Collins v Union Bank Of Switzerland & Ors [2000] EWCA Civ 176 (25 May 2000)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ORDER OF THOMAS J.
QUEEN’S BENCH DIVISION HIGH COURT OF JUSTICE
Royal Courts of Justice
Strand, London, WC2A 2LL
Thursday 25 May 2000

B e f o r e :
LORD JUSTICE OTTON
LORD JUSTICE BUXTON
——————-
 

SAMUEL JOHN COLLINS
ANTHONY THOMAS ETRIDGE
JOSE LUIS MENDEZ GONZALEZ
Claimants/Appellants
– and –
UNION BANK OF SWITZERLAND
BARCLAYS BANK PLC
RICHARD CAPLAN & CO (A FIRM)
ST GEORGES STREET TRUSTEES LIMITED
ST JAMES’S TRUSTEES LIMITED
Defendants/
Respondents

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
Adrian Brunner Q.C./Kenneth Hamer (instructed by Messrs Collins for the Appellants)
Antonio Bueno Q.C./Geraldine Andrews (instructed by Herbert Smith for the Respondents)
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Judgment
As Approved by the Court
Crown Copyright ©

LORD JUSTICE OTTON:

This is an application by the claimants for permission to appeal from the Order of Thomas J. dated 15 November 1999 whereby the Learned Judge dismissed the appeal of the claimants against the Order of Senior Master Turner granting summary judgment to the first and second defendants on the basis that the claimants had no real prospect of succeeding in their claims at trial. The Senior Master had also refused to allow the claimants to resurrect an allegation of fraud against Union Bank of Switzerland (UBS) which had been struck out by Timothy Walker J. on 10 November 1997.
Permission to appeal is only sought against the Order in respect of the first defendants, the claim as against the second and third defendants having been withdrawn. There is an accompanying application to admit further evidence on the basis that there are special grounds for so doing pursuant to Order 59, Rule 10(2) Schedule 1 CPR.
Background
The claimants are businessmen and claim to be the ultimate beneficial owners of a golf course and leisure development in Valencia in Spain (known as the “El Bosque Development”). The El Bosque Development was beset by financial problems which by January 1992 were brought to a head by a major creditor, Rattan Limited, calling in a debt in excess of £700,000 owed by the principal company within the group, El Bosque Holdings Limited. The claimants urgently needed to find money to pay off Rattan and save the development.
The claimants assert that in early May 1992 they received an offer to purchase the El Bosque development for £18,000,000 from a Mr Zack Goodman, representing the prospective owners of an off-shore company yet to be formed in Alderney called Jouvin Limited. Jouvin obviously had no funds of its own but intended to raise the finances.
In early May 1992 the second plaintiff saw a copy of an unsigned document entitled “Expression of Intent” emanating from an entity called the Royal Trust of Greece whose alter ego was a Mr George Langoudontis. The Expression of Intent was addressed to Jouvin and assured it of RTG’s intent to proceed with the structuring of the required loan of £45,000,000. Insofar as it relates to UBS, the only defendant left in the action, it would seem that the second plaintiff made enquiries about RTG through The Heritable and General Investment Bank Ltd.and his solicitor, Mr Caplan, the third defendant, using the bank account details set out in the Expression of Intent.
Heritable and General asked UBS for their opinion as to the “integrity and financial standing of your above customer.” Mr Beat Hunold of the UBS Glarus branch in Switzerland replied in German on 15 May 1992 which (when badly translated) stated “unfortunately the Bank was unable to give any information about Mr Langoudontis and had no connection with RTG.” The gist of the message was (inaccurately) reported back to the second plaintiff on the 18 May by Heritable and General as follows :
“We think they are saying that Langoudontis is unknown to them and they have no association with Royal Trust.”
In the interim the third defendant had approached his bank, Barclays, who sent a fax to Mr Hunold asking for his opinion on RTG in confidence. On 18 May Mr Hunold replied in German, when translated :
“We inform you that we have no account dealing with the Royal Trust of Greece and no information about this company. The account number 212-037-60F is a private account of Mr Langoudontis director of the Royal Trust. At the present time it has enough to cover £18m.”
UBS in Switzerland uses the abbreviation “m” in its internal documents to denote “mille”, meaning thousand, and “mio” to denote million. Hunold interpreted the “m” in Barclays request to mean “mille”, and answered the question accordingly. There was at the time some $82,812 in Langoudontis account. However, his answer was interpreted by the English recipients as indicating that there was £18 million to the credit of Langoudontis account at the Glarus branch of UBS at that time.
It is common ground that Mr Langoudontis was carrying on the fraudulent and dishonest business of inducing persons who wished to borrow funds to pay a fee for the arranging of significant loans which never materialised and that there were a number of victims of the fraud perpetrated by Langoudontis and RTG and their representatives in England.
Barclays’ enquiry, together with Hunold’s response which was endorsed on the same document, was passed on to the third defendant by Barclays under cover of a slip which contained an express disclaimer. A loose translation of the UBS reference was forwarded by Mr Caplan to the second plaintiff, apparently without also passing on the disclaimer. On receiving the reference the third plaintiff wrote to Heritable and General and enclosed the UBS reference. Thus the second plaintiff had the two apparently conflicting UBS references.
