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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Nayyar & Ors v Sapte & Anor [2009] EWHC 3218 (QB) (16 December 2009)
URL: http://www.bailii.org/ew/cases/EWHC/QB/2009/3218.html
Cite as: [2009] EWHC 3218 (QB), [2010] PNLR 15, [2010] Lloyd's Rep PN 13

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Neutral Citation Number: [2009] EWHC 3218 (QB)
Case No: TLQ/09/0156
Claim No: HQ08X01902

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
16/12/2009

B e f o r e :

MR JUSTICE HAMBLEN
____________________

Between:
ROMY NAYYAR
PARAMJIT SINGH KANG
HOLIDAY MOOD LIMITED
MORESAND LIMITED
(t/a Crystal Travel)

Claimants
- and -

(1) DENTON WILDE SAPTE
(2) GAURI ADVANI
Defendants

____________________

Mr Stephen Cogley and Mr Tim Marland (instructed by Blake Lapthorn) for the Claimants
Mr Justin Fenwick QC (instructed by Barlow Lyde & Gilbert LLP) for the 1st Defendant
Mr Bob Moxon Browne QC and Mr Charles Phipps (instructed by Kennedys) for the 2nd Defendant
Hearing dates: 17-20, 23-24, 30 November, 1 December 2009

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Hamblen :

