subsequently said had not come from it. Although a forged letter purportedly from Eggar Forrester to UBE or Universal has not been put in evidence, I find, on a balance of probabilities, that there was such a letter and it was written and sent by the Claimant.
- Critically, in order to justify his account of his dealings with the US $555,000 transferred by UBE into ISEL's Florida Account, the Claimant relied upon an alleged authority by UBE to apply that money for the purposes of the shipment of cement, and also payment in respect of the Ga Chau, and then to retain the balance for his own personal benefit. The only authority on behalf of UBE on which he is able to rely is a fax from Mr Davis Lee of 2nd May 1992. The difficulty, from the Claimant's perspective, is that the fax was sent on a later date than the dates on which, according to the bank statement of First Union Bank, the US $555,000 was withdrawn from ISEL's Florida Account. That bank statement shows that on 21st April 1992 US $500,000 was extracted from the account, and on 24th April 1992 US $110,000 was credited to the account and US $112,500 was withdrawn. Those withdrawals could only have been made by or at the direction of the Claimant.
- The Claimant was bound, in those circumstances, in order to maintain his credibility, to deny the authenticity of the First Union Bank statement to which I have referred. Mr Benson gave evidence that he had obtained that bank statement and other documents from First Union Bank in the course of his investigations. In response to Mr Benson's evidence, the Claimant swore an affidavit on 3rd February 1998 in the ISEL Action in which he said:
"The Copy of the bank statement in Mr Benson's Affidavit PB1 has been confirmed by the First Union Bank as a Forgery, and bears no resemblance to the Original Documents issued by the First Union Bank..."
In his second affidavit sworn in the Hubner Action on 23rd December 1999 the Claimant said, with reference to the First Union Bank statement,
"The exhibit in Mr Benson's affidavit is either a forgery manufactured by him or by somebody else. There is produced to me and marked "TD7" a copy of the original of this statement which I hold. It is easy to see how the alterations have been made when the copy produced by Mr Benson is compared against the original ."
These statements by the Claimant are of no weight whatsoever. The Claimant has produced no evidence from any one at First Union Bank confirming that the bank statement showing the dealings on ISEL's Florida Account for the period 16th April 1992 to 27th April 1992 was or might be a forgery. The statement of the Claimant, in his affidavit of 3rd February 1998 in the ISEL Action, that some unspecified person in First Union Bank, at some unspecified time, and in some unspecified place and circumstances confirmed to some unspecified person that the statement was a forgery is of no value. Further, contrary to what was stated in the body of the Claimant's affidavit of 23rd December 1999 in the Hubner Action, there was not exhibited to the affidavit the "original" of the bank statement. What was exhibited in "TD7" to the affidavit of 23rd December 1999 was a bundle of four documents, including an identical statement to that which is relied upon by the Defendant and a statement in respect of an entirely different bank account in the name of Thomas Daly "DBA Imex Corporation". The other two documents in the exhibit are irrelevant. There being no explanation in either affidavit as to the alleged alterations from the original, the references to those alterations in the affidavit of 23rd December 1999 are of no value whatever. No expert evidence was given on behalf of the Claimant in support of any case that the copy of the bank statement relied upon by the Defendant was or might have been a forgery because it differed from other documents of First Union Bank in material respects. In those circumstances, subject to any evidence given at the trial itself, the Defendant was entitled to say, and I would have held, that on a balance of probabilities the copy of the bank statement relied upon by the Defendant was a true copy of the original.
- At the trial itself, counsel for the Claimant sought to advance, in cross examination of the Defendant's witnesses, the case that the statement was a forgery and not a true copy of the original. Differences were pointed out to the witnesses between the copy of the challenged bank statement and an original bank statement in respect of the account in the name of "Thomas Daly DBA Imex Corporation" with First Union Bank . Those differences were said to comprise a difference in the logo, in the size and appearance of slashes in the dates for the relevant entries, and in print size.
- Mr Benson's oral evidence was that he had obtained the statements from a Mr William McCann of First Union Bank after Mr Benson produced to Mr McCann a power of attorney from ISEL. In view of the challenge to Mr Benson's evidence as to the provenance of the relevant bank statement and its authenticity, during the course of the trial those acting for the Defendant obtained a certification from Mr McCann that the relevant bank statement and other bank documents were true copies of the originals. Mr McCann wrote a letter dated 8th May 2001 saying as follows:
"Attached are notarized, certified, true copies of the original bank statements dated 4/30/92, 2/28/92 and 3/31/92 for the First Union Account of IMEX Shipping Europe Limited, account number 14964003074. I have also attached notarized, certified, true copies of the signature card for this same account.
If I can be of further assistance please let me know."
