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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> El Ajou v Dollar Land Holdings Ltd [1993] EWCA Civ 4 (02 December 1993)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1993/4.html
Cite as: [1993] EWCA Civ 4, [1994] 2 All ER 685, [1994] BCC 143

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JISCBAILII_CASE_TRUSTS

BAILII Citation Number: [1993] EWCA Civ 4
CHANF 92/0879/B

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
(MR. JUSTICE MILLETT)

Royal Courts of Justice
Strand
London WC2
2 December 1993

B e f o r e :

LORD JUSTICE NOURSE
LORD JUSTICE ROSE
and
LORD JUSTICE HOFFMANN

____________________

ABDUL GHANI EL AJOU Appellant
-v-
DOLLAR LAND HOLDINGS LIMITED
FACTORUM NV Respondents

____________________

(Handed Down Judgment of
John Larking, Chancery House, Chancery Lane, London WC2
Telephone No: 071-404 7464
Official Shorthand Writers to the Court)

____________________

MR. M. BELOFF QC, MR. R. ELLIS and MISS. S. MOORE (instructed by Bower Cotton & Bower of London EC4Y 8BH) appeared on behalf of the Appellant
MR. R. TAGER (instructed by Kaufman Kramer Shebson of London NW1 6QW) appeared on behalf of the Respondents

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    LORD JUSTICE NOURSE:

    Introduction

    Of the questions that remain in dispute in this case, the most important is whether, for the purposes of establishing a company's liability under the knowing receipt head of constructive trust, the knowledge of one of its directors can be treated as having been the knowledge of the company. That is essentially a question of company law. There are or have been other questions on tracing and constructive trust.

    The company is the first defendant, Dollar Land Holdings PLC ("DLH"). The director is Mr Sylvain Ferdman, who was the chairman and one of the three directors of DLH between June 1985 and June 1987. The party who seeks to recover against DLH in constructive trust is the plaintiff, Abdul Ghani El Ajou. He has put his claim at £1.3m. On 12th June 1992, after a trial extending over some 11 days, Mr Justice Millett delivered a reserved judgment dismissing the plaintiff's action. He held that the plaintiff had an equitable right to trace the money into the hands of DLH, but that Mr Ferdman's knowledge of their fraudulent misapplication could not be treated as having been the knowledge of DLH, either on the ground of his having been its directing mind and will or on the ground of his having been its agent in the transaction. The judge found that another person closely concerned with the affairs of DLH, Mr William Stern, did not have the requisite knowledge of the misapplication. The plaintiff now appeals to this court. He does not seek to upset the judge's finding in regard to Mr Stern. DLH has put in a respondent's notice whose primary purpose is to impugn the judge's finding as to one part of the tracing exercise.

    Mr Justice Millett's judgment is reported at (1993) 2 All ER 717. Because the report sets out in full the judge's clear and necessarily lengthy statement of the facts and because the issues have narrowed in this court, the facts can now be stated relatively briefly. I will state them mainly in the judge's own words.

    The facts

    The plaintiff is a wealthy Arab businessman resident in Riyadh. He was the largest single victim, though only one of many victims, of a massive share fraud carried out in Amsterdam between 1984 and 1985 by three Canadians, Allan Lindzon (or Levinson), Lloyd Caplan and Harry Roth ("the Canadians"). Some of the proceeds of the fraud were passed from Amsterdam through intermediate resting places in Geneva, Gibraltar, Panama and Geneva (again) to London, where in 1986 they were invested in a joint venture to carry out a property development project at Nine Elms in Battersea in conjunction with DLH. The interest of the Canadians in the joint venture was bought out by DLH in 1988, which is a public limited company incorporated in England but resident for tax purposes in Switzerland. It is a holding company. Its principal activities, carried on through its subsidiaries, are property dealing and investment. At the material time it was in a substantial way of business. It denies that in 1986 it had any knowledge that the money which the Canadians invested in the project represented the proceeds of fraud. Moreover, in buying out their interest in 1988 it claims to have been a bona fide purchaser for value without notice of the fraud.

    Mr Ferdman is a Swiss national, resident in Geneva. He worked for many years for the Bank of International Credit in Geneva. In 1972 he left the bank and set up his own company, Société d'Administration et de Financement SA ("SAFI"), through which he acted as a fiduciary agent. SAFI was originally owned jointly by Mr Ferdman and an old-established Swiss cantonal bank of good reputation, but in 1982 Mr Ferdman became its sole proprietor. SAFI acted as a fiduciary agent for clients who did not wish their identities to be disclosed. Two of its clients were a Mr Singer and a Mr Goldhar, who were associates of the Canadians. Mr Ferdman was accustomed to accept funds from clients without questioning their origin, and to act for clients who were anxious to conceal their identity. He regarded the need to preserve his clients' anonymity as paramount - without it he would have had no business - and to this end he was willing on occasion to present himself or SAFI as a beneficial owner and to make false statements to that effect. The judge found that it must have been plain to Mr Ferdman by the end of October 1985 that Singer and Goldhar were implicated in a fraud. Moreover, Mr Ferdman admitted to the judge at the trial that he knew perfectly well that the Canadians were involved with Singer and Goldhar in the fraud and were not just behind them. The Canadians also had a fiduciary agent resident in Geneva who acted for them. He was Mr David D'Albis, an American citizen.

    DLH is an English company which was formerly listed on the London Stock Exchange. In June 1985 its entire issued share capital was acquired by Keristal Investments and Trading SA ("Keristal"), a Panamanian company beneficially owned by a Liechtenstein foundation. In the annual reports of DLH Mr Ferdman described himself as the beneficial owner of Keristal, but that was not the case. He was simply preserving the anonymity of his principals, the founders and beneficiaries of the Liechtenstein foundation, who were two US citizens resident in New York ("the Americans"). The judge recorded that the plaintiff was satisfied that the Americans had no connection of any kind with the Canadians or their associates or any of the other persons involved in the fraud.

    DLH was acquired as a vehicle for the Americans' property dealings in the United Kingdom. Its business activities were under the direction of Mr William Stern, described by the judge as a property dealer who suffered a spectacular and well-publicised bankruptcy as a result of the 1974 property crash. He was engaged in the business of identifying opportunities for property investment and introducing them to investors willing to pay him a fee or a share in the eventual profits. Mr Stern had lived in Geneva as a boy and was acquainted with Mr Ferdman. They became friends, though they lost contact with each other for some years. Mr Stern knew that he was a fiduciary agent and had established SAFI, which he believed still to be jointly owned by Mr Ferdman and a reputable cantonal bank. From time to time he suggested deals to Mr Ferdman and enquired of him whether he had any suitable investors among his clients.

