Goldspan Ltd v Patel [2012] EWHC 1447 (Ch)

[2012] EWHC 1447 (Ch)

Case No HC09C04089

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Rolls Building, Fetter Lane, London, EC4A 1NLL

Date 1 June 2012

Before

THE HON MR JUSTICE ARNOLD

Between

GOLDSPAN LIMITEDClaimant

AMBRISH JYOTINDRA PATELDefendant

Simon Edwards (instructed by CKFT Solicitors) for Claimant

Matthew Hardwick (instructed by Hugh Cartwright & Amin) for Defendant

Hearing Hearing dates: 3-4, 8-9 May 2012

Judgment

Introduction

[1]In these proceedings Goldspan Ltd (“Goldspan”), acting by its liquidator Phillip Roberts (“the Liquidator”), claims the sum of £710,000 plus interest from Ambrish Jyotindra Patel on the bases that(i) he dishonestly assisted in the fraudulent diversion of that sum by his cousin Arvindkumar (or Arvind) Ratilal Patel from Goldspan and

(ii) he knowingly received £100,000 of it. In order to distinguish between Ambrish Patel and Arvind Patel, I will follow the course taken by the parties at trial of referring to the former as “AJ” and the latter as Arvind.

Arvind’s fraud

[2]The background to this claim is a fraudulent breach of fiduciary duty committed by Arvind in his capacity as director of Goldspan. It is convenient to begin by recounting the essential facts concerning that fraud.

[3]On 1 April 1992 Goldspan was incorporated by Arvind and Minaxi Patel (Arvind’s wife, “Minaxi”). Arvind was a director and Minaxi was both a director and the company secretary. It appears that initially half the shares were owned by Pradipkumar Shah.

[4]In December 1992 Goldspan purchased two nursing homes in London, namely Thurlow Lodge, 11/12 Thurlow Road, London NW3 and Hampstead House, 12 Lyndhurst Gardens, London NW3 (“the London Nursing Homes”), for £900,000. In August 1995 Goldspan purchased a third nursing home, Hyde Nursing Home located at 2-4 Stocker Road, Bognor Regis, for £420,000. It appears that these purchases were financed by one or more loans from Bank of Scotland.

[5]On 6 January 1997 Goldspan borrowed £1,260,000 from Kredietfinance Corporation Ltd by way of a remortgage of the three properties to pay off the Bank of Scotland loan or loans.

[6]By a letter from Benham & Reeves estate agents dated 18 March 1997 which was countersigned by Arvind on 28 March 1997, Arvind instructed Benham & Reeves to market the London Nursing Homes at a total asking price of £2.6 million.

[7]In 1997 Summit Enterprises Ltd (“Summit”) was the registered proprietor of a property at 48 Boundary Road, London NW8 (“Boundary Road”) which had previously been used as nursing home. At some point before 30 May 1997 Arvind and Minaxi Patel agreed with Alexander Beare, who was the director and controller of both Summit and Prime Central Properties Ltd (“Prime”), subject to contract, that Summit would purchase the London Nursing Homes from Goldspan for the sum of £2.8 million and that Arvind would purchase Boundary Road from Summit for £2.2 million. It appears that Arvind intended to demolish Boundary Road and build a new nursing home on the site.

[8]On 30 May 1997 the following transactions took place: i) Goldspan exchanged contracts to sell the London Nursing Homes to Tara Properties Ltd (“Tara”), a company registered in the Turks & Caicos Islands, in the sum of £1.5 million. ii) Tara exchanged contracts with Summit for the sale of the London Nursing Homes at the price of £2.8 million. iii) Arvind exchanged contracts with Summit to purchase Boundary Road for £2.2 million. It appears that he paid a deposit of £110,000.

[9]The date fixed for completion of all three contracts was 1 December 1997. The solicitors who acted for Goldspan and for Arvind were Meer Care and Desai (“MCD”).

[10]The contracts were not completed on 1 December 1997, however. Instead, the contract between Goldspan and Tara was completed on 9 April 1998. On the same day, the contract between Tara and Summit was completed, at the direction of Summit, in favour of Prime. Arvind’s purchase of Boundary Road did not complete on 9 April 1998. Instead, on that date, Arvind and Summit entered into an agreement varying the completion date by extending it to 9 October 1998 with a further deposit of £1.29 million being paid, making a total deposit of £1.4 million.

[11]Tara was controlled by Arvind. He arranged for most of the “profit” of £1.3 million that Tara made on its sale to Summit to be transferred to Summit’s bankers as part-payment for his purchase of Boundary Road from Summit. The “profit” belonged to Goldspan, because the true consideration for the sale of the London Nursing Homes was £2.8 million and not £1.5 million. In effect, Arvind Patel diverted the “profit” of £1.3 million from Goldspan and used it to make a part-payment in respect of his purchase of Boundary Road from Summit.

Earlier proceedings

[12]In September or October 1996 the Commissioners of Inland Revenue presented a petition to wind up Goldspan for failure to pay(i) some of the income tax deducted by the company and employer’s national insurance contributions for the year ended 5 April 1995 and

(ii) any of the income tax deducted and employer’s national insurance contributions for the seven months ended 5 November 1995, together with interest to 8 August 1996, totalling £58,871.39. The petition recorded that the Commissioners had applied for payment on 8 August 1996, but Goldspan had not paid any of the sum due. It appears that at some point Goldspan paid off the debt, and hence avoided being wound up at that stage.

[13]On 20 December 1996 Lina Patel, who appears to have been distantly related to Arvind, issued a petition under section 359 of the Companies Act 1985 seeking an order for rectification of the register of members of Goldspan so as to substitute her name for that of Minaxi as the holder of 40 shares in the company. On about 20 June 1997 Lina Patel issued a petition seeking an order that Goldspan be wound up on the ground that it was just and equitable to do so alternatively for an order that Arvind and Minaxi purchase her shares in the company pursuant to section 359. In an affidavit sworn on 20 June 1997 Lina Patel’s husband Hemant Patel alleged, in summary, that(i) Arvind and Minaxi were in breach of an agreement with Lina Patel dated July 1993 under which Lina Patel lent Goldspan £80,000 to enable Mr Shah to be bought out and was to acquire 40% of the shares in Goldspan and become a director,

(ii) in March 1995 Lina Patel had been excluded from involvement in the company,

(iii) shares had been wrongly issued to Arvind,

(iv) Goldspan had only repaid £35,000 of the loan and

(v) Arvind and Minaxi had diverted substantial quantities of fees paid by residents of the London Nursing Homes from Goldspan for their own benefit. In an affidavit sworn on 1 September 1997 Minaxi essentially denied these allegations. It appears that this litigation dragged on for some time afterwards.

[14]On 26 February 1998 Goldspan applied by originating motion for an order against Lina Patel seeking the removal of cautions registered against the London Nursing Homes. An affidavit sworn in support of the application by Naynesh Desai of MCD on the same date stated that Goldspan was in a very precarious state, owing money to Kredietbank (which was threatening to appoint a receiver) and the Inland Revenue (which was threatening winding up proceedings). Mr Desai said that completion of the sale had been delayed from 1 December 1997 because Tara had experienced delays in obtaining planning permission for a change of use for the premises, that a new completion date had been set for 20 February 1998 and that Goldspan had been unable to complete on that date because of the cautions. On 3 March 1998 Harman J made an order vacating the cautions and ordering Lina Patel to pay Goldspan’s costs of the application.

[15]As discussed in more detail below, in June 1999 Goldspan proposed a company voluntary arrangement or CVA to its creditors, but the proposal was not approved. On 28 July 1999 Goldspan was ordered to be wound up. Mr Robert’s predecessor as liquidator was appointed on 22 September 1999 and Mr Roberts succeeded him on 19 May 2003.

[16]On 16 March 2000 director’s disqualification proceedings were commenced against Arvind. It is not clear to me how these were resolved.

[17]Sometime in 2000 Thomas Weatherald & Sons Ltd (“Weatheralds”), who it appears had provided services to Arvind in connection with his proposed redevelopment of Boundary Road, issued a bankruptcy petition against Arvind. Prior to a hearing of that petition on 15 August 2000, Arvind proposed an individual voluntary arrangement or IVA to his creditors. This proposal was approved, and Mervyn Smith was appointed as the supervisor (“the Supervisor”).

[18]In April 2004 Goldspan brought proceedings against Arvind and Minaxi for the breach of their fiduciary duties as directors. On 29 July 2005 Goldspan obtained summary judgment against Arvind for £1.3 million plus interest of £636,870.

[19]Also in April 2004 Goldspan brought proceedings against MCD for professional negligence. Those proceedings were settled in September 2006 upon the payment of £1.4 million by MCD’s insurers.

[20]After obtaining summary judgment against Arvind, Goldspan presented a petition to bankrupt Arvind. On 20 February 2006 he was adjudged bankrupt. Sue Casey (“the Trustee”) was subsequently appointed trustee in bankruptcy of Arvind’s bankrupt estate.

The present claims

[21]Goldspan’s present claims concern two payments made at the direction of Arvind to AJ.

[22]On 26 October 1998 Arvind agreed to sell Boundary Road to Abbeycare Ltd for the sum of £1.6 million. It appears that Arvind was forced into this loss-making sale because his bankers declined to loan him £800,000 to complete his purchase from Summit. The sale was completed on 25 or 26 February 1999. The balance payable by Abbeycare Ltd on completion after deduction of stamp duty and fees was £777,175.

[23]On 26 February 1999 Arvind instructed MCD to transfer £610,000 from the proceeds of sale of Boundary Road to AJ’s (Diamond Reserve) account number 77440226 at National Westminster Bank Plc’s (“NatWest’s”) Wembley branch. On 1 March 2009 Sharad Bhagani of NatWest (as to whom, see below) sent AJ a fax with details of the transfer saying “As requested by Arvind Patel”.

[24]On 11 March 1999 Arvind instructed MCD “following the discharge of the Mareva Injunction” to transfer £100,000 from the proceeds of sale of Boundary Road to AJ’s Diamond Reserve account. It is not clear who had obtained the Mareva injunction or why, but it may have been Lina Patel.

