Hurst & Ors v Hone & Ors [2010] EWHC 1159 (QB)

[2010] EWHC 1159 (QB)Case No TLQ/09/0819
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 27 May 2010
Before
MR JUSTICE KEITH
Between
(1) SIR GEOFFREY HURSTClaimants(2) DAVID BARKLEYClaimant(3) DARREN INNOCENTClaimant(4) TERENCE HOPLEYClaimant(5) PAUL KENYONClaimant(6) MARTIN ROBERTSClaimant(7) VERNA ROBERTSClaimant(1) MICHAEL HONEDefendants(2) MARK CORDNERDefendant(3) ROYAL MARBELLA GROUP OF COMPANIES SLDefendant(4) WILCHESTER HOLDINGS INCDefendant(5) GROSVENOR SQUARE INVESTMENTS INCDefendant(6) AZUL PROPERTIES SLDefendant(7) SANDRA CORDNERDefendant
Mr Peter Knox QC and Mr Robert Strang (instructed by DMH Stallard, solicitors) for ClaimantsMr Michael Jefferis and Ms Anne Fairpo (instructed by Judge Sykes Frixou, solicitors) for Second and Seventh DefendantsHearing Hearing dates: 17 and 19, 22-26 February, 1-5, 8-12 and 16 March 2010
Judgment
[1]This case is all about a development on the Costa del Sol. It was called Aloha Royal. The claimants were all persuaded to buy apartments in the development off-plan and to pay the whole of the purchase price before the apartments were built. They thought that they would be getting a good return on their investment. In fact, they got nothing because the developer to whom they paid the purchase price was not in a position to convey good title to the apartments. The case has attracted a good deal of publicity because one of the claimants is the footballer, Sir Geoff Hurst.[2]Although there are seven defendants, this is the court’s judgment following the trial of the action against only two of them, Mark Cordner and his wife Sandra, who are the second and seventh defendants. One of the other defendants, Wilchester Holdings Inc, the fourth defendant, no longer exists as an entity capable of being sued, and the other defendants (with the exception of Grosvenor Square Investments Inc, the fifth defendant) have not been served with the proceedings, either because their whereabouts are unknown (as is the case with Michael Hone, the first defendant), or because the purported service of the proceedings on them (as is the case with Royal Marbella Group of Companies SL, the third defendant, and Azul Properties SL, the sixth defendant, both of which are companies incorporated in Spain) was not in accordance with Spanish law. Grosvenor Square Investments Inc has been served with the proceedings, but the claimants have elected not to proceed with the claim against it, because it is suspected that it may be worthless.[3]The only claim against Mrs Cordner is a tracing claim which is brought against her as well as Mr Cordner, because one of the claimants, Paul Kenyon, the fifth claimant, says that the sum he paid for the apartment he was buying was immediately used by Mr Cordner to pay for a house which he and Mrs Cordner were jointly purchasing, and that when that house was eventually sold, the proceeds of sale were used to pay for the house in which they are now living. Accordingly, the trial has been to all intents and purposes the trial of the claimants’ claim against Mr Cordner. His case in a nutshell is that the real villain of the piece is Michael Hone, and that he is as much a victim of Mr Hone’s fraudulent behaviour as the claimants. Indeed, he says that he too was conned by Mr Hone into investing in property in Spain, and was at one time one of the people giving the claimants’ solicitors instructions – albeit indirectly – about the proceedings which the claimants were contemplating bringing against Mr Hone or his companies.[4]Save for one issue, the trial has been limited to issues of liability. The only issue relating to quantum which has been addressed is whether any credit is to be given against the claimants’ claims for damages for the investments they made, and if so on what basis. They claim that their investments are completely valueless, but even if they are not, it would not be worthwhile embarking on litigation in Spain against the company which originally owned the land on which the apartments they bought were to be built, or against the company which acquired the land and built the apartments.[5]Leaving aside the tracing claim against Mr and Mrs Cordner, the claimants rely on six causes of action against Mr Cordner relating to the apartments they bought. The first two are based on representations which were allegedly made to them by Mr Cordner and which induced them to buy the apartments and pay the entire purchase price up front and without security. Those representations are alleged to be false. To the extent that it is proved that Mr Cordner knew they were false, the cause of action is deceit. To the extent that it is not proved that he knew they were false, the cause of action is negligent mis-statement on the basis that his relationship with the claimants was such that he owed them a duty of care to ensure that what he was telling them was true, and that he had had no reasonable grounds for thinking that they might be true.[6]The next three causes of action are all an elaboration of these two causes of action, and in some respects depend on the claimants proving the same representations and that they were false. They are breach of trust, breach of fiduciary duty and conspiracy. But the final cause of action is more important because it is established, say the claimants, even if such representations as Mr Cordner is found to have made, though false, were made neither deceitfully nor negligently. It is said that on a true analysis of his relationship with Mr Hone, he and Mr Hone were in partnership with each other when it came to the apartments which the claimants were buying, and in that way Mr Cordner became liable for what Mr Hone had done deceitfully in furtherance of the partnership’s objectives.[7]Finally, there are two other causes of action against Mr Cordner which are independent of the apartments which the claimants were persuaded to buy. Sir Geoff entered into a promotional agreement with Mr Hone’s company and lent Mr Hone £350,000 a large part of which remains unpaid. He claims that he was induced to enter into the promotional agreement and to make that loan by representations made to him by Mr Cordner. Those representations are alleged to be false. To the extent that it is proved that Mr Cordner knew they were false, the cause of action once again is deceit. To the extent that it is not proved that Mr Cordner knew they were false, the cause of action is negligent mis-statement. B. The background facts[8]Many of the background facts are uncontroversial, but an appreciation of them is critical to an understanding of the case. I trust that I will be forgiven for reciting them in some detail, though it is necessary to start with what is known about Mr Hone and Mr Cordner.[9]Michael Hone. Mr Hone has used the names Michael Metcalf and Michael Metcalf-Hone. He was born in 1946 and is now 63 years old. In the name of Michael Metcalf, he was sued in the English courts by a Danish bank in Gibraltar, and was found to have knowingly assisted the managing director of the bank in a series of frauds consisting of loans to companies controlled for the most part by Mr Hone engaged in the development of holiday villas on the Costa del Sol and elsewhere. Judgment was entered against him and others for about £66m inclusive of interest. The judgment talked of him having gone to Spain in 1979 following the failure of a business which supplied commercial vehicles. He was based in Spain throughout the time with which this case is concerned.[10]Just as judgment was about to be handed down in the Danish bank case, a number of companies in which Mr Hone apparently had an interest began to be incorporated. The first was the fourth defendant, Wilchester Holdings Inc. (“Wilchester”). It was incorporated on 15 July 1997 in Delaware. The next was the fifth defendant, Grosvenor Square Investments Inc. (“Grosvenor”), also incorporated in Delaware, this time on 19 February 1998. There is no evidence of the extent of Mr Hone’s interest in these companies. There then followed a series of companies incorporated in Spain, all but one with registered offices in Marbella. Some of these companies had the words “Royal” and “Marbella” in their names:• Royal Marbella Land SL, incorporated on 25 February 1998• Royal Marbella Invest SL, incorporated on 25 February 1998• Royal Marbella Golf and Country Club SL, incorporated on 18 March 1998• Royal Marbella Development and Construction SL, incorporated on 23 July 1998 The nature of the business of these companies was recorded as “renting real estate” with the exception of the last, the nature of whose business was recorded as “construction”. The fact that these companies all had English names suggests that the properties to which they related were to be marketed in English-speaking countries, no doubt primarily in the UK.[11]Company records did not disclose who the shareholders of these companies were, because where a company’s share capital is below a certain figure – and the share capital of these companies was presumably below that figure – Spanish law does not require the identities of shareholders to be made public. However, Mr Hone was appointed a proxy in each of these companies on 28 December 1998. Under Spanish law, a proxy is someone who is empowered to act on behalf of a company pursuant to a power of attorney given by the administrator of the company.[12]In due course, the two Spanish companies which are defendants in this case were incorporated. The first was the sixth defendant, Azul Properties SL (“Azul”), which was incorporated on 14 May 1999. Its registered office was also in Marbella. The nature of its business too was recorded as “renting real estate”, and it was recorded as having no employees. This was the company which was to own the land on which the apartments which the claimants purchased were to be built. Once again, company records did not disclose who the shareholders of Azul were, but a brochure for the development which was produced at the beginning of 2003 (“the 2003 brochure”) shows that Wilchester owned 50% of Azul’s shares, and the other 50% were owned by Dovereen Investments Inc. (“Dovereen”) This was a company incorporated in the British Virgin Islands on 16 September 1999, but apart from that nothing is known about it. Having said that, since Mr Hone is said to have an interest in Wilchester, he was one of the people behind Azul. Indeed, he was appointed a director of Azul on 26 July 2002 and its sole administrator on 29 November 2002.[13]Finally, on 24 April 2001 Royal Marbella Group of Companies SL (“RMG”) was incorporated. Its registered office was also in Marbella. The nature of its business was recorded as “auxiliary financial real estate”, and it was recorded as having six employees. It was under the name “Royal Marbella Group” that the development which included the apartments which the claimants purchased was marketed. Information about shareholders in the company’s records shows that Mr Hone was the sole director of the company. He was appointed an administrator of the company on 12 March 2002, and when the Pall Mall, London, branch of the Banco de Sabadell was appointed RMG’s bankers, Mr Hone described himself as the sole administrator of the company.[14]Mark Cordner. Mr Cordner was born in 1962 and is now 47 years old. He worked for Norwich Union and then Allied Dunbar for 7-8 years selling their financial products. He has no academic qualifications, but while he was with Allied Dunbar he sat some examinations on financial planning and mortgages. These consisted for the most part of multiple choice questions and may not have been particularly taxing.[15]Mr Cordner had had some knowledge of the Spanish property market before he met Mr Hone. In 2002, he bought two properties off-plan in a development known as Los Flamingos, and one in a development known as Dominion Beach. He was to sell one of the properties at Los Flamingos for a profit of about €50,000 before tax, and the one in Dominion Beach (which he had not bought off-plan) for a profit of about €150,000 before tax. In addition to buying properties in Spain, Mr Cordner was also selling them off-plan as a sales agent for developers. The main development was Los Flamingos. He sold 4-5 properties there, no doubt earning a commission on each sale. It looks as if the corporate vehicle through which he traded in this way from November 2002 was Euro Property Solutions Ltd, of which Mr and Mrs Cordner owned 45% of the shares. It was in 2002 that he met Maribel Gallardo, a Spanish lawyer, who acted for him on the purchase of at least one of his properties.[16]The recruitment of Mr Cordner. Mr Cordner met Mr Hone at a property exhibition in Loughton in late 2002 or early 2003. RMG had an office there which Mr Hone was to tell Mr Cordner was on a 10 year lease. Mr Hone was promoting a development in Marbella known as Aldea Beach through RMG which Mr Cordner thought he owned. Indeed, at all times Mr Cordner regarded Mr Hone and RMG as one and the same thing. Mr Hone said that he was the owner of the land, and was involved in a joint venture with the developers. The land had not yet been developed, but he nevertheless persuaded Mr Cordner to purchase one of the apartments to be built in this development, no. 15. The advantage of buying properties off-plan, so Mr Hone said, was that the purchase price was heavily discounted, and they could later be sold at a considerable profit, but that was presumably something which Mr Cordner already knew from his own experiences of buying and selling properties off-plan in Spain.[17]It was shortly after this that Mr Hone asked Mr Cordner to act as RMG’s agent in England marketing its properties in Spain, including its properties at Aldea Beach and Aloha Royal. Mr Cordner agreed to do so, and his role was to market RMG’s properties in Spain here. The corporate vehicle through which he traded continued to be Euro Property Solutions Ltd, but in July 2003 Mr and Mrs Cordner acquired the shares of its remaining shareholders, a married couple, Steve Hickey and Melanie Faldo, and thereafter they were the only shareholders. At the same time, the company changed its name to Marbella Properties Ltd (“MPL”). It traded under the styles “Royal Marbella Group” and “Royal Marbella UK”. It did so from an office in Hatfield before moving to new offices in St Albans. In addition Mr Cordner managed RMG’s office in Loughton. He continued to be based in the UK throughout the time with which this case is concerned.[18]It is worth commenting here on the use of the word “Royal” in the style under which MPL traded. You cannot use the word “Royal” in a trading name without the approval of the Secretary of State, and it has not been suggested that such approval was ever sought, let alone obtained. Indeed, Mr Hone must have suspected that to be the case, because there can be no other sensible reason for why a company incorporated in the UK of which Mr Hone was a director was called Royalle Marbella (UK) Ltd.[19]In RMG’s brochure produced in early 2004, Mr Cordner was described as Chairman – International Markets. He was said to have “negotiated exclusive representation for the Royal Marbella Group in all key markets outside Spain”, and he was quoted as saying that “my teams are now advertising and exhibiting all over Europe every week”. A year or so later, RMG was calling itself Royal Group Marbella rather than the Royal Marbella Group if its 2005 brochure is anything to go by. In that brochure Mr Cordner was the first of RMG’s “key personnel” to be featured, and he was described as Chairman. The words “my teams” had now become “our representatives”. He was also described as RMG’s UK sales director in 2005 and 2006. All this presented the picture to the outside world that by the beginning of 2005 Mr Cordner had moved from a marketing role to a more centralised one.[20]On 24 June 2003, Mr Cordner became a signatory on RMG’s bank account with the Pall Mall branch of Banco de Sabadell. This was a sterling account. It was the account into which deposits from purchasers of units would be paid, and out of which the commission which Mr Cordner would be earning on sales which he had effected would be paid. He remained a signatory on that account until 29 March 2005. Indeed, the arrangements between RMG and MPL were particularised in heads of terms signed by Mr Hone on behalf of RMG and Mr Cordner on behalf of MPL. The document is a relatively formal one, and although it was anticipated that “a more comprehensive contract” would be drawn up, it never was. The document is not dated, but it was printed on 5 July 2003, and a slightly different version was printed on 16 July 2003. Curiously, RMG is referred to as “Royal Marbella Group SA”. These heads of terms provided that MPL was to have the sole right to represent RMG in any country outside Spain, and with the exception of sales previously arranged by Mr Hone and his wife, RMG would only deal with purchasers from those countries if they had been introduced by MPL. MPL would be entitled to commission at a rate to be agreed. Unusually, MPL had to pay for the privilege of being RMG’s exclusive agent in these countries. The sum it had to pay was £450,000, to be paid by deducting 10% from any commission due to MPL. Mr Cordner claims – and I have no reason to doubt what he says – that this aspect of the agreement was never implemented. The £450,000 was never paid, and no deductions were ever made from MPL’s commission in respect of it.[21]Mr Cordner’s case is that he was simply a salesman. He had no role within RMG save for the fact that for a while he managed RMG’s office in Loughton. He was just providing the services of a sales team through MPL. The titles he was given were just that – titles – there to impress the people he was doing business with and fanning his own vanity. Nick Clarke, Mr Cordner’s cousin, who Mr Cordner recruited as a sales agent for RMG’s developments from April 2004, talked of Mr Cordner telling the world and his wife that he was a bigger fish in the pond than he really was – no doubt buoyed up by the fancy titles which Mr Hone gave him. Mr Hone and his wife would apparently laugh about Mr Cordner’s titles which they described as changing day to day.[22]Some scepticism for this view of Mr Cordner’s role within RMG would have been justified in the light of heads of terms which Mr Hone and Mr Cordner signed in February 2004. The document in which these terms were included was not dated, but it was printed on 4 February 2004. Handwritten additions to it show that the expenses of MPL which had hitherto been paid by RMG were to be reimbursed to RMG. But what was apparently agreed was for RMG’s properties to be marketed by a new company in place of MPL to be named RMG (Spain) Ltd. RMG (Spain) Ltd would not receive commission, but for introducing purchasers to RMG, RMG would pay 110% of RMG (Spain) Ltd’s running costs. Mr Hone, his wife and Mr Cordner were each to be allotted one-third of RMG (Spain) Ltd’s shares. Profits could not be distributed without the joint agreement of Mr Hone and Mr Cordner. In addition, although it is unclear what this means, Mr Cordner would receive a one-third interest “in the sales operation” of RMG, and would ensure that “all sales arising … will be accounted for through this operation”. Like the provision relating to the £450,000.00 in the heads of terms printed in July 2003, Mr Cordner says that these terms were never implemented.[23]I am satisfied that RMG (Spain) Ltd did indeed take over MPL’s responsibilities for marketing RMG’s properties. A number of things point to that. It was incorporated on 6 February 2004. Commission payable to salesmen was to be paid from March 2004 by RMG (Spain) Ltd, not MPL. None of the invoices from MPL which have been disclosed are dated after April 2004, save for those which relate to properties sold before April 2004. And MPL’s financial statements show a dramatic decline in turnover from £511,955 in the year ending 30 September 2004 to £28,652 in the year ending 30 September 2005. But none of that means that all the provisions in the document printed on 4 February 2004 were implemented – in particular, how RMG (Spain) Ltd was to be paid, how shares in it were to be allotted, and how its profits were to be distributed. There is nothing to suggest that these provisions were ever implemented, and their implementation would not have sat well with the sort of role which in my opinion Mr Hone would have regarded as appropriate for Mr Cordner. In the circumstances, I go along with Mr Cordner’s account of his limited role within RMG, though I should add that RMG (Spain) Ltd was struck off the Register of Companies on 1 November 2005 for failing to file an annual return, and from then the responsibility for marketing RMG’s properties fell on World Property Group Ltd (“WPG”), which was incorporated on 7 November 2005 and whose sole shareholder was Mr Cordner.[24]The special deal. The commission which Mr Cordner said he and MPL were initially earning was between 7-10% of the purchase price of the units he sold. It depended on how large the deposit for each unit was. He also earned override commission on the sales generated by the salesmen he recruited. That tended to work out at about 1-2% of the purchase price of the units sold by those salesmen. That compared rather well with what the salesmen were getting. Mr Clarke said that his commission started at 1½% of the purchase price and later went up to 2%. But there came a time – Mr Cordner says that it was in about May 2003 – when a different commission arrangement was negotiated between him and Mr Hone for a limited number of apartments at Aloha Royal for which the list price in the 2003 brochure was €474,800. These apartments – 10 in all – were initially to be marketed at €298,000 despite the list price and Mr Cordner was to be paid commission of €84,300 for each apartment he sold. The reduced price at which the apartments were to be marketed together with the size of the commission is one of the reasons why the claimants say that the arrangement between Mr Hone and Mr Cordner over these apartments was akin to partnership rather than principal and agent, and that they had agreed to split the purchase price between them. Mr Cordner says – and I have no reason to doubt it – that the deal was offered to the other shareholders in Euro Property Solutions Ltd as well, but Melanie Faldo was the sister of Steve Rockall, RMG’s International Marketing Director, and she had fallen out with Mr Rockall. Mr Hone backed Mr Rockall over her, and she said that she and Mr Hickey would have nothing more to do with Mr Cordner, which was why they walked away from the deal Mr Hone was offering.[25]Why was Mr Hone prepared to offer Mr Cordner this special deal for 10 apartments at Aloha Royal? That is a highly contentious issue, but Mr Cordner says that Mr Hone told him that he needed to raise €3m urgently so that he could “buy out his business partner in a land deal”. He thought that the land deal may have related to Aloha Royal, though later in his evidence he said that this possibility only occurred to him later on. Mr Hone said that his business partner, who was 68, had fallen in love with a 22 year old Russian girl, and they were going off to live on an island somewhere. Mr Cordner added that Mr Hone said that he, Mr Hone, “would make a lot more money from future sales in the Aloha Royal development in the long run once he had removed his partner”. The claimants say that this hardly explains why Mr Hone was content to reduce the purchase price of the apartments by such a large amount and was prepared to pay Mr Cordner such a huge commission on top of that. Would not Mr Hone have got Mr Cordner just as interested if he had offered commission of, say, €40,000? Mr Cordner’s response was that Mr Hone could afford to be generous over his commission to get the best out of Mr Cordner because Mr Hone had said that once he had bought out his partner, “he’d make millions”.[26]According to Mr Cordner, Mr Hone said that the purchasers of these 10 apartments would have to pay the whole of the purchase price up front (unlike purchasers of other units at Aloha Royal and the purchasers of units at RMG’s other developments who had to pay a deposit of usually only 30% of the purchase price when buying units off-plan with the balance payable on completion). Indeed, Mr Clarke did not recall a time when the purchasers were being required to pay the whole of the purchase price up front. The reason Mr Hone gave him for wanting to get the whole of the purchase price up front, so Mr Cordner says, was because he needed to raise the capital “immediately” to buy out his business partner.[27]Again, the claimants say that this does not begin to explain why Mr Hone was prepared to reduce the price for these 10 apartments by such a large amount, on top of the huge commission he would be having to pay Mr Cordner. But even if Mr Hone had told Mr Cordner that he was doing it because he needed to raise money quickly, the claimants say that it would have told Mr Cordner that Mr Hone did not have access to conventional forms of borrowing for one reason or another. Indeed, Mr Clarke says that Mr Cordner told him that pre-funding was necessary in order to finance the construction of the development, but Mr Clarke added that had Mr Hone told him, Mr Clarke, to ask for the whole of the purchase price up front, he would have begun to wonder whether Mr Hone had funding problems.[28]Mr Clarke went on to say that by 2005 he would have felt very uneasy about marketing properties for RMG on the basis that the whole of the purchase price had to paid up front. That is because by then he had become concerned that RMG had collected deposits for developments for which the construction had not yet begun. Normally, Mr Clarke said, you would be keen to get the construction of the development underway, because it was only when the construction was completed that you would get the balance of the purchase price. But Mr Hone always had a new story about why the construction of the developments did not get going. Eventually, Mr Clarke was to tell Mr Cordner that he did not believe a word of what Mr Hone said. Things had begun “to smell” so much that in September or October 2005 he stopped working for RMG. Both his parents and his brother had invested in RMG’s developments, though not at Aloha Royal, and they all lost money.[29]But Mr Cordner says that none of that occurred to him at the time. He regarded the deal which Mr Hone put to him as so exciting an opportunity that he “reserved” all 10 apartments himself. The effect of that was that no-one else could market them. The potential returns were so outstanding that he promoted the apartments to his family and friends (though no members of his family purchased any of them) and even purchased two of the apartments himself – no. 52 (which he purchased through a company owned by him, Paddington Properties Inc.) and no. 56 (which he bought jointly with Mr Barkley). Mr Innocent bought no. 62. Mr and Mrs Roberts bought no. 68. Sir Geoff Hurst (together with Jonathan Power) bought no. 60 and (together with Terence Hopley, the fourth claimant) no. 90 as well. Some time later Mr Kenyon was to buy no. 64 at an increased price of €360,000.[30]Mr Cordner acknowledged that the mathematics did not add up. If he was to be paid a commission of €84,300 on each sale at €298,000, that would have left Mr Hone with net proceeds of sale of only €213,700. Even if Mr Hone received that for all 10 apartments, that only gave him €2,137,000 whereas what he had wanted to enable him to buy out his partner had been €3m. Mr Cordner could not explain that. Presumably he thought that Mr Hone had the balance of €863,000 within his own resources or proposed to raise it through other sources of finance. He had not given much thought to why Mr Hone had not resorted to more conventional forms of borrowing rather than selling the apartments at a very significant discount and giving Mr Cordner such a huge commission (which Mr Cordner said was the best commission he had ever earned), though he knew that Mr Hone did not borrow money from banks, because that was what Mr Hone had told him once. He never said whether Mr Hone had ever explained to him why that was. If that is indeed true, the claimants say that this should at the very least have set alarm bells ringing.[31]The marketing of RMG’s developments. Aloha Royal was just one of a number of developments which RMG marketed on the Costa del Sol, the Costa de la Luz and in Tenerife. One of RMG’s marketing strategies was to persuade celebrities to endorse its developments. That is how Sir Geoff became involved with RMG. He was not alone. The names and photographs of Sir Steve Redgrave, Kim Wilde, Tony Underwood and others feature prominently in RMG’s promotional material. Another of its marketing strategies was to sponsor events such as racing at Royal Windsor racecourse over three days in June 2004.[32]The land. The land on which Aloha Royal was to be built was registered under title 35994 in the municipality of Marbella. It was transferred to Azul by a deed of sale dated 28 June 1999. Azul then began to arrange for the development of the land. The 2003 brochure shows that in December 2000 plans for the development had been drawn up by architects, which had been stamped as received by the authorities in Malaga on 7 March 2001. The brochure records that in December 2002 it had been confirmed that “the licence”, presumably the building licence, had been approved, and that it was expected that “building”, presumably construction, would “mobilise”, i.e. begin, in April (presumably April 2003). It is that which dates the brochure to the early part of 2003. The name of the development was to be Aloha Royal, and the building licence was in fact issued to Azul on 27 May 2003.[33]Two comments should be made about the 2003 brochure. First, it gave details about the nature of the development. 92 apartments were to be built in three phases. They were to be sold at three different prices: €474,800, €721,215 and €871,468, though one was to be sold at €550,000. The brochure recorded that by then 17 of the apartments had been sold. None of them were among the apartments which the claimants were subsequently to buy. Secondly, the brochure appears to have been published, not so much to market the individual apartments in the development, but rather to raise money for the construction of the development. It offered 25% of the shares in Azul at a price of €2,460,100, which amounted to 25% of the costs of €9,840,415 which had been incurred thus far for the purchase of the land, professional fees and other costs. At the front of the brochure, Dovereen disclaimed liability for any information contained within it, and that rather suggests that it was Dovereen’s shares in Azul which were being offered rather than Wilchester’s. It does not look as if a buyer could be found for the 25% stake in Azul on offer, and Mr Hone, with the help of Mr Cordner, appears to have embarked on a fund-raising exercise of their own. It was in that context that the claimants were persuaded to invest in the development.[34]Azul’s sale of the land. On 14 January 2004, Azul agreed to sell the land to Desarrollos Urbanisticos Jiminez Alvarez SL (“Duja”). The claimants and their advisers were not aware of that until 17 April 2009 when Mr Barkley was sent a copy of the agreement by a lawyer in Marbella with whom Mr Cordner had put him in touch. Although dated 14 January 2003, there are things in the document which show that this must have been a mistake. Under the agreement, Duja was not being required to pay anything for the land. What it undertook to do was to build the 92 apartments within 36 months of the issue of the building licence (which is the Spanish equivalent of the grant of planning permission) and transfer 24 of them back to Azul. RMG was to have the exclusive right to market the 68 remaining apartments for a fee of 15% of their list price. And in order to keep Duja to its undertaking to build the 92 apartments and to transfer 24 of them back to Azul, Duja was required to give Wilchester a bank guarantee for €3m. So what Azul got out of the deal was that it would not have to raise funds for the construction of the development, and in return for transferring the land to Duja, it would get 24 apartments which it could then sell and marketing rights over the remaining 68 apartments.[35]Having said that, there are a number of features about the agreement which are worth commenting on. First, the agreement purported to value the 24 apartments which were to be transferred back to Azul at €1.8m, which works out at only €75,000 an apartment. On the other hand, the bank guarantee to be given by Duja in effect valued the 24 apartments at €3m, which works out at €125,000 an apartment. It may be that these figures were notional figures only, or were artificially low for tax reasons. A Spanish lawyer instructed on behalf of the claimants for the purpose of these proceedings, Tomas Agüera Hertz, said that undervaluing property for tax reasons used to be “a national sport” in Spain. But leaving these figures aside, the deal looks a good one for Azul. Rounding the figures to the nearest €100,000, if one takes the value of the 24 apartments to be transferred to Azul as their sale prices in the 2003 brochure, their value comes to €15.6m. If one takes the value of the 68 apartments to be retained by Duja as the total sale price of all the apartments in the brochure (€54.8m) less the €15.6m for the 24 apartments to be transferred to Azul, which comes to €39.2m, Azul’s commission on that figure at the rate of 15% is €5.9m. If that is added to the €15.6m, Azul gets €21.5m out of the deal, compared with the costs incurred up to early 2003 of €9.8m according to the brochure given to Mr Kenyon.[36]Secondly, the sale was expressed to be “free of tenants, squatters or other occupants”. That suggests that Azul was representing to Duja that no-one had at that stage acquired any rights over any of the apartments. If that was what Azul was representing, it was not true. The 2003 brochure showed that by early 2003 17 of the apartments had been sold, and by January 2004 all the claimants (with the exception of Mr Kenyon) had agreed to buy apartments in the development and had paid for them. Thirdly, the 24 apartments reserved for Azul included(a) all the apartments sold to the claimants (but not one which Sir Geoff was to receive in return for making personal appearances for RMG and endorsing the development, no. 20) and(b) seven of the 17 units which the brochure said had already been sold.[37]When Duja acquired the land, it was subject to a charge of €179,679.80 which had been payable in December 2003. But shortly after its acquisition of the land, it mortgaged the land for a much larger sum – €24,234,900 on 18 May 2004. That was borrowed to finance the construction of the apartments. That rather suggests that the deal was not a particularly good one for Duja. Rounding the figures to the nearest €100,000, once Duja had paid commission of €5.9m on the 68 apartments it would be retaining, the net sale price of those 68 apartments would be €33.3m, against which there were borrowings with which the land was charged of €24.4m, leaving it with a profit of only €8.9m (less the interest payable on those borrowings), despite taking all the risks of the development.[38]There is another curious feature about Azul’s sale of the land to Duja. The agreement between Azul and Duja was unenforceable until it had been notarised by a public notary, and the terms of the agreement had been entered in the land register, which was available for public inspection. That occurred shortly before 21 June 2004 when the relevant tax office was notified of the terms of the agreement. The agreement must have been varied by then, because the land register showed that only nine apartments, not 24, were to be transferred back to Azul, and those apartments were now valued at €2m. Those nine apartments included only two of the apartments sold to the claimants – no. 64 sold to Mr Kenyon, and no. 90 sold to Sir Geoff and Mr Hopley. So if the entries in the land register are anything to go by, the other apartments sold to the claimants (as well as no. 20 given to Sir Geoff and no. 52 purchased by Mr Cordner himself) were effectively sold to Duja without reservation. And if the entries in the land register represent the real terms of the agreement between Azul and Duja, the mathematics become easier to reconcile with commercial reality. The value of the nine apartments referred to in the land register, going on their sale price in the 2003 brochure rather than their value in the land register, comes to €6.2m. That puts a value of €48.6m (i.e. €54.8m less €6.2m) on the 83 apartments retained by Duja. Azul’s commission on the sale of those 83 apartments would be €7.3m, i.e. 15% of €48.6m. If that is added to the €6.2m, Azul gets €13.5m, which is not that far from the costs of €9.8m, which it had incurred by the beginning of 2003 according to the brochure given to Mr Kenyon. Similarly, once Duja had paid commission of €7.3m on the 83 apartments it would be retaining, the net sale price of the 83 units would be €41.3m, against which the borrowings of €24.4m would leave Duja with a healthier profit of €16.9m, less the interest payable on the borrowings.[39]Azul’s sale of the land to Duja was followed by Duja’s greater involvement in RMG’s developments. By the time Mr Clarke stopped working for RMG, it had begun to trade, so he said, under the name of Royal Duja Group. Indeed, Mr Cordner was to tell one of the claimants, Mr Barkley, towards the end of 2006 that Duja had bought Mr Hone’s interest in RMG. But Azul’s sale of the land to Duja raises the question of whether Mr Hone and RMG were initially intending to develop the site, or whether it was a scam from the very beginning, with the 2003 brochure being used to bring potential investors in, with Mr Hone planning to disappear (as he eventually did) when investors began to realise that they had been conned into paying the whole of the purchase price for their apartments up front. That is not something which the evidence enables me to decide, and I have had to proceed on the assumption that at the beginning at any rate Azul’s plan was to develop the site through RMG, and that it was at some time towards the end of 2003 that the plan changed.[40]The requirements of Spanish law. Before coming to the circumstances in which the claimants acquired their apartments at Aloha Royal, it is necessary to say something about what Spanish law does to protect purchasers who buy properties in Spain off-plan. The unchallenged evidence of Rebecca Kettell, a solicitor with expertise in Spanish law, is that such protection is provided by Law 57 of 1968 and takes two forms: guarantees and separate bank accounts.[41]Art. 1 of Law 57 of 1968 requires anyone who promotes the construction of residential property and who receives funds on account from the purchaser to arrange for there to be a guarantee in place to secure the return of those funds together with interest if(a) the construction does not begin or(b) the construction is not completed by the agreed date for completion. This guarantee may be in the form of an insurance policy with an authorised insurer or a guarantee from a registered bank or savings bank. The insurance policy or guarantee must be individual to the purchaser, and it must refer to the amount guaranteed. A collective guarantee is not permitted. Art. 3 provides that if the construction of the property is not completed by the agreed date for completion, the purchaser can enforce the guarantee and obtain the return of their funds together with interest or agree a new date for completion.[42]The guarantee remains valid until the grant of the habitation licence relating to the property. The habitation licence is a licence granted by the local authority on completion of the construction, confirming that the construction conforms to any appropriate building regulations and planning conditions. That means that once the habitation licence has been granted, the guarantee automatically lapses. The effect of that is that the guarantee does not relate to title at all. A developer is required to state in its promotional material its obligation to provide a guarantee and the entity through which the guarantee will be given. In addition, the terms of the agreement for the purchase of the property have to refer to the developer’s obligation to provide such a guarantee and have to give specified information about the guarantee.[43]As for separate bank accounts, Art. 1 of Law 57 of 1968 requires a developer to place any funds received on account from the purchaser of a residential property in a designated bank account separate from any of the developer’s other funds. Those funds may only be used to fund the construction of the property. C. The claimants’ accounts[44]Each of the claimants have their own story to tell. Their accounts have a number of common features, but since there are some differences between them, it is necessary to consider their versions of the relevant events both separately and together. It was in 2003 that Aloha Royal began to be marketed, and that is where the claimants’ stories begin.[45]Sir Geoff’s promotional agreement. In about June 2003, Sir Geoff was invited by a theatrical and promotional agent to meet Mr Hone. Sir Geoff agreed to do so. The meeting took place at RMG’s office in Loughton. Both Mr Hone and Mr Cordner were there as well as a number of others. Mr Hone did not appear to Sir Geoff at the time to be “the main player”, and none of those present stood out as being the one running the business. Sir Geoff was told about RMG’s various developments, and he was shown promotional literature as well as plans and drawings. He thought that Mr Hone and Mr Cordner were impressive in the way they came across, and they seemed to him to know what they were talking about. The upshot was that Sir Geoff was asked by Mr Hone if he would consider entering into a promotional agreement with RMG.