Analysis
In 2007 the defendant Mr Jimenez (J) became involved in the development of a golf course in France and gathered together a number of investors including the claimant Mr Wise (W), then a close friend of his, who provided £500,000 to invest in the project. The money was procured by means of a loan from Coutts and Co of £350,000 together with funds from two other accounts held by W. It was transferred to the account of a dormant company, the second defendant, CD Investments Ltd (CDI) set up by W and now in liquidation, and hence to an account with HiFX in J’s name in the form of €740,000. From this account €800,000 was paid out to J on 4 December 2007 some of which he says related to the golf project and the final balance to a Mr Vickery on the same date at which point the balance on the account was nil. It was argued that the golf course land was held by a French company Les Bordes Golf International SAS (SAS) of which J is or was a director, which in turn is owned by a Cypriot company (Holdings) with a principal investor who owns half the capital, an individual investor with 6.2%, and a third company Les Bordes (Cyprus) Ltd (LB Cyprus Ltd) holding the remaining 43.74%. The shares in LB Cyprus Ltd are registered in the name of JF Nominee Services, whom it is alleged hold the shares beneficially for, among others, CDI. In July 2011 W and J met and discussed the possibility of sorting the matter out, together with another issue between them, by October 2011. W alleged that at this meeting J agreed to pay him back the £500,000 with three months. Following this there was a series of emails between the parties in which J stated that no such agreement existed though ‘[w]e still have an outstanding one on Cyprus’. W replied that there was a differencebetween the two deals and he wasnot mixing them up while J continued to insist the two matters should be dealt with together. It was left that J told W his advisors would have to sort it out and W said that was no problem. In November 2011 W signed what purported to be back dated assignments, one ofwhich purported to assign the benefit of the debt of €740,000 owed by J from CDI to W.
In the absence of any evidence relating to the purpose for which the £500,000 had been provided W started proceedings against J and, when the matter came to court, the questions remaining to be decided were:
- a) whether the money had been paid to J for an agreed purpose which had not been carried out and J was therefore liable for breach of trust;
- b) as the proper claimant W or CDI; and
- c) was there a compromise agreement that J would return the money to W?
J argued that W’s money was invested in the development as agreed and that he had a complete defence to the claim but the manner in which he explained that investment varied from time to time. There was no evidence that J had made such an investment until less than a month before the trial a letter dated 23 May 2012 was produced from Cyprus Ltd advising that CDI represented by its director W had a beneficial interest in 26 shares of the company pursuant to an equity investment in 2007 of €739,000. A subsequent letter was produced on the first day of the trial from JF Nominee Services stating that they held shares for the beneficial owners of Cyprus Ltd and that they held shares in the name of CDI though it did not state how many. It also said W was involved in setting the structure up.
Held:
- (1) J received the sum of £500,000 from W for a specific purpose and did not satisfy the court that on a balance of probabilities that he fulfilled that purpose. He therefore held the sum on resulting trust for W or CDI. As the monies were no longer available equitable would be ascertained and J was liable to pay £500,000 with interest from 4 December 2007 when the monies left J’s account [79]. It had been agreed that the payment was made so that J could make an investment in the development of the golf course. The letters produced by J were hearsay and no notice had been given to rely upon them. They could be given little weight [49] and did not establish that J had acquired shares in Cyprus Ltd with the money paid over to him either by W or CDI. Evidence introduced to show that the monies used to pay for the golf course land in 2007 came from HiFX had not been pleaded and failed to show how J had secured an investment for W or CDI if neither of them had any sort of legally enforceable interest in SAS or LB Cyprus Ltd [53].
- Where monies were lent for a specific purpose, and the borrower was not free to apply them as he so wished, then the borrower was subject to a fiduciary duty to apply the monies for the agreed purpose and no other. If the purpose failed the monies were held on resulting trust. The appropriate approach where the monies were no longer available was to order equitable compensation [58-60].
- (2) The appropriate claimant was W. He provided the money that passed through CDI but never appeared on it’s books not least because the company was dormant at the time. While the driving force behind the use of CDI was most likely W’s advisor, J was aware that W was making the investment and all his dealings were with W. Even if J were to say that he had to account to CDI and not W, CDI would hold those monies on resulting trust for W as CDI never acquired any beneficial interest I the sum in question [73, 80]. With respect to the purported assignment, the benefit of the CDI debt was already with W so this was nonsense and the documents were in any event ineffective [37, 39]
- (3) While there was little doubt the parties did discuss the investment in July, and a time frame for sorting it out was mentioned, on balance it seems that this was all part of the discussions and negotiations between the parties fell short of a binding agreement.
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