Argyle UAE Ltd v Par-La-Ville Hotel And Residences Ltd & Ors [2018] EWCA Civ 1762

[2018] EWCA Civ 1762Case No A3/2017/2275
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2017] EWHC 1915 (Ch)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ROGER WYAND QC SITTING AS A DEPUTY HIGH COURT JUDGE
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26/07/2018
Before
LORD JUSTICE HENDERSONLORD JUSTICE FLAUX
Between
(1) ARGYLE UAE LIMITEDAppellants(2) ROBERT MCKELLARAppellant(1) PAR-LA-VILLE HOTEL AND RESIDENCES LIMITED (in Provisional Liquidation)Respondents(2) MICHAEL W MORRISON AND CHARLES THRESH (in their capacity as Receivers of the Trustees of the Skyline Trust (a trust formed in Bermuda))Respondent(3) ARGYLE LIMITED (in Liquidation)Respondent
The Second Appellant in person for AppellantsMatthew Parker (instructed by Enyo Law LLP) for RespondentsHearing Hearing date: 10 July 2018
Judgment Approved

Introduction

[1]The appellants appeal with the permission of Newey LJ against the Order dated 27 July 2017 of Mr Roger Wyand QC sitting as a Deputy High Court Judge in the Chancery Division whereby the judge struck out the appellants’ Defence in respect of the respondents’ unjust enrichment claim and entered summary judgment for the respondents on that claim, ordering the appellants to give restitution to the respondents of the sums of U.S. $999,999.99 and U.S. $11,500,000 together with interest and costs.[2]The appellants were legally represented at the hearing before the judge by Mr Hugh Jory QC instructed by Alexander Whyatt Solicitors and continued to be legally represented in the preparation of the appeal, the appeal skeleton argument having been prepared by Mr James Couser of counsel. However, in the week before the hearing of the appeal, the Court made an Order permitting Alexander Whyatt Solicitors to come off the record pursuant to CPR 42.3 and the appellants were not legally represented at the appeal hearing. The Court permitted Mr Robert McKellar, the second appellant and the director and shareholder of the first appellant to make submissions on behalf of the appellants. Mr McKellar adopted the written submissions of Mr Couser and made further submissions orally in particular in relation to the factual background. Those submissions were presented in a courteous and measured way which was of considerable assistance to the Court.