    Mr Ferdman introduced the Americans to Mr Stern, who was able to recommend a successful investment in a United Kingdom property. The Americans were willing to make further investments in the United Kingdom, and Mr Stern suggested that he should look for a suitable English vehicle, if possible a quoted company, which they could acquire and use as a medium for further investment. Mr Stern found DLH and Keristal acquired it as a pure cash shell in June 1985. Mr Ferdman and Mr Favre and Mr Jaton, two fellow directors of SAFI, were appointed to be the directors of DLH and Mr Ferdman its chairman. The judge described the three of them as nominee directors representing the interests of the beneficial owners. They played no part in the conduct of DLH's business which was carried on by Mr Stern in consultation with the Americans. Mr Stern was not a director of DLH, but he was appointed managing director of Dollar Land Management Ltd., one of its subsidiaries. DLH was in a substantial way of business and was able to raise very large sums on the security of its assets. At the end of 1986 it had secured bank loans and other mortgage creditors of more than £10m. By the end of 1987 that figure had risen to more than £30m.

    Mr Stern asked Mr Ferdman if he could find an investor willing to put up equity finance for the Nine Elms project. Mr Ferdman, who was to receive from DLH an introductory commission of five per cent of the funds obtained, brought one of the Canadians, Roth, to London in March 1986 and introduced him to Mr Stern, who provided him with a detailed investment proposal which included a profit forecast. All negotiations were conducted between Roth and Mr Stern. Mr Ferdman played no part. By a letter dated 20th March 1986 and addressed to Roth, care of SAFI in Geneva, the terms which had been agreed between him and Mr Stern were set out. Although that letter was signed by Mr Ferdman, it was composed entirely by Mr Stern. I will return to it later in this judgment.

    On 25th March Mr Ferdman copied the letter of 20th March (with two variations which the judge inferred were made at the request of the Canadians) by telex to Mr D'Albis, who gave instructions on the same day for £270,000 to be transferred from Geneva to the Royal Bank of Scotland in London for the account of DLH's solicitors, Grangewoods. The judge found that that sum represented proceeds of the fraud and that finding has not been questioned in this court. Subsequently, Mr Ferdman despatched a duplicate of the telex in the form of a letter on DLH's headed paper, and over his own signature, to Yulara Realty Ltd. ("Yulara") in Panama. That letter was dated 7th April. Again, I will return to it later. Yulara was a Panamanian company owned by the Canadians, which Mr Ferdman knew was a vehicle for their investment in the Nine Elms project. Mr Ferdman retained on his own files a copy of the letter countersigned by a Panamanian lawyer on behalf of Yulara by way of acceptance.

    Contracts for the purchase of the Nine Elms site were exchanged on 26th March. The purchaser was a subsidiary of DLH, Dollar Land (London) Ltd. ("DLH London"). The £270,000 which Grangewoods had received on the previous day was used to pay the deposit. On 11th June 1986 DHL London assigned the benefit of the contract to DLH for £100,000 and on the same day DLH entered into a contract for the sale of the site to Regalian Properties (Northern) Ltd. ("Regalian"). Completion took place on the same day at a price of £2.7m, £1m of which was recorded as being paid by DLH.

    The further funding of the project was complex. Reduced to its essentials, the method adopted was as follows. On 6th May 1986 Keristal (expressed to be represented by Mr Ferdman) and Yulara (expressed to be represented by the Panamanian lawyer) entered into a written loan agreement which was signed by them on behalf of Keristal and Yulara respectively. The agreement recited that Keristal was the holding company of DLH and that Yulara and DLH had entered into an agreement as per the letter dated 7th April. Article 1 was in substance a further recital to the effect that Yulara was making available or had given to Keristal (it is not clear which) the amount of up to $2.5m for as long as the agreement as per the letter of 7th April would be in force. By Article 2 Keristal accepted that amount on terms that it undertook to use the funds (a) "in order to make a joint venture in a certain real estate investment in London" in accordance with the terms contained in the letter dated 7th April and (b) "in order to [obtain] a bank guarantee of £1,300,000 to be issued in favour of [DLH London] or another company owned by [DLH]".

    On 12th and 16th May respectively two sums of $1,541,432 and $1,143,000, making a total of $2,684,432, were credited to an account of Keristal ("the Keristal No.2 account") at Banque Scandinave in Geneva. The account was operated by SAFI and was used exclusively for the purpose of funding the Nine Elms project. The bank statement for the account shows that the first sum came from the Bank of America; the source of the second is not shown. The judge found that both sums were traceable to Panama as proceeds of the fraud. That is the finding which the respondent's notice seeks to impugn. I will return to it shortly.

    Pursuant to arrangements made by Mr Ferdman, Scandinavian Bank Group Plc in London then agreed to advance £1.3m to Factotum NV ("Factotum"), a shelf company previously incorporated by Mr Ferdman in the Netherland Antilles, which he decided to make use of as a convenient vehicle for channelling the money to DLH. (Factotum is the second defendant in the action, but it has no assets and has never been served.) The advance was supported by a guarantee given by Banque Scandinave secured on the moneys in the Keristal No.2 account. The whole of the loan from Scandinavian Bank in London to Factotum was drawn down and £1,030,000 was paid into Grangewoods' client account on 29th May. Of those moneys £745,598.60 were used to discharge the amount due from DLH on completion of the purchase of the site on 11th June. The balance was used to discharge obligations of DLH and to make various other payments at the direction of DLH, including payment to Mr Ferdman of his introductory commission of £65,000.

    It is clear from the foregoing that the £1,030,000 paid to Grangewoods represented moneys that had been credited to the Keristal No.2 account. It is also clear that the moneys so credited belonged to the Canadians. What is in dispute is the judge's finding that they represented moneys which Mr D'Albis had sent to Panama from Gibraltar on 30th March and 1st April 1986, a fact that had to be established in order that they could be treated as proceeds of the fraud. It is convenient to deal with that question now.