[46]Following this meeting, Sir Geoff decided to promote RMG’s developments, and an agreement was drawn up. It was called an “image rights and personal appearance contract”. The parties to it were Sir Geoff and an entity called Royal Marbella Group SL, which was obviously intended to be RMG. Under its terms, Sir Geoff was to make a total of 15 personal appearances and endorse RMG’s developments by allowing his name and image to be used. In return, he was to be assigned “the outright freehold title” of an apartment in one of RMG’s developments on the Costa del Sol, which had a market price of at least €330,000 at the date of the agreement. The agreement ran from 18 June 2003 to 31 December 2006, and it provided that the construction of the apartment would be completed by the time the agreement expired, unless the parties agreed a later date of completion. The agreement was signed by Sir Geoff and by Mr Hone for RMG.[47]Sir Geoff asked for the apartment to which he was entitled to be at Aloha Royal since he had been particularly impressed with the plans for that development when he had seen them and had been told that its construction would take about 18 months. This information became important to Sir Geoff when he began investing in Aloha Royal himself later on. He says that he thought that 18 months was about the right time for the construction of the development to take, and it meant that his investment could be recouped within a reasonable time. In due course, he was assigned no. 20 Aloha Royal. A letter dated 25 June 2003 confirming that from Mr Rockall showed that the “current retail value” of the apartment was €474,800 (which accorded to the list price for the apartment in the 2003 brochure), but that it was being “sold” to Sir Geoff at €298,000. It is unclear what that was meant to convey to Sir Geoff since he was not “buying” the apartment at all, but what it rather suggests is that Sir Geoff was getting one of the 10 apartments which were being marketed at a specially discounted price.[48]Following the signing of this agreement, Sir Geoff met Mr Hone and Mr Cordner a number of times both in the UK and in Spain. The impression he had got by then was that Mr Hone was “the boss”, and that he owned most or all of the business, though his recollection was that Mr Cordner described himself as “the chairman”. As time went by, Sir Geoff had little to do with Mr Cordner, because Mr Cordner was not involved with the photographic shoots for RMG’s brochure or with Sir Geoff’s personal appearances. That was more the responsibility of Mr Rockall. And although Sir Geoff is not prepared to describe Mr Hone as a friend of his, he socialised with him occasionally, if only because he likes to form a bond with people he does business with.[49]Although Sir Geoff gave no evidence about it, he must have mentioned much of this to Mr Hopley who was a friend of his. Mr Hopley recalls Sir Geoff telling him about the approach he had had from the theatrical and promotional agent with a view to him doing some promotional work for RMG, and about how he had met Mr Hone and Mr Cordner. Mr Hopley remembers Sir Geoff telling him that the apartment he was being offered for the promotional work he was being asked to do for RMG was going to be of a very substantial value. Sir Geoff told him that his impression of Mr Hone and Mr Cordner was that they were extremely wealthy, and had developed some of the most prestigious properties on the Costa del Sol. Mr Hopley says that he suggested to Sir Geoff that he ought to check RMG out before becoming its “ambassador”, and that they should go to Marbella together to look at some of RMG’s developments.[50]That is what they did. That was when Mr Hopley first met Mr Cordner, who Mr Hopley says introduced himself as chairman of RMG. They were shown a number of completed developments which were occupied, as well as some sites which had not yet been developed. Sir Geoff was to say that it was Mr Cordner who showed them around (even though he was quoted in one of RMG’s brochures as saying that it had been Mr Hone who had done that), and that when he first saw the completed developments, which Mr Cordner said were RMG developments, they appeared to be well constructed, and that led him to believe that the sites which had not been developed (including the site at Aloha Royal which Mr Cordner told him had been bought by RMG for development) would be to a high standard. For his part, Mr Hopley says that there was nothing which actually said that these completed developments were RMG’s developments. Mr Cordner simply said that he had been associated with them, and that they had all been marketed in the same way and had made substantial returns. They were also shown the sites at Aloha Royal and Aldea Beach. These had not been developed. No work was going on at Aldea Beach, although some ground preparation work was being carried out at Aloha Royal. Mr Hopley did not see any signage at Aloha Royal which showed that it was part of RMG.[51]According to Mr Hopley, Mr Cordner said that the sites at Aloha Royal and Aldea Beach had been bought by RMG. That was of significance to Mr Hopley. If he had been told that the sites were owned by others, he would have wanted to know by whom, and he would have wanted to meet them. Mr Cordner added that work would begin on the development of these sites shortly. He said that all the apartments on these sites had been sold off-plan to groups of investors who were going to sell the apartments when their construction had reached roof-level. Mr Cordner said that there were no apartments on these developments available. Again, Sir Geoff gave no evidence of a conversation of this kind when he first went to view the developments in Spain (which he says was after he signed the agreement), but without being critical of Sir Geoff in any way, I thought that Mr Hopley had a clearer recollection of events than him, and had in a number of respects a better grip on the detail. I think it more likely than not that these events occurred before Sir Geoff signed the agreement. After all, it took a little while for the agreement to be signed. Although the agreement does not include the date when Sir Geoff signed it, it includes the date when Mr Hone signed it (15 July 2003), though this itself may not be accurate because Mr Rockall, who purported to witness Mr Hone’s signature, signed the agreement as such a witness on 11 July 2003. Moreover, it is plain that the agreement had not been drawn up by the time of Mr Rockall’s letter of 25 June 2003 because that referred to Mr Hone having “put the legal wheels in motion”.[52]Sir Geoff’s purchase with Mr Hopley of no. 90 Aloha Royal. Sir Geoff’s evidence was that towards the end of July or the beginning of August 2003, Mr Cordner asked him if he was interested in buying another apartment at Aloha Royal. Sir Geoff’s recollection is that what Mr Cordner told him was that he had bought 10 apartments in the development himself from Mr Hone at a pre-sales launch, and was able to “sell them on” at a heavily discounted price. Mr Cordner may not have actually used the word “bought”, but that was what Sir Geoff understood Mr Cordner to mean. Mr Cordner showed Sir Geoff the list prices for the apartments at Aloha Royal, and told Sir Geoff that the ones he had were the ones with a list price of €474,800, but which he could sell for €298,000, provided that Sir Geoff was prepared to pay the whole of the purchase price up front. Mr Cordner told him that when the apartments were built they would sell for €650,000-€700,000. That sounded “about right” to Sir Geoff.[53]For his part, Mr Hopley’s evidence was that some time after his trip to Spain with Sir Geoff, he got a telephone call from Mr Cordner. Mr Cordner had come across to him by then as an influential businessman with considerable experience of properties in the area. Mr Cordner had said that he had worked for RMG for many years, and Mr Hopley says that he thought that Mr Cordner was the man at the top. What Mr Cordner had told him was that he had “taken” 10 apartments at Aloha Royal for his family (including one for his mother and father), but that one of the sales had fallen through. He was therefore prepared to offer it to Sir Geoff and him. Mr Cordner did not say how he had taken the 10 apartments for his family – whether he had bought them or reserved them or whatever. Mr Cordner added that the whole of the purchase price would have to be paid up front, but they could expect a substantial return on their investment when the development reached roof level as they would be getting the apartment at a heavily discounted price. At some stage – Mr Hopley did not say when – he must have been told about the list price of €474,800, and the discounted price of €298,000 which they would have to pay. He was not so sure that it would sell for €474,800 when it was launched, but he considered €298,000 to be a fair price.[54]Mr Hopley says that following this conversation he received a number of further calls from Mr Cordner about the purchase of the apartment. He also met Mr Cordner along with Sir Geoff. Mr Hopley says that Mr Cordner said that he had previously invested in 10 apartments at Aloha Royal, and that the returns were guaranteed. Mr Hopley treated that latter comment as merely Mr Cordner’s view of the likelihood of a substantial return on their investment, since he knew that the returns could not be guaranteed. But he says that he was influenced by Mr Cordner’s comment that RMG was lucky to have Sir Geoff on board: that gave Mr Hopley a measure of confidence, because he did not think that anyone would try to rip Sir Geoff off. He also recalls Mr Cordner telling him that the money they paid had to be kept in a totally separate account, and that it was his, Mr Cordner’s, responsibility to ensure that the money was used for what it was supposed to be used for. That accorded with Mr Hopley’s previous experience of buying properties off-plan: the funds were kept in a separate account and released in stage payments.[55]Sir Geoff and Mr Hopley both recall what Mr Cordner told them about the involvement of lawyers in the purchase. Sir Geoff says that Mr Cordner told him that RMG’s “in-house lawyer” could deal with all the legal work on their behalf. He realised that he could have instructed Spanish lawyers himself if he had wanted to, but he thought that it made more sense to use RMG’s lawyers since they were in-house. Mr Hopley’s evidence was to similar effect. He recalls Mr Cordner telling him not to bother about obtaining independent legal advice because he, Mr Cordner, would arrange for that on their behalf. Mr Cordner said that they had done it many times before on other developments using a firm called Spanish Legal Services. Mr Hopley had instructed lawyers himself when he had bought properties in the past – sometimes lawyers recommended by the vendors – and he thought that the lawyers who Mr Cordner would be using would make the appropriate searches to check that the vendor had the right to sell the apartment to them and would draw up the contract of sale. Had he known that Mr Cordner had no intention of getting that sort of advice for him, he would have instructed lawyers himself. Spanish Legal Services was the style under which a lawyer named Sylvia Campaña practised, and what none of the claimants knew was that she was RMG’s lawyer. Indeed, she had a desk at one of RMG’s two offices in Puerto Banus.[56]Sir Geoff referred to one other thing which he claims Mr Cordner told him. Sir Geoff was aware that when you pay for a property which you are buying off-plan, there should be some mechanism in place for your money to be protected. When he discussed that with Mr Cordner, Mr Cordner told him that the money would be held in an escrow account with the bank, and would be released in stages as the construction reached the first and second storeys. If the development was not completed, the bank would return the money. Sir Geoff was a little imprecise about when Mr Cordner told him that. It is unlikely that it would have been at the time of the promotional agreement, since this was information which only someone who was putting up funds for the acquisition of a unit at Aloha Royal would need to know. But it must have been at some time before Sir Geoff decided to invest in Aloha Royal himself, because he claims that this assurance about what would happen to his money influenced his decision, and he would not have proceeded otherwise as he would not have regarded his investment as sufficiently safe. It is to be noted, though, that Sir Geoff referred to this feature of what Mr Cordner had told him only in his fourth and final witness statement, which was wrongly described as his fifth witness statement. It was made a couple of months before the trial began, and as we shall see, Sir Geoff was not alone among the claimants in having recalled something along these lines only at a late stage.[57]Sir Geoff and Mr Hopley decided to buy the apartment which Mr Cordner had offered them. It was no. 90 Aloha Royal. They each paid their share of the purchase price by a cheque for the sterling equivalent of half of €298,000. They made their cheques payable to RMG because that was what Mr Cordner had asked them to do. Mr Cordner had advised them that it would be tax-efficient if they bought the apartment through an offshore company, and he put them in touch with Clive Reed of Reed Management Ltd in Gibraltar. The company which Mr Reed either acquired or caused to be incorporated for that purpose was Castlemore Holdings Ltd, a company incorporated in Delaware. Although Sir Geoff’s witness statements do not mention it, it looks as if Sir Geoff signed RMG’s standard property reservation sheet at the time, which shows that on 12 August 2003 no. 90 Aloha Royal was reserved for himself and Mr Hopley in the name of Castlemore Holdings Ltd, and that the purchase price of €298,000 was paid in full on 18 August 2003.[58]Sir Geoff and Mr Hopley did not receive a contract of sale at that stage. After a while, Sir Geoff asked Mr Cordner for it. When it arrived, it named Wilchester as the promoter of the land on which the apartment was to be built. According to Mr Agüera, the promoter of land under Spanish law is the person who owns the land and who applies for and obtains a building licence to develop it. Sir Geoff noticed that Wilchester was named as the promoter (equating it, I think, in his own mind with vendor), and that it had been Mr Hone who had signed the contract on behalf of Wilchester. Although Sir Geoff had been told that the apartment was one which Mr Cordner had bought, he did not give much thought to this apparent inconsistency at the time. The same is true of Mr Hopley. Although he noticed that the promoter of the land was Wilchester, he imagined that because the contract had been drafted by Spanish Legal Services there must have been some reason for that, and he did not give much thought to it at the time either. Apart from those facts, there was nothing unusual about the contract. It recorded that Wilchester undertook to complete the construction of the apartment by 30 March 2005, with an additional grace period of two months, and it included the statement required by Law 57 of 1968 that Wilchester would “guarantee the amounts paid on account”. The contract was unenforceable until it had been notarised by a public notary, and that was when the documents of guarantee were to be delivered to Sir Geoff and Mr Hopley. No such documents were ever provided to them, and it does not look as if the contract was ever notarised before a public notary. That applied to the other claimants’ contracts as well.[59]At no time during these discussions or thereafter did Mr Cordner ever mention that he was entitled to commission on the sale of the apartment. It did not occur to Mr Hopley that Mr Cordner would be receiving commission. After all, this was a flat which he had bought and was selling on. You only get commission if you sell property as an agent. In addition, he says that he would not have gone ahead with the purchase if he had known how much commission Mr Cordner was getting. He had never heard of a salesman getting nearly 30% of the price of a “new build”. Sir Geoff’s position was that it did not really occur to him at the time – one way of the other – that Mr Cordner might be earning any commission, but looking back on things now that he knows the commission Mr Cordner was getting, he does not think that he would have bought the flat. As he put it, “the figures wouldn’t have stacked up”.[60]In the interests of completeness, I should add that Mr Hopley said that if he had been told that Aloha Royal had not been “approved”, and that “the appropriate documents” were not in place, he would not have invested in the development. I am not quite sure what he meant by that, but I take it that he was saying that he had assumed that the owners of the site at Aloha Royal had been granted the equivalent of planning permission to develop it. He added that had he been told otherwise, he would not have joined in the purchase of no. 90.[61]Mr Hopley says that he came to view RMG in the same light as Sir Geoff did. He went to the meeting at Royal Windsor racecourse sponsored by RMG in June 2004, which was when he saw Mr Hone for the first time, though he did not speak to him then, and has not spoken to him since. But the event made RMG look like a company of substance. Mr Cordner was driving a Bentley Continental at the time, and told Mr Hopley that he had “many millions tied up in Spanish developments”.[62]Sir Geoff’s purchase with Mr Power of no. 60 Aloha Royal. After Sir Geoff and Mr Hopley agreed to purchase no. 90 Aloha Royal, Mr Cordner continued to press Sir Geoff to invest in another apartment there. This time Sir Geoff approached Mr Power, who he describes as a long-term business associate and friend, to see if he might be interested. The two of them met Mr Cordner at Selfridges Hotel in London. At the meeting, Mr Cordner told them that the rest of the 10 apartments were selling quickly, and that some of them had been taken up by his family and others. Following that meeting, Sir Geoff and Mr Power decided to purchase another of the 10 apartments at Aloha Royal at the discounted price of €298,000 through another company acquired or set up by Mr Reed, Whitechapel Investments Inc (“Whitechapel”), another company incorporated in Delaware. Mr Power is not one of the claimants. He decided not to join the action, says Sir Geoff, because “he didn’t want to throw good money after bad”.[63]Mr Cordner provided them with a draft of the contract of sale, and Mr Power sent it to his solicitors. His covering letter referred to what Mr Cordner had told him when they had met, which was that he felt sure that when the apartment was completed in early 2005, it would be worth in the region of €700,000. He also referred to Sir Geoff’s own involvement with RMG and the property he had already purchased at Aloha Royal – things which gave him confidence about the deal. One of the questions which Mr Power wanted answered was how it had come about that they were being offered the apartment at such a significant discount from what Mr Power described as the “[s]elling price on open market” of €474,800. That question among others was relayed to Mr Cordner by Mr Power’s solicitors, and on 26 November 2003 Mr Cordner replied to that question as follows:
“I had already agreed with the developer to purchase the first 10 properties at a ‘pre launch’ price of €298,000, at launch the price of properties for this development was €474,800. This is now the last property available at this reduced price.”
A copy of that letter was sent to Sir Geoff.[64]It is unclear what effect that letter had on Sir Geoff’s decision to go ahead with the purchase. His witness statement is silent on the point, and he was not asked about it when he gave evidence. But it obviously satisfied Mr Power because by 5 December 2003 RMG’s standard property reservation sheet had been completed showing that no. 60 Aloha Royal had been reserved for them. It recorded that the purchase price of €298,000 had been paid in full. In fact it was paid by Mr Power’s solicitors remitting £211,347.00, which was the sterling equivalent of €298,000 at an exchange rate of £1.00 to €1.41, to RMG’s account at Banco de Sabadell, and Sir Geoff gave Mr Power a cheque for half of that amount. The formal contract of sale – which was dated 21 April 2004 – was in the same form as the contract of sale relating to no. 90 Aloha Royal, except that on this occasion both Wilchester and Grosvenor were named as the promoters of the land on which the apartment was to be built. Mr Hone signed the contract on behalf of Wilchester and Grosvenor.[65]The loan of £350,000. Although Sir Geoff’s claim relating to the loan is independent of the apartments which the claimants were persuaded to buy, it is an integral part of the story, and I propose to deal with Sir Geoff’s account of the loan here. Sir Geoff’s evidence was that in about May 2004 Mr Cordner told him that Mr Hone urgently needed a loan in connection with a development in Tenerife. The amount Mr Hone wanted to borrow from Sir Geoff was £350,000, and in return Sir Geoff would be repaid £595,000 by the end of December 2005. Mr Cordner told Sir Geoff that the reason why the return was to be so high was that Mr Hone would be making many more times that on the development in Tenerife. Mr Cordner had approached Mr Hopley as well, and Sir Geoff was under the impression that the return was going to be as high as it was because they were the first people who had been approached. He cannot now recall what made him think that, but he thought that it was likely to have been something which Mr Cordner had said to him, because for the most part it was Mr Cordner rather than Mr Hone to whom he was speaking about the proposed deal.[66]In the course of his conversations with Mr Cordner, Sir Geoff recalls Mr Cordner telling him two things of significance. First, Mr Hone would provide Sir Geoff with a post-dated cheque for the £595,000. Mr Cordner called such a cheque a pagarê (which is Spanish for an IOU or promissory note), and he said that it would be good security for the loan since it was a criminal offence in Spain for such a cheque to be dishonoured on presentation for payment. Secondly, Mr Cordner said that he was himself lending towards the £3m in all which Mr Hone was trying to raise. At one point in his evidence, Sir Geoff actually went so far as to say that Mr Cordner said that he had already made a loan to Mr Hone in connection with the project, though that was very much an afterthought on Sir Geoff’s part, and there is no reference to Mr Cordner having said anything about that in Sir Geoff’s witness statements.[67]There may have been other things which Mr Cordner told Sir Geoff which Sir Geoff no longer recalls, because they were referred to in an attendance note which his solicitor, Alan Simpson of Alan Simpson & Co, took when Sir Geoff asked him for advice about the proposed deal. For example, Sir Geoff told Mr Simpson that the development in Tenerife was one in which Mr Hone was engaged with a hotel group, and that the reason why Mr Hone needed the £3m was because one of Mr Hone’s former partners had withdrawn from the project and had left him with that shortfall. When Mr Simpson had asked Sir Geoff why the funds were not being raised through a bank, Sir Geoff told him that he had been told that there had not been time to arrange the finance in that way. However, it is not possible to say whether these comments should be attributed to Mr Hone or Mr Cordner, because the attendance note does not record Sir Geoff saying who it was who had told him these things. Sir Geoff’s evidence was that he was getting information from both Mr Hone and Mr Cordner, though most of his conversations about the loan were with Mr Cordner. He says that it was not so much Mr Hone who was pressing him to lend the money, but rather it was Mr Cordner.[68]It is unnecessary to describe all the correspondence and attendance notes which Mr Simpson’s involvement generated, but since it is important to see the extent to which Sir Geoff relied on what he had been told by Mr Cordner, some reference to the documents is essential. They show a number of things. First, there are the things Mr Hone told Mr Simpson about the deal and the security he could offer for the loan. He told Mr Simpson what Mr Cordner had told Sir Geoff about the pagarê and what its effect was, adding that it would be issued by Grosvenor (which he described as an investment company which he owned). Then Mr Hone told Mr Simpson that he had arranged for his shareholding in Wilchester to be lodged with Spanish Legal Services who would hold it in escrow until repayment had been made. Wilchester, he said, owned 50% of a prime development site which was unencumbered, had a value of €18m, and “comprised 92 development units”. He was obviously talking about Aloha Royal. Mr Hone went on to tell Mr Simpson that he would arrange for the sale of any units on the site not to be agreed without the consent of those investing in the site. Mr Hone also said that he had raised the whole of the £3m he had needed in connection with the project in Tenerife – in part by borrowing from companies in which he had an interest – and he needed a loan from Sir Geoff in order to repay that borrowing. Finally, he said that Sir Geoff (and Mr Hopley) were the only people who were going to get a return as high as 70%. That was because he wanted to honour the offer which had been made to them. All other investors were to get a return of 30-35% on their money.[69]Secondly, Mr Simpson was expressing very considerable scepticism to Sir Geoff about the wisdom of Sir Geoff going ahead with the deal. He doubted Mr Hone’s claim that Mr Hone had raised all the money he needed. He thought it very unlikely that Mr Hone would give Sir Geoff such a good rate of return when he had managed to raise all the money he needed by giving other lenders a lower level of return. He was concerned why Mr Hone was not borrowing money conventionally from a bank, especially if there was an unencumbered site which could be offered as security for the borrowing. Unsurprisingly, Mr Simpson advised Sir Geoff not to proceed with the deal. Mr Hone’s acknowledgement that he needed to overcome concerns of this kind may well have been behind an offer which Mr Hone made to Mr Hopley for additional security by way of a charge over an apartment at Aloha Royal. Sir Geoff said that Mr Hopley had wanted that additional security after talking to Mr Cordner. Indeed, one of Mr Simpson’s attendance notes records Sir Geoff telling him that he and Mr Cordner had heard of that offer, and if they were to lend Mr Hone money themselves they wanted similar security.[70]For a variety of reasons, Mr Simpson did not regard this offer as making Sir Geoff’s position more secure, and he continued to advise Sir Geoff not to go ahead. Sir Geoff noted Mr Simpson’s unease, but decided to proceed with the deal nevertheless. In the light of that, Mr Hone submitted a draft of the contract for the loan for Mr Simpson to consider. Mr Simpson pointed out to Sir Geoff the ways in which in his view the contract did not give Sir Geoff the security he needed. Mr Simpson noted that the contract recorded accurately what Mr Hone had told him about Wilchester having a 50% interest in the land, but one of the things which Mr Simpson advised Sir Geoff was that Spanish lawyers should be instructed to check that Wilchester did indeed have title to the land. He also informed Sir Geoff that Mr Hone had been in touch with him once again and had said that he now had investors ready to invest £8m in the project.[71]Within a day or so, Mr Simpson was sent another draft contract which sought to deal with the additional security which Sir Geoff and Mr Hopley had each sought. Instead of a contract for a loan, what was now proposed was a contract of sale. Under Sir Geoff’s he would buy no. 57 Aloha Royal for £350,000 payable up front, and Mr Hone had the right to buy the apartment back from Sir Geoff for £595,000 at any time within 18 months. This was obviously unsatisfactory, because it gave Mr Hone the option of saddling Sir Geoff with the apartment instead of paying him £595,000. When that was pointed out to Mr Hone, he readily agreed to the contract being redrafted so that after 18 months Sir Geoff could require Mr Hone to buy the apartment back at £595,000. The contract of sale which Mr Hopley was offered was in the same terms, though it related to no. 61 Aloha Royal. Mr Hopley decided not to go ahead with the deal at all, and he falls out of the picture.[72]Eventually, though, Sir Geoff decided to proceed on the basis of the original draft – i.e. a contract for a loan rather than a contract of sale – but the interesting feature of the draft contract of sale is that it named Azul as the proprietor of the land. That was inconsistent, of course, with the draft contract for the loan which said that Wilchester had a 50% interest in the land. Azul’s interest in the land had not been made known to Sir Geoff or Mr Hopley by then – or indeed to any of the other claimants, all of whom had purchased their apartments at Aloha Royal by then. The promoter of the land had consistently been described in their contracts of sale as either Wilchester or Grosvenor. But Mr Hone had little option but to reveal Azul’s interest, because he had been required by Mr Simpson to produce the land registry entries, which had shown Azul to be the registered proprietor of the land.[73]There was one other matter which gave Mr Simpson some disquiet. Although Mr Hone had told him that the land was unencumbered, Mr Simpson discovered that it was subject to a legal charge – presumably the one for €179,679.80 which had been payable in December 2003. When Mr Simpson asked Mr Hone about it, Mr Hone said that when he had bought the land in 1995 it had been subject to a small charge, but the rate of interest on the loan to which the charge related was low. He said that the balance outstanding on the loan was about £73,000. Sir Geoff was told about that – and about Azul being the owner of the land, not Wilchester – but it did not affect his decision to go ahead with the loan.[74]Although Sir Geoff’s evidence was that it was Mr Cordner rather than Mr Hone who was making the running, Mr Simpson says that the “sales pitch” – to him at any rate – came from Mr Hone. His conversations with Mr Cordner were about “progress reports and the security”. He knew that Mr Cordner was reporting back to Mr Hone what he told Mr Cordner because shortly afterwards Mr Hone would call him to discuss the things which he and Mr Cordner had talked about. But there was one thing which Mr Cordner told Mr Simpson which was highly significant. When Mr Simpson mentioned to Mr Cordner his discovery that the land was encumbered, he asked Mr Cordner why Mr Hone did not ask the bank to lend him the money he wanted against the security of the land since the charge was such a small one. Mr Cordner told him – and I quote from what he was to say in a letter he wrote to Sir Geoff shortly afterwards – “that Michael Hone never used [b]anks for borrowing”. As I shall explain later, that is more relevant to the claimants’ claims about the apartments they bought. Interestingly, Sir Geoff says that Mr Cordner told him that Mr Hone did not use banks, but again he did not mention that until his fourth and final witness statement.[75]The agreement for the loan which was eventually signed was dated 19 May 2004. The security for the loan included the pagarê cheque for £595,000 and the deposit by Mr Hone with Spanish Legal Services of his 100% shareholding in Wilchester. In fact, Spanish Legal Services never confirmed that it was holding Mr Hone’s shares in Wilchester. It merely confirmed in a document signed by Sylvia Campaña that it was holding Wilchester’s deed of constitution and Mr Hone’s power of attorney. But the pagarê cheque for £595,000 was provided, and Sir Geoff’s £350,000 was remitted – presumably at Mr Hone’s request – to RMG’s account at Banco de Sabadell. Payment of the £595,000 was due 18 months from when the £350,000 had been paid. Since it was paid by CHAPS transfer on 26 May 2004, the £595,000 had to be repaid by 26 November 2005.[76]It was not paid by then. Sir Geoff was under the impression that it was payable by the end of December, but it was not paid by then either. Mr Hone kept on making various excuses. He said that he was involved in court cases concerning some of his developments. Another time he said that he was involved in divorce proceedings. Eventually, though, Sir Geoff began to receive some payments from various third parties. By August 2007, he had received a total of £240,000, but he has received nothing since. At some stage, he got in touch with Mr Cordner, who told him that he, Mr Cordner, had been repaid what he had invested, although not in cash, but in apartments or land.[77]In the interests of completeness, I should add two things. The first relates to a particular feature of the evidence which is said to raise questions about Sir Geoff’s credibility. A couple of months before the £595,000 was due to be paid, Sir Geoff wrote to Mr Hone. He asked for £385,000 (i.e. the original £350,000 plus 10%) to be paid to his (and his wife’s) bank account in the UK, but for the balance of £210,000 to be paid into Whitechapel’s account at Banco Santander in Puerto Banus. The letter included the sentence:
“Michael, you did say you would give me a letter stating I have made just 10% interest”
. The suggestion was made that Sir Geoff was proposing to account to the Revenue for interest of only 10%, not 70%. Sir Geoff denied that. He said that he wanted some of the money in an offshore account so that he could invest it in other property if he chose to. He would be accounting to the Revenue for the balance of £210,000 when the money was eventually remitted to the UK.[78]The second is that Sir Geoff and Mr Hopley were not the only claimants to have been requested to lend Mr Hone money in connection with the project in Tenerife. Mr Kenyon was asked to as well. It was Mr Cordner who asked him to do that. Mr Cordner showed Mr Kenyon a contract in the same form as the one which Sir Geoff eventually signed – and dated, like Sir Geoff’s, 19 May 2004 – but between Mr Hone and Steve Lomas, a footballer who Mr Kenyon had heard of. The contract was signed by Mr Hone, but not Mr Lomas, and under it Mr Lomas had agreed to lend Mr Hone £1m in return for repayment of £1.5m 18 months later. Mr Cordner told Mr Kenyon that he would get exactly the same deal. Mr Kenyon decided not to go ahead.[79]Sir Geoff’s acquisition of no. 20 Aloha Royal. No. 20 Aloha Royal was the apartment which was to be transferred to Sir Geoff under his promotional agreement with RMG. But some time in 2004 Mr Hone suggested that Sir Geoff should instead take an apartment in Aldea Beach. Since Sir Geoff had an interest in two other apartments at Aloha Royal, Mr Hone said that Sir Geoff should not keep all his eggs in one basket. Sir Geoff took Mr Hone’s advice, and agreed to take no. 312 Aldea Beach instead.[80]It will be recalled that Sir Geoff’s promotional agreement had provided that the construction of the apartment which would be transferred to him would be completed by the time the agreement expired i.e. by 31 December 2006, unless the parties agreed to a later date for completion. By the summer of 2006, it had become apparent to Sir Geoff that the development at Aldea Beach could not properly be completed by the end of 2006. Construction had not even started then. Although there had been some delay on the construction of the development at Aloha Royal, work there was well under way by the summer of 2006. So on 2 August 2006 Sir Geoff e-mailed Mr Hone, and suggested that they switch back to no. 20 Aloha Royal, that it be sold and that he should then be paid the list price of €474,800. After a while, Mr Hone’s son Michael got in touch with him. They met and discussed Sir Geoff’s suggestion about no. 20 Aloha Royal and the payment of the £595,000 which was imminently due. Following that meeting, Michael e-mailed Sir Geoff saying that the “contractual agreement for the property in Aldea Beach 2 is being looked at, I will have an answer on that soon”. Sir Geoff heard nothing further, and he has still not had transferred to him any apartment under the promotional agreement, nor the proceeds of sale of any apartment.[81]Mr Innocent’s purchase of no. 62 Aloha Royal. I deal next with Mr Innocent, because he was the first of the other claimants who invested in Aloha Royal through Mr Cordner. Mr Innocent has known Mr Cordner for 30-35 years. They used to live around the corner from each other. Mr Cordner had arranged a number of mortgages for him, as well as an insurance policy with Allied Dunbar. Mr Innocent’s evidence was that it was some time in April or May 2003 that Mr Cordner suggested that he should look at some properties Mr Cordner had in Spain as a possible investment. He mentioned the development at Aloha Royal. He told Mr Innocent that there were 10 apartments available there. The seller was an Irishman named Michael Hone who was building the properties but who needed cash to pay a partner off. Mr Cordner said that he was very close to Mr Hone and was going to his daughter’s wedding, though Mr Innocent accepts that he may have been mistaken about that, and that Mr Cordner may have been referring to Mr Hone’s own wedding. Be that as it may, Mr Cordner said there would be a good deal if he could come up with the money quickly. He said that Mr Kenyon (who they both knew but who Mr Innocent had not seen for many years) had already purchased one of the apartments, as indeed had Sir Geoff Hurst.[82]Mr Cordner showed Mr Innocent some brochures. From Mr Innocent’s description of it, one of them was the 2003 brochure. In the brochure, Mr Innocent saw a price of €474,000 for each apartment. (In fact, the price was €474,800, and that price related only to one type of apartment.) Mr Cordner told him that he could get it for £212,000. Mr Innocent worked out that this represented a saving of about £110,000-£115,000. Mr Innocent did not say in his witness statements that Mr Cordner said anything about him having to pay the whole of the purchase price up front, but Mr Cordner must have told him that for him to have paid the whole of the purchase price within a few weeks. Mr Innocent was sufficiently interested to visit Spain and look at the development – especially as Mr Cordner told him that the people he was working for would pay for Mr Innocent’s accommodation in Spain. All Mr Innocent had to do was pay for the flight.[83]Mr Cordner took Mr Innocent to a number of sites. It is not entirely clear from Mr Innocent’s witness statements whether these were developed or undeveloped sites, but it looks as if some of them were undeveloped, some of them were in the process of development and some were near completion. Aloha Royal, though, was undeveloped. Mr Innocent was told that all of the apartments to be built on it would have a sea view. Mr Cordner took him to one of RMG’s two offices in Puerto Banus. The one he went to was on the front, with the other some 200 feet back from the front. Mr Cordner had a separate office in the office to which Mr Innocent was taken, with his own desk in it.[84]Following his visit to Spain, Mr Innocent says that he spoke to Mr Cordner several times about his possible purchase of one of the apartments at Aloha Royal. In the course of those conversations, Mr Cordner told him a number of things. He told Mr Innocent that arrangements would be made for lawyers to be instructed when the apartment was built, and Mr Innocent therefore believed that he did not need a lawyer at that stage. Mr Cordner told him not to worry about what would happen to his money if the site was not developed because Spanish law required a bank guarantee to be in place, and such a guarantee would be in place. Mr Cordner said that he would sort out that side of things for Mr Innocent. Mr Cordner said that Mr Innocent would only have to pay IVA (the Spanish equivalent of VAT) if he resold the apartment before it had been built. He said that Mr Innocent could have first choice of the 10 apartments being sold, and could earn commission of £8,000 if he introduced a buyer himself.[85]Mr Innocent eventually decided to buy one of the apartments. He chose one which had slightly larger square footage than the others. It was no. 62. RMG’s standard property reservation sheet records no. 62 being reserved for Mr Innocent on 13 June 2003. Mr Innocent gave Mr Cordner a cheque for £212,000, which Mr Cordner asked him to make payable to Grosvenor, which Mr Cordner said was one of Mr Hone’s corporate vehicles. The cheque was paid into Grosvenor’s account at Banco Santander in Puerto Banus on 17 June 2003, which is a little odd because the cheque appears to be dated 20 June 2003. I say “appears to be dated” because if one looks carefully, the “2” of “20” appears to have been written over “1”. Nothing seems to turn on that, and the property reservation sheet records the sum of €298,000 having been paid in full on 17 June 2003.[86]Two comments should be made about the property reservation sheet. First, it purports to have been signed by Mr Innocent and Mr Hone. Mr Innocent says that he never saw it and that the signature on it is not his. I have no reason to doubt that. A number of the claimants say the same thing. It looks as if the claimants’ signatures were “added” in RMG’s office when it became known that Mr Cordner had not managed to get them to sign the property reservation sheets. Secondly, at the foot of Mr Innocent’s property reservation sheet, Mr Cordner wrote the following note to Mr Hone:
“This was paid by way of a stirling [sic] cheque for £212,000 on basis of 1.4 exchange rate. Please pay back in form of cash/cheque any monies overpaid when we next meet.”