Factual background

[3]The background to the dispute is a complex one, although ultimately the issues for this Court are not ones of any great complexity or difficulty.[4]On 9 July 2014, Mexico Infrastructure Finance LLC (“MIF”), a finance company incorporated in Delaware, entered a credit agreement with the first respondent (“PLV”) to provide a loan of U.S. $18 million in relation to a hotel, residential and retail development in Bermuda. The purpose of the loan was not to fund the development but to enable PLV to discharge debts and security granted to third parties so that PLV could secure additional financing for the development. The loan was to be repaid on 30 December 2014. On the same day as the loan was made, the Corporation of Hamilton, Bermuda (“the Corporation”) provided a guarantee of the loan to MIF.[5]The net proceeds of the loan were paid into an escrow account with the Bank of New York Mellon (“BNYM”) to be held by BNYM as escrow agent pursuant to an escrow agreement between MIF, PLV, the Corporation and BNYM also dated 9 July 2014.[6]Thereafter PLV was unable to raise additional financing for the development. On about 16 October 2014, Mr Michael Maclean a director of PLV had a meeting in London with Mr McKellar, who was a 50% shareholder in and director of the third respondent (“Argyle”) and the sole shareholder and director of the first appellant (“Argyle UAE”). They discussed a proposed transaction whereby PLV would pay a proportion of the monies in the escrow account to Argyle in return for which Argyle would utilise a credit facility to buy and sell financial instruments.[7]On 19 October 2014, Mr MacLean settled the Skyline Trust in Bermuda, of which he and his wife, also a director of PLV, were beneficiaries. The trustees were friends or relatives of his.[8]On 20 October 2014 the so-called Trade and Profit Share Agreement (“TPSA”) was entered into between Argyle and the trustees of the Skyline Trust (“the trustees”) pursuant to which the trustees agreed to transfer U.S.$12.5 million (which the TPSA stated was currently held in an account of Mr and Mrs MacLean at Clarien Bank in Bermuda) to Argyle in return for which Argyle agreed(i) that for a period of a year it would utilise a credit facility of U.S. $125 million to buy and sell financial instruments through high frequency trading; and(ii) to generate and pay to the trustees before 31 December 2014 a minimum of U.S.$18 million by way of profit from such trading activities and that any further profits thereafter would be split 80% in favour of the trustees, 20% in favour of Argyle.[9]So far as relevant to this appeal, the following were express terms of the TPSA: 5 Argyle will following receipt of the pre-qualifying information from Funder [i.e. the trustees] and due diligence for the Assets [i.e. the U.S. $12.5 million] as set out in this Agreement arrange the following: 1. Deliver to the Funder’s reasonable satisfaction, such written evidence from a top tier bank or other reputable bank or financial institution which shall confirm the availability of and Argyle’s access to the Credit (as the term “Credit” is defined in paragraph 5.3 below) (sic); 2. Subject to the satisfaction of the deliverables noted in paragraph 5.1 to the reasonable satisfaction of the Funder, arrange with the Funder to receive the Assets into Argyle’s nominated bank account as a fee payment to Argyle in order to utilise a credit which Argyle warrants and confirms is currently available to Argyle to the value set out in Part Two of Schedule One hereto (the “Credit”) to be used in financial markets including (but not limited to) the United Kingdom (including Channel Islands), Europe, Canada, USA, Hong Kong, Singapore, Switzerland and United Arab Emirates to purchase and resell Instruments on a matched trade basis or to place such Credit with Financial Managers or dealers regulated by the FCA (or similar regulatory authorities in the relevant jurisdiction) in order to perform or execute such matched trades; 3. Following payment to Argyle (or as it directs) of the Assets as set out in the immediately preceding paragraph from the Funder, to commence the acquisition and resale of Instruments through Argyle’s nominated transacting account or bank accounts up to the value of the Credit and organising the exit selling to Argyle’s nominated buyer from the transacting account or bank account to create spread profits or commissions on such trades for distribution in accordance with the Second Schedule hereof in the minimum amount of Eighteen Million United States Dollars $18,000,000 (“Base Profit”) on or before 31 December 2014 (“Base Profit Distribution Date”); 16 The payment of the Fee [i.e. the U.S. $12.5 million] to Argyle for the Credit shall be a one time irrevocable payment made on the date of this Agreement for the value of the Credit time being of the essence in respect of such payment.[10]On the same day as the TPSA, 20 October 2014, Mr MacLean in his capacity as a director of PLV wrote a Letter of Acknowledgment and Agreement to the trustees and to himself and his wife requesting their acknowledgment and agreement to (i) the official appointment of the Trust as PLV’s agent, representative and nominee for the purpose of entering the TPSA and receiving any proceeds under it; the appointment of Mr and Mrs MacLean as Escrow Agent to hold the Assets [i.e. the U.S. $12.5 million] in their account at Clarien Bank upon trust for PLV; and (iii) the agreement of Mr and Mrs MacLean as Escrow Agent to release of the Assets in accordance with paragraph 5.2 of the TPSA. The Letter was countersigned by the trustees and by Mr and Mrs MacLean as Escrow Agent.