    Tracing through Panama

    The question was dealt with by the judge between pp.734H and 736D. He said that the plaintiff was unable, by direct evidence, to identify the moneys in the Keristal No.2 account with the money which Mr D'Albis had sent to Panama only a few weeks before. However, he thought that there was sufficient, though only just, to enable him to draw the necessary inference. At p.734J, he continued:

    "One of the two sums received in the Keristal No.2 account was $1,541,432 received on 12 May 1986 from Bank of America. That corresponds closely with the sum of $1,600,000 transferred to Bank of America, Panama on 1 April 1986. In relation to the later transaction, Bank of America may, of course, merely have been acting as a correspondent bank in New York and not as the paying bank; and the closeness of the figures could be a coincidence. It is not much, but it is something; and there is nothing in the opposite scale. The source of the other money received in the Keristal No.2 account is not known, but from the way in which the Canadians appear to have dealt with their affairs, if one sum came from Panama, then the other probably did so, too."

    At p.735F, after considering other points on each side, the judge said that the fact remained that there was no evidence that the Canadians had any substantial funds available to them which did not represent proceeds of the fraud. At p.736D, he concluded:

    "In my judgment, there is some evidence to support an inference that the money which reached the Keristal No.2 account represented part of the moneys which had been transmitted to Panama by the second tier Panamanian company some six weeks previously, and the suggestion that it was derived from any other source is pure speculation."

    Mr Tager, for DLH, submitted that neither of the routes followed by the judge led to the conclusion that he reached. He took us carefully through the bank statement for the Keristal No.2 account. He relied on the fact that there were two separate credits to it of very precise amounts, the second having been made four working days after the first. It had been impossible to identify the source of the second credit. All this suggested that the two credits had come from different sources. There was no necessary connection between the first and the sum of $1.6m that had been sent from Gibraltar to the Bank of America in Panama on 1st April. Mr Tager argued that there were other very substantial funds available to the Canadians. He disputed the judge's view that there was no evidence that they had any substantial funds available to them that did not represent proceeds of the fraud. He submitted that the plaintiff had not discharged the evidential burden of establishing the necessary link.

    Having carefully considered these and other arguments of Mr Tager, I remain unconvinced that the judge drew the wrong inference. I well appreciate both that the question is of critical importance to the plaintiff's case and that, since it depends almost entirely, if not exclusively, on documentary evidence and undisputed events, we in this court are, in theory at any rate, in as good a position to draw an inference as the judge himself. In practice, however, the judge, after an 11 day trial, was in a much better position than we are. From all that I have seen and heard of the case, I would feel no confidence at all in saying that the judge had drawn the wrong inference.

    The assets received by DLH

    On the footing that the moneys credited to the Keristal No.2 account were proceeds of the fraud, it becomes necessary to identify the assets received by DLH and the dates when it received them. The plaintiff's position is a simple one. He says that DLH received £270,000 on 25th March 1986 and a further £1,030,000 in June 1986 (though logically he ought to say on 29th May 1986, when the latter sum was paid into Grangewoods' client account; see further below). The judge considered these questions at p.738. He thought that the position was somewhat more complicated than the plaintiff would have had it.

    As to the £270,000, the judge said, at p.738C:

    "The sum of £270,000 was never received by DLH. It was paid into Grangewoods' client account and their client at the time must be taken to have been DLH London. DLH London was not a nominee or agent for DLH. As had previously been agreed between Roth and Mr Stern, it was the intended contractual purchaser of the site, and the money was to be used exclusively for the payment of the deposit on exchange of contracts. In my judgment, DLH did not receive the money at all, and DHL London did not receive it beneficially but upon trust to apply it for a specific purpose. DLH London used the money, as it was bound to do, to pay the deposit on the site, and thereby acquired for its own benefit a corresponding interest in the site which it subsequently sold and transferred to DLH. The plaintiff can follow his money through these various transactions, but the relevant asset capable of being identified as having been received by DLH is an interest in the site corresponding to the payment of the deposit."

    This question depends on the true construction and effect of the letter of 20th March 1986. Both Mr Beloff QC, for the plaintiff, and Mr Tager referred to its terms at some length in order to determine whether DLH London had acted as principal or as agent for DLH. Although he was not greatly concerned either way, Mr Beloff submitted that DLH London had acted as agent and that the £270,000 was accordingly received by DLH on 25th March. But in my view the judge was right, as a matter of construction, to conclude that DLH London, and not DLH itself, was the principal, so that it was that company that was Grangewoods' client when the money was received. I therefore agree with the judge that DLH did not receive anything on 25th March, but that on the assignment of the benefit of the contract to it on 11th June it received an interest in the site corresponding to the payment of the deposit.

    As to the balance of £1,030,000, the judge said, at p.738E-F:

    "The sum of £1,030,000 was also paid into Grangewoods' client account, but by then their client had become DLH. The money was disbursed on the instructions and for the benefit of DLH. Only £745,598.60 was used to pay the money due to the vendor on completion, but this was the result of the arrangements which DLH had made with Regalian. So far as Yulara is concerned, the whole £1.3m must be taken to have been disbursed as agreed between them on the acquisition of a 40 per cent interest in the project. Moreover, in my judgment, on a proper analysis of the transaction between Yulara and DLH, Yulara's money should be treated as having been invested in its share of the project, and not in or towards the acquisition of DLH's share.

    The investment proved highly successful. In itself it was not a breach of trust and caused the plaintiff no loss. Had he been able to intervene before the Canadians were bought out, he could have claimed the whole of Yulara's interest in the project; but whatever the extent of DLH's knowledge of the source of Yulara's funds, his claim would have been confined to Yulara's interest in exoneration of that of DLH. In the events which have happened, the plaintiff is in my judgment bound to treat his money as represented by Yulara's interest in the project, and must rely exclusively on the transaction on 16 March 1988 when Yulara's interest was bought out by DLH."

    For a reason which will become clear when I deal with the question whether Mr Ferdman was the directing mind and will of DLH, Mr Beloff expressed greater concern at the judge's decision of this question. However, subject to one point, I feel unable to differ from his reasoning on it.

