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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Relfo Ltd v Jadvavarsani [2012] EWHC 2168 (Ch) (27 July 2012) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2012/2168.html Cite as: [2012] EWHC 2168 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
Relfo Limited (in liquidation) |
Claimant |
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- and - |
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Mr Bhimji Velji JadvaVarsani |
Defendant |
____________________
Duncan
Macpherson
& Dirk van Heck (instructed by the Defendant under the direct public access rules) for the Defendant
Hearing dates: 26/6/12 - 5/7/12
____________________
Crown Copyright ©
Mr Justice Sales :
Introduction
The factual background: Relfo and the payments in issue
"During February and March 2004, [Relfo] became involved in a transaction whereby a container of computer goods were purchased for distribution throughout Moscow. Mr Gorecia advises that, whilst this transaction was negotiated during February and March, the substantial investment made by [Relfo] was not concluded until April 2004 and amounted to approximately £1/2 million.
Mr Gorecia advises that, not only did the investment fail, in that it showed no profit return but that, furthermore, the company with whom Relfo transacted in Moscow was soon after placed into insolvent liquidation and that the entire investment of some £500,000 was lost with no realistic prospect of return."
"1. The Statement of affairs records that the Company is alleged to be owed the sum of £1,065,000 in respect of a loan made to an associated Company, Plusresult Ltd, however after inspection of the records of both companies I am only able to identify payments of £420,000, and require an explanation of the variation.
2. The Company is alleged to have invested £500,000 in the Ukraine. The nature and purpose of this investment is not apparent from the papers currently in my possession. However the Company's records show that payments totalling £666,587 were apparently made in respect of these investments.
3. Less than two months before the Company entered into insolvent liquidation, a sum of £500,000 was transferred by the Company to an account in a Latvian bank allegedly maintained by a company registered in the British Virgin Islands (although no such company can be traced in the BVI Companies Registry) [this is a reference to the Relfo/Mirren payment]. This payment was described in the statement of affairs as an investment in Computer chips in Moscow. I require a full explanation of the circumstances of this investment, and the apparent discrepancies.
4. Substantial payments appear to have been made from the Company's account to the directors, including the sum of £250,000 paid by cheque number 100280 on 24th April 2003. In light of these payments I also wish to see copy statements relating to the directors personal bank accounts for a period from 1st June 2001 onwards, and would be grateful if you could arrange for these to be supplied to me prior to our meeting."
"I dealt with [Mr Dagan] alone. The company was Moscow-based. I did not know who the shareholders were but [Mr Dagan] asked me to transfer the money to a Latvian bank. I saw no documentation and undertook that transfer in May 2004 to [Rietumu]. I had no idea where the money was going to.
After the money was transferred I spoke to [Mr Dagan] once or twice a week. He told me around 25.05.04 that the investment in the company had gone bad. I have no further details. He does know the person who received the money and who he dealt with [was] Mr Miroshnichenko. That person apparently, according to [Mr Dagan] is non-contactable but I believe is a Russian national. I need to go to Moscow to see if there is any possibility of recovering at least part, if not all, of the investment."
This account is to be contrasted with the account Mr Gorecia gave in the statement of affairs and the meeting with the Liquidator on 23 July 2004 (see paras. [19]-[20] above), at which he did not mention Mr Miroshnichenko or any need to go to Moscow, but said that the investment had been lost because the company in Moscow had gone into liquidation.
"I confirm that as per our agreement, I am sending you the amount of five hundred thousand pounds sterling as investment for the purchase of computer equipment and parts as discussed. I will be sending the money from UK on or around 30 April 2004. As per your instructions the money is being sent to [Mirren, with its British Virgin Islands address noted]. Beneficiary Bank: [Rietumu]."
i) A copy of a document dated "05.01.2004" entitled "Loan Agreement 01-03/UK About the Loan for the company Mirren Limited", which set out the terms of a loan by Relfo to Mirren of £500,000 to be transferred by Relfo to Mirren "not later than the 5th of May 2004", at an annual interest rate of 10% ("the purported Mirren loan agreement"). The document had been signed by someone on behalf of Mirren (and its British Virgin Islands address was given) and also bore what appeared to be the signature of Mr Gorecia for Relfo. Later, at an interview under caution with a Department of Trade and Industry investigator, when Mr Gorecia was asked about this document he said that the signature was his. But in his evidence at trial he sought to explain this away by saying that he had acknowledged his signature only under "the pressure of the moment" and said that in fact he knew nothing about this document and that his signature on it had been forged. I do not find it credible that at an interview under caution Mr Gorecia would have accepted that the signature on the purported Mirren loan agreement was his if he did not recognise that document;
ii) A copy of an unsigned document entitled "Protocol No. 1 Issued in addition to the Loan Agreement #01-03/UK", dated 5 May 2004 ("Protocol No. 1"), stating that Relfo cancelled the loan agreement and that Mirren "must return the amount of 878,479.35 US dollars in accordance with the payment instructions given by Relfo Limited" after retaining US$11,570.65 as compensation for the cancellation, being "the 1.3% from the amount of the initial loan of 890,050.00 US dollars";
iii) A copy document dated 5 May 2004 from Relfo to Mirren, again bearing what appeared to be the signature of Mr Gorecia, which referred to Protocol No. 1 and instructed Mirren to transfer the amount of US$878,479.35 to Bhimji Varsani's account with Citibank Singapore, with the following explanation to be recorded "Payment on behalf of Corn Ltd (Kiev, Ukraine), Loan Agreement No. 2412/01-1 dated 24.12.2001" ("the purported Relfo/Mirren instruction"). This matched the designation of the agreement with Corn which Mr Gorecia had previously produced to the Liquidator. Mr Gorecia's evidence at trial was that this also was not his genuine signature, and that the document was forged. There was uncontested expert evidence adduced by the Defendant at trial that this signature was exactly the same as that on the purported Mirren loan agreement, such that one must have been a cut and pasted replica of the other or both were cut and pasted replicas of some other signature. The expert had not been asked to compare the two signatures with a known genuine signature of Mr Gorecia;
iv) A copy of an unsigned document entitled "Protocol No. 2 Issued in addition to the Loan Agreement #01-03/UK" between Relfo and Mirren ("Protocol No. 2") recording that Mirren had returned the loan in accordance with Protocol No. 1 and that both parties and fulfilled and settled all their obligations towards each other;
v) A copy of a screen shot dated 19 October 2004 of what appeared to be a statement of account for Mirren's account at Rietumu showing a single transaction of receipt of US$890,050 from Relfo with the explanation "Re loan agreement 01 03 UK".