I shall return to the significance of that later.[87]After handing over his cheque, Mr Innocent had to chase Mr Cordner for the contract of sale. When it arrived about six weeks later it was in Spanish. Mr Innocent asked Mr Cordner for one in English, but it did not arrive for four months or so. When it did, Mr Innocent saw that like the Spanish version it was dated 30 July 2003. It was in the same form as the contract which Sir Geoff and Mr Hopley received, and named Wilchester as the promoter of the land, but it had not been signed. Mr Innocent assumed that Wilchester was just another of Mr Hone’s corporate vehicles. Like Mr Hopley, he did not see Mr Hone until much later. That was about two years after he had purchased no. 62, and even then only briefly.[88]Mr and Mrs Roberts’ purchase of no. 68 Aloha Royal. Mr Roberts has known Mr Cordner for over 20 years. Mr Cordner used to go to a bingo and amusement arcade which Mr Roberts owned, and he would take his wife and mother-in-law there a couple of times a year to play bingo. They got to know each other socially, and later on Mr Cordner arranged a number of mortgages for him. Mr Roberts’ purchase of no. 68 Aloha Royal was not his first foray into the Spanish property market at Mr Cordner’s suggestion. In about 2002 Mr Cordner had told him that he was buying 10 apartments off-plan at a discount at a development called Los Flamingos, and that he would be selling them on to select customers for €301,000. When built, they would be worth around €400,000. Mr Roberts bought two of them and his son bought one. Mr Cordner said that he would arrange mortgages for them, and he got his lawyer in Spain, Maribel Gallardo, to act on the transaction. Mr Roberts and his son still owned the apartments at the time of his and his wife’s purchase of no. 68 Aloha Royal. In due course the development at Los Flamingos was completed. Mr Roberts sold one of his apartments in 2008, his son sold his about six months before that, and Mr Roberts still owns his other apartment there. They were sold for more than they had been bought for, but Mr Roberts and his son made a net loss of about €50,000 on each apartment when the cost of redeeming the mortgages, the cost of selling the apartments and taxes were taken into account.[89]Mr Roberts’ evidence was that it was in the summer of 2003 while he was in Spain that he got a call from Mr Cordner. Mr Cordner spoke to him about 10 apartments in a new development known as Aloha Royal. What Mr Cordner was actually telling him about these 10 apartments wavered in the course of his evidence. At one point in his witness statements, he spoke of Mr Cordner having told him that he had bought them, but at another he spoke of Mr Cordner having told him that he was buying them in bulk, getting the impression that he was buying them directly from the builder. He said both those things at different stages of his oral evidence, adding another version for good measure when he said that he had got the impression that Mr Cordner could buy the 10 apartments, but that he needed people to buy them from him so that he could pay for them himself. The most that can definitively be said of this part of Mr Roberts’ evidence is that Mr Cordner was saying that if Mr Roberts decided to buy one of the apartments, he would be buying it from Mr Cordner.[90]Mr Roberts’ evidence was clearer when it came to the price. Mr Cordner, he said, told him that he could sell one such apartment to him at a significant discount of around €100,000-€150,000. He said that Mr Roberts could possibly double his money. Because he was having to pay for the apartments himself, he needed the whole of the purchase price up front.[91]Mr Roberts was attracted by the offer. His thinking was that if he was going to be buying an apartment from Mr Cordner, Mr Cordner must have been getting the 10 apartments cheaper than if he had bought them one at a time, and he could therefore afford to sell some of them on to people like Mr Roberts at what he had bought them for, because he could re-sell the others at a profit. That was how Mr Roberts thought Mr Cordner had funded his purchase of the apartments at Los Flamingos. He therefore went to the site and took a look at it for himself. Mr Cordner had told him that it would take about two years for the development to be completed, and having seen the site for himself, Mr Roberts thought that it would take some time to build.[92]Mr Cordner contacted Mr Roberts once Mr Roberts had returned to the UK. He said that Mr Roberts would have celebrity neighbours since Harry Redknapp had bought at Aloha Royal, and Geoff Hurst, Martin Peters and Michael Flatley were all buying there. Mr Roberts was a supporter of West Ham, a club with which Sir Geoff, Martin Peters and Harry Redknapp were all closely connected. Eventually, Mr and Mrs Roberts agreed to buy one of the apartments on offer. Because Mr Roberts thought that they would be buying the apartment from Mr Cordner at the price which Mr Cordner had paid for it, he did not think that Mr Cordner would be making a profit on the sale of the apartment to them. But had he known that Mr Cordner was just an agent, selling the apartment on behalf of Mr Hone, and making a large commission on the side of €84,300, he would probably not have gone ahead with the purchase. He had some difficulty articulating why, but the effect of what he was saying, I think, was that since the price which he and his wife had to pay for the apartment was €298,000, Mr Hone would only be getting €213,700 for it once he had paid Mr Cordner’s commission, and if Mr Hone had been content to sell at that price, that rather suggested that the sale price of €298,000 was not such a bargain after all.[93]The apartment which Mr and Mrs Roberts bought was no. 68 Aloha Royal. Mr Cordner had previously said that he knew a lawyer who could sort out all the legal documentation and who he would arrange to act on the transaction, so they left Mr Cordner to deal with the legal side of things. RMG’s standard property reservation sheet records the apartment as having been reserved for them on 18 June 2003, and the purchase price of €298,000 having been paid in full that day. It was not signed by anyone on behalf of the vendor. It purports to have been signed by Mr Roberts, but he says that the signature is not his. Like Mr Innocent’s property reservation sheet, at the bottom there was a note to Mr Hone from Mr Cordner which reads:
“Cheque paid into Bank of Sabadel [sic]. Please see attached copy of cheque. But if better than 1.40 rate should be 1.44.”
Again, I shall return to the significance of that later. The cheque to which Mr Cordner’s note refers is Mr and Mrs Roberts’ cheque for £211,347, being the sterling equivalent of €298,000 at an exchange rate of £1.00 to €1.41, payable to RMG. But the cheque is dated 19 August 2003, and it follows that the date on the property reservation sheet cannot be correct. Indeed, it is obvious that the date 18 June 2003 in two places on the property reservation sheet was written over the original date, which was presumably 19 August 2003. Again, nothing appears to turn on that.[94]On 17 September 2003, Mr and Mrs Roberts were sent two versions of the contract of sale – one in Spanish and the other in English. It was in the same form as the contracts of sale sent to the other claimants. It had been signed by Mr Hone. Wilchester was named as the promoter of the land, and although Mr Roberts noticed that at the time, it did not cause him any concern, because he assumed that it was a company in which Mr Cordner was involved. The fact that he was involved in an offshore company was consistent with what Mr Cordner had told him about having offshore bank accounts.[95]At the same time, Mr Roberts says that he received a copy of part of Harry Redknapp’s contract. It may be that he was sent that, but he could not have received it then because it is dated 26 August 2004. It relates to no. 61 Aloha Royal, but it looks as if it was a contract of the kind which Sir Geoff was offered when Mr Hone was trying to get Sir Geoff to lend him the £350,000. That is because under the contract Harry Redknapp was being required to pay £400,000 up front with the right to require Mr Hone to buy back the apartment 18 months later for £600,000. And no. 61 Aloha Royal happened to be the apartment which Mr Hopley was offered as security for the £350,000 which he was thinking of lending to Mr Hone.[96]Mr Barkley’s purchase with Mr Cordner of no. 56 Aloha Royal. Mr Barkley is a financial adviser. He first met Mr Cordner about 12 years ago when they were both working for Allied Dunbar as sales managers. In about September 2003, they were at an Allied Dunbar sales convention in Mauritius. Mr Cordner told Mr Barkley that he was acting for “the Royal Marbella Group”, and had come across an investment opportunity in Spain. He said that Michael Hone, who owned 50% of RMG, wanted to buy out the owner of the other 50% of RMG, who was a man in his sixties and who wanted to go off into the sunset with a much younger woman who he had just married. Mr Hone, said Mr Cordner, wanted to raise £2m, and to do so he was selling 9, possibly 10, apartments in a development near Puerto Banus to be known as Aloha Royal for £212,000 each. Mr Cordner said that the real price was €480,000 (which should have been €474,800), and the reason why the apartments were being offered at such a large discount was that Mr Hone needed the money straight away, which was why investors were being asked to pay the whole of the purchase price up front, even though they were buying off-plan.[97]Although that was what Mr Barkley was told, this was not an investment in which he could participate – not then at any rate. That was because, so Mr Cordner told Mr Barkley, all the apartments had been sold, or were under offer. But he promised to let Mr Barkley know if anyone dropped out and an apartment became available. He said that he would make sure that Mr Barkley got the first opportunity to buy one.[98]Following Mr Barkley’s return to the UK, Mr Cordner got in touch with him. This was some time in October 2003. He told Mr Barkley that an opportunity to invest in the development had arisen because one of the apartments there had become available. Mr Barkley flew out to Spain in early November 2003, and Mr Cordner took him to both of RMG’s offices in Puerto Banus. In the one on the front facing the sea, Mr Barkley met Mr Hone briefly. Mr Hone did not give him a “sales pitch”. He just told Mr Barkley how well the business was doing and how busy they all were. He left the discussions about Mr Barkley’s proposed investment to Mr Cordner. This office had large photographs of Sir Geoff and Sir Steve Redgrave in the window, and Mr Cordner told Mr Barkley that they were ambassadors for RMG. While Mr Barkley was in the office, there was talk about Mr Cordner having his photograph taken as he was the chairman of RMG, and it needed to go into the brochure. Mr Cordner also gave Mr Barkley his business card which described him as the chairman of RMG based in Watford.[99]Mr Cordner then took Mr Barkley to the site where Aloha Royal was to be built. It was a green field site, fenced around the perimeter with large photographs of Sir Geoff and Sir Steve on some of the hoardings. There was no sign of any construction going on, but Mr Cordner told Mr Barkley that the development would be completed in 18 months. Mr Barkley noticed that the development was to be built right in front of another development and would block its view. He therefore asked Mr Cordner how planning permission had been obtained. Mr Cordner told him that Mr Hone had owned the site since 1986 and that planning permission was therefore guaranteed. He added that in any event there was or would be a bank guarantee in place. Mr Barkley asked Mr Cordner what that meant, and Mr Cordner stated that if the apartments were not built, the investors would be guaranteed their money back. Mr Cordner then took Mr Barkley to some other sites which were being developed by Mr Hone and RMG, including one at Aldea Beach. He also told Mr Barkley about other celebrities who were to be ambassadors for RMG.[100]Mr Barkley told Mr Cordner that he could not afford to buy the apartment, and Mr Cordner said that he was willing “to go halves” with Mr Barkley on it as he wanted to buy at Aloha Royal anyway. Indeed, he told Mr Barkley that he had already bought an apartment there himself. At some stage, Mr Cordner gave Mr Barkley a paper on which he had written in euros the relevant figures for no. 56 Aloha Royal. The launch price was to be €474,800, but the price at which it could be sold to Mr Barkley was €298,000. That meant that it would cost each of them €149,000, which at an exchange rate of £1.00 to €1.41 came out at £105,673. The note also said that the expected selling price in 14-16 months was €600,000-€650,000, and that they should be able to double their money within that time. Mr Cordner also told him at some stage that if the flat was to be sold before its construction had been completed, IVA would not be payable on the purchase, but once the habitation licence had been granted, IVA was payable on the purchase at the rate of 7%.[101]Mr Barkley decided to accept Mr Cordner’s offer that they go halves. His intention was to sell the apartment before it was completed. Mr Cordner told him that a Spanish lawyer he knew, Sylvia Campaña, would look after the legal formalities for them. She had, he said, acted for him on properties which he had bought from RMG. He also said that they should buy the apartment through an offshore company as that would be tax efficient, and that they should enlist Mr Reed’s services in that connection. The company which Mr Reed either acquired or caused to be incorporated for that purpose was Champagne Investments Inc, another company incorporated in Delaware.[102]Before leaving Spain, Mr Barkley signed RMG’s standard property reservation sheet, which showed that no. 56 had been reserved for Mr Cordner and Mr Barkley in the name of Champagne Investments Inc. Although Mr Barkley had not yet given Mr Cordner his share of the purchase price, because he had not taken his chequebook to Spain with him, the property reservation sheet recorded that the purchase price of €298,000 had been paid in full on 7 November 2003. On his return to the UK, Mr Barkley sent a cheque for £104,929, which was the sterling equivalent of €149,000 at an exchange rate of £1.00 to €1.42, to RMG’s UK office. He made the cheque payable to RMG as that was what Mr Cordner had said. The cheque was dated 12 November 2003, and was drawn on the joint account of Mr and Mrs Barkley, though it was Mr Barkley alone who was investing in the apartment.[103]A month or so later, Mr Cordner asked Mr Barkley whether he would be interested in becoming one of RMG’s salesmen in the UK. “Introducer” was the word he used. Mr Barkley agreed to do so, and he also agreed to approach other sales people he knew through Allied Dunbar who might be similarly interested. He arranged a seminar at a hotel in Surrey in January 2004, and about 30 people attended. Mr Cordner was due to attend, but instead he sent Russell West, whose business card described him as RMG’s national sales director based at Hatfield. Mr West gave a presentation of RMG’s developments. The only significance of that is that one of the topics covered in Mr West’s presentation was bank guarantees. His slide presentation said that they were available “on all sites”, and that the “clients’ deposit money” was protected because it was “fully bank guaranteed”. Following the seminar, Mr Barkley wrote to Mr Cordner with a number of questions which he and other attendees had about marketing RMG’s developments, one of which related to the bank guarantees. That question read:
“How long after paying the deposit do the clients get the bank guarantee, and more importantly, we have had some clients say that they would not pay the deposit until they know the bank guarantee is in place.”
When RMG(UK) produced a guide for introducers, the guide included the following answer to their question:
“Once the client’s 30% deposit is lodged in the Spanish Lawyer’s client account and the Sale contract is finalised (i.e. signed by the client’s lawyer and Royal Marbella Director in front of a Spanish Notary), then the lawyer can arrange for the Spanish Bank underwriting the development to issue the guarantee to the client. NB: This is the Spanish legal process NOT a Royal Marbella ‘process’. Please note; however, [that] the client’s money stays in the lawyer’s client account and NOT in Royal Marbella’s account.”
[104]It may well be that this answer was drafted by Mr West, not Mr Cordner. It is undoubtedly the case that the original handwritten draft of the answer is not in Mr Cordner’s handwriting. But I am sure that the answer represents what Mr Cordner would himself have been aware of at the time. It would therefore mean that he knew that Spanish law required any deposit paid by the purchaser when buying a property off-plan to be protected by a bank guarantee which would be put in place once the purchaser had signed the contract of sale. The answer does not actually say that the requirement to keep the purchaser’s deposit separate from RMG’s own funds is a legal requirement, but again since the answer represents what Mr Cordner would himself have thought at the time, it would mean that he knew that RMG’s in-house practice required that any deposit paid by the purchaser remained in the Spanish lawyer’s client account.[105]On 9 February 2004 Mr Barkley was sent the contract of sale. It was dated 10 December 2003. It showed that he and Mr Cordner had purchased no. 56 Aloha Royal in the name of Champagne Investments Inc. It was in the same form as the contracts of sale which the other claimants received. It had been signed by Mr Hone. Wilchester and Grosvenor were named as the promoters of the land. If Mr Barkley’s third witness statement is to be taken literally, he did not notice that Grosvenor was named as one of the promoters of the land, because he only mentions noticing the name of Wilchester. Be that as it may, he was surprised when he saw Wilchester’s name in the contract, in the light of what Mr Cordner had said about RMG being the owner of the development. He spoke to Mr Cordner about that straight away, and Mr Cordner told him that Wilchester was Mr Hone’s company. That put Mr Barkley’s mind at rest since Mr Cordner had previously said that Mr Hone had been one of the two owners of RMG. Interestingly, the document referred to at [75] above in which Spanish Legal Services confirmed that it was holding Wilchester’s deed of constitution was addressed to Mr Cordner and Mr Barkley, which suggests that it came into existence in order to provide some comfort for Mr Barkley. Indeed, Mr Barkley thought that the document had actually been attached to their contract of sale.[106]I shall come later to what Mr Barkley – and the other claimants – did to progress things, but there is one feature of Mr Barkley’s case which I should mention here. Over the years, Mr Barkley became increasingly concerned that something was seriously amiss with the whole transaction, and in 2008 he began to ask Mr Cordner to provide evidence that he had paid for his own half-share of the apartment. Mr Cordner initially said that he operated so many bank accounts that he would not have a clue which one he made the payment from. Indeed, he did not know whether he had actually made a payment or whether he had set off some of the commission to which he was entitled from RMG towards the purchase price. By March 2009, Mr Barkley was pressing Mr Cordner on an almost daily basis to provide evidence of his payment, and eventually Mr Cordner provided Mr Barkley with a very bad photocopy of a cheque for £99,938 payable to Grosvenor. This cheque could not have been Mr Cordner’s payment for his half-share of no. 56 Aloha Royal – not simply because his half-share was £104,929, not £99,938, but also because the cheque was dated 27 June 2003, which was over four months before they had agreed to buy no. 56. When Mr Barkley pointed that out to Mr Cordner, he said that he must have sent him the wrong cheque.[107]However, in the process of disclosure following the issue of these proceedings, Mr Cordner disclosed a better copy of that cheque. On that photocopy but underneath the cheque, Mr Hone had written:
“Received 17/6/03. No. 52 Aloha Royal.”
He had then signed it. What had happened was that Mr Cordner had himself bought no. 52 Aloha Royal. His cheque to Grosvenor for £99,938 represented part-payment for that purchase, and Mr Hone had acknowledged receipt of the cheque on a photocopy of the cheque, which he then sent to Mr Cordner. The case advanced on Mr Barkley’s behalf was, therefore, that Mr Cordner decided to pretend that this cheque represented his payment for his half-share of no. 56 Aloha Royal, and he then photocopied the photocopy of it in such a way as to remove Mr Hone’s receipt because that would have disclosed to Mr Barkley that the receipt related to the purchase of another apartment altogether.[108]So how did Mr Cordner pay for his half-share in no. 56? Another document disclosed by Mr Cordner following the issue of the proceedings reveals that. It is a note which Mr Cordner wrote to Mr Hone. Having recorded that the purchase price of no. 56 had been €213,700, and that the sterling equivalent of €151,000 had been paid by Mr Barkley, Mr Cordner was telling Mr Hone that the balance of the purchase price, i.e. €62,700, should come from the commission of €84,300 which he was entitled to from the sale of no. 60 Aloha Royal to Sir Geoff and Mr Power. He was therefore telling Mr Hone that he was still owed the balance of that commission, i.e. €21,600, and that he would be invoicing Mr Hone for that in due course.[109]Mr Cordner, of course, made a mistake when he said that Mr Barkley had paid the sterling equivalent of €151,000. Mr Barkley had only paid the sterling equivalent of €149,000. But more important is his statement that the purchase price for no. 56 had been €213,700. The real purchase price had been €298,000. What Mr Cordner was doing was deducting his commission of €84,300, and then calling the resulting figure of €213,700 the purchase price. The significance of all this is that if Mr Cordner had told Mr Barkley how he had really paid for his half-share of no. 52, Mr Barkley would have known that Mr Cordner was getting commission of €84,300 on apartments he sold at Aloha Royal, and that he had even got commission of €84,300 on their own purchase. Although they were supposed to be going halves on the purchase, the effect of that was that Mr Barkley had paid the sterling equivalent of €149,000 for his half-share, whereas Mr Cordner had paid only €62,700 for his. The case advanced on Mr Barkley’s behalf, therefore, was that Mr Cordner had been reluctant to disclose how he had paid for his own half-share, because that would have revealed that they had not been going halves at all.[110]However, it was not just the fact that they were not going halves which concerns Mr Barkley now that he knows the commission which Mr Cordner was making on the purchase. Had he known that at the time, he would not have gone ahead with the purchase. At one stage, it looked as if he was qualifying the extent to which his knowledge of the commission would have affected what he did, because he said that if Mr Cordner had been paying for his share of the purchase price from commission on some other deal, that would not have troubled him. However, his ultimate position, which I can readily understand, was that it was the size of the commission which really worried him – no doubt, because Mr Hone would only have got €213,700 out of the sale for himself. As Mr Barkley put it, where was the profit going to come from? The apartment would have had to increase in value by €84,300 before there would be a profit for him and Mr Cordner.[111]Mr Kenyon’s purchase of no. 64 Aloha Royal. Mr Kenyon is a director of a company which installs electrical systems in buildings. He has been involved in property building and development in a small way. He owns five properties in this country as well as a villa in Spain. He has known Mr Cordner for about 11 years. They met when Mr and Mrs Kenyon moved to the small cul-de-sac in Hatfield where Mr and Mrs Cordner were living. Their families socialised, and a close friendship developed. In due course, Mr Cordner became Mr Kenyon’s financial adviser, and on Mr Cordner’s advice he bought shares for a not inconsiderable sum in a company which eventually went into liquidation. He lost his money, as did Mr Cordner who had made a similar investment.[112]Mr Kenyon knew about Mr Cordner’s involvement with property in Spain because in February 2003 Mr Cordner had rented an office from Mr Kenyon in Hatfield. The signage referred to “Royal Marbella UK” or something like that. Indeed, the first investment which Mr Kenyon made in Spain at Mr Cordner’s suggestion was in the summer of 2003. That was about the time when some of the other claimants were buying their apartments at Aloha Royal. Mr Cordner told Mr Kenyon that he had a very good deal going on a development known as Aldea Beach. Mr Kenyon accompanied Mr Cordner to Spain and looked at the site. He decided to proceed and paid deposits of £50,000 each for two corner plots, but apart from some work on the foundations and the laying of some pipework, the development was never built. Mr Kenyon never got his money back. Aldea Beach was one of RMG’s developments – at any rate, it was to RMG that Mr Kenyon thinks his two cheques for £50,000 were payable. Indeed, by the time Mr Kenyon bought his apartment at Aloha Royal, he knew that one of RMG’s marketing strategies was to invite celebrities to endorse its developments. Mr Cordner had told him that Kim Wilde and her husband would be investing in and running a bar at Aldea Beach, that Sir Steve Redgrave was already an ambassador for the group, and that Sir Geoff Hurst was investing in Aloha Royal.[113]In March 2004, Mr Cordner persuaded Mr Kenyon to buy another apartment off-plan in Spain – this time at Aloha Royal. This was a site, he said, on which 92 apartments were to be built, and that the company developing the sites was RMG, which was a proper company and had been in business for 25 years. Mr Kenyon was not sure whether he was told whether it was Mr Hone or RMG who owned the site – he said different things at different times. But Mr Cordner did say that he was the chairman of RMG, that he knew Mr Hone well and that there was a very good deal going because Mr Hone wanted to raise money to buy out his partner in RMG. Mr Hone was therefore selling 9 apartments at Aloha Royal at a very significant discount, though the whole of the purchase price had to be paid up front. Mr Cordner said that he had only one apartment left, and that because Mr Kenyon was a good friend of his, he did not want him to miss out on the opportunity. He added that he was himself buying at Aloha Royal with Sandra and his parents, and that Mr Kenyon would need to make up his mind immediately.[114]Mr Cordner wrote down the relevant figures on a piece of paper. The apartment was no. 64 Aloha Royal. Its launch price was €474,800, but the “special price” which Mr Kenyon could buy it for was €360,000. The sterling equivalent of that at an exchange rate of £1.00 to €1.43 was £251,748. Work on the foundations had been due to start on 20 February 2004, and the construction was due to be completed by April or May 2005. The note recorded that Mr Kenyon would have the option of either keeping a “fantastic apartment” or selling it for €550,000-€700,000.[115]Mr Kenyon decided to go ahead with the deal, and a day or two later he gave Mr Cordner his cheque for £251,748. It was payable to RMG at Mr Cordner’s request. Mr Kenyon assumed that Mr Cordner was involved in RMG as Mr Cordner had told him that he traded at the time as Royal Marbella UK, and he assumed that Royal Marbella UK had something to do with RMG. Mr Cordner had told him that he, Mr Cordner, would be handling the legal side of the purchase, and that there was a Spanish lawyer who would look after everything for Mr Kenyon.[116]Mr Kenyon’s cheque for £251,748 was paid into RMG’s account at Banco de Sabadell. The funds were cleared on 2 April 2004. Thereafter a cheque dated 2 April 2004 was drawn on that account for exactly the same amount – £251,748 – signed by Mr Cordner and payable to the solicitors who were acting for him on the purchase of Mr Cordner’s new house, the Derings. The purchase was completed on 30 April 2004. It was that payment which constitutes the basis of the tracing claim against Mr and Mrs Cordner. Mr Cordner says that this sum – along with two others for £50,000 and £15,000 – were lent to him by Mr Hone to enable him to pay for the Derings. That is another topic to which I shall have to return later.[117]If one of RMG’s standard property reservation sheets was ever completed relating to Mr Kenyon’s purchase of no. 64, it has not been disclosed. Mr Kenyon says that he never saw one. As for his contract of sale, Mr Kenyon says that he did not get it for quite a while. His daughter was working for Mr Cordner at the time, and she told her father that he should get his contract sorted out. It was not long after that that the contract was sent to him. Mr Kenyon thought that by then it was 2005. It was suggested to Mr Kenyon that it could not have been as late as that because his daughter stopped working for Mr Cordner in October 2004, and in any event there was produced a fax from a Spanish lawyer, Estella Torrero Torres, dated 15 October 2004 purporting to send to Mr Cordner Mr Kenyon’s contract. However, the contract sent with the fax was not Mr Kenyon’s contract for his purchase of no. 64 Aloha Royal. What was sent with the fax were Mr Kenyon’s contracts for the purchase of the two apartments at Aldea Beach. That is apparent from(a) the fax itself which is headed “Mr Kenyon’s contracts”, i.e. in the plural,(b) the fax said that it consisted of 17 pages (so if the covering page is ignored, that leaves 16 pages),(c) the English and Spanish versions of the Aldea Beach contracts consisted of 16 pages, and – this is the point which really clinches it –(d) those 16 pages all have a fax header of 14 October 2004.[118]There is strong support for Mr Kenyon’s recollection that he did not get the contract of sale until 2005 from a message on the notepaper of WPG showing that “Liz” at WPG was chasing Mr Hone’s son for Mr Kenyon’s contract. Since Mr Cordner acknowledges that WPG was not set up until 2005, Mr Kenyon could not have received his contract before then. As it is, the contract was in the same form as the contracts sent to the other claimants. Wilchester was named as the promoter of the land, but Mr Kenyon did not give that much thought at the time. The contract was dated 31 March 2004, and Mr Kenyon presumed that it had been backdated to when he had paid for the apartment. Both Mr and Mrs Kenyon were named as the purchasers, and when the issue arose as to whether in the circumstances Mrs Kenyon should have been a claimant, Mr Michael Jefferis for Mr and Mrs Cordner told me that this was not a point he was taking, and he did not require any amendment to be made to the claim form or the Particulars of Claim to join Mrs Kenyon to the proceedings.[119]Subsequent events. Aloha Royal was eventually built, admittedly well after 30 March 2005, but it was nevertheless completed, and those of the claimants who visited Aloha Royal to view their investment were generally pleased with it. But they were not able to occupy their apartments or sell them. The reason, Mr Cordner told them, was that the habitation licences had not come through. That was not altogether surprising. Local officials had been imprisoned in connection with a scandal over the improper grant of such licences, and the understanding of some of the claimants was that their issue had been frozen by central government for the time being.[120]However, it later became apparent that the hold-up with the habitation licences was not the real problem. The problem – as the claimants discovered only relatively recently – was that the new owners of the site, Duja, did not recognise the claimants’ interests in the apartments they had bought. Duja was not a name which came as a surprise to Sir Geoff. He had met the men who ran Duja a number of times at various promotional events organised by RMG. Nor was the name unknown to Mr Barkley, because he recalls Mr Cordner having told him at some stage that Duja was the company responsible for the construction of the development at Aloha Royal. Indeed, Mr Barkley remembers Mr Cordner telling him towards the end of 2006 that Duja had bought RMG from Mr Hone. He had asked Mr Cordner if that would make any difference to their investment, and Mr Cordner had said that it was a good thing because Duja had assets worth millions. Mr Barkley maintained contact with Duja thereafter so that he could check on the progress of the construction. However, by the summer of 2007, he was getting confusing reports from his contact at Duja about the habitation licences, and he decided to get in touch with Spanish Legal Services, who he recalled held Wilchester’s deed of constitution. By then he knew that Ms Campaña was RMG’s lawyer, and he remembered that she had signed the document recording that Spanish Legal Services were holding Wilchester’s deed of constitution. However, when he called Spanish Legal Services, he was told that she had left.[121]Mr Barkley reported that to Mr Cordner. Mr Cordner put Mr Barkley in touch with Estella Torrero Torres – the lawyer who had faxed to Mr Cordner Mr Kenyon’s contracts for Aldea Beach in October 2004. He said that Estella would “look after us and sort us out”. Mr Cordner did not tell him then, as Mr Barkley was to discover later, that Estella was Duja’s lawyer. However, despite a number of e-mails and calls to Estella, she did not get back to Mr Barkley.[122]In the meantime, both Mr Roberts and Mr Kenyon had been speaking to Mr Cordner. He had told Mr Roberts that there was a problem with the development over and above the habitation licences, and to Mr Kenyon he had claimed that he was just as much a victim as everyone else and that Mr Hone had “ripped him off” as well. That was the first time that Mr Kenyon had heard Aloha Royal being called a rip-off. Up to then, the delay had been simply over the habitation licences, or so he had thought.[123]Mr Barkley was aware that his plight was shared by others, and not just people like him who had invested in Aloha Royal. Investors who had bought apartments in other developments were also worried. People were also getting in touch with Sir Geoff – no doubt as one of the public faces of RMG – to find out what was going on. At that stage, Mr Barkley did not think that he and others like him had been the victim of a fraud, still less that Mr Cordner was implicated in it. They were just frustrated that the construction had been completed but they had not yet got their apartments. Eventually, the solicitor who represents the claimants in these proceedings, Siobhan Lomasney, was instructed. She has since moved firms but nothing turns on that. A meeting took place with her. Mr Barkley had wanted Mr Cordner to come to that meeting, but he said he could not. He knew Mr Barkley was going, and he agreed to cover half of Mr Barkley’s legal costs. Mr Barkley had asked him to do that because it was Mr Cordner who had got Mr Barkley into this mess. Mr Cordner also said that he would continue to try and enlist Estella’s help. Eventually it was decided to form an action group which would concentrate just on Aloha Royal, and that was when Mr Cordner put Mr Roberts and Mr Kenyon in touch with Mr Barkley. It was Mr Kenyon who brought Mr Innocent in. Later on, Mr Cordner told Mr Barkley a number of times that he wanted to meet Ms Lomasney. She declined to meet him unless he was separately represented. I mention these facts only because Mr Cordner has claimed that he was one of the people giving the claimants’ solicitors instructions – admittedly indirectly through Mr Barkley.[124]In January 2009, Mr Cordner told Mr Barkley that they had been invited to Portugal to meet representatives of Duja. Mr Cordner said that Duja wanted to meet him because he had sold many units in a development called Los Cabanos, and now that the units had been built, Duja was looking for the balance of the purchase price. The trouble was that property prices had fallen by then, and many of the purchasers were being difficult about completing. Duja wanted to enlist their help in getting the reluctant purchasers to pay up, and were prepared to pay for their flights and accommodation. Mr Barkley knew about the development at Los Cabanos because he had introduced some of his clients to the development, and had earned commission himself which Mr Cordner had paid out of his own commission. Mr Cordner told Mr Barkley that he thought that they might be able to use the meeting as a negotiating tactic over the Aloha Royal apartments. Mr Barkley agreed to go, and the meeting took place on 29 January 2009. Estella was there, and that was when Mr Barkley discovered that she had been representing Duja all along.[125]The deal which Duja put to Mr Cordner and Mr Barkley was that if they managed to arrange mortgages for an agreed number of the people who had agreed to buy apartments at Los Cabanos, Duja would exchange no. 56 Aloha Royal (the apartment which Mr Cordner and Mr Barkley had bought together) for one at Los Cabanos. But for present purposes, what is relevant is that when the position of other people who had bought apartments at Aloha Royal was brought up, Duja simply offered to sell them apartments at Los Cabanos at €40,000 less than the usual price. Mr Barkley did not regard that offer as remotely attractive, and he told Duja and Mr Cordner that he was not interested in it. It was suggested to Mr Barkley that he had been less than frank in failing to refer in his witness statements to the personal deal which he and Mr Cordner had been offered. It may have been better if Mr Barkley had mentioned that – as Mr Barkley himself acknowledged – but his failure to do so does not, to my mind, damage his reliability and credibility as a witness in any way.