    Introduction

  1. The Claimants ("Mr Nayyar", "Mr Kang", "Holiday Mood" and "Moresand") are travel agents. At the material time, Mr Nayyar was a director and 50% shareholder in Holiday Mood, the other shares being held by his father. Mr Kang was one of the directors and one of four equal shareholders in Moresand, a family company established in 1987. Holiday Mood and Moresand were the corporate vehicles through which Mr Nayyar and Mr Kang conducted their respective travel agency businesses.
  2. The Claimants seek damages against the Defendants for negligence and/or breach of contract and/or breach of fiduciary duty in relation to the sum of £383,259 paid by the Claimants in anticipation of the appointment of their joint venture, Maharaja Travel Limited ("Maharaja Travel"), by Air India as its exclusive Global Sales Agent for the UK and Ireland. The appointment was to be for a minimum of 4½ years. Such appointments are well known in the aviation industry - and are referred to as "GSAs".
  3. GSAs are recognised as being very lucrative for travel agents. They involve being made the airline's exclusive sales agent in the specified country or territory. This means that a commission is earned on every ticket sold. As Mr Kang put it, they are the "ultimate dream" of any travel agent. In the present case it was anticipated by the Claimants that the proposed GSA would yield net profits of over £2 million per year.
  4. The GSA opportunity was introduced to Mr Nayyar by the Second Defendant, Ms Advani. At the time she was a senior solicitor employed by the First Defendant ("DWS") in the India Group. Her main role involved marketing and development and the introduction of parties in the commercial field with a view to generating fees for DWS and increasing its profile and presence in India. She was a dual qualified lawyer who had contacts and connections within India, and was the ex daughter in law of the Deputy Prime Minister at the material time, Mr Lal Krishna Advani.
  5. The Claimants contend that Ms Advani promoted the idea, and actively encouraged the Claimants, to pursue the GSA. They say that they were told that to obtain the GSA would cost £2 million: an upfront payment or deposit of £400,000 and a balance of £1.6 million payable in two instalments, including £250,000 in legal fees. The person who introduced the opportunity to Ms Advani was Mr Ashkok Yadav, a former Tourism Minister for the State of Utter Pradesh ("Mr Yadav"). Apparently Mr Yadav had connections in the aviation industry in India and with the then Aviation Minister, Mr Hussain. Mr Yadav was introduced to the Claimants by Ms Advani and they met with him in India in September and October 2002.
  6. The Claimants further contend that, acting on the advice of Ms Advani, and with her positive encouragement, they paid £13,000 in cash to Mr Yadav's assistant as part of the deposit on 20 September 2002. A further sum totalling £370,259 was paid by transfers from the account of Moresand in two tranches - £100,000 on 26 September 2002, and £270,259 on 2 October 2002. These sums were transferred into the account of a BVI company called Avacorp at HSBC in Hong Kong. The payment details were allegedly given to Mr Nayyar by Ms Advani on the Claimants' return to the UK from India on 26 September 2002.
  7. The GSA was never awarded to the Claimants and, despite repeated demands of Mr Yadav, the deposit has not been recovered. The Claimants now claim the loss of the deposit and wasted costs as damages against Ms Advani and DWS.
  8. As against Ms Advani, the Claimants contend that she assumed a duty of care toward them, positively advised them, made representations to the effect that they should proceed, and encouraged them to rely on her skill, expertise, knowledge and experience as a solicitor. They contend that she was acting as the Claimants' solicitor; she told them this, they believed it, and each treated the other as solicitor/client. The Claimants also contend that Ms Advani misrepresented the position and her misrepresentations were negligent; as an incidence of her duty as a solicitor, she gave negligent advice, when positively advising, and was further negligent in omitting to give advice and/or to consider appropriately the risks involved with the Claimants. The Claimants further contend that Ms Advani was acting in a fiduciary capacity - arising from the relationship of solicitor and client, but in any event because, on the facts, the Claimants reposed trust and confidence in her, which she knew and actively encouraged. Her duties were allegedly owed to all Claimants – she was aware of each and that the companies were the businesses through which Mr Nayyar and Mr Kang operated and would be involved. Each of the Claimants contributed to the lost deposit.
  9. As against DWS, the Claimants contend that the activities carried on by Ms Advani were within the scope of her employment. Alternatively, they were so closely connected with what she was expressly authorised to do in her capacity as an employee, that it is fair and just in all the circumstances to find DWS vicariously responsible. Further or alternatively, DWS clothed Ms Advani with apparent/ostensible authority: she deployed her business card, her website entries and her status as solicitor with DWS. These factors, in conjunction with what she was expressly employed to do in any event, establish that she had the requisite apparent/ostensible authority.
  10. Ms Advani's defence is that none of the Claimants ever retained her, or DWS, as their solicitor, and that her role in the GSA transaction was limited to putting Mr Nayyar in touch with Mr Yadav. This was the type of introduction that formed the basis of Ms Advani's daily work for DWS, and was directed towards promoting commerce amongst her numerous contacts, and the prospect, either immediate or more remote, of legal work (e.g. in drafting a GSA) which might result to the benefit of her fee-earning colleagues, and hence to the firm. Ms Advani's case is that there was nothing unusual or irregular in effecting this type of introduction. Ms Advani denies that she knew anything about whether Mr Yadav would require payment for his involvement, and if so on what terms and that neither Mr Yadav nor the Claimants discussed this with her. Ms Advani denies that she had any of the several meetings which allegedly took place with the Claimants, denies that she met them in India, or took them to meet Mr Yadav and says that the only thing she did was to effect an introduction in late Spring/early Summer 2002. For the purposes of effecting the introduction, she was acting within the scope of her employment in that she was developing business.
  11. DWS's defence is that it was never retained as solicitors for any of the Claimants, and that if Ms Advani in fact acted for them in the ways alleged, her actions were outside the usual scope of a solicitor's work, and therefore outside the terms of her employment with DWS. DWS also say that if Ms Advani acted as alleged the Claimants cannot reasonably have considered that she was acting as a solicitor, and in such event she had no ostensible authority so to act.
  12. Both Ms Advani and DWS contend that in any event the Claimants must have known and intended that the deposit monies should be used as an illegal inducement since there is no way that an honest businessman could have believed that these were legitimate advance payments for a GSA. They contend that the payments to Mr Yadav were intended by the Claimants to secure a preference over other applicants in relation to the award of the GSA and involved an attempted bribe. The Claimants have to rely on those tainted payments to establish the damage they claim to have suffered, so the doctrine of illegality is triggered. The claim is accordingly barred. The Defendants rely on the maxim ex turpi causa non oritur actio: the court will not assist a claimant to recover compensation for the consequences of his own wrongful conduct.
  13. The outline facts