[11]On 24 October 2014, PLV and the Corporation wrote letters to BNYM authorising the transfer of monies out of the Escrow Account into the account of Mr and Mrs MacLean at Clarien Bank.[12]At the direction of Argyle, payments of the Assets were made by the trustees pursuant to the TPSA as follows (pursuant in each case to an invoice from Argyle UAE):(i) U.S. $499,999 to Rational Foreign Exchange Ltd (a foreign exchange broker) on 31 October 2014;(ii) U.S. $11.5 million to an account of Argyle UAE at EFG Bank in Grand Cayman on 5 November 2014; and(iii) U.S. $500,000 also to Rational Foreign Exchange Ltd on 7 November 2014. In each case the invoice described the payment sought as Fees for 12 months use of the Credit. The payments to Rational Foreign Exchange Ltd were then converted into sterling which was then paid into a personal account of Mr McKellar.[13]In the event, although Mr McKellar’s evidence was that he carried out negotiations and preparatory work for trading, he accepted that no trades were done and accordingly no profits were ever made. In particular, the U.S. $18 million, which PLV would have used to repay the loan to MIF, was not repaid by 31 December 2014 or at all. Mr McKellar seeks to ascribe this failure to two factors:(i) the fact that the Assets were paid over late and not on the date of the TPSA, 20 October 2014 and(ii) the fact that on 20 February 2015, Argyle was served with a freezing injunction obtained by MIF against PLV and Mr and Mrs MacLean.[14]On 24 December 2014, as the 31 December deadline approached, Mr McKellar emailed Mr MacLean and Mr Oosthuizen of Wakefield Quinn, Bermudian lawyers acting for PLV/the trustees explaining that he had put in place a standing instruction to his bank to pay U.S.$18 million to the Clarien Bank account once that amount was reached (the implication being that trading had started and profits were being made) but that if that sum were not reached, he would also put in place a “contingency payment” of U.S. $300,000. He said he would also write to confirm that the larger payment of U.S. $18 million would be made on or before the end of January 2015 when “our office” reopens, which was said to be on 26 January. He said:
“Obviously we are not contractually obliged to make the U.S. $300,000 payment because that is not part of our contract with the Trustees, but I will do so as a gesture of goodwill to help as much as possible for you to gain an extension for your loan arrangement.”
[15]On 30 December 2014, Mr Outerbridge the mayor of the Corporation informed Mr McKellar by email that MIF was resistant to an extension and might attempt to freeze the trade the following day, the due day for the loan. Mr McKellar expressed concern about this in forwarding the email to Mr MacLean and Mr Oosthuizen on 31 December 2014 saying they could not be put in a position where this took place and proposing on advice that the U.S. $375,000 (which the previous U.S. $300,000 had now become) should be paid to Wakefield Quinn as escrow agent. He said:
“This works for us as this is an ex gratia payment, not related to the original transaction in any way”
. He also proposed that: “the balance USD18M when it becomes available in January 2015” should be paid to Wakefield Quinn in case of any Court proceedings. Mr McKellar and Mr MacLean agreed on the telephone later that day that the U.S. $375,000 would be paid to Wakefield Quinn.[16]Mr McKellar drew our attention to the fact that Mr Oosthuizen had replied on 4 January 2015, saying that Wakefield Quinn could receive the U.S. $375,000 in trust for PLV/the trustees on the basis that it was an initial payment against Argyle’s obligations under the TPSA and without prejudice to their rights under that agreement. However, we have seen nothing to suggest that Mr McKellar agreed to pay the U.S.$375,000 on that basis as opposed to it being an ex gratia payment unconnected with the TPSA as he had previously said. The payment was made at some point in January 2015.[17]On 20 February 2015 after the Bermudian freezing injunction was served on Argyle, Mr McKellar emailed Mayor Outerbridge saying that:
“We have put in place a payment of USD 18M pursuant to [the TPSA]”
. Later in the email he says they will pay the U.S. $18 million.[18]On 7 March 2015, Mr McKellar emailed Mayor Outerbridge again saying they had asked their lawyer’s bank to pay the US $18 million “to a Trust Company account that we have…that we use for our USD banking in US. The Trust Company have agreed to accept it and pay it on to Michael Smith’s client account for the Skyline Trustees”.[19]On 7 May 2015, Mr McKellar on behalf of Argyle and Argyle UAE and Mayor Outerbridge issued a press release, the context of which was that the fact that money loaned which had been guaranteed by the Corporation had been paid out of the Escrow Account with BNYM to Argyle/Argyle UAE had caused something of a political fuss in Bermuda. In the press release, Mr McKellar explained that because the U.S. $12.5 million fee was paid late the 31 December 2014 deadline for the U.S. 18 million was not achievable and that a U.S. $375,000 “ex gratia payment without liability on Argyle’s part” was agreed to be paid to the trustees to extend the payment of the U.S. $18 million beyond 31 December 2014 and that such payment was made to the trustees’ lawyers in January 2015.