    I am puzzled by the judge's suggestion that by the time the £1,030,000 was paid into Grangewoods' client account their client had become DLH. At p.730F-G he had found that that payment was made on 29th May, before the assignment of the benefit of the contract by DLH London to DLH on 11th June. However, this point (which was not addressed in argument), though it may be of importance in relation to the date at which DLH must be treated as having had knowledge of the fraud (see below), does not affect the judge's view of the asset received by DLH in respect of the £1,030,000 and the date when it received it.

    Knowledge

    It having been established that DLH received assets representing proceeds of the fraud, I come to the question of knowledge. By the end of the hearing there could have been no doubt that Mr Ferdman himself had the requisite knowledge. At p.740F-G, the judge said of him:

    "He freely admitted that he knew that the persons who were providing the money for the Nine Elms project were the persons who had been behind the fraud in Amsterdam; and that by 7 April 1986, when he signed the letter to Yulara, he knew (or assumed) that the money which he would be receiving into the Keristal No.2 account was part of the proceeds of the fraud."

    Thus arises the most important question remaining in dispute, which is whether Mr Ferdman's knowledge can be treated as having been the knowledge of DLH. The plaintiff contends that it can and ought to be, first, on the ground that Mr Ferdman was, in relation to DLH's receipt of the assets representing the moneys fraudulently misapplied, its directing mind and will; secondly and alternatively, on the ground that he was its agent in the transaction. Because a company's directing mind and will are often the mind and will of one or more of its directors and because a director is for many purposes an agent of the company, there is a danger of confusion between the two grounds on which the plaintiff relies. But they are, as the judge made clear, quite separate. The plaintiff can succeed on either. The convenient course is to deal with the law and the facts in regard to each of them in turn.

    Directing mind and will

    This doctrine, sometimes known as the alter ego doctrine, has been developed, with no divergence of approach, in both criminal and civil jurisdictions, the authorities in each being cited indifferently in the other. A company having no mind or will of its own, the need for it arises because the criminal law often requires mens rea as a constituent of the crime, and the civil law intention or knowledge as an ingredient of the cause of action or defence. In the oft-quoted words of Viscount Haldane LC in Lennard's Carrying Co., Ltd. v. Asiatic Petroleum Co., Ltd. (1915) AC 705, 713:

    "My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation."

    The doctrine attributes to the company the mind and will of the natural person or persons who manage and control its actions. At that point, in the words of Mr Justice Millett, at p.740J:

    "Their minds are its mind; their intention its intention; their knowledge its knowledge."

    It is important to emphasise that management and control is not something to be considered generally or in the round. It is necessary to identify the natural person or persons having management and control in relation to the act or omission in point. This was well put by Eveleigh J in delivering the judgment of the Criminal Division of this court in Reg. v. Andrews-Weatherfoil Ltd. (1972) 1 WLR 118, at 125C:

    "It is necessary to establish whether the natural person or persons in question have the status and authority which in law makes their acts in the matter under consideration the acts of the company so that the natural person is to be treated as the company itself."

    Decided cases show that, in regard to the requisite status and authority, the formal position, as regulated by the company's articles of association, service contracts and so forth, though highly relevant, may not be decisive. Here Mr Justice Millett adopted a pragmatic approach. In my view he was right to do so, although it has led me, with diffidence, to a conclusion different from his own.

    DLH contends that its directing mind and will in relation to its receipt of the assets representing the moneys fraudulently misapplied were either the mind and will of Mr Stern alone or of Mr Stern and the Americans together. They were not the mind and will of Mr Ferdman. The judge's acceptance of this contention is expressed at p.741A-B:

    "In 1986 [DHL's] directors were all officers of SAFI, but they were merely nominee directors representing the interests of the Americans. Mr Ferdman was a non-executive director. His only executive responsibilities were to act as a fiduciary agent, represent the interests of the Americans, and ensure that the necessary corporate documentation was in order. The witnesses agreed that, in the early days of DLH, Mr Ferdman played a bigger role than he did [later]; but I do not think that that was due to any change in his role. He was always responsible for the formal paper work, but not for the business. As the business expanded, so his relative importance diminished. Even in 1986, he played no part in business decisions. These were taken by Mr Stern in consultation with the Americans. In my judgment, Mr Ferdman's position as chairman and non-executive director of DLH was insufficient by itself to constitute his knowledge ipso facto the knowledge of DLH.
    It has not been alleged, still less established, that the other two officers of SAFI, who with Mr Ferdman constituted the board of DLH in 1986, shared Mr Ferdman's knowledge of the source of the Canadians' money, but in my judgment it would make no difference if they did. Like Mr Ferdman, they were merely nominee directors with non-executive responsibility. They had no authority to take business decisions. In relation to its business affairs in 1986, neither Mr Ferdman alone nor the board as a whole can realistically be regarded as the directing mind and will of DLH."

    In disagreeing with the judge on this question, I start from the position that the transactions to be considered are those by which DLH received assets representing the moneys fraudulently misapplied. The responsibility for the management and control of those transactions is not to be determined by identifying those who were responsible for deciding that DLH would participate in the Nine Elms project and the nature and extent of that participation, far less by identifying those who were responsible for business decisions generally. Neither Mr Stern nor the Americans made any of the arrangements for the receipt or disbursement of the moneys by Grangewoods. Nor did they commit DLH to the obligations correlative to their receipt. None of them had the authority to do so. That was the responsibility of Mr Ferdman. The crucial considerations are that Mr Ferdman made all the arrangements for the receipt and disbursement of the £270,000 and the £1,030,000; that it was he who signed the letter of 20th March to Roth; that it was he who, on 25th March, copied that letter to Mr D'Albis; that it was he who signed and despatched the letter of 7th April to Yulara; that it was he who, on 6th May, signed the agreement with Yulara; and that it was those steps that caused DLH to become involved in the project and enabled it later to acquire the assets representing the moneys fraudulently misapplied.

    Each of the steps taken by Mr Ferdman was taken without the authority of a resolution of the board of DLH. That demonstrates that as between Mr Ferdman on the one hand and Mr Favre and Mr Jaton on the other it was Mr Ferdman who had the de facto management and control of the transactions. It may be that that state of affairs involved some breach of the directors' duties to DLH. But that would not enable DLH to say that Mr Favre and Mr Jaton were parties to its directing mind and will in any relevant respect. Mr Tager sought to show that they did perform duties as directors of DLH. No doubt they did. But there is no real evidence that they had any responsibility for the transactions in question. In my view the directing mind and will of DLH in relation to the relevant transactions between March and June 1986 were the mind and will of Mr Ferdman and none other. That means that DLH had the requisite knowledge at that time.