  14. Prior to the incorporation of Holiday Mood, Mr Nayyar was a manager at Holiday Express which also operates as a travel agency. In 1999, whilst working at Holiday Express, he was introduced to DWS. Holiday Express did a considerable amount of travel agency work for DWS.
  15. Whilst employed with Holiday Express, Mr Nayyar was introduced to Ms Advani at DWS's offices. Thereafter Ms Advani contacted Mr Nayyar on various occasions to make arrangements for business and personal trips. This continued after Mr Nayyar left Holiday Express to establish Holiday Mood.
  16. In the summer of 2002, Ms Advani telephoned and informed him that a business opportunity had arisen for the acquisition of the Air India UK and Ireland GSA and that she was therefore making enquiries as to whether Mr Nayyar was interested or knew of a suitable candidate.
  17. The evidence of the Claimants was that following the initial telephone conversation between Mr Nayyar and Ms Advani there was a series of meetings with Ms Advani at which the GSA opportunity was discussed and that she was extensively involved throughout. In particular, that there were: four meetings in July/August 2002 with Mr Nayyar; a meeting on 12 September 2002 at which she was introduced to Mr Kang and at which it was decided to proceed with the transaction; a visit to Delhi involving a meeting between Mr Nayyar, Mr Kang and Ms Advani at the Oberoi hotel on 16 September 2002 and a meeting between all of them with Mr Yadav at his house later the same day; payment at Ms Advani's instigation of £13,000 in cash on 20 September 2002 to an assistant of Mr Yadav called Daniel; the provision of payment instruction details for payment of the balance of £400,000 by Ms Advani to Mr Nayyar following their return to the UK; a number of meetings between Ms Advani and Mr Nayyar thereafter; three further visits to India by Mr Nayyar and Mr Kang at Ms Advani's instigation, including a meeting with Ms Advani at the Taj Mahal hotel in Delhi in March 2003 at which they provided to her various documentation which she had requested. All of this was denied in the Defence served by Ms Advani.
  18. The case advanced in Ms Advani's Defence was that she introduced the GSA opportunity to Mr Nayyar, gave him Mr Yadav's contact details and essentially left it to them to take it further if they were so minded. It was accepted that she occasionally rang Mr Nayyar to ask about progress and that she would ring Mr Yadav to chase him when Mr Nayyar was having difficulty getting in contact with him. Aside from assisting in the drafting of a letter dated 8 August 2002 in support of the application, this was the extent of her involvement up until May 2003. She never met Mr Kang and she had no knowledge of his involvement before June 2003.
  19. Ms Advani's Defence case was supported by witness statements from her and others and the Claimants' witnesses were cross examined on the basis of the contents of those statements. However, shortly before Ms Advani was due to open her evidential case and to be called her counsel advised the Court that it had been decided that she would be proffering no witness evidence. It follows that her witness statements have no evidential status save to the extent that they had been put to and accepted by other witnesses. It also follows that Ms Advani advances no witness evidence to counter that of the Claimants' and DWS' witnesses. She can rely on documents to counter that evidence and answers procured in cross examination, but has no witness evidence to set against it.
  20. For the Claimants I heard evidence from Mr Nayyar, Mr Kang, Mr Sen Kandiah (a businessman and acquaintance of Mr Kang and proposed financial backer of Maharaja Travel), Mr Shamser Singh Boparai (a friend of Mr Kang), Mr Tanzy Nayyar (Mr Nayyar's brother) and Mr Raj Kumar (the owner of a number of UK travel agencies). For DWS I heard evidence from Ms Tanya Alfille (a senior solicitor), Mr Daleep Kumar Singh (a solicitor at DWS and colleague of Ms Advani) and Mr John Rosenheim (the partner at DWS responsible for dealing with claims against DWS).
  21. Ms Advani's counsel submitted that no adverse inference should be drawn from her failure to give or proffer evidence because there is no case to answer. I was referred to Brooke LJ's summary of the position in Wisniewski v Central Manchester Health Authority [1998] PIQR 324, at 340:
  22. "(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
    (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
    (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
    (4) If the reason for the witness's absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified."
  23. The main reason given for not calling evidence was that the evidence of the Claimants' witnesses was so unreliable that none of their evidence could be safely relied upon unless independently corroborated. Given the lack of such corroboration on the material issues there was no case to answer on the evidence.
  24. I have carefully considered the various criticisms made of the Claimants' witness evidence and in particular the evidence of Mr Nayyar and Mr Kang. In particular, I have reviewed the veracity and the reliability of the evidence given judged against all the other evidence, both oral and documentary, the inherent probabilities, the cross examination carried out and the demeanour of the witnesses in giving evidence. Whilst, as appears below, there are aspects of the Claimants' evidence which I reject, I do not consider that this should or does lead to the conclusion that all their evidence, unless corroborated, is to be rejected as being unreliable. On the contrary, I am satisfied that there is a core of truth in the allegations underlying the claim, albeit I accept that in certain respects that central core has been elaborated upon in an attempt to bolster the Claimants' case. In all the circumstances I am satisfied that there is an evidential case to answer.