[20]Pursuant to Orders of the Supreme Court of Bermuda made in October 2015, Mr Morrison and Mr Thresh of KPMG Advisory Limited were appointed joint provisional liquidators of PLV and receivers of the trustees of the Skyline Trust. On 1 July 2016, Mr Thresh and Mr Cohen were appointed joint liquidators of Argyle pursuant to an Order of the Supreme Court of Gibraltar. After their appointment it emerged from the corporate returns in Gibraltar that Argyle had no history of trading and paid up share capital of only £1,000. The statutory books and records did not disclose any active trading or that Argyle had ever entered an agreement like the TPSA. There was no evidence of any resolution that Argyle should enter the TPSA or that monies paid to Argyle under the TPSA should instead be paid to Argyle UAE.[21]On 12 July 2016, Mr McKellar emailed Mr Morrison, Mr Thresh and Mr Cohen on the subject of the payment of the outstanding U.S.$18 million, saying, inter alia:
“To resolve this matter Argyle UAE Limited have given Irrevocable instructions to Global Financial Trust in California who hold investments in their portfolios for Argyle UAE Limited to pay the following amounts to Apex Law’s Client account: USD12,500,000 – representing the original fee received in the matter – to Apex Law’s client account for onward payment into Bermuda Court USD5,500,000 to Apex Law’s client account for onward payment into Bermuda Court. This makes a total sum of USD18,000,000. I have also instructed that a payment is also made to Apex Law’s client account of a sum equivalent to cover interest.”
[22]On 5 August 2016, Popplewell J granted a without notice freezing injunction in favour of the respondents against the appellants which included orders for disclosure of assets backed by affidavit. Mr McKellar swore two affidavits on 17 August 2016 giving such disclosure on behalf of each of the appellants from which it emerged that of the U.S. $11.5 million paid to EFG Bank U.S. $328,000 odd had been used to buy an Aston Martin for Mr McKellar. The bulk of the monies, some U.S. $9.9 million were transferred to an account at Falcon Private Bank in Zurich. U.S. $4,467,375 was used to buy a property called Overton Grange in Sussex in Mr McKellar’s sole name in December 2014 and some U.S. $2.5 million to buy another property, Rystwood Farm in the joint names of Mr McKellar and Ms Hawes (his then fiancée, now wife, the third defendant, but who has no involvement in this appeal) in February 2015. In 2014 and 2015, a further U.S. $1.3 million of the monies was expended on renovation and refurbishment at the two properties. U.S. $115,000 was used in November 2014 to buy an engagement ring for Ms Hawes.[23]According to his affidavits, these various monies were paid to him as director’s loans. However, no documentary evidence whatsoever has been produced to support that assertion. There is no loan agreement or board resolution, no memorandum or email, nothing setting out the terms of the loans or the interest payable, an extraordinary gap if these were genuine director’s loans in such substantial amounts.[24]At all events, the effect of the transfers to Mr McKellar is that the bulk of the U.S. $12.5 million has been dissipated. He asserted in his submissions before this Court that some of this was expended as director’s expenses, but that case is not pleaded in the Defence and there is no evidence to support it. Only some U.S. $7,500 was left in the Falcon bank account. According to his affidavit Argyle UAE accumulated commissions and profits from October 2014 of some U.S. $19.9 million which was invested in Global Financial Trust. This is presumably the trust company to which Mr McKellar was referring in his email to Mayor Outerbridge of 7 March 2015.[25]As part of their efforts to ensure that the freezing order was complied with, the respondents’ solicitors investigated Global Financial Trust. The information they obtained indicated that it was not a legitimate financial institution and suggested that it did not exist. Mr McKellar continued to maintain that it did exist and produced an email from a Clarence Hester, President of Global FG Enterprises LLC dated 30 June 2017 purporting to attach the current statement for the Argyle UAE account. The email also stated that Global Financial Group Trust is a Hawaiian trust which is the trust company of Global FG Enterprises Ltd and that the Argyle UAE account statement was booked through Global Financial Trust Management Group KB as it is not a U.S. corporation. The attached statement was apparently printed out from the internet on 29 June 2017 but had an account date of 29 June 2016, a year earlier. When this was pointed out, Mr McKellar produced another print out dated 3 July 2017 with an account date of 3 July 2017. These documents purported to show U.S. $19,805,382 in the account. The investigations carried out by the respondents’ solicitors into Global Financial Trust Management Group KB had suggested that this entity does not exist.[26]Whilst it is not critical to the determination of the appeal, I agree with Mr Matthew Parker for the respondents that the story that there is some U.S. $19.9 million invested by Argyle UAE with Global Financial Trust is exactly that, a complete fiction. If that money were invested with Global Financial Trust, Mr McKellar has failed to provide any explanation why those funds have not been liquidated, as they surely could be in a matter of days, and U.S. $18 million paid over to PLV/the trustees, in accordance with his repeated promises to do so.