    Next, I must consider whether the plaintiff's right to recover is affected by Mr Ferdman's having ceased to be a director of DLH in June 1987. This question is of significance only in relation to the £1,030,000. It has no bearing on the £270,000. At p.743A, Mr Justice Millett, having repeated his view that, in regard to the £1,030,000, the relevant transaction was the acquisition by DLH of Yulara's interest in the joint venture on 16th March 1988, continued:

    "By then Mr Ferdman had ceased to be a director of DLH for 9 months, and he had nothing at all to do with the transaction. Even if, contrary to my judgment, Mr Ferdman's knowledge should be attributed to DLH in 1986, it would be quite wrong to treat DLH as still possessing that knowledge in 1988. As Megarry V-C pointed out in Re Montagu's Settlement Trust (1987) Ch. 264, 284, a natural person should not be said to have knowledge of a fact that he once knew if at the time in question he has genuinely forgotten all about it. In my judgment, where the knowledge of a director is attributed to a company, but is not actually imparted to it, the company should not be treated as continuing to possess that knowledge after the director in question has died or left its service. In such circumstances, the company can properly be said to have 'lost its memory'".

    While I might agree with the judge that the knowledge of a director, who had known of a misapplication of trust moneys at the time of their misapplication but had genuinely forgotten all about it by the time that they were received by the company, could not be attributed to the company, I am unable to see how that can assist DLH here. The steps that caused DLH to become involved in the project and enabled it later to acquire the asset representing the £1,030,000 were all taken between March and June 1986. Moreover, although the judge held that the plaintiff was bound to treat the £1,030,000 as represented by Yulara's interest in the project, he found, at p.730 F-G, that that sum had been paid into Grangewoods' client account on 29th May 1986 and had thereafter been wholly disbursed as directed by DLH, £745,000 approximately in satisfaction of the purchase price. In the circumstances, DLH having had the requisite knowledge at the time that it became involved in the project and when the £1,030,000 was disbursed as it directed, it would in my view be unrealistic to hold that it ceased to have that knowledge simply because the mind and will that had been the source of it played no part in the receipt of the asset itself. I am therefore of the opinion that DLH is on this ground liable to the plaintiff in constructive trust.

    Agency

    Although the views so far expressed are enough to dispose of the appeal in favour of the plaintiff, I turn briefly to the alternative question whether Mr Ferdman's knowledge ought to be imputed to DLH, on the ground that he acted as DLH's agent in the transaction.

    Mr Justice Millett thought that it was not accurate to describe Mr Ferdman as having acted as the agent of DLH in obtaining money from the Canadians. I am not sure that I would agree with him on that question. The real question is whether Mr Ferdman acted as the agent of DLH in the transactions by which it received assets representing the moneys fraudulently misapplied. I find it unnecessary to answer either question. That is because I agree with the judge that, even if Mr Ferdman was DLH's agent, his knowledge could not, as a matter of law, be imputed to it.

    It is established on the authorities that the knowledge of a person who acquires it as a director of one company will not be imputed to another company of which he is also a director, unless he owes, not only a duty to the second company to receive it, but also a duty to the first to communicate it; see Re Hampshire Land Co. (1896) 2 Ch. 743 and Re Fenwick, Stobart & Co., Ltd. (1902) 1 Ch. 507.

    Mr Ferdman acquired his knowledge of the fraudulent misapplication as a director of SAFI. I do not doubt that he owed a duty to DLH to receive it. But I agree with the judge that he owed no duty to SAFI to communicate it. I also agree with him that the facts of this case are indistinguishable in any material respect from those in Re David Payne & Co., Ltd. (1904) 2 Ch. 608.

    Conclusion

    I would allow the appeal. On that footing, it becomes necessary to consider the relief to which the plaintiff is entitled, a consideration so far made unnecessary by the judge's dismissal of the action. Although it would be possible for this court to deal with that question itself, I think it preferable to remit it for consideration by the judge.

    LORD JUSTICE ROSE: I gratefully adopt the recital of facts in the judgment of Nourse LJ. For the reasons which he gives, I agree that the appellant's submissions with regard to the payment of the deposit and the balance of the money fail. The Judge's conclusions, namely that the deposit was paid to Dollarland Holdings London beneficially and that the balance was received by DLH on trust to invest on behalf of Yulara pursuant to a joint venture agreement, were, on the evidence before him, correct. Equally, the judge's finding, which DLH seek to challenge, that the money can be traced to the proceeds of fraud by the Canadians, is, in my view, unimpeachable.

    The submissions with regard to the role of Ferdman and whether his knowledge of the fraudulent origin of the invested funds should be attributed to DLH raise considerations of more general importance. In English law the concept of a company's directing mind and will has its origins in the speech of Viscount Haldane V.C. in Lennard's Carrying Co Ltd -v- Asiatic Petroleum Co Ltd [1915] AC 705 at 713. In Tesco Ltd -v- Nattrass [1972] AC 153 Lord Diplock at 200A identified those who are to be treated in law as being the company as:

    "those natural persons who by the memorandum and articles of association or as a result of action taken by the directors, or by the company in general meeting pursuant to the articles are entrusted with the exercise of the powers of the company."

    Lord Reid at 171F said:

    "Normally the board of directors, the managing director and perhaps other superior officers of a company carry out the functions of management and speak and act as the company...But the board of directors may delegate some part of their functions of management giving to their delegate full discretion to act independently of instructions from them."

    At 190G Lord Pearson said:

    "There are some officers of a company who may for some purposes be identified with it as being or having its directing mind and will, its centre and ego and its brains...The reference in the Trades Descriptions Act 1964 to 'any director, manager, secretary or other similar officer of the body corporate' affords a useful indication of the grades of officers who may for some purposes be identifiable with the company."

    There are, it seems to me, two points implicit, if not explicit, in each of these passages. First, the directors of a company are, prima facie, likely to be regarded as its directing mind and will whereas particular circumstances may confer that status on non-directors. Secondly, a company's directing mind and will may be found in different persons for different activities of the company.

    It follows that Millett J's unchallenged conclusion that Stern, although neither a director nor an employee, was the "moving force" behind the company's activities does not preclude a finding that Ferdman was the company's directing mind and will in relation to some activities.