Assessment of the witnesses and the evidence
"At around the same time (early 2004), I was offered an opportunity to invest in Moscow. I was promised a 30 per cent return (£150,000) within 2 months on investing £500,000 to buy computer parts for onward sale in Moscow. The proposal was made by a man called Mr. S.G. Miroshnichenko in or about February 2004 when I had travelled to Kiev to meet with our Russian Partners. Whilst there I met with Mr. Vitaly Kudrowski, Alexander Sotskov and Mr. Guy Dagan, who were the key figures involved in the Odessa and Corn projects. Vitaly and Guy Dagan introduced me to Mr. S.G. Miroshnichenko at a meeting at [the offices of Corn in Kiev]. Mr. S.G. Miroshnichenko put the proposal to me at this meeting – he needed to get money up front to bring in a consignment of computer parts and I would get a return of around 30 per cent within 2 months. Mr. Dagan's main role at this meeting was translating. Vitaly backed Mr. S.G. Miroshnichenko up, saying that this would be a profitable short term investment and that he himself had put in USD1.5 million. I said I would think about it and the meeting concluded. I spoke further to Vitaly and Mr. Dagan about the proposal after the meeting. They endorsed the proposal, told me that they knew Mr S.G. Miroshnichenko and said I would make £150,000 to £200,000 on the transaction if I invested the full £500,000 that I had available to invest (I wanted to invest as much money as I could and made sure that I had an assurance from Vitaly and Mr. Dagan that Mr. S.G. Miroshnichenko would allow me to invest the full £500,000). I formed the impression that they had both done business with Mr. S.G. Miroshnichenko before, although I don't remember whether they said so. I gave them an answer, by phone, some time later, then Mr. Dagan gave me the name of Mirren Ltd and the details of its bank account with the timing of the transaction being left to me. I made the payment in early May. As far as I was concerned, I was dealing with the people, not the goods. I wasn't going to retail the computer parts or get involved in their distribution. At the time, I was making frequent visits to Kiev and I had travelled to the Ukraine again just before May. Also, Mr. Dagan used to come to London on a regular basis. Back then, I and the Varsanis were pleased with what appeared to be a good investment in the Ukraine and in the Odessa and Corn projects. I had built up a close personal friendship with those concerned over a period of 2 or 3 years. I felt certain that if I financed the purchase of the computer parts, I would get the £650,000 back quickly and would be in a better position to meet the Claimant's liabilities. The nature of the "deal" was unimportant. I relied on my perceived close association with my Ukrainian partners. If they had recommended me to invest in a fashion business instead of computer parts, I would have done so. My ultimate objective was to ensure the Claimant would continue to trade profitably and meet its liabilities. Within a week of my having remitted the £500,000 to Mirren (on or about 7 or 8 May 2004) I received a telephone call to my mobile telephone from Mr. Dagan. He said that he had bad news. Mr S.G. Miroshnichenko had disappeared. He said there would be difficulty in recovering the monies. Vitaly Kudrowski was a long-time member of the consortium who had been the driving force behind the Odessa project. He told me that my investment had failed and that I was not the only investor to lose money. I did not know whether Mirren went bankrupt or not. All I was informed was that the person who was in control and managing the transaction had disappeared and was uncontactable. Vitaly said he would try to sort matters. However, I decided at this stage to obtain professional advice and so I went to my accountants Richard Anthony & Co. I fully explained my position to them. I pointed out that my objective was to try to raise monies for the Claimant through these business dealings. My accountants introduced me to Valentine & Co (Insolvency Practitioners) in or about May 2004. I had explained the problem to them and I stated that I could raise between £700-800,000 for the Claimant. However, I needed more time in order to raise additional monies to ensure the Claimant could discharge all its liabilities. At this stage I was not absolutely certain that the monies invested in the Mirren deal would not be recoverable. At the time I remitted the payment of £500,000 to Mirren I truly believed what my partners had told me – that this was a good investment by way of a short term loan that would repay to the Claimant £650,000 including the capital. I thought it was an easy way of making money."
Legal analysis
(i) The property claim
(ii) The knowing receipt claim
"The first [of the two main classes of case] is concerned with the person who receives for his own benefit trust property transferred to him in breach of trust. He is liable as a constructive trustee if he received it with notice, actual or constructive, that it was trust property and that the transfer to him was a breach of trust; or if he received it without such notice but subsequently discovered the facts. In either case he is liable to account for the property, in the first case as from the time he received the property, and in the second as from the time he acquired notice."
See also Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC at 707C-E and 715A-C per Lord Browne-Wilkinson.
(iii) The claim in unjust enrichment
Defences on which Bhimji Varsani seeks to rely
Conclusion