[126]Finally, Mr Barkley explained how a copy of the agreement between Azul and Duja came into the claimants’ hands. After Mr Barkley had expressed his own concerns about Aloha Royal to Mr Cordner, Mr Cordner had told him that there were two contracts between Mr Hone and Duja relating to Aloha Royal. Under one of them, Duja was supposed to transfer 9 apartments back to Mr Hone after the development had been completed. Under the other, Duja was supposed to transfer 15. The two of them had raised the issue with Estella at the meeting on 29 January 2009, and Estella subsequently agreed to meet Mr Cordner to discuss it. Mr Cordner subsequently told Mr Barkley that at that second meeting Estella had confirmed that she had seen an agreement relating to 15 apartments, and that if she did not have a copy of it herself, she would try to get one from Mr Hone. Mr Cordner said that he had asked her to send a copy of it to Mr Barkley, and Mr Barkley got it from her on 17 April 2009. That was the agreement referred to at [34] above. The agreement, of course, did not reserve 15 apartments to Azul. It reserved 24, but that was 15 more than the agreement referred to in the land register. D. Mr Cordner’s account[127]Mr Cordner was in the witness box for over six days. During that time I had plenty of opportunities to assess what he was like. He is not a man of considerable intelligence. Indeed, he described himself as “not the brightest bulb in the box”. He does not have a particularly good command of English, and uses inappropriate shorthand to convey ideas because he cannot formulate them properly himself. He does not think particularly logically. He was not pretending to be duller than he really was when he had difficulty following some of the things he was being asked and giving a straight answer to a straight question. As Mr Jefferis said, he was a salesman: you simply had to wind him up and he would be very good at repeating what he was told to best effect. The difficulty he had in distinguishing between himself and MPL or between Mr Hone and RMG was not Machiavellian. The truth is that he regarded them as the same thing. His account of his dealings with the claimants has to be seen in that light.[128]I bear in mind two other things. First, no-one’s recall is perfect, and the detailed nature of some of the topics Mr Cordner was asked about were such that there were many things that he could not remember. That was particularly apparent when he was questioned about the things which the claimants say show that when it came to the special deal the relationship between him and Mr Hone was akin to partnership. I have endeavoured to reflect that in my overall assessment of Mr Cordner’s credibility and reliability as a witness. Secondly, Mr Cordner was denied the benefit of evidence from two of his witnesses. One of them, Steve Rockall, had been warned off, he said. The other, Claire Campbell, Mr Hone’s former wife, had abruptly severed contact with Mr Cordner ten days or so before he gave evidence. That led Mr Cordner to believe that she may have been “got at” as well. I was not asked to read their witness statements, though parts of Ms Campbell’s witness statement were put to Mr Cordner when he was cross-examined, and to the extent that he agreed with her evidence, he adopted it.[129]At the core of Mr Cordner’s case is the suggestion that when the claimants discovered that they were not going to be able to serve Mr Hone with the proceedings or enforce any judgment against him or any of his companies which were worth powder and shot, they decided in their desperation to go after him. The case which has been cobbled together against him – by attributing a few things he did not say – owes much to the fact that the claimants think he has assets which can be used to satisfy any judgment against him, even though he was no more than a bit player in this drama.[130]Mr Cordner says that like everyone else he was completely taken in by Mr Hone. The man was “incredibly charming and plausible”. I do not doubt that at all. Mr Cordner would not have been the first person to have been taken in by him, and I am sure that Sir Geoff was as well. Mr Cordner says that he did not know about Mr Hone’s previous litigation, and when he once asked Mr Hone why his son Michael used the surname Metcalf, not Hone, Mr Hone told him that his, Mr Hone’s, stepfather had treated him better than his real father, and that he had therefore used his stepfather’s name sometimes. Presumably his son had done the same thing. It may be, though, that it should have occurred to Mr Cordner that something was not quite right about him. If RMG was as successful as Mr Cordner thought, for example, why was Mr Hone so reluctant for there to be any reference to him in its brochures? The idea that he had decided to take a back seat and let those who had done all the hard work take the credit – which is what Mr Cordner says was the reason Mr Hone gave him – does not ring true. But for the moment it is necessary to summarise Mr Cordner’s account of his dealings with the claimants, bearing in mind the things they say he said to get them on board, though for the most part it will only be necessary to summarise those parts of Mr Cordner’s evidence which address the things they attributed to him.[131]Sir Geoff’s promotional agreement. Mr Cordner first met Sir Geoff at RMG’s office in Loughton when Sir Geoff went there to discuss his promotional agreement with Mr Hone. Mr Cordner had only been involved with RMG for a few months by then, and the idea of getting Sir Geoff to endorse RMG’s developments came from Mr Hone and Mr Rockall. Mr Cordner says that he was peripheral to the meeting. He was going in and out of the office while it was going on. In short, his case was that getting Sir Geoff in as one of RMG’s ambassadors was down to Mr Hone. He recalls Sir Geoff going to Spain with Mr Hopley, and seeing them while they were there, though he would be very surprised if it had not been Mr Hone who had shown them around. Mr Cordner was pretty sure that he had not done so. He says that if he had shown them around, he would have remembered it: Sir Geoff, he said, was a man who he was in awe of.[132]The sale of no. 90 Aloha Royal to Sir Geoff and Mr Hopley. Mr Cordner did not deal in his evidence with the difference in recollection between Sir Geoff and Mr Hopley about when the availability of apartments at Aloha Royal was first discussed – when Sir Geoff and Mr Hopley were in Spain, or later with them after they had returned to England. But on the assumption that the issue was first raised with Sir Geoff after Sir Geoff had returned to England, Mr Cordner thinks that Sir Geoff had already made up his mind about buying one of the apartments at Aloha Royal from his conversations with Mr Hone. Mr Cordner was simply reiterating what Mr Hone had previously told Sir Geoff. As it was, Mr Cordner’s recollection of what he told Sir Geoff was that he had reserved 10 apartments at Aloha Royal. He did not say that he had bought 10 apartments himself, or that he was able to “sell them on”. At the time when his witness statement was prepared, Mr Cordner was under the impression that it was to Sir Geoff that he was supposed to have said that he had sold some of the apartments to members of his family, and his evidence was that he had simply told Sir Geoff that he had offered some of the apartments to members of his family. However, he did not deny that he had told Sir Geoff that the apartments had a list price of €474,800, but that they were available at €298,000, provided that the whole of the purchase price was paid up front. It was because no-one in his family had been in a position to do that that none of them had bought any of the 10 apartments. He told Sir Geoff that it was a great deal, and that he was investing in Aloha Royal himself.[133]On the other hand, on the assumption that the availability of apartments at Aloha Royal had first been raised when Mr Cordner saw Sir Geoff and Mr Hopley in Spain, Mr Cordner could not recall whether he had told them that RMG had owned Aloha Royal (or Aldea Beach for that matter), but since Mr Hone had said that he owned RMG, he thinks that he may well have said that RMG owned the land and was going to develop it. He did not really distinguish between RMG and Mr Hone. Sometimes he said that Mr Hone owned the land and would be developing it. Sometimes he said that RMG would be. The two were interchangeable. What he denies, though, is that he told them that all the apartments at Aloha Royal (and Aldea Beach) had already been sold off-plan.[134]As for Mr Hopley’s claim that Mr Cordner called him some time after their trip to Spain and told him that he was now able to offer an apartment at Aloha Royal because the sale of one of the 10 apartments he had “taken” there had fallen through, Mr Cordner says that he did not have this conversation with Mr Hopley. Mr Hopley has confused him for Mr Hone. Having said that, Mr Cordner says that he knows that he said that to someone – perhaps to Mr Barkley but he could not be sure – but that he could not recall whether he had said it to Mr Hopley at some stage. Mr Cordner says that in fact one of the 10 sales had fallen through. The circumstances of that had been that Mr Hone had told him that he would take back any of the 10 apartments at Aloha Royal which were comprised in the special deal, but which Mr Cordner was unable to sell. In the event, Mr Hone took back five of the apartments and sold them to Bernard Brogan (who was described in RMG’s 2005 brochure as its projects director). It was the sale to Mr Brogan of one of those five apartments which had fallen through, and Mr Hone had released that apartment back to Mr Cordner.[135]The claimants’ case is that this explanation for what Mr Cordner said to Mr Barkley (or perhaps Mr Hopley) is untrue. Not only was it inconsistent with what Mr Cordner had said in his second witness statement about him being unable to think of a reason why he would have said to anyone at the time that there was just the one apartment available. But in addition the contract of sale for the five properties which Mr Brogan bought from Azul showed(a) that the contract of sale was dated February 2006, i.e. more than two years later, and(b) that the five properties comprised 4 penthouses and only one apartment. Mr Cordner acknowledged that none of the penthouses at Aloha Royal had been included in the special deal, which related only to 10 apartments. Not to put too fine a point on it, the claimants’ case is that Mr Cordner was lying when he said that one of the 10 sales had fallen through. He was trying to give the impression that they had been selling well, and that the unexpected availability of one of the apartments was an opportunity which should not be missed. So when he was confronted with this contract of sale, Mr Cordner accepted that they could not have been any of the five apartments which he had claimed Mr Hone had taken from him. And as for what he had said in his witness statement, Mr Cordner said that he must have got confused about when he was supposed to have said that there was just the one apartment available.[136]Mr Cordner denies that he told Mr Hopley that his and Sir Geoff’s money would be kept in a separate account, or that he told Sir Geoff that it would be held in an escrow account and returned to them if the development was not completed. If he told them anything about how their money would be protected, it was simply that there would be a bank guarantee in place. Mr Cordner did not know what the requirements of Spanish law were about(a) keeping the funds of purchasers who were buying properties off-plan separate from the developers’ own funds, or(b) some mechanism being in place which would provide adequate protection for the purchasers’ funds. However, his evidence was that both Mr Hone and Sylvia Campaña had told him that a bank guarantee was in place which would enable purchasers to get their money back if the apartments they were buying were not built. He acknowledged that he had never actually seen that guarantee, but he said that this was a matter to be left to the lawyers.[137]The claimants’ case is that Mr Cordner knew all along that there would not be a bank guarantee in place. That is said to be borne out by a fax which he sent to Estella in the early hours of the morning of 28 December 2004 requesting that five of the claimants’ contracts be “notarised at the notary” (presumably the public notary so that they could be enforceable), in order that either(a) an “embargo” could be put on them, or(b) Duja could transfer them directly to the claimants as the claimants had paid Mr Hone in full for them. What is said on behalf of the claimants is that Mr Cordner must have realised that their interests in the properties were not protected for Mr Cordner to have suggested that an embargo (which presumably prevented them from being disposed of) should be obtained. The apartments to which this fax related were Mr Cordner’s own apartment (no. 52), the one he was buying with Mr Barkley (no. 56), Mr Innocent’s (no. 62), Mr Kenyon’s (no. 64) and Mr and Mrs Roberts’ (no. 68). Mr Cordner’s explanation for taking these steps was that by then he had begun to distrust Mr Hone. Not only were there delays in the construction of Aloha Royal, but even when it was completed, Mr Hone (as well as representatives of Duja and local lawyers) kept on telling him that there was a delay in the issue of the habitation licences. So he just wanted to make sure that the claimants were protected until the habitation licences came through. The sending of this fax did not mean, he said, that he knew that bank guarantees were not in place. Indeed, the date and time on the fax header were inaccurate, because the fax machine he had was an old one, and it would get the date and time wrong.[138]As for lawyers, Mr Cordner did not deal specifically with what both Sir Geoff and Mr Hopley claim Mr Cordner said about Mr Cordner arranging lawyers for them. But his evidence was that he informed all the claimants as well as other investors that they could either instruct their own lawyers to act for them – whether it was a lawyer in Spain or a solicitor in England – or they could use Spanish Legal Services who were Spanish lawyers with whom he could put them in touch. Mr Cordner was, of course, aware of the importance of legal advice. After all, in RMG’s 2004 brochure he had said that he had experienced “the delights of several Spanish estate agents and lawyers” when he had first invested in property in Spain. He had ended up “dazed and confused”. That was why RMG’s 2004 and 2005 brochures both said that one of the golden rules about buying a property in Spain was to find a lawyer to give legal advice and assistance. RMG’s brochure referred to Spanish Legal Services being able to provide “specialist legal services”, and it included a fetching photograph of Ms Campaña. Indeed, Spanish Legal Services was incorporated as Spanish Legal Services SL on 30 December 2003, with Ms Campaña as its administrator. Mr Cordner says that he never told any of the claimants that they did not need to bother about obtaining independent legal advice because he could arrange for that on their behalf, or that they did not need a lawyer at that stage, or that a Spanish lawyer he knew would look after the legal formalities for them, or that he, Mr Cordner, would be handling the legal side of things.[139]Mr Cordner acknowledged that with the exception of Mr Barkley and Mr Power, he did not attempt to find out whether any of the claimants had received legal advice – whether from Spanish Legal Services or any other lawyer in Spain or solicitor in England. He had not offered to introduce those of the claimants who he actually saw in Spain to Ms Campaña, even though she had a desk in one of RMG’s offices in Puerto Banus. It would, of course, have been difficult for them to get legal advice if they were being asked – as was the case – to pay the whole of the purchase price before lawyers could have checked that RMG was able to pass good title to the apartments, and before they even received the contracts of sale. Indeed, the claimants’ case is that by saying that he could arrange for the legal side of things, Mr Cordner was discouraging them from taking legal advice because he knew that lawyers would discover that RMG did not have title to the land.[140]Mr Cordner did not deal in his evidence specifically with the property reservation sheet for no. 90 Aloha Royal which Sir Geoff signed or the contract of sale which he and Mr Hopley eventually received. His evidence was that the property reservation sheet was the first document which came into existence, and the salesman would then send it to Mr Hone or Ms Campaña. Since he was the relevant salesman in the case of the apartments comprised in the special deal, it would have been him who would have sent them to Mr Hone or Ms Campaña. As for the contracts of sale, he was not involved in drafting them. They would have been drafted by Ms Campaña. Sometimes he never even saw them. He would – or at least might – see them if they went to MPL for onward transmission to the purchaser, but sometimes they went to the purchaser direct.[141]Mr Cordner did not comment in his evidence on Wilchester being named as the promoter of the land in the contract of sale sent to Sir Geoff and Mr Hopley. But as we shall see, Wilchester was named as the promoter of the land in the contract of sale of no. 52 Aloha Royal which Mr Cordner bought through Paddington Properties Inc, and he simply assumed that Wilchester was one of Mr Hone’s companies. He had never heard of either Azul or Grosvenor, and although Azul had been referred to in the 2003 brochure and even described on the plans contained in the brochure as the propriedad of the land, he had not picked the references to Azul up and would not have known what propriedad (which means proprietor) meant. As for his commission, Mr Cordner believes that he was paid his commission of €84,300 from the sale of no. 90 Aloha Royal to Sir Geoff and Mr Hopley.[142]The sale of no. 60 Aloha Royal to Sir Geoff and Mr Power. Mr Cordner claims that he did not “press” Sir Geoff to invest in another apartment, but he recalls meeting Sir Geoff and Mr Power at Selfridges Hotel, and discussing their possible purchase of another flat at Aloha Royal. He denies telling them that some of them had been taken up by members of his family. He acknowledged that he had spoken of having “purchased” the 10 apartments himself in his reply to the question asked by Mr Power’s solicitors (when he had only reserved them so that they could not be marketed by anyone else), and he attributed that to a mistake on the part of his secretary and to his own fault in not checking the letter properly. She had misinterpreted how she was to reply to the query, and he had not picked up her error. Indeed, the language of the answer – in particular the word “was” – suggested that the 10 apartments had already been launched at €474,800. Mr Cordner said that his secretary must have used the word “was” because the 2003 brochure had already been published by then, and that showed that the launch price was to be €474,800.[143]Mr Cordner does not dispute that he earned commission of €84,300 on the sale no. 60 Aloha Royal to Sir Geoff and Mr Power. It will be recalled that he used €62,700 of it to pay for his half-share of no. 56 Aloha Royal, and informed Mr Hone that he was going to invoice him for the balance, though as we shall see it was MPL who invoiced RMG for the balance.[144]Sir Geoff’s loan of £350,000. In May 2004, Mr Hone asked Mr Cordner whether he would be prepared to lend him £350,000, and in return he would pay Mr Cordner £595,000 by December 2005. Mr Hone offered a post-dated cheque as security which Mr Hone said was known as a pagarê, and that it was criminal offence in Spain to dishonour such a cheque. Mr Cordner acknowledged that the attractiveness of the offer – like the commission to be earned on the 10 apartments at Aloha Royal – should have set alarm bells ringing, but it did not, and Mr Cordner agreed to consider Mr Hone’s proposal.[145]Mr Cordner thought seriously about the proposal, and even asked Mr Hone if he was prepared to release deposits which Mr Cordner had put down on apartments at Aldea Beach and Aloha Royal. Mr Cordner claims that Mr Hone was initially agreeable to that, but later changed his mind. The only alternative form of finance which was viable was for Mr Cordner to re-mortgage the house he and his wife had just bought – the Derings – but he and his wife eventually decided against doing that. He therefore did not take up Mr Hone on his offer.[146]It is said on the claimants’ behalf that Mr Cordner was never seriously considering lending to Mr Hone. Mr Cordner had just bought the Derings with a loan of £942,000 secured by way of a mortgage, and on his case with loans totalling £316,748 from Mr Hone. In addition, his bank accounts show that he was overdrawn at the time. He just did not have the funds available to lend Mr Hone anything approaching £350,000. Mr Cordner says that he was thinking of lending Mr Hone perhaps £100,000-£200,000. The claimants say that it would have been absurd for him to risk that amount when the return on the proposed sale of his apartments at Aloha Royal and Aldea Beach were potentially so great, but Mr Cordner says that the return on the loan was 70% over only 18 months, and that this return was guaranteed whereas the return on the apartments was not.[147]It is also said on the claimants’ behalf that if Mr Hone really wanted to raise money from Mr Cordner, he would have asked him to pay back the loans of £316,748 rather than borrow money from Mr Cordner at such an exorbitant rate of interest. The fact that he did not rather suggests that Mr Hone did not know anything about these loans. And Mr Cordner had no answer for why Mr Hone might have even considered allowing Mr Cordner to have his money back for the apartments at Aloha Royal when he had sold them at such a cheap price in order to raise the money he needed to pay off his partner.[148]Sir Geoff was not the only person Mr Cordner spoke to about lending money to Mr Hone. He says that Mr Hone asked him to find people who might be interested in his offer. Although Mr Cordner does not have a clear memory of it, he does not dispute that he spoke to Mr Hopley and Mr Kenyon about it. But he does not believe that he sent Mr Kenyon a copy of Mr Lomas’ contract, and if he did not, it must have been Mr Hone who provided it to Mr Kenyon. Unquestionably, Mr Kenyon got it from someone, because it was Mr Kenyon who disclosed it.[149]It is against that background that we come to Mr Cordner’s evidence about how he came to talk to Sir Geoff about the proposed loan and what he told him. In his witness statements, he said that Mr Hone asked him to put the proposal to Sir Geoff. In his evidence, he said that Mr Hone told him to get Sir Geoff to ring him, i.e. Mr Hone. So it is unclear whether he was saying that Mr Hone wanted to put the offer to Sir Geoff himself, or whether he was content for Mr Cordner to do that. But it was almost certainly the latter because Mr Cordner acknowledged that he would get a commission if he got Sir Geoff to lend Mr Hone the money, based on a percentage of the amount which was actually lent. Presumably Mr Cordner would have got similar commissions if he had persuaded other people to lend to Mr Hone. In the event, he was paid commission on Sir Geoff’s loan. He cannot now recall how much it was, but he thought that it would have been £12,000-£25,000. For Mr Cordner to have earned commission of that kind, he must have done quite a lot to get Sir Geoff to agree to lend Mr Hone the money.[150]As for what Mr Cordner told Sir Geoff, he agreed that he told Sir Geoff that Mr Hone needed to raise a loan for a development in Tenerife, and that the return on the loan would be as high as it was because Mr Hone would be making a lot of money on the development. That was presumably what Mr Hone had told him. He agreed that he told Sir Geoff that the security would be in the form of a post-dated cheque, known as a pagarê, and that it was a criminal offence in Spain not to honour it on presentation. Finally, he agrees that he told Sir Geoff that he was considering lending Mr Hone money himself. He claims that he did not tell Sir Geoff that he had already done so, nor did he tell Sir Geoff later on that he had been repaid what he had invested, though not in cash, but in apartments or land. And he says that when he heard that Mr Hopley had asked for additional security in the form of an apartment at Aloha Royal, he told Sir Geoff that he wanted security of that kind as well. He does not recall telling Mr Simpson that Mr Hone never used banks for borrowing.[151]The sale of no. 62 Aloha Royal to Mr Innocent. Mr Cordner agreed that Mr Innocent was a good friend of his. Mr Cordner says that what he told Mr Innocent was that 10 apartments were available at a special price on land owned by Mr Hone which he was developing. He agrees that he told Mr Innocent that Mr Hone needed cash to buy out his partner. He does not think that he said that he was “very close” to Mr Hone. He had only known Mr Hone for a few months then, and he may have said that he got on well with him. They were close, but not very close, and if he had said that they were very close, he would have been exaggerating.[152]Mr Cordner does not think that he told Mr Innocent that Mr Kenyon and Sir Geoff had already purchased apartments at Aloha Royal. What he says he told Mr Innocent was that he was going to invest in Aloha Royal himself. He says that he could not recall whether Mr Innocent had met or even heard of Mr Kenyon, but he commented that it would have been stupid for him to tell Mr Innocent that Mr Kenyon had purchased there if Mr Innocent knew Mr Kenyon, because Mr Innocent could easily find out from Mr Kenyon that it was untrue. As for Sir Geoff, Mr Cordner said that he would not have dreamt of saying that Sir Geoff had bought there if it was not true in view of his high esteem for Sir Geoff. He agrees that he said that a bank guarantee would be in place, and that there was £8,000 to be made if Mr Innocent introduced a purchaser for one of the apartments at Aloha Royal himself. He also agrees that he received his commission of €84,300 on this sale.[153]The sale of no. 68 Aloha Royal to Mr and Mrs Roberts. Mr Cordner agreed that Mr and Mrs Roberts were friends of his. When he spoke to Mr Roberts about the 10 apartments at Aloha Royal, he told Mr Roberts that he had reserved them. He did not say that he had bought them, or was buying them in bulk, or could buy them. He agrees that he told Mr Roberts that they were available at a discount, though not a significant discount, but he did say that they had been reduced from €474,800 to €298,000. He agrees that he told Mr Roberts that the apartments there would be built in two years, and that he believed that Mr Roberts could double his money, since once they were built they could be worth €600,000-€700,000.[154]Mr Cordner was mystified about Mr Roberts being sent Harry Redknapp’s contract for the purchase of no. 61 Aloha Royal. Harry Redknapp had not bought an apartment at Aloha Royal, though he had bought properties through RMG elsewhere. He did not doubt that someone must have sent Harry Redknapp’s contract to Mr Roberts for Mr Roberts to have disclosed it, and he can only assume that it was sent to Mr Roberts by mistake. He says that he never told Mr Roberts that Harry Redknapp had bought an apartment at Aloha Royal. He had been told by Mr Hone that Martin Peters and Michael Flatley were considering investing in RMG, and he thinks that he told Mr Roberts that that was what Mr Hone had told him, but he was unable to say whether he told Mr Roberts that before or after Mr Roberts handed over his cheque for £211,347.[155]The purchase of no. 56 Aloha Royal by Mr Cordner and Mr Barkley. Mr Cordner agreed that Mr Barkley was a friend of his who he had met at Allied Dunbar in the 1990s. He does not disagree with much of Mr Barkley’s account of what he told Mr Barkley at the sales convention in Mauritius, but he thinks that although he regarded Mr Hone and RMG as synonymous, he told Mr Barkley that Mr Hone, rather than RMG, owned the land on which Aloha Royal was to be developed. Mr Cordner did not think that Mr Hone had a partner in RMG. He thought that Mr Hone owned RMG himself, and that the partner who Mr Hone wanted to buy out was a partner in an unrelated land deal. That was what he says he told Mr Barkley. He recalls telling Mr Barkley that the 10 apartments had been “bought up”, and that was a reference to the fact that Mr Hone had taken back from him those of the apartments which Mr Cordner had not been able to sell.[156]Mr Cordner agreed that he got in touch with Mr Barkley again to tell him that one of the apartments had become available. He thinks that he was referring to one of the apartments which Mr Brogan had bought, but if he was not, it must have been because Mr Hone had released a second apartment back to him. He does not disagree with what Mr Barkley says he told Mr Barkley when they were in Spain together, save that he says that he told Mr Barkley that a bank guarantee would be in place, not that one was in place.[157]Mr Barkley was the only one of the claimants for whom Mr Cordner says that he did something more than just tell them that they could use Spanish lawyers who he could arrange or get their own legal advice. He says that when he told Mr Barkley that they could use either Ms Campaña or another lawyer, Mr Barkley left the decision up to him. “Whatever” was Mr Barkley’s response, he said. So he asked Ms Campaña to check things out for them. He does not know what she did, if anything, but she told him that “she’d done the checks and that everything was OK”. This would have been after they had signed the property reservation sheet, but before he got Mr Barkley’s cheque.[158]The claimants’ case is that Mr Cordner was making this up as he went along. He does not recall who paid Ms Campaña’s fees, and speculates that she might not have charged them at all, even though the guide for introducers reckoned that legal costs would amount to about 1% of the purchase price at the time of the payment of the deposit, and would come in all to about 2% of the purchase price. He does not recall whether Mr Barkley even asked him whether he had got legal advice and whether everything was alright. And he agrees that in his Defence his answer to the allegation that he told the claimants that he would sort out the legal side of things was a denial that he had said that, rather than that – in Mr Barkley’s case – this was the very thing he had done.[159]When Mr Cordner came in his evidence to Mr Barkley’s request for Mr Cordner to explain how he had paid for his half share of no. 56, he was not prepared to accept that he was being pressed about that by Mr Barkley on an almost daily basis. But when he sent Mr Barkley the photocopy of the cheque for £99,938 payable to Grosvenor, he genuinely thought that it represented his payment for his half-share of no. 56. How did he have a photocopy of the cheque when he would have sent the original to Mr Hone? Mr Cordner says that his practice is to photocopy cheques for large amounts, before sending them off, though he does not believe that the photocopy of the cheque Mr Barkley produced could have been the one he had sent to Mr Barkley, because he would not have sent such a bad photocopy to him. His case, I think, is that the photocopy of the cheque which Mr Barkley produced is so bad because Mr Barkley or the claimants’ solicitors must have photocopied the photocopy of the cheque which he had sent to Mr Barkley.[160]So if Mr Cordner sent the original cheque to Mr Hone, and sent the photocopy which he had made of the original cheque to Mr Barkley, how was he able to disclose in the course of the proceedings the better photocopy of that cheque on which Mr Hone had completed his receipt of it? Mr Cordner says that it was sent to him by Mr Hone as his receipt for part-payment of the purchase price for no. 52. The document which he gave to his solicitors in the course of disclosure was not the original of the document he got from Mr Hone because that had Mr Hone’s handwriting on it in blue biro, whereas the one disclosed by his solicitors is a photocopy of that. Mr Cordner assumed that he had photocopied himself the actual document he got from Mr Hone, and that it was that photocopy which he had given to his solicitors, but he has been unable to find the original document himself.[161]Mr Cordner was indignant at the suggestion that he was not going halves with Mr Barkley because of the commission of €84,300. The purchase price had actually been €298,000, he said, and the fact that he was getting commission which was being deducted from his half-share of the purchase price did not alter that. But the fact that in the note which Mr Cordner wrote to Mr Hone he said that the purchase price was €213,700, i.e. €298,000 less €84,300, led to a rather radical suggestion being made to Mr Cordner in the course of his cross-examination. That was that the special deal was not that the 10 apartments would be sold for €298,000 with Mr Cordner getting commission of €84,300 on each sale, but that they were to be sold for at least €237,000 with Mr Cordner getting commission on each sale at a more conventional rate of 10%, and that if he managed to sell any of the apartments for more than €237,000, he could keep the difference. That suggestion was said to be supported by the reference to the purchase price in Mr Cordner’s note to Mr Hone of €213,700, as well as the fact that the €237,000 was not far off half of €474,800, but more importantly by an undated invoice addressed to Mr Hone setting out the commission due to Mr Cordner on 27 June 2003. That invoice referred to the commission which Mr Cordner was due on two of the apartments at Aloha Royal which he had sold by then – no. 52 (which he had bought himself) and no. 62 (which Mr Innocent had bought). In that invoice, the commission which Mr Cordner said was due to him for each sale was €23,700, i.e. 10% of €237,000.[162]I cannot go along with this at all. As Mr Jefferis pointed out, the mathematics do not add up. €237,000 is not half of €474,800: €237,400 is. €213,700 is not €237,000 less 10%. €237,000 less 10% is €213,300. And the fact that the commission which Mr Cordner got on the apartment which he sold to Paddington Properties Inc. (his own company) was €23,700 is explicable on the basis that the purchase price of that apartment was €237,000. After all, the property reservation sheet and the contract of sale both refer to the purchase price as being €237,000. It is not possible to explain for sure why the commission due on Mr Innocent’s apartment was expressed in the invoice to be €23,700, but that may have been because Mr Cordner had only been paid part of his commission by then, and this was his invoice for the balance.[163]The sale of no. 64 Aloha Royal to Mr Kenyon. Mr Cordner agreed that he and Mr Kenyon were friends. Indeed, he described Mr and Mrs Kenyon as “very, very good friends” of his. He says that when he told Mr Kenyon about the apartments at Aloha Royal which were being sold at a discount, he told Mr Kenyon that Mr Hone operating through RMG owned the site and was the developer of it, and that Mr Hone needed to raise money to buy out his partner. He did not say that Mr Hone needed to raise money to buy out his partner in RMG. He thinks that he told Mr Kenyon that Mr Hone needed to buy out his partner in a land deal. He did not tell Mr Kenyon that he was the chairman of RMG. All he told him was whatever his job title at the time would have been.[164]Mr Cordner did not initially deal in his evidence with whether he told Mr Kenyon that he had only one apartment left, but he told Mr Kenyon that he had reserved 10 apartments without telling him how many of them had been sold. However, when he was reminded that he had told Mr Power’s solicitors four months or so earlier that the apartment which Mr Power was thinking of buying with Sir Geoff was “the last property available at the reduced price”, Mr Cordner said that by the time that he was talking to Mr Kenyon about Mr Kenyon’s proposed purchase of an apartment at Aloha Royal, Mr Hone had told him that another apartment had become available. He agrees that he told Mr Kenyon that he had invested in Aloha Royal himself, but not that his parents had.[165]Of course, all this happened quite a time after the other claimants had bought their apartments at Aloha Royal. If, as Mr Cordner claims, Mr Hone had told him back in May 2003 that he needed to raise the money “urgently”, was Mr Hone still saying that he needed the money to buy out his partner in a land deal? Mr Cordner says that he was still saying that, but he acknowledged that it was not Mr Hone who needed the money quickly. It was he, Mr Cordner, who needed it quickly because Mr Hone had said that he could borrow from Mr Hone whatever he got from the sale of no. 64 Aloha Royal to Mr Kenyon and use it towards the purchase of the house he was buying at the time. He denied that he had concealed that from Mr Kenyon because he feared that Mr Kenyon might not buy the apartment if he knew what the money was ultimately going to be used for. Finally, Mr Cordner acknowledged that he had told Mr Kenyon that he was getting the apartment at a special price. To the suggestion that the price could hardly be described as special when all the other claimants had paid only €298,000 for their apartments, whereas Mr Kenyon had paid €360,000 for his, Mr Cordner said that it was a special price in the sense that it was being sold for below the list price of €474,800. He did not say in his evidence why the price which Mr Kenyon had had to pay for his apartment was €62,000 more than the other claimants had had to pay for theirs, or whether his commission on the sale of the apartment to Mr Kenyon had still been €84,300 or whether it had been more than that because the purchase price had been greater.[166]Mr Cordner’s own investments. A central feature of Mr Cordner’s case is that he had the same trust in Mr Hone as the claimants had in him. If he had not believed Mr Hone, and if he had had any inkling that Mr Hone would not be able to develop Aloha Royal, or to pass good title to the apartments there, would he have bought apartments there himself? And would he have invested in Aldea Beach which was another RMG development? In order to evaluate that point, it is necessary to look at each of the investments Mr Cordner made, bearing in mind that he says that he bought these properties as investments either to sell when they had been built or to rent out.[167]I deal first with no. 52 Aloha Royal. The property reservation sheet shows that Mr Cordner bought no. 52 for €237,000 on 17 June 2003. He purported to pay for it by(a) a cheque payable to Grosvenor for £99,938, which equated to €139,914 at an exchange rate of £1.00 to €1.43, and(b) £97,086 in lieu of commission. The invoice which he sent to Mr Hone for his commission on this sale was for €23,700, i.e. 10% of €237,000. Mr Cordner was uncertain why his purchase of no. 52 was structured in this way, i.e. €237,000 with commission of 10%, but he agreed that the effect was that he would have to pay tax on only €23,700 and not on €84,300. Indeed, Mr Cordner admitted that he had not even paid tax on the €23,700. He said that at the time he believed, albeit wrongly, that he would only be liable for tax when the gain was realised, i.e. when no. 52 was eventually sold.