The proceedings

[27]The respondents’ pleaded case, so far as relevant to the appeal, is that Argyle UAE and Mr McKellar have been unjustly enriched at the expense of PLV and the trustees by the payment of U.S. $12.5 million because there was a total failure of consideration under the TPSA. The respondents pleaded that the whole TPSA was a sham. The further or alternative case was that they had been unjustly enriched at the expense of Argyle, which was contractually entitled under the TPSA to receive the U.S. $12.5 million fee and correspondingly obliged to pay the U.S. $18 million “base fee” to the trustees, and the liquidators of Argyle had been unable to find any documents evidencing the basis on which the fee was paid to Argyle UAE.[28]In their Defence drafted by Mr Jory QC, the appellants contended that the parties had agreed that the U.S. $375,000 would be paid by Argyle to the trustees instead of the U.S. $18 million. It is asserted that it was a matter for Argyle to direct where payment of the fee should be made and it had directed payment to Argyle UAE which was intended to be the party which would conduct the trades under the Credit, an assertion which was repeated by Mr McKellar in his submissions to this Court. It is pleaded that the fee was payable in consideration of Argyle giving the trustees access to the Credit for 12 months which Argyle remained willing and able to do by itself and/or Argyle UAE but was effectively prevented from doing so by notice of the Bermudian freezing order.[29]The respondents issued the application to strike out the defence to the unjust enrichment claim and for summary judgment on 20 March 2017.

The judgment below

[30]Having set out the factual background, the judge set out the law on striking out and summary judgment. In relation to the former, he stated that a defence may be struck out if it consists of a bare denial or otherwise sets out no coherent statement of facts or if the facts set out, while coherent would not, even if true, amount in law to a defence to the claim. In relation to summary judgment, the judge set out at [25] the well-known summary of the legal principles in the judgment of Lewison J (as he then was) in Easyair v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. It was not suggested on this appeal that there was any error in the judge’s self-direction as to these legal principles.[31]As to the law on unjust enrichment, he noted at [28] that to succeed the respondents needed to establish that(i) the appellants had been enriched;(ii) that the enrichment was at the respondents’ expense and(iii) that the enrichment was unjust.[32]He dealt first with the claim of PLV and the trustees and their case that there had been a total failure of consideration under the TPSA since there was no utilisation of any credit, no trading in any instruments and no profit. He noted at [31]-[32] the plea that the TPSA was a sham which went further than necessary for the purposes of the application he was hearing, so that it was not appropriate for him to decide whether there was a credit or not. He said that the respondents’ case was that one of the situations where a defendant’s enrichment is unjust is where money is paid under a contract and there has been a total failure of the consideration for the payment. He set out 29-057 of Chitty on Contracts (32nd edition, 2015) cited by Mr Parker, which he also cited before this Court, where reference is made to this being a failure of basis rather than a failure of consideration, that is a “complete failure of the performance for which the payer has bargained”.[33]He referred at [33] to the fact that the appellants contended that the payment of U.S. $375,000 was some sort of consideration under the TPSA but rejected that saying that it did not represent performance of the TPSA in any way. At [34] he concluded that the respondents were correct that there was a total failure of consideration as there was no utilisation of any credit, no trading and no profit.[34]He then went on to deal with various arguments advanced by Mr Jory QC as to why the appellants were nonetheless not liable to the respondents. He rejected at [35]-[36] the suggestion that an assertion by Mr MacLean that the funds belonged to him afforded any defence. Although this point was reiterated by Mr McKellar in his oral submissions before us, there is nothing in the point. As the judge said, the Skyline Trust was a signatory of the TPSA and the monies were paid out of the MacLeans’ bank account on its behalf.[35]The judge then dealt with a related point that the appellants relied upon the decision of the Supreme Court in Investment Trust Companies v Revenue and Customs Commissioners [2017] UKSC 29; [2018] AC 275 for the proposition that the benefit received by the defendant must come directly from the claimant. The judge regarded this as too narrow a construction of Lord Reed JSC’s judgment. He cited the various passages relied upon by Mr Jory QC and at [40] referred to the submission that there was no direct transfer from PLV or the Trust to the appellants. He said that the payments were made direct to Argyle UAE and to Rational FX for converting into sterling and crediting to Mr McKellar’s account and it was irrelevant that the payments were made at the direction of Argyle. There was no evidence that Argyle had received the benefit and then made a gift to the appellants as in Lord Reed’s example at [49]. This argument did not give rise to an arguable defence.[36]At [41] to [46] he dealt with Mr Jory QC’s argument based on the decision of the Court of Appeal in MacDonald, Dickens & Macklin v Costello [2011] EWCA Civ 930 that a restitutionary claim should not be allowed to undermine a contract in which the parties chose to allocate the risks of the transaction. He held that requiring the appellants to repay the U.S. $12.5 million paid pursuant to the terms of the TPSA would not undermine the contractual arrangements where there had been a total failure of consideration.[37]Finally in relation to the claim of PLV and the trustees, the judge dealt at [47]-[48] with Mr McKellar’s claim that the payments made to him were remuneration or directors’ loans so the respondents could not claim unjust enrichment against him. The judge rejected that argument, holding that the payments made to Mr McKellar were part of a series of transactions which could be considered as a single transaction so that Mr McKellar had no arguable defence to the claim in unjust enrichment.[38]The judge then went on to deal with the second pleaded basis of the unjust enrichment claim, that the appellants had been unjustly enriched at the expense of Argyle. He noted at [49] the appellants’ contention that Argyle had directed the money to be paid to Argyle UAE and Mr McKellar pursuant to a contract between Argyle and Argyle UAE but had produced no evidence as to the existence or terms of such a contract. All that was said was that Argyle UAE was to carry out the trading under the TPSA but the respondents’ evidence was that they could find no documents evidencing this transaction in the records of Argyle. The appellants contended that this was not surprising as Mr McKellar was the director of both companies. The judge held at [50] that none of this gave rise to a positive case as to why the appellants should be entitled to keep the money paid to them by Argyle whose case had all the requirements of unjust enrichment.[39]Accordingly, he held at [51] that the appellants’ defence to the unjust enrichment claim disclosed no reasonable grounds for defending the claim and should be struck out. They had no real prospect of successfully defending the claim and there was no other compelling reason why the issue should go to trial.