    In the present case, the company's activity to which Ferdman's knowledge was potentially pertinent was the receipt of over £1 million for investment. Ferdman had been appointed by the Americans for two reasons in particular: first, as a Swiss resident operating the formal aspects of the company he was able to confer the tax advantages of non-resident status on DLH on the basis that its "central management and control" was in Switzerland not England; and secondly because the Americans did not want Stern to be seen to have any official role in the company. Ferdman was a director and chairman of the board and his services were charged for at a higher rate than that for other directors. He instructed accountants and solicitors. He convened meetings. He claimed in the company's accounts to be its ultimate beneficiary. He was a necessary signatory of legal documents and signed the Yulara agreement without needing the authority of a board resolution to do so: by so doing he committed the Company to that agreement.

    Having regard to these matters, it seems to me to be plain that, for the limited purposes here relevant i.e. the receipt of money and the execution of the Yulara agreement, he was the directing mind and will of the company. In consequence, his knowledge of the fraud was DLH's knowledge and, in this respect, I differ from Millet J. It is immaterial that by March 1988, when DLH acquired Yulara's interest, Ferdman had ceased to be a director. That cessation did not deprive DLH of its continuing knowledge in relation to the transaction, which embraced both the initial receipt of the money in May 1986 and the ultimate acquisition of Yulara's interest.

    If the appellant does not succeed on this point, Mr Beloff's alternative submission based on agency is, in my view, doomed to fail. This court is, in my judgment, bound to hold, on the authority of Re David Payne [1904] 2 Ch 608 that, qua agent, Ferdman was under no obligation to disclose his knowledge to DLH, there being no duty on DLH to enquire as to the source of the offered money. I agree with Hoffmann LJ's analysis of the three categories of agency cases to which he refers and with his conclusion that they have no application in the present circumstances.

    To the extent indicated I would allow this appeal.

    LORD JUSTICE HOFFMANN: This is a claim to enforce a constructive trust on the basis of knowing receipt. For this purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty.

    There is no dispute that the first requirement is satisfied. The Canadians bribed the plaintiff's fiduciary agent to give them over US $10,000,000 of his money in return for worthless shares. The argument in this appeal has been over, first, which assets were received beneficially by DLH; secondly, whether they are traceable as representing the plaintiff's money; and thirdly, whether the admitted knowledge of the frauds on the part of Mr Ferdman, chairman of DLH, can be imputed to the company.

    1. Identifying the assets beneficially received.

    The judge has found as a fact that certain assets received by DLH, namely the benefit of the deposit paid under the contract for the purchase of the Nine Elms site and Yulara's interest in the development, were traceable in equity as proceeds of fraud. Both sides have challenged certain aspects of this finding.

    (a) The deposit.

    The plaintiff says that the asset received by DLH was not the benefit of the deposit but the money used to pay it. This had been sent on 25th March 1986 to DLH's subsidiary DLH London, which entered into the contract to buy the site and afterwards assigned that contract (with the benefit of the deposit) to DLH. The plaintiff says that DLH London received the money as agent for DLH. The only evidence for this claim is that it was paid pursuant to an agreement between Roth and DLH. But that in my judgment is no reason why DLH London should not have received the money beneficially and this would be consistent with its having been the contracting party and subsequently assigning that contract for a substantial consideration to DLH.

    (b) The main investment.

    The plaintiff says that the other asset received by DLH was not Yulara's interest in the project, which it acquired on 16th March 1988, but the £1,030,000 invested by Yulara on 29th May 1986. In my judgment the judge was right in holding that money was not received by DLH beneficially but on trust to invest on behalf of Yulara. DLH and Yulara were joint venturers. Yulara was making an equity investment by which it acquired a proprietary interest in half the share of profits due to DLH under its arrangements with Regalian and the benefit of a guarantee by DLH that its capital would be repaid. DLH received no part of this investment beneficially until it bought out Yulara's interest.

    2. Tracing.

    DLH challenges the judge's finding that the money can be traced to the proceeds of fraud which the Canadians had remitted to Panama. In my view, this was a finding which the judge was entitled to make. Mr Tager says that it might have been the proceeds of frauds on other people or even the money realised by the Canadians when they sold the business. It might have been, but as against the plaintiff I do not think that the Canadians would have been entitled to say so. Nor is DLH. The mixed fund was impressed with an equitable charge in favour of the plaintiff which was enforceable against the Canadians and persons claiming under them.

    3. Knowledge.

    The judge correctly analysed the various capacities in which Mr Ferdman was involved in the transaction between DLH and the Canadians. First, he acted as a broker, introducing the Canadians to DLH in return for a 5% commission. In this capacity he was not acting as agent for DLH but as an independent contractor performing a service for a fee. Secondly, he was authorised agent of DLH to sign the agreement with Yulara. Thirdly, he was at all material times a director and chairman of the board of DLH.

    There are two ways in which Mr Ferdman's knowledge can be attributed to DLH. The first is that as agent of DLH his knowledge can be imputed to the company. The second is that for this purpose he was DLH and his knowledge was its knowledge. The judge rejected both.

    (a) The agency theory.

    The circumstances in which the knowledge of an agent is imputed to the principal can vary a great deal and care is needed in analysing the cases. They fall into a number of categories which are not always sufficiently clearly distinguished. I shall mention three such categories because they each include cases on which Mr Beloff placed undifferentiated reliance. In fact, however, they depend upon distinct principles which have no application in this case.

    (i) Agent's knowledge affecting performance or terms of authorised contract.

    First, there are cases in which an agent is authorised to enter into a transaction in which his own knowledge is material. So for example, an insurance policy may be avoided on account of the broker's failure to disclose material facts within his knowledge, even though he did not obtain that knowledge in his capacity as agent for the insured. As Lord Macnaghten said in Blackburn Lowe & Co. v. Vigors (1887) 12 App. Cas. 531, 542:

    "But that is not because the knowledge of the agent is to be imputed to the principal but because the agent of the assured is bound as the principal is bound to communicate to the underwriters all material facts within his knowledge."

