Gore & Anor v Mishcon de Reya [2015] EWHC 164 (Ch)

Case No HC 2013 000248Case No HC 2013 000181[2015] EWHC 164 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue 7 Rolls Building,, Fetter LaneDate Friday 30 January 2015
London EC4A 1NL
Before
HIS HONOUR JUDGE HODGE QCsitting as a Judge of the High Court
Between
And between:ClaimantPatrick Brian GoreClaimantAllied Developments (Europe) LimitedClaimant- and –
Between
Mishcon de ReyaDefendant
Mr Robert Hantusch (instructed by Kennedys Law LLP) for ClaimantsMr Robert Anderson QC and Mr Robert Weekes (instructed by Robin Simon LLP) for DefendantsHearing Hearing dates: 13-16, 19, 20, 22, 23, 30 January 2015
JudgmentJudge Hodge QC:
[1]This is the trial of two claims which were heard together between Tuesday 13 and Friday 23 January 2015. The first, issued on 19 February 2013, is a claim by Mr Kwok Choon Chiang (who is known by the initials “KC”) and Merlion Limited (“Merlion”), a limited partnership formed in the State of Alabama, USA (and named after the well-known Singapore tourist icon which combines the head of a lion with the body of a fish) which is beneficially owned and controlled by KC. For the purposes of this judgment, it is unnecessary to distinguish between KC and Merlion; and I shall proceed as though KC were the sole claimant. This claim relates to some US $3.5 million All references to $ are to US dollars. received by the Defendants, the well-known firm of solicitors, Mishcon de Reya (“Mishcons”), from another well-known firm of solicitors, Simmons & Simmons (“S & S”), between 10 October and 9 November 2007 and representing part of a series of payments (totalling some $4 million) which had been transferred to S & S by two firms of Alabama-based attorneys instructed by KC. Mishcons released these moneys on the instructions of a client of that firm, Mr Mick Shephard (“Mr Shephard”), to persons and for purposes appointed by him. The claim by KC was the subject of an unsuccessful application for summary judgment before Roth J whose judgment (dated 23 May 2013) bears the neutral citation number [2013] EWHC 2319 (Ch). The second claim, issued on 26 November 2013, is brought by Mr Patrick Brian Gore (“Mr Gore”) and a UK-based company of which he is one of the three directors and an equal one third shareholder, Allied Developments (Europe) Limited (“ADEL”). This claim relates to £224,500 paid directly to Mishcons by Mr Gore on 27 November 2007 and released by Mishcons on the instructions and at the direction of Mr Shephard. For the purposes of this judgment, it is unnecessary to distinguish between Mr Gore and ADEL; and I shall proceed as though Mr Gore were the sole claimant, whilst bearing firmly in mind that Mr Martin Griffiths (who gave evidence before me) and Mr Christopher Hamilton (who did not) are also equal one-third shareholders and co-directors of ADEL with Mr Gore. All four claimants are represented by Mr Robert Hantusch (of counsel); and Mishcons are represented by Mr Robert Anderson QC leading Mr Robert Weekes (also of counsel).[2]In one sense this is an unusual case because there is really little dispute about the primary facts. Rather, the case centres upon the inferences to be drawn from the undisputed facts and the contemporaneous documents. With their written opening, counsel for Mishcons produced a written chronology with which Mr Hantusch has taken no issue. A more detailed survey of the facts is now to be found at Section E of Mishcons’ written closing submissions. Accordingly, it is necessary for me to provide only the most brief description of the facts which give rise to the present claims, supplemented by the schedule to this judgment which details(1) the sums received by S & S by and on behalf of KC and Merlion,(2) and(3) the sums transferred to Mishcons by S & S and Mr Gore respectively, and(4) the payments out of Mishcons’ client account. This judgment breaks no new legal ground; but it may serve as a salutary warning that even the most experienced and successful of businessmen can be taken in by an apparently plausible chancer.[3]In or about June 2007 ADEL and its affiliates needed to raise funding to refinance an existing development in Cardiff (Bay Pointe) and to acquire a property development in Orlando, Florida USA known as 1000 North Orange. The plan was that they should do so by procuring a bank guarantee which could then be “cashed” (in the sense of procuring a loan facility to be secured by the bank guarantee). Initially it was hoped to obtain the bank guarantee from UBS Bank in the United States with the assistance of a French Canadian, Mr Patrick Danan, and his associate, Mr Edmondson. Mr Shephard and his company, MKC Holdings International Limited (“MKC”), were introduced to ADEL by a broker, Mr Mark Timmis, as someone who could assist in obtaining the loan facility. However, having “planted the seeds of doubt”, by the end of July 2007 Mr Shephard had persuaded ADEL that this funding mechanism was not going to work and that the only viable option was for Mr Shephard to obtain the bank guarantee as well as cashing it. This became known as “Plan B”. Mr Shephard represented that this would require an advance fee of up to $10 million to be paid to the “owner” of the guarantee. Mr Shephard was prepared to provide part of this; but ADEL lacked the resources to provide the remainder. During the latter half of September 2007, KC was introduced to ADEL in the United States as someone who needed to raise money to refinance certain real estate owned by Merlion in Orange Beach, Alabama and to develop it as a condominium resort hotel, but who had the cash available to assist with the payment of the advance fee. As the matter developed, KC, Merlion and a specially incorporated affiliate of ADEL called CAMP (Orange Beach) Holdings LLC (“CAMP”) entered into a written agreement (“the JVA”) effective 1 October 2007 regarding a joint venture to be formed under which Merlion and/or KC were to deposit $3 million into “ a client escrow account” with S & S in the UK to be “used only for the specific purpose of closing the Credit Facility to complete” a $35 million loan to refinance the exiting secured indebtedness on Orange Beach and to develop the resort hotel. The moneys paid over to Mishcons were intended by KC, Merlion, Mr Gore and ADEL to be used by Mr Shephard to obtain the bank guarantee, which would then be cashed to raise the required finance. In fact, these moneys were “pocketed” by Mr Shephard in what is said (almost certainly correctly) to be an “advance fee fraud”.[4]The relevant partner in Mishcons was Mr Kevin Steele (“Mr Steele”). He was convicted on 5 December 2011, after a trial at the Crown Court at Southwark, on 2 counts of conspiring with Mr Shephard to use false instruments and to commit fraud by false representation – offences to which Mr Shephard had previously pleaded guilty – and on a third count of fraud for which Mr Steele was sentenced to a total term of 5 years and 6 months’ imprisonment (which was subsequently reduced on appeal to 4 years and 4 months). Those convictions related to a wholly separate fraud which had been committed against a Swiss bank, EFG Private Bank Limited, in or about the middle of 2008, some months after the events complained of in these actions, and it was in no way connected with the present claims. As a result of this latter fraud, Mr Steele had been expelled as a partner in Mishcons on 19 September 2008 (following a period of suspension); and he was subsequently struck off the Roll of Solicitors on 22 August 2012. He had earlier been adjudged bankrupt on 5 October 2011. The issue at this heart of this litigation is whether Mishcons can be rendered vicariously liable for Mr Steele’s actions in releasing the moneys which form the subject-matter of these two claims on the authority of, and in accordance with directions from, Mishcons’ client, Mr Shephard.[5]The claims against Mishcons are founded upon three separate but, by reason of their common factual basis, closely-linked causes of action. These are:(1) First, that Mishcons received, and then permitted the disposal by Mr Shephard, for his own personal benefit, of some $ 3.5 million of the moneys provided by KC and Merlion and £ 224,500 of moneys provided by Mr Gore which monies were, on the claimants’ cases, held subject to a Quistclose The name derives from the House of Lords decision which recognised the existence of such trusts: Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. resulting trust under which they should have been applied for the specified purpose of obtaining bank funding or returned if that purpose were not achieved. This cause of action focuses upon the fiduciary duties of Mishcons as the recipient of the moneys. The claims for breach of trust under this head are for the sums of $ 3.5 million (plus interest) paid by KC and Merlion and £ 224,500 (plus interest) paid by Mr Gore.(2) Secondly, that Mr Steele, as a partner in Mishcons, dishonestly assisted Mr Shephard in dealing with those same moneys, and that Mishcons are vicariously liable for the defaults of Mr Steele, and so for the loss of those moneys. Unlike the Quistclose resulting trust claim, this cause of action focuses upon the fiduciary duties of Mr Shephard as the client of Mishcons at whose direction the moneys were disbursed.The claim under this head is again for the sums of $ 3.5 million (plus interest) paid by KC and Merlion and £ 224,500 (plus interest) paid by Mr Gore.(3) Thirdly, that Mr Steele and Mr Shephard conspired together to defraud all four claimants, and that Mishcons are vicariously liable for all of the losses resulting from that conspiracy. The losses claimed from the conspiracy are greater than the sums totalling $ 3.5 million and £ 224,500 that were received and disbursed by Mishcons; and for the purposes of this trial they also include the following other losses suffered, being:- (a). In the case of KC and Merlion: (i) The substantial costs and interest payable under certain promissory notes and later loans used partly to repay those promissory notes; (ii) Payments totalling $ 500,000 that were used to pay S & S and to discharge other purported expenses; and (iii) Failed funding costs of $58,114.87. (b). In the case of Mr Gore and ADEL: (i) Payments totalling £ 52,500 made at the direction of Mr Shephard; and (ii) Failed funding costs and expenses of £ 97,507.35.[6]Mishcons submit that the following key points emerge from the trial:(1) Although the claimants advance three different causes of action, each one depends (at the least) on the same two allegations – (i) that the moneys transferred to Mishcons’ client account were not objectively intended to be at the free disposal of Mr Shephard; and (ii) that Mr Steele was subjectively aware that was the case. Unless the claimants can establish both allegations, their claims should fail in their entirety.(2) Therefore, the dishonest assistance claim adds nothing to the Quistclose trust claim. The conspiracy claim also adds nothing to the Quistclose trust claim, save that the claimants seek additional heads of loss in respect of it.(3) Neither of those two allegations can be maintained in the light of the unequivocal and unambiguous statements made by Mr Dyton (an experienced commercial solicitor) and Mr Gore (an experienced chartered accountant) when transferring the moneys to Mishcons. They said that the monies were to be held to the account of MKC and to the instruction/order of Mr Shephard. This is not an assertion of a beneficial interest on the part of the transferee. It is the polar opposite.(4) No witness or documentary evidence has done anything to impugn the judgment of Roth J, dismissing the summary judgment application with indemnity costs. The reasons given by the judge in his detailed and careful judgment are more than sufficient for these claims to be dismissed. The claimants have not even sought to engage with the judge’s analysis.(5) The witness evidence and documents have established that Mr Steele had an exceptionally limited role in relation to the events about which the claimants complain. He never met, spoke to or corresponded with KC. He only met Messrs Gore and Griffiths and Hamilton once, and even then only at a very early stage (on 13 June 2007). The claimants’ complaint against Mr Steele is essentially that he authorised payments out from Mishcons’ client account of moneys paid into that account with the claimants’ consent and which the claimants had said should be held to the account, order and instruction of Mr Steele’s client. That provides no basis at all for an arguable claim against Mishcons, let alone one founded in fraud or dishonesty.