He was designated at the foot of the letter as "William McCann, Security Officer". Notwithstanding that letter and the notarisation and certification of the relevant bank statement, those acting for the Claimant persisted in their challenge. Initially the suggestion made on behalf of the Claimant seemed to be that, by reason of the description of Mr McCann in the letter of 8th May 2001 as a "security officer" rather than a "securities officer", the status of Mr McCann to give the appropriate certification was in doubt. There also seemed to be a suggestion at one point, on behalf of the Claimant, that Mr McCann might have colluded with the Defendant or Stephen Daly or Mr Benson or all of them to mislead the court or third parties as to the authenticity of the relevant statement. In due course, Mr Marsden clarified that his concern was that Mr McCann might not have compared the copy of the relevant bank statement in evidence before the court with the microfiche in the records of the bank. Evidence was given by Mr Ernest Miller Sime, a compliance officer with First Union National Bank in London, that Mr William McCann does exist and is a vice president of the bank and had given the certification and notarisation mentioned in the letter of 8th May 2001. Those acting for the Claimant were still not satisfied. Accordingly, enquiries were made on behalf of the Defendant as to whether Mr McCann would be willing to give evidence by video conference. Unfortunately, it seems that the suggestion, which appeared to have been made on behalf of the Claimant at one point in the trial, that Mr McCann might himself be involved in some collusive activity to mislead third parties or the court as to the authenticity of the bank statement, led to considerable consternation at the bank. In the event, on the last of the trial there was supplied a witness statement by Mr McCann dated 16th May 2001 in the following terms:
" I ,William McCann, Vice President at First Union Bank ("First Union"), 6700 66th Street North, Pinellas Park F1., 33781 USA will say that;
1. In about February 1994 I handed to a representative of a UK company called IMEX Shipping Europe Limited, copies of bank statements from the IMEX Shipping Europe Limited account number 14964003074 held at First Union in St. Petersburg.
2. On about 4th May 2001 Mr Martin Hubner asked First Union to confirm the status of the bank statements and signature card copies of which are attached to this statement marked "W M 1-4".
3. I have compared the documents "W M 1-4" against the copies held on file at First Union. The copies on the First Union file had been printed off a microfiche.
4. The original microfiche is likely to have been destroyed pursuant to First Union's 7 year retention policy.
5. It appears to me that the documents referred to in "W M 1-4" are copies of the same statements as those copies held on file. The copy statements on file at First Union are internal documents and not susceptible to outside interference. I therefore, as requested, certified the copy documents that I had been sent and placed then in the DHL service for carriage to the United Kingdom to Mr Martin Hubner at 9 Steele's Mews South, London NW3 4SJ.
6. On 15th May 2001 I was asked by Mr Hubner's solicitors to provide this statement.
7. The contents of this statement are true to the best of my knowledge, information and belief."
If accepted at its face value, that witness statement is a complete answer to any suggestion that the relevant bank statement showing the dispositions on ISEL's Florida Account on 21st and 24th April 1992 has been fraudulently manufactured.
- Mr Marsden, on behalf of the Claimant, objected to there being put in evidence the certification and notarisation of the various bank documents by Mr McCann dated 8th May 2001 and the witness statement of Mr McCann dated 16th May 2001. He submitted that it was far too late to introduce this new evidence, bearing in mind that the status of the relevant bank statement had been in issue since the affidavit of the Claimant sworn in the ISEL Action on 3rd February 1998. Furthermore, he said, and relied upon the fact, that those acting on behalf of the Claimant had not had the opportunity to interview Mr McCann or other bank officials about the contents of Mr McCann's witness statement. Mr Marsden submitted that if, contrary to his primary position, the certification and notarisation of Mr McCann and also Mr McCann's witness statement were admitted as evidence, then they should be regarded as of questionable weight in view of the matters already mentioned, the absence of any opportunity for Mr Marsden to cross examine Mr McCann whether in court, or by video link or in some other way, and the absence of any indication in Mr McCann's witness statement as to whether or not there still exists a microfiche of the original bank statement and whether or not he has actually searched for such a microfiche.