    In this category fall two of the cases upon which Mr Beloff QC relied, namely Turton v. London and North-Western Railway Co. (1850) 15 L.T.(O.S.) 92 and Dresser v. Norwood (1864) 17 C.B.(N.S.) 466. In the former case the agent was authorised to conclude a contract of carriage on behalf of the principal. The agent's knowledge of the carrier's standard terms of business was held sufficient to enable those terms to be treated as included in the contract. The agent, said Pollock C.B., "made the same contract in this case as if he had made it for himself." In the latter case, the agent was authorised to enter into a contract for the purchase of wood. His knowledge that the vendor was a factor dealing for a principal was held sufficient to enable the contract to be treated as made with the principal and so preclude the purchaser from relying on a set-off against the factor. Neither are cases of imputation of knowledge. Rather, the agent's knowledge affects the terms or performance of the contract which he concludes on behalf of his principal.

    These principles have no application in this case. We are not concerned with the contractual terms upon which DLH received the traceable assets but whether it had the knowledge which would impose a constructive trust. In other words, real imputation of knowledge is required.

    (ii) Principal's duty to investigate or make disclosure.

    Secondly, there are cases in which the principal has a duty to investigate or to make disclosure. The duty to investigate may arise in many circumstances, ranging from an owner's duty to inquire about the vicious tendencies of his dog (Baldwin v. Casella (1872) L.R. 7 Ex. 327) to the duty of a purchaser of land to investigate the title. Or there may be something about a transaction by which the principal is "put on inquiry". If the principal employs an agent to discharge such a duty, the knowledge of the agent will be imputed to him. (There is an exception, the scope of which it is unnecessary to discuss, in cases in which the agent commits a fraud against the principal). Likewise in cases in which the principal is under a duty to make disclosure (for example, to an insurer) he may have to disclose not only facts of which he knows but also material facts of which he could expect to have been told by his agents. So in Gladstone v. King (1813) 1 M. & S. 35 a marine insurance policy was avoided because the master of the ship knew that it had suffered damage, even though he had not in fact communicated this information to the owner. The case of Regina Fur Company Ltd v. Bossom [1957] 2 Lloyd's L.R. upon which Mr Beloff strongly relied, also concerned the duty to make disclosure under an insurance policy and therefore falls within the same category.

    None of these cases are relevant because in receiving the traceable assets, DLH had no duty to investigate or make disclosure. There was nothing to put it on inquiry.

    (iii) Agent authorised to receive communications.

    Thirdly, there are cases in which the agent has actual or ostensible authority to receive communications, whether informative (such as the state of health of an insured: Blackley v. National Mutual Life Assurance [1972] N.Z.L.R. 1038) or performative (such as a notice to quit: Tanham v. Nicholson (1872) L.R. 5 H.L. 561) on behalf of the principal. In such cases, communication to the agent is communication to the principal. These cases also have no application here. Mr Ferdman did not receive information about the frauds in his capacity as agent for DLH. He found it out while acting for the Canadians.

    (iv) Agent's duty to principal irrelevant.

    What it therefore comes to is that Mr Ferdman, an agent of DLH, had private knowledge of facts into which DLH had no duty to inquire. Mr Beloff said that Mr Ferdman nevertheless owed DLH a duty to disclose those facts. He then submits that because he had such a duty, DLH must be treated as if he had discharged it.

    I am inclined to agree that Mr Ferdman did owe a duty, both as broker employed by DLH to find an investor and as chairman of the Board, to inform DLH that the Yulara money was the proceeds of fraud. I reject Mr Tager's submission, based on Kelly v. Cooper [1992] 3 W.L.R. 936, that no term can be implied in a contract with a Swiss fiduciary agent which requires him to disclose that the money for which he is being paid a 5% procurement commission has been stolen. There is no evidence that Switzerland will enforce a confidence in iniquity any more than this country.

    But Mr Beloff's submission that DLH must be treated as if the duty had been discharged raises an important point of principle. In my judgment the submission is wrong. The fact that an agent owed a duty to his principal to communicate information may permit a court to infer as a fact that he actually did so. But this is a rebuttable inference of fact and in the present case the judge found that Mr Ferdman did not disclose what he knew to anyone else acting on behalf of DLH. In some of the cases in the third of the categories I have mentioned, the fact that an agent with authority to receive a communication had a duty to pass the communication on to his principal is mentioned as a reason why the principal should be treated as having received it. I think, however, that the true basis of these cases is that communication to the agent is treated, by reason of his authority to receive it, as communication to the principal. I know of no authority for the proposition that in the absence of any duty on the part of the principal to investigate, information which was received by an agent otherwise than as agent can be imputed to the principal simply on the ground that the agent owed to his principal a duty to disclose it.

    On the contrary, I agree with the judge that Young v. David Payne & Co. Ltd [1904] 2 Ch. 608, 611 is authority against such a proposition. In that case the Exploring Land and Minerals Co. Ltd. lent £6,000 to David Payne & Co. Ltd for 30 days on the security of a debenture. One Kolckmann, a stockbroker who was concerned in an ambitious and somewhat dubious scheme of flotation involving David Payne & Co. Ltd, was also a director of the Exploring Land company. In his capacity as stockbroker he knew that the money would not be applied to any authorised purpose of the company but diverted to the use of its controlling shareholder. He actually signed the cheque by which the money was advanced. David Payne & Co. Ltd went into liquidation and the liquidator challenged the validity of the debenture on the ground that Kolckmann's knowledge of the ultra vires purposes for which the money would be used should be imputed to the Exploring Land company.

    Buckley J. appears to have assumed that, as a director of the Exploring Land company, Kolckmann owed a duty to disclose what he knew about the real purposes for which the money would be used. But he regarded this as insufficient to enable that knowledge to be imputed to the company. He said at p.611 (my emphasis):

    "I understand the law to be this: that if a communication be made to his agent which it would be his duty to hand on to his principals...and if the agent has an interest which would lead him not to disclose to his principals the information that he has thus obtained, and in point of fact he does not communicate it, you are not to impute to his principals knowledge by reason of the fact that their agent knew something which it was not in his interest to disclose and which he did not disclose."

    It is true that in the Court of Appeal, both Vaughan-Williams L.J. and Romer L.J. said that Kolckmann owed no duty to impart his knowledge to the Exploring Land company. Thus Romer L.J. said:

    "I take it that in such a transaction the lending company was not bound to inquire as to the application of the money at all by the borrowing company. That being so, it appears to me that knowledge independently acquired by a director in his personal capacity in respect to a matter which was irrelevant so far as concerned the lending company is knowledge which cannot be imputed to the company, for it was knowledge of something which did not really concern the lending company as a matter of law. Therefore, you cannot imply a duty on the part of the director to have told these facts to the lending company, or a duty on the part of the lending company to have inquired into that question.."