(6) The court need not determine any issue in relation to the Solicitors’ Accounts Rules (“the SARs”) because: (a) they are irrelevant to the conspiracy claim since non-actionable breaches of a non-criminal statute cannot be “unlawful acts” for the purposes of that tort; (b) they are irrelevant to the dishonest assistance claim since there is no basis for suggesting that regulatory rules made by the Law Society are a proxy for subjective or objective standards of honesty; (c) they are irrelevant to the Quistclose trust claim since any asserted limited purpose for which the moneys might be held by Mishcons would not be identified by the SARs;and although the claimants submit that if there were some uncertainty, compliance with the SARs (in terms of identifying the relevant “client”) required Mishcons to make some inquiries of S & S, there was plainly no uncertainty at all because Mr Dyton’s instructions were unequivocal; and (d) considerable caution should be exercised before making any finding in relation to the operation of the SARs (which could potentially have significant practical implications for the solicitors’ profession) when it is not in fact necessary to do so.(7) The court has had the benefit of evidence which it was not necessary to explore in great detail on the summary judgment application, being that concerning the correspondence betweens Messrs Danan and Shephard, with the “assistance” of Messrs Gore, Hamilton and Griffiths. The content of much of that correspondence was false and calculated to mislead; and it should be inferred that its purpose was in fact to mislead Mr Steele. It cannot sensibly be suggested that if Mr Steele were dishonest and/or a co-conspirator with Mr Shephard, the latter would have gone to such lengths to mislead him.(8) The court has also had the considerable benefit of hearing evidence from Mr Shephard’s assistant, Mr Mark Pattinson. There is no reason to doubt the truth of his evidence; and the claimants (who called him as their witness) certainly cannot, and do not, seek to do so. Having seen essentially the same documents as Mr Shephard had made available to Mr Steele, and having worked closely with Mr Shephard, Mr Pattinson was adamant that neither he nor Mr Steele was involved in any fraud in relation to the relevant transactions (indeed, he did not believe that it was a fraud at all at the time). In circumstances where Mr Steele was not called as a witness, Mr Pattinson’s evidence is particularly instructive.(9) In cross-examination of Mr Brown, and then in closing submissions, the claimants have sought to advance an entirely new and unpleaded allegation that Mr Shephard and Mr Steele were “building the file”, by which is meant assembling exculpatory documents if, and in the event that, Mishcons’ partners were to investigate Mr Steele. The claimants should not be entitled to advance this last-ditch allegation at this late stage. There is, in any event, no evidence (let alone any reasonably credible evidence) in support of it. Mr Steele received documents from his client, Mr Shephard in connection with transactions on which Mr Shephard and his company, MKC, had instructed him; and Mr Steele put those documents on his client file. There is simply no basis for asserting that Mr Steele must have done so for nefarious motives.(10) It appears from the claimants’ opening and closing submissions, and their decision not to cross-examine Mr Brown in this regard, that the claimants do not, in these proceedings, seek to rely upon the fact that Mr Steele was convicted of criminal offences in relation to the EFG Bank fraud. It involved different parties, an entirely different transaction, and took place at a different time. There is no proper basis for inferring that, on account of having been involved in that particular fraud, Mr Steele must somehow have committed fraud on these claimants. This now appears to be common ground.[7]As will become apparent, in broad terms I accept these submissions.When considering KC’s claim, Roth J observed (at [4]) that:
“The loss of his money, some of which he had borrowed from his sister and other third parties, was undoubtedly a terrible blow for KC. But the issue in these proceedings is whether he can recover on account of his loss from Mishcons”
. That is still the issue before me. The answer is that, whether or not Mr Shephard did defraud the claimants, and whatever sympathy one has for KC and Mrs Chiang – and I do entertain considerable sympathy for them (as distinct from Mr Gore) since they are the most deserving of individuals and they have been treated shamefully - Mishcons were not to blame for their misfortunes; and these claims must therefore be dismissed. If KC requires redress, I fear he must look elsewhere (if it is not already too late to do so).[8]I remind myself that the legal burden rests on the claimants to prove each element of their case to the civil standard of proof, that is to say on the balance of probabilities. Given the nature of the allegations made in relation to Mr Steele, I also remind myself of Lord Nicholls of Birkenhead’s well-known observations in Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 at 586D-F, where he said:
‘The balance of probability standard means that a court is satisfied that an event occurred if a court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence…Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.’
However, I must also bear in mind that Mr Steele has been convicted of serious offences of dishonesty (to which he had pleaded not guilty), he has been sentenced (after an appeal) to over 4 years’ imprisonment, and he has been struck off the Roll of Solicitors. Clearly, he is not someone who has adhered throughout his professional life to the high standards of integrity and honesty so rightly expected of solicitors generally.[9]Both Mr Gore and KC gave evidence before me. KC and his wife, Mrs Terri Chiang, were present in court throughout the trial, and they have taken a lively interest in the proceedings (although KC told me that his presence in court did not mean that he understood all that was being said). Mr Gore left court at the conclusion of his evidence and he did not return (which may have been because I had been told that his father had been admitted to hospital in the Midlands during the course of the trial). In addition, I have heard oral evidence from three further witnesses for the claimants: Mr Richard Dyton (an experienced solicitor and the partner in the Projects and Construction Group of S & S, who acted for ADEL), Mr Griffiths, and Mr Mark Pattinson (who was Mr Shephard’s assistant). I also received two witness statements from Mrs Chiang without objection from the defendants, who did not require her to be tendered for cross-examination. For the defendants, I heard from one witness, Mr Jarret Brown, a partner in Mishcons, who had had some limited involvement with Mr Steele’s relevant file in October 2007 with a view to satisfying himself that the treatment of moneys received into, and paid out of, Mishcons’ client account complied with money-laundering requirements; and who later, in September 2008, became involved in investigating the EFG Bank fraud and, in consequence, Mr Steele’s conduct as a partner of Mishcons generally, including assuming overall responsibility on behalf of Mishcons for the conduct of this litigation.[10]With the exception of Mr Gore, there was no real challenge to the integrity or the probity of any of the witnesses or the contents of any of their written evidence. Rather, cross-examination was focussed upon establishing what each of the witnesses had known about events at the time and, in particular, whether they had seen certain documents; what they had understood the contemporaneous documents to mean; and whether certain of the documents accorded with their contemporaneous understanding of matters.[11]Mr Gore (who is now 46 years of age) was in the witness box for some 8 hours, starting at just after 3.30 pm on Day 1 (Tuesday 13 January) and concluding in time for the luncheon adjournment on Day 3 (Thursday 15 January). Mr Gore was a voluble witness who gave lengthy answers to questions. At times he professed a curious difficulty in understanding certain of Mr Anderson’s questions which I find to be attributable to a reluctance on Mr Gore’s part to provide a straight answer. Mr Anderson’s cross-examination established that Mr Gore was an experienced chartered accountant, with impressive professional and practical credentials in the field of auditing and corporate finance (including 10 years at Arthur Andersen) and some 20 years’ experience of deal-making and the like. In the course of his evidence, Mr Dyton described Mr Gore as “quite a diligent type of guy”, and I accept this description of Mr Gore in general. However, in relation to the series of events which have given rise to the present litigation, I am satisfied that Mr Gore was not merely naïve and gullible but (as Mr Gore himself accepted) he “compromised his integrity on several occasions”, and he told a number of lies in the process of which he was now “ashamed”. I find that (as Mr Gore described himself) he was “blinded by greed to try and get the deal away”, and spent some five months acting at Mr Shephard’s “beck and call”, “dancing to his tune”, and unthinkingly and uncritically going along with all that Mr Shephard instructed him to say or do. I find that I cannot accept Mr Gore’s evidence on any matter in dispute unless such evidence either(1) is corroborated by some contemporaneous document or other witness evidence which I accept as honest and reliable or(2) constitutes an admission against Mr Gore’s interests. I find that (not always at Mr Shephard’s behest, but sometimes of his own accord) Mr Gore was a knowing party to drafting a series of false documents that were designed to mislead (1) the financial institutions from which ADEL and its affiliates were seeking to raise money and their representatives, (2) ADEL’s own solicitor (Mr Dyton),(3) Mr Shephard’s appointed solicitor (Mr Steele), and(4) (in relation to the work that was being done to bring the transaction to a successful completion) even his own joint venturer, KC. Such conduct is inexcusable. I also find that Mr Gore was not prepared to be open and frank with the court during the course of his cross-examination, notably in relation to the identity of the “benefactor” of the original proposed guarantee from UBS, which I am satisfied (despite his protestations to the contrary) was understood by Mr Gore to be Mr Danan.[12]Mr Anderson invites me to find that Mr Gore also deliberately deceived KC into agreeing to inject $3 million into the transaction by the false representation that he and Mr Griffiths had already deposited $ 5 million towards obtaining the bank guarantee. At first I was attracted to this conclusion; but Mr Hantusch has persuaded me not to make such a finding. I accept KC’s evidence (at paragraph 28 of his witness statement, and affirmed in cross-examination) that initially he was told by Messrs Gore and Griffiths “that ADEL had invested US $5 million to get their part of the bank guarantee and my US $3-4 million was to obtain a larger bank guarantee”. However, KC accepts (at paragraph 32) that he was later given a copy of a letter dated 22 September 2007 from MKC to Mr Gore which confirmed that MKC could access (upon demand from Hiscox Limited, apparently one of Mr Shephard’s companies) the first payment of $5 million which Carlton Limited (another of Mr Shephard’s companies) was providing, and that further payments were expected in the near future. I accept Mr Gore’s evidence (at T2/160) that “there was nothing hidden or underhand about what we were trying to do” since they gave KC a copy of the “Hiscox letter”. I find that Mr Gore had originally been led to understand by Mr Shephard that MKC was already holding the first payment of $5 million towards “the cost and activation of the facility Carlton Limited are providing”; that this was why Mr Gore told KC that (as stated in Mr Gore’s discussion paper dated 24 September 2007) he and Mr Griffiths had “already deposited $5m”; and that Mr Gore drafted his email to MKC of 24 September 2007 requesting confirmation of the fact that MKC “was holding” the first payment of $5 million because that was his genuine understanding at the time. Mr Shephard faxed this email request through to Mr Steele for his urgent advice; and, no doubt following some undocumented discussion between himself and Mr Steele, Mr Shephard redrafted the confirmation to make it clear that MKC could “access” the first payment of $5 million “upon demand from Hiscox”. Such a revision of the facts would have been typical of Mr Shephard’s method of working. When dealing with a meeting in Birmingham on 3 November 2007 between KC and Messrs Gore, Griffiths and Shephard (at T3/21) Mr Gore described Mr Shephard (as I find accurately) as seeming “to change his mind, change the facts at least once every couple of days. So it’s very difficult. It’s like hugging jelly to actually know what Mick is actually saying to you.” KC accepted in cross-examination that it “was sometimes difficult to understand what was going on”, and that it was all “very confusing”. Mr Gore can be criticised for replicating his earlier language in the signed JVA (“CAMP’s affiliates have already deposited $5 million”) and for not telling KC that ADEL had no proof that this sum of $5 million ever existed. As a result, it is clear that KC was left with the false impression that Mr Shepherd had already loaned ADEL or its affiliates $5 million which had been deposited towards the fees. But I do not accept that Mr Gore deliberately set out to mislead KC in this way (although the fact that he was misled was convenient for Mr Gore).