  25. The other reason given for not calling evidence was that even if the Claimants' evidence, in its broad outline, were accepted, the Claimants' case would still fail for illegality and/or because on that evidence Ms Advani was not acting as a solicitor. Even if that case were made out, I do not consider that it provides an adequate explanation for Ms Advani's failure to back up with evidence the stark denials of central factual allegations made by her in her Defence and put to the other parties' witnesses.
  26. I therefore consider that this is a case in which I would be entitled to draw adverse inferences against Ms Advani from her failure to give evidence. However, of far greater weight, in my judgment, is the fact that on a number of issues there is simply no evidence to set against that given by the Claimants and DWS's witnesses.
  27. The findings I make in the light of all the evidence available to the Court are set out below.
  28. Mr DK Singh was a colleague of Ms Advani in the India Group at DWS. It was put to Mr DK Singh on behalf of Ms Advani that at the time the GSA opportunity had first been raised with her by Mr Yadav she discussed it with him and it was at his suggestion that Mr Nayyar was contacted. This was denied by Mr DK Singh who said he had no recollection of any such conversation. He explained that he would have remembered such a conversation because it was his understanding from his time working at the Indian High Commission that Air India had discontinued GSAs and so he would have questioned this. I accept his evidence and find that there was no such conversation. It was also put to him that Ms Advani had kept him regularly informed of her discussions with Mr Nayyar concerning the GSA and developments relating to it. This was denied by Mr DK Singh who said that the first knowledge he had of it was when Mr Nayyar contacted him in 2004 to raise his concerns regarding what had occurred. I accept his evidence.
  29. Following the conversation between Ms Advani and Mr Nayyar during which the GSA opportunity was first raised I accept Mr Nayyar's evidence that there was a series of meetings between them at which the opportunity was discussed in more detail.
  30. Ms Advani's counsel challenged this evidence on the basis that the telephone records did not reveal any contact between Mr Nayyar between February and July 2002 and that it was therefore implausible that there were meetings in July 2002, as claimed by Mr Nayyar, still less the number of meetings claimed. However, the telephone records are not complete as they do not include records from Ms Advani's home line. Further, Ms Advani acknowledges that there was telephone contact between her and Mr Nayyar during the February to July 2002 period, both to discuss travel matters and to introduce the GSA opportunity. The telephone records therefore do not tell the full story and I accept that there were meetings between Ms Advani and Mr Nayyar as stated by him in evidence.
  31. The first meeting took place not long after her initial telephone call. They agreed to meet at the Marriott Hotel in Grosvenor Square, London to discuss the proposition in greater detail. At that meeting, which probably took place in early July 2002, Ms Advani informed him that the GSA appointment would be for four and a half years, with renegotiation commencing after four years; that there would be a cost involved with the GSA appointment which would include legal fees, a commission payment and travel costs; that as a solicitor she had experience in this type of transaction; that this type of transaction would be relatively small compared to other cross-border transactions that she had previously been involved in. At that meeting she also gave Mr Nayyar her DWS business card and invited him to check her details on the DWS website.
  32. Following this initial meeting, Ms Advani telephoned Mr Nayyar and asked him whether he was interested in securing the GSA. Mr Nayyar said that he would need more information before he could commit to such a project and they arranged another meeting.
  33. The second meeting took place one evening later in July 2002 at the London Marriott Hotel. During the meeting Ms Advani advised Mr Nayyar of the anticipated cost of securing the GSA. She said that payment would be made in rupees and a deposit would be required. The deposit would be the rupee equivalent of £400,000 and the balance would be the rupee equivalent of £2 million so that the entire cost of the transaction would amount to some £2.4 million. She said that the deposit would be a consultation fee and that legal fees would be £250,000, which would be included in the balance figure; that the legal fees would include all Ms Advani's dealings with her contacts in India and all documentation and paperwork; that with the exception of the initial deposit, a payment structure could be negotiated for the balance; that Mr Nayyar should consider involving another party to the transaction in order to raise funds; and that this would be a once in a lifetime opportunity.
  34. It was not made clear at the meeting whether the £250,000 legal fees were to be the fees of Ms Advani or DWS and at no stage was there any clear understanding or agreement about this.