    It is however clear from the process of reasoning that what Romer L.J. means is that in the absence of a duty to inquire, there was no duty of disclosure on the part of the director on which an outsider could rely for the purpose of imputing his knowledge to the company. I do not think that it would have affected his conclusion if the director had for some other reason (e.g. some internal company rule) owed a duty of disclosure with which he did not in fact comply. I agree with Buckley J. that this would have been irrelevant.

    It follows that in my judgment Millett J. was right to hold that Mr Ferdman's position as agent or broker does not enable his knowledge to be imputed to DLH.

    (b) The "directing mind and will" theory.

    The phrase "directing mind and will" comes from a well-known passage in the judgment of Viscount Haldane L.C. in Lennard's Carrying Co. Ltd v. Asiatic Petroleum Co. Ltd [1915] A.C. 705 which distinguishes between someone who is "merely a servant or agent" and someone whose action (or knowledge) is that of the company itself. Despite their familiarity, it is worth quoting the terms in which Viscount Haldane said that the directing mind could be identified:

    "That person may be under the direction of the shareholders in general meeting; that person may be the board of directors itself, or it may be, and in some companies it is so, that that person has an authority coordinate with the board of directors given to him under the articles of association, and is appointed by the general meeting of the company and can only be removed by the general meeting of the company. My Lords, whatever is not known about Mr Lennard's position, this is known for certain, Mr Lennard took the active part in the management of this ship on behalf of the owners, and Mr Lennard, as I have said, was registered as the person designated for this purpose in the ship's register."

    Viscount Haldane therefore regarded the identification of the directing mind as primarily a constitutional question, depending in the first instance upon the powers entrusted to a person by the articles of association. The last sentence about Mr Lennard's position shows that the position as reflected in the articles may have to be supplemented by looking at the actual exercise of the company's powers. A person held out by the company as having plenary authority or in whose exercise of such authority the company acquiesces, may be treated as its directing mind.

    It is well known that Viscount Haldane derived the concept of the "directing mind" from German law (see: Gower Principles of Modern Company Law (5th ed. 1992) p.194, n.36) which distinguishes between the agents and organs of the company. A German company with limited liability (GmbH) is required by law to appoint one or more directors (Geschftsfhrer). They are the company's organs and for legal purposes represent the company. The knowledge of any one director, however obtained, is the knowledge of the company (Scholz, Commentary on the GmbH Law (7th ed. 1986), Section 35.) English law has never taken the view that the knowledge of a director ipso facto imputed to the company: Powles v. Page (1846) 3 C.B. 16; Re Carew's Estate Act (1862) 31 Beav. 39. Unlike the German Geschftsfhrer, an English director may as an individual have no powers whatever. But English law shares the view of German law that whether a person is an organ or not depends upon the extent of the powers which in law he has express or implied authority to exercise on behalf of the company.

    Millett J. did not accept that Mr Ferdman was the directing mind and will of DLH because he exercised no independent judgment. As a fiduciary he acted entirely upon the directions of the American beneficial owners and their consultant Mr Stern. All that he did was to sign the necessary documents and ensure that the company's paper work was in order. This involved seeing that decisions which had really been taken by the Americans and Mr Stern were duly minuted as decisions of the board made in Switzerland.

    But neither the Americans nor Mr Stern held any position under the constitution of the company. Nor were they held out as doing so. They signed no documents on behalf of the company and carried on no business in its name. As a holding company, DLH had no independent business of its own. It entered into various transactions and on those occasions the persons who acted on its behalf were the board or one or more of the directors.

    It seems to me that if the criterion is whether the candidate for being the "directing mind and will" was exercising independent judgment, as opposed to acting upon off-stage instructions, not even the board of directors acting collectively would in this case have qualified. It also did what it was told. But Mr Tager was inclined to concede that the board, acting as a board, could properly be regarded as the directing mind and will. It was certainly held out in certain quarters as such. DLH claimed non-resident status from the Inland Revenue on the ground that its "central management and control" was situated in Switzerland.

    The authorities show clearly that different persons may for different purposes satisfy the reqirements of being the company's directing mind and will. Therefore the question in my judgment is whether in relation to the Yulara transaction, Mr Ferdman as an individual exercised powers on behalf of the company which so identified him. It seems to me that Mr Ferdman was clearly regarded as being in a different position from the other directors. They were associates of his who came and went. SAFI charged for their services at a substantially lower rate. It was Mr Ferdman who claimed in the published accounts of DLH to be its ultimate beneficial owner. In my view, however, the most significant fact is that Mr Ferdman signed the agreement with Yulara on behalf of DLH. There was no board resolution authorising him to do so. Of course we know that in fact he signed at the request of Mr Stern, whom he knew to be clothed with authority from the Americans. But so far as the constitution of DLH was concerned, he committed the company to the transaction as an autonomous act which the company adopted by performing the agreement. I would therefore hold, respectfully differing from the judge, that this was sufficient to justify Mr Ferdman being treated, in relation to the Yulara transaction, as the company's directing mind and will. Nor do I think it matters that by the time DLH acquired Yulara's interest in the Nine Elms project on 16th March 1988, Mr Ferdman had ceased to be a director. Once his knowledge is treated as being the knowledge of the company in relation to a given transaction, I think that the company continues to be affected with that knowledge for any subsequent stages of the same transaction. So, for example, if (contrary to the judge's finding) the £1,030,000 sent by Yulara on 29th May 1986 had been received beneficially by DLH as a loan, but Mr Ferdman had resigned or died a week earlier, I do not think that the DLH could have said that it received the money without imputed knowledge of the fraud. And in my judgment the subsequent acquisition of Yulara's interest was sufficiently connected with the original investment to be affected by the same knowledge.

    I would therefore allow the appeal. I do not regard this as an unsatisfactory outcome. If the persons beneficially interested in a company prefer for tax or other reasons to allow that company to be for all legal purposes run by off-shore fiduciaries, they must accept that it may incur liabilities by reason of the acts or knowledge of those fiduciaries.


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