[25]On 31 March 1999 Arvind sent AJ by fax a note dated 30 March 1999 requesting that “the funds” be transferred to account number “12457/sub account Jersey Branch” in the name of Manisha Patel and Jignasha Patel (Arvind’s daughters, who I will refer to as “Manisha” and “Jignasha”) at Bank of India, London Branch, 16 Finsbury Circus “L.E.C. 2 M.7.U.L.” (i.e. London EC2M 7UL).

[26]On 7 April 1999 AJ sent Mr Bhagani by fax a letter instructing NatWest to transfer £710,000 to the account specified in Arvind’s note dated 30 March 1999, transcribing the details with exactitude.

[27]On 13 April 1999 AJ sent Mr Bhagani by fax a letter referring to his letter dated 7 April 1999 and requesting that that transfer be put on hold and the money transferred instead to AJ’s Premium Reserve account number 77496051 at the same branch of NatWest. He asked for acknowledgement of his letter by return fax as soon as possible, saying that this was very important.

[28]On 14 April 1999 Mr Bhagani sent AJ a fax acknowledging receipt of both of AJ’s faxes. He stated that in response to the 7 April fax he had given one month’s notice to transfer the sum from the Diamond Reserve account to the Premium Reserve account in readiness to effect a transfer to the Bank of India, that the date of transfer from the Diamond Reserve account to the Premium Reserve account was 8 May 1999 and that no other action had been taken.

[29]On 6 May 1999 AJ sent Mr Bhagani by fax a letter requesting that on 8 May 1999 the following transfers should be made from the Premium Reserve account:(i) £100,000 to a joint account in the name of AJ and his wife at California Bank and Trust (“CBT”), San Jose, California and

(ii) £610,000 to the account of Manisha and Jignasha at the Bank of India previously specified. These instructions were actioned by NatWest on 10 May 1999, except that the sum of £100,036 was transferred to CBT. The reason for this discrepancy is unclear, but does not appear to matter.

[30]Goldspan’s case is that Arvind, having used Goldspan’s money to purchase Boundary Road as described above, held his interest in that property on trust for Goldspan. Accordingly, when Arvind completed the sale of Boundary Road, Goldspan says that he held the proceeds of sale on trust for Goldspan. Goldspan’s claims against AJ are that, by receiving £710,000 of Goldspan’s money, transferring £610,000 to Arvind’s daughters and keeping £100,000 for himself, AJ(i) dishonestly assisted Arvind’s breach of trust in relation to the whole sum and

(ii) knowingly received the £100,000. Accordingly, Goldspan claims that AJ is liable together with Arvind as a constructive trustee.

[31]Goldspan began these proceedings on 29 October 2009, on which day Goldspan sought and obtained a freezing order in relation to AJ’s assets in England and Wales (which amounted to £353,827.41). The Liquidator’s decision to commence these proceedings over 10 years after his predecessor was appointed came about as a result of(i) the receipt by the Liquidator from the Trustee in November 2008 of a copy an undated letter apparently from Arvind to AJ (“the Undated Letter”) which the Trustee had copied from the Supervisor’s file and

(ii) the receipt by the Liquidator in September 2009 of an expert report by Dr Audrey Giles, the well-known forensic document examiner, expressing her opinion that there was very strong support for the view that the Undated Letter had been signed by AJ. I will explain the significance of the Undated Letter to Goldspan’s claims below.

[32]It can be seen from the chronology that Goldspan brought these proceedings over a decade after the two payments in question were made by Arvind to AJ. Furthermore, as will appear, AJ’s defence to the claims relates to events going back to 1996. Yet further, the proceedings have regrettably taken a further two and half years to get to trial. As explained in more detail below, this has inevitably made it difficult for Goldspan, AJ and the court to establish the relevant facts.

[33]Another point which is important to note is that Goldspan originally advanced a tracing claim in addition to its claims for dishonest assistance and knowing receipt, but that claim was abandoned on 13 April 2012, shortly before trial.

The law

[34]There is no dispute as to the relevant law. Both counsel cited the statements of the law in Lewin on Trusts (18th ed). For the purposes of this judgment it is sufficient to cite the following passages (footnotes omitted):

“DISHONEST ASSISTANCE General requirements of liability 40-09 The general requirements of liability for dishonest assistance are as follows: (1) there is a trust, see §§ 40-14 to 40-17; (2) there is a breach of trust by the trustee of that trust, see §§ 40-18 to 40-20; (3) the defendant induces or assists that breach of trust, see § 40-21; and (4) the defendant does so dishonestly, see §§ 40-22 to 40-36. … The subjective and objective elements of dishonesty 40-23 It will be observed from the above quotations in the Brunei Airlines case that Lord Nicholls referred to dishonesty as having both a subjective and an objective element. The subjective element is concerned with all the circumstances known to the defendant, his personal attributes such as his experience and intelligence, and the reason why he acted as he did. Knowledge, though concerned with what the defendant actually knew at the time, as distinct from what a reasonable person would have known or appreciated, does include suspicion if it relates to the transaction concerned and is combined with a conscious decision not to make enquiries which might result in knowledge. But the defendant’s general suspicion that the trustee has been involved in money laundering activities will not suffice if there is no such suspicion in relation to the transaction concerned. The objective element of dishonesty is concerned with an objective assessment of the defendant’s mental state as established by the subjective element. If by ordinary standards the defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The defendant cannot escape a finding of dishonesty because he himself sees nothing wrong in his behaviour. … Effect of ignorance of the trust 40-34 In the ordinary course the defendant cannot be held liable if he is ignorant of the trust since there will be no basis upon which he could have been held to be dishonest. … But special considerations apply where the defendant is aware that he is involved in a money laundering exercise or the like, or shuts his eyes to that obvious fact, and allows his services to be used. In such a case there is no need to prove that the money launderer had knowledge of the trust … : a man who consciously assists others by making arrangements which he knows are calculated to conceal what is happening from a third party, takes the risk that they are part of a fraud practised on the third party. But it is otherwise if it is not plain to the defendant that he is involved in money laundering, and if that is so it needs to be shown that he had knowledge of the trust so that dishonesty can be established against him. … KNOWING RECEIPT … General requirements of liability for knowing receipt 42-22 The general requirements of liability for knowing receipt are as follows: (1) there is property subject to a trust, see §§ 42-30 to 42-34; (2) the property is transferred, see § 42-35; (3) the transfer is in breach of trust, see §§ 42-36 to 42-41; (4) the property (or its traceable proceeds) is received by the defendant, see §§ 42-42 to 42-44; (5) the receipt is for the defendant’s own benefit, see §§ 42-45 to 42-47; and (6) the defendant receives the property with knowledge that the property is trust property and has been transferred in breach of trust, or if not a bona fide purchaser of a legal estate without notice, retains the property, or deals with it inconsistently with the trust, after acquiring such knowledge, see §§ 42-48 to 42-65. …”

General requirements of liability (1) there is a trust, see §§ 40-14 to 40-17; (2) there is a breach of trust by the trustee of that trust, see §§ 40-18 to 40-20; (3) the defendant induces or assists that breach of trust, see § 40-21; and (4) the defendant does so dishonestly, see §§ 40-22 to 40-36. … Effect of ignorance of the trust KNOWING RECEIPT General requirements of liability for knowing receipt (1) there is property subject to a trust, see §§ 42-30 to 42-34; (2) the property is transferred, see § 42-35; (3) the transfer is in breach of trust, see §§ 42-36 to 42-41; (4) the property (or its traceable proceeds) is received by the defendant, see §§ 42-42 to 42-44; (5) the receipt is for the defendant’s own benefit, see §§ 42-45 to 42-47; and (6) the defendant receives the property with knowledge that the property is trust property and has been transferred in breach of trust, or if not a bona fide purchaser of a legal estate without notice, retains the property, or deals with it inconsistently with the trust, after acquiring such knowledge, see §§ 42-48 to 42-65. …”

General requirements of liability for knowing receipt

[35]With regard to the claim for knowing receipt, counsel for Goldspan did not rely upon the fact that it is sufficient for the claimant to establish that the defendant’s statement of knowledge was such as to make it unconscionable for him to retain the benefit of the receipt, and it is not necessary to show that the defendant was dishonest (see Lewin at §42-55). Rather, he put both of Goldspan’s claims squarely on the basis that AJ had acted dishonestly.

[36]As for the standard to which that allegation must be proved by Goldspan, the House of Lords and the Supreme Court have held that there is only one civil standard of proof, namely proof on the balance of probabilities, and that there is no necessary connection between the seriousness of an allegation and the improbability that it has taken place: see In re B

[2008] UKHL 35

[2009] AC 11

at [15] and Re S-B (Children) (Care Proceedings: Standard of Proof)

[2009] UKSC 17

[2010] 1 AC 678

at [34].

The witnesses

[37]The only witness called by Goldspan was Jonathan Aaron. He is a partner in Sterling Ford insolvency practitioners. Since September 1999 he has had day-to-day responsibility for the administration of Goldspan under the supervision successively of Mr Gendall and Mr Roberts. Self-evidently, he had no personal knowledge of the events in question. The primary function of his evidence was accordingly to explain how, when and from what sources the liquidator had obtained relevant documents.

[38]In addition Goldspan relied on a witness statement of Joel Leigh of Goldspan’s solicitors, who gave evidence of a similar kind to Mr Aaron, and on two expert reports of Dr Giles, which were not challenged by AJ.

[39]The principal witness for AJ was AJ himself. I will describe him and consider his evidence in detail below. At this stage, I note three general points. The first is that, prior to the commencement of these proceedings, AJ appears to have been a man of unblemished character. Indeed, his unchallenged evidence, which is supported by various documents which he has exhibited, is that, as I shall describe below, he had devoted considerable time, effort and money to supporting philanthropic and public interest causes.