  35. In late July 2002, a third meeting was held between Mr Nayyar and Ms Advani at the London Marriott Hotel. At this meeting, Mr Nayyar confirmed that he was interested. Ms Advani told Mr Nayyar that he would have to incorporate a new company in whose name the GSA would be vested.
  36. Meanwhile Mr Nayyar was taking steps to find a partner as he did not consider that he could take on the project alone. In early August 2002 he met with Mr Kang, someone he had known for seventeen years and who had a well established travel agency business, Moresand. He explained that there was a GSA opportunity although he did not at that stage disclose that it was for Air India. Mr Kang was very interested as GSAs are widely recognised as being very lucrative.
  37. A further meeting took place between Mr Nayyar and Mr Kang at Mr Kang's home on 17 August 2002. Mr Nayyar disclosed that the GSA was to be for Air India, that the matter would be handled by Ms Advani of DWS and that she was the daughter in law of the Indian Deputy Prime Minister. Mr Kang was impressed that such a well connected person was involved and also that she worked for DWS, a firm he knew of. Mr Kang suggested that Mr Sen Kandiah, a wealthy colleague who had been involved in the travel industry and had good relationships with several UK banks, might be interested in becoming involved as an investor. There then followed a number of discussions and meetings with Mr Kandiah culminating in a Memorandum of Understanding dated 15 September 2002, which will be considered further below.
  38. There were two further meetings in August 2002 between Mr Nayyar and Ms Advani. The second of these was on about 28 August 2002, again at the Marriott Hotel. During this meeting Mr Nayyar raised his concern as to why he had been chosen as a candidate for the GSA. Holiday Mood was still a relatively new company, with few employees, which was not as established in the market as many of its competitors. Ms Advani told him that Air India wanted a new, fresh faced company which they could mould to suit them.
  39. There was also further discussion as to the payment structure for the GSA project. Ms Advani said that she would be able to negotiate the price down to £2m as opposed to £2.4m. The deposit would remain the same at £400,000 and the balance would be payable in two instalments – the first instalment would be payable 30 days after the letter of appointment had been issued and the second instalment would be payable 60 days thereafter. Ms Advani said that there was a deadline for putting forward a candidate was approaching and that she had been discussing the GSA with other companies that might be interested.
  40. Ms Advani had in fact approached Mr Raj Kumar, the managing director of Acetrip Limited which owns a number of UK travel agencies. This approach had been made through a business colleague of Mr Kumar, Mr Anwar Saleem. There were three meetings between Mr Kumar, Mr Saleem and Ms Advani at the Waldorf Hotel in Aldwych, London in August 2002 to discuss the GSA opportunity. She told Mr Kumar that through her contacts in India she would be able to offer the opportunity of an Air India GSA being awarded to a UK travel agency. She explained that this would obviously come at a cost and mentioned a figure of £1.7 million. She said that there would be an upfront fee of 10% to 20% which would be paid in India. Mr Kumar was interested although he considered that the cost should not be more than £1.5 million. Ms Advani advised Mr Kumar that her associate in India was Mr Yadav, gave him Mr Yadav's contact details and suggested he go to India to meet Mr Yadav in person and that he should take the upfront payment with him so that it could be paid in India. In the event Mr Kumar did go out to India on 5 September 2002, accompanied by Mr Saleem. They met with Mr Yadav at his private residence that afternoon and Mr Yadav asked for the upfront payment of the rupee equivalent of £340,000. Mr Kumar said he would be willing to pay the monies into an escrow account pending the appointment of his company as GSA. However, this was unacceptable to Mr Yadav who said he would need the payment first to show willingness to proceed and as security that the balance be paid. Mr Kumar considered that this did not seem normal and decided not to proceed with the transaction. Ms Advani was informed about the fact and reason for the failure of the discussions.
  41. Meanwhile discussions were continuing between Ms Advani and Mr Nayyar in the UK. He told her that he was in the process of incorporating a new company, Maharaja Travel, for the purpose of the GSA. She told him that she was drafting a letter to be put on Maharaja Travel letter headed paper in connection with the application for the GSA. She said that it would have to be backdated to 8 August 2002 so that it fell within the tendering period. Ms Advani faxed to Mr Nayyar from DWS a draft of the letter on 9 September 2002 and a supplementary paragraph to be inserted followed on 12 September 2002. Mr Nayyar signed the letter shortly thereafter with the false date of 8 August 2002. The letter ("the application letter") was addressed to the Commercial Director of the Ministry of Civil Aviation and provided as follows:
  42. "We recognise through our sources that Air India is presently in the process of appointing Sole General Sales Agency for the UK and Ireland. We would indeed be obliged if the above company would be considered for the appointment of such position, that of Sole General Sales Agency for the UK and Ireland for passenger and cargo transportation.