The grounds of appeal

[40]The grounds of appeal can be summarised as follows:(1) That the judge was wrong to find at [34] that there was a total failure of consideration;(2) That the judge was wrong to find at [40] that the appellants had no realistic prospect of successfully arguing that the claim could not succeed because there was no direct transfer of the benefit. He had wrongly applied the law stated by the Supreme Court in the Investment Trust Companies case;(3) That the judge was wrong to find at [43]-[46] that the appellants had no realistic prospect of successfully arguing that the claim should not succeed because of the principle of upholding contractual arrangements by which the parties have chosen to allocate the risks of the transaction;(4) The judge was wrong to find at [49]-[50] that the Argyle claim fulfilled all the requirements of unjust enrichment. In doing so, he had erroneously reversed the burden of proof applicable to unjust enrichment claims.

Total failure of consideration

[41]In support of the first ground of appeal, the written submissions of Mr Couser on behalf of the appellants contended that there had not been a total failure of consideration for three reasons:(1) Part of the consideration for the fee was the making available of the Credit under paragraph 5. The Credit had been made available and that was part performance of the obligation making up the consideration, so it could not be said that there was a total failure of consideration.(2) The evidence of Mr McKellar that he had carried out negotiations and preparatory work for trading constituted “commenc[ing] the acquisition and resale of instruments” with the meaning of paragraph 5.3 of the TPSA and was again part performance.(3) The payment of U.S. $375,000 constituted a variation of the TPSA as pleaded and therefore part performance and, in any event, the judge recognised there was a dispute as to the status of the payment, so that he should not have concluded this point in the respondents’ favour when that dispute was unresolved.[42]Mr McKellar relied upon these matters in his oral submissions. He emphasised that in real business terms utilisation of the Credit included having it available and having meetings with banks to discuss trades. He also submitted that the nature of the payment of U.S. $375,000 was unresolved and, as I have already noted, he relied upon the email from Wakefield Quinn of 4 January 2015 which said that the payment would be accepted as part payment towards the U.S. $18 million.[43]Despite these submissions, I consider that the judge was correct to conclude that there had been a total failure of consideration under the TPSA for the following reasons. First, as Mr Parker submitted, Argyle had warranted in the TPSA that the Credit existed. Its only value to the respondents was if trades were carried out pursuant to it, with the potential for profits. Making the Credit available was not part of the contractual obligation for which the fee was due. Paragraph 5.3 is quite clear that it is the acquisition and resale of instruments so as to generate profits which is the obligation for which the fee is being paid.[44]Second, whilst there are cases where preparatory work is part of the contractual obligations, this is not such a case. As Lord Goff said in Stocznia Gdanska SA v Latvian SS Co [1998] 1 WLR 574 at p 588D:
“…the test is not whether the promisee has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due.”
[45]As Lord Goff pointed out, the contract in that case was not just for the sale of the ship, but for its design and construction at the shipyard, so that those preparatory works of design and construction formed part of the consideration for which the price was paid (see p 588E-G). In contrast, in the present case, contrary to Mr McKellar’s submissions, the meetings and negotiations which he says he had did not form part of the contractual obligation of Argyle for which the fee was paid. Rather they were preparatory work for the TPSA which was not remunerated under that agreement. It was only if a trade for which the Credit was to be utilised had been executed that there would have been part performance of the contractual obligation under the TPSA.