- The certification and notarisation of Mr McCann and his witness statement of 16th May 2001 ought to be admitted in evidence, and I give leave for them to be so admitted. They are relevant evidence. Bearing in mind that Mr Benson gave sworn evidence that the relevant bank statement had been given to him by an officer of First Union Bank, it seems to me that the onus was firmly placed on the Claimant to adduce some cogent evidence to undermine the apparent authenticity of the document. The Claimant chose not to adduce any evidence from the Bank itself or any relevant expert evidence. I therefore have little sympathy for the suggestion that the Claimant has been materially prejudiced by the statements obtained, on behalf of the Defendant, from Mr McCann. No basis whatever has been put forward for suggesting that Mr McCann has any connection with the Defendant or Stephen Daly or anyone else associated with the affairs of ISEL, or for any inference that Mr McCann has any reason to lie about the authenticity of the statement he has certified and notarised as being a true copy of the original. The challenge to the authenticity of the bank statement, which has been persisted in throughout the trial, has all the hall marks of mere opportunism. In the absence of any possible ground for suggesting that Mr McCann might have colluded with the Defendant or some other person in wishing to mislead the court or others as to the authenticity of the document or as to the steps taken by Mr McCann as stated in his witness statement, it seems to me that his witness statement carries considerable weight. As I have said, even in the absence of his evidence, I would have held that that, on a balance of probabilities, the bank statement of First Union Bank showing the transactions on ISEL's Florida Account between 16th April and 27th April 1992 was true and authentic. In the light of the Mr McCann's evidence, that conclusion is incontrovertible.
- Accordingly, I find that the Claimant withdrew US $500,000 from ISEL's Florida Account on 21st April 1992, and that on 24th April 1992 he re-paid US $110,000 and withdrew or caused to be withdrawn US $112,500. Those transactions were well before the fax from Mr Davis Lee of Cheng Saint Trading of 2nd May 1992, upon which the Claimant relies as giving authorisation to him to retain the balance of the US $555,000 after expenses. This clearly shows, in my judgment, that the explanation given by the Claimant for his conduct is entirely untrue. It supports the inevitable conclusion that the Claimant took all or part of the US $555,000 dishonestly as part of a scheme to defraud UBE as well as ISEL, the Defendant and Stephen Daly.
- A number of other factors clearly support the conclusion that, in procuring payment of the US $555,000 and in his subsequent dealings with that money, the Claimant was involved in a dishonest scheme. I agree with Mr Berry that the authority purportedly given by Mr Davis Lee to the Claimant to retain for his own purposes the balance of the US $555,000 is clearly questionable. As Mr Berry observed, it seems hardly credible that any commercial entity would wish simply to give away US $309,000. I find that Davis Lee had no actual authority to do so on behalf of UBE or Universal. The Claimant maintains that neither UBE nor Universal ever complained to the police authorities in Florida that the US $555,000 had been improperly obtained or dealt with. I have already said that I reject that assertion. It is clear from evidence that I have already mentioned, including the terms of Gina Pola's plea agreement and the information given to Mr Benson of the existence of a warrant for the Claimant's arrest for wire fraud in the United States, that UBE or Universal did complain to the police authorities there about the dealings surrounding the US $555,000 sent to ISEL in April 1992.
- I further find that Mr Lee had no ostensible authority to permit the Claimant to retain for his own purposes any part of UBE's US $555,000. It is not credible that the Claimant could have thought Mr Lee had any authority to give away such a substantial sum for no apparent benefit to UBE. Indeed, on a balance of probabilities, looking at the evidence as a whole, I find that Mr Lee was acting as agent for ISEL rather than for UBE or Universal.
- It is to be noted that the Claimant has obtained no evidence from Mr Davis Lee in connection with this matter. The fax of 2nd May 1992 from Mr Lee seems to indicate some kind of collusive arrangement between the Claimant and Mr Lee to transfer the benefit of the contract of affreightment to Cheng Saint Trading. Mr Berry submitted that the fax is a forgery, which was manufactured by the Claimant in order to explain and excuse his conduct. Even if it was not a forgery, as to which I have reached no firm conclusion, I find that the authority purportedly given by the fax to the Claimant to retain any part of the US $555,000 for his own purposes was made without any actual or ostensible authority and that was well known and understood by the Claimant.
- When the Defendant and Stephen Daly learnt of the payment of the US $555.000 into ISEL's Florida Account and its subsequent removal from that account, they made persistent attempts to contact the Claimant. They were told by Gina Pola that he had typhus and was in a hospital in Mexico, an explanation which I find to have been a deliberate lie. Despite attempts thereafter to locate the Claimant, the Defendant and Stephen Daly were unable to do so. On the Claimant's admission, in early May 1992 the Claimant and Gina Pola closed ISEL's offices in Florida and they then disappeared entirely from view. Its seems probable that they came to England. I find that they deliberately evaded attempts by the Defendant, Stephen Daly, and the police authorities in the United States to contact him. This too is evidence, in my judgment, of the Claimant's dishonest conduct.