[13]Mr Dyton gave evidence for about 3 ½ hours on the afternoon of Day 3 (Thursday 15 January) and continuing until about 12.10 on the following day. I accept Mr Anderson’s description of Mr Dyton as a witness who gave honest and straightforward evidence which for the most part should be accepted. However, as Mr Anderson also points out, he was addressing conversations and events which occurred more than 7 years ago, in circumstances where he had taken few contemporaneous notes (whether in the form of an attendance note or email). I therefore accept that caution must be exercised when assessing Mr Dyton’s suppositions as to what Mr Steele may or may not have known about the relevant transactions at the time and, in particular, Mr Dyton’s assumption that Mr Steele would have known that the several transfers to Mishcons’ client account had been made “to lever the bank guarantee and the loan and everything else that was going to be needed for the transaction”; although I have no reason to take issue with Mr Dyton’s perception that Mr Steele “conducted himself in a normal manner”.[14]Mr Dyton described Mr Shephard as “a very unusual character … clearly commercially sharp” but one who never brought any papers into meetings or took any notes at all. He was not the sort of commercial person that S & S would normally deal with. Mr Dyton made it clear that S & S’s client was ADEL and that the firm had not acted for KC or Merlion. He was also very clear that the moneys derived from KC were never held in escrow by S & S, that he had no reason to suppose that KC had any title to those moneys, that he treated them as though they were ADEL’s moneys, and that he accepted instructions from Mr Gore as to how they were to be disbursed.[15]KC (who is now 57 years of age) gave evidence before me for about 2 ¼ hours starting at about 12.10 and concluding at about 3.45 on Day 4 (Friday 16 January). As Mr Anderson acknowledges, KC was a dignified and honest witness. He has lost a very substantial sum of money. He has been treated very poorly by his purported colleagues - Messrs Shephard, Gore, Hamilton and Griffiths. He and his wife deserve (and receive) the court’s sympathy. However, as Mr Anderson points out, neither KC’s testimony, nor that of Mrs Chiang, provide any real support for his claim, or for that of the ADEL claimants, against Mishcons. Indeed, it is to KC’s great credit (and I suspect characteristic of the man) that he did not seek to embellish his testimony so as to advance his claim. I accept the evidence of KC and his wife. However, I note:(1) that KC had no contact whatsoever with Mishcons or Mr Steele (although I find that he had heard of Mishcons even before he received Mr Gore’s email reply of 6 November 2007) and KC gave no instructions to them;(2) that KC also had very little contact with Mr Shephard (whom he had difficulty in understanding), his dealings being with, and through, Mr Gore;(3) that KC had difficulties in understanding the transaction and he did not know who Mr Danan was; and(4) that KC had no solicitors acting for him (or for Merlion) in the UK before he was referred (apparently by Mr Dyton) to Kennedys in or about the middle of December 2007, having formed the view that Mr Shephard was a “liar” and a “crook”.[16]Mr Griffiths gave evidence before me for about 1 ½ hours on the morning of Day 5 (Monday 19 January 2015). For the most part his evidence was measured and reliable. As Mr Anderson observes, although he was involved in the creation of some misleading or false documents, he was, on the whole, prepared to acknowledge his role. Thus, in relation to the request to act letter dated 8 June 2007 from ADEL to Mr Shephard (of MKC), Mr Griffiths accepted that he had composed the letter at Mr Shephard’s dictation because (even at that early stage in their acquaintance) “whatever he said, we did”, and without giving any “real thought to the actual contents”.[17]Mr Pattinson gave evidence before me for about an hour either side of the luncheon adjournment on Day 5 of the trial. I found him to be a candid, and an honest, witness who strove to be accurate and precise in answer to questions in cross-examination. (There were no questions put to Mr Pattinson in re-examination.) Mr Pattinson had pleaded guilty to his part in the EFG Bank fraud, he gave evidence for the prosecution, he described himself as the “forger-in-chief”, and he was sentenced to 18 months’ imprisonment. I accept Mr Anderson’s submission that Mr Pattinson’s evidence (which I accept) is significant in the following respects:(1) As Mr Shephard’s assistant at the material time, he was an “insider”.(2) Although he should have been well able to identify any fraud being perpetrated by Mr Shepherd, Mr Pattinson was clear that he did not think that the North Orange project was a fraud at all, whether involving Mr Shephard, Mr Steele or anyone else.(3) As far as Mr Pattinson was aware, the North Orange project was the first matter on which Mr Shephard had instructed Mr Steele.(4) Mr Pattinson’s understanding was that there had been no change to the original plan whereby it was Mr Danan who was to provide the bank guarantee, with Mr Shephard “cashing” it and managing the proceeds. Mr Anderson invites me to find that Mr Pattinson was misled in precisely the same manner as Mr Steele, with both men receiving false correspondence from Mr Danan, and both believing, on the basis of that correspondence, that the failure of the transaction was the fault of Mr Danan, and that Mr Shephard’s conduct was not fraudulent. If Mr Pattinson was unable to identify any misconduct on the part of Mr Shephard, it is said to be difficult to understand how Mr Steele, his solicitor, was supposed to have done so. As will become apparent later in this judgment, I accept that submission.[18]Mishcons’ sole witness, Mr Brown, gave evidence for just under 3 ½ hours, beginning at about 2.45 pm on Day 5 and concluding just before the luncheon adjournment on Day 6. As one should expect from an experienced solicitor in a reputable Mid-City firm, his evidence was measured, balanced, frank and honest; and I accept Mr Brown’s evidence so far as he was able to assist the court.[19]Mr Anderson criticises the claimants for their failure to call Mr Shephard and Mr Steele. He points out that they would have been able to speak to the allegations of dishonesty and conspiracy that the claimants advance; and he submits that it is difficult to see how the claimants can hope to sustain those allegations in the absence of both of them. He points to the fact that the claimants’ solicitors (Kennedys) have procured a (limited) waiver of privilege in relation to documents and Mishcons’ relevant files, and they have also called Mr Shephard’s assistant as a witness. Absent any explanation from the claimants, the court is invited to infer that Mr Shephard was not called (or, if necessary, summoned) because he would not have supported the claimants’ case. His evidence either would have been, or would have been established in cross-examination to have been, that Mr Shephard did mislead Mr Steele, and that the latter was not a party to any conspiracy concerning the transaction at issue in these claims. I decline to draw any inference adverse to the claimants from their failure to call Mr Shepherd. I cannot speculate upon what evidence he might have given; and I can well understand that none of the parties would have wished to proffer Mr Shephard as an honest witness upon whose evidence the court could safely rely. Likewise with Mr Steele. He was said to have fallen out with his former partners in Mishcons; and issues of client confidentiality were (I find genuinely) perceived by Mishcons as raising difficulties in adducing evidence as to matters (including advice sought and received by Mr Shephard and MKC) which, consistently with Mishcons’ case, they might otherwise have wished to adduce. Conversely, Mr Steele (who has already served one term of imprisonment) could hardly have been expected to have been prepared to give evidence supportive of the claimants’ case. I would undoubtedly have benefitted from hearing either (or both) of Messrs Shephard and Steele cross-examined; but I am not so naïve as to contemplate that this was ever a realistic scenario.[20]I accept that Mr Danan plainly had highly relevant evidence to give; but he is neither a UK national nor resident in the UK and I can understood why he would have been reluctant to come to the UK to give evidence voluntarily. I draw no adverse inference from the claimants’ failure to call him. However, the same does not apply to Mr Hamilton. He is a UK national who is still an equal shareholder in, and a director of, ADEL, one of the claimants. There is no valid reason – and none was suggested – for the claimants’ failure to call him. I am entitled to infer that Mr Hamilton has not been called either because he would not have given evidence supportive of the claimants’ case or (and perhaps more likely) for fear of the damage that might have been wreaked upon that case (in particular as to the knowledge and role of Mr Steele) were Mr Hamilton to have been cross-examined.[21]At this point, it is necessary for me to consider the knowledge and role of Mr Steele for they are central to the second and third limbs of the claimants’ case. Mishcons were retained pursuant to a retainer letter dated 11 September 2007. This letter had been prepared using a template (headed “Advising on foreign acquisition”), which required the writer to “include as much detail as possible as to the scope of our instructions and also specifically exclude matters in respect of which we are not instructed e.g. tax or foreign jurisdiction”. The retainer letter prepared by Mr Steele (and headed “Foreign acquisition/Patrick Gore and his companies”) began as follows:
“Thank you for instructing the Firm in relation to your claim, and your companies claim for fees from Patrick Gore and his company relating to the acquisition and development of the Orange County site in Florida. You, and others appointed by you, claim fees from Gore pursuant to various agreements under which you were to arrange funding. The agreements were prepared by Simmons and Simmons. Simmons and Simmons propose to pay some fees but insist they are paid to us and that we pay your appointees. A list of payments and recipients must be kept available in the event the matter becomes litigious, or your appointees seek to claim directly against Gore. I am to liaise with Richard Dyton of Simmons and Simmons. We expect everything to be resolved this year. He may seek an indemnity from you. In addition some of the settlement proceeds are to be used by your family to acquire property in the Philippines. Without any recourse on our part we can contact and recommend suitable local lawyers, but you will meet them directly when you visit in October.”