[168]In these circumstances, the claimants say that there are four things which show that Mr Cordner’s purchase of no. 52 hardly represented a risk for Mr Cordner. First, this was an extraordinarily good deal for Mr Cordner. He was getting the apartment incredibly cheaply, and because of the way the purchase was structured, he was even minimising his tax exposure. Secondly, there was good reason to think that he did not even pay the £99,938, because he got most of it back by a cheque for £83,073 dated 27 June 2003 drawn on RMG’s account with Banco de Sabadell signed by Mr Hone. Mr Cordner assumes that this would have been for commission he was owed, but there is no paperwork which has been disclosed relating to that payment. And the link between Mr Cordner’s cheque to Grosvenor for £99,938 and RMG’s cheque to Mr Cordner for £83,073 is that Mr Cordner’s cheque, though dated 27 June 2003, looks as if it was originally dated 17 June 2003. That would tie in with Mr Hone’s receipt for it which is dated 17 June 2003, and the suggestion is that the date was changed to 27 June 2003 because that was when Mr Hone was to pay Mr Cordner the £83,073. Mr Cordner denied all that. Thirdly, if this was a genuine arms-length purchase, why did Mr Cordner think that the cheque for £99,938 related to his purchase of no. 56 Aloha Royal with Mr Barkley – unless he knew all along that it did not? Fourthly, it is questionable whether Mr Cordner was already owed commission of £97,086. He could not remember what it was for.[169]From no. 52 Aloha Royal, I turn to the other apartments at Aloha Royal which Mr Cordner bought jointly with others. First, there is no. 56 which he bought jointly with Mr Barkley. The claimants say that this purchase too hardly represented a risk for Mr Cordner because he paid for his half-share of it out of commission – the commission of €84,300 which he was due on this very sale, and €62,700 out of the commission of €84,300 which he was due on the sale on no. 60 Aloha Royal to Sir Geoff and Mr Power. Secondly, there is no. 66 Aloha Royal which Mr Cordner claims he bought jointly with Mark Byrne paying half the purchase price himself. Mr Cordner said that no. 66 was again one of the apartments at Aloha Royal covered by the special deal. He claims that subsequently Mr Byrne wanted to own no. 66 himself outright. Mr Byrne had previously paid deposits on two apartments at Aldea Beach – nos. 112 and 114 – and Mr Cordner agreed to give up his interest in no. 66 Aloha Royal for Mr Byrne’s interest in nos. 112 and 114 Aldea Beach. There is no documentation relating to their purchase of no. 66 Aloha Royal, but documents produced by Mr Cordner show that he acquired his interest in the two apartments in Aldea Beach by contracts dated 15 May 2005, and they say that a 20% deposit on each of €71,894 had been paid on 29 May 2003.[170]The claimants do not suggest that Mr Cordner did not acquire a half-share of no. 66 Aloha Royal with Mr Byrne. Their case is that he did not pay for his half-share. Unlike his other investments in Aloha Royal and Aldea Beach, it is not referred to in any of his witness statements, and if he had paid anything for it, he could be expected to have mentioned his interest in the apartments since he was referring to his investments to show that he had trusted Mr Hone. The reason why he did not refer to his interest in no. 66 until he gave evidence about it was, say the claimants, because he knew that he would be questioned about how he had paid for it. Mr Cordner says that he paid for his half-share out of his commission on the sale itself and other commission to which he was entitled, but no document showing that has been disclosed, nor has he disclosed any note to Mr Hone (similar to the one he wrote explaining how he had paid for his half-share of no. 56) explaining how he had paid for his half-share of no. 66. Indeed, Mr Cordner’s invoice to Mr Hone of 27 June 2003 for outstanding commission, in which one might have expected to see a reference to the commission he had earned on his and Mr Byrne’s purchase of no. 66, does not reference to no. 66 at all. These are all powerful points, but although the interest which Mr Cordner acquired in nos. 52, 56 and 66 Aloha Royal represented on the face of it an excellent deal for him, I am not prepared to say that he did not pay for these apartments what he claims he paid for them. Nor am I prepared to say that the points made on behalf of the claimants are so strong that they undermine his claim that his purchases of the apartments show that he was taken in by Mr Hone as well.[171]From Mr Cordner’s investments at Aloha Royal, I turn to his investments at Aldea Beach. This was a development which encountered planning problems, and as a result was never built. Leaving aside nos. 112 and 114, Mr Cordner had an interest in three apartments at Aldea Beach, nos. 15, 103 and 204. No. 103 was one of two apartments which he had sold to Jane Durbridge, the widow of an old friend of Mr Cordner. He had encouraged her to invest the proceeds of her marital home which represented her life savings in the apartments, swearing on her children’s lives that the investment would be safe, and telling her that she would be able to double her money. When it became apparent that the planning problems could not be surmounted, and Mrs Durbridge and her children had had to move to a hostel for the homeless, she wrote to Mr Hone, who Mr Cordner had told her he had been in partnership with, but he was not willing to return her deposits to her. Eventually Mr Cordner agreed to buy one of the apartments from her. She was to get her deposit for that apartment back from him, but he was not willing to buy the other apartment from her.[172]No. 204 Aldea Beach was another apartment which Mr Cordner bought back from the purchaser who wanted his deposit back. The purchaser in that case was Ian Vaughan. The claimants’ case is that Mr Cordner bought this apartment and that of Mrs Durbridge because he was embarrassed that they had risked their life savings on an investment which he had encouraged them to make, and in Mrs Durbridge’s case because he was genuinely sorry for the plight she was in. That is also said to be the reason why he was prepared to exchange his interest in no. 66 Aloha Royal for Mr Byrne’s two apartments at Aldea Beach. But the real point here is that the circumstances in which Mr Cordner acquired his interest in nos. 103 and 204 Aldea Beach completely undermine his assertion in his second witness statement that his acquisition of these two apartments “again … demonstrates [his] continuing confidence in [Aldea Beach] and in Michael Hone and in the Royal Marbella Group even as late as 27 December 2007”, which was about when he made his last payment to Mrs Durbridge towards the deposit she had paid on no. 103.[173]Finally, there is Mr Cordner’s own purchase of no. 15 Aldea Beach. The property reservation sheet shows that he bought it for €264,961 inclusive of IVA, paying a deposit of £18,528, which equated to €26,496, being 10% of the purchase price, at an exchange rate of £1.00 to €1.43. This compares with the deposit of 30% of the purchase price paid by Mrs Durbridge for her two apartments at Aldea Beach and by Mr Vaughan for no. 204 Aldea Beach. But here again there is some suggestion that like his purchase of no. 52 Aloha Royal Mr Cordner may have been repaid that amount at about the same time. The two cheques which he wrote to pay for no. 52 Aloha Royal and no. 15 Aldea Beach – £99, 938 (payable to Grosvenor) on 27 June 2003 and £18,528 (payable to RMG) on 28 June 2003 – amount to £118,466, whereas two cheques payable to Mr Cordner drawn on RMG’s account at Banco de Sabadell and signed by Mr Hone – £32,000 on 17 June 2003 and £83,073 on 27 June 2003 – amount to £115,073. And that does not include £85,714 paid to Euro Property Solutions Ltd by cheque dated 17 June 2003. Is this an example of Mr Cordner pretending to pay for properties he was buying, but getting the money back in a roundabout way? Like the payment of £99,938, Mr Cordner could not be sure what the payments of £32,000 or £85,714 were for, but he assumes they were for commission. Once again, I am not prepared to say that Mr Cordner did not pay for this apartment what he claims he paid. E. Mr Cordner’s credibility[174]The challenge to Mr Cordner’s credibility. Mr Cordner’s credibility as a witness is at the heart of the case. It was for that reason that he was cross-examined at some length about things that revealed the kind of man he was. For example, vanity made him go along with things said about him which were not true. He allowed RMG’s 2004 brochure to paint a false picture about him. It talked of him having been in financial services for 23 years, whereas that had only been his occupation for 14 years. It said that he was familiar with the process of “legal conveyance” in the UK, whereas he did not know how conveyancing worked and left that to solicitors. It spoke of him having acquired “a fabulous investment portfolio”, which Mr Cordner himself described as poetic licence since his investments in Aloha Royal and Aldea Beach were relatively modest. It mentioned his “enormous network of financial clientele”, whereas in truth he was simply selling financial products to members of the public. And it referred to his chairmanship of the Independent Mortgage Network, which sounded as if he was the chairman of an association of mortgage brokers, whereas in truth it was the trading name of one of his companies.[175]The same is true of job titles. He plainly enjoyed having the grandiose titles which Mr Hone gave him. Mr Hone may well have been content for Mr Cordner to call himself the chairman of RMG. That was what his business card said he was, and it was how he was described in RMG’s 2005 brochure. But it gave a false impression of Mr Cordner’s real role within RMG, which was simply that of a salesman providing the services of a sales team through MPL.[176]But it was not just vanity which I find drove Mr Cordner. I have no doubt that he tried to pull the wool over Mr Barkley’s eyes in a number of respects. He was being less than frank with Mr Barkley when he purported to go halves on the purchase of no. 56 Aloha Royal, whereas the commission he was getting on the sale meant that he was paying far less for his half-share than Mr Barkley. He then tried to conceal that fact from Mr Barkley by refusing for some time to explain how he had paid for his half-share, and then by pretending that the cheque for £99,938 related to his purchase of no. 56 Aloha Royal, whereas in fact it related to his purchase of no. 52 (a fact which he tried to conceal by photocopying the cheque in such a way as to delete the receipt he got from Mr Hone).[177]In addition, Mr Cordner was less than frank when it came to his income. He either minimised or exaggerated it as it suited him. For example, his tax return for the year ending 5 April 2004 gave a figure for his income which did not include some of the commission he received. It did not include the commission he got on the sale of no. 56 Aloha Royal to himself and Mr Barkley, or on the sale of no. 60 Aloha Royal to Sir Geoff and Mr Power. Mr Cordner’s explanation for that was that he had used this commission for making further property investments, and he believed that he had to declare it only when the gain was realised, i.e. when the property which the commission was used to pay for was sold. When it was put to him that he could not have told his accountant about that commission because otherwise he would have been advised to declare it, he said that he thought that he had told his accountant about it. I do not believe him, and this revealed something else about Mr Cordner, which is that when the going gets tough, he does not mind putting the blame on someone else if he thinks that will help.[178]The flip side of the coin is that Mr Cordner exaggerated his income when applying for loans. So when he and his wife applied in September 2003 to the Cheltenham and Gloucester Building Society for their current mortgage to be increased to fund their purchase of the Derings, Mr Cordner gave as his taxable income for that year £465,000, and £310,000 for the previous year. When Mr and Mrs Cordner applied towards the end of 2007 to the Bank of Scotland for a loan in connection with the purchase of their present house, Mr Cordner said that his annual income was £500,000. And when they applied in February 2009 to Blemain Finance Ltd for a loan, Mr Cordner said that his income was £21,000 a month. Mr Cordner admitted that these statements were not true, but he sought to justify what he had said on the basis that these were “self-certified” applications, and that he was confident that he could service the loans from his future earnings. This, I think, demonstrates another facet of his character. He is prepared to say things which he knows to be untrue, and he hopes that things will turn out in such a way that his untruths will not have mattered.[179]Moreover, I have a strong sense that in the course of his evidence Mr Cordner tried, when finding himself in a corner, either to claim a loss of memory or to make things up as he went along. I find it difficult, for example, to believe that Mr Cordner was unable to remember what the sums of £32,000 and £83,073 paid to him on 17 June 2003 and 27 June 2003 were for, as well as the sum of £85,714 paid to Euro Property Solutions Ltd on 17 June 2003. And the best example of Mr Cordner making things up as he went along was when he was trying to explain why he had told some of the claimants that there was only one apartment left at the specially discounted price. It was opportunism, I think, which made him say that it was one of the apartments that had been bought by Mr Brogan whose sale had fallen through, when he had forgotten that four of the five properties bought by Mr Brogan were penthouses, not apartments. Another example of that was when he said that he had sought Ms Campaña’s advice on his and Mr Barkley’s purchase of no. 56 Aloha Royal. He realised when he was in the witness box that when it came to property he was buying himself he had to show that he had followed the golden rule stated in RMG’s brochure about getting legal advice.[180]The tracing claim. Having said all that, the feature of the evidence which was most capable of damaging Mr Cordner’s credibility related to what happened to the £251,748 which Mr Kenyon paid for his apartment. Although the evidence on that topic is most relevant to Mr Kenyon’s tracing claim, I deal with it here because of the impact it has on Mr Cordner’s credibility.[181]It was on 9 January 2004 that Mr and Mrs Cordner entered into a memorandum of sale for the purchase of the Derings for £1.3m. Shortly afterwards, the Cheltenham and Gloucester Building Society was informed that they required a loan of £942,000. Contracts were exchanged on 24 February 2004, and completion was fixed for 30 April 2004. A few days before the exchange of contracts, £65,000 had been received by Mr and Mrs Cordner’s solicitors – £50,000 from RMG’s account at Banco de Sabadell, and £15,000 from the Independent Mortgage Network. So with the £942,000 from the Cheltenham and Gloucester and the £65,000, Mr and Mrs Cordner still needed to find £343,000 plus an additional sum for costs and other disbursements. Mr Cordner thought that the net proceeds of the sale of their current house would come to about £50,000. Mr Kenyon agreed to lend him £40,000, and did so, but Mr Cordner accepts that by late March 2004 he still needed to raise “quite a lot” to complete the purchase of the Derings. Indeed, there was an additional complication, which was that although Mr Cordner was planning to sell his current house at the same time, there was a problem to do with a strip of land, and he might not have the net proceeds of sale of his current house to put into the pot. (His fears turned out to be justified. His current house could not be sold until later in the year, and in the meantime the house was rented to the people who eventually bought it.)[182]Mr Kenyon’s cheque for £251,748 for no. 64 Aloha Royal was dated 29 March 2004. As I said at [116] above, the day it was cleared Mr Cordner wrote a cheque for that amount drawn on RMG’s account with Banco de Sabadell payable to his solicitors. That sum, together with the £50,000 previously received and a further £15,000 subsequently received from RMG, amount to sums totalling £316,748 being paid by RMG to Mr Cordner’s conveyancing solicitors. Mr Cordner’s case is that the three sums represented three separate loans made to him on separate dates by Mr Hone. Why should Mr Hone have done that – especially at a time when he was himself looking for £3m to fund a project in Tenerife? And would he really have lent all this money to Mr Cordner when he was trying to get Mr Cordner and Sir Geoff to lend him money with a return of 70% over 18 months? Mr Cordner’s explanation for that was that Mr Hone could see that Mr Cordner was in a panic about raising what he needed to buy the Derings, and he agreed to help Mr Cordner out because he could see that Mr Cordner’s need at the time was greater than his. In addition he valued Mr Cordner as a salesman, and did not want to do anything which risked losing Mr Cordner’s services. That was why, says Mr Cordner, Mr Hone told him that if he could sell one of the properties at Aloha Royal he would lend Mr Cordner the amount Mr Cordner raised on the sale.[183]Shortly after the issue of these proceedings, Mr Cordner was ordered to swear an affidavit answering a long request for information. One of the things he was asked was how Mr Kenyon’s cheque for £251,748 had been applied. He simply said that it had been paid into RMG’s account with Banco de Sabadell on about 29 March 2004. He did not go on to say that the same amount had then been paid out to his conveyancing solicitors by cheque on the very day on which Mr Kenyon’s cheque had been cleared, and that this cheque was a loan from Mr Hone to help him purchase the Derings. Mr Cordner says that it was not the case that he had forgotten that. It was simply that he did not think that he was being required to give that information. However, shortly afterwards the claimants’ solicitors learnt of the cheque for £251,748.00 payable to Mr Cordner, and they asked Mr Cordner’s solicitors what the cheque was for. That was when Mr Cordner’s solicitors said that the cheque represented a loan from Mr Hone towards Mr Cordner’s purchase of the Derings, and in a subsequent letter implied that Mr Cordner’s failure to mention that in his affidavit was because he had forgotten that the money from Mr Kenyon had been used for that purpose. The claimants’ solicitors then queried whether the omission had been through forgetfulness or whether it had been deliberate, and Mr Cordner’s solicitors confirmed that it had just been forgotten.[184]Mr Cordner would not have forgotten that. Realising, so it is said, that no-one would believe that he had forgotten what he had used Mr Kenyon’s money for, Mr Cordner said in effect that his solicitors had been wrong. He would not have told them that he had forgotten what the money had been used for. Although he acknowledged that his solicitors are unlikely to have confirmed that the omission from his affidavit had been due to forgetfulness without speaking to him once again, he maintained that the reason for the omission was because he thought that he was only being asked what had happened to Mr Kenyon’s cheque, not what had happened to his money thereafter.[185]In addition to all that, there are a number of curious features about these loans if that is what they were. First, Mr Cordner acknowledged that there were no terms of the loans as to interest or repayment. Indeed, Mr Cordner accepted that Mr Hone had never asked him for repayment, and the loans remain outstanding. Mr Cordner says that he has not taken any steps to repay Mr Hone because it is Mr Hone who owes him money – both unpaid commission and the losses he made on his investments in Aloha Royal and Aldea Beach.[186]Secondly, Mr Cordner would be entitled to commission on the sale of no. 64 Aloha Royal to Mr Kenyon, but the level of that commission was never discussed, even though the price which Mr Kenyon had to pay for it was €360,000, much more than any of the other claimants had to pay for their apartments. Mr Cordner simply assumed that the commission would be the same as before, i.e. €84,300, though he did not discuss that with Mr Hone because he was happy with commission at that rate. But the real point here is that if Mr Hone had been prepared to let Mr Cordner treat what Mr Kenyon had paid as a loan, why was Mr Cordner’s commission of €84,300 not set off against that, so that he could be treated as having borrowed £251,748 less that commission? Mr Cordner had no answer to that.[187]Thirdly, Mr Cordner accepted that after these events he continued to earn commission, which Mr Hone paid him. Why did Mr Hone not take out of that commission the £316,748 which Mr Cordner claims he owed Mr Hone? Mr Cordner’s answer to that was that Mr Hone was preoccupied in keeping his business going, especially the properties he was marketing in Portugal, for which Mr Cordner was earning good commission. Mr Hone knew, says Mr Cordner, that if he withheld any of the commission he owed Mr Cordner, Mr Cordner would not be able to pass on the commission to his salesmen. “It was a train creating money”, he said. “He wasn’t going to shut me off.”[188]In fairness to Mr Cordner, it should be said that Mr Hone has confirmed that he made these loans to Mr Cordner. On 28 November 2007 he wrote, in a letter addressed “To whom it may concern”:
“I can confirm that I lent Mark Cordner a series of loans to purchase his new home their [sic] was £50,000.00 loan on 16 February 2004, there was a further £251,748 on 5 April 2004 and a further £15,000.00 on 26 April 2004. This was a personal loan from myself and the monies, i.e. £316,748, is still outstanding.”
However, Mr Cordner did not list these loans when he had to set out his existing commitments at the time he and his wife applied to the Bank of Scotland in 2007 for a loan. Moreover, the letter was written almost four years after the loans were supposedly made, and it is not suggested that there are any contemporaneous documents evidencing them. And in any event, the circumstances in which Mr Hone’s letter was written are important. At the time, Mr Cordner’s tax affairs were being investigated by the Revenue, and when Mr Cordner got this letter, he sent it straight off to his accountant, having previously asked his conveyancing solicitors to remind him where the funds for the purchase of the Derings had come from (presumably because he had no documents of his own to refresh his memory of these loans). Although it was vehemently denied by Mr Cordner, there is a strong suspicion at the very least that Mr Cordner first found out from his conveyancing solicitors which of the sums had come from RMG, and armed with that information he asked Mr Hone to provide him with a letter saying that the three payments were loans so that he could explain to the Revenue that they were something other than income for which he was liable to be taxed. The point can be made, I think, that if these indeed had been loans in 2004, Mr Hone’s letter in 2007 would have gone on to say that the amount outstanding on the loans had been reduced by €84,300, being the commission payable to Mr Cordner on the sale to Mr Kenyon of no. 64 Aloha Royal.[189]Indeed, there is a good deal to suggest that Mr Hone did not know about the sale of no. 64 to Mr Kenyon, and therefore his cheque for £251,748, until much later. Mr Kenyon’s was the one apartment for which one of RMG’s standard property reservation sheets has not been disclosed, and his contract of sale did not arrive until 2005. It was therefore suggested that it was only then that Mr Hone knew that no. 64 Aloha Royal had been sold to Mr Kenyon, and only then that Mr Hone had discovered what Mr Cordner had done with the proceeds of Mr Kenyon’s cheque. That would explain why Mr Cordner was removed as a signatory from RMG’s account at Banco de Sabadell on 29 March 2005. Mr Hone was angry at Mr Cordner’s use of the money in that account for his own purposes. Mr Cordner denied that. He said that Mr Hone knew about the sale of no. 64 to Mr Kenyon at the time. He added that he had been made a signatory on the account since Mr Hone was in Spain so much of the time and he was in England. It enabled Mr Cordner to pay MPL’s and RMG’s expenses in the UK. His removal as a signatory would have been because Mr Hone’s son had taken over responsibility for the running of RMG’s office in England by then. It could be said, though, that that might be a reason for adding Mr Hone’s son as a signatory. It was not a reason for removing Mr Cordner as one.[190]That leads me to one final point on this part of the case. One of the many things which Mr Cordner was ordered to give information about on affidavit was who all the signatories on RMG’s account at Banco de Sabadell were. His response was that he did not know who they were. That was a surprising answer in view of the very many cheques he had drawn on the account in the 21 months or so during which he had been one of the signatories. His explanation was:
“I answered the question as quickly as I could. My head was up in the air at the time with all the information I was being required to give. I didn’t give it as much thought as I should.”
[191]All in all, I am completely unconvinced that the £251,748 which Mr Cordner paid to his conveyancing solicitors was lent to him by Mr Hone. Mr Hone would not have dreamt of doing that at a time when he was trying to raise money himself, even if(a) his claim that it was for a project in Tenerife was bogus, and(b) he had no intention of giving anyone who lent him any money the 70% return on their investment that he was promising. Everything I know about Mr Hone – and what I suspect he thought of Mr Cordner – is completely at odds with the idea that he was desperate to keep Mr Cordner because of his value as a salesman. The absence of (a) any terms relating to interest or repayment, (b) any documents evidencing the loans,(c) any reference to the loans when Mr Cordner listed his commitments for the Bank of Scotland,(d) any demand by Mr Hone for repayment and(e) any attempt by Mr Hone to set off such commission as Mr Cordner was owed against the loans are all inconsistent with the existence of the loans. In addition, there is the probability – as I find it to be – that Mr Home did not know about the sale of no. 64 Aloha Royal to Mr Kenyon, and therefore his cheque for £251,748, for some time, and that he was so concerned about what it had been used for when he did discover it that he had Mr Cordner’s name removed from the list of signatories on RMG’s bank account. When you couple all that with what I find to be Mr Cordner’s attempt to conceal from the claimants’ solicitors how the money paid over by Mr Kenyon was eventually used, it is unsurprising that Mr Hone’s letter of 28 November 2007 purporting to confirm the loans carries very little weight – especially when you remember the circumstances in which that letter came to be written.[192]Mr Cordner’s false claim, therefore, that he was lent the proceeds of Mr Kenyon’s cheque by Mr Hone is a significant matter when it comes to assessing Mr Cordner’s credibility as a witness. Having said that, it is important not to place undue weight on it in the wider scheme of things. Just because Mr Cordner pretended that he had Mr Hone’s permission to take the money at the time does not begin to mean that he said everything which the claimants say he said to them, nor does it necessarily mean that he knew that some of the things that he said were untruthful. Overstating your income to get a mortgage and understating it to the Revenue to reduce your liability to tax may be wrong, but it does not mean that you lie to your friends as well. F. The special deal[193]The secret nature of the special deal. There are a number of things which suggest that the special deal relating to the 10 apartments at Aloha Royal was a personal deal between Mr Hone and Mr Cordner (rather than one between Mr Hone and MPL), and that it was to be kept confidential. That is not just because there was nothing in writing about it at all, let alone an agreement setting out its terms. It is also because(a) no invoices for the commission were submitted by MPL (save for just one) and(b) the commission was paid to Mr Cordner personally. The effect was that the commission which Mr Cordner received did not go through MPL’s books, and could not therefore be picked up by MPL’s auditors. Indeed, Mr Cordner did not declare the commission he received to the Revenue on his own tax returns.[194]The one exception to the complete absence of any invoices from MPL for the commission was MPL’s invoice no. RMUK06 dated 11 December 2003 for €21,600 for Sir Geoff’s and Mr Power’s purchase of no. 60 Aloha Royal. That neatly ties in with Mr Cordner’s note to Mr Hone referred to at [108] above in which Mr Cordner said that he would be submitting an invoice for this amount on his next invoice, which rather suggests that MPL’s submission of the invoice was a mistake. Of course, the absence of any other invoices from MPL may be due to things like missing paperwork, but four points should be noted.[195]First, attached to the property reservation sheet of 13 June 2003 for Mr Innocent’s purchase of no. 62 Aloha Royal is a slip of paper on which Mr Cordner wrote: “No comm due”. He wrote something similar down the side of the property reservation sheet of 19 August 2003 (but overwritten 18 June 2003) relating to Mr and Mrs Roberts’ purchase of no. 68 Aloha Royal. Mr Cordner’s explanation for that was that he was telling Mr Hone that his commission had been paid on these purchases. When it was suggested to him that if that was the case, he would have made a similar note whenever his commission was paid, and he did not do that, his answer was that you have different ways of doing things at different times, and this happened to be the way he was recording his receipt of the commission at that time. A more plausible explanation, I think, is that what he recorded represented his instructions to MPL’s auditors, Baker Tilly, that there had been no commission due on the purchases, and so they should not bother looking for evidence of it.[196]Secondly, Mr Cordner said that invoices would not have been submitted when his commission was set off against his own investments, as was the case with the commission he got from the sale of no. 56 Aloha Royal to himself and Mr Barkley, and the balance of the commission he got from the sale of no. 60 Aloha Royal to Sir Geoff and Mr Power (which was set off against his purchase of no. 56 Aloha Royal with Mr Barkley) and the unidentified commission of €97,086 (which was set off against his purchase of no. 52 Aloha Royal). The note he sent to Mr Barkley about the former, and the one he made on the bottom of the property reservation sheet for the latter, constituted, said Mr Cordner, the invoices for that commission. But those notes would not have been sufficient invoices if RMG had wanted to deduct its expenditure on commission from its income for the purpose of its own liability for tax, which suggests that RMG did not declare to the tax authorities in Spain what was made on the sale of the apartments to which the special deal related. And in any event this does not explain the absence of invoices for Sir Geoff’s and Mr Hopley’s purchase of no. 90 Aloha Royal, Mr Innocent’s purchase of no. 62 Aloha Royal and Mr and Mrs Roberts’ purchase of no. 68 Aloha Royal.[197]Thirdly, among the documents disclosed by Mr Cordner was MPL’s sales and commission report. Since the last entry which is dated related to a property sold on 9 February 2004, it must have come into existence after that date, i.e. after all the claimants (with the exception of Mr Kenyon) had purchased their apartments. There is no reference in that report to Mr Cordner’s own purchase of no. 52 Aloha Royal, or to Mr and Mrs Roberts’ purchase of no. 68 Aloha Royal, or to Sir Geoff’s and Mr Hopley’s purchase of no. 90 Aloha Royal. Mr Cordner was unable to explain that, and it suggests that the commission on those purchases went to Mr Cordner, rather than MPL.[198]It is true that Mr Innocent’s purchase of no. 62 Aloha Royal and Mr Barkley’s purchase of no. 56 Aloha Royal with Mr Cordner are referred to in the report. But the report says that no commission was due on Mr Innocent’s purchase, and it is silent on whether any commission was due on Mr Barkley’s purchase with Mr Cordner. Mr Cordner says that the entry relating to Mr Innocent probably meant that the commission had been paid, and the reason for the absence of any entry relating to commission on Mr Barkley’s purchase was because the commission was set off against Mr Cordner’s other investments. But the former answer is not consistent with the way the rest of the report was compiled, and the latter is implausible for the reason given at [196] above. Also referred to in the report is Sir Geoff’s and Mr Power’s purchase of no. 60 Aloha Royal, which is consistent with that being the only example of MPL submitting an invoice for commission on an apartment to which the special deal related, but significantly that referred to a commission of only 9% of the purchase price being due.[199]In the interests of completeness, I should add that there is just one other apartment at Aloha Royal referred to in the report. It is no. 58 which the report said was sold to someone called Wilkowski. The report says that no commission was due on this sale. Mr Cordner thought otherwise. He thought it meant that the commission due had been paid. Mr Cordner believes that no. 58 was one of the apartments to which the special deal related, but he also thinks that the apartment was actually sold by one of his salesmen in Manchester, who had requested that the price be reduced. Mr Cordner thinks that Mr Hone agreed to that, and that he had to share the reduced commission with the salesman. Whether that account is correct or not, it does not affect the comments I have made about the rest of the report.[200]Fourthly, the only invoice which has been disclosed for commission due on apartments to which the special deal relates (apart from MPL’s invoice no. RMUK06) is the one referred to at [161] above which related to new sales as at 27 June 2003. As well as invoicing Mr Hone for the commission of €23,700 due on Mr Cordner’s own purchase of no. 52 Aloha Royal, it also invoiced Mr Hone for the commission of €23,700 due on Mr Innocent’s purchase of no. 62 Aloha Royal. Since there is no record of any payment to MPL of these commissions, it looks as though the invoice was submitted by Mr Cordner rather than MPL. It is also noteworthy that it was submitted to Mr Hone rather than to RMG. Indeed, Mr Cordner accepted that all the commission payable on apartments to which the special deal related (save for the €21,600 for the sale of no. 60. Aloha Royal to Sir Geoff and Mr Power) came to him personally, or was treated as having come to him personally as a result of his use of the commission to make investments of his own.[201]I turn to whether any of the commission relating to apartments covered by the special deal was declared for tax purposes. Mr Cordner accepts that when he used the commission which would otherwise have been due to him to make investments of his own, that commission would not have been included in either MPL’s or his own tax returns. He claims that that was because he believed, albeit wrongly, that the commission only had to be declared when the gain was realised. I do not believe him. Mr Cordner also accepts that the commission which was actually paid rather than used by him to make further investments was not declared by him in his tax returns. But the reason for that, so he says, was his belief that the commission had been paid to MPL, that the tax on it had been paid by MPL, and that he had therefore received the commission net of tax. That would have applied to the commission due on the sale of no. 62 Aloha Royal to Mr Innocent, no. 68 Aloha Royal to Mr and Mrs Roberts and no. 90 Aloha Royal to Sir Geoff and Mr Hopley.[202]MPL’s financial statements prepared by Baker Tilly show that MPL’s turnover for the year ending 30 September 2003 was £293,566 and for the year ending 30 September 2004 was £511,955. The commission on the sale of no. 62 Aloha Royal to Mr Innocent had been due on 17 June 2003, on the sale of no. 90 Aloha Royal to Sir Geoff and Mr Hopley on 18 August 2003, and on the sale of no. 68 Aloha Royal to Mr and Mrs Roberts on 19 August 2003. The last two payments were due relatively soon before MPL’s financial year came to an end, and it may be that, if they had been accounted for at all, they would have been accounted for in the year ending 30 September 2004. Since there is no breakdown of how the turnover figures had been arrived at, it is not possible to use MPL’s financial statements to say that Mr Cordner’s claim that tax was paid on those commissions, albeit by MPL rather than by him, is untrue. But the strong probability is that tax was not paid by MPL on these commissions, since the absence of invoices for them strongly suggests that they did not go through MPL’s books at all. I therefore do not believe his claim that he thought that the appropriate tax on this commission had been paid by MPL.[203]The benefit of the exchange rate. One of the features of the special deal advanced on the claimants’ behalf related to the exchange rate. Their case is that what Mr Hone wanted to get out of the special deal was €213,000 for each of the apartments. Since the apartments were to be marketed in the UK, it was plain that many if not all of the purchasers would want to pay for their apartments in sterling. Since the exchange rate at the time was in the region of £1.00 to €1.40, and since 213,000 x 1.4 amounts to 298,200, Mr Hone was content(a) for the apartments to be marketed at €298,000,(b) for any payments in sterling to be converted into euros at the rate of £1.00 to €1.40, and(c) for Mr Cordner to have the benefit of any fluctuations in the exchange rate. To give an example, suppose the purchaser paid £212,000 for his apartment, but at the time of payment, the exchange rate was £1.00 to €1.43, so that the purchaser in fact paid €303,160 (i.e. £212,000 x 1.43), Mr Hone was content for the purchaser to be treated as having paid €298,000, and for Mr Cordner’s commission to be the difference between €213,000 and €303,160, i.e. €90,160, rather than €84,300.[204]This was said to be borne out by various notes which Mr Cordner made on the property reservation sheets. For example, it will be recalled that Mr Innnocent paid £212,000 for his apartment. On his property reservation sheet, Mr Cordner wrote that the £212,000 had been paid on the basis of an exchange rate of £1.00 to €1.40. He added the words:
“Please pay back in form of cash/cheque any monies overpaid when we next meet.”