[46]Third, so far as the payment of U.S. $375,000 is concerned, in my judgment the judge was quite right to conclude that this was not part performance of the obligation of Argyle under the TPSA. It is important to focus on the appellant’s pleaded case, which is that the TPSA was varied so that the obligation to pay U.S. $18 million was replaced by the obligation to pay U.S. $375,000. Quite apart from the complete commercial implausibility of that contention, it is entirely inconsistent with the contemporaneous documentation in which Mr McKellar describes the payment as ex gratia and unconnected with the TPSA and acknowledges time and again that the U.S. $18 million remained due even after the U.S. $375,000 was paid.[47]The email from Wakefield Quinn of 4 January 2015 is no answer to this point, since there is no evidence that Mr McKellar or Argyle UAE in fact paid the U.S. $375,000 on the basis that it was part payment of the U.S. $18 million. Furthermore, the contemporaneous documentation after payment, specifically the emails of 20 February 2015 and 7 March 2015 and the press release of 7 May 2015, all acknowledging that the full U.S. $18 million remained due, is all inconsistent with payment having been on that basis. In addition, no such case is pleaded by the appellants.

Direct payment

[48]Mr Couser’s written submissions in relation to ground 2 rely upon Lord Reed’s judgment in the Investment Trust Companies case at [46]-[51] as reaffirming the general rule that to found a claim in unjust enrichment the benefit received by the defendant must have come directly from the claimant. However, as Mr Couser acknowledges, Lord Reed recognised that there are exceptions to that general rule. As he said at [47]-[48]:
“47. There are, however, situations in which the parties have not dealt directly with one another, or with one another’s property, but in which the defendant has nevertheless received a benefit from the claimant, and the claimant has incurred a loss through the provision of that benefit. These are generally situations in which the difference from the direct provision of a benefit by the claimant to the defendant is more apparent than real. 48. One such situation is where the agent of one of the parties is interposed between them. In that situation, the agent is the proxy of his principal, by virtue of the law of agency. The series of transactions between the claimant and the agent, and between the agent and the defendant, is therefore legally equivalent to a transaction directly between the claimant and the defendant…”
[49]In my judgment, the present case is just such a case of agency. Despite Mr MacLean’s alleged subsequent assertion that he was personally entitled to the U.S. $12.5 million, upon which Mr McKellar placed reliance, it is clearly the case from the terms of the TPSA and the other agreements referred to at [8] and [10]-[11] above that(i) the U.S. $12.5 million was PLV’s money which came from the Escrow Account;(ii) the trustees entered the TPSA as agents for PLV;(iii) the U.S. $12.5 million was held by Mr and Mrs MacLean in their Clarien Bank account as Escrow Agent and in trust for PLV and the trustees and(iv) when they paid the money out of that account at the direction of Argyle, they did so as agents for PLV and the trustees. Accordingly, that payment was legally equivalent to a direct payment by PLV and the trustees to the recipients, in this case Argyle UAE and Mr McKellar.[50]Even if that agency analysis were wrong, I consider the judge was right to conclude that those agreements and the payments to Argyle UAE and Mr McKellar were part of a series of transactions which could be regarded as one transaction, one of the other exceptions to the general rule recognised by Lord Reed at [48]. Furthermore, given the overall circumstances and, in particular the fact that Argyle never actively traded and had such limited paid up share capital together with the fictitious assertion that U.S. $19.9 million is being held at Global Financial Trust by Argyle UAE, Mr McKellar’s case that he was entitled to receive and retain the bulk of some U.S. $12.5 million as director’s remuneration or as director’s loans is unsustainable. He was clearly unjustly enriched at the expense of PLV and the trustees.