[22]It is said by the claimants that this letter was, and is, a complete “sham”, its purpose being “to create the impression within Mishcons that the matter was being conducted properly in the event that anyone other than Mr Steele had occasion to consider or deal with the matter”, and thus to deceive Mr Steele’s partners. It is said that, as at 11 September 2007, there was no existing, or arguable, claim for fees for arranging funding between Mr Shephard (or any of his companies) and Mr Gore (or his companies), or no such claim which could then have been enforced by legal action. This is said to appear clearly from passages in the witness statements of both Mr Gore (at paras 112-113 All references to paragraph numbers are to the principal witness statement of the relevant witness. ) and Mr Dyton (at para 31), upon which they were not challenged in cross examination. Mr Hantusch contends that the retainer letter bears no relationship to(1) what was proposed by Mr Shephard to Mr Steele or(2) the nature of the work that was actually carried out for Mr Shephard and his companies by Mr Steele, most of which fails to qualify as the provision of legal services. All that Mr Steele is said to have needed was a very broad and general retainer, to be recorded in a document to be placed on the firm’s file, and which would justify the receipt of moneys into Mishcons’ client account. Mr Steele is said to have been “engaged simply to act as a conduit for disbursing funds”, giving no substantive advice to Mr Shephard or to MKC.[23]I reject these submissions for the following reasons:(1) A retainer letter does not become a “sham” simply because little (or even no) advice is given pursuant to it unless (as a minimum) it can be demonstrated that it is known by both parties to the retainer that this will be the case at the time it is entered into. In my judgment, such knowledge has not been demonstrated on the part of Mr Steele.(2) At least some advice was in fact sought by, and given to, Mr Shephard from, and by, Mr Steele during the course of the retainer. An email sent by Mr Shephard to Mr Steele on 12 November 2007 records that Mr Steele had confirmed to Mr Shephard at a meeting that day that the contract with 1000 North Orange LLC was, in Mr Steele’s opinion, “legally watertight”. Mr Gore’s email to MKC of 24 September 2007 (requesting confirmation of the fact that MKC “was holding” the first advance payment of $5 million) was faxed through to Mr Steele by Mr Shephard, apparently for his urgent advice. Very much later, on 9 April 2008, Mr Steele sought the advice of counsel, Mr Tim Higginson (of Littleton Chambers), when the matter did threaten to become litigious.(3) It is inherently unlikely that an experienced solicitor, and a partner in a reputable firm, such as Mr Steele would enter into a sham retainer with a person for whom he had not previously acted. As the Court of Appeal recorded (in its judgment reducing Mr Steele’s sentence of imprisonment from 5 ½ years to 4 years and 4 months: [2013] EWCA Crim 538 at [9]-[10]), prior to the offences which Mr Steele committed in the middle of 2008 he had been a man of good character; and the sentencing judge had accepted in terms that Mr Steele had not set out to commit the fraud but he had been lured into it by the dominating character of Mr Shephard (who had previous convictions for offences of dishonesty which indicated a pattern of fraudulent offending). The sentencing judge had also recorded that Mr Steele’s movement of money between client accounts had not been intended to generate money for Mr Steele, or motivated by greed, but only by a desire to solve a professional problem for which Mr Steele had been partly responsible. Mr Anderson points out that Mr Steele had no motive for entering into a sham retainer, or otherwise acting dishonestly in relation to this retainer, and none has been suggested. There is not a shred of evidence that Mr Steele benefitted personally, or stood to benefit, from the payments of which the claimants complain. In Mr Steele’s email of the same date responding to Mr Shephard’s email of 12 November 2007 (previously cited) Mr Steele thanks Mr Shephard “for the kind gifts” (and inquires if Mr Shephard has left any contracts downstairs). As Mr Anderson suggested, this may be a reference to some present which Mr Shephard had brought back from a trip overseas. Certainly, Mr Steele is unlikely to have referred to it in an email if it were a bribe, and he was consciously concerned about “building” or “packing” a file. I accept Mr Anderson’s submission that it is highly improbable that Mr Shephard should have engaged Mr Steele for the first time, and at the outset persuaded him to participate in a fraud (with all the attendant risks of the loss of his entire career, financial ruin and imprisonment), for no potential benefit to Mr Steele.(4) If the retainer letter had been devised for the purpose of misleading Mr Steele’s partners in Mishcons, then one would have expected the nature of the transaction to have been described in more, and more convincing, detail. The poor drafting is more consistent with authenticity than it is with a sham.(5) The documents on Mishcons’ file are consistent with Mr Shephard “misleading” Mr Steele, and of the latter being “duped”. Twice in cross-examination (at T2/83-4 and T2/109) Mr Gore accepted in terms that that was one interpretation of the facts; and Mr Gore later acknowledged (at T3/32) that he had considered himself to be an intelligent man until he himself had “got duped in this lot”.[24]In answer to a question from the Bench, Mr Gore also advanced an alternative interpretation of the documents on Mr Steele’s file which was that Mr Shephard “was ensuring that Mr Steele had all of the documents that he needed to protect the fraud that they were perpetrating on us…. I think he was just ensuring that he had all of his ducks in a row in terms of the paper trails that he needed on [Mr Steele’s] files”: T2/108-9. This assertion (which was developed during his cross-examination of Mr Brown) has led Mr Hantusch to advance the submission (described by Mr Anderson as “an eleventh hour allegation” which the claimants’ team have adopted “at the final gasp, as a matter of last resort”) that the nature and terms of various letters and emails purporting to come from Mr Danan, but clearly composed by Mr Shephard, establish that Mr Steele was “building a file to attempt to support the manner in which the client account was operated on behalf of Mr Shephard”. Mr Hantusch skilfully developed this argument in the course of his closing oral submissions. Having carefully considered all that he has had to say, I reject this submission for the following reasons:(1) There is force in Mr Anderson’s point that the allegation assumes what the claimants have to prove, which is that Mr Steele was in cahoots with Mr Shephard in misleading and defrauding the claimants, because the documents are exculpatory rather than incriminatory.(2) There is no evidential basis for the allegation. All that Mr Steele was doing was to receive documents from his client and put them on the client file.(3) Mr Shephard’s conduct is inconsistent with seeking to lay a false paper trail. In his email to Mr Steele of 10 November 2007 (forwarding Mr Shephard’s email to Mr Danan earlier that evening) Mr Shephard states in terms:
“I would be grateful if you could keep a copy on the file.”
Mr Brown accepted (at T6/68) that such a request was “not normal”. It would not have been necessary to make such a request if (as on the claimants’ hypothesis it would have been) it was known and understood by Mr Steele that these documents were to be placed on the file to protect Mr Steele’s position. Rather, this request savours of an attempt by Mr Shephard to advance his own position by misleading Mr Steele, and by creating a paper trail for Mr Shephard’s own benefit. Mr Steele actually forwarded this whole email to his secretary early on the morning of the next working day (12 November 2007) presumably for her to copy for the file. (4) Mr Steele’s conduct is inconsistent with seeking to lay a false paper trial. As Mr Brown observed (at T6/37) “… if I was creating a file, I would want a file to be created where there is correspondence flowing between myself and the client, to actually look as if it was a proper … you know, a file in the normal course”; and later (at T6/51) “It’s all one-way traffic. It’s all coming in, there’s nothing come out. If you want to build a file, you’ve got to have two-way traffic”. If the absence of any evidence of advice being given by Mr Steele to Mr Shephard is (as Mr Hantusch submits) a badge of fraud, then any deliberate cover-up would have involved the creation of evidence of such advice being given and received. (5) Not all of the exculpatory documents were to be found on Mr Steele’s file (as on Mr Hantusch’s hypothesis they should have been). To take but one example, in his oral closing Mr Anderson made much play of a letter dated 22 August 2007 from Mr Shephard to Mr Gore as evidence that any obligation to reimburse fees paid and moneys deposited if the bank guarantee were not successfully cashed imposed a purely contractual (and qualified) rather than a fiduciary obligation upon MKC to effect repayment. In his oral reply, Mr Hantusch made the point that there was no evidence that this letter had been sent to Mr Steele before 9 April 2008 (and after it had been referred to in S & S’s letter of claim of 4 April 2008). This is hardly consistent with “building” a file.[25]Mr Hantusch submits that Mr Steele’s dishonesty is further demonstrated by his conduct in relation to the alternative funding mechanism which Mr Shephard sought to put in place after Mr Danan’s email to Mr Shephard of 27 November 2007 (copied to Mr Hamilton and forwarded to Mr Steele) stating that he could not be “involved in a transaction with a Bank Guarantee”. He relies upon Mr Steele’s consistent representations to Mr Dyton, extending from just before Christmas 2007 through January until early April 2008, that this was a genuine transaction despite the fact that no documents relating to the supposed funder (which was identified as HSBC Canary Wharf) of this alternative mechanism have been found on Mr Steele’s files. I acknowledge that the absence of any such documentation is troubling. But Mr Shephard was undoubtedly a sophisticated and proficient fraudster who was able to deceive a number of experienced professional and business persons. One simply does not know what Mr Shephard was reporting to Mr Steele at the time; and I am not satisfied that Mr Steele was the only person who was not deceived by Mr Shephard at the time. Whether they are viewed in conjunction with the other matters relied upon by Mr Hantusch or (still less) in isolation, I cannot regard Mr Steele’s dealings (or lack of dealings) and statements in connection with the alternative funding mechanism as consistent only with Mr Steele being a knowing party to some dishonest scheme on the part of Mr Shephard. There are other innocent potential explanations.