By early June it was apparent to the plaintiffs that RTG’s role was as a mere arranger of finance and not the providers. The second plaintiff travelled to Greece with Mr Goodman where they met Mr Langoudontis. Mr Etridge asserts that about a week after his return, on 17 June 1992, he received an offer for the El Bosque Development from Paramount Property Gibraltar Ltd. The offer was for 12 million pounds. About two weeks later Rattan Limited obtained a judgment against El Bosque Holdings in the Isle of Man. Shortly after this, Mr Etridge was supplied by Mr Goodman with a copy of a Loan Contract between Jouvin and RTG dated 8 July 1992. This document clearly described RTG as “acting on behalf of the principal lenders with a signed contract” and stipulated that it was “subject to …… final agreement thereafter of the capital principal lenders to provide the required loan to the borrowers.”
On 14 July Mr Etridge wrote to Paramount turning down its offer. He gave the reason that a “much higher offer (had been received from) another party in May (who) during last week received confirmation that their finances were under lock and key.” It appears that the claimants’ primary claim in damages is based on the assertion that they would have sold to Paramount and would have received £12 million had it not been for the UBS reference. They alleged that Mr Etridge on their behalf turned down the Paramount offer in reliance on Hunold’s representation that RTG were good for £18,000,000 in mid-May. The Senior Master and the Judge made the critical finding that by that stage any reasonable businessman in their position would have appreciated that RTG were mere intermediaries and their financial status had nothing whatever to do with the viability of the Jouvin transaction.
On 19 August Rattan commenced winding up proceedings in the Isle of Man. In spite of extensive attempts by the claimants to find funds they were not forthcoming. The shares in El Bosque never changed hands. Eventually, in November 1993 the proceedings in the Isle of Man were settled on terms whereby Mr Stirling, the owner of Rattan Ltd. gained control of the El Bosque Developments in exchange for writing off the indebtedness.
The Judgment
Thomas J. found as a fact that Collins and Etridge did not rely on the UBS reference. They never believed that RTG was going to be the source of the funds for Jouvin. The contemporaneous documents, which Mr Etridge studied with great care, made it “clear beyond argument” that RTG was not the source of the loan.
The reliance issue
In the proposed grounds for the appeal no challenge is made to the judge’s finding that the claimants placed no reliance on the reference dated 8 May 1992. In the claimants’ skeleton argument in support of their application for leave to appeal to the Court of Appeal dated 18 December 1999 there is again no suggestion that the Learned Judge erred in this regard. However on the 8 May 2000, four days before the Hearing, the applicants lodged a supplementary skeleton argument in which they sought to raise the issue before this Court. Not surprisingly the defendants objected strenuously. We decided to hear the argument on a provisional basis.
Mr Adrian Brunner Q.C. contended that the question whether and to what extent the claimants relied upon the UBS reference in proceeding with the Jouvin offer of £18,000,000 and rejecting the Paramount bid of £12,000,000 is one of fact. The information must have played a “real and substantial part though not by itself a decisive part, in inducing the claimants to act” in order to be the cause of the loss. The claimants contend that they did rely on the misrepresentation and are prepared to say so on oath. That the ultimate source of the money was not RTG determinative ; banks do have their lines of credit. RTG was described as the “the lender” in both the Letter of Intent and the Loan Contract with Jouvin and assurance was needed as to the standing of RTG. Their assertion that they relied on the reference in rejecting Paramount and proceeding with Jouvin is strongly supported by Mr Etridge immediately [after] instructing Mr Caplan to act on the sale of the El Bosque development to Jouvin on 28 May 1992. In the absence of the reference the claimants would not have continued to treat with Jouvin. The reference enabled the claimants to proceed on the basis that RTG was a bank of good standing with substantial assets rather than, as was the truth, on the basis that it was of no standing or worth. A bank of substance would not be expected to enter into loan commitments without its lines of credit in place. Leading counsel was particularly critical of the conduct of Hunold. The explanation of £18m meaning £18 thousand is unconvincing and can only be evaluated at trial. Hunold’s answer was given in flagrant breach of UBS’s internal regulation which required double signatures and confirmed by higher authority. Hunold may well have fallen under the influence of Langoudontis and must have been in league with him at least to the extent of doing his will and giving at his behest an untrue reference. He must have known and intended that the reference would communicate the fact that such sums were already in the account and that this would materially affect the judgement of those who were seeking the reference.