- It is convenient to mention here the suggested explanation given by Stephen Daly for the transactions on ISEL's Florida Account on 24th April 1992 when there was credited to the account US $110,000 and then withdrawn US $112,500. I accept his suggested explanation is probably the correct one. He said that the Ga Chau could only be chartered if a deposit of US $112,500 was paid. When Stephen Daly and the Defendant became aware that UBE had transferred money to Florida, but they failed to make contact with the Claimant, they became very concerned, and Stephen Daly left a telephone message for the Claimant that, if the Ga Chau was not obtained (for the purposes of the contract of affreightment) and a deposit paid for it, he would report the matter to the authorities in Florida . Stephen Daly suggested, and I agree, that it is likely that, having received that telephone message, the Claimant restored to ISEL's Florida Account sufficient to enable the deposit for the Ga Chau to be paid out of ISEL's Florida Account. This would, and did, give the Claimant a breathing space before the police were alerted. It was during that period that the Claimant closed down ISEL's offices in Florida, and he and Gina Pola were able to disappear from view.
- The way in which the Claimant passed all or part of the US $555,000 through different accounts over a relatively short period of time also supports the conclusion that he was engaged in an exercise to cover his tracks, having perpetrated a dishonest scheme. This is borne out by the hand written letter from him to the Defendant and Stephen Daly in March 1993, to which I have already referred, in which he observed - "you did not think I was stupid enough to put all the money I got for the contract in one bank". In the same letter he stated to the Defendant and Stephen Daly- "you should have taken the offer that went along with it. You would have been 75 grand better off from your share of the contracts". This seems to me to be a clear confirmation and admission that he was engaged in an exercise intended to be a fraud on ISEL as well as on the Defendant and Stephen Daly.
- It is to be noted that in paragraph 44 of the Claimant's witness statement in the ISEL Action dated 8th October 1999 the Claimant stated that Cheng Saint Trading agreed that "Imex" could keep the balance of the US $555,000; and it was only in and from the time of the Claimant's witness statement in the Hubner Action dated 18th September 2000 that the Claimant asserted that he was permitted to retain for his own personal benefit that balance. Furthermore, I have already referred, in the context of the credibility of the Claimant, to the differing versions put forward by the Claimant from time to time as to whether he used any part of the US $555,000 for his own purposes and as to whether the sums in the Jersey Bank Account were derived in whole or in part from the US $555,000. His original (and now discredited) evidence on those matters, which was designed to enable him to set aside the judgment obtained in the ISEL Action, was part of his attempt to enjoy the proceeds of the fraud he has committed on UBE, ISEL, the Defendant and Stephen Daly. The Hubner Action, instituted and continued to trial by the Claimant, at public expense, is a remarkable and brazen continuation of that same attempt.
- Mr Marsden submitted that it is understandable that the Claimant should have considered that he had and has a right or a moral right to retain what was left of the US $555,000 after expenses, since the contract of affreightment was effectively procured entirely or almost entirely as a result of the Claimant's connections and efforts and, in any event, he was and is the majority beneficial owner of ISEL. For the reasons I have given in detail, the Claimant's intentions with regard to the procuring and disposal of the US $555,000 paid by UBE were dishonest throughout. He never believed that he was entitled, as against UBE, Universal, the Defendant and Stephen Daly to retain for his own benefit any part of the US $555,000. His conduct from the 8th April 1992 onwards has not been the conduct of a person who honestly believes that what he has done is correct in law. His conduct has been the conduct of a person concerned to cover his tracks, to avoid contact and explanation, and to weave a tissue of untruths in order to confuse, obfuscate and evade detection of the truth.
The Cause of Action for Money Had and Received.
- In support of the Claimant's case that he is entitled to recover damages equal to the amount taken from the Jersey Bank Account in June 1995 at the direction of the Defendant, Mr Marsden relied upon the following passage in Goff & Jones' The Law of Restitution (5th Edition) at page 76:
"Restitutionary claims are generally personal. In order to prevent the defendant's unjust enrichment, the law imposes upon him a personal obligation to make restitution to the plaintiff. As has been seen, the basis of the personal claim will normally be: mistake; compulsion; or necessity; or it may arise from a contract which is or has become ineffective, when the basis of a money claim will be total failure of consideration or free acceptance if services are rendered or goods delivered. In contrast, the restitutionary claim may be based on the defendant's wrongful act; in these circumstances he may succeed even though the defendant's enrichment cannot be equated with plaintiff's loss.
The plaintiff may base his claim on one of these grounds but may also seek a restitution proprietary remedy. Alternatively, he may ground his claim on his legal or equitable title to land, chattels or money, in which case he may ask the court for restitutionary relief ."
- Apart from the above passages in Goff and Jones' work, no authorities were cited by Mr Marsden in support of a claim to restitutionary relief on the facts of the present case.
- Mr Marsden's primary case on behalf of the Claimant is as follows. Immediately prior to the withdrawal of funds from the Jersey Bank Account, at the direction of the Defendant, the legal title to the funds in that account was vested in the Claimant. The Defendant had no personal title to those funds, and he had no authority to act on behalf of ISEL. Accordingly, Mr Marsden submitted, whether or not the beneficial interest in the money in the Jersey Bank Account was vested in ISEL, and whether or not the Claimant had properly or improperly obtained the money in the Jersey Bank Account from ISEL, the Defendant wrongfully procured the removal of the money from the Jersey Bank Account and is therefore liable in restitution for damages for money had and received.