    Our reputation in the industry remains impeccable, with firmly established credentials within the travel industry with over 20 years of knowledge and experience. We, without doubt understand the travel distribution within the Indian sub-continent and for the rest of the world. For the past years we have been specialising in the worldwide holiday tours and giving studied and well thought out importance to this area of the travel business though not at all neglecting our business clientele on the other side of the spectrum. This has been operated under our flag ship company Holiday Mood. We in addition pride ourselves in training our staff to highest standards in both product knowledge and customer service.

    We are indeed confident that given the chance we will be able to provide the nations official carrier Air India with outstanding service and selfless sense of duty. Our pride in India remains spontaneous, absolute, and unfailing. We therefore would only work towards better revenue prospects, better promotion and marketing techniques and prospects for India's national carrier Air India keeping in mind both the Western and Eastern markets.

    Sir, we would be greatly honoured to be given the opportunity to present our credentials to you in order to establish our unfailing sense of duty towards this endeavour. In addition, we look forward to be able to present Air India to both its current and new client base most satisfactorily and moreover to undertake to show absolute commitment to achieving maximum sales for Air India and offer all assistance and co operation to the organisation."

  43. It was the evidence of Mr Nayyar and Mr Kang that there then followed a meeting between them and Ms Advani in the late evening of 12 September 2002 at the Hilton Metropole Hotel in London. This was strongly challenged by Ms Advani's counsel in cross examination. Reliance was placed in particular on an email sent to Mr Nayyar's office at 2150 hours on 12 September 2002 attaching the latest draft of the MOU between Mr Nayyar, Mr Kang and Mr Kandiah. It was put to Mr Nayyar that this showed that he was working on the MOU that evening and Mr Nayyar initially accepted in evidence that he had been and that he, Mr Kang and Mr Kandiah stayed up late that night finalising the terms of the MOU. However, he later corrected this and said that the late night session was the evening before the MOU was signed on 15 September 2002 – i.e. 14 September 2002. The evidence of Mr Kang and Mr Kandiah was to similar effect. I accept their evidence on this issue.
  44. Reliance was also placed by Ms Advani's counsel on the fact that the backdated letter of 8 August 2002 referred to Mr Nayyar's "flag ship" company, Holiday Mood, rather than Mr Kang's far more substantial company, Moresand. It was submitted that this suggested that Mr Kang was not involved, at least at that stage. However, the letter was mainly drafted on 9 September 2002, which was before Ms Advani was said to have met Mr Kang. Moreover, it referred to the applicant having over 20 years of knowledge and experience in the travel industry, which would be true of Mr Kang but not Mr Nayyar, who had only 9 years experience.
  45. In support of the Claimants' case that there was a meeting that evening evidence was given that Mr Boparai, a friend of Mr Kang, had driven with him to the meeting and witnessed it taking place. There were a number of unsatisfactory features of that evidence. In particular, it remained unclear why Mr Boparai should want to come along with Mr Kang to a late night business meeting in which he was to play no role. On his evidence, he was picked up by Mr Kang at about 10.30 pm, taken to the Metropole Hotel, sat there having a drink on his own for 1 ½ hours until about 1.15 am while Mr Kang had his meeting, and then came back. He was also adamant that it was a Friday because his wife was at home rather than working and he was allowed to go out at the weekend. However, in fact 12 September 2002 was a Thursday.
  46. I am not satisfied that Mr Boparai accompanied Mr Kang to the Metropole Hotel that evening but I am nevertheless satisfied that a meeting with Ms Advani did take place there. Mr Kang was clear as to both the fact of the meeting and its content. It is also inherently probable that he would wish to meet Ms Advani and discuss the transaction before deciding to commit himself to it. There is evidence of frequent telephone contact between Ms Advani and Mr Nayyar and Mr Yadav that day, including calls to Mr Yadav during and shortly after the alleged meeting. I have also heard no evidence from the person who denies that it took place, Ms Advani.