[40]The second point is that, as I shall explain below, AJ admitted knowingly making a false statement in his fourth affidavit in these proceedings, which was sworn in support of an application to vary the freezing order. So far as that is concerned, as counsel for Goldspan accepted, I must bear in mind the guidance given by the Court of Appeal Criminal Division in R v Lucas (1981) 73 Cr App Rep 159 as to the significance of lies. In short, the court must remember that lies are told for many reasons, among them to bolster a truth, to conceal disreputable conduct which is unrelated to the wrong alleged, to cover confusion and for other innocent reasons. In the present case, it is common ground that the lie did not relate to the allegations that are the subject of Goldspan’s claims. Furthermore, AJ gave a detailed explanation of his reasons for the lie which was not undermined, or even seriously challenged, in cross-examination. Yet further, AJ has already paid a considerable price for the lie, as explained below. Thus the only significance of the lie is that it demonstrates that, on at least one occasion, AJ was prepared not merely to lie, but also to perjure himself. In saying that, I do not intend to understate the seriousness of the matter. In these circumstances I accept the submission of counsel for Goldspan that the court must be cautious about accepting AJ’s evidence.

[41]The third point is that, despite his perjury, my impression of AJ’s oral evidence was a favourable one. His demeanour was calm and dignified, with occasional touches of emotion. His answers to questions were direct, responsive and coherent. On a small number of minor points, he had to correct his evidence either in chief or in cross-examination, but there were no major changes to his story. He understandably had difficulty in remembering some of the events of 1996-1999, but did not appear to be hiding behind that difficulty. In short, he appeared to be a witness who was doing his best to tell the truth to the best of his recollection. I make it clear that I do not regard this as determinative of the issue of dishonesty; but it goes some way to neutralising the second point.

[42]In addition, AJ called the following witnesses: i) Mr Bhagani. Mr Bhagani is a Senior Bank Manager employed by NatWest, for whom he has worked since 1973. In 1999 he was the manager of the Wembley branch where AJ had his accounts. He has also been a personal friend of AJ for over 40 years. ii) Raj Desai. Mr Desai is a friend of AJ’s who has known him for over 21 years. iii) Suresh Savjani. Mr Savjani is a solicitor. Prior to 1 May 1996 he was in partnership with a Mr D.D.P. Debidin under the style Debidin & Savjani. Since then he has carried on practice on his account under the style Savjani & Co. He and Mr Desai have known each other for more than 40 years.

[43]No challenge was made to AJ’s account of his background, career and family connections in his witness statement. This may be summarised as follows. He was born in India. When he was four, his family emigrated to Uganda. When he was 17, they were expelled from Uganda by Idi Amin’s regime. He then obtained a degree in accounting from Sardar Patel University in India, where he met his future wife. They were married in 1977. In 1978 they emigrated to California, where AJ has been resident ever since. They have two sons, the younger of whom is called Amit.

[44]In 1981 AJ obtained a job as a bookkeeper with Paper Materials Company, Inc, a specialist manufacturer of packaging based in California. He worked his way up to become owner (with his wife) of the company, which he renamed Odyssey Enterprises Inc (“Odyssey”, later renamed Creative Packaging Solutions Inc). By 2001 Odyssey had a turnover of about $30 million and employed about 300 people. It operated from two properties, one in San Jose owned by Barjarang Investments and one in Gilroy, California owned by JH Investments. Barjarang Investments was a partnership between AJ, his wife, Michael Mercier and Mr Mercier’s wife, while JH Investments was a partnership between AJ, his wife, Dr Suhas Patil and Dr Patil’s wife. In addition, Barjarang Ventures, a partnership between AJ and his wife, owned a company called Plas/Sys Inc which was based in the USA and had a division in Malaysia.

[45]Despite being resident in the US since 1978, AJ has for many years kept money in bank accounts in the UK. His evidence was that this was partly for convenience when visiting the UK and partly by way of an insurance policy.

[46]Although AJ was successful and comparatively wealthy for a time, this did not last. He lost a lot of money in the dotcom crash of 2001. In 2002 he sold Plas/Sys. By 2004, Odyssey had ceased to be profitable. Accordingly, in 2004 AJ decided to close Odyssey down, and to retire from full-time business to devote himself to wildlife conservation. After all the assets of Odyssey had been sold and creditors paid, there was a shortfall of $350,000 which AJ paid from his own resources.

[47]In 2005 Barjarang Investments sold the property in San Jose and purchased two other properties, one in Phoenix, Arizona and one in Mesa, Arizona which were the subject of commercial lets. These generated a healthy rental income until October 2008, when the tenant of the Phoenix property became insolvent. The Phoenix property was put on the market in November 2008 at an asking price of $3.5 million, but only sold for $1.6 million in October 2010. AJ’s admitted perjury relates to this sale, and so I must return to this subject below.

[48]Apart from his share of the rental income, since 2004 AJ’s only income has been from occasional consultancy work for PKG Technologies.

[49]In 1992 AJ founded The Indus Entrepreneurs (“TIE”), an organisation which promotes entrepreneurship among young Indian business people through a system of mentoring, networking and education. TIE now has 57 chapters in 14 countries including the UK. In 2007 AJ founded the Hasla-Mara Wildlife Conservation Foundation (“the Foundation”), a charitable foundation which is dedicated to preserving wildlife habitat in Africa. From then until the commencement of the present proceedings, AJ devoted a large part of his time to the Foundation, which achieved some success with a conservation project in Kenya.

AJ’s relationship with Arvind

[50]AJ is a member of a relatively large extended family whose members live in Canada, India, the UK and the USA. Arvind is a first cousin to AJ: he is AJ’s mother’s older sister’s son. Arvind was brought up in Kenya. In about 1971 Arvind moved to the UK, where he has been resident ever since. AJ saw Arvind from time to time when they were growing up. As adults, they kept in touch, but were not close. AJ estimated that he saw Arvind about once or twice a year until 2007. Like many cousins in their community, they addressed and referred to each other as “brother”.

[51]Prior to 2007, AJ and Arvind had never gone into business together or been involved in each other’s businesses. It is AJ’s case, however, and central to his defence to Goldspan’s claims, that he loaned the sum of approximately £100,000 to Goldspan at Arvind’s request in 1996-1997 and that the sum of £100,000 he received in March 1999 was a repayment of this loan. Goldspan disputes that allegation, and much of the evidence at trial related to it.

[52]In addition to the transfers of £610,000 in March and May 1999, two later sets of transactions involving AJ and Arvind’s daughters were examined at trial. First, loans made by AJ to a business run by Manisha and Jignasha called Studentsdirectory.com Ltd (“Studentsdirectory”) in 2000. Secondly, an investment made by AJ of behalf of his son Amit in a business nominally operated by Manisha called Redbourne Care Ltd (“Redbourne”) in 2007. By September 2009 – prior to the commencement of these proceedings - AJ was accusing Arvind of defrauding him of the money invested in Redbourne. AJ’s unchallenged evidence was that he had not been in contact with Arvind since December 2009.

The loan

[53]AJ’s evidence in summary was as follows. Sometime in 1996 Arvind asked AJ to lend Goldspan money, and AJ was happy to do so. AJ did not recall the precise date when Arvind made this request, but, given that AJ visited the UK in late April 1996, he believed that it was probably then. He did not recollect exactly why Arvind said that Goldspan needed the money, but thought that tax payments were mentioned. He did not recollect precisely when or how the money was advanced, but he thought that Arvind had initially requested £50,000, which Arvind had promised to repay within a couple of months, and which AJ had transferred from a UK account. He thought that Arvind had subsequently requested further sums amounting to about $80,000, which AJ had transferred from his CBT account. Thus by late 1996 or early 1997 AJ had lent a total of about £100,000. At the time the loan was made, no written record of it was made. Subsequently Goldspan failed to repay the loan, and so AJ insisted that a written agreement be drawn up and that Arvind and Minaxi Patel enter into a guarantee in January 1997. Goldspan continued to fail to repay the loan, however. In October 1998 Arvind gave AJ two post-dated cheques in partial repayment of the loan which bounced. Having lost patience, in early December 1998 AJ instructed Savjani & Co to recover the loan, and they duly sent letters before action. In addition, AJ chased Arvind personally. Ultimately, the loan was repaid by means of the £100,000 transferred to AJ on 11 March 1999.

[54]Goldspan’s case is that this entire story is false in almost every respect. Although Goldpan accepts that loan documents were created and that Savjani & Co were instructed to recover the supposed loan, Goldspan contends that this was an elaborate charade and that there never was any such loan. These contentions give rise to a series of questions which I will consider in turn.

What was the purpose of the loan?

[55]There is clear evidence that Goldspan was in financial difficulties by August 1996, and probably earlier. Goldspan’s financial statements for the year ending 31 December 1996 show net current liabilities of £828,548. As noted above, Inland Revenue presented a petition in September or October 1996 in respect of Goldspan’s indebtedness as at on 8 August 1996. On 14 October 1996 Kredietfinance made the offer to remortgage Goldspan’s properties which was completed on 6 January 1997. In these circumstances it is plausible that Arvind should have approached AJ, who at that time was doing well, to borrow money for Goldspan.

[56]Goldspan suggests that it had no need to borrow money at that time. The basis for this suggestion is that Arvind was diverting income from Goldspan, essentially as alleged by Lina Patel and her husband in 1997. Goldspan contends that this is supported by a comparison between valuation reports on the London Nursing Homes prepared by a firm called Pinders and the company’s accounts. There are two problems with this suggestion, however.

[57]The first is that the allegation was investigated by the Inland Revenue’s Special Compliance Office in accordance with the Inland Revenue’s Code of Practice 9, guidance IR120 and a statement made to Parliament on 7 November 2002. Arvind and Minaxi Patel were interviewed by the SCO for almost a whole working day on 11 March 2003. The minutes of the meeting run to 239 paragraphs. During the course of the meeting Arvind admitted that he had diverted £1.3 million from Goldspan to Tara, stated that he had obtained a loan of £100,000 from AJ (on Arvind’s account, for the purchase of Boundary Road) and admitted that he had used the proceeds of the sale of Boundary Road largely to make payments to AJ and his daughters (although Arvind’s account of the amounts so paid - £50,000 and £591,000 - was inaccurate). One of the many questions discussed during the course of the meeting was whether Goldspan had understated its fee income as alleged by Lina Patel and her husband. Arvind denied this. The discussion included consideration of the Pinders reports. The minutes show that Arvind appeared to have explanations for the matters put to him and that he was supported by his accountant, Mr P.K. Patel of King & King. Furthermore, when Goldspan sued Arvind and Minaxi Patel in 2004, it did not allege that fee income had been diverted. Thus there is no firm evidence to substantiate the allegation.