Similarly, Mr Roberts paid £211,347 for his apartment. On his property reservation sheet, Mr Cordner added the words “… if better than 1.40 rate, should be 1.44.” What Mr Cordner was saying was that the amount which Mr Roberts had paid was based on an exchange rate of £1.00 to €1.40, but that he thought that the exchange rate at the time had been £1.00 to €1.44. In fact, the £211,347.00 which Mr Roberts had paid for his apartment was equivalent to €298,000 at an exchange rate of £1.00 to €1.41, but whatever the exchange rate which had been used to calculate what Mr Roberts had to pay in sterling, Mr Cordner was saying that the amount which Mr Roberts should have had to pay in sterling was only £206,944 (i.e. €298,000 x 1.44), and if Mr Cordner was correct in saying that this was the exchange rate at the time of Mr Roberts’ payment, the difference between £211,347 and £206,944 was the amount which the claimants say Mr Cordner was entitled to in addition to his commission of €84,300.[205]I cannot go along with this hypothesis at all. Mr Cordner’s notes on the property reservation sheets are just as consistent with the claimants being reimbursed any amount which they overpaid if the sterling payments they made were in excess of the sterling equivalent of €298,000 at the exchange rate prevailing at the time as Mr Cordner getting the benefit of it. Indeed, Mr Cordner’s evidence – which I have no real reason to doubt – was that he referred on the property reservation sheets to the fact that the purchase price had been paid in sterling or to the exchange rate so that RMG would be aware of the need to reimburse those claimants who paid in sterling. It may be that people like Mr Innocent and Mr Roberts were not in fact reimbursed anything by RMG, but although that was something which Mr Cordner should have followed up, it would not have been surprising for him not to do so. After all, he would think that once he had made the sale, everything else was down to others.[206]Moreover, Mr Cordner was making a huge amount of commission on each sale. It does not make sense for Mr Hone to have been content for Mr Cordner to benefit from advantageous fluctuations in the exchange rate as well, without Mr Cordner at the same time running the risk of adverse fluctuations in the exchange rate. Mr Peter Knox QC for the claimants expressly disavowed any suggestion that the claimants’ case was that Mr Hone was content for Mr Cordner to have the benefit of any advantageous fluctuations in the exchange rate if he had to bear as well the burden of any adverse fluctuations in the exchange rate. Thus, if fluctuations in the exchange rate favoured the euro, so that the exchange rate at the time of payment by the purchaser of, say, £212,000 was £1.00 to €1.37, (with the result that the purchaser had in fact paid €290,440, i.e. £212,000 x 1.37), it was not contended that Mr Cordner had to settle for the purchaser being treated as having paid €298,000, with the result that Mr Cordner’s commission would only be the difference between €213,000 and €290,440, i.e. €77,440, rather than €84,300.[207]The real reason for the special deal. That the claimants were offered a special deal by Mr Cordner because Mr Hone needed to raise money has never seriously been disputed. What is more contentious is why he needed to raise the money, and if it was to buy out a partner, whether Mr Cordner knew that that was untrue.[208]There are a couple of documents which the claimants say give the game away. One is the contract for the sale of the five properties at Aloha Royal to Mr Brogan. The other is a contract dated 26April 2002 between Mr Hone, Estella and two Irishmen, Patrick Cullen and Patrick Kenny (“the Irish contract”). When the Irish contract was disclosed, the first two pages of Mr Brogan’s contract were clipped to it. What was agreed under the Irish contract was that Azul was selling no. 53 Aloha Royal to Mr Cullen and Mr Kenny for €254,017.77 inclusive of IVA. However, they would be paying €474,799.56 up front. The difference of €220,781.79 would be treated as a loan made by Mr Cullen and Mr Kenny, repayable on the execution by Azul of the public deed of sale. The handing over of the apartment and the execution of the public deed of sale had to take place by 30 June 2004. In order to guarantee the completion “of this contract and of five other contracts”, i.e. to guarantee that the properties would be built, the deeds of Dovereen (which the contract recorded owned 50% of the shares in Azul) were to be lodged with Estella until 30 June 2004 to guarantee up to 800m pesetas (roughly equivalent to €4.8m and presumably an estimate of the construction costs) until 30 June 2004. If the public deed of sale for no. 53 was executed, and the €220,781.79 paid to Mr Cullen and Mr Kenny, by 30 June 2004, the deeds in Dovereen would be returned to Mr Hone. If either of those things did not happen, the shares in Dovereen would be transferred to Mr Cullen and Mr Kenny and other buyers in the same situation as them in proportion to the amount of their investment.[209]The effect of this contract was that until the contractual conditions were satisfied, Mr Hone could not sell any further flats at Aloha Royal through Azul without Estella countersigning any new contracts of sale – and Estella could not do that without there being a bank guarantee in place. It was clipped to part of Mr Brogan’s contract because someone must have realised that the “five other contracts” in the Irish contract could well relate to the five properties bought by Mr Brogan. So before Mr Hone could sell any more apartments at Aloha Royal without a bank guarantee in place, he had to find what was needed to buy Mr Brogan, Mr Cullen and Mr Kenny off. He needed about €2m to do that. That, say the claimants, was the land deal which he was referring to when he was saying that he wanted to buy out his partner. The suggestion is that Mr Cordner knew all about that, and therefore had Mr Hone over a barrel, because he knew that Mr Hone could not sell any more apartments there until he had raised the money. Indeed, it was suggested to Mr Cordner that it was he who had asked for such a high rate of commission, and that Mr Cordner knew that he had to tell potential buyers that he would sort out the legal side of things because if they took legal advice of their own, they would have discovered that neither Mr Hone nor RMG owned the land and that they had no right to sell it.[210]This elaborate and ingenious argument does not work. Although the construction of the flats was not expressed to be one of the two conditions which had to be satisfied before Estella was no longer required to countersign any new contract of sale, that was presumably what the Irish contract contemplated. Moreover, the “five other contracts” referred to in the Irish contract could not have related to the five properties bought by Mr Brogan because Mr Brogan’s contract for the purchase of the five properties was dated February 2006, almost 4 years after the Irish contract. But even if this was what the special deal was all about, I do not think for one moment that Mr Cordner was in on it. He was visibly shocked when the penny dropped with him about what was being suggested. That was not shock because he had not expected to be rumbled. It was shock because this was not a scenario which had ever occurred to him. G. The representations[211]The torts of deceit and negligent mis-statement depend on whether Mr Cordner made the representations he is alleged to have made and whether they were false, and in the case of deceit whether he made them knowing that they were false. In this part of the judgment, I deal with the representations he is alleged to have made. Since every allegation of fraud must be distinctly alleged, it is to the representations referred to in the Particulars of Claim, albeit heavily amended, that I turn. I bear in mind that allegations of fraud need only be proved to the civil standard of preponderance of probability, though more convincing evidence is required to establish fraud than other types of allegation.[212]It will have been apparent from my summary of Mr Cordner’s own account of his dealings with the claimants that he does not dispute many of the things which they attributed to him. His case is that they were either true or that if they were not he did not know that they were false. But for representations which he denies making or at least does not admit making, it has been necessary for me to assess the reliability of the claimants as witnesses. I stress their “reliability” because for the most part their credibility has not been at issue. I have borne in mind that when they gave evidence they were trying to recall conversations which took place 6 or 7 years ago, and that it was only in the last year or so that they were asked to recall precisely what Mr Cordner had said to them. Nor is it the case that it occurred to them within a short time that Mr Cordner may have been the villain of the piece, and that means that they would not have had occasion within a year or so to look back on precisely what it was that Mr Cordner had said to them.[213]I have, of course, borne in mind that many of the claimants say they were told broadly the same thing, but that really cuts both ways. On the one hand, it could be said that that confirms that their recollection is accurate. On the other hand, the wish sometimes becomes the father to the thought, so that if you have heard what other people are saying, then there may be a strong inclination for you to think that it was said to you as well.[214]There was also a problem with one feature of the witness statements, but in order to explain that I have to digress for a moment. In addition to the express representations which Mr Cordner is alleged to have made to them, it is argued on behalf of the claimants that some of things which they say he said and did impliedly conveyed other things to them. The implications which the express representations supposedly made to the claimants conveyed amount, so it is said, to a series of implied representations. Mr Jefferis said that the concept of a fraudulent implied representation is “one that seems inherently incorrect”. I do not agree. What is necessary for these implied representations to be actionable is that both the claimants and Mr Cordner must have appreciated that the express representations he made bore the implications which are alleged. Five such representations were alleged in the Particulars of Claim:(i) (a) a company trading as the Royal Marbella Group controlled a group of companies, or at least there was an association of companies which could properly be called a “group of companies”, (b) the group was substantial, and (c) the company or group was reputable (“the first implied representation”);(ii) RMG had title to the site at Aloha Royal and was able to sell the apartments there (“the second implied representation”);(iii) (a) RMG could lawfully raise the purchase price up front as a matter of Spanish law, (b) the purchase price could lawfully be applied for buying out Mr Hone’s partner, and (c) RMG or Mr Hone were intending to comply with Spanish law in carrying out the contracts (“the third implied representation”);(iv) Mr Cordner or RMG intended to arrange for lawyers to do the legal work for the claimants on their purchase of apartments at Aloha Royal (“the fourth implied representation”);(v) (a) each of the deals was a good one, and RMG (or at least some related entity controlled by Mr Hone) was ready, willing and able to carry out the development and pass clean title to the claimants within the time frames Mr Cordner mentioned or thereabouts, and (b) there were therefore proper arrangements in place to ensure that this would happen (“the fifth implied representation”) or to ensure that this would result so far as reasonably practicable (“the alternative fifth implied representation”).[215]This brings me back to the feature of the claimants’ witness statements which is troubling. Additional witness statements were taken from Sir Geoff, Mr Innocent, Mr Roberts, Mr Barkley and Mr Kenyon. In those statements, the claimants purported to address a point which Mr Cordner had made about the claimants having had contact or dealings with Mr Hone, and that they would therefore have relied more on what he had said to them rather than anything which Mr Cordner may have said. That was not strictly accurate. What the claimants were actually doing was addressing whether they had realised that what Mr Cordner had said to them carried the various implications pleaded in the Particulars of Claim. But more importantly, when the claimants came to give oral evidence, it was plain that some of them had not understood what had been written on their behalf and what they had signed to. For example, when it came to the statement that they believed that RMG was able “lawfully to raise the purchase money up front” or similar language, a number of them said either that they did not know what that meant or that they meant to say something else. Accordingly, in summarising the effect of their evidence, I have, where necessary, ignored what that part of the witness statements said, and concentrated on what the claimants said in oral evidence they had been trying to get across in those passages. With that preface, I propose to deal separately with each of the representations, dealing first with representations which are said to have induced the claimants to invest in Aloha Royal, before turning to those representations which are said to have induced Sir Geoff to enter the promotional agreement and to lend Mr Hone the £350,000.[216]RMG and its developments. What Mr Cordner is said to have told the claimants about RMG and its developments differed from claimant to claimant. He is said to have told Sir Geoff and Mr Hopley that the completed developments which he showed them were RMG developments, and that the undeveloped sites he showed them, including Aloha Royal, had been bought by RMG for development. He is said to have told Mr Innocent that Mr Hone was building the properties at Aloha Royal, and to have shown him Aloha Royal when Mr Innocent went to Spain. He is said to have told Mr Barkley that the completed developments which he showed him had been developed by Mr Hone and RMG, and that the site at Aloha Royal was owned by Mr Hone. And he is said to have told Mr Kenyon that RMG was a proper company, that either Mr Hone or RMG owned the site at Aloha Royal, and that RMG would be developing it. It is not suggested that he said anything along these lines to Mr Roberts.[217]Save for one matter, I have no doubt that Mr Cordner said these things to Mr Innocent, Mr Barkley and Mr Kenyon. Mr Cordner does not really dispute what they attributed to him, and what they say he said is what he says he believed to be the case. I am sure that he believed that RMG would be developing Aloha Royal, and although he said different things to different people about whether it was Mr Hone or RMG who owned the site, the fact is that he said the two things interchangeably because he believed that the two were synonymous. He could therefore have said either of the two things which Mr Kenyon says he said about who owned the site at Aloha Royal, and it is not possible to say now which he said. However, I doubt whether Mr Cordner told Mr Kenyon that RMG was a proper company. Words of that kind were attributed to Mr Cordner by Mr Kenyon for the first time in his fourth witness statement, and in any event that was not alleged even in the latest version of the Particulars of Claim. What Mr Cordner actually told Mr Kenyon – and this came out in his oral evidence – was that RMG had been in business for 25 years, which was tantamount to saying that it was an established company, but that was not alleged in the latest version of the Particulars of Claim either.[218]Whether Mr Cordner said the things to Sir Geoff and Mr Hopley which they attribute to him depends in part on whether it was Mr Cordner who showed them around the completed developments and the undeveloped sites. Mr Cordner does not think he did, because he would have remembered taking Sir Geoff around them if that is what happened, and he claims to have no recollection of having done that. But I think it likely that he did, Sir Geoff and Mr Hopley both having a clear recollection that he did, and I think that he told them what they say he told them.[219]To the extent that Mr Cordner described the developments (whether completed ones or undeveloped sites) as RMG developments, it is said that Mr Cordner made the first implied representation. That allegation is based on the facts that the word “Group” in RMG’s name suggested that there was an association of companies which could be described as a group of companies, that an association of companies which called itself a group of companies would be regarded – by a lawyer at least – as substantial, and that the word “Royal” in RMG’s name gave the impression that it was reputable. I do not believe that the mere fact that Mr Cordner described the developments as RMG developments implied any of those things. It was not Mr Cordner’s description of the developments as RMG developments which implied those things, but rather RMG’s name, and that had not been something for which Mr Cordner was responsible. In any event, I do not think for one moment that it occurred to Mr Cordner, or to any of the claimants for that matter, that he might have been saying something about the structure, size or reputation of RMG by simply saying that RMG was the developer of the sites. It is because I do not think that what Mr Cordner said implied that RMG was either substantial or reputable that I do not need to address the argument advanced by Mr Jefferis based on section 6 of the Statute of Frauds (Amendment) Act 1828 (commonly known as Lord Tenterden’s Act) that such a representation cannot found an action unless it is made in writing.[220]By telling Sir Geoff and Mr Hopley that RMG had bought the site at Aloha Royal for development, it is said that Mr Cordner made the second implied representation. Of course, the apartments had not been built by the time that Mr Cordner spoke of RMG having bought the site for development, and the second implied representation should therefore be treated as being a representation that RMG had title to the site at Aloha Royal and was able to sell such apartments as were to be built there. Mr Cordner was obviously saying much more than that RMG was just marketing the apartments to be built there. I have no doubt that by saying that RMG had bought the site, Mr Cordner was saying that RMG had title to the site. And by saying that RMG had bought the site for development, he was saying that when RMG bought the site its intention was to develop the site, and that it was able to sell the apartments which were to be built there. That was not a statement as to a future state of affairs. It was a statement about RMG’s ability to sell the apartments at the time the statement was made. I think that Sir Geoff, Mr Hopley and Mr Cordner all realised that that was the effect of what Mr Cordner was saying, and I therefore conclude that Mr Cordner made the second implied representation to Sir Geoff and Mr Hopley.[221]It is not suggested that Mr Cordner said anything specific to Mr Innocent about who had bought or owned the site at Aloha Royal. But Mr Cordner did tell Mr Innocent that Mr Hone was building the properties at Aloha Royal, and in the context in which Mr Innocent says that Mr Cordner told him that, it meant that Mr Hone was developing the site, but making 10 of the apartments to be built there available at a discounted price. By saying that, he was saying that Mr Hone had title to the site and was able to sell the apartments to be built there. However, the second implied representation pleaded in the Particulars of Claim was that RMG – not RMG or some other entity controlled by Mr Hone – had title to the site at Aloha Royal and was able to sell the apartments there. So the question is whether what Mr Cordner was in effect saying to Mr Innocent amounted to a representation that RMG had title to the site and was able to sell the apartments to be built there. I do not think so. Mr Cordner did nothing to suggest to Mr Innocent that RMG’s role was anything other than marketing the site. The signage at RMG’s offices to which Mr Cordner took Mr Innocent, and the use of RMG’s standard property reservation sheet, was entirely consistent with that. And it was not as if Mr Cordner asked Mr Innocent to make his cheque payable to RMG. He was asked to make it payable to Grosvenor.[222]As for Mr Barkley, it is not suggested that Mr Cordner said to Mr Barkley anything specific about who would be developing the site at Aloha Royal, although Mr Cordner did say to Mr Barkley that it was Mr Hone who owned the site. But he showed Mr Barkley the site at Aloha Royal because that was where the apartments which he was trying to interest Mr Barkley in buying were, and that has to be seen in the context of Mr Cordner(a) having previously told Mr Barkley of Mr Hone’s interest in RMG and of his wish to sell a number of apartments there, and(b) showing Mr Barkley some developments which he said were being developed by Mr Hone and RMG. By showing Mr Barkley other sites which Mr Cordner said were being developed by Mr Hone and RMG, he was in effect telling Mr Barkley that Mr Hone and RMG would be developing Aloha Royal. And by referring to Mr Hone’s interest in RMG when he had first spoken to Mr Barkley about some apartments at Aloha Royal going cheaply, Mr Cordner was in effect saying that the corporate entity through which Mr Hone would be developing the site and selling the apartments there would be RMG. That is especially so in the light of (a) his comment to Mr Barkley that Ms Campaña had acted for him on properties he had bought from RMG, and (b) his request to Mr Barkley to make his cheque payable to RMG. I think that Mr Barkley and Mr Cordner both realised that that was the effect of what Mr Cordner was saying, and I therefore conclude that Mr Cordner made the second implied representation to Mr Barkley.[223]It is said on behalf of the claimants that Mr Cordner expressly made the second implied representation to Mr Kenyon. He did not. It is true that in his witness statements he talked of Mr Cordner having told him that RMG owned the site as well as developing it, but the cross-examination of him showed that when it came to what Mr Cordner had then said about who owned the site, he was unsure whether Mr Cordner had referred to Mr Hone or RMG. As I have said, it is not possible for me to say which Mr Cordner said, but since I find that Mr Cordner told Mr Kenyon that RMG would be developing the site, and since Mr Cordner told Mr Kenyon to make his cheque payable to RMG, he was in effect saying that RMG was able to sell the units which were to be built on it, even if the site on which the units were to be built was owned by Mr Hone. Again, I think that Mr Kenyon and Mr Cordner both realised that this was the effect of what Mr Cordner was saying, and I therefore conclude that Mr Cordner made the second part of the second implied representation to Mr Kenyon.[224]There is no doubt that the second implied representation was false. RMG did not have title to the site. Azul did. Its title to the site following the deed of sale of 28 June 1999 had been registered and noted in the land register. And it had title to the site even after 14 January 2004, i.e. at the time when the representation was made to Mr Kenyon, because the agreement between Azul and Duja for the sale of the site was not enforceable until shortly before 21 June 2004. Nor could it be said that RMG had title to the site because of Mr Hone’s interests in both Azul and RMG. There is no direct evidence that he had any interest in Dovereen, which the 2003 brochure said had a 50% interest in Azul. Admittedly, the Irish contract required him to lodge the deeds of Dovereen with Estella, but that could simply mean that he had the shareholders’ authority to do that. Nor is there any direct evidence that he had any interest in Wilchester, which the 2003 brochure said had a 50% interest in Azul. The fact that he owned or controlled Wilchester is, so far as I can tell, no more than a matter of assertion. Moreover, the fact that RMG was to develop the site did not necessarily mean that it was able to sell the apartments to be built there.[225]Did Mr Cordner know that RMG did not have title to the site? I begin with two of the documents which Mr Cordner accepts that he had (in the case of one, something very much like it) which referred to Azul: the 2003 brochure and the building licence. The building licence is in Spanish, but(a) it was disclosed by Mr Cordner, and(b) at the bottom of it someone (the claimants say it was Mr Cordner) has written that it is the building licence for Aloha Royal. Anyone looking at it knowing that it was the building licence for Aloha Royal would realise that the licence was being issued to Azul because (a) the licence (which consists of only one page) is addressed to Azul, and (b) in the middle of the licence Azul’s name is prominently displayed in bold capitals. However, I do not believe that Mr Cordner was asked about this document, and it is possible, therefore, that he thought that Azul was issued with a building licence because it was the developer of the land, rather than the owner of it.[226]Secondly, there is the 2003 brochure. That was disclosed by one of the claimants, and their solicitors are not able to say which one it was. But the strong probability is that whoever disclosed it was given it by Mr Cordner, and Mr Cordner accepts that a brochure very much like the 2003 brochure was one which he was using then. I have referred at [141] above to Mr Cordner’s evidence about the references in that brochure to Azul, and I am inclined to believe him. He is simply not the sort of man to read the fine print, and I do not think that he knew that RMG did not have title to the site.[227]Having said that, I am sure that Mr Cordner knew that something fishy was going on. The apartments were being sold at a heavily discounted price. The price was further reduced by a very sizeable commission which Mr Cordner got. If Mr Hone was doing it to raise money, why not try to raise it by more conventional means? Mr Cordner would have realised that something was in play here. He would have asked himself what that was. A little thought would have told him that it could only have had something to do with whether RMG had title to the site at Aloha Royal and was able to sell such apartments as were to be built there.[228]Three things point to that. First, Mr Cordner knew that when Ms Campaña drew up the contracts of sale for the apartments to which the special deal related, Wilchester was named as the promoter of the land, save for two instances when it was named as the promoter of the land with Grosvenor. That would have told him – at any rate from the time he first saw one of those contracts – that RMG was not selling the land. Secondly, the only units ever sold at Aloha Royal were those covered by the special deal. Certainly Mr Cordner did not sell any other units at Aloha Royal himself, and MPL’s sales and commission report did not refer to any other sales at Aloha Royal. Thirdly, Mr Cordner was trying – so I find – to discourage the claimants from using lawyers themselves. He could only have done that because he feared that the sales would not go through, and the obvious reason for that would have been because he suspected that there was something dodgy about title. I do not think that Mr Cordner knew what that was, and I therefore cannot say that he knew that RMG did not have title to the site or that the apartments could not be sold. Indeed, that explains why he invested in Aloha Royal himself. But he had good reasons for thinking that RMG might not have title to the site, and he went ahead with his investments because the bargain he was getting was a terrific one and because he hoped that things would turn out alright in the end.[229]Mr Innocent and Mr Barkley gave evidence about what Mr Cordner said about the proposed development of the site at Aloha Royal. Mr Innocent says that Mr Cordner told him that all of the units would have a sea view. And Mr Barkley says that he and Mr Cordner discussed the question of planning permission when he suggested to Mr Cordner that the development would block the view of another one. It is said that by discussing the proposed development of the site at Aloha Royal, Mr Cordner made the fifth implied representation. There are four elements of the fifth implied representation: first, that it was a good deal; secondly, that some entity controlled by Mr Hone was able to pass clean title to the apartments; thirdly, that such an entity intended to carry out the development (“willing”); and fourthly, that there were proper arrangements in place (i.e. sufficient funding) to enable the apartments to be built and the development to be completed (“ready and able”).[230]I do not think that Mr Cordner was saying in effect all these things just by discussing the development in this way. Mr Cordner was doing no more than spelling out two features of the development, namely that it would have a sea view and that it had planning permission. I do not see why, by stating just that, Mr Cordner could be said to have been saying that the deal was a good one, or that an entity controlled by Mr Hone was able to pass clean title to the apartments, or that there were proper arrangements in place to enable the apartments to be built and the development to be completed. Other things which Mr Cordner said and did may have carried implications of that kind, but not these comments about particular features of the development. Having said that, though, by talking about these features of the development, I think that Mr Cordner was in effect saying that an entity controlled by Mr Hone was intending to carry out the development.[231]Mr Cordner’s representation that an entity controlled by Mr Hone was intending to carry out the development was certainly not true by the time Mr Kenyon came onto the scene, because by then Azul had privately agreed to transfer the site to Duja. But was it true when Mr Innocent went to Spain, which would, I think, have been a few weeks before 17 June 2003, which is the date on which he paid the purchase price according to the property reservation sheet? And if so, was it still true when Mr Barkley went to Spain early in November 2003? It all depends on whether Mr Hone was ever intending to develop the site, and if so, when did the time come when he decided not to. That is not something which the evidence enables me to decide one way or the other, and I therefore cannot say that it is more likely than not that Mr Cordner’s representation that an entity controlled by Mr Hone was intending to carry out the development was untrue when he made that representation to Mr Innocent and Mr Barkley. But in any event, even if RMG (or some other entity controlled by Mr Hone) was not intending to carry out the development when Mr Cordner implied that it was, I do not think that he realised that it was untrue until very much later on.[232]Chairman of RMG. Three of the claimants say that Mr Cordner told them that he was the chairman of RMG. They are Sir Geoff, Mr Hopley and Mr Kenyon. Mr Cordner’s case is that he only called himself what his job title was at the time, but as I said at [175] above, both his business card and RMG’s 2005 brochure described him as the chairman of RMG, and I am sure that that is how he described himself to Sir Geoff, Mr Hopley and Mr Kenyon, albeit possibly with Mr Hone’s permission. But although Mr Hone may have allowed Mr Cordner to call himself chairman of RMG, he was not its chairman. He merely headed RMG’s sales team in the UK. His statement that he was chairman was false, and known by Mr Cordner to be false, because he knew that his real role within RMG was a long way off being its chairman.[233]RMG’s offices. Both Mr Innocent and Mr Barkley say that Mr Cordner took them to at least one of RMG’s two offices at Puerto Banus. Mr Cordner does not deny that. It is said that by doing that Mr Cordner made the first implied representation. I do not agree. The mere fact that Mr Cordner was associated with RMG so that he took potential buyers to RMG’s offices did not imply anything about RMG’s structure, size or reputation. It was RMG’s name, and the fact that RMG’s offices bore its signage, which implied those things, and that was not something for which Mr Cordner was responsible. In any event, I do not think for one moment that it occurred to Mr Cordner – or to Mr Innocent or Mr Barkley for that matter – that Mr Cordner might have been saying something about the structure, size or reputation of RMG by simply taking them to RMG’s offices.[234]Very close to Mr Hone. Mr Innocent says that Mr Cordner told him that he was very close to Mr Hone. If Mr Cordner had told Mr Innocent that, it would have been untrue, because Mr Cordner acknowledged that although they were close, they were not very close. This sort of exaggeration was exactly the sort of thing Mr Cordner would say, not just so that he could boast of his friendship with a man who was as successful as Mr Hone appeared to be, but also to get Mr Innocent to trust his judgment about Mr Hone. But I doubt very much whether Mr Innocent really remembered his conversation with Mr Cordner that well to be able to say that he used the word “very”, and I cannot say that Mr Cordner probably did.[235]Mr Hone’s partner. The reason Mr Cordner gave some of the claimants for why the apartments on offer at Aloha Royal were going so cheaply was that Mr Hone wanted to raise cash to buy out his partner. He told Mr Innocent that Mr Hone needed the cash to pay a partner off. He is said to have told Mr Barkley that Mr Hone owned 50% of RMG and wanted to raise £2m to buy out the owner of the other 50%. And he is said to have told Mr Kenyon that Mr Hone wanted to raise money to buy out his partner in RMG. Mr Cordner’s case is that he did not think that Mr Hone had a partner in RMG. He thought that Mr Hone owned RMG himself, and he therefore denies that he told Mr Barkley or Mr Kenyon anything about the partner Mr Hone wanted to buy out being Mr Hone’s partner in RMG. What he told Mr Barkley, he says, was that it was his partner in a land deal who Mr Hone wanted to buy out, though he was to say that later on it occurred to him that the land deal may have related to Aloha Royal.[236]The strong probability is that Mr Cordner did say words to the effect that Mr Hone’s partner who he wanted to buy out was his partner in RMG. It is, I think, very unlikely that Mr Barkley and Mr Kenyon would have made the same mistake, though whether Mr Hone actually had a partner in RMG is not something I can make definitive findings about. RMG’s company records show that Mr Hone was the sole director of RMG, and he described himself to RMG’s bankers as its sole administrator, but crucially there is no evidence about RMG shareholders. In the circumstances, I cannot say that Mr Cordner’s representation to Mr Barkley and Mr Kenyon that Mr Hone had a partner in RMG was false.[237]However, even if Mr Hone had a partner in RMG, I do not think that Mr Hone was raising the cash to buy that partner out, assuming in Mr Cordner’s favour that Mr Hone was raising the cash to buy a partner out. If he was trying to buy a partner out at all, it was Dovereen, Wilchester’s “partner” in the ownership of Azul. If the 2003 brochure was accurate in saying that Wilchester and Dovereen each had a 50% shareholding in Azul, and if Wilchester was owned and controlled by Mr Hone, it looks as if Mr Hone was trying to raise money to buy out his (i.e. Wilchester’s) “partner” in Azul (i.e. Dovereen). It follows that Mr Cordner’s representation to Mr Barkley and Mr Kenyon that Mr Hone needed to raise the cash to buy out his partner in RMG was false. If he was trying to raise cash to buy out a partner, it was his partner in the ownership of Azul, i.e. Dovereen.[238]Having said that, I do not think that Mr Hone was trying to raise the cash to buy out Dovereen’s interest in Azul. If the 2003 brochure is anything to go by, Dovereen’s shareholding in Azul was being offered to outsiders. That was being done to raise money for the construction of Aloha Royal. If finance for this construction could not be raised in that way, the funds had to be raised in some other way. However, the €2m or so which Mr Hone was going to raise from the sale of the 10 apartments after commission had been paid was hardly going to be enough for that purpose. Obviously, further funding was going to be necessary. It follows, therefore, that Mr Hone was trying to raise the money to fund the initial stages of the construction of Aloha Royal, or he was trying to raise it for some unidentified purpose of his own. One thing which can be said with some confidence is that he was not trying to raise it to buy out his partner, let alone to buy out his partner in RMG. It follows that Mr Cordner’s representation to Mr Innocent, Mr Barkley and Mr Kenyon that Mr Hone needed to raise the money to buy out a partner was false.[239]But did Mr Cordner know that this was false? I shall return to Mr Kenyon later but I do not think that Mr Cordner did – at any rate not when he made the representation to Mr Innocent and Mr Barkley. I do not think for one moment that Mr Hone took Mr Cordner into his confidence, and although he must have known that there was something funny going on about Aloha Royal, there is nothing which suggests that Mr Cordner might not have taken what Mr Hone told him at face value. There is no reason to doubt Mr Cordner’s evidence that Mr Hone did indeed tell Mr Cordner that he needed to raise the money to buy out his partner. Admittedly, I also find that he told Mr Cordner that that partner was his partner in RMG. Since Mr Cordner thought that Mr Hone owned and would be developing the site at Aloha Royal through RMG, that should have made Mr Cordner wonder how Mr Hone could use the proceeds of sale of RMG’s assets to buy out his partner in RMG. Indeed, the same could be said of the claimants, but I do not believe that thinking of that kind ever came up on Mr Cordner’s radar – or on the claimants’ either.[240]There is an additional point here about what Mr Cordner said to Mr Barkley, which was that the amount which Mr Hone wanted to raise was £2m. Mr Cordner did not deny the effect of that, because he thought that he might have referred to €3m. That is said to have been false in view of the commission Mr Cordner would be getting. In the light of that commission, Mr Hone would only be able to raise €2,137,000, which was far less that £2m. But I do not believe that what Mr Cordner told Mr Barkley was necessarily false. The fact that Mr Hone knew that he could only raise just over €2m by the special deal did not make Mr Cordner’s statement that Mr Hone wanted to raise £2m false. It could simply have reflected Mr Hone’s recognition that he would not be able to raise the whole of the £2m if Mr Cordner was to get this level of commission. In any event, Mr Cordner’s commission was the only reason why the sale of the 10 apartments at €298,000 would not have resulted in Mr Hone receiving the equivalent of £2m. In these circumstances, it could be said that when Mr Cordner said that Mr Hone wanted to raise £2m, he was referring to what the sale of the apartments would raise before commission had been paid, not after. As it is, there is no allegation in the latest version of the Particulars of Claim that Mr Cordner’s statement that Mr Hone wanted to raise £2m was false.[241]Mr Cordner’s statement to Mr Innocent, Mr Barkley and Mr Kenyon that Mr Hone needed the money to buy out his partner (whether his partner in RMG or his partner in some other venture) is said to have amounted to one aspect of the third implied representation, namely that the money which Mr Innocent, Mr Barkley and Mr Kenyon paid for their apartments could lawfully be used by Mr Hone to buy out his partner. The important word here is “lawfully”. Was Mr Cordner impliedly representing that Spanish law permitted the purchase price of a property which was being bought off-plan to be used for the developers’ own purposes (other than to fund the construction of the property) even before the property has been built? Again, it is important to see the context in which Mr Cordner said that Mr Hone needed the cash to buy out his partner. He told Mr Innocent that there would be a good deal going if he could come up with the money quickly. He told Mr Barkley at the sales convention in Mauritius that Mr Hone needed the money straight away. And he told Mr Kenyon that he would need to make up his mind immediately. Mr Cordner did not dispute any of that. The obvious implication of that is not merely that Mr Hone needed the cash to buy out his partner, but also that he was going to use the cash for that purpose quickly, i.e. before their apartments had been built. So the question is whether that carried with it the implication that Spanish law permitted that? I think it did, but the important thing is that neither Mr Innocent nor Mr Barkley nor Mr Kenyon said that they thought that what Mr Cordner was saying meant that, and I do not believe that Mr Cordner would have realised that what he was saying meant that either.[242]I return to whether Mr Cordner knew by the time he told Mr Kenyon that Mr Hone needed to raise the money to buy out his partner that what he was saying had become false by then. This was almost a year after Mr Cordner had told Mr Innocent that. Mr Cordner was to accept in cross-examination that by then it was not so much Mr Hone who needed the money, but rather he who did because of what Mr Hone had told him about being able to use whatever Mr Kenyon paid towards the purchase of the Derings. So what Mr Cordner told Mr Kenyon – namely that it was Mr Hone who needed the money – was false because it was Mr Cordner who needed it, and Mr Cordner must have known that it was false.[243]A good deal. Mr Cordner told two of the claimants that the deal was a good one. What he said to Mr Innocent was that there would be a good deal if Mr Innocent came up with the money, and he said that in the context of him showing Mr Innocent the 2003 brochure, and telling him that he could get the apartment for £212,000 despite the list price in the brochure of €474,800. What he said to Mr Kenyon was that there was a very good deal going, and he said that in the context of him telling Mr Kenyon that the nine apartments to which the deal related were being sold at a very significant discount. Mr Cordner does not dispute saying that.[244]The claimants’ case is that by saying that to Mr Innocent and Mr Kenyon, Mr Cordner was in effect saying that the minimum price for which the vendor could sell the apartments and still make a profit was not substantially below the price at which they were being offered to Mr Innocent and Mr Kenyon. This was false because the minimum price for which the apartments could be sold and still provide a profit for the vendor must have been substantially below that for the vendor to have been able to afford to pay Mr Cordner a substantial commission which was not disclosed to Mr Innocent and Mr Kenyon. I cannot go along with this contention. I do not think that the effect of what Mr Cordner was saying was what the claimants say it was. At the most, the effect of what Mr Cordner was saying was that the vendor could still make a profit even if the purchase price was substantially reduced to €298,000 in the case of Mr Innocent and €360,000 in the case of Mr Kenyon. But he was not implying that the vendor could not go significantly below those figures and not still make a profit.[245]Mr Cordner’s statements to Mr Innocent and Mr Kenyon about how good the deals were are also said to have amounted to the fifth implied representation. This has to be seen in the context that they were being asked to pay the whole of the purchase price up front, that Mr Innocent was taken to one of RMG’s offices in Puerto Banus, and Mr Kenyon was asked to make his cheque payable to RMG. By telling them what a good deal it was in these particular circumstances, I think that the effect of what Mr Cordner was saying was that an entity controlled by Mr Hone was in a position to pass clean title to them, that such an entity was intending to carry out the development, and that there was sufficient funding in place to enable the apartments to be built and the development to be completed.[246]Part of this was false at the time Mr Cordner was dealing with Mr Innocent. Although Azul (which was an entity controlled by Mr Hone) was in a position to pass clean title to Mr Innocent, there is nothing to suggest that either Azul or RMG at that stage had the necessary funds in place to enable the apartments to be built and the development to be completed. I have already said that I cannot say that Mr Hone was not at that stage intending to carry out the development. But by the time Mr Cordner was dealing with Mr Kenyon, that was false, because Azul had agreed (admittedly by an agreement which was then unenforceable) to sell the land to Duja.[247]Having said that, although Mr Innocent and Mr Kenyon understandably thought that they would be getting title to their apartments, that their apartments would be built and that the development would be completed, I do not believe that they applied their minds to whether RMG (or any other entity) was able at that time to pass clean title to them, or that at that time sufficient funding was in place to enable the apartments to be built and the development to be completed. And I certainly do not think that that would have occurred to them as a result of what Mr Cordner told them about how good the deal they were getting was, even in the context in which he said it. The same goes for Mr Cordner. And if he did not realise that he was in effect making that representation, the question whether he was aware of its falsity becomes immaterial.[248]Mr Cordner’s purchase of the apartments. It is said that Mr Cordner told a number of the claimants that the apartments to which the special deal related were apartments which he had bought. Some of the evidence was not quite that clear. Sir Geoff says that Mr Cordner told him that he had bought 10 apartments at Aloha Royal himself from Mr Hone at a pre-sales launch, and was able to “sell them on” at a heavily discounted price. He added that Mr Cordner may well not have used the word “bought”, so that was only what Sir Geoff understood Mr Cordner to mean. Mr Hopley said that Mr Cordner had told him that he had “taken” 10 apartments at Aloha Royal, but he did not say how Mr Cordner had taken them – whether he had bought them or reserved them or whatever. Mr Roberts’ evidence, which is summarised at [89] above, was unclear about how or when Mr Cordner would be buying the apartments, but the effect of what he was saying on each version of what Mr Cordner had told him was that if Mr Roberts decided to buy one of the apartments, he would be buying it from Mr Cordner.[249]I do not doubt that Mr Cordner told Sir Geoff and Mr Hopley what they say he said. But what Sir Geoff thought Mr Cordner meant is no more than guesswork, and Mr Hopley’s version of what Mr Cordner said is just as consistent with Mr Cordner having reserved the 10 apartments. I cannot say that the probabilities are that Mr Cordner told them that he had bought the apartments himself. However, Mr Roberts is in a different position. His previous dealings with Mr Cordner over the development at Los Flamingos had led him to believe that on that occasion Mr Cordner had bought the apartments there himself and that Mr Roberts and his son had then bought their apartments from Mr Cordner. It was only because Mr Roberts thought that Mr Cordner had himself bought the apartments at Aloha Royal that he was able to offer one of them to Mr Roberts at a discount. And it was because Mr Cordner himself was selling the apartment to him, and not selling it as an agent, that Mr Roberts thought that Mr Cordner would not be making a profit on the sale. Mr Cordner’s profit would be coming from the other apartments he sold. The strong probability is that, despite his denial, Mr Cordner did indeed tell Mr Roberts that Mr Roberts would be buying the apartment from him. That was false, of course, and known by Mr Cordner to be false at the time.[250]Mr Cordner’s family. When Mr Cordner told Mr Hopley that he had “taken” 10 apartments at Aloha Royal, he said, so Mr Hopley claims, that he had taken them for his family (including one for his mother and father). Mr Cordner is said to have said something along the same lines to Sir Geoff and Mr Kenyon as well. Sir Geoff says that when he and Mr Power met Mr Cordner at Selfridges hotel, Mr Cordner said that the rest of the 10 apartments were selling quickly, and that some of them had been taken by his family and others. And Mr Kenyon says that Mr Cordner told him that he was himself buying at Aloha Royal with Sandra and his parents. Mr Cordner claims that he only said that he had “offered” the apartments, or some of them, to members of his family, but I think that his recollection here is at fault. What was attributed to him was just the sort of thing which I think Mr Cordner would have said to give potential buyers confidence in the development, and too many of the claimants say the same thing for them to have got it wrong. What Mr Cordner said was false and known by him at the time to be false: neither his parents nor any other member of his family had bought apartments at Aloha Royal.[251]The discount and the up front payment. Mr Cordner told the claimants that the apartments were being sold at substantially less than the list price, provided that they were paid for in full up front. I set out at [243] above what he told Mr Innocent and Mr Kenyon. Sir Geoff said that Mr Cordner showed him the list prices for the units at Aloha Royal, and told him that the ones he had were the ones with the list price of €474,800, but which he could sell for €298,000, provided that Sir Geoff was prepared to pay the whole of the purchase price up front. Mr Hopley said that Mr Cordner told him that the whole of the purchase price would have to be paid up front, but that he and Sir Geoff could expect a substantial return on their investment as they would be getting the apartment at a heavily discounted price. Mr Roberts said that Mr Cordner told him that he could sell him one apartment at a significant discount of around €100,000-€150,000, but that Mr Roberts needed to pay the whole of the purchase price up front. And Mr Barkley said that when they had been at the sales convention in Mauritius, Mr Cordner had told him that investors were being asked to pay the whole of the purchase price up front.[252]The claimants’ case is that by saying to Mr Hopley and Mr Roberts that the price they would be paying for the apartments had been heavily or significantly discounted, Mr Cordner was in effect saying what they claim was the effect of what he told Mr Innocent and Mr Kenyon about the deal being a good one. For the reasons given at [244] above, I do not agree with that.[253]In addition, though, the claimants say that by telling Sir Geoff, Mr Hopley, Mr Innocent, Mr Roberts, Mr Barkley and Mr Kenyon that in order to get the discounted price for their apartments they had to pay the whole of the purchase price up front, Mr Cordner was making the third implied representation to them. I have no doubt that by requiring them to pay the whole of the purchase price up front in order to get the discounted price, Mr Cordner was saying that Spanish law permitted the whole of the purchase price to be paid up front. That was not false. Spanish law did permit the whole of the purchase price to be paid up front. But by asking for money up front, I am sure that Mr Cordner was also saying that it was intended to handle and use the money in accordance with the requirements of Spanish law, even if, as I find, he did not know what those requirements were. Such an implication was included in the third implied representation, since the last element of that representation is that RMG or Mr Hone were intending to comply with Spanish law in carrying out the contracts. Indeed, this representation would have been made out if only a small percentage of the purchase price had to be paid up front, since the requirements of Spanish law relate to any funds paid on account.[254]This part of the third implied representation was false. Where funds were received from purchasers of apartments being bought off-plan, Spanish law required those funds to be placed into a designated bank account separate from the developers’ own funds, and a guarantee to be in place to secure the return of those funds together with interest if the apartments were not built or were not built by the agreed date for completion. There was no intention on the part of RMG or Mr Hone to comply with the first of these requirements because the money was to be used to enable Mr Hone to pay off his partner. And since no guarantee was ever put in place, it is not difficult for me to find that there was no intention on the part of RMG or Mr Hone to comply with the second of those requirements either.[255]However, I doubt whether Mr Cordner would have realised that requiring the whole of the purchase price to be paid up front carried with it the implication that it would be handled and used in accordance with the requirements of Spanish law. I do not think that that would have crossed his mind, and to be frank I do not think that it would have crossed the minds of the claimants as well. Again, this was not something which would have come up on their radar.[256]Only one apartment available. A recurrent theme in Mr Cordner’s sales pitch relating to the apartments at Aloha Royal was his practice of telling potential buyers either that there was only one apartment left or that one had just become available. He told Mr Hopley that the sale of one of the apartments had fallen through and that he was therefore prepared to offer it to Mr Hopley and Sir Geoff. In his letter to Mr Power’s solicitors, he said that this was “the last property available” at the reduced price. And having told Mr Barkley while they were in Mauritius that all the apartments at Aloha Royal which had been offered at the large discount had all been sold or were under offer, Mr Cordner later told him that one of the apartments had become available. Mr Cordner cannot recall whether he told Mr Hopley what Mr Hopley attributes to him, but he does not deny that he told Mr Barkley what Mr Barkley claimed he said. I have no doubt that he did indeed tell Mr Hopley that the sale of one of the apartments had fallen through. I think he probably told Mr Kenyon as well that he had only one apartment at Aloha Royal left. That was Mr Kenyon’s evidence, but since that representation to Mr Kenyon was not pleaded in the latest version of the Particulars of Claim, I say no more about that.[257]Mr Cordner denies that any of this was false. If he said what was attributed to him, it was either because the sale to Mr Barkley of one of the five apartments which he had bought had fallen through, and Mr Hone had released that apartment back to Mr Cordner, or because Mr Hone had released another apartment to him. I do not believe Mr Cordner on this topic. To the extent that he relied on the properties sold to Mr Brogan, I do not believe him for the reasons advanced by the claimants as summarised at [135] above. In any event, he spoke to Mr Hopley and Mr Barkley, and wrote to Mr Power’s solicitors, at different times. It was in about July 2003 that he told Mr Hopley that the sale of one of the apartments had fallen through. He must have been referring to another apartment when in October 2003 he told Mr Barkley that one of the apartments had become available because by then Mr Hopley had agreed to buy no. 90 Aloha Royal with Sir Geoff. And he must have been referring to a further apartment when on 26 November 2003 he informed Mr Power’s solicitors about the property being the last one available, because by then Mr Barkley had agreed to go halves with Mr Cordner on no. 56 Aloha Royal. He therefore had to have been referring to different apartments, and I do not believe for one moment that they all happened either to be the last one left, or to have just become available when Mr Cordner spoke to Mr Hopley and Mr Barkley and wrote to Mr Power’s solicitors. Indeed, I am sure that Mr Cordner knew at the time that what he was saying was untrue.[258]The return on the investment. Mr Cordner told all of the claimants with the exception of Mr Innocent about the return they would get on their investment. He told Sir Geoff that when the apartments were built they would sell for €650,000-€700,000. He told Mr Hopley that they could expect a substantial return on their investment when the development reached roof level. He told Mr Roberts that he could possibly double his money. The note he gave to Mr Barkley said that the expected selling price in 14-16 months time was €600,000-€650,000, and that they should be able to double their money within that time. And the note he gave to Mr Kenyon said that he would be able to sell the apartment for €550,000-€700,000. The notes, of course, speak for themselves, but Mr Cordner does not deny that he told Sir Geoff, Mr Hopley and Mr Roberts what they attribute to him. He said that what he told them represented what he genuinely thought about their investments.[259]The claimants’ case is that by saying these things Mr Cordner was making the fifth implied representation, and in relation to what he told Sir Geoff and Mr Hopley the second implied representation as well. However, the allegation that what Mr Cordner said to Sir Geoff and Mr Hopley carried with it the second implied representation was not pleaded in the latest version of the Particulars of Claim, and I say no more about it. As with the representation which Mr Cordner made to Mr Innocent and Mr Kenyon about how good the deal they were getting was, I think that by talking in such optimistic terms about the return which the claimants would be getting on their investment, the effect of what Mr Cordner was saying was that RMG was in a position to pass clean title, that RMG was intending to carry out the development, and that there was sufficient funding in place to enable the apartments to be built and the development to be completed. For the reasons given at [246] above, much of that was false, but for the reasons given at [247] above, I do not believe that either the claimants or Mr Cordner realised that he was in effect making the fifth implied representation.[260]The time the construction would take. A number of the claimants were given by Mr Cordner an estimate of how long it would take for the construction of the development to be completed. Sir Geoff was told that it would take about 18 months. Mr Roberts was told about 2 years. And Mr Kenyon was told, admittedly in March 2004, that it would be completed by April or May 2005. Mr Cordner did not deny any of that. Once again, the claimants’ case is that by saying these things Mr Cordner was making the fifth implied representation. I agree, but I do not think that either the claimants or Mr Cordner realised that.[261]A separate account. Two of the claimants say that Mr Cordner told them that their money would be kept in a separate account. Sir Geoff says that Mr Cordner told him that the money would be kept in an escrow account with the bank, and would be released in stages as the construction reached the first and second storeys. Mr Hopley says that Mr Cordner told him that the money had to be kept in a totally separate account. Those statements carried with them the implication that it was intended to keep the money in such accounts. Mr Cordner denies that he said anything along these lines to them. All he knew was that there would be a bank guarantee in place. However, I find that Mr Cordner did tell Mr Hopley what Mr Hopley claims he said. It is true that it was not in the one witness statement Mr Hopley made. What that said was that Mr Cordner had said that “he was obligated to accept responsibility formally for the actions of RMG”. This was very much “legal-speak”, and when he gave evidence orally, Mr Hopley explained that what Mr Cordner had actually told him was that the funds had to be kept in a totally separate account, and that it was his responsibility to ensure that the funds were used for what they were supposed to be used. I accept his evidence. It was given in a straightforward and open way, and since, as I find, Mr Hopley’s previous experience of buying properties off-plan was that the funds were kept in a separate account and released in stage payments, it was just the sort of thing which he would want to get Mr Cordner’s assurance about. In any event, for the reasons given at [104] above, Mr Cordner was aware that RMG’s in-house practice required any deposit paid by the purchaser to be kept in a separate account maintained by RMG’s lawyers.[262]I am less sure of the accuracy of Sir Geoff’s recollection on the topic for the reasons set out at [56] above. Not only was he uncertain about when Mr Cordner told him what he claims Mr Cordner said, but it was something which Sir Geoff came out with relatively late in the day. On balance, though, I think it probable that Mr Cordner did say to Sir Geoff what Sir Geoff claims, if only because he was aware of what RMG’s in-house practice was, and was likely to have given this extra assurance to possible purchasers. And it is plain that the implication behind what Mr Cordner told Mr Hopley and Sir Geoff was false. It was not intended that the money which Sir Geoff and Mr Hopley was to pay for their apartments was to go into an escrow account or a separate account, because Mr Cordner thought that it was going to be used by Mr Hone to buy out his partner. So he knew that it was false as well.[263]The return of their money. A slight variation on the representation that the claimants’ money would be kept in a separate account was the representation which a number of the claimants say Mr Cordner made to them that if the development was not completed they would get their money back. Sir Geoff says that he was told that the bank would return his money if the development was not completed. Mr Innocent says that he was told that he was not to worry about what would happen if the site was not developed because Spanish law required a bank guarantee to be in place, and such a guarantee would be in place. Mr Barkley says that he was told that there was, or would be, a bank guarantee in place, and when he asked Mr Cordner what that meant, he was told that if the apartments were not built, the investors would be guaranteed their money back.[264]I should add that in his fourth witness statement Mr Kenyon said:
“I have no recollection of Mark Cordner using the specific words ‘bank guarantee’ when he was assuring me that if I invested in Aloha Royal my investment would be safe.”