  47. At that meeting Ms Advani informed Mr Nayyar and Mr Kang that if the GSA appointment letter was not issued within 72 hours of the deposit being paid, the money would be returned. In response to concerns expressed and queries raised by Mr Kang about guarantees relating to the appointment letter and the return of the deposit if it was not issued, Ms Advani said that, as a UK lawyer, she was their guarantee. She said that the transaction was small compared to other DWS deals that she had done and again, this was a once in a lifetime opportunity. She also told them that her contact in India was Mr Yadav whom she referred to as her consultant. She described him as a former Minister and a close acquaintance of the Aviation Minister. She called Mr Yadav on her mobile and Mr Nayyar spoke to him. Mr Nayyar and Mr Kang then confirmed that they wanted to go ahead and she said that as the transaction was quite time sensitive they would need to fly out to meet Mr Yadav.
  48. Ms Advani was already due to go out to India and went out on 13 September 2002. Mr Nayyar and Mr Kang followed on 15 September 2002. Early that morning they finalised and signed the MOU with Mr Kandiah. The MOU provided that the initial deposit of £400,000, which was described as "initial incidentals", would be arranged and paid for by Mr Nayyar and Mr Kang; that once a firm and irrevocable letter of appointment had been put up Mr Kandiah would reimburse them in that sum; that he would bring £2.1 million (including the £400,000) into the joint venture and arrange for bank guarantees; that £1 million of this sum was a loan that would be repaid out of the first year of revenues and that he would acquire a 35% equity share in the joint venture company.
  49. Prior to signing up to the MOU Mr Kandiah had performed various financial projections. As set out in a schedule he prepared, the expectation was that the GSA would bring in net profits of about £2.5 million per year.
  50. Before going out to India Mr Nayyar said that he spoke to Mr DK Singh at DWS to ask about Ms Advani's credentials in the context of the GSA arrangement, that there was a discussion about this and that Mr DK Singh confirmed that it was within her parameters. Mr DK Singh said that he had no recollection of such a conversation, that he was sure he would have remembered it and that he would not have responded in the manner suggested. It was also apparent from the telephone records that there were two telephone conversations between them that day and that Mr DK Singh made the first call, which suggests that he initiated the conversations. I accept his evidence and find that there was no conversation as described by Mr Nayyar.
  51. On 15 September 2002, Mr Nayyar and Mr Kang travelled to India. On 16 September 2002, their evidence was that they met Ms Advani in her hotel room at the Oberoi Hotel, following which they left together to meet with Mr Yadav at his residence. This was strongly challenged in cross examination and it was put that Ms Advani was not involved in any meetings with them that day.
  52. The Claimants adduced evidence from Mr Nayyar's brother, Mr Tanzy Nayyar, in support of their case that there was a meeting with Ms Advani. He said that he had driven Mr Nayyar and Mr Kang from the Le Meridian hotel to the Oberoi hotel; seen them meet Ms Advani there and then go off to their meeting with Mr Yadav; awaited their return, had dinner with them and then driven them back to their hotel. This evidence was far from satisfactory. It was unclear why he should take a day off work just to be able to drive Mr Nayyar and Mr Kang from the Le Meridian hotel to the Oberoi hotel; his explanation that this was set up by a telephone call made to him by his brother that morning was not supported by the telephone records; he was unable to reconcile the significant disparity between the time at which the apparently short meeting with Mr Yadav began (about 6.30pm according to Mr Kang) and the time when his brother telephoned him, allegedly on the way back from the meeting (9.05pm); and he was unable to explain why his brother should have telephoned him at 9.46pm, at a time when he claimed that he was already back with his brother.
  53. Although I am not satisfied that Mr Tanzy Nayyar witnessed any meeting with Ms Advani that day, I am satisfied that Mr Nayyar and Mr Kang did meet Ms Advani and that later they together met Mr Yadav. She was in Delhi at the time. She was actively pursuing the GSA opportunity. There was evidence that she was in telephone contact with both Mr Nayyar and Mr Yadav that day. I have heard no evidence from her to set against that of Mr Nayyar and Mr Kang.
  54. At the meeting at the Oberoi, Ms Advani advised that if Mr Nayyar and Mr Kang did not pursue the GSA then the GSA could be awarded to other travel companies, and showed them documentation relating to Mr Kumar's company. It was also said that at that meeting Ms Advani described Mr Yadav as DWS's consultant. I am not satisfied that she did so. It is inherently improbable that he would be, or would be so described, and, on the Claimants' evidence, he had previously been described as her consultant and contact.