[58]Secondly, even if Arvind had diverted fee income from Goldspan as alleged, that would not show that Goldspan had no need to borrow money from AJ. Indeed, it might be the very reason why Goldspan did need to borrow money.

Does Goldspan have records of receiving a loan from AJ?

[59]Goldspan has few records of receiving a loan from AJ, but there are at least two documents which do appear to show that such a loan was made. The first is a document disclosed by Goldspan with Mr Aaron’s fourth witness statement dated 16 April 2012 (well after AJ’s witness statement and only about three weeks before trial) which had been found in Goldspan’s old records. This is a copy of a statement for an account of Goldspan at Bank of India showing the receipt of £50,000 “from Barcl/Savjeni [sic] sol” on 18 June 1996. In this copy the receipt has been annotated in manuscript “LOAN FROM AMRISH PATEL”. Arvind seems to have been in the habit of misspelling AJ’s first name “Amrish” rather than “Ambrish”. It therefore seems likely that the annotation was made by, or on the instructions of, Arvind. Furthermore, there is no evidence to indicate when the annotation was made. Yet further, there is no other reference to a loan of £50,000 from AJ in Goldspan’s records. In itself, therefore, it is not a document to which it would be possible to attach much weight. As discussed below, however, it turns out to have more significance than that.

[60]The second document is an “analysis of directors’ loan account” dated 31 December 1997. This includes two credits which read “Loan Amrish Patel to Pay PAYE and NIC £16,719.71” and “Loan Amrish Patel to Pay PAYE and NIC £15,761.51”.

When and how where the monies advanced?

[61]In considering the evidence as to when and how AJ advanced the monies to Goldspan, three points need to be noted at the outset.

[62]First, AJ attempted in his witness statement to reconstruct the manner in which the monies were paid to Goldspan. He explained in his written and oral evidence that he was handicapped in doing so by the fact that he did not have bank statements for his account at CBT for the relevant period, although he had retained some other financial records relating to that period including copies of some CBT cheques. His explanation for this was that he had been in the habit of keeping his CBT statements in files at his office, since prior to moving house in December 1997 he had had limited storage space at home. Although storage space had ceased to be a problem after that, he had continued the habit of keeping those statements in his office. When the building in San Jose was sold in 2005, AJ’s brother-in-law G.H. Patel had cleared it in AJ’s absence and had disposed of files which included his historic bank statements (he had closed the CBT account in about 2000 or 2001). As a document from CBT demonstrated, AJ had not been able to obtain copies of statements for his CBT account for the period January 1996 to December 2000 since CBT’s policy was not to retain statements for more than seven years. (By contrast, the Liquidator obtained copies of statements for AJ’s NatWest Diamond Reserve and Premium Reserve accounts from NatWest going back to 1996, leading AJ to comment that the Liquidator had more of his bank statements than he did.) Although this account was challenged in cross-examination, I see no reason not to accept it.

[63]Secondly, AJ acknowledged in his evidence in chief that there was an inaccuracy in his reconstruction. His explanation was that he could not remember precisely how and when he had advanced the monies, and was forced to rely on such documentary records as were available. Furthermore, as he pointed out, additional relevant documents had been disclosed by Goldspan after he had made his statement. One of these was an additional NatWest bank statement disclosed on 12 January 2012. Another was the annotated Goldspan Bank of India statement referred to above.

[64]Thirdly, there was an important development on the last day of the trial. On the penultimate day, Mr Savjani gave evidence and was asked about two CHAPS transfers apparently made by his firm. That evening, Mr Savjani went to his office and searched through the firm’s CHAPS records. He succeeded in finding two documents relating to the transfers. He produced these at court the next morning, and gave evidence about them. This evidence put the two transfers in question in a new light.

[65]The £50,000. In his witness statement AJ said that he thought it very likely that he had loaned the sum of £50,000 credited to Goldspan’s Bank of India account on 18 June 1996. At that time the only copy of the statement disclosed by Goldspan did not bear the annotation referring to AJ. It was only some four and a half months later that Goldspan disclosed the annotated copy referred to above. Thus both the content of this document and the timing of its disclosure support AJ’s evidence. Goldspan suggests that Arvind may have made the annotation in June 1999 in circumstances I shall consider below. Even if that is correct, I do not consider that it detracts from the evidential significance of the document that I have just described. Moreover, the evidential significance of the statement does not end there.

[66]A statement for AJ’s Diamond Reserve account disclosed by Goldspan on 12 January 2012 shows the receipt of £50,000 on 19 January 1996 by CHAPS transfer from “Debedin [sic] & Savjani”. As noted above, the statement for Goldspan’s Bank of India account shows the receipt of £50,000 by Goldspan from “Barcl/Savjeni sol” on 18 June 1996. In his oral evidence, AJ said that he thought that there was a link between these two transfers, and that maybe he had had a creditor who had paid some money to him and whom he had later instructed to pay money to Goldspan.

[67]The documents produced, and evidence given, by Mr Savjani on the last day of the trial support this. The documents confirm that Mr Savjani’s firm did give instructions for the two transfers to be made. Mr Savjani was able to say that both transfers were on the instructions of the same client, which was neither Goldspan nor AJ. Moreover, his evidence was that it was likely that both transfers arose out of the same transaction, and that that transaction was the sale of a property. It was also his evidence that, so far as he was aware, his firm had never acted for either Goldspan or Arvind, nor had it acted for AJ prior to being instructed to recover the loan.

[68]In the light of this evidence, it is probable that AJ was owed money by Mr Savjani’s client and that AJ directed the client to pay £50,000 to Goldspan. This provides further support for AJ’s evidence that it was likely that he loaned this sum to Goldspan on 18 June 1996. It is convenient to note at this point that this also ties in with the letter dated 20 February 1998 considered below (see paragraphs 88-89).

[69]The $50,000. AJ’s evidence was that it was likely that the payments of £16,719.71 and £15,761.51 recorded in the directors’ loan account analysis referred to above reflected two payments of $25,000 which he had made from his CBT account in late 1996 or early 1997.

[70]It appears from the stubs in Goldspan’s paying in book that both sums were paid in separately on 6 January 1997. Indeed, the pens used on the two stubs are different. It is perhaps a little odd that the sums were paid in separately if they represent sums loaned by AJ, but no more than that. More significantly, the sum of £16,719.71 appears to have been paid by cheque, but Goldspan suggests that the sum of £15,761.51 was paid in cash. It is not clear whether or not this is correct, however, because the stub has £15,000 written against cash and in the total box, but the sum is crossed through in both places and £15,761.51 has been written at the bottom.

[71]More important than either of these points, in my view, is the date of these two payments. AJ’s passport shows that he arrived in the UK on 5 January 1997. Thus he was in the country on 6 January 1997. This makes it unlikely that AJ sent the money by wire transfer from the US. It also makes it unlikely that he wrote two cheques for $25,000 each. First, it does not appear that any currency exchange took place. Secondly, the sums paid in are different. It nevertheless remains possible that AJ paid the money in sterling. But if so, one has to wonder why he would have made two advances on the same day, unless perhaps one sum was paid by cheque and one by cash.

[72]The stubs support the view that both payments were credited to Arvind’s director’s loan account, since the first stub has been annotated “Arvind’s” and the second “Arvind Director”, but they do not refer to any loan from AJ. Furthermore, it is Goldspan’s case that the statement in the directors’ loan account analysis cannot be relied on. This is for two reasons, one rather convoluted and the other more straightforward.

[73]The first reason is that Goldspan has disclosed a different version of the Bank of India statement which shows the receipt of £50,000 from “Barcl/Savjeni sol”. This version has a different manuscript annotation on it, namely an addition of £50,000, £4,000 cash and £3,000 cash to give a total of £57,000. Goldspan points out that:(i) in his witness statement AJ suggested that he had transferred the £50,000 by two transfers of £25,000 and that one of the transfers was evidenced by an entry on his Diamond Reserve account statement showing a transfer of that sum to an unidentified account; and

(ii) £57,000 plus £25,000 plus £16,719.71 = £98,719.71.

[74]The significance of that figure is that on 7 January 1997 a letter of that date on Odyssey’s headed notepaper purportedly from AJ to Arvind at Goldspan was sent by fax from Primo Packaging Co, a division of Odyssey, to Goldspan. The material part of the letter reads as follows:

“As per our agreement in April 1986, the 98,719.71 Pounds with 5.25% interest, the amount borrowed by Goldspan LTD, is due and payable. Please transfer the above amount to my account number 005 48426187 in Sumitomo Bank of California ….”

CBT was at that time known as Sumitomo Bank of California, and the account number given was AJ’s account number.

[75]This letter was disclosed by Goldspan on 16 April 2012 with Mr Aaron’s fourth statement. At first blush, it supports AJ’s evidence about the loan. In particular it ties in with AJ’s belief that Arvind’s original request for money was made in April 1996 and it supports the figure of approximately £100,000. On further consideration, however, it is a rather mysterious document. It is common ground that, as explained above, AJ was in the UK on that date. Thus he could not have signed the letter in California. That explains why the signature on the document does not appear to be AJ’s signature (although there is no expert evidence on the point). Furthermore, the letter was sent very shortly before the loan documentation discussed below was created. AJ was at a loss to explain the letter in his evidence. Goldspan suggests that what these documents reveal is Arvind manufacturing a paper trail, with AJ’s assistance, to support a false story that AJ had lent Goldspan money.

[76]I do not accept this suggestion. In the first place, the arithmetic is unpersuasive, because on AJ’s account in his witness statement the £25,000 was part of the £50,000, not additional to it. Secondly, as counsel for Goldspan himself pointed out, Mr Bhagani’s evidence suggests that the £25,000 was not transferred to Goldspan or Arvind. Thirdly, there is now rather better evidence as to how and when the £50,000 was paid which does not involve the £25,000 transfer from the Diamond Reserve account. Fourthly, there is nothing else to link the £57,000 annotation to either the cheque stubs or the 7 January 1997 letter. On the other hand, as discussed below, there is a reason for thinking that the £57,000 annotation does reflect money lent by AJ to Arvind. Fifthly and perhaps most importantly, I cannot see any reason for thinking that Arvind would have been manufacturing a paper trail to support a false story of a loan at that date. Goldspan was under financial pressure at that time, and this was before Arvind committed his fraud on Goldspan. As I shall discuss below, there is good reason to believe that Arvind forged documents in 2000, but that is a different matter.