- The second way in which Mr Marsden puts the Claimant's case, is as follows. If the money in the Jersey Bank Account was wrongfully acquired by the Defendant from ISEL, the Defendant held that money on constructive trust for ISEL and was bound to account for it to ISEL. He submitted that, by virtue of the constructive trust, the Claimant was and is under an obligation to protect ISEL's interests and, for that purpose, to recover the money taken from the Jersey Bank Account at the direction of the Defendant.
- In the further alternative, Mr Marsden submits that the court should permit the Claimant to show and give effect to his "repentance" (in Mr Marsden's language) by permitting the Claimant to recover the money taken out of the Jersey Bank Account in order that it should be restored to ISEL.
- In my judgment, the claim for damages for money had and received fails, whichever way it is put on behalf of the Claimant.
- The starting point is that, on any footing, the Claimant was not personally entitled to the money in the Jersey Bank Account. I have found, on the facts, that the Claimant was not given consent by UBE or Universal to keep for his own benefit any part of the US $555,000 paid into ISEL's Florida Account in April 1992. I have further found that the dealings by the Claimant with those moneys was part of a dishonest scheme to defraud UBE, ISEL, the Defendant and Stephen Daly .
- Even if, contrary to my findings of fact, the Claimant had acted in good faith throughout, and had in fact received the authority of UBE to keep part of the US $555,000 for his own purposes, the Claimant undoubtedly would have held the money in the Jersey Bank Account on constructive trust for ISEL. In seeking authorisation to retain for his own purposes any part of the US $555,000, and in negotiating a transfer of the benefit of the contract of affreightment to Cheng Saint Trading as part of an arrangement under which the Claimant would personally benefit from the US $555,000, there was manifest conflict between his duties to ISEL as a director and his personal interests. Further, the opportunity to acquire a personal benefit in respect of the US $555,000 payment by UBE had arisen because he was a director of ISEL, into whose bank account the US $555,000 had been paid pursuant to the contract of affreightment with ISEL. Those facts gave rise to a constructive trust in favour of ISEL of any part of the US $555,000 taken by the Claimant for his own purposes: Boardman v Phipps [1967] 2 AC 46. I did not understand Mr Marsden to dissent from this proposition.
- At the commencement of the trial, Mr Marsden submitted that ISEL had no independent right of disposition of any part of the US $555,000 paid into ISEL's Florida Account. He submitted that ISEL was only entitled to 50 cents per tonne of cargo transported, and that the US $555,000 always remained the money of UBE to be dealt with in accordance with UBE's instruction. This appeared to be, in substance, a submission that ISEL always held the US $555,000 on trust to apply the money in accordance with directions of UBE or its agent, Universal, and, subject to those instruction, on trust UBE itself. This would have been the legal position if the mutual intention of ISEL and UBE, and the essence of their bargain, was that the US $555,000 should not become part of the assets of ISEL but should be used exclusively for a specified purpose and the benefit of a specified person or class of persons: Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567, 248. Mr Marsden did not, in his closing submissions, address any argument to me on the application of the principle in the Quistclose case to the facts of the present proceedings. As I have already said, no evidence was given by Mr Lee of Cheng Saint Trading or by anyone for UBE or Universal. There is no evidence that the US $555,000 was in the nature of a loan or was the subject of any special instructions or agreement that it should be kept separate and distinct from the other assets of ISEL. Accordingly, there is no factual basis for a Quistclose trust in relation to the US $555,000 or any part of it.
- In any event, it seems to me that even if there had been a Quistclose trust in relation to the US $555,000 or any part of it, and the Claimant had acted bona fide throughout and had indeed been given authority by UBE to keep part of the US $555,000 for his own purposes, the conflict between the Claimant's interest and duty which I have mentioned above would still have given rise to a constructive trust in favour of ISEL in respect of the funds in the Jersey Bank Account, on the principles in Boardman v Phipps .
- In relation to the primary way in which Mr Marsden put the Claimant's legal case, Mr Berry submitted that the Claimant is unable to point to any particular established category of restitutionary relief which would enable the Claimant to recover on the facts of the present case. Mr Marsden retorted that a restitutionary remedy for unjust enrichment applies even in cases where the Claimant can prove no actual loss. I accept that as a correct proposition in general terms. It seems to me, however, to be a very different proposition that a person who has dishonestly appropriated property belonging to another can recover that property from a third party in an action for money had and received. No authority has been cited to me to support such a proposition. In the absence of any authority, I reject the proposition on the facts of the present case.