[26]I therefore conclude that there is no proper basis for finding that Mr Steele acted dishonestly in relation to the matters which are the subject of this litigation. In doing so, I bear in mind also Mr Anderson’s point (which I accept) that if this were a fraud involving Mr Steele, it was a high-risk one. The counter-party to the transactions was understood to be represented by S & S. Any payment out of Mishcons’ client account over £10,000 had to be approved by another partner in addition to Mr Steele; and this procedure was adhered to in relation to each payment out of the client account of which complaint is made. Mishcons’ two compliance officers, Mr Brown and Mr Kevin Gillon, were alerted to concerns regarding the receipt of moneys into Mishcons’ client account on 25 October 2007; and Mr Brown satisfied himself that “the matter is genuine” by speaking to Mr Steele. Mr Steele even forwarded one of Mr Dyton’s emails (of 24 October 2007) to Mr Brown (on 26 October 2007) inquiring if it was “an undertaking”. If he was a knowing party to fraud, then Mr Steele was either incredibly naïve, or ridiculously stupid, or both. Mr Hantusch rightly relies upon the fact that “it was readily apparent that none of the payments that were made from out of the $3.5 million originally received from S & S or the £224,500 paid by Mr Gore was made for the purposes of obtaining funding forming the subject of the Fund Management Agreement” (as appears from the narrative forming part of the Schedule to this judgment). Had Mr Steele been in on the fraud with Mr Shephard, they could easily have ensured that the moneys were paid out of Mishcons’ client account to one of Mr Shephard’s companies (perhaps located offshore) under the guise of a “payment to broker” rather than, for example, recording payments of £170,000 for a Maybach motor car and £31,000 for a “diamond bracelet loan”. Mr Anderson also makes the point that if there had been any fraudulent conduct, it would have been identified by the Serious Fraud Office and by Mishcons in the course of their investigations; but I attach little weight to this factor bearing in mind that there has been no criminal prosecution of Mr Shephard in relation to this matter.[27]I must also consider what Mr Steele understood about the sums that were being transferred into Mishcons’ client account. I attach little weight to Mr Dyton’s evidence of Mr Steele’s understanding because Mr Dyton’s email of 8 October 2007 (which stands as his attendance note of his conversation with Mr Steele on 5 October) records nothing more than Mr Steele’s confirmation that he “was aware of the transaction” without identifying precisely what “the transaction” was; and Mr Dyton’s evidence in cross-examination (at T3/166-171) takes matters no further. Mr Dyton’s understanding (that “the structure was still to provide funds to obtain a bank guarantee”: see T3/165) may not have been shared by Mr Steele. The best evidence of Mr Steele’s understanding of the purpose of the money transfers is to be found in his mis-addressed “Property Temp4” email to Mr Dyton of 15 October 2007, which stated:
“I understand from Mr Shephard the further funds are to be transmitted to my firm pursuant to the Fund Management Agreement dated 5July 2007 as amended 5 October 2007” (“the FMA”). Although this email never reached Mr Dyton, it clearly represents what Mr Steele knew, and understood, at the time it was sent. That understanding is confirmed by the terms of Mr Steele’s instructions to Mr Higginson (of counsel) in his letter written on 9 April 2008 (but misdated 13 March 2008), which also shows that Mr Steele continued in this understanding up until that point in time. But, as Roth J pointed out in his judgment on the summary judgment application (at [49]), Mr Steele’s understanding makes “little sense” because the FMA “makes no provision whatever for the transmission of funds from the Allied parties to Mr Shephard or his company. On the contrary, under the FMA … payment for the benefit of Mr Shephard is to come out of the drawdown of funds under the banking facility and not by way of additional payment from outside”
. As Mr Anderson points out, the FMA (even in its amended form) is entirely unrelated, and has no application, to the funds transferred to Mishcons’ client account. None of the claimants are parties to the FMA; it did not concern the property at Orange Beach in the State of Alabama, but rather the development at North Orange, Orlando in the State of Florida which ADEL was pursuing before its introduction to KC; and it was nothing to do with the provision of funds to secure a bank guarantee. As Mr Anderson also rightly observes, the FMA says nothing about the retention of any title to, or any beneficial interest in, any funds transferred by any person (let alone by any of the claimants, none of whom were even parties to the FMA). In the absence of any direct evidence, I infer from all of the documentation and evidence (including the emails and letters that were sent and copied to him, and the narrative accompanying the entries in Mishcons’ records of the payments out of client account) that Mr Steele’s true understanding of the purpose of the money transfers must have been that they represented fees due to Mr Shephard or his company (MKC), and that they were to be at his free disposal; and that Mr Steele’s reference to the FMA was intended as a loose way of expressing this. Nothing said or done by any of the claimants (or by S & S) before all the moneys had been transferred out of Mishcons’ client account (or indeed until receipt of S & S’s letter of 4 April on 8 April 2008) contradicted this understanding.[28]Paragraph 38 of the Chiang claimants’ statement of case asserts that “in accordance with the terms of the letter of 22 August 2007, the [$ 3.5 million transfers] were to be held as deposits until used to obtain the agreed financing and would be returned if not so used”. I am not satisfied that this letter has any relevance at all to Mr Steele’s understanding in the light of Mr Hantusch’s objection that there is no evidence that it reached Mr Steele before 9 April 2008. But if it does, Mr Anderson is right to point out that this letter has no application to the funds transferred, and that it was in any event inconsistent with the creation of any trust obligation. He relies upon what was said by Roth J at [55] (with which I entirely agree):
“This letter, of course, antedates KC's involvement and is regarding the Florida property development, which was a different project. That project was expressly the object of the FMA and I assume that the contract to which Mr Shephard refers in the letter is indeed the FMA. But even as regards the financial arrangements for that project, this letter does not assist the claimants' case for three reasons. First, it makes clear that fees were expected to be paid to Mr Shephard's company, in other words, that remuneration for the benefit of Mr Shephard apparently did not exclusively comprise the $ 22.5 million to come out of the bank funding once that was advanced. Secondly, those fees were to be paid in advance of securing the bank funding and not withheld until closing. Thirdly, MKC or Mr Shephard, once he received those fees, appears to assume an obligation to repay them, less professional expenditure incurred, if funding was not secured by reason of his or MKC's default, but not otherwise. That qualification seems to me inconsistent with a contention that the transfer of money on account of fees was not intended to give MKC ownership of the funds. If a bank guarantee was not secured for some other reason, MKC expressed the view, as set out in this letter, that it was under no obligation to make reimbursement. This supports the conclusion that the obligation which Mr Shephard and his company assumed was a personal obligation only and that there was no intention to create a trust over the fund.”
If Mr Steele received this letter, I consider that it would have reinforced Mr Steele’s inferred understanding (as stated above) as to the true purpose of the transfers into Mishcons’ client account. Nothing in the 22August 2007 letter purports to require any payments made to MKC to be used or applied exclusively to effect a particular identified payment(s) so that if the money cannot be so used or applied then it is to be returned to the payer.[29]There is no issue as to the sums claimed by way of loss as a result of the matters complained of in these two actions (as distinct from their recoverability). It is therefore unnecessary for me to make any findings of fact in this regard.[30]I now turn to the law. The legal principles applicable to Quistclose trusts are now reasonably well-established, at least at first instance level, and were not in dispute between counsel. They are most conveniently and concisely set out in the judgment of Norris J at first instance in Bieber v Teathers Ltd [2012] EWHC 190 (Ch), [2012] 2 BCLC 585 as follows:
“16. First, the question in every case is whether the payer and the recipient intended that the money passing between them was to be at the free disposal of the recipient: Re Goldcorp Exchange [1995] 1 AC 74 and Twinsectra Ltd v Yardley [2002] 2 AC 164 at [74]. 17. Second, the mere fact that the payer has paid the money to the recipient for the recipient to use it in a particular way is not of itself enough. The recipient may have represented or warranted that he intends to use it in a particular way or have promised to use it in a particular way. Such an arrangement would give rise to personal obligations but would not of itself necessarily create fiduciary obligations or a trust: Twinsectra at [73]. 18. So, thirdly, it must be clear from the express terms of the transaction (properly construed) or must be objectively ascertained from the circumstances of the transaction that the mutual intention of payer and recipient (and the essence of their bargain) is that the funds transferred should not be part of the general assets of the recipient but should be used exclusively to effect particular identified payments, so that if the money cannot be so used then it is to be returned to the payer: Toovey v Milne (1819) 2 B & Ald 683 and Quistclose Investments [1970] AC 567 at 580B. 19. Fourth, the mechanism by which this is achieved is a trust giving rise to fiduciary obligations on the part of the recipient which a court of equity will enforce: Twinsectra at [69]. Equity intervenes because it is unconscionable for the recipient to obtain money on terms as to its application and then to disregard the terms on which he received it from a payer who had placed trust and confidence in the recipient to ensure the proper application of the money paid: Twinsectra at [76]. 20. Fifth, such a trust is akin to a “retention of title” clause, enabling the recipient to have recourse to the payer's money for the particular purpose specified but without entrenching on the payer's property rights more than necessary to enable the purpose to be achieved. It is not as such a “purpose” trust of which the recipient is a trustee, the beneficial interest in the money reverting to the payer if the purpose is incapable of achievement. It is a resulting trust in favour of the payer with a mandate granted to the recipient to apply the money paid for the purpose stated. The key feature of the arrangement is that the recipient is precluded from misapplying the money paid to him. The recipient has no beneficial interest in the money: generally the beneficial interest remains vested in the payer subject only to the recipient's power to apply the money in accordance with the stated purpose. If the stated purpose cannot be achieved then the mandate ceases to be effective, the recipient simply holds the money paid on resulting trust for the payer, and the recipient must repay it: Twinsectra at [81], [87], [92] and [100]. 21. Sixth, the subjective intentions of payer and recipient as to the creation of a trust are irrelevant. If the properly construed terms upon which (or the objectively ascertained circumstances in which) payer and recipient enter into an arrangement have the effect of creating a trust, then it is not necessary that either payer or recipient should intend to create a trust: it is sufficient that they intend to enter into the relevant arrangement: Twinsectra at [71]. 22. Seventh, the particular purpose must be specified in terms which enable a court to say whether a given application of the money does or does not fall within its terms: Twinsectra at [16]. 23. It is in my judgment implicit in the doctrine so described in the authorities that the specified purpose is fulfilled by and at the time of the application of the money. The payer, the recipient and the ultimate beneficiary of the payment (that is, the person who benefits from the application by the recipient of the money for the particular purpose) need to know whether property has passed.”