In my judgment the question whether the representation in the UBS reference was made negligently or dishonestly by Hunold is of only academic importance. There will never be any prospect of establishing at trial that experienced businessmen believed that RTG was going to lend the money to Jouvin and that the reference played any role in their decision to reject the offer from Paramount. Whatever Mr Etridge and Mr Collins may now contend or genuinely believe cannot stand alongside the contemporaneous documents. As Thomas J. said they make it “clear beyond argument” that RTG was not the source of the loan. I am satisfied that there is no real prospect of reversing the Senior Master’s and Thomas J.’s decisions that there is no real or realistic prospect of a finding in favour of the claimants on this issue in the face of contemporaneous documents. In any event, the judge rightly held that if Hunold was negligent UBS was protected by Barclays’ disclaimer of which the claimants were aware when the action was commenced although UBS were not.
It is not surprising therefore that the claimants have been so tenacious in trying to construct a fraud claim against UBS arising out of the conduct of Hunold.
The fraud issue
The claimants’ various attempts to construct a case of fraud against UBS must be briefly stated. In April 1997 the original Statement of Claim included an allegation that Hunold knew that £18m meant £18 million. This assertion was not particularised and not surprisingly received severe criticism from Master Turner in dismissing UBS’s application to set aside service of the writ. An amendment substantially expanded the plea.
In November 1997 Timothy Walker J. ruled that the plea of fraud was unarguable and that no cause of action could be brought against UBS in England under that head. Six months later the primary limitation period expired.
In August 1999 senior Master Turner refused permission for an amendment to reintroduce the fraud plea and granted summary judgment to UBS and Barclays. In November 1999 the fraud plea was reformulated during the hearing before Thomas J. in order to bring the pleadings into line with the claimants’ then skeleton argument. Thomas J. refused permission to amend.
In the proposed grounds of appeal it is asserted that the judge erred in finding that the claimants’ witness statements showed that there was no real prospect of success at trial on the question of fraud. He commented that there was no witness statement from Hunold rebutting the allegations made against him and this fact in itself made it inappropriate to give summary judgement. The judge failed to draw the correct inferences, namely that Hunold had acted improperly.
In support of this ground the applicants seek to place further evidence before this Court. It is said that there is credible witness evidence which now exists that supports the claimants’ contentions that Hunold acted dishonestly, which it was not possible to obtain before the hearing, and which, if it had been available to the Learned Judge, would have led him to conclude that there was a real prospect of the claimants succeeding in the allegations of dishonesty and would have led the claimants to include an allegation of fraudulent misrepresentation in the Statement of Claim from its inception or in an earlier amendment.
Thomas J. held (page 20A) :
“There is no evidence whatsoever to suggest that Mr Hunold was in league with Mr Langoudontis, save the events surrounding this case. Thus to plead he was in league is in a sense circular because the inference can only be drawn from the facts of the case.”
The further evidence is a statement from a non-party, David Tristram, supported by a statement of truth dated 17 December 1999. It is submitted that this evidence is precisely of a kind that Thomas J. found absent from the claimants’ case ; it is independent evidence supporting the allegation made by the claimants that Hunold and Langoudontis were acting in league. If Tristram’s evidence had been available before Thomas J., the chain of circularity would have been broken and would have led at the very least to a finding that the claimants had real prospects of establishing that Hunold was dishonest and acting in league. Moreover there is clear evidence capable of supporting the contention that the reference was dishonestly provided by Hunold acting in association with Langoudontis. Tristram’s statement clearly reveals that the relationship between the two was very much closer than Hunold had ever admitted and that Hunold on other occasions represented (falsely) that Langoudontis had millions of pounds in his personal account. If the case on fraud were not struck out the disclaimer would disappear and could not cover liability for fraudulent misrepresentations. Moreover the burden of (disproving) reliance would shift to the defendants. Accordingly it is submitted it can no longer properly be said that the claimants have no real prospect of succeeding at trial and leave to appeal should therefore be granted.
Finally it is submitted, that the finding on fraud was in any event against the weight of the evidence. The Learned Judge was wrong merely to find that Hunold was a fool rather than a knave. Conversely, the evidence is of sufficient strength to justify the opposite finding. There is irrefutable evidence that UBS told Hunold not to let Langoudontis have any UBS headed notepaper. UBS have not given any explanation as to this potentially damning evidence which strongly suggests that they knew Langoudontis could not be trusted.