- I turn to Mr Marsden's second way of putting the Claimant's case, namely that as a constructive trustee of the funds in the Jersey Bank Account the Claimant had and has a duty to protect the funds for the benefit of ISEL. As Mr Berry pointed out, however, equity imposes a constructive trust on the Claimant in order to provide a remedy for ISEL. It was not imposed to give the Claimant, a dishonest wrongdoer, an obligation or right to recover the property in his own name from a third party.
- I turn to the third way in which Mr Marsden put the Claimant's case, namely that the court should permit the Claimant, as an act of "repentance", to recover the money which had been in the Jersey Bank Account in order that he might account for it to ISEL and so purge his wrongdoing. No authority was cited to me for this unusual proposition. On the facts of the present case, it is sufficient to say that the Claimant persisted throughout the trial in maintaining that he had acted in good faith and with proper authority. I have found, however, that his conduct was dishonest and he has engaged, at the public expense, in litigation which was designed to secure the return to him, for his own benefit, of the proceeds of his dishonest scheme. The concept of "repentance" does not appear to have featured in his conduct to date.
- In support of the various ways in which Mr Marsden put the Claimant's case, he submitted that I should conclude that the money taken from the Jersey Bank Account pursuant to the default judgment in the ISEL Action has not been used for the benefit of ISEL but has in whole or in part been divided between, among others, the Defendant and Stephen Daly for their personal benefit. The evidence given on behalf of the Defendant was that the money was paid in its entirety at the directions and for the benefit of Mr Hunt, with whom ISEL had purported to enter into a contract dated 20th November 1992 for the tracing and recovery of the money taken by the Claimant from the US $555,000. The evidence on behalf of the Defendant was that the expense incurred by Mr Hunt in tracing and recovering the money in the Jersey Bank Account and in uncovering the scheme and conduct of the Claimant in relation to the US $555,000 exceeded the amount recovered. Mr Marsden submitted that I should not accept this evidence at face value since the money paid out of the Jersey Bank Account passed through a number of unusual accounts and also because the evidence was that no one, on behalf of ISEL, had conducted any kind of detailed analysis of the expenditure of Mr Hunt. It is sufficient for me to say, on this issue, that I am satisfied that the intention of the Defendant in entering into the agreement with Mr Hunt of 20th November 1992, purportedly on behalf of ISEL, was to benefit ISEL. I am also satisfied that the Defendant himself has received no part of the money recovered from the Jersey Bank Account.
- If, and insofar as, it is an essential part of the Claimant's cause of action that he must satisfy the Court that he intends to apply the damages recovered from the Defendant for the benefit of ISEL pursuant to the constructive trust on which he held the money in the Jersey Bank Account, then it is clear that he cannot succeed. He would be obliged to rely upon his own unlawful conduct in order to establish the constructive trust. Public policy does not permit the Claimant to maintain a cause of action which is dependant upon proof of his own unlawful conduct: Tinsley v Milligan [1994] 1 AC 340.
- Recognising that the Claimant might encounter difficulty in recovering in his own name the money taken from the Jersey Bank Account at the direction of the Defendant, Mr Marsden made an application on the tenth day of the trial for ISEL to be joined to the proceedings. The application followed the formal concession during the trial, to which I have referred earlier in this judgment, made on behalf of the Claimant, that the money in the Jersey Bank Account had come from the US $555,000 paid into ISEL's Florida Account on 16th April 1992. Mr Marsden submitted that it was just and appropriate that ISEL should be joined since its joinder would not add to the evidence or cost of the proceedings and would serve to avoid the need for any separate and subsequent proceedings by ISEL to recover money from the Defendant. Mr Marsden informed me that a firm of solicitors was prepared to act for ISEL.
- In my judgment, it is not appropriate to join ISEL to the proceedings at this late stage, and I decline to do so for the following reasons. The Hubner Action was commenced by the Claimant in November 1998. The Claimant has delayed making an application to join ISEL for some two and a half years. He has ultimately made an application in the middle of the trial of the Action. He did not make the application so long as he was contending that he did not take any part of the US $555,000 for his own purposes and no part of the funds in the Jersey Bank Account derived from the US $555,000, or alternatively the US $555,000 was never at the independent disposal of ISEL but remained the at sole disposition of UBE, which gave him authority to keep a part for his own purposes. In so far as the perceived need to join ISEL to the Hubner Action has arisen because the Claimant has changed his evidence on the use of part of US $555,000 for his own purposes and the provenance of the funds in the Jersey Bank Account, I see no reason why the court should assist the Claimant. Equally, in so far as the application to join ISEL was made in case I should find (as I have done) that, contrary to the evidence of the Claimant, the Claimant did not obtain the consent of UBE to the retention of any part of the US $555,000 for his own use, and he was well aware that he had not obtained any such consent, and he retained for his own purposes all or part of the US $555,000 in pursuit of a dishonest scheme, I again do not see why the court should assist the Claimant.