[31]This formulation of the law was accepted not only by both parties in that case on the subsequent appeal ([2012] EWCA Civ 1466, [2013] 1 BCLC 248) but also by the Court of Appeal with the following qualifications at paragraph [15] in the judgment of Patten L.J.:- “Both sides accepted this as an accurate statement of the relevant principles. I would only add by way of emphasis that in deciding whether particular arrangements involve the creation of a trust and with it the retention by the paying party of beneficial control of the monies, proper account needs to be taken of the structure of the arrangements and the contractual mechanisms involved. As Lord Millett stressed in Twinsectra (at [73]) and the judge repeated in para [17] of his own judgment, payments are routinely made in advance for particular goods and services but do not constitute trust monies in the recipient’s hands. It is therefore necessary to be satisfied not merely that the money when paid was not at the free disposal of the payee but that, objectively examined, the contractual or other arrangements properly construed were intended to provide for the preservation of the payor’s rights and the control of the use of the money through the medium of a trust. Critically this involves the court being satisfied that the intention of the parties was that the monies transferred by the investors should not become the absolute property of [the recipient] (subject only to a contractual restraint on their disposal) but should continue to belong beneficially to the investors unless and until the conditions attached to their release were complied with. Although directed to a slightly different context, it is worth recalling what Mason J said in Hospital Products Ltd v United States Surgical Corporation(1984) 156 CLR 41 at 97:
“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”
[32]I accept Mr Hantusch’s submission that the classic form ofQuistclose trust which has been recognised by the courts concerns moneys that have been loaned to a recipient for one particular purpose and which are to be returned if that purpose is not achieved; but provided the terms can be established by evidence, such a trust can come into existence whenever parties enter into a commercial arrangement which permits one party to have a limited use of the other's money for a stated purpose, is not free to apply it for any other purpose, and must return it if for any reason the purpose cannot be carried out. Moreover such terms need not be set out or accepted in writing.[33]All of this appears most clearly from the judgment of Hildyard J. in Challinor v Juliet Bellis & Co I was told that an appeal was argued before the Court of Appeal in December 2014 and that the Court of Appeal’s judgment is presently awaited. [2013] EWHC 347 (Ch) at [551] and following as follows:- “551. . . .. As it seems to me, the lack of writing does not necessarily mean that the circumstances are not such as to give rise to a Quistclose trust, though of course the burden of demonstrating that such a trust may be inferred in such circumstances is inevitably heavier. Nor does the fact that in this case, the trustee is not the borrower make the argument "impossible to understand". The Quistclose trust analysis or doctrine is plainly capable of extending to the three-party situation in this case, as it did in Twinsectra. More generally, I consider that Counsel for the Defendant Firm adopted too restrictive a view as to what might be regarded as a form of Quistclose trust. Trusts analogous to classic Quistclose trusts 552. I accept that in a classic Quistclose case it is the combination of(a) the exclusiveness of the purpose,(b) the sufficient definition of the exclusive purpose to enable its satisfaction to be clearly determined,(c) the communication of that purpose to the immediate recipient of the monies and(d) the direction (express or implied) for return of the monies to the payer if the exclusive purpose is no longer capable of being satisfied that negates any intention on the part of the payer to part with the entire beneficial interest in the monies in the meantime. As Lord Millett explained, it is that retention of beneficial interest unless and until the purpose can be fulfilled that gives rise to the resulting trust in favour of the payer. 553. Stipulation of an exclusive purpose for the loan may be the classic, but in my judgment is not the only, circumstance of which the immediate recipient is cognisant and which negates an intention on the part of the payer, to pass away beneficial ownership so as to give rise to such a resulting trust. 554. The crucial question, as it seems to me, is as to the terms on which (objectively determined) the Defendant Firm received investors' monies into its client account, and whether such terms negate any intention that such monies should belong immediately to AFL [the client], such that the account holder is bound to hold such monies for the payer pending receipt or satisfaction of a clear direction or pre-stipulated event providing for or triggering transfer of ownership to AFL. 555. As was discussed in argument, nomenclature, or over-rigid characterisation, has bedevilled this case. At an earlier stage, debate over the appropriateness of the term 'escrow' in any context other than deeds clouded the real issue; and at trial, rigid analysis of the characteristics of a classic Quistclose trust, as if that was the only form of resulting trust, obscured the real question I have identified. 556. As Lord Millett emphasised in Twinsectra (at page 192F-H):
"I do not think that subtle distinctions should be made between "true"
Quistclose trusts and trusts which are merely analogous to them. It depends on how widely or narrowly you choose to define the Quistclose trust. There is clearly a wide range of situations in which the parties enter into a commercial arrangement which permits one party to have a limited use of the other's money for a stated purpose, is not free to apply it for any other purpose, and must return it if for any reason the purpose cannot be carried out." 557. In my judgment, once excessively strict characterisation is abandoned and the essential question is understood, some of the difficulties that seemed to arise in consequence of the lack of documentation, and the paucity and uncertainty as to the communications between the parties, fall away (or at least are materially attenuated). 558. The focus then becomes not so much on whether there was a sufficient definition and shared understanding of the purpose for which loans were made, but more on (1) what in all the admissible circumstances can have been the objective intention of the parties in making and accepting payments into the Defendant Firm's client account before the terms of any loan had been finally agreed, if not to hold the money pending agreement or some future instruction or event; (2) what can have been the objective intention of the parties if the terms of the loans were never finally agreed or the future instruction or event was never given or did not occur; and (3) whether (objectively) there ever was, or arose, any sufficient basis for Mrs Bellis to treat the monies without enquiry of the payers as belonging to AFL. 559. Twinsectra assists in this regard also in confirming the characterisation of monies held in a solicitor's client account. In his speech Lord Hoffmann said this (at paragraph 12):
"Money in a solicitor's client account is held on trust. The only question is the terms of that trust."
Trusts analogous to classic Quistclose trusts "I do not think that subtle distinctions should be made between "true" Quistclose trusts and trusts which are merely analogous to them. It depends on how widely or narrowly you choose to define the Quistclose trust. There is clearly a wide range of situations in which the parties enter into a commercial arrangement which permits one party to have a limited use of the other's money for a stated purpose, is not free to apply it for any other purpose, and must return it if for any reason the purpose cannot be carried out." "Money in a solicitor's client account is held on trust. The only question is the terms of that trust."

Trusts analogous to classic Quistclose trusts

[34]The last paragraph of that citation is also said to highlight a further important point about Quistclose trusts. If the subject matter is money in a solicitors’ client account, then there is clearly a trust in being and the key question which arises is: what are its terms? In particular, is the beneficiary of the trust of those moneys the client of the solicitor (in which case there is a bare trust for the client absolutely); or is the beneficiary a person who provided funds to be placed in the client account in the name of that client for a particular purpose, which funds are to be returned if the purpose is not achieved (in which case the trust will be a Quistclose trust)?[35]The Challinor case is also said by Mr Hantusch to highlight two important further points about the effect of any uncertainty that may exist as to when monies held subject to a Quistclose trust in a solicitors’ client account may be released from the trust, and the relevance of the SARs to a Quistclose trust of monies in a solicitors’ client account. The position in these respects is said to be quite clear:(1) Any uncertainty as to the terms upon which funds may be released imposes a duty on the solicitor (as trustee) to seek instructions from the party who provided the trust finds before they are disposed of, even if the disposal is to be to the client of the solicitor in whose name the monies are being held; and(2) When there is a Quistclose trust of monies in a solicitors’ client account, the SARs provide the implied terms of the trust such that any breach of those rules will give rise to a breach of trust.[36]Mr Hantusch relies in support upon paragraphs [567] – [568A] of the judgment in Challinor as follows: 567 In that context, any uncertainty as to what directions were given or are to be implied as to the release of or transfer of beneficial interests in the monies does not undermine the trust; it undermines the ability of the trustee to do anything other than seek direct instructions from the beneficiaries or remit the monies back to them: see Twinsectra at paragraph 101. 568. See also per Chadwick J (as he then was) in Bristol and West BS v May, May & Merrimans [1996] 2 All ER 801 at 819: "In Target Holdings Ltd v Redferns (a firm) [1995] 3 All ER 785 at 795, [1995] 3 WLR 352 at 362 Lord Browne-Wilkinson made it clear that he accepted that moneys held by solicitors on client account are trust moneys. Absent any express trust imposed by the client at the time that the moneys are paid to the solicitor, it seems to me that the trust which attaches to clients' moneys (in cases within this second category) is an implied trust imposed in order to give effect to the Accounts Rules made under s 32 of the 1974 Act [i.e. the Solicitors' Accounts Rules 1986, then 1991, then 1998].The solicitor's obligations under that trust are the obligations imposed by the rules. It follows that a payment made out of clients' moneys to or to the order of a third party which is not authorised by, or 'properly required' on behalf of, the client is a payment made in breach of trust." 568A In this context, Counsel for the First Defendant have urged on me . . . that the trust to which Chadwick J above refers is a trust for the benefit of the solicitor's client, and not the payer, and the duties are accordingly owed to the client, and not the payer. I would add this in deference to their concerns. Of course, in the May, May and Merrimans case the various firms of solicitors whose client accounts were being utilised to hold the proceeds of loans made by the plaintiff building society were in each case acting on each side of the lending transaction. However, and as set out in paragraph 516 above, the SAR expressly require all money that does not belong to the solicitor to be held in a separate client account, and not all monies held in a solicitor's client account are held for a client of that firm. The question is not who the firm's client is, but on whose behalf or to whose order or instruction the money is being held. It is for the solicitor to establish that with certainty; and his or her duty is not to withdraw that money from the client account unless and until clearly authorised to do so by the person on whose behalf or to whose order or instruction the money is held. That accords with a basic principle of the law of trust and trustees, that a trustee must ensure that he or she knows who the beneficiaries are and the terms of the trust in question. 