[77]I accept that it seems probable that there is a connection between the £98,719.71 and the £16,719.71, but this could be consistent with the latter sum having been advanced by AJ. I also accept that it is odd that the £16,719.71 appears to have been included in the total, and not the £15,761.51, but that is so whether the money was really lent by AJ or not.

[78]The second reason advanced by Goldspan is that the original ledgers for the directors’ loan accounts in 1996 and 1997 make no mention of this £32,000-odd loan from AJ to Arvind. The directors’ loan account analysis was part of the supporting paperwork created by King & King for a report dated 14 June 2004 which they prepared on behalf of Arvind as part of the Code of Practice 9 process. Goldspan suggests that the analysis was prepared by King & King for the purpose of assisting Arvind to try and explain what he had done with the funds he had misappropriated from the company.

[79]As counsel for AJ submitted, however, this does not appear to be correct. The King & King report had a different purpose. King & King, as Arvind’s accountants, accepted that the £1.3m “profit” from the sale of the London Nursing Homes was a taxable capital gain in Arvind’s hands. What they did, however, was to deduct Arvind’s capital losses. First, there was the £600,000 loss on Boundary Road. Secondly, King & King treated his director’s outstanding loan account balances as irrecoverable against the insolvent Goldspan with the result that they too qualified as capital losses for the purposes of offsetting tax. Thus the purpose of the report was to offset, so far as lawful, capital losses against Arvind’s admitted gain, and hence minimise Arvind’s capital gains tax bill. It follows that it was not in Arvind’s interest falsely to suggest that sums credited to his director’s loan account were in fact sums loaned by a third party, which would reduce the sum outstanding on his director’s loan account and thus reduce the deduction.

[80]The $30,000. AJ’s evidence was that he thought it likely that he had made two final payments of $15,000, totalling $30,000. This evidence was not specifically challenged in cross-examination.

Why was the loan documentation created?

[81]AJ’s evidence is that, at the time he first advanced the monies to Goldspan, no written record was made of the loan since it was common practice amongst AJ’s family, friends and wider community to operate on trust. When Arvind did not repay the sums as he had promised, however, AJ became concerned. Accordingly, AJ insisted on the loan being formally documented. Two documents were drawn up and signed. The first is an agreement in the form of a letter from AJ to Goldspan dated 8 January 1997 countersigned by Arvind on behalf of Goldspan on 10 January 1997. The second is a guarantee executed as a deed by Arvind and Mina [sic] Patel on 10 January 1997, except that it is not witnessed as it should be.

[82]It is important to note that no challenge is made by Goldspan to the authenticity of these documents. Indeed, counsel for Goldspan expressly conceded that they had been signed on the date that they appeared to have beeen signed. In any event, I would so find even in the absence of that concession, since another document disclosed by Goldspan on 16 April 2012 with Mr Aaron’s fourth statement is the final page of a 10 page fax from Vijay Sharma solicitors to Arvind dated 10 January 1997 consisting of the (unsigned) signature page of the letter agreement. Vijay Sharma were acting for Arvind at that time.

[83]It is common ground that the letter agreement is another slightly odd document. In particular, the first sentence says that AJ is making available to Goldspan a loan of up to £100,000 (i.e. in the future), but the second sentence says that no drawing may be made after 31 December 1996 (a date which had already passed). This can be explained on the basis that the document was drawn up in a somewhat unprofessional manner, however. The letter goes on among other things to provide for interest at 5.25% and for repayments to be made to AJ’s account number 005 48426187 at Sumitomo Bank of California. It also contains various legal provisions, such as that it is governed by English law.

[84]Once again, Goldspan suggests that these documents are part of a paper trail manufactured by Arvind with AJ’s assistance. Again, however, I cannot see any reason to think that Arvind would have done such a thing at that date. Furthermore, why would he have gone to the trouble of getting solicitors to draw up legal documentation? Why in particular would he have manufactured a personal guarantee? And why would the documentation include the slightly odd mistakes mentioned above?

[85]Goldspan also suggests that it would have been unnecessary for AJ to have both the 7 January 1997 letter and the loan documentation, and points to the inconsistency in the amounts between them. While I agree that this again seems a little odd, I do not agree that it supports the idea of a paper trial being created. On the contrary, I consider it improbable that anyone would create both sets of documents if manufacturing a paper trail. I think it more likely that the 7 January 1997 letter was a first step by AJ to record what he had lent, and perhaps to show that he had made a formal demand for repayment, while the loan documentation was intended to give him legal security in respect of the loan.

What happened after the loan documentation was created?

[86]AJ’s evidence was that, after the loan documentation was created, Arvind continued to promise that the money would be repaid, but for a long time no money was forthcoming.

[87]On 1 April 1997 Arvind faxed AJ a copy of the 18 March 1997 letter from Benham & Reeves recommending marketing the London Nursing Homes at £2.6 million (see paragraph 6 above). AJ’s explanation for this was that he believed that Arvind had sent this letter to him to show that Goldspan would be in a position to repay the loan when the properties were sold.

[88]On 20 February 1998 Arvind and Minaxi sent AJ by fax a letter on Goldspan’s headed notepaper which includes the following passage:

“Ref: LOAN OF £100,000 TO GOLDSPAN LTD Firstly as Company Directors I would like to thank you for the loan of £100,000.00 which you kindly lent to Goldspan Ltd in June 1996. I would like to apologise for the delay in returning the above borrowed funds on the date promised so that you could honour your other financial commitments. As Company Directors, we would like to confirm that completion has taken place, and that the set back was due to some minor complications with the lease but this has now been clarified. We appreciate your patience and understanding in this matter, and assure you that the moneys will be transferred into your account as soon as the funds are released.”

[89]AJ’s evidence was that he took this letter at face value. The letter does not explain what transaction has completed, but AJ understood that this referred to the sale of the London Nursing Homes. In fact, however, that transaction had not yet completed. On the other hand, completion of the sale had been scheduled to take place on 20 February 1998 (see paragraph 14 above).

[90]Arvind also appears to have sent AJ a copy of a letter from MCD to NatWest dated 16 July 1998 regarding the Mareva injunction which had been granted over Goldspan’s assets to the value of £100,000. AJ’s evidence was that he again believed that this was sent to him to explain the continuing delay in repayment of the loan.

Why did the cheques bounce?

[91]AJ’s evidence was that, after many months of chasing Arvind for repayment of the loan, on 17 October 1998 Arvind made out two cheques to AJ dated 21 October 1998 in the sums of £37,000 and £20,000 by way of partial repayment of the loan, but the cheques were subsequently dishonoured. This account is supported by the following evidence:(i) AJ’s passport shows that he arrived in the UK on 15 October 1998;

(ii) AJ was able to produce the dishonoured cheques;

(iii) the relevant statement for AJ’s Diamond Reserve account shows the money being first credited and then debited;

(iv) on 10 November 1998 AJ sent Mr Bhagani by fax a letter (expressed to be following a telephone conversation on 6 November 1997) asking for confirmation that the cheques, which AJ had handed to Mr Bhagani on 17 October 1998 had been credited to his account;

(v) on 17 November 1998 NatWest wrote to AJ informing him that the cheques had been dishonoured; and

(vi) AJ mentioned the bounced cheques in his instructions to Savjani & Co discussed below. In the light of this evidence, I consider that there can be little doubt that AJ’s account is correct.

[92]Goldspan suggests that the cheques were never going to clear, because Arvind wrote them on an MBNA credit account and had insufficient credit. That may be so, but it seems to me to be immaterial.

[93]In my view the bounced cheques are significant in a number of ways. First, Goldspan has no alternative explanation as to why Arvind should have written them. In particular, I do not find it plausible that, if the loan was fictitious, Arvind would have gone to the lengths of writing two cheques which bounced. Secondly, the cheques add up to £57,000, which is the same figure as the total in the annotation discussed above. Thus they appear to be linked backwards in time with the £50,000 credited to Goldspan’s Bank of India account. Thirdly, they are linked forwards in time with AJ’s instructions to Savjani & Co.

Why did AJ instruct Savjani & Co?

[94]AJ’s evidence was that, when the cheques bounced, he lost patience with Arvind and decided to instruct a solicitor to recover the loan. He asked Mr Desai to recommend someone, and Mr Desai recommended Mr Savjani. Accordingly, on 7 December 1998 AJ sent Mr Savjani by fax a letter (on Odyssey headed notepaper) instructions to send a demand letter to Goldspan and Arvind. Among other things the letter said that a partial payment of £57,000 had been made, but the cheques bounced.

[95]On 9 December 1998 Mr Savjani sent AJ a client care letter acknowledging his instructions. On 18 January 1999 Mr Savjani sent AJ a letter referring to his letter dated 9 December 1998, and intervening communications via Mr Desai, and noting that he had heard nothing further. Mr Savjani presumed that AJ had been away on holiday, and AJ’s passport does indeed confirm that he was abroad in the second half of December 1998.

[96]On 26 January 1999 AJ sent Mr Savjani a fax. On 27 January 1999 Mr Savjani sent AJ a handwritten fax asking AJ to telephone to clarify a couple of points. On 28 January 1999 Mr Savjani sent AJ a letter setting out the points that he required clarifying. The letter is striking for at least two reasons. First, Mr Savjani apologised for not being able to speak to AJ when AJ called him at home at 7:30 that morning, explaining that he did not have the file with him and was not fully awake at that time in the morning. Secondly, Mr Savjani commented that he needed original documents, that the copy documents AJ had sent him were not very good and that AJ had sent him a letter from MCD the significance of which Mr Savjani did not understand.