Allocation of risk

[51]The third ground of appeal advanced by Mr Couser in his written submissions based upon MacDonald, Dickens & Macklin v Costello [2011] EWCA Civ 930 is not pressed hard and Mr McKellar did not make further submissions orally. This is scarcely surprising since, as Mr Couser’s submissions recognise, the point could only have any force if there was not a total failure of consideration. Given that, for the reasons I have given, there was a total failure of consideration, I agree with the judge that there is nothing in this point. As the judge correctly said, the authorities cited by Etherton LJ (as he then was) in that case are ones where the contract has been performed by one party but the other party who has contracted to pay fails to do so. The first party then seeks to recover payment from a third party with which it has no contractual relationship. This is not such a case. The U.S. $12.5 million was paid pursuant to the TPSA, the consideration for which has totally failed. The claim in unjust enrichment cannot be said to undermine the contractual arrangements.

Argyle’s claim

[52]Mr Parker submitted that even if the appellants could successfully show a sufficiently arguable defence to the unjust enrichment claim of PLV and the trustees (which, for the reasons I have given above, I am satisfied they cannot) they had no answer to Argyle’s claim. He submitted that Argyle was entitled to the fee under the TPSA and could direct where it should be paid. It had directed that payments be made to Argyle UAE and Mr McKellar neither of whom has provided any basis upon which they should be entitled to retain the fee of U.S. $12.5 million as against Argyle. The money cannot have been paid as a gift, because Argyle was always subject to the contractual obligation to pay U.S. $18 million by 30 December 2014 and was otherwise left with no assets.[53]Mr Couser sought to suggest in his written submissions that the judge had reversed the burden of proof because it was for the respondents to establish their case of unjust enrichment in the ordinary way before any evidential burden passed to the appellants and yet the judge had found against the appellants that they had not advanced a positive case as to why they were entitled to retain the monies paid to them by Argyle.[54]Mr Parker submitted that this point is misconceived and I agree. There is no question of the burden of proof being reversed. What the judge has decided, in an entirely orthodox manner, is that the defence discloses no defence to the respondents’ claim at paragraph 29(4) of the Particulars of Claim that the appellants had been unjustly enriched at the expense of Argyle. All that is pleaded in the Defence is that Argyle directed payment to Argyle UAE which was the party intended to carry out the trades. However, even if that were correct, it does not begin to explain how and why, not having conducted any trades, Argyle UAE was entitled to retain the monies as against Argyle. Furthermore, the Defence does not begin to disclose a case as to how and why Mr McKellar was entitled, as against Argyle, to retain the monies he received and dissipated. As I have already held, his assertion that these were director’s remuneration or loans is unsustainable. In circumstances where the appellants have not put forward any case as to why they should be entitled to retain the monies as against Argyle, the judge was quite right to grant summary judgment against them and to strike out this part of the Defence.

No other compelling reason for trial

[55]Finally, I should record that, in his submissions before us, Mr McKellar submitted that the underlying factual dispute was complex and could only be fairly resolved at trial. However, I consider that none of the matters he relied upon gave rise to any arguable defence to the unjust enrichment claim. For example he placed considerable reliance on the fact that the Corporation had defended a claim on the guarantee by MIF on the basis that in entering the guarantee it had acted ultra vires and that, although this point had been decided in the Corporation’s favour, the matter was to be heard by the Privy Council. As was pointed out by the Court during the course of argument, that is all very interesting but wholly irrelevant to the unjust enrichment claim in these proceedings. Likewise any assertion by Mr MacLean in the past that he was personally entitled to the monies. Quite apart from the fact that, on the material before the Court that assertion is unsustainable, it affords the appellants with no defence to the respondents’ claim, as the judge found. There is no reason, compelling or otherwise, why this claim should have to go to trial and the judge was quite right to strike out this aspect of the Defence and to enter summary judgment on the unjust enrichment claim in favour of the respondents.[56]I consider that the appeal should be dismissed.[57]I agree.

Cited in 1 later judgment