- Furthermore, I have found there are currently no directors of ISEL. Accordingly, neither the Claimant nor any other person is properly authorised to give instructions on behalf of ISEL in relation to these proceedings.
- If anyone was properly authorised to act for and in the best interests of ISEL, it is not at all clear to me that such a person would wish to support the present proceedings. The Claimant, who is not a director of the ISEL, and who has conceived and executed a scheme to defraud the company, certainly cannot be relied upon to act in its best interests. There is no person properly authorised on behalf of the company to consult the creditors of the company. There has been no evidence to indicate that the other shareholder, Stephen Daly, would wish to support the present proceedings.
- It is the Defendant's case that the money recovered form the Jersey Bank Account has been expended entirely for the purposes and in the interests of ISEL. The money recovered was expended pursuant to the agreement of 20th November 1992 purportedly entered into between ISEL and Mr Hunt, for the purposes of tracing and recovering money taken by the Claimant from ISEL's Florida Account. As between ISEL and the Defendant, who purported to act on ISEL's behalf, but who was not a director of the company at the material time, the issue of whether or not the agreement of 20th November 1992 was in the interests of and ought to be ratified by ISEL and whether the money recovered from the Jersey Bank Account was properly applied for the benefit of ISEL, would be material issues in any proceedings between them. Any claim by ISEL for damages against the Defendant arising out of those issues might expose ISEL to expense, including any adverse order for costs. The resolution of those issues might indeed involve additional time and expense, including the time and cost of new evidence or the carrying out of any orders for accounts and enquiries. Moreover, so far as I am aware, ISEL has no assets. All these difficulties, that is to say the absence of any person to give instructions on behalf of ISEL, the uncertainty of the benefit to ISEL of being joined as a party, the absence of any assets in ISEL, and the potential exposure of ISEL and the Defendant to additional expense, militate against the joinder of ISEL to the Hubner Action at this stage. Certainly it would not be right for the Claimant and his legal advisors, with the benefit of public funds to assist the Claimant personally in his claim, to pursue on behalf of ISEL those issues which would arise between ISEL and the Defendant if ISEL was joined. That would simply enable the Claimant to decide what is in the best interests of ISEL, its shareholders and its creditors, and to argue for compensation to be paid by the Defendant to ISEL equivalent to the amount withdrawn from the Jersey Bank Account at the direction of the Defendant. The Claimant would thereby be circumventing the more appropriate procedure of applying for relief and directions in the Company's Court in order to place the affairs of ISEL on a proper footing, whether by an application that it be wound up and a liquidator appointed or some other relief. On any such application, there would be an opportunity for the shareholders and interested creditors to make known their views.
- The fact that it is not, in my judgment, appropriate to join ISEL to the Hubner Action, and the analysis in support of that conclusion, reinforce the conclusion that the Claimant cannot achieve in his own name, by way of an action for money had and received, a claim for damages against the Defendant intended to restore to ISEL the money misappropriated by the Claimant.
The Compromise Agreement
- A considerable time was taken up during the trial on the issue of whether or not the Claimant entered into and signed Compromise Agreement while he was in The Wolds Prison. The Defendant's case is that Mr Benson visited the Claimant in prison, and the Claimant entered into and signed the Compromise Agreement on 6th May 1995. The Claimant's case is that he never agreed to enter into the Compromise Agreement, and his signature on the copy of the Compromise Agreement put in evidence before the Court is a forgery.
- It is very difficult to understand why so much time has been devoted to the issue of the validity of the Compromise Agreement, since it is not pleaded and has never been pleaded by way of defence to the Claimant's claim. This is not surprising since Comptons, who were retained by the Defendant to act for ISEL, said in a letter to the Claimant's solicitors dated 11th July 1995 that the Compromise Agreement was being treated as at an end by virtue of the Claimant's repudiation of it.
- In the circumstances, I intend to deal with the Compromise Agreement quite briefly. In my judgment, on a balance of probabilities, the Claimant did sign the Compromise Agreement on 6th May 1995.
- There is a straight conflict between the evidence of the Claimant, on the one hand, and the evidence of Mr Benson, on the other hand, as to what took place in The Wolds Prison in meetings between the Claimant and Mr Benson on 5th and 6th May 1995. For the reasons I have given earlier in this judgment, where the evidence of the Claimant and of Mr Benson conflict, I generally prefer the evidence of Mr Benson. I do not consider that it would be in character for Mr Benson to have committed a serious criminal offence in forging the Compromise Agreement.