However, in none of his three earlier statements did Mr Kenyon say that Mr Cordner had given him that assurance. Mr Kenyon merely referred in his third witness statement to his belief that his investment was safe because of the trust he had in Mr Cordner. If Mr Cordner had told Mr Kenyon that his investment was safe – which I doubt – I do not think that he was saying that Mr Kenyon’s money was safe. He was only saying that it was not a risky investment, i.e. that it was likely to produce a return. I have already dealt with the effect of a representation of that kind at [258]-[259] above.[265]It was, therefore, only Mr Innocent and Mr Barkley who claimed that Mr Cordner had said anything to them about a bank guarantee. There is no doubt that Mr Cordner spoke to them about a bank guarantee. He accepts that he did. After all, the availability of bank guarantees was a topic covered in Mr West’s slide presentation for RMG’s introducers, and introducers were told in the guide produced for their use that Spanish law required any deposit paid by the purchaser when buying a property off-plan to be protected by a bank guarantee which would be in place once the purchaser had signed the contract of sale. In any event, the evidence of Mr Clarke on the topic – which I unreservedly accept – is important. He would tell potential purchasers that bank guarantees were required by Spanish law. He had done that because it was like a mantra which he and the other introducers were told “virtually every day”.[266]But what did Mr Cordner actually tell them about bank guarantees? Mr Cordner’s own evidence was that Mr Hone and Ms Campaña had told him that a bank guarantee was in place which would enable purchasers to get their money back if the units they were buying were not built. However, since Spanish law requires the guarantee to be individual to the purchaser, what they must have meant was that arrangements had been made with RMG’s bank for guarantees to be given to purchasers who agreed to buy units off-plan. Mr Cordner was not asked whether he was aware that the guarantees had to be individual to the purchasers, or whether he checked with Mr Hone or Ms Campaña precisely what they meant. In the circumstances, I cannot say that Mr Cordner told Mr Barkley that a bank guarantee was already in place, and I find that what he told Mr Barkley was what Mr Innocent claims Mr Cordner told him, namely that a bank guarantee would be in place, and that they would in effect get their money back if their apartments were not built. And if that was what Mr Cordner told Mr Innocent and Mr Barkley, I think it probable that he told Sir Geoff what Sir Geoff claims Mr Cordner said.[267]Telling Mr Innocent and Mr Barkley that there would be a bank guarantee in place carried with it the undoubted implication that RMG was intending to arrange such a guarantee. Any previous intention to arrange for such a guarantee would have gone by January 2004 when Azul agreed to sell the land to Duja. As it is, there has been no evidence whatever which suggests that a guarantee was put in place before then, and it is highly probable that by the time Mr Cordner told Mr Barkley in November 2003 that there would be a bank guarantee in place, any intention that there had been to arrange for one had ceased to exist. However, that cannot be said for what Mr Cordner told Mr Innocent in what would have been early June 2003, or for what he told Sir Geoff some time before 12 August 2003. So although the implication behind what he told Mr Barkley was false, I cannot say that the implication behind what he told Mr Innocent or Sir Geoff was.[268]Did Mr Cordner know that the implication behind what he told Mr Barkley was false? It is said on behalf of Mr Barkley that Mr Cordner must have done: why else would he have discouraged Mr Barkley from getting his own legal advice, and why else would he have told Sir Geoff and Mr Hopley that their money would be kept in a separate bank account? I do not think that either of these things show that Mr Cordner knew in November 2003 that it was not intended to put a bank guarantee in place. Discouraging people from taking legal advice was more consistent with not wanting them to find out that RMG did not have title to the land. And keeping the money in separate accounts was neither consistent not inconsistent with having a bank guarantee in place. Nor do I think that the claimants’ argument summarised at [137] above is persuasive. That only shows that Mr Cordner knew by December 2004 that there was no such guarantee in place, and it does not help on whether Mr Cordner would have known in November 2003 that there was at that stage no intention to put a bank guarantee in place. Nevertheless, I do think it probable that Mr Cordner knew that the implication behind what he told Mr Barkley was false. By the time he told Mr Barkley in effect that RMG was intending to arrange for such a bank guarantee, five months or so had passed since he had told Mr Innocent the same thing. And yet he himself admitted that he never saw a guarantee. I do not think that he would have believed in November 2003 that RMG was intending to arrange for a bank guarantee if he had not by then seen the bank guarantee which he had told Mr Innocent in June 2003 would be arranged.[269]It is said on behalf of the claimants that Mr Cordner’s statement to Mr Innocent and Mr Barkley that there would be a bank guarantee in place carried with it the fifth implied representation. I think that is right but only to a limited extent. Mr Cordner was simply assuring Mr Innocent and Mr Barkley that the intention was to make arrangements whereby they would get their money back if the development did not take place. I do not think that by doing that Mr Cordner was making any statement about how good the deal was. Nor was he saying that an entity controlled by Mr Hone was in a position to pass clean title to them, or that there was sufficient funding in place to enable the apartments to be built and the development to be completed. But he was saying, I think, that an entity controlled by Mr Hone was intending to carry out the development. Having said that, I have already said that I cannot say that Mr Hone was not intending to carry out the development at the time Mr Cordner spoke to Mr Innocent. It is more questionable whether Mr Hone was intending to carry out the development at the time Mr Cordner spoke to Mr Barkley. In view of Azul’s sale of the land to Duja in January 2004, there must have come a time before the end of 2003 when Mr Hone decided that neither he nor an entity controlled by him would be developing the site. He may have made that decision by the time Mr Cordner spoke to Mr Barkley about a bank guarantee being in place, but I cannot say that he probably did.[270]The use of lawyers. The use of lawyers was a topic which cropped up in all of Mr Cordner’s conversations with the claimants. Sir Geoff says that Mr Cordner told him that RMG’s “in-house lawyer” could deal with all the legal work on their, i.e. his and Mr Hopley’s, behalf. Mr Hopley says that Mr Cordner told him not to bother about obtaining independent legal advice because he, Mr Cordner, would arrange for that on their behalf, adding that he had done it many times before on other developments using a firm called Spanish Legal Services. Mr Innocent says that Mr Cordner told him that arrangements would be made for lawyers to be instructed when the apartment was built. Mr Roberts says that Mr Cordner told him that he knew a lawyer who could sort out all the legal documentation and who he would arrange to act on the transaction. Mr Barkley says that Mr Cordner told him that a Spanish lawyer he knew, Sylvia Campaña, would look after the legal formalities for them. And Mr Kenyon says that Mr Cordner told him that he would be handling the legal side of the purchase, and that there was a Spanish lawyer who would look after everything for Mr Kenyon.[271]At [138] above, I summarised Mr Cordner’s evidence of what he said to the claimants about the use of lawyers. I do not think that Mr Cordner’s evidence was truthful. It is noteworthy that although he claims that he told all of them that they had the option of instructing their own lawyers or using Spanish Legal Services who he would put them in touch with, he did not at any time say what the response of any of the claimants (with the exception of Mr Barkley) was when given this option. Nor did he say that he ever asked any of them before they actually gave him their cheques whether they had obtained legal advice, which he could be expected to have asked them if he had really given them the option. Nor could he have thought that they had taken legal advice by the time they gave him their cheques, because he would have known that they had not been given draft contracts of sale. They were only sent to the claimants weeks and sometimes months later. Without draft contracts, the claimants could not have obtained any form of informed legal advice at all. I am sure that Mr Cordner said to the claimants only what they say he said, bearing in mind that, with the exception of Mr Innocent, they all say broadly speaking that he said the same thing to them.[272]Nor do I think that Mr Cordner dealt with Mr Barkley any differently. At [157] above, I summarised Mr Cordner’s evidence of his conversations with Mr Barkley about the use of lawyers, but(a) having seen Mr Barkley, I do not think for one moment that he would have been as uninterested in getting legal advice as Mr Cordner says he was, and(b) it would have been entirely understandable for Mr Cordner on his joint purchase of no. 56 Aloha Royal to suggest to Mr Barkley that, with Mr Cordner’s experience of dealing in properties in Spain, he would arrange for the appropriate legal formalities to be done. And for the reasons set out at [158] above, I do not believe that Mr Cordner spoke to Ms Campaña about the purchase of no. 56 Aloha Royal at all. I think that he felt that he had to say that he had because Mr Barkley’s purchase of no. 56 Aloha Royal was one in which he had a personal stake. However, all this has to be put to one side because although it was pleaded that Mr Cordner had told Mr Barkley that Ms Campaña would deal with the legal formalities, it was not pleaded that this was said before Mr Barkley gave Mr Cordner his cheque. It was pleaded that this occurred later on when they were discussing why Wilchester had been named in the contract of sale as the vendor.[273]The last two sentences of the previous paragraph were included in a draft of this judgment which was sent to the parties for any typing corrections and obvious errors to be pointed out. Mr Barkley’s legal team commented that in the latest version of the Particulars of Claim it had been alleged that all of the claimants (leaving aside some of Sir Geoff’s investments) had handed over their cheques in reliance on Mr Cordner’s representations about lawyers. They also made the point that Mr Barkley’s evidence had been that he had relied on the representation about lawyers when handing over his cheque, that his evidence about when the conversation between him and Mr Cordner about lawyers had taken place had not been challenged in cross-examination, and that Mr Cordner’s own evidence had been that the discussion about lawyers had preceded the handing over by Mr Barkley of his cheque. That may be so, but the paragraphs in the latest version of the Particulars of Claim which were relied upon (paras. 44, 47 and 48) were not specific to Mr Barkley, and para. 44 (which pleaded the representations about lawyers) itself said that the specific representations were “as set out in the schedules”. The passage in the schedules to the latest version of the Particulars of Claim on this topic which related to the representation about lawyers made to Mr Barkley was in para. 7 of Schedule 4. That pleaded that Mr Cordner had told Mr Barkley that Ms Campaña would be dealing with the legal formalities when he was explaining why Wilchester had been named in the contract of sale, not RMG. Accordingly, it was expressly pleaded in Mr Barkley’s case that his conversation with Mr Cordner about lawyers happened some time after he had agreed to buy no. 56 Aloha Royal with Mr Cordner, since it was much later that he received the contract of sale. As I said in [211] above, it is how the representations were pleaded that is material.[274]As for Mr Kenyon, he was told by Mr Cordner that he had to make up his mind about investing in Aloha Royal immediately. There simply was not going to be enough time for him to instruct lawyers himself, so the notion that he was given the option of doing that rather than relying on Mr Cordner to handle the legal side of the purchase makes no sense.[275]I leave Mr Innocent aside for the moment. By saying what he did to the other claimants, Mr Cordner was in effect saying that it was his intention to arrange for lawyers, sometimes referring to Ms Campaña or Spanish Legal Services specifically, to look after the legal side of things. But what did he mean by that? I do not think that he meant that he would be arranging for lawyers simply to draw up the appropriate documents. Purchasers of properties off-plan overseas need legal advice about whether they will get title to what they are buying, and whether their investment is protected if the development is not completed. Mr Cordner knew that, and that was what he meant when he was saying that he would arrange for lawyers to look after the legal side of things. In short, he was saying that he would arrange for lawyers to act on the claimants’ behalf on the transactions, and that carried with it the implication that that was what he was intending to do. That was the fourth implied representation, and I find that what Mr Cordner said to the claimants carried that implication. That applies also to Sir Geoff, even though what he told Sir Geoff was that the legal work would be done by RMG’s “in-house lawyer”, since the lawyer would be doing that legal work on behalf of Sir Geoff and Mr Hopley.[276]What Mr Cordner said to the claimants was false, and known by Mr Cordner at the time to be false. He was not intending to arrange for lawyers for the claimants at all. He was not going to do anything once the sale had been secured. He knew, of course, that Ms Campaña would be drafting the contracts of sale, and handling any other legal formalities for RMG, but that was all. There was no question of any lawyers being instructed to look after the claimants’ interests. It was said that that was because Mr Cordner knew that the claimants would not be getting title to their apartments. I am not convinced of that, though I think that Mr Cordner realised that lawyers had to be kept away from the transactions because he knew something fishy was going on from the terms of the special deal, and had he thought about what that was rather than being blinded by the commission he was going to make, he would, for the reasons given at [228] above, have realised that there was something dodgy about title.[277]I return to Mr Innocent. Mr Cordner did not tell Mr Innocent that he would arrange for lawyers to be instructed at that stage. He told Mr Innocent that arrangements would be made for lawyers to be instructed when his apartment was built. That is said to carry with it the fourth implied representation. I do not agree. The fourth implied representation related to what Mr Cordner or RMG intended to do for the claimants on their purchase of apartments at Aloha Royal. What Mr Cordner said to Mr Innocent related to what was intended to be done when his apartment had been built,which was going to be a long time after Mr Innocent’s apartment had been purchased. It may be that what Mr Cordner told Mr Innocent made Mr Innocent think that he did not need a lawyer when he was buying the apartment, but it was not pleaded that that was something which Mr Innocent could have taken from what Mr Cordner told him.[278]Previous purchasers. Mr Innocent says that Mr Cordner told him that Sir Geoff and Mr Kenyon had already bought apartments at Aloha Royal, and Mr Roberts says that Mr Cordner told him that Harry Redknapp had bought there, and that Martin Peters, amongst others, was buying there. At [152] and [154] above, I summarised Mr Cordner’s evidence on the topic. I am inclined to believe Mr Cordner’s evidence about what he told Mr Innocent. If he did not know that Mr Innocent knew Mr Kenyon, there would have been no point in mentioning Mr Kenyon to him. If he did know that Mr Innocent knew Mr Kenyon, he was hardly likely to have said something which Mr Innocent would quickly find out was untrue. I do not doubt that Mr Cordner mentioned Sir Geoff to Mr Innocent, since that was at about the time when Mr Hone would have been thinking of asking Sir Geoff to help market RMG, but I think it unlikely that he would actually have said to Mr Innocent that Sir Geoff had bought an apartment at Aloha Royal. I suspect that Mr Innocent has confused talk of Sir Geoff’s connection with RMG with Sir Geoff actually investing in one of RMG’s properties.[279]As for Mr Roberts, I do not doubt that Mr Roberts was sent a copy of part of Harry Redknapp’s contract for the purchase of no. 61 Aloha Royal. After all, it was Mr Roberts who disclosed it. But he got it after he had handed over his and his wife’s cheque for the apartment they were buying. He says that he got it in September 2003 when he got his contract for the purchase of no. 68 Aloha Royal, but that cannot be right because the part of Harry Redknapp’s contract which he was sent a copy of was dated 26 August 2004. It must have been sent to him after that – presumably to assure Mr Roberts that he would be getting the apartment he had bought in due course. However, although Mr Roberts was wrong about when he got the copy of Harry Redknapp’s contract (and although he gave a number of versions about how the 10 apartments at Aloha Royal were becoming available), I think it highly likely that Mr Cordner told him that Harry Redknapp had bought there, and that Martin Peters, among others, was buying there. That was just the sort of thing which Mr Cordner would say to secure the sale to Mr Roberts. It was not as if Harry Redknapp and Martin Peters had no connection with RMG. Mr Cordner acknowledged that Harry Redknapp had bought properties through RMG elsewhere. It is possible that all he told Mr Roberts about Martin Peters was that Martin Peters was investing in RMG, because that was what Mr Hone had told him, but I think it much more likely that Mr Cordner went one step further and told him that Martin Peters was buying at Aloha Royal. After all, Mr Roberts would not have had celebrity neighbours – which was what he says Mr Cordner told him – unless Martin Peters was already buying at Aloha Royal.[280]What Mr Cordner told Mr Roberts about Harry Redknapp and Martin Peters was false. Mr Cordner agreed that Harry Redknapp had not bought an apartment at Aloha Royal, and he has not claimed that Martin Peters was buying there. Since Mr Cordner would have known who had bought or were buying apartments at Aloha Royal – especially if they were well known – he knew that what he told Mr Roberts was false.[281]Mr Cordner’s commission. Mr Cordner accepts that he discussed with Mr Innocent the commission which Mr Innocent could make if he introduced a purchaser for one of the apartments at Aloha Royal himself. There was £8,000 in it for him. It is said that the impression which Mr Innocent got from what Mr Cordner told him on the topic was that(a) £8,000 represented the commission which Mr Cordner was making on the sale of the apartments at Aloha Royal, and that(b) Mr Cordner was prepared to give Mr Innocent a share of his commission if Mr Innocent introduced a purchaser himself. I did not understand Mr Innocent to be saying that either of those things were the impression which Mr Cordner conveyed to him. But leaving that aside, as for (a), I do not think that Mr Innocent could have got from what he says Mr Cordner said – namely, that there was £8,000 to be made if Mr Innocent introduced a purchaser for one of the apartments at Aloha Royal himself – that Mr Cordner was saying that his own commission was £8,000. All that Mr Innocent could have got out of it was what he, Mr Innocent, would make by way of commission. As for (b), that was not the representation which was pleaded in the latest version of the Particulars of Claim. What was pleaded was that Mr Innocent could earn £8,000 himself if he introduced a purchaser. I am sure that this is what Mr Cordner actually told Mr Innocent, and there is no reason to suppose that it was false.[282]Going halves with Mr Barkley. Mr Barkley says that when he was with Mr Cordner in Spain and he told Mr Cordner that he could not afford to buy the one apartment which Mr Cordner had said had become available, Mr Cordner said that he was willing “to go halves” with Mr Barkley on it. That is slightly different from the way the representation was pleaded in the latest version of the Particulars of Claim. It was pleaded that Mr Cordner’s offer to go halves was made at the sales convention in Mauritius should an apartment become available, rather than in Spain when an apartment had become available. However, that is a distinction without a difference, bearing in mind that Mr Cordner does not dispute that he offered to go halves with Mr Barkley on the purchase of the apartment.[283]But what did Mr Cordner’s offer to go halves with Mr Barkley on the purchase of the apartment mean? That is the critical question. By offering to go halves, was Mr Cordner offering to pay the same amount as Mr Barkley would have to pay? If that was what he was offering, he had no intention of honouring that offer. Mr Barkley would be paying the sterling equivalent of €149,000 for his half-share, but Mr Cordner would only be paying €64,700 for his, once his commission of €84,300 had been deducted from the sum he would otherwise have had to pay. In my opinion, Mr Cordner’s offer to go halves amounted to an offer that he would be paying the same amount as Mr Barkley. So if the amount which Mr Cordner would otherwise have had to pay was to be reduced by such commission as he was entitled to, he and Mr Barkley would be going halves on that commission as well. It was to conceal the fact that the sum he would have had to pay had been reduced by the commission to which he was entitled – and by such a large amount of commission at that – that he was so reluctant to disclose how he had paid for his half-share, since that would have revealed that they had not been going halves at all. By offering to pay the same amount as Mr Barkley, Mr Cordner was representing that if Mr Barkley accepted his offer, his current intention was to pay what Mr Barkley had to pay. Since that was not his intention at the time – because he proposed to deduct his commission from what he had to pay – his representation to Mr Barkley was false, as of course he knew.[284]A special price. Mr Cordner agrees that he told Mr Kenyon that Mr Kenyon was getting his apartment at a special price. Whether that was false depended on what Mr Cordner meant. It is argued on Mr Kenyon’s behalf that Mr Cordner could have meant a variety of things. If he meant that Mr Kenyon was getting his apartment at a price which other investors at Aloha Royal were paying, that was false because other investors were only paying €298,000 for their apartments. Alternatively, Mr Cordner is said to have arranged with Mr Hone that he could set the price of the apartments himself provided that they were sold for at least €237,000. If Mr Cordner could set the price himself, there was nothing “special” about the price which Mr Kenyon had to pay for his apartment. In any event, it is said that by telling Mr Kenyon that the price was special, Mr Cordner was impliedly saying that the price had been reduced to the minimum at which a profit could be made. Such an implication would have been false.[285]I cannot go along with any of these possibilities. Mr Cordner simply meant that Mr Kenyon was getting his apartment at a price well below the list price. That was not false. The price which Mr Kenyon was having to pay for his apartment – €360,000 – was indeed well below the list price of €474,800, even if it was more than the other claimants had had to pay.[286]The cheques payable to RMG. By asking Sir Geoff and Mr Hopley to make their cheques payable to RMG, it is said that Mr Cordner made the second implied representation. I do not think that that follows, but it does not matter because I have already found at [220] above that Mr Cordner made the second implied representation to Sir Geoff and Mr Hopley when he told them that RMG had bought the site at Aloha Royal for development.[287]Sir Geoff’s promotional agreement. When Sir Geoff first went to MPL’s office in Loughton, branded as it was as RMG, he was told about RMG’s developments, including Aloha Royal, and shown promotional literature as well as plans and drawings. Implicit in the use of RMG’s name and in the description of its various developments is said to be the first implied representation. It may be that the first implied representation was implicit in the use of RMG’s name, but RMG’s name was not something for which Mr Cordner was responsible. Moreover, I do not think that the first implied representation was implicit in the description of RMG’s various developments. What gave rise to the first implied representation was RMG’s name.[288]Implicit in the statement that one of RMG’s developments was Aloha Royal is said to be the second implied representation. This covers much the same ground as [220] above, and provided that Mr Cordner could be said to have participated in the meeting sufficiently so that what was said could be attributed to him as well as to Mr Hone (and Mr Rockall), he must be regarded as having made the second implied representation to Sir Geoff at the meeting. Sir Geoff’s and Mr Cordner’s recollections of the role Mr Cordner played at the meeting are set out at [45] and [131] above respectively. I prefer Sir Geoff’s account of it. It was Mr Cordner who was selling the individual units, and he would, I think, have wanted to explain to Sir Geoff why people might be enthusiastic about investing in developments like Aloha Royal. That is borne out by the way Mr Hopley recalls Sir Geoff speaking of Mr Cordner as well as Mr Hone following the meeting. Indeed, my impression is that Mr Hone preferred to let others do the talking when it came to selling. For example, he did not give Mr Barkley a “sales pitch” when Mr Barkley saw him in Spain. Having said that, Mr Cordner did not know that the second implied representation was false for the reasons given at [225]-[226] above.[289]At the meeting, Mr Hone asked Sir Geoff if he would consider entering into a promotional agreement with RMG. It is said that implicit in that request was the first and second implied representations. I leave to one side whether the representations were implicit in that request, since I am not persuaded that Mr Cordner could be said to have played a part in inviting Sir Geoff to enter into a formal agreement under which he would be endorsing RMG’s developments. It was Mr Rockall who was responsible for promoting RMG and its developments, and what Sir Geoff would be required to do under such a promotional agreement was something which Mr Rockall – along with Mr Hone – would have discussed with Sir Geoff rather than Mr Cordner. It was one thing for Mr Cordner to talk about RMG’s developments. It would have been quite another thing for him to have talked about Sir Geoff’s role in promoting them. Indeed, it may well be that Mr Cordner was not even there when the promotional agreement was being discussed.[290]Sir Geoff’s loan of £350,000. Mr Cordner agrees that he told Sir Geoff that Mr Hone needed to raise a loan for a development in Tenerife, and that Mr Hone wanted Sir Geoff to lend him £350,000. He does not deny that he told Sir Geoff that Sir Geoff would be repaid £595,000 by the end of December 2005. He agrees that he told Sir Geoff that the security for the loan would be in the form of a pagarê cheque, and that it was a criminal offence in Spain to dishonour such a cheque when it was presented for payment. He was saying in effect that a pagarê would be good security for the loan. It is said on behalf of Sir Geoff that Mr Cordner went so far as to tell him that “everything was secure”. That was not Sir Geoff’s evidence. His evidence was that Mr Cordner convinced him that everything was secure, and that may therefore have simply been Sir Geoff’s take on the enforceability of the security being offered.[291]There are two other things which Mr Cordner is said to have told Sir Geoff. First, Sir Geoff claims that Mr Cordner told him that he had already made a loan to Mr Hone in connection with the project. But as I said at [66] above, that was very much an afterthought on Sir Geoff’s part, and there is no reference to Mr Cordner having said anything about that in Sir Geoff’s witness statement. I much prefer Sir Geoff’s original evidence which was that Mr Cordner told him that he was himself lending towards the £3m in all which Mr Hone was trying to raise. There is a subtle but important difference between Mr Cordner and Sir Geoff. If Sir Geoff’s recollection of what Mr Cordner told him is right, Mr Cordner was saying that he had already decided to make a loan to Mr Hone. That is the effect of Mr Cordner having said that he was himself lending to Mr Hone. Mr Cordner says that he told Sir Geoff only that he was considering lending to Mr Hone himself, not that he was doing so (which suggested that he had already decided to do so).[292]Secondly, though, Mr Cordner agrees that when he heard that Mr Hopley had asked for additional security in the form of a charge over an apartment at Aloha Royal, he told Sir Geoff that he wanted security of that kind as well. That is equally consistent with Mr Cordner having told Sir Geoff that he was lending to Mr Hone and having said that he was only considering doing so. What makes me think it much more likely that he told Sir Geoff that he was indeed lending money to Mr Hone is that I accept Sir Geoff’s evidence that later on Mr Cordner told him that he, Mr Cordner, had been repaid what he had invested. Since he had not made a loan to Mr Hone, he would only have said that he had if he had previously told Sir Geoff that he had been lending to him.[293]What Mr Cordner told Sir Geoff is said to carry with it three implied representations:(i) that Mr Cordner believed that Mr Hone’s finances were such that Mr Hone would be able to repay the £595,000 by the end of December 2005;(ii) that an entity controlled by Mr Hone was ready, willing and able to carry out the development at Aloha Royal; and(iii) that Spanish law permitted an apartment to be sold by way of security for a loan which was to be used to finance a development in Tenerife.[294]In my opinion, two of these representations were implicit in what Mr Cordner told Sir Geoff. By telling Sir Geoff that he, Mr Cordner, was lending to Mr Hone, Mr Cordner was telling Sir Geoff that he was confident that he would get his money back. Since he would hardly have been lending to Mr Hone unless he was going to get a good return on his loan, he was also telling Sir Geoff that he was confident that he would get the return on his loan as well. That was tantamount to him telling Sir Geoff that he believed that Mr Hone would be able to repay him, Mr Cordner, and would in fact do so. Since it was Mr Cordner who was relaying to Sir Geoff Mr Hone’s request for a loan against the background of Mr Cordner’s own confidence about Mr Hone’s ability and willingness to repay Mr Cordner, that was tantamount to him telling Sir Geoff that he believed that Mr Hone would be able to repay Sir Geoff the amount which he promised to repay him, and would in fact do so, which is representation (i).[295]The same goes for representation (ii). By telling Sir Geoff that he, Mr Cordner, wanted the same sort of additional security which Mr Hone had offered to Mr Hopley – a charge over an apartment at Aloha Royal – he was saying to Sir Geoff that an entity controlled by Mr Hone was ready, willing and able to carry out the development at Aloha Royal, because only then would such additional security really amount to security for the loan. However, I do not think that representation (iii) was implicit in anything which Mr Cordner told Sir Geoff. It is important to remember that the additional security which Mr Cordner told Sir Geoff he wanted was the same security as Mr Hone offered to Mr Hopley. That offer was for a charge over an apartment at Aloha Royal, and so if representation (iii) had been that Spanish law permitted an apartment to be charged (rather than sold) by way of security for a loan which was to be used to fund a development overseas, that might have been a representation which was implicit in what Mr Cordner had told Sir Geoff. It is true that the additional security which Mr Hopley was subsequently offered was not a charge over such an apartment, but the sale to Mr Hopley of an apartment at Aloha Royal, with an obligation on Mr Hone to buy it back later on. But that did not affect the nature of the representation which Mr Cordner made to Sir Geoff. In any event, I am completely unpersuaded that by relaying to Sir Geoff the additional security which Mr Hopley wanted, and by telling Sir Geoff that he, Mr Cordner, wanted the same security for himself, Mr Cordner was saying anything about what Spanish law permitted. Indeed, unlike representations (i) and (ii), neither he nor Sir Geoff would have realised that what he told Sir Geoff was capable of carrying that implication.[296]Was representation (i) false? It may well be that Mr Hone’s talk of a project in Tenerife was untrue. It was his way of getting people to lend him money. But I do not think that Mr Cordner thought that Mr Hone’s claim about needing funds for the development in Tenerife was untrue. All Mr Cordner could see was (a) the commission he would earn if he could find people prepared to lend to Mr Hone, and (b) the return which he would make if he lent to Mr Hone. He must have realised that Mr Hone was strapped for cash. Why else would Mr Hone have need to borrow money? And he must have realised that Mr Hone could not raise funds in the conventional way by borrowing from financial institutions. Although he thought that Mr Hone did not borrow from banks, he must have realised that it would have been more accurate to say that banks would not lend to him. That was why Mr Hone had to offer such a high rate of return to investors who were prepared to lend to him.[297]But the question is whether Mr Cordner believed that Mr Hone would pay Sir Geoff £595,000 by the end of December 2005. The fact that he was strapped for cash and without other forms of funding available to him in May 2004 did not of itself mean that his finances would be just as precarious at the end of 2005. Indeed, Mr Cordner said – and here I think he was telling the truth – that Mr Hone had told him about how much more he would be making on the development in Tenerife. It follows that representation (i) was not false.[298]Representation (ii) was undeniably false because by May 2004 Azul had already agreed – albeit privately – to transfer the site at Aloha Royal to Duja. But did Mr Cordner believe that representation (ii) was untrue? I do not think that he did. I do not think that he realised that RMG (or some other entity controlled by Mr Hone) was not intending to carry out the development at Aloha Royal until very much later.[299]Having dealt with the representations which are said to have been implicitly made by Mr Cordner to Sir Geoff, there is one important express representation which I have found Mr Cordner made – namely that he was himself lending to Mr Hone. As I have said, Mr Cordner denies saying that. He admits only to having said that he was considering lending to Mr Hone. But I have disbelieved him on that issue. On the basis of what I have found he said, what he said was false because Mr Cordner accepts that he did not lend to Mr Hone at all. He would therefore have known that what I find he said to Sir Geoff was untrue.[300]Finally, I have not overlooked that Mr Cordner does not dispute that he spoke to Mr Kenyon about Mr Kenyon lending to Mr Hone. Despite Mr Cordner’s denial, I am sure that it was he, rather than Mr Hone or anyone else, who sent the copy of Mr Lomas’ contract to Mr Kenyon, but that has not helped one way or the other on whether what Mr Cordner told Sir Geoff carried with it any of the three implications alleged, or what he believed about the truth or falsity of those implied representations. H. The causes of action[301]Deceit. The effect of the findings I have made is that the representations pleaded in the Particulars of Claim which Mr Cordner made which were false and known by him to be false when he made them were:(a) that he was the chairman of RMG (which was what he told Sir Geoff, Mr Hopley and Mr Kenyon),(b) that Mr Hone needed to raise the money to buy out his partner (which Mr Cordner knew was false by the time he told that to Mr Kenyon),(c) that the apartments at Aloha Royal which he was selling were his (which was what he told Mr Roberts),(d) that some of the apartments at Aloha Royal had been taken by members of his family (which was what he told Sir Geoff, Mr Hopley and Mr Kenyon),(e) that only one apartment was available (which was what he told Mr Hopley and Mr Barkley),(f) that their money would be kept in a separate account (which was what he told Sir Geoff and Mr Hopley),(g) that there would be a bank guarantee in place, which carried with it the implication that RMG was intending to arrange for one (which Mr Cordner knew was false by the time he told that to Mr Barkley),(h) that he would arrange for lawyers to act on the claimants’ behalf, namely the fourth implied representation (which was what Mr Cordner in effect told Sir Geoff, Mr Hopley, Mr Roberts and Mr Kenyon),(i) that Harry Redknapp had bought at Aloha Royal and that Martin Peters was buying there (which was what he told Mr Roberts),(j) that he was prepared to go halves with Mr Barkley on the purchase of no. 56 Aloha Royal (which was what he told Mr Barkley), which carried with it the implication that Mr Cordner was intending to pay what Mr Barkley had to pay, and(k) that he was lending money to Mr Hone in connection with Mr Hone’s development in Tenerife (which was what he told Sir Geoff). Representations (a)-(j) related to the claimants’ investments in Aloha Royal. Representation (k) related to Sir Geoff’s loan of £350,000 to Mr Hone. There was no representation pleaded in the Particulars of Claim which I have found to be false and known by Mr Cordner to be false which related to Sir Geoff’s promotional agreement, and Sir Geoff’s claim against Mr Cordner in deceit relating to the promotional agreement therefore fails.[302]For representations (a)-(j) to amount to deceit, Mr Cordner must have intended the claimants to have acted on them, which in this context means that he must have said what he said in order to persuade the claimants to buy one of the apartments on offer at Aloha Royal, and to persuade Sir Geoff to lend Mr Hone the £350,000 which Mr Hone was asking for. Leaving aside representation (a), I have no doubt that each of the representations (b)-(j) were made in order to persuade the claimants to buy one of the apartments on offer at Aloha Royal, and that representation (k) was made to persuade Sir Geoff to lend Mr Hone the £350,000. Mr Cordner made representation (b) to explain to Mr Kenyon why the one apartment left at Aloha Royal was going so cheaply, because Mr Kenyon might otherwise have been suspicious about the “special price” he was getting. Mr Cordner made representation (c) to explain to Mr Roberts why he was able to sell the apartment to him at a discount, because Mr Roberts might otherwise have been suspicious about the deal he was being offered. Mr Cordner made representation (d) to give Sir Geoff, Mr Hopley and Mr Kenyon confidence that their investments at Aloha Royal were worth making, since Mr Cordner would hardly have allowed members of his family to invest there if they were not. Mr Cordner made representation (e) to give Mr Hopley and Mr Kenyon the impression that the apartments were in considerable demand, because that would also give them confidence that their investments were worth making. Mr Cordner made representations (f) and (g) to give Sir Geoff, Mr Hopley and Mr Barkley the comfort of knowing that if the development was not carried out they would be able to get their money back. Mr Cordner made representation (h) to Sir Geoff, Mr Hopley, Mr Roberts and Mr Kenyon because he realised that there was a chance that they would not go ahead with their purchases of apartments at Aloha Royal if they obtained legal advice for themselves, since he knew from the terms of the special deal that something fishy was going on, and that might well be discovered by the lawyers. Mr Cordner made representation (i) to Mr Roberts to make him think that he would have celebrity neighbours at Aloha Royal, which would make purchasing an apartment there an even more attractive proposition. Mr Cordner made representation (j) to Mr Barkley because he suspected that if Mr Barkley knew that the substantial commission he was earning would reduce significantly the amount that he would be paying, Mr Barkley would have insisted that they share the commission – something which Mr Cordner would not have been prepared to do, in which case Mr Barkley would not have gone ahead with the purchase. And Mr Cordner made representation (k) to give Sir Geoff the confidence that he would get his £350,000 back plus the additional £245,000 since Mr Cordner would hardly have been lending to Mr Hone if he was not confident about that.