37. Applying those legal principles to the facts of the present case, it is the claimants’ case that Mishcons held the $ 3.5 million that was paid over by S & S, and the £224,500 that was paid directly by Mr Gore, on the terms of a Quistclose trust. Mr Hantusch accepts that the terms of the trust that is being relied upon were not expressly imposed in writing or otherwise: this is not an “express terms” case. However, Mr Hantusch submits that the mutual intention of the payer and the recipient, objectively ascertained from the circumstances of the transaction, and the essence of their bargain, was that the funds transferred should not form part of the general assets of Mishcons’ client, but should be used exclusively for the purpose of obtaining a bank guarantee, which could then be “cashed” for the benefit of the claimants. He invites the court to determine “that the objective intention of the parties was that the moneys paid to Mishcons should not be at the free disposal of either MKC or Mr Shephard such that a Quistclose trust is indeed established”. 38. At the summary judgment stage, Roth J held (at [42]) that there were “… a number of quite fundamental problems in seeking to contend that the monies transferred by KC were subject to a trust such that he retained beneficial ownership in the monies and that Mishcons were not entitled to pay them out to the order of Mr Shephard. As the third of the principles set out in the Bieber case emphasises, the intention of the parties are to be objectively construed from the circumstances of the transaction. Therefore it is necessary to consider closely the basis of the arrangements for the payment of this money by KC to Mishcons.” I am in complete agreement with Roth J’s observations. At [43] Roth J observed that the transfers of KC’s moneys had gone through three stages:(1) from KC to the two firms of Alabama attorneys;(2) from those attorneys to S & S; and(3) from S & S to Mishcons. In order to maintain his Quistclose claim, at each of those three stages KC (or his lawyers on his behalf) must (at the very least) have asserted an intention to retain beneficial title to those moneys. 39. Although I have received no evidence as to the applicable law in the State of Alabama, I am prepared to accept that KC retained title to his moneys in the hands of his Alabama attorneys. However, I am entirely satisfied that, with the possible exception of the terms of the JVA, there is no evidence that, at least after his meeting with Mr Dyton (also attended by Mrs Chiang and Messrs Shephard, Gore, Griffiths and Hamilton) on 5 October 2007, KC ever retained any beneficial interest in any of the funds he had transferred, or was later to transfer, to S & S. Mr Dyton’s evidence (at T3/130-134) was that he treated those funds as ADEL’s moneys, rather than KC’s; and that he accepted instructions from Mr Gore, rather than from KC, both to transfer them to Mishcons and as to the terms of each transfer. That is consistent with the fact that Mr Dyton asked, and all three of ADEL’s directors agreed, at the 5October 2007 meeting, that the fees outstanding from ADEL to S & S should be paid out of the moneys transferred to S & S by KC: on the claimants’ case, this would have constituted a breach of trust on the part of S & S. As Mr Anderson points out, the role of S & S in these transactions in acting for, and accepting instructions from, ADEL, rather than from KC, and the use of the moneys in the S & S client account are manifestly inconsistent with any intention that KC should retain any beneficial interest in such moneys. 40. In his oral reply, Mr Hantusch referred to the terms of the JVA under which Merlion and/or KC were to deposit $3 million into a client escrow account with S & S “and used only for the specific purpose of closing the Credit Facility to complete the ReFi Loan”; and he submitted that even if S & S held the moneys for the benefit of their client ADEL, S & S’s client held the moneys for the benefit of KC and Merlion (both of whom were parties to the JVA). I am satisfied that the JVA can have no possible application to the second and third instalments of $600,000 and $1.4 million that were transferred to S & S because these funds were not transferred by Bradford Pitts LLC (as expressly contemplated by the JVA) but by the second firm of Alabama attorneys (and, in the case of the latter payment, because, in addition, it was made after the disclosures at the Birmingham Airport hotel meeting on 3November 2007). In relation to these two sums, I agree with Mr Anderson that the Quistclose claim fails at the second stage, even before reaching the stage of the transfer of the moneys from S & S to Mishcons. Even if a Quistclose trust were to apply to the moneys transferred by S & S to Mishcons out of these two sums, the beneficiary would not be KC (or Merlion); and that is the end of their claim in relation to those moneys. 41. In relation to the first transfer from Bradford Pitts LLC of $2 million, with some hesitation I have concluded that KC did not retain the beneficial title to these moneys either. This is because in their email to Nick Jones (of S & S) of 3 October the Alabama attorneys (Bradford Pitts LLC) stated that they were “preparing to transfer $2,000,000 USD to your firm’s trust account to be held in escrow for Infinia Gulf Coast Holdings LLC until Messrs Hood and Chiang close the deal in London next week. Will you require any additional instructions on the disposition of these funds?” Mr Dyton’s response (by email on 4 October 2007) was to say: “Patrick Gore is due to visit us tomorrow in these offices and I intend to discuss with him then the retentions which will be made from the onward transfer on the closing.” In the event Arthur Hood (and another potential investor, Archie Powell) ultimately dropped out of the picture; and (as previously related) the meeting with Mr Dyton on 5 October 2007 was attended not only by Mr Gore but also by KC and Mrs Chiang and Messrs Shephard, Griffiths and Hamilton. According to Mr Dyton’s email of 8 October 2007 (which in terms stands as his “record” of the meeting) it was there agreed that the $2 million received from KC (and 2 other anticipated payments totalling a further $2.3 million from Mr Hood and Mr Powell, which never materialised) should be paid over to Mishcons. There is no suggestion that KC’s funds should be subject to any form of escrow arrangement, still less any retention of title agreement. Mr Dyton answered Mr Anderson’s question (at T3/131): “Whatever additional instructions or the like were taken [at the meeting] they did not result in the moneys being held in escrow as a result of taking those instructions or the like?” in the negative. Later in his cross-examination, Mr Dyton said that he treated the funds as ADEL’s moneys; and, in consequence (and with ADEL’s authority), he applied some $242,000 of them in payment of fees due to S & S from ADEL, relating to work done on Bay Pointe, Cardiff and the purchase of 1000 North Orange, Orlando, which had nothing to do with KC, and which pre-dated his involvement with ADEL. Mr Dyton was an experienced, competent and patently honest solicitor. He would not have done this had he had any inkling or suspicion that title to any part of the $2 million had been retained by KC. I acknowledge that the subjective intentions of the recipient as to the creation of a trust are irrelevant; but there must be an intention to enter into an arrangement which has the effect of creating a trust under which the relevant moneys should be used exclusively to effect particular identified, and ascertainable, payments. I am satisfied on the evidence that Mr Dyton (and ADEL’s directors) had no such intention. Thus, even in relation to the first $2 million, I am satisfied that KC’s case fails at the second stage. However, it is appropriate that I should go on to consider the third stage, not least because Mr Gore’s own moneys passed directly to Mishcons and not through S & S. 42. Roth J held that it was not necessary to decide the summary judgment application at stages 1 or 2 because there was clear and unequivocal evidence of the relevant communications between Mr Dyton and Mr Steele at stage 3. He held (at [46]): “It is notable that, far from stating that these funds were being sent on behalf of KC or Merlion as owner of the money, Mr Dyton stated that they were being sent on the instructions and on behalf of ADEL, and further it is expressly stated that the monies were to be held to the order of Mr Shephard. In my judgment, such statements are wholly inconsistent with the intention, objectively viewed, that Mr Shephard was not to have full ownership and control of the monies. And there is nothing whatever to suggest that the transfers were being made on the basis that ownership was to remain with KC or Merlion, who are not even mentioned, and to be released to Mr Shephard only on completion of the financing transaction.” 43. I agree entirely with Roth J’s analysis and his conclusion which, in my judgment, apply equally to Mr Gore and to his £224,500 payment (even though the claim for this had not been initiated at the time of the hearing before Roth J). This position has not changed in the light of the disclosure and the evidence in these actions. The only communications concerning the transfer of the moneys involved the express statements that they were to be held to the account of MKC, to the order of Mr Shephard. That is manifestly inconsistent with them being held on any Quistclose trust. Moreover, had KC or ADEL considered that the moneys in Mishcons’ client account remained the property of KC (or ADEL) it is inconceivable that they would not have complained to one or more of Mr Dyton, Mr Steele or one or other of KC’s firms of Alabama attorneys when Mr Shephard revealed, at the meeting at the Hilton Hotel near Birmingham International Airport on 3 November 2007, and described by Mr Gore at T3/21) as “one of those moments where your gut just goes through the floor”, that all of the moneys had already been transferred away from Mishcons’ client account. Instead, KC provided a further $1.4 million, and Mr Gore re-mortgaged his family home and borrowed moneys to raise enough money to pay a still further £224,500 direct to Mishcons. Had I upheld the Quistclose trust claim in relation to the earlier transfers totalling some $2.1 million, I might well have rejected the claim in relation to these later sums because of the knowledge acquired of the payments out of Mishcons’ client account at the 3November meeting. As it is, however, I am satisfied that the Quistclose trust claim fails in its entirety. There were no express terms upon which any of the moneys were to be held; and the circumstances of the transaction do not show any mutual intention that the funds transferred should not be part of the general assets of Mishcons’ client “but should be used exclusively to effect particular identified payments, so that if the money cannot be so used then it is to be returned to the payer”. Certainly, it is not “clear” that that was the case, which is the burden the claimants bear in respect of this aspect of their claim. Since there was no Quistclose trust, the relevant “client” for the purposes of the SARs was MKC (and not KC or ADEL); and therefore there was no relevant breach of the SARs. I specifically reject the submission that there was any uncertainty about the terms upon which the moneys were being transferred to Mishcons’ client account. There was therefore no obligation upon Mishcons or Mr Steele to seek direct instructions from S & S (or, in relation to the £224,500, from Mr Gore) as to the application of the moneys or to remit the moneys back to that firm (or to Mr Gore). 44. I turn then to the dishonest assistance claim. This requires the claimants to prove that Mr Steele dishonestly assisted a fiduciary in the breach of his duties. For the claimants to succeed in this claim, they need to establish, first, that Mr Shepherd owed a fiduciary duty to the claimants in relation to the funds in question and, secondly, that Mr Steele dishonestly assisted Mr Shepherd in a breach of that fiduciary duty. In the course of his oral closing (at T7/85-6), Mr Hantusch accepted (rightly in my judgment) that the requirement of “dishonesty” was unlikely to be satisfied unless Mr Steele knew that Mr Shephard owed duties of a fiduciary character (although he need not have appreciated that they attracted that description) because, if he did not know of the relevant duties, he could scarcely have been acting dishonestly in permitting Mr Shephard to give directions as to how the moneys in Mishcons’ client account, ostensibly in the name of Mr Shephard or his company (MKC), were to be applied or expended. In the present case, the need for dishonesty to be proved requires the claimants to establish that Mr Shephard obtained the moneys in question on terms that they would only be applied for the purpose of obtaining funding, and that Mr Steele dishonestly assisted him in applying that money for other purposes. This claim does not require it to be established that Mishcons was itself a trustee; but it does require it to be established that Mr Shephard owed the duties of a trustee, and that Mr Steele dishonesty assisted him in breaching those duties. Mr Hantusch submits that these requirements are well satisfied on the evidence. 