- The Claimant supports his case that his signature on the Compromise Agreement was a forgery by reference to evidence given by Mr Ramage and Ms Anne Daly. I have already explained earlier in my judgment why I have doubts as to reliability of the evidence they have given in this matter.
- Against the evidence of the Claimant, Mr Ramage and Ms Anne Daly, must be set a number of matters which point strongly in support of the Claimant's signature being genuine. The opinion of the handwriting expert, Ms Sawyer, is that the signature is the authentic signature of the Claimant. She qualifies her opinion to the extent that she has not been able to examine the original, which has not been produced in evidence. Nevertheless, her opinion carries considerable weight.
- Mr Benson's evidence was that, having procured the Claimant's signature to the Compromise Agreement on 6th May 1995, during the following week he sent or delivered the original to Mr Goldrich of Comptons. The original cannot now be found. He gave evidence that, before taking or sending the original to Mr Goldrich, he had a copy certified by solicitors occupying premises in the same building as his office. A copy so certified was produced in evidence. To that extent, the account of Mr Benson is supported.
- A letter was written by Mr Hunt to the Claimant dated 25th May 1995, following a visit by Mr Hunt to the Claimant in prison on the previous day. Mr Marsden submitted that it is to be inferred that the reason Mr Hunt visited the prison was because the Compromise Agreement had not been signed, and Mr Hunt wished to persuade the Defendant to sign it. The letter of 25th May 1995, however, is expressed in terms which are more consistent with there having been an agreement than with an attempt by Mr Hunt to persuade the Claimant to enter into one.
- In support of the Claimant's case on the Compromise Agreement, Mr Marsden submitted that the purported acceptance of a repudiation by the Claimant of the Compromise Agreement so shortly after it was signed was an implicit recognition that there never had been any concluded agreement. He submitted that the Defendant must have got cold feet about relying upon and enforcing the Compromise Agreement. Mr Marsden submitted that, if there had been a valid and effective Compromise Agreement, the Defendant would have sought to secure the co-operation of the Claimant in instructing the Bank of Scotland to release the money in the Jersey Bank Account, rather than seek to enforce the default judgment contained in ISEL Action. There are, however, possible practical explanations for the Defendant's wish to treat the Compromise Agreement as no longer binding and effective. On 6th May 1995 it may not have been known whether or not the default judgment could be successfully executed in Jersey against the Jersey Bank Account. On 23rd June 1995, the balance of that account was recovered. The Compromise Agreement required the Claimant to be paid £20,000; but, having recovered the total amount outstanding to the credit of the Jersey Bank Account, the Defendant may have considered that it would be desirable to avoid the obligation to pay the £20,000 due under the Compromise Agreement.
- Furthermore, Mr Hunt gave evidence that he was not particularly happy about the Compromise Agreement, since, in his view, it would or might prejudice any subsequent case against the banks through which the US $555,000 had passed.
- The Claimant gave evidence that Mr Benson had gained access to him in The Wolds Prison in May 1995 by posing as his solicitor. In her first Witness Statement, Ms Anne Daly said that Mr Benson had repeatedly bragged to her on a number of occasions that he had gone into the prison where the Claimant was on remand and had pretended to be the Claimant's solicitor in order to get a document signed by the Claimant.
- I reject that evidence of the Claimant and Anne Daly. In his Affidavit sworn on 12th May 1995 in the ISEL action, the Claimant said:
"I was met by this person, who I assumed [my emphasis], was my solicitor … This person, then identified himself, as Patrick Benson; I immediately informed the prison staff, that this person was not my solicitor, requested how, he had obtained entry to the prison as such? To be informed, that Mr Benson had signed the visitors document, as being a solicitor on official business for the FBI …"
- The fact that Mr Benson did not obtain entry to The Wolds Prison by posing as the Claimant's solicitor is also supported by a copy of the "official visitors form" completed by Mr Benson when visiting The Wolds on 5th May 1995. This says nothing whatever about Mr Benson being a solicitor, let alone the Claimant's solicitor. Indeed, on the form he indicates himself as representing "Imex Europe Limited".
- Mr Ramage gave evidence that, pursuant to a request by Mr Benson, he visited the Claimant, his uncle, in The Wolds Prison to try to obtain the signature of the Claimant to an agreement. In his oral evidence, but not in his witness statement dated 1st July 2000, Mr Ramage said that he thought this was about 8th May 1994. Assuming that Mr Ramage's reference to 1994 should have been to 1995, the 8th May was a Bank Holiday. I accept Mr Benson's evidence that he was not anywhere in the vicinity of The Wolds on that day, but had returned home.
Conclusion
- For the reasons set out in this judgment I find in favour of the Defendant and dismiss the Hubner Action.