[97]On 2 February 1999 Mr Savjani sent AJ a letter enclosing draft letters to Goldspan and to Arvind and Mina [sic] Patel. Among other things, the letter noted that Mr Savjani was to ignore the letter from MCD since it had no relevance to the instant claim. (It seems probable that the letter in question was the letter dated 16 July 1998 – see paragraph 90 above). On 3 February 1999 Savjani & Co. wrote to Goldspan requiring payment of £100,000 together with accrued interest of £11,478.88 within 10 days of the date of the letter. It appears that Savjani & Co wrote to Arvind and Mina Patel claiming under the guarantee on the same date.

[98]On 17 February 1999 Mr Savjani sent AJ a letter noting that he had not received any response to his two letters of 3 February 1999 and asking for instructions.

[99]On 2 March 1999 Mr Savjani sent AJ a letter recording that he had received a telephone message stating that AJ had received all the payments due to him and that Mr Savjani could close his file. Mr Savjani went on to say that he would let AJ have his account and noted that AJ had already made a payment on account of £892.23, which ought to suffice. It will be appreciated that this letter was after AJ had received the sum of £610,000, but before he had received the sum of £100,000, the subject of the present claims.

[100]On 11 March 1999 Mr Savjani sent AJ a letter enclosing his account for the work undertaken in the sum of £632.75 plus £110.73, making a total of £743.48, and a cheque for the balance in AJ’s favour in the sum of £148.75.

[101]As noted above, Goldspan does not dispute the authenticity of the documents passing between AJ and Mr Savjani. In any event, Mr Savjani verified them, and gave evidence that he recollected being instructed by AJ to recover a loan. Furthermore, Mr Desai gave evidence confirming that he had recommended Mr Savjani to AJ. Nevertheless, it is Goldspan’s case that this entire episode was an elaborate charade, and that there was in fact no loan for Savjani & Co to recover. I find that suggestion utterly implausible. The documents are full of convincing details, such as the 7:30 phone call. In my judgment they provide strong evidence to support AJ’s case on the loan. Furthermore, as noted above, they tie in with other documentary evidence, such as the loan documents and the documents relating to the bounced cheques.

Why did AJ write to Arvind on 8 February 1999?

[102]On 8 February 1999 AJ sent Arvind and Mina [sic] Patel a fax pressing for repayment of the loan and stating that he had retained Savjani & Co to recover the money plus interest in damages. In the fax AJ complained that in December 1998 he had to sell shares in a company called Exodus Communications in an attempt to a purchase a property as a result of the money which Arvind had promised to repay not arriving. AJ said that he had sold the shares at $35.50 to $51.50 and that there were now trading at $88.50, meaning he had lost at least $288,000. In these proceedings AJ had disclosed statements from his Charles Schwab share trading account which confirm that he did indeed sell shares in Exodus Communications at the prices stated in the fax in November and December 1998.

[103]Goldspan suggest this fax is suspicious, for three main reasons. First, Goldspan suggests that it is odd for AJ to send such a fax after having instructed solicitors. AJ’s evidence was that he sent it precisely in order to explain why he had resorted to instructing solicitors. I find that explanation plausible. Secondly, Goldspan suggests that it cannot have been correct that AJ lost the opportunity just because Arvind failed to make the repayment. I am not satisfied that Goldspan has established that AJ had no need of the funds in December 1998, however. This was just after the two cheques bounced. In any event, it is plausible that AJ was making a point to Arvind, regardless of how strictly accurate it was that Arvind’s failure to repay the loan had caused the loss. Certainly, I find that more plausible than the suggestion that all the details in the fax were again part of an elaborate charade. Thirdly, Goldspan suggests that the fax is inconsistent with AJ being prepared to accept the sum of £100,000 in satisfaction of the debt. AJ’s evidence, however, was that all he cared about was recovering the money he had lent. He used the threat of claiming interest and damages to try and recover that money, but once it was paid he was prepared to drop those claims. Again, I find that evidence plausible.

What happened when AJ received the disputed payments from Arvind?

[104]As noted above, on 1 March 1999 Mr Bhagani sent AJ a fax with details of the £610,000 transferred to his account by MCD at Arvind’s request. AJ’s evidence was that this money arrived out of the blue, and that he telephoned Arvind the same day to demand an explanation. It is in this connection that AJ made the most significant change to his witness statement. In his witness statement he said that Arvind’s response was that he needed AJ to hold the money for him. In his oral evidence in chief, however, he corrected this and said that Arvind’s response had been that MCD had made a mistake, and had transferred £610,000 to AJ’s account when they should have transferred £100,000 in repayment of the loan. He maintained his account in cross-examination. I do not regard the change in itself as detrimental to AJ’s credibility, since AJ did end up holding the money for Arvind for a short period. What is more important is the credibility of his evidence that Arvind blamed MCD. I shall consider this below.

[105]AJ said that he then asked Arvind for details of an account to which AJ could transfer the £610,000 less the £100,000 that he was owed. Arvind said that he would do so, but in the meantime asked AJ to send him some information about his company in Malaysia. AJ did indeed send Arvind a letter dated 3 March 1999, which begins and ends with statements that AJ does not understand why Arvind needs the information. Again, however, this is a piece of unnecessary detail which adds supporting colour to AJ’s story. This is particularly so given that AJ travelled to Malaysia on 5 March 1999, returning on 14 March 1999.

[106]AJ said that it was following his telephone conversation with Arvind that he left a message for Mr Savjani to say that the money had been repaid.

[107]It was also his evidence that he only learnt about the £100,000 transfer after his return from Malaysia. He was not sure whether he had telephoned Arvind about this or not. He said that the thing he remembered most clearly was chasing Arvind for account details.

[108]On 31 March 1999 AJ received the fax from Arvind requesting him to transfer funds to his daughters’ account. AJ said that he did not register that the account was an offshore one in Jersey because the address given was that of the London branch of Bank of India.

[109]On 7 April 1999 AJ sent the fax to Mr Bhagani requesting him to send all of the £710,000 to Arvind’s daughters. His explanation for this was his anger at Arvind’s behaviour in transferring this money to him made him want to be rid of it. A complicating factor was that he was very busy at the time, since JH Investments was in the process of purchasing the property in Gilroy, a transaction that completed on 12 April 1999. A few days later he realised that, having waited over 2 years for repayment, he could not risk parting with the £100,000, and so he sent the instruction dated 13 April 1999. Subsequently he sent the instruction dated 6 May 1999. In that way he obtained repayment of the £100,000 and transferred the £610,000.

[110]While this account raises obvious question marks with respect to the £610,000, given the matters set out above, I find it plausible with regard to the £100,000.

Do subsequent statements by Arvind shed any light on the matter?

[111]A completion statement in respect of the sale of the London Nursing Homes on 9 April 1998 apparently prepared by MCD refers to the sum of £100,000 from the proceeds as having been paid to Arvind. Consistently with this, a letter from Arvind to MCD dated 14 April 1998 authorises MCD to pay that sum to him “in part redemption of his shareholders loans to the company”. Furthermore, an analysis of the distribution of funds from the disposal of the London Nursing Homes prepared by King & King and dated 30 July 1998 also has an entry for “Repayment of loan 100,000.00”. I agree with counsel for AJ that it seems probable that Arvind used this £100,000 together with the £1.3 million “profit” from the sale of the London Nursing Homes to pay the £1.4 million deposit on Boundary Road.

[112]Unsurprisingly, Arvind subsequently attempted to conceal what he had done. There were two meetings of Goldspan’s creditors on 4 and 18 June 1999 to consider Goldspan’s proposal for a CVA. At these meetings Arvind produced the letter agreement dated 8 January 1997 in an attempt to explain the £100,000 repayment of loan shown in the King & King analysis. Arvind was effectively trying to explain to Goldspan’s creditors why there was no money left from the £1.5 million proceeds of sale of the London Nursing Homes by saying that the bulk of the money had been used to redeem the Kredietfinance mortgage, £100,000 had been used to repay AJ and so on. At that stage, no one else appears to have known about Arvind’s diversion of £1.3 million. In the event the proposal was not accepted, and subsequently Goldspan was wound up.

[113]Arvind told what appears to be the same story in his proposal for an IVA in August 2000, where he said that he had borrowed £100,000 from his “brother” (i.e. AJ) and that that sum was agreed to be repaid from the £1.5 million proceeds of sale from the London Nursing Homes. Again, it does not appear that anyone else knew about his diversion of £1.3 million at that time. I will return to this point below.

[114]Arvind told a different story at the meeting with the SCO on 11 March 2003, however. On this occasion Arvind again said that Goldspan had borrowed £100,000 from AJ. But his account differed from that in June 1999 in two respects. First, in June 1999 he said that the loan was repaid from the £1.5 million proceeds from the sale of the London Nursing Homes to Tara, whereas in March 2003 he said that the loan was repaid from the £1.3 million “profit”. Secondly, in June 1999 he said that the loan was repaid in full, whereas in March 2003 he said that only £50,000 was repaid. To my mind, it is clear that Arvind’s second account is rather closer to the truth than the first. By 2003 the game was up so far as the diversion was concerned, and it was no doubt clear to Arvind that it was equally unsustainable to claim that the loan was repaid from the £1.5 million. It is puzzling that he said that only £50,000 had been repaid to AJ, but I do not attach any particular significance to that.

[115]I do not accept that it follows that Arvind’s first story supports Goldspan’s claims against AJ, as counsel for Goldspan suggested. Rather, it would appear that Arvind was misusing the loan documentation to conceal his own wrongdoing. Indeed, if anything, I consider it more significant that the one point that Arvind consistently maintained, including at the SCO meeting, was that Goldspan had borrowed £100,000 from AJ.

Conclusion in relation to the loan

[116]Drawing these threads together, my conclusion is that AJ did lend Goldspan approximately £100,000 in the period June 1996 to January 1997, did require Goldspan to enter into the letter agreement and Arvind and Minaxi to enter into the guarantee, did receive two cheques from Arvind which bounced and did instruct Savjani & Co to recover the loan. Given that there was a loan which AJ had been attempting to recover, I accept AJ’s evidence that the £100,000 he received in March 1999 represented repayment of that loan. It follows that AJ received that money honestly. That is the end of Goldspan’s case in relation to the £100,000. But it is by no means a complete answer to Goldspan’s case in relation to the £610,000. The fact that AJ received the £100,000 honestly does not necessarily disprove Goldspan’s claim that he dishonestly assisted Arvind with respect to the £610,000.