45. In my judgment, the dishonest assistance claim fails on the facts. Mr Hantusch accepted in closing (at T7/86) that Mr Steele needed to know that Mr Shephard had received the moneys on terms as to how he was to apply them. I am satisfied that no such knowledge on the part of Mr Steele has been made out. Mr Hantusch relied in closing upon the terms of the retainer letter. The court having rejected his submission that this letter is a sham, Mr Hantusch is entitled to rely upon this letter; but, in my judgment, it does not assist his clients’ case because it says nothing about the purpose(s) for which the moneys transferred into Mishcons’ client account are to be applied. (Indeed, it expressly recognises that “some of the settlement proceeds are to be used by your family to acquire property in the Philippines”, which is hardly consistent with the asserted fiduciary obligation.) When read in conjunction with the instructions issued on the occasion of the transfers (that they were to be held to the account of MKC, to the order of Mr Shephard), in my judgment Mr Steele cannot be said to have been acting dishonestly in applying the moneys in accordance with Mr Shephard’s instructions in the manner that he did. I have already made the inferential finding that that Mr Steele’s true understanding of the purpose of the money transfers was that they represented fees due to Mr Shephard, or his company (MKC), and that they were to be at his free disposal. There was therefore nothing untoward, still less dishonest, on the part of Mr Steele in applying those moneys to the purposes that he did. Accordingly, the second of the two essential ingredients of a dishonest assistance claim has not been made out. I accept Mr Anderson’s submission that, on the facts of the present case, precisely the same issue arises in the dishonest assistance claim as in the Quistclose trust claim; and that it fails for similar reasons: absent knowledge on the part of Mr Steele that the transfers were to “be used exclusively to effect particular identified payments, so that if the money cannot be so used then it is to be returned to the payer”, there can have been no dishonest assistance on his part. 46. Mr Anderson also submits that the claim for dishonest assistance fails because no fiduciary duties were owed by Mr Shephard in any event. This submission is developed at paragraph 156 of Mr Anderson’s written closing submissions. In the event, it is unnecessary for me to decide this issue, and there is no reason why I should do so. (Since the resolution of this issue depends on the inferences to be drawn from the documents and largely uncontentious facts, an appeal court will be in just as good a position as I am to decide this issue.) But I record that Mr Anderson’s submissions seem to me to carry particular force. I should also record the point made by Mr Anderson, in his oral closing, that if KC (and Merlion) no longer retained any beneficial title to the moneys when they were transferred to S & S, then it is not they who would have been the beneficiary of any fiduciary duty that may have been owed by Mr Shephard. 47. Finally, I turn to the conspiracy claim. Mr Hantusch notes that para 24-98 of Clerk & Lindsell on Torts, 21st edn, identifies four elements that need to be satisfied for an unlawful means conspiracy to be made out: (1) a combination of two or more persons, (2) to take action which is unlawful in itself, (3) with the intention of causing damage to a third party,(4) who does incur the damage. Although nothing turns upon it, I prefer the rather fuller formulation of the ingredients of the tort of unlawful means conspiracy identified by Mr Anderson by reference to para 7.02 of McGrath: Commercial Fraud In Civil Practice, 2nd edn: (1) a combination or understanding between two or more people; (2) an intention to injure another individual or separate legal entity, albeit no need for that to be the sole or predominant intention; (3) concerted action, consequent upon the combination or understanding; (4) use of unlawful means as part of concerted action;(5) resulting in damage being caused to the target of the conspiracy. 48. Mr Hantusch submits that the evidence in this case well demonstrates that, acting wrongfully and with intent to injure the claimants, Mr Steele and Mr Shepherd conspired and combined together to defraud the claimants by carrying out the following unlawful acts and means by which the claimants were injured; and that Mishcons are vicariously liable for Mr Steele’s actions as a partner in the firm and are therefore liable for all the losses suffered by the claimants resulting from the conspiracy. The principal acts relied upon are that: (1) Mr Shephard and Mr Steele agreed, in or about September 2007, that Mr Steele would operate the Mishcons’ client account to receive monies and to provide banking facilities to Mr Shepherd. (2) Mr Steele and Mr Shepherd agreed and conspired together to procure that Mishcons would be retained for that purpose, which was plainly in breach of the SARs. (3) Mr Steele and Mr Shepherd agreed and conspired together to procure that Mishcons would be retained for that purpose in order to give Mr Shephard’s business dealings using that client account an unjustified appearance of legitimacy. (4) Mr Steele created the sham retainer letter. (5) Mr Steele then received into Mishcons’ client account $ 3.5 million from S & S which had been provided to S & S by KC, and, later, £ 224,500 which had been provided by Mr Gore.(6) At the request of Mr Shephard, Mr Steele then authorised the misapplication of those monies for the benefit of Mr Shephard, and the benefit of his family and others, when they both at all times well knew that they had been paid over for the purposes of obtaining the funding forming the subject of the FMA and were not being made for Mr Shephard’s personal benefit. The authorisation of those misapplications is the principal unlawful act that is relied upon. Mr Hantusch also prays in aid Mr Steele’s conduct in relation to the alternative funding mechanism, and, in particular, his representations to Mr Dyton that this was a genuine transaction. In the course of his oral closing, Mr Hantusch confirmed that, on the claimants’ case, those representations were part of the “cover-up”, and thus part of the conspiracy; but he acknowledged that, of themselves, they could not constitute “unlawful means” for the purposes of the tort of conspiracy because they all post-dated the withdrawal of all of the funds from Mishcons’ client account, and thus post-dated the damage alleged to have been suffered by the claimants which constitutes the gist of this cause of action. As Mr Anderson rightly observed, the alleged misrepresentations were not a means of inflicting harm on any of the claimants. In any event, they were not “unlawful”: there is no pleaded case in deceit, nor could there be because there was no reliance on any representation, and no representation was causative of any loss. However, the allegations in relation to the alternative funding mechanism are said by Mr Hantusch to “add weight” to the conspiracy claim. 49. Mr Anderson submits that there is no proper basis for the conspiracy claim, and it should not have been advanced. He points out that the concept of “unlawful means” has two elements: (1) a requirement that the acts involved are unlawful; and (2) a requirement that the unlawful acts were the means of inflicting harm on the claimant. The only unlawful means alleged in support of the claimants’ case on conspiracy are said to be the alleged breaches of the purported Quistclose trust, so the conspiracy claim is said to add nothing to the claimants’ case. If there was no such Quistclose trust, and therefore no breach, then the conspiracy claim must fail, and should be dismissed. The claimants cannot rely upon alleged breaches of the SARs as “unlawful means” since non-actionable breaches of a non-criminal statute are not “unlawful acts” for the purposes of the tort of conspiracy to injure by unlawful means. Breaches of rules of professional conduct that are not actionable by the solicitors’ client, let alone a non-client, do not constitute “unlawful means”. 50. I accept Mr Anderson’s submissions. In the light of my earlier findings of fact, the conspiracy claim fails and must be dismissed. I have found that Mr Steele’s retainer was not a sham; that there was no Quistclose trust attaching to the moneys received into Mishcons’ client account; and that there was no dishonest assistance provided by Mr Steele because he was oblivious to any misapplication of the moneys which had been paid into Mishcons’ client account. It follows there was no “conspiracy” between Mr Steele and Mr Shephard, and that Mr Steele was not a knowing party to the use of any “unlawful means”. 51. I therefore dismiss both claims. SCHEDULE: Receipts, Transfers and Payments 1. The total sums paid to S&S by and on behalf of KC and Merlion: Date Amount US $ 9 October 2007 $ 1,999,939.63 17 October 2007 $ 599,967.60 7 November 2007 $ 1,399,967.23 Total $ 3,999,874.46 2. The amounts transferred by S & S to Mishcons were as follows: Date Amount US $ Amount £ (after conversion) 10 October 2007 300,000 146,035.15 17 October 2007 1,199,000.36 588,315.06 18 October 2007 305,000 148,238.15 26 October 2007 295,879.44 142,916.22 9 November 2007 1,399,967.23 675,986.11 Total 3,499,847.03 1,701,490.69 3. On 27 November 2007 Mr Gore paid £ 224,500 to Mishcons: Date Amount £ 27 November 2007 £ 224,500.00 4. Mishcons’ client account transactions: KC/Merlion receipts Tran Date Description Payor/Payee Credit £ Debit £ Balance £ Narrative 10/10/2007 Receipt Simmons & Simmons 146,035.15 0.00 146,035.15 Deposit monies – US $ 300,000.00 @ 2.0543 17/10/2007 Transfer Michael A Shephard 0.00 (6,506.56) 139,528.59 Pay Bill 1013909 17/10/2007 Payment M Shephard 0.00 (280,000.00) -140,471.41 Settlement 17/10/2007 Payment M & Mrs Shephard 0.00 (20,000.00) -160,471.41 Monies to client 17/10/2007 Payment Mrs K J Shephard 0.00 (20,000.00) -180,471.41 Redemption 17/10/2007 Payment Mr D W A Shephard 0.00 (20,000.00) -200,471.41 Redemption 17/10/2007 Payment Mr & Mrs Shephard 0.00 (10,000.00) -210,471.41 Settlement 17/10/2007 Receipt Simmons & Simmons 588,315.06 0.00 377,843.65 Completion monies US $1,199,000.36 @ 2.038 18/10/2007 Payment Mrs L Dewhurst 0.00 (45,000.00) 332,843.65 Loan 18/10/2007 Payment Mr M Pattinson 0.00 (30,000.00) 302,843.65 Loan 18/10/2007 Payment Mr P Gore 0.00 (10,000.00) 292,843.65 Loan 18/10/2007 Receipt Simmons & Simmons 148,238.15 0.00 441,081.80 Settlement monies US $305,000.00 @ 2.0575 19/10/2007 Payment Martin Myatt 0.00 (25,000.00) 416,081.80 Loan 23/10/2007 Payment Roland B Beltran 0.00 (108,225.11) 307,856.69 Completion monies US $220,000.00 @ 2.0328 26/10/2007 Trust Transfer Michael A Shephard 0.00 (115,000.00) 192,856.69 Trn cleared funds re loan 28010/1 – 28010/2 26/10/2007 Payment Mr M T Pattinson 0.00 (23,000.00) 169,856.69 Loan 26/10/2007 Payment M L Myatt 0.00 (21,000.00) 148,856.69 Loan 26/10/2007 Payment Mrs L Dewhurst 0.00 (15,000.00) 133,856.69 Loan 26/10/2007 Payment Mr M T Pattinson 0.00 (15,000.00) 118,856.69 Loan 26/10/2007 Payment Mrs L Dewhurst 0.00 (14,856.69) 104,000.00 Loan 26/10/2007 Payment Mark Timmis 0.00 (7,500.00) 96,500.00 Loan 29/10/2007 Payment Falcon of Hull & Lincolnshire 0.00 (170,000.00) -73,500.00 Payment for Maybach 29/10/2007 Receipt Paragon Company Services 6,506.56 0.00 -66,993.44 Duplicate payment of bill 1013909 29/10/2007 Receipt Mishcon de Reya USD Clie 142,916.22 0.00 75,922.76 Trn of settlement monies from US $295,879.44 @ 2.0703 13/11/2007 Payment Mrs K Shephard 0.00 (5,000.00) 70,922.78 Loan 13/11/2007 Payment Mrs L Dewhurst 0.00 (5,000.00) 65,922.78 Loan 13/11/2007 Payment Mr M T Pattinson 0.00 (5,000.00) 60,922.78 Loan 13/11/2007 Payment Mr D W A Shephard 0.00 (3,500.00) 57,422.78 Loan 13/11/2007 Receipt Mishcon de Reya US Dollar 675,986.11 0.00 733,408.89 Trn settlement monies revd from Simmons & Simmons US $1,399,967.23 @ 2.0710 14/11/2007 Transfer Michael A Shephard 0.00 (7,521.76) 725,887.13 Pay Bill 1014681 15/11/2007 Payment GDR Inc Limited 0.00 (20,000.00) 705,887.13 Loan 15/11/2007 Payment Mr M T Pattinson 0.00 (15,000.00) 690,887.13 Loan 16/11/2007 Payment George Pragnell Limited 0.00 (31,000.00) 659,887.13 Diamond bracelet loan 19/11/2007 Payment Howell & Co 0.00 (612,000.00) 47,887.13 Loan to be held to our order 19/11/2007 Payment Mr Mark Pattinson 0.00 (10,000.00) 37,887.13 Loan 19/11/2007 Payment Paragon Company Services 0.00 (10,000.00) 27,887.13 Loan 19/11/2007 Payment Mrs Kharen J Shephard 0.00 (5,000.00) 22,887.13 Loan 22/11/2007 Payment Allied Partnership Ltd 0.00 (11,750.00) 11,137.13 Loan 22/11/2007 Payment George Pragnell Limited 0.00 (8,189.00) 2,948.13 Loan Mr Gore receipt 27.11.2007 Receipt P Gore 224,500 227,448.13 Settlement monies and on account fees 28.11.2007 Payment Paragon Company Services Ltd HSBC 40-17-21 81406690 0.00 -82,166.00 145,282.13 Loan 28.11.2007 Payment D.W.A. SHEPHARD HSBC 40-15-17 21674660 0.00 -7,000.00 138,282.13 Loan 28.11.2007 Payment Michael A Shephard 0.00 -1,175.00 137,107.13 Trn cleared funds re fes 28010/1 – 28195/1 29.11.2007 Payment Michael Shephard, Bank of Scotland, 12-08-95 06017486 0.00 -135,334.00 1,773.13 Monies to client