UBS strenuously opposed both the application to admit the fresh evidence and the reinstatement of the fraud allegations. They assert that the action in tort for deceit is statute barred by section 2 Limitation Act 1980. Time started to run on the date on which the alleged loss and damage was suffered ; in the present case, the date of rejection of the Paramount offer on 14 July 1992. Alternatively, the limitation period expired at the latest, in early August 1999. Tristram’s witness statement does not provide “special grounds” which would justify this late evidence being introduced. This evidence could have been obtained with reasonable diligence for the hearing before either the senior master or the judge. The evidence would not have had an important influence on the outcome of the part 24 application.
Mr Brunner has advanced an argument that time does not run until June 1999 when UBS disclosed documents (relating to the Glarus branch discovery) sufficient to place reliance on section 32 Limitation Act. I do not consider it necessary to determine the limitation issue for the purpose of determining this application.
The claimants’ difficulties are far more profound. In approaching Tristram’s evidence it is, to my mind, highly significant to consider the role that Tristram has hitherto played in the litigation. In May 1998 the claimants commenced proceedings against Tristram alleging that he was complicit in Langoudontis’s fraudulent schemes. The writ claimed damages for conspiracy to defraud and for fraudulent or negligent misrepresentations. It is not necessary to particularise the nature of the allegations but they were undoubtedly serious and no doubt would have only been made after serious consideration by the claimants and their legal representatives. There was certainly documentary evidence from the Metropolitan Police which indicated a close association between Tristram and Langoudontis. The evidence therefore is, at best, that of an accomplice who has been given an immunity from suit by the claimants in return for his testimonies. I therefore approach his newly claimed credibility with a good deal of circumspection.
Following the service of the writ Tristram put in a defence which concluded :
“I, David H.G. Tristram, ….. there have been no related associations, activities or conspiracies which could give rise to the plaintiffs claims. Any information required by the plaintiffs has at all times been given freely where I possess such information.”
No explanation has been given for the failure to obtain evidence prior to commencement of proceedings against him. I accept the submission on behalf of UBS :
“The inference can be drawn if Tristram had said anything about Hunold which indicated that Hunold was in league with Langoudontis, either during the claimants investigations from 1993 onwards, or when he met the claimants solicitors in June 1998, it would have been at the forefront of the pleaded case put before the senior master and the judge.”
It must follow that the evidence which it is now sought to adduce could have been obtained with reasonable diligence for the hearing before either the senior master or the judge, or both. Moreover, if the claimants were in possession of this information they could have sworn an affidavit that they were in possession of and wished to rely upon hearsay evidence to this effect. This was not done.
In these circumstances it is also inherently unlikely that his evidence, had it been available, would have had important influence on the outcome of the part 24 application.
There are two final points for consideration. First, Mr Brunner submits that a CPR part 24 application should not have led to a mini trial. The hearing lasted over three days and the claimants refer to the dicta of the Court of Appeal in Swain v. Hillman `The Times’ 1 November 1999 and contend that difficult questions of fact, including the determination of questions of reliance by the claimants, which required extensive reference to evidence made such an application inappropriate. It follows from the above analysis of the facts and my conclusions that I cannot accept this contention. This was not a mini-trial ; the principal issue of reliance was determined on the contemporaneous documents. A considerable part of the three day hearing turned on the application to reinstate the fraud allegation. The essential issue of reliance was determined properly conclusively and safely on the contemporaneous documents. Nothing said by Lord Woolf M.R. in the Swaine case indicates that the summary procedure was inappropriate in this case ; it saved the parties the expense of a lengthy trial and achieved expedition.
Second, this being an appeal following a previous unsuccessful appeal to a High Court judge in chambers from a decision of the senior master it must be considered within the Court’s approach to such applications for leave as laid down in paragraph 20 of the Practice Direction (Court of Appeal : Leave to Appeal and Skeleton Arguments) (1999) 1 W.L.R. 2. Leave will only be normally granted if the case raises an important point of principle or practice or the case was “one which for some other reason should be considered by the Court of Appeal” In my judgment neither of these criteria is met.
I would dismiss this application.
LORD JUSTICE BUXTON
I agree.

Order: Applications dismissed. Minute of order to be lodged with the court.
(Order does not form part of the approved judgment) 

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