What knowledge, if any, did AJ have of Arvind’s fraud on Goldspan in 1999?

[117]In considering Goldspan’s claim in relation to the £610,000, a key question is whether Goldspan has proved that AJ had sufficient knowledge of Arvind’s fraud at the time that he received and transferred the money in March-May 1999. Throughout these proceedings AJ has denied that, prior to the commencement of the proceedings, he was aware of(i) the back-to-back sales of the London Nursing Homes,

(ii) Arvind’s diversion of the £1.3 million “profit” or

(iii) the fact that the money AJ received and transferred represented the proceeds of sale from Boundary Road. It was not directly put to AJ in cross-examination that these denials were false. Goldspan relies on the Benham & Reeves letter dated 18 March 1997 (see paragraphs 6 and 87 above) and Arvind and Minaxi’s letter dated 20 February 1998 (see paragraphs 88-89 above) as contradicting those denials, but in my view those documents do nothing of the kind. All they show is that AJ knew that Goldspan was selling the London Nursing Homes, something he has always admitted.

[118]In his closing submissions counsel for Goldspan primarily relied on the fact that AJ admitted in cross-examination that he had appreciated that the source of the money was the proceeds of sale of Goldspan’s property. In my view that is an important admission, but equally important is AJ’s denial that he knew that the money was not Arvind’s. He explained that his understanding was that Arvind was liquidating his business. It was also his understanding, based on his experience of real estate transactions in the USA, that, if Arvind had access to the money after completion, that was because the money was what was left over after all claims against the property had been paid off. Thus he believed the money to be Arvind’s money. Before I can reach a conclusion as to whether I accept this evidence, it is necessary to consider four other matters.

The Undated Letter

[119]In his proposal for the IVA, Arvind claimed that he had borrowed £1.4 million from AJ in order to purchase Boundary Road, and still owed him £600,000. On 25 August 2000 the Supervisor wrote to Arvind informing him that Weatheralds’ solicitors were intending to oppose the proposal for an IVA and stating that he needed documentary evidence of the claims made in the proposal with regard to AJ and three other creditors. The Undated Letter was one of the documents produced by Arvind in response to this request.

[120]The Undated Letter reads as follows:

“Mr Amrish Patel California Arvind Patel 9 Chasewood Park Sudbury Hill Harrow on the Hill Middlesex HA1 3YP Dear Arvind Re: 48 Boundry Road, St Johns Wood I write to you with regards to you in connection with the above. I let you invest this money as I thought that this property in Boundry Road, St Johns Wood would be a good investment. Instead you have lost a substantial sum of money which has caused great distress not only to myself but my family. I lent you 1.4 million and due to whatever difficulties that you had, I have incurred a loss of £600,000.00. I hold you personally liable for this loss and can demand the return of this money at any point. I would like you to be aware that I am in urgent need of this money and put you on notice. Yours Sincerely Mr A J Patel”

California Arvind Patel Sudbury Hill Harrow on the Hill Middlesex HA1 3YP Dear Arvind Re: 48 Boundry Road, St Johns Wood Yours Sincerely Mr A J Patel”

Yours Sincerely

[121]Four points about the Undated Letter are common ground. The first is that it is a work of fiction: AJ did not lend Arvind £1.4 million to invest in Boundary Road. The second is that, in the light of the expert evidence of Dr Giles, it is very probable that the document bears AJ’s signature. The third is that, although undated, it probably dates from early October 2000. AJ’s passport shows that he was in the UK from 1 to 5 October 2000, and thus he could have signed it during that period. The fourth is that it contains a number of errors and discrepancies, some obvious (such as the misspelling of “Ambrish” and “Boundary”) and others less so (such as the reference to AJ as “Mr A J Patel”: AJ’s unchallenged evidence was that it was not his custom to refer to himself in that way, but rather as “A.J. Patel”).

[122]Goldspan does not suggest that the Undated Letter directly supports its claims in relation to either of the two disputed payments, but relies upon it as similar fact evidence of AJ dishonestly assisting Arvind to conceal his diversion of £1.3 million.

[123]AJ’s evidence was that he had not knowingly signed the Undated Letter. He surmised that Arvind had somehow tricked him into doing so, but was unable to explain how this had occurred.

[124]At first blush, the Undated Letter appears to be quite damning evidence against AJ. On further consideration of the circumstances in which it was produced by Arvind, however, it appears much less so.

[125]It is clear from the Supervisor’s letter dated 25 August 2000 that it was important for Arvind to be able to establish that AJ was his largest creditor, rather than Weatheralds. In mid September 2000 Arvind produced proxy forms from four creditors of his, namely AJ, Naser Ahmed, Nitin Shah and Maniben Patel, appointing the chairman of the meeting to be their proxy holders at a meeting of Arvind’s creditors on 21 September 2000 to approve the proposal for an IVA. The five creditors represented at the meeting all voted in favour of the proposal, Weatheralds having agreed with the Supervisor to do so upon certain conditions. Thus it was duly approved.

[126]In his witness statement AJ said that he was convinced that that the signature on the proxy form purporting to be from him was not his signature and invited Goldspan to submit the proxy form to Dr Giles for forensic examination. As Mr Aaron explained in his third witness statement, which was exchanged with AJ’s statement, however, this very proxy form was one of two documents sent by the Trustee to the Liquidator on 19 November 2008, the other being the Undated Letter. Mr Aaron revealed that the Trustee herself had wanted to establish the genuineness or otherwise of this proxy from (as well as the Undated Letter) because she thought that “the signature on the proxy seemed to have been forged, possibly by Arvind Patel and wanted to obtain a forensic specialist’s opinion”. Although Mr Aaron and the Liquidator considered that “the signatures to our untrained eyes seemed to differ”, the decision was taken not to submit the signature to Dr. Giles on the grounds that “if the proxy form had been forged, it would have no value to the liquidation”. Thus it was common ground at trial that Arvind had probably forged AJ’s signature on the proxy form.

[127]In addition to the point about the signature, the proxy form contains Arvind’s usual misspelling of AJ’s first name. It also gives AJ’s address as “7749 Country Lane, Pleasnton” rather than 7747 County Lane, Pleasanton.

[128]In early October 2000 Arvind produced letters purporting to be from each of the four creditors referred to above to evidence their claims. One of these was the Undated Letter. Comparison of each of the other three letters with the corresponding proxy form reveals discrepancies: i) In the case of Mr Ahmed, there is a letter dated 2 October 2000 from “Mr Nasir Ahmed”, whereas the proxy identifies the creditor as “Naser Ahmed”. There is also an obvious difference between the signatures. ii) In the case of Mr Shah, there is a letter dated 4 October 2000 from “Niten Shah”, whereas the proxy identifies the creditor as “Mr Nitin S. Shah”. iii) In the case of Mrs Patel, there is a letter dated 5 October 2000 letter was from “Manimasi C. Patel”, whereas the proxy identifies the creditoras “Mrs Maniben Patel”. In addition, the letter misspells her address as “Troro Road”, whereas the proxy gives it as “Truro Road”.

[129]Given that Arvind was a fraudster who at this point in time was still attempting to conceal his wrongdoing, given that it is clear that he was under pressure to produce supporting evidence from friendly creditors in order to ensure that the IVA was approved, and given the matters referred to above, I consider that each of the proxy forms and letters must be regarded with grave suspicion. In these circumstances, it is not implausible that Arvind took advantage of AJ’s presence in the UK and somehow tricked AJ into signing the Undated Letter.

Studentsdirectory

[130]Goldspan contends that in 2000-2001 AJ allowed his account at CBT to be used to receive money from Jignasha Patel’s account at Mashreq Bank in Dubai and then sent that money to Studentsdirectory. Goldspan relies upon this as further similar fact evidence of AJ dishonestly assisting Arvind to deal with misappropriated funds. Once again, AJ’s defence to this charge involves a loan.

[131]AJ’s evidence was that one of the young entrepreneurs he mentored was Arvind’s daughter Manisha. She had an idea for a business of selling student textbooks online, which became Studentsdirectory. Arvind’s other daughter Jignasha was also a director of the company. AJ agreed to provide the business with a revolving line of credit of $50,000. Without access to his bank statements from CBT, AJ was unable to give details as to precisely when he had made money available pursuant to this facility.

[132]Goldspan has drawn attention to four credits recorded in Studentsdirectory’s bank statements which it suggests reflect transfers from AJ. The first is a credit of £32,898.51 on 28 June 2000 which is expressly attributed to AJ. AJ accepted that he had paid this sum on the date shown and said that it represented a $50,000 loan from his CBT account.

[133]The second is a credit of £33,254.89 on 18 August 2000 from an unidentified source. AJ pointed out that there was a document apparently showing payments from Jignasha’s account at Mashreq Bank which recorded a payment of $50,032.87 on 16 August 2000 (just two days earlier), and said that it was his belief that it was likely that that particular credit to the account corresponded with that $50,032.87 payment from Jignasha. I agree that this appears plausible.

[134]The third is a credit of £33,726.53 on 22 December 2000 from an unidentified source and the fourth is a credit of £34,458.99 on 23 February 2001 from an unidentified source. AJ accepted the possibility that these might have been loan payments from him, but said that any money that he loaned to Studentsdirectory was repaid.

[135]Goldspan also relies upon the existence of what appear to be three letters dated 13, 20 and 24 June 2000 respectively from Jignasha to Ashrad Khan of Mashreq Bank intructing him to transfer of $50,000 to AJ’s CBT Account. Save for the date, the letters are identical. Only the earliest one is actually signed. There is nothing on the face of the documents to show that they were actually sent.

[136]AJ’s evidence was that it was possible that Jignasha had repaid money that he had lent, since Jignasha helped her sister run the company. He did not think that he had ever lent Studentsdirectory as much as $150,000 at a time, however, or that he had received $150,000 in repayment in such a short space of time.

[137]There are documents, one of which I have referred to above, apparently recording payments from four accounts maintained by Jignasha at Mashreq Bank. These documents record just one potentially matching payment out of one of the accounts in the period June/July 2000: a sum of $50,019.17 on 20 June 2000. Even that payment does not precisely tally with the apparent instruction to transfer $50,000. If that payment was made pursuant to one of the three letters, it can only have been pursuant to the earliest, namely the signed letter dated 13 June 2000.