[303]Different considerations apply to representation (a). Mr Cordner did not call himself the chairman of RMG to persuade the claimants to invest in Aloha Royal. He called himself the chairman because that was what Mr Hone was content to let Mr Cordner call himself, and because it gave him status.[304]I turn to another feature of the law of deceit which has to be proved for the representations to be actionable, and that is that the claimants were influenced by the representations. They have to prove that they acted in reliance on Mr Cordner’s representations. If they would have invested in Aloha Royal even without those representations, their claims for deceit will fail. So too will Sir Geoff’s claim relating to his loan of £350,000 to Mr Hone. However, the representations need not have been the sole cause of the claimants acting as they did. Provided that the representations contributed substantially to what they did, that will be enough. So if the claimants were influenced partly by the representations (albeit sufficiently influenced for those representations to have contributed substantially to what they did), Mr Cordner will not be any the less liable because the claimants were partly influenced by other things.[305]I deal first with the representation which Mr Cordner made to persuade Sir Geoff to lend Mr Hone £350,000. There were, I think, many things which persuaded Sir Geoff to lend to Mr Hone. There was Mr Hone’s plausibility and the aura of success and wealth which surrounded him. There was the security (such as it was) of the pagarê cheque. But most important of all was the size of the return. It was a brilliant deal – some might say too good to be true – but it was because Sir Geoff could make so much in so short a time that he was less cautious than he otherwise might have been. That was why he decided to proceed with the loan despite Mr Simpson’s advice that it was unwise to do so. The fact is – and I do not criticise Sir Geoff for this for one moment – he decided to trust his own judgment about Mr Hone. The fact that his judgment turned out to be wrong was one of those things. I do not doubt that Sir Geoff was partly influenced by what he would have taken to be Mr Cordner’s own confidence in lending to Mr Hone, but I also have no doubt that this was a factor which did not weigh all that much with Sir Geoff. I cannot say, therefore, that Mr Cordner’s representation that he was lending to Mr Hone himself contributed substantially to Sir Geoff’s decision to lend Mr Hone the £350,000, and Sir Geoff’s claim against Mr Cordner in deceit relating to the loan therefore fails.[306]I turn to the pleaded representations which Mr Cordner made to persuade the claimants to invest in Aloha Royal which I have found to be false and known by Mr Cordner to be false at the time. He made representation (d), (f) and (h) to Sir Geoff. He made representations (d), (e), (f) and (h) to Mr Hopley. He made representations (c), (h) and (i) to Mr Roberts. He made representations (e), (g) and (j) to Mr Barkley. And he made representations (b), (d) and (h) to Mr Kenyon. I have no doubt that each of these representations played a part in their decisions to invest in Aloha Royal, representation (h) playing its part in persuading them to invest in Aloha Royal without obtaining their own legal advice. I do not doubt that other factors went into their decisions to invest in Aloha Royal, for example, what they were told about RMG’s developments and the proposals for the site at Aloha Royal, the prices they were offered the apartments for when compared with the list price, the returns which they were told they could make on their investments, as well as the various things which they were told by Mr Cordner which I have found either to be true or not known by Mr Cordner to be false. Similarly, factors which might have influenced some of them did not influence others. For example, Mr Kenyon said that a bank guarantee was of no importance to him. But looking at the cases of Sir Geoff, Mr Hopley, Mr Roberts, Mr Barkley and Mr Kenyon separately from each other, and comparing(a) the pleaded representations which Mr Cordner knew to be false which were made to them with(b) the other things which made them invest in Aloha Royal, I have concluded that the pleaded representations which Mr Cordner knew to be false which were made to them contributed substantially to their decisions to invest in Aloha Royal. It follows that the claims of Sir Geoff, Mr Hopley, Mr and Mrs Roberts, Mr Barkley and Mr Kenyon against Mr Cordner in deceit relating to their purchases of nos. 56, 60, 64, 68 and 90 Aloha Royal succeed.[307]However, there are no pleaded representations which Mr Cordner made to Mr Innocent to persuade him to invest in Aloha Royal which I have found to be false and known by Mr Cordner to be false at the time. It follows that Mr Innocent’s claim against Mr Cordner in deceit relating to his purchase of no. 62 Aloha Royal must fail.[308]Negligent mis-statement. Negligent mis-statement needs to be considered in respect of those representations which I have found were made by Mr Cordner, which were pleaded against him, and which were false, but which I have not been satisfied were known by Mr Cordner to be false at the time he made them. Those representations were:(a) that RMG had title to the site at Aloha Royal, namely the first part of the second implied representation (which was what Mr Cordner in effect told Sir Geoff, Mr Hopley and Mr Barkley),(b) that RMG was able to sell the apartments at Aloha Royal, namely the second part of the second implied representation (which was what Mr Cordner in effect told Sir Geoff, Mr Hopley, Mr Barkley and Mr Kenyon), and(c) that Mr Hone needed to raise the money to buy out a partner (which was what he told Mr Innocent and Mr Barkley). These representations all related to the claimants’ investments in Aloha Royal. There are other pleaded representations made by Mr Cordner which were false, but which were not known by him to be false when he made them. However, these were some of the implied representations, and the persons to whom they were made (as well as Mr Cordner himself) did not realise the effect of them. I have therefore put them to one side.[309]To the extent that these representations were made to Sir Geoff, Mr Hopley, Mr Barkley and Mr Kenyon, the question whether they were made negligently does not need to be addressed, because the claims for negligent mis-statement are alternative to the claims for deceit. The same applies to Mr Roberts’ claim for negligent mis-statement. That leaves the representation made to Mr Innocent that Mr Hone needed the money to buy out a partner, which is the only representation made to Mr Innocent which I have found to be false. Here too it is unnecessary for me to decide whether Mr Cordner made the representation negligently, because even if he did, I have not been persuaded that this representation on its own could be said to have contributed substantially to Mr Innocent’s decision to invest in Aloha Royal. It follows that Mr Innocent’s claim against Mr Cordner for negligent mis-statement must fail.[310]There are in addition two other pleaded representations made by Mr Cordner to Sir Geoff which were false but which were not known by Mr Cordner to be false when he made them. The first related to Sir Geoff’s promotional agreement. That was the representation which Mr Cordner made to Sir Geoff that one of RMG’s developments was Aloha Royal, which carried with it the second implied representation. The second implied representation may have contributed to why Sir Geoff wanted the apartment which was to be assigned to him under the promotional agreement to be at Aloha Royal, but I do not believe that it contributed substantially to his decision to enter the promotional agreement with RMG.[311]The same is true of the other pleaded representation made by Mr Cordner to Sir Geoff which was false but which he did not know was false when he made it. That representation related to Sir Geoff’s loan to Mr Hone, and was the representation that an entity controlled by Mr Hone was ready, willing and able to carry out the development at Aloha Royal. That representation was made in connection with the additional security for the loan which Mr Hone had offered to Mr Hopley. But what is critical here is that Sir Geoff ultimately decided to lend Mr Hone the £350,000 without taking that additional security. He regarded the pagarê cheque as sufficient security for his loan. In other words, although Mr Cordner was saying than an entity controlled by Mr Hone was ready, willing and able to carry out the development at Aloha Royal, and although that would have given Sir Geoff greater confidence that his earlier investments in Aloha Royal had not been misplaced, that had not contributed – let alone contributed substantially – to his decision to lend to Mr Hone.[312]In the circumstances, it is unnecessary for me to decide whether Mr Cordner owed a duty of care to Sir Geoff over the accuracy of what he told him, because even if he did, and even if he intended Sir Geoff to act on what he told him about Aloha Royal being one of RMG’s developments which an entity controlled by Mr Hone was ready, willing and able to develop, that representation – even when coupled with Mr Cordner’s representation that he was lending to Mr Hone – did not contribute substantially to Sir Geoff’s decision to lend money to Mr Hone himself. It follows that Sir Geoff’s claim against Mr Cordner for negligent mis-statement relating to his promotional agreement and the loan of £350,000 to Mr Hone must fail.[313]Breach of trust. The claimants’ claim for breach of trust is that Mr Cordner held the proceeds of the cheques which the claimants handed over or sent to him for the purchase of their apartments at Aloha Royal on constructive trusts, because Mr Cordner was aware that those cheques had been provided under a mistake of fact induced by his deceit. In breach of those constructive trusts, he then caused the cheques to be paid into RMG’s account at Banco de Sabadell, or in the case of Mr Innocent’s cheque in favour of Grosvenor, he caused the cheque to be paid into Grosvenor’s account at Banco Santander. Mr Knox acknowledged that the law in this area is not as straightforward as it might be, but he contended that the claimants’ analysis was supported by Lord Browne-Wilkinson’s speech in Westdeutche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at pp 714C-715C.[314]This is not a debate to which I need to make my own contribution. It is acknowledged that the claims for deceit and breach of trust run in tandem, in the sense that the claims for breach of trust are dependent on the success of the claims for deceit. That is not to say that there are no differences between the two claims. Mr Knox alerted me to one on the issue of damages. When it comes to assessing the quantum of the losses of those claimants whose claims for deceit have been successful, the court will have to decide whether they need to give credit for the value of the apartments they bought. However, on the claimants’ claims for breach of trust, it is said that this does not need to be addressed, because Mr Cordner was liable to account to the claimants for the proceeds of their cheques regardless of anything else. Again, that does not need to be addressed, because as we shall see I have concluded that although the claimants are obliged to give credit for the value of their apartments, their apartments are completely valueless to them.[315]Breach of fiduciary duty. The claims of Mr Innocent, Mr Roberts, Mr Barkley and Mr Kenyon for breach of fiduciary duty are that their friendship with Mr Cordner resulted in them trusting him to look after their interests in preference to his own or anyone else’s, and not dealing with him on a usual arms-length commercial basis. That is said to have resulted in the creation of a fiduciary relationship between them and Mr Cordner. Such a relationship is also said to have arisen between Sir Geoff and Mr Hopley on the one hand and Mr Cordner on the other, even though they were not friends of Mr Cordner, as a result of his promise that he would arrange for lawyers to deal with the legal work, or words to that effect.[316]The claimants’ case is that in breach of Mr Cordner’s fiduciary duty which arose as a result of his fiduciary relationship with the claimants, Mr Cordner preferred his own interests (and at times Mr Hone’s) to the interests of the claimants by(a) failing to inform them of the risks they were taking which he must have known about,(b) making the various misrepresentations which he made to them,(c) failing to disclose to them that he had bought no. 52 Aloha Royal in June 2003 for €237,000 which was €61,000 less than the discounted price of €298,000 which the claimants paid for their apartments (and €123,000 less than the “very significantly” discounted price which Mr Kenyon paid for his), and(d) failing to disclose to them that a substantial proportion of what they were paying for their apartments would be paid to him by way of commission.[317]Mr Knox acknowledged that although the claims for breach of fiduciary duty to some extent traverse different ground from that of deceit, the claimants did not need the court to rule on the claims for breach of fiduciary duty of those claimants whose claims for deceit were successful. It follows that it is only Mr Innocent’s claim for breach of fiduciary duty which has to be addressed.[318]The principles to be applied in determining whether the relationship between Mr Innocent and Mr Cordner was one which equity recognises as a fiduciary relationship are elusive, but a helpful analysis of the current state of the law appears in Snell’s Equity, 31st ed, paras 7-07 and 7-08:
“The categories of fiduciary relationships are not closed. Fiduciary duties may be owed despite the fact that the relationship does not fall within one of the settled categories of fiduciary relationships, provided the circumstances justify the imposition of such duties. Identifying the kind of circumstances that justify the imposition of fiduciary duties is made difficult by the fact that the courts have consistently declined to provide a definition, or even a uniform description, of a fiduciary relationship, preferring to preserve flexibility in the concept. Numerous academic commentators have offered suggestions, but none has garnered support. The ‘fiduciary relationship is a concept in search of a principle’ (Mason, ‘Themes and Prospects’ in Finn (ed), Essays in Equity (1985) 242 at p 246)’. There is, however, growing judicial support for the view that ‘a fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence’ (Bristol & West Building Society v Mothew [1998] Ch 1 at p 18). ‘The concept encaptures a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is adverse to the interests of the principal’ (Arklow Investments Ltd v Maclean [2000] 1 WLR 594 at p 598G).”
[319]Mr Cordner acknowledged that his friendship with Mr Innocent meant that Mr Innocent was entitled to place his trust in him when he recommended investing in Aloha Royal. You are more likely to take things on trust from your friends than you are from other people, because you are entitled to assume that your friends are acting in your best interests. Mr Cordner accepted that Mr Innocent could also expect him to be open and candid with them. That meant disclosing to him everything which he needed to know in order to make a judgment about investing in Aloha Royal, including anything which was not quite right.[320]These are no more than the attributes of friendship, of course, and you cannot say that friends are automatically in a fiduciary relationship with each other. That was why Mr Jefferis relied on Chaudhry v Prabhakar [1988] 3 All ER 718 in which the plaintiff sued a friend of hers for wrongly advising her that a car she was thinking of buying was in good condition. All three members of the Court of Appeal were concerned about a concession made by counsel for the plaintiff’s friend that a duty of care had arisen. Stuart-Smith LJ said at p 721j-722a:
“When considering the question of whether a duty of care arises, the relationship between the parties is material. If they are friends, the true view may be that the advice or representation is made on a purely social occasion and the circumstances show that there has not been a voluntary assumption of responsibility.”
Stocker LJ said at p 723g:
“… in my view, in the absence of other factors giving rise to such a duty, the giving of advice sought in the context of family, domestic or social relationships will not in itself give rise to any duty in respect of such advice.”
And May LJ said at p 725b-c:
“… I for my part respectfully doubt whether counsel’s concession in the instant case was rightly made in law. I do not find the conclusion that one must impose on a family friend looking out for a first car for a girl of 26 a Donoghue v Stevenson duty of care in and about his quest, enforceable with all the formalities of the law of tort, entirely attractive.”
[321]However, Chaudhry was concerned with the duty of care in the law of negligence, not the circumstances in which friends can be said to be in a fiduciary relationship, and Mr Cordner’s attempts to persuade Mr Innocent to invest in Aloha Royal were very different from giving a friend informal advice about the condition of a car, even if your knowledge of cars is much greater than that of your friend. What is said to be significant here is that the transaction which Mr Cordner was recommending Mr Innocent to enter involved the payment of a large sum of money without legal advice, without the making of any investigations as to title, and without any discernable security. That is true, and I suspect that Mr Innocent would have been more circumspect about investing in Aloha Royal had he been approached by someone who was not a friend of his. But the critical point, I think, is that although he trusted Mr Cordner not to pull a fast one over him, he still knew that there was something in it for Mr Cordner.[322]I say that for these reasons. Mr Innocent knew that Mr Cordner was working in Spain and that selling properties there was his business. After all, when he went to Spain, Mr Cordner took him to one of RMG’s offices, and Mr Innocent saw that Mr Cordner had his own desk there. He knew that those who Mr Cordner was working for were prepared to go to some lengths to persuade potential purchasers to invest in their properties. It will be recalled that Mr Cordner told Mr Innocent that the people he was working for would pay for Mr Innocent’s accommodation in Spain: all Mr Innocent had to do was to pay for his flight. Had Mr Innocent thought about it, he would, I am sure, have realised that in some way Mr Cordner would be financially rewarded for each of the apartments he was instrumental in selling, even if he did not know what Mr Cordner’s commission would be. So although he would have thought that Mr Cordner would not sell him a property which Mr Cordner did not think was a reasonable purchase, the fact is that(a) he should have realised that Mr Cordner’s motives were not entirely altruistic, and(b) in any event he made his own judgment about the wisdom of the transaction, admittedly going to some extent on what Mr Cordner told him, but when he should have recognised that Mr Cordner would have had his own interests to serve. In these circumstances it is not possible to say that Mr Cordner was in the position of a fiduciary to Mr Innocent, and Mr Innocent’s claim against Mr Cordner for breach of fiduciary duty must be dismissed.[323]Conspiracy. The claimants’ case on conspiracy is put in two alternative ways. The first is that Mr Cordner agreed with Mr Hone to raise funds from the claimants by unlawful means. The unlawful means are said to have been the various representations which Mr Cordner was to make to the claimants to induce them to part with their money and which were false and known by Mr Cordner to be false at the time he made them. Mr Knox confirmed that this form of conspiracy added nothing to the claims for deceit, so that if the claims for deceit succeeded, it would be unnecessary for this form of conspiracy to be addressed, and if the claims for deceit failed, the claims for this form of conspiracy had to fail as well.[324]The alternative way in which the claimants’ case in conspiracy is cast is that Mr Cordner agreed with Mr Hone to do an act which would be unlawful under Spanish law, namely to raise funds for the construction of a development without arranging for a guarantee in the form of an insurance policy or a bank guarantee to be in place, and without placing the funds into a bank account separate from their own funds. A conspiracy of this kind did not, of course, require deceitful or negligent misrepresentations to have been made to the claimants, but Mr Knox acknowledged that the claimants would nevertheless have to prove that representations were made which induced the claimants to invest in Aloha Royal, because it was the representations which constituted the causal link between what was said to be the original agreement which constituted the conspiracy and the parting by the claimants with their money.[325]This form of conspiracy raises a point which the courts have not had to grapple with before – namely whether the tort of conspiracy by unlawful means is committed when the unlawful act which the conspirators agreed to do was an act which was unlawful under foreign as opposed to domestic law. However, Mr Knox elected not to advance any submissions on that issue because he acknowledged that this form of conspiracy likewise added nothing to the claims of deceit and negligent mis-statement, since it required the claimants to prove that Mr Cordner had made representations to them which induced them to invest in Aloha Royal. So if the claims for deceit (or alternatively for negligent mis-statement) succeeded, it would not be necessary for this form of conspiracy to be addressed, and if the claims for deceit and negligent mis-statement failed, the claims for this form of conspiracy had to fail because there would not have been the necessary link between what was said to be the original agreement which constituted the conspiracy and the claimants’ decisions to invest in Aloha Royal.[326]Partnership. The claimants’ case is that the special deal relating to the 10 apartments at Aloha Royal was an arrangement which Mr Hone and Mr Cordner had on the side. The true analysis of their relationship in connection with this deal was one of partnership. So even if such representations as Mr Cordner is found to have made, though false, were made neither deceitfully nor negligently, Mr Cordner was nevertheless liable for those representations if(a) he made them in furtherance of the partnership’s objectives and(b) Mr Hone knew of their falsity at the time they were made.[327]The basis on which it is said that the relationship between Mr Hone and Mr Cordner was one of partnership is that when it came to the sale of the apartments at Aloha Royal Mr Cordner (whether on his own or as a director of MPL) was not working for RMG or Mr Hone or any other entity controlled by him as an agent on commission. The claimants’ case is that Mr Hone and Mr Cordner were in effect in business together, the objective of that business being to enable the two of them to raise funds for their own use from the sale of the apartments which actually belonged to Azul, those funds to be divided between them, so that Mr Hone would receive about 70% and Mr Cordner about 30%. This analysis of their relationship is said to be borne out by(i) the nature of the special deal itself, which involved Mr Cordner getting (a) a rate of “commission” far greater than would have been appropriate if he had simply been a salesman being paid commission and (b) the benefit of fluctuations in the exchange rate between euros and sterling,(ii) their awareness that the site which prospective investors were told the apartments were to be built on was owned by Azul, even though the claimants had to make their cheques payable to entities other than Azul (Grosvenor in the case of Mr Innocent and RMG in the case of the other claimants), and(iii) the attempts they made to keep the special deal secret, namely the absence of any paperwork relating to it, the virtual absence of any invoices for the “commission”, and the payment of the “commission” to Mr Cordner rather than MPL.[328]The difficulty with this analysis is that as I have previously said I do not believe that Mr Hone was taking Mr Cordner into his confidence. Mr Cordner would not have known what Mr Hone’s true plans were for the site which Mr Hone had earmarked as the site for Aloha Royal. Nor did he know that the entity which owned the site was Azul. Unquestionably there came a time when Mr Hone had no intention of developing the site himself. That was why Azul sold the site to Duja. Indeed, it may be – though I cannot make any findings about this one way or the other – that Mr Hone was never intending to develop the site himself. However, Mr Cordner was not to know that, and if he ever did realise it, it was not until very much later.[329]For the reasons given at [193]-[202] above, I have little doubt that both Mr Hone and Mr Cordner wanted to keep the deal they had reached over the sale of apartments at Aloha Royal secret. That must have been because they wanted to keep the amount of Mr Cordner’s commission confidential. That begs the question why Mr Hone was prepared to pay Mr Cordner so much commission, and what Mr Cordner thought the reason for that was, if this was not a scam which Mr Cordner had been a party to all along. I am not able to make any findings one way or the other about what Mr Hone’s motivation was. It may be that he had no intention even then of developing the site himself. On the other hand, it may be that he was at that stage intending to develop the site himself, but that he had debts of his own which he needed to pay urgently or that he had to get the purchase price up front to finance the construction of the development. He knew that no-one would be prepared to pay the whole of the purchase price up front unless they were getting an exceptional deal, which was why he was prepared to offer the apartments at a price so much below the list price. And in order to forestall Mr Cordner asking him awkward questions about why the list price was being departed from by such a large amount and why exceptionally the whole of the investment had to be paid before construction had even begun, Mr Cordner had to be rewarded so significantly that all he could see was the amount of commission he would be making. Having seen Mr Cordner over many days in the witness box, I think he was just the sort of man who would seize the opportunity of making a great deal of money without thinking what may have lain behind the deal which Mr Hone was putting to him.[330]As I stated at [239] above, the probabilities are that the reason Mr Hone gave Mr Cordner for needing to raise funds quickly was indeed because he wanted to buy out his partner in RMG. But from Mr Cordner’s point of view, the strong probability is that the deal had to be kept secret because he was not going to be putting the commission on the special deal through MPL. He was going to take the commission himself and not declare it for tax purposes. That was why there was nothing in writing about it, why no invoices for the commission were submitted by MPL (save for invoice RMUK06 for €21,600), why the commission was not paid to MPL, and why no tax was in fact paid on the commission.[331]It follows that such representations as Mr Cordner made as were false were not made in furtherance of the objectives of any partnership between Mr Hone and Mr Cordner because there was no such partnership between them, and this aspect of the claimants’ claim against Mr Cordner must fail.[332]Mr Kenyon’s tracing claim against Mr and Mrs Cordner.For the reasons given at [181]-[191] above when dealing with Mr Kenyon’s tracing claim against Mr and Mrs Cordner, I concluded that Mr Cordner’s claim that Mr Hone lent him the proceeds of Mr Kenyon’s cheque for £251,748 was false. Mr Cordner therefore knew that he was not entitled to use the proceeds of that cheque towards the purchase of the Derings. Mr Jefferis realistically acknowledged that in those circumstances Mr Kenyon’s tracing claim against Mr and Mrs Cordner had to succeed. However, a number of other issues arise on the tracing claim. They include whether Mr Kenyon’s funds can be traced into(a) Mr and Mrs Cordner’s interest in a property in Hatfield owned by Mrs Cordner’s mother, or(b) Mr Cordner’s interest in the house in which he and Mrs Cordner are now living, so that Mr Kenyon can get the benefit of the increase in value of the Derings between when it was bought and when it was sold. They also include how the tracing claim is affected by what Mrs Cordner claims was the huge amount of work which she, Mr Cordner and Mr Cordner’s parents did to improve the Derings and their present home, the huge amount which Mr Cordner’s father paid towards improving them, and the sums which Mr Cordner drew from the proceeds of sale of the Derings to invest in his business. However, it was agreed that these issues do not relate to the establishment of Mr Kenyon’s tracing claim, and that it was inappropriate for those issues to be addressed in the course of the current trial. I. Other issues[333]The claimants’ contributory negligence. By a late amendment to the Defence, it was argued on Mr Cordner’s behalf that the claimants’ damages should be reduced by their contributory negligence in “[f]ailing to take any, or any sufficient steps, to protect their own interest; or make any or any sufficient enquiries, to enable [them] to protect their own interest, when entering the transactions now complained of.” Now that those of the claimants who have established liability on Mr Cordner’s part have done so on the basis of their claims in deceit, the possibility of contributory negligence is no longer something upon which Mr Cordner can rely. Contributory negligence cannot be pleaded in response to a claim in deceit, “since where the defendant intended that the claimant should rely on his statement to the claimant’s detriment, it is not open to him to argue that the loss could have been avoided if the claimant had taken more care to avoid being duped by the defendant”: Clerk & Lindsell on Torts, 19th ed, para 3-45, and the cases cited in footnote 91.[334]Sir Geoff’s liability to contribute. By another late amendment to the Defence, it was argued on Mr Cordner’s behalf that Sir Geoff was liable to make a contribution to such damages as Mr Cordner has to pay to the claimants on the footing that he was responsible (whether on his own or with others) for their loss as a result of statements which were attributed to him in various RMG brochures. The statements to which this allegation relates were pleaded as being those set out in Mr Rockall’s witness statement. Many of those statements were about the pleasures of living on the Costa del Sol, but some of them were about RMG and its developments. They were:• “The Royal Duja Group/Royal Group/Royal Marbella Group has revolutionised the way anyone can buy abroad.”• “On our first inspection tour we were delighted to meet Michael at Royal Duja Group/Royal Group/Royal Marbella Group who took time and pride in showing us properties that the company had built. We were even allowed to meet some true artisans at work on site.”• “I have always avoided any questionable associations; with Royal Duja Group/Royal Group/Royal Marbella Group I know I have a partner that wont let me down.” These were said to be quotations from issues 4 and 5 of 2004, issue 7 of 2005 and issue 10 of 2006 of RMG’s promotional magazine.[335]This claim – presumably under the Civil Liability (Contribution) Act 1978 – cannot succeed. The issues in which the statements were said by Mr Rockall in his witness statement to have been made were all published after the claimants (with the possible exception of Mr Kenyon in respect of the issues published in 2004) had invested in Aloha Royal. In any event, none of the claimants were asked whether they had read what Sir Geoff was quoted as having said in the brochures, and there is therefore no evidence that any of them were in any way influenced by what was attributed to him.[336]Credit to be given by the claimants. The remaining issue is whether, when it comes to assessing the claimants’ losses, they are obliged to give any credit for the value of the investments they made. That is the only issue of quantum which was ordered to be tried together with the issues on liability. The claimants’ investments in Aloha Royal only have some value if they are able to establish that they have title to the apartments they acquired. The claimants’ only recourse would be to commence proceedings in Spain for the equivalent in Spanish law of a declaration as to title. That raises the question whether it would be worthwhile to embark on such litigation, bearing in mind that it is well established (see, for example, Pilkington v Wood [1953] Ch 770) that a claimant is not expected to mitigate his loss by commencing speculative proceedings against third parties when the outcome is highly uncertain.[337]In my view, there are too many obstacles for the claimants to surmount to make any litigation in Spain a viable proposition. There would be no point suing Wilchester or Grosvenor on the basis that they were named in the contracts of sale as the promoters of the land because there is nothing whatever to suggest that they are worth powder and shot. In any event, they would, I imagine, be able to defend any claims against them on the basis that they are not in truth the owners of the land. Azul was. However, the fact that Azul was the owner of the land at the time of the contracts of sale would not enable the claimants to sue Azul successfully either. Mr Agüera said – and I have no reason to doubt it – that any claim in Spain against Azul (or against Duja for that matter) would fail, even though Azul (and thereafter Duja) was the owner of the land, because it was Wilchester and Grosvenor with whom the claimants had purported to contract.[338]There is another problem with suing Azul or Duja in Spain. Although the 24 apartments reserved for Azul under its agreement with Duja included all the apartments sold to the claimants (though not the one which Sir Geoff was to receive under his promotional agreement), that part of the agreement was unenforceable because under the terms of the agreement entered in the land register, only nine of the apartments were to be transferred back to Azul. Of those nine apartments, only two were ones which had been sold to the claimants – no. 64 sold to Mr Kenyon and no. 90 sold to Sir Geoff and Mr Hopley. The agreement was therefore enforceable only in respect of those two apartments, and in any event – although this is not something which Mr Agüera mentioned – it is possible that the agreement was enforceable against Duja only at the suit of Azul, not the claimants. In any event, like Wilchester and Grosvenor, there is nothing to suggest that Azul has assets which make it worth suing.[339]The same applies to Duja. Mr Agüera has discovered that Duja transferred its ownership of the development at Aloha Royal to the Labaro Group, in lieu of cash, so as to participate as a shareholder in what sounds like the Spanish equivalent of a rights issue to raise capital for the Labaro Group. As it is, the Labaro Group is now in administration, and its administrators do not recognise the claimants’ claims to the apartments.[340]Even if all these problems could be overcome, it is apparent that the claimants’ apartments are not now worth what they were so as to justify bringing proceedings in Spain. That is because Mr Agüera has learnt that the mortgage which Duja entered in order to secure funding for the construction of the site is still outstanding. It will be recalled that the mortgage was for €24,234,900. Mr Agüera’s evidence – which I accept – was that the apartments reserved to Azul would be subject to that mortgage. In order to discharge the mortgage on a particular apartment, the purchaser of the apartment would have to repay that part of the mortgage which is attributable to the mortgage. How much that would be would depend on the total amount of the mortgage outstanding, and there is no evidence of what that was. But Mr Agüera said that the land register showed that the mortgage was for 23 years. During the first three years of the mortgage, only interest was payable. Capital and interest would be payable thereafter, though I assume that in the first few years, payments would be more attributable by far to the payment of interest than the repayment of capital. Bearing in mind that Aloha Royal was to consist of 92 apartments, it may be that the claimants’ apartments could be subject to a mortgage of up to €250,000 each. It would not make financial sense to pursue highly speculative litigation in Spain in order to secure a declaration of title to an apartment with a mortgage of that size, bearing in mind what the claimants paid for their apartments. J. Conclusion[341]These, then, are my conclusions on the issues which the trial raised. Sir Geoff, Mr Hopley, Mr and Mrs Roberts, Mr Barkley and Mr Kenyon are entitled to damages from Mr Cordner for his deceit in connection with their purchase of nos. 56, 60, 64, 68 and 90 Aloha Royal. Their damages will have to be assessed, and the remaining questions which arise on Mr Kenyon’s tracing claim will have to be decided, at a further hearing, unless the parties can reach agreement on all outstanding issues, including the costs of the proceedings. Since the parties will want to take stock of their position in the light of this judgment, it will not be necessary for anyone to attend court when this judgment is handed down, but it is important to maintain the momentum of the proceedings, if only because of the freezing order over Mr Cordner’s assets, which will remain in place for the time being until the court orders otherwise. I therefore direct that the parties’ solicitors let my clerk and the Queen’s Bench Listing Office know within 21 days of the handing down of this judgment whether a further hearing is required. In the meantime, if any party wishes to apply for permission to appeal, my clerk should be notified of that within 7 days of the handing down of this judgment, and I will consider the question on the basis of any written representations without a hearing. However, any appellant’s notice will still have to be filed within 21 days of the handing down of this judgment.[342]Finally, I wish to thank counsel and solicitors for their input into this case. They made my task less onerous than it would otherwise have been, though my particular thanks must go to Mr Jefferis who stepped into the breach very shortly before the hearing when circumstances made it such that Mr and Mrs Cordner’s previous counsel could no longer represent them.