[138]Finally, Goldspan relies on a fax which AJ sent Arvind which says “Arvind please use the following account number”. It then set outs the details of AJ’s CBT account, which correspond to those on the letters from Jignasha to Mashreq, but the wording and layout is slightly different. Finally it says “Just let me know how much you are transferring and when”. The fax transmission details on the document have faded and are difficult to read. Furthermore, a hole has been punched through part of the transmission date. The date appears to be Ju[ ] 15 00, which could be 15 June 2000 or 15 July 2000. AJ was unable to explain this document. Counsel for Goldspan suggested that the correct date was 15 June 2000, and that the document was connected with the letters from Jignasha to Mashreq Bank. This appears plausible, except that it is strange that the fax should be dated two days after the first letter. Even if there is a connection, however, it is possible that the fax simply represents AJ giving instructions as to how money owed to him by Studentsdirectory is to be repaid.

[139]Thus there is really no hard evidence to suggest that AJ’s account of the matter is incorrect. Still less is there any hard evidence that AJ was dishonestly assisting Arvind to deal with misappropriated funds. This episode occurred 13 months after AJ paid the £610,000 to Bank of India. Furthermore, Goldspan has abandoned its tracing claim. As it must be taken to accept, there is nothing to show that the money which Jignasha transferred to AJ in June 2000 (if she did) was derived from the £610,000. Nor is there is anything to show that the money derived in some other way from the £1.3 million diverted by Arvind from Goldspan.

Redbourne

[140]At the commencement of these proceedings, Goldspan relied on a payment of £10,000 by AJ to Redbourne on 13 May 2008 (some nine years after his receipt of the sums of £610,000 and £100,000) as further evidence of dishonest assistance. By the end of the trial, Goldspan had abandoned reliance upon this payment. Instead, it is AJ who relies upon this episode.

[141]AJ’s evidence was that in July or August 2007 Arvind and Manisha invited him to invest in a venture to run a care home at 229 High Street, Penge, London SE20. AJ agreed to invest £70,000 on behalf of his son Amit on the basis that Amit and Manisha would each own 50% of Redbourne, which operated the home, and would each be directors. In the event, AJ ended up investing a total sum of £87,209, of which the £10,000 payment in question formed part. In early October 2008 AJ visited the UK. In advance of his visit he sent Manisha an email asking to see Redourne’s accounts and financial records, but this did not happen. At various points in 2009 AJ again chased for accounts, but was fobbed off each time. AJ became increasingly concerned, and in September 2009 he asked a nephew of his to look into the Companies House records. At this point, he discovered that the only recorded director was Manisha and the only shareholders were Manisha and Jignasha. Furthermore the accounts were overdue. AJ therefore sent an email to Arvind, Manisha and Jignasha on 16 September 2009 explaining what he had found out and asking a series of questions. He concluded by saying:

“… I would just like a payback of my investment of British pounds 87,209. I do not want to put you through any problems as the lawyer I consulted feels this is fraud. If you want to make arrangements to return my investment please let me know and we can move forward …”

AJ continued to press the matter until these proceedings were commenced on 29 October 2009. He has not been repaid the £87,209.

[142]AJ’s evidence about these matters is supported by a wealth of contemporaneous documentation, including extensive email correspondence and bank statements, and it was not seriously challenged in cross-examination. In the light of this evidence, it appears that AJ was the victim of a fraud by Arvind. Furthermore, this episode supports AJ’s evidence that, even as late as 2007-2008, he was unaware that Arvind was in financial difficulties. (In fact, Arvind was still an undischarged bankrupt, since the Trustee had obtained an order suspending his discharge from bankruptcy). It also lends further support, if it is needed, to AJ’s version of events with regard to the £100,000 loan to Goldspan and the loan to Studentsdirectory.

Phoenix

[143]On 28 May 2010 AJ issued an application to vary the terms of the freezing order originally granted by Warren J and subsequently continued by consent by order of Lewison J dated 11 November 2008 in order to permit him to use part of the frozen funds to fund his defence. The basis of the application was that his monthly income of approximately £4,000 was not sufficient either to pay his monthly outgoings or to fund this substantial piece of litigation. (The freezing order only permitted him to spend £5,000 on legal expenses.) The application was supported by AJ’s second affidavit sworn on 24 May 2010, which disclosed his assets outside England and Wales and his income and outgoings. One of the assets he disclosed was the property in Phoenix (see paragraph 47 above). He stated that this had been placed on the market on 8 November 2008, but that there had been no viable offers.

[144]The variation application was twice adjourned. It was originally listed for hearing before Master Moncaster on Monday 14 June 2010, but on Friday 11 June 2010 the Master declined to it hear on the ground that he had no power to vary the freezing order. Accordingly the application was re-listed before a judge on 7 July 2010. On 30 June 2010 Goldspan served a witness statement of Mr Aaron opposing the application on the basis that the entire fund frozen by the freezing order represented the traceable proceeds of Arvind’s fraud on Goldspan. This led to the matter being adjourned and re-listed for 28 October 2010. In the meantime AJ filed a third affidavit sworn on 19 August 2010 in which he addressed the tracing claim at length and in detail. Goldspan served a further witness statement of Mr Aaron on 9 September 2010, and AJ filed a fourth affidavit in reply sworn on 19 October 2010. In paragraph 46.2 of that affidavit he stated that the Phoenix affidavit was still being marketed. This was a lie: in fact the property had been sold and AJ had received $803,000 on 7 October 2010.

[145]On 28 October 2010 the variation application was heard by John Randall QC sitting as a Deputy Judge of the High Court. He acceded, in part, to the variation application upon condition that AJ provide security over his interest in the Phoenix property. After the hearing, AJ’s solicitors wrote to Goldspan’s solicitors saying that AJ’s partner Mr Mercier had objected to Goldspan taking a charge over the Phoenix property given it was for sale, and offering the Mesa property instead. This again was a lie. As a result, however, it was agreed between the parties that the order should be sealed in a form which required that security be given over one of the properties, the identity of the property to be agreed or determined by the court in default of agreement.

[146]In January 2011 AJ visited his solicitors in the UK to prepare his witness statement. He confessed to them that the Phoenix property had been sold on 7 October 2010. Accordingly they wrote to Goldspan’s solicitors revealing the true position in 20 January 2010. The letter was somewhat mealy-mouthed, in that it said that AJ had not intended to mislead the court. That was not correct. Nevertheless, it did contain an apology and accept that the order of 28 October 2010 would have to be amended.

[147]On 14 March 2011 AJ consented to an order of David Richards J setting aside the order of 28 October 2010, requiring AJ to return the money he had received under that order, dismissing AJ’s variation application and requiring AJ to pay Goldspan’s costs of that application to be assessed on the indemnity basis. As I have already said, it follows that AJ has paid a heavy price for his perjury.

[148]On 29 March 2011 AJ swore a fifth affidavit in which he unequivocally admitted the perjury, apologised for it, and gave a detailed explanation for his reasons for committing it. In brief summary, AJ said that he was frustrated by the delays in bring this case to trial so that he could prove his innocence of Goldspan’s claims, that he was particularly frustrated by the adjournments of the variation application, that he was very concerned by the liquidator’s tracing claim and that he became obsessed with demonstrating that that claim was untenable. An offer had been received for the purchase of the Phoenix property in June 2010, which AJ and his partner had done the minimum necessary to progress hoping that a better offer would be made. In the event, no better offer had been received by late September 2010. On the contrary, the offeror had reduced its offer following due diligence. Accordingly, AJ and his partner concluded that they had no alternative but to conclude the sale of the Phoenix property at what amounted to a fire sale price in early October 2010. AJ was concerned that, if he revealed this, it would lead to a further adjournment of his application and thus derail his attempt to get the tracing claim before the court to show that it was unsustainable. He also prayed in aid the other pressures he was under. As I have said, there was no real challenge to this explanation in cross-examination.

The £610,000

[149]I am now in a position to express my conclusion in relation to the £610,000. The starting point is that I have already concluded that AJ has told the truth about the £100,000 loan from Goldspan. Next, I have concluded that neither the Studentsdirectory episode nor the Redbourne episode provides any support for Goldspan’s claim. On the contrary, the Redbourne matter suggests that, if anything, AJ is a victim of Arvind rather than an accomplice. On AJ’s account he received £610,000 out of the blue from Arvind; and, when asked to explain this, Arvind said that it was a mistake by MCD. At first blush, this does not seem very plausible; but, given the other evidence in this case, I cannot say that it is incredible. AJ also claims that, when he received the transfer instructions from Arvind, he did not appreciate that the account was an offshore account in Jersey. Again, this does not appear very plausible, but given the content and layout of Arvind’s fax, I cannot say that it is incredible.

[150]Counsel for Goldspan submitted that the various transfers had the appearance of being pre-arranged. While I agree with the initial transfer of £610,000 has this appearance, I do not agree that this is true of the later transfers. It was only on 31 March 1999 that Arvind gave AJ instructions as to where to send that money. Furthermore, AJ’s successive instructions to Mr Bhagani show a clear change of mind on his part. I find AJ’s explanation of this plausible.

[151]In my view AJ ought to have realised that Arvind appeared to be engaged in a money-laundering exercise of some kind. That is not the issue, however. The issue is whether Goldspan has proved on the balance of probabilities that AJ acted dishonestly. Given AJ’s perjury, I cannot simply rely upon AJ’s previous good character and his denial of dishonesty as an answer to the charge. The key question, to my mind, is whether Goldspan has proved on the balance of probabilities that AJ knew, or shut his eyes to the fact, that the £610,000 was Goldspan’s money rather than Arvind’s money. Having given the matter anxious consideration, I do not consider that Goldspan has. On the contrary, I accept AJ’s evidence summarised in paragraph 118 above.

Limitation and quantum

[152]In the light of this conclusion, it is not necessary for me to consider AJ’s limitation defence. Nor is it necessary for an issue as to quantum which arose during the course of the trial to be investigated.

Result

[153]The claim is dismissed.