  55. They were then taken by car to Mr Yadav's private residence to meet with him. At that meeting Ms Advani and Mr Yadav repeated that there would be a three day guarantee whereby if the letter of appointment was not issued within three days of the deposit being paid, the deposit would be refunded. They stressed that the £400,000 deposit would have to be provided before any further action could be taken. In terms of payment of the balance, it was said that the balance could be paid in two instalments within two months of receipt of the GSA letter of appointment.
  56. Following the meeting Ms Advani provided Mr Nayyar with Mr Yadav's mobile number although she said that she would act as the contact with Mr Yadav.
  57. On 20 September 2002 Ms Advani contacted Mr Nayyar and asked how they planned to pay the deposit and whether they had any funds they could release immediately as a gesture of good faith. Mr Nayyar told her that the maximum sum they could get from the bank was 900,000 rupees or £13,000. She said that that would do as a start. An assistant of Mr Yadav named Daniel called round to the hotel to collect the money. He accompanied Mr Nayyar and Mr Kang to the HSBC bank and 900,000 rupees was withdrawn from the personal account Mr Kang had set up. This was handed over to Daniel without any receipt being sought or given.
  58. Mr Nayyar and Mr Kang returned to the UK on 26 September 2002. Shortly after their return Mr Nayyar was contacted by Ms Advani who was chasing the payment of the balance of the deposit. She told Mr Nayyar that all the necessary vetting and checking had been completed and that they were now in a position to award the GSA to Maharaja Travel. She gave Mr Nayyar bank details of where to send the remaining deposit money. This was a business account of a BVI company based in Hong Kong called Avacorp. Mr Kang said that he had certain reservations about this but when these were put to Ms Advani by Mr Nayyar she said that this was normal Indian business practice.
  59. The deposit monies were then transferred to the Avacorp Account. £100,000 was wire transferred from Moresand's account on 26 September 2002 and £270,259 on 2 October 2002, making a total (including the earlier cash payment of £13,000) of £383,259. In the meantime Ms Advani had provided Mr Nayyar and Mr Kang with a sample Air India GSA and they were asked to make any changes they wished to make.
  60. Considerable time at trial was taken up investigating the source of these funds and the treatment of them in the companies' accounts. I find that Mr Nayyar's personal contribution was £40,000, paid out of his sole trader business, of which £30,000 was inappropriately taken from money held on trust in a trust account as representing clients' deposits. Mr Kang's personal contribution was the £50 out of the £13,000 cash paid to Daniel plus a further £300 or thereabouts incurred by way of expenses. £60,443 came from Holiday Mood's account and was transferred via Mr Nayyar's non-resident Indian HSBC account to Mr Kang's non-resident HSBC account and thence to Moresand's account. The balance of monies were paid by Moresand. It was submitted that the various movements between different accounts for different persons for the purpose of the payments, and the unclear and unsatisfactory way they were treated in the accounts, supported an inference of nefarious intent. I do not consider that any clear inference to that effect can by drawn, although the fact that Mr Nayyar was prepared to use monies from a trust account for investment purposes does not reflect well on him or his business morality. Mr Kang also wrongly maintained up until cross examination that £100,000 of the monies contributed from his side were personal rather than from Moresand.
  61. Ms Advani confirmed that the deposit had been received and said Mr Nayyar and Mr Kang should travel to India for completion, although she would be unable to accompany them.
  62. Mr Nayyar and Mr Kang made their second visit to India on 6 October 2002 and met with Mr Yadav at his home on 7 October 2002. He showed them a letter of appointment stating that Maharaja Travel was the new GSA for Air India for the UK and Ireland. He said that they were not allowed to take it away as it had to go through official Indian channels first. 15 November 2002 was mentioned as the likely date when the GSA contract would be issued.
  63. No letter of appointment was received in the weeks following Mr Nayyar and Mr Kang's return to the UK, which caused them increasing concern. Ms Advani said that there was a 45 day "cooling off" period and they had to wait for this to end. She said that she was in regular contact with India and that everything was in order. By late November 2002 still nothing had been received. Mr Nayyar and Mr Kang went out to India again at the end of November 2002, at Ms Advani's prompting. However, there was still no letter of appointment.
  64. By January 2003 Mr Nayyar and Mr Kang were losing patience and decided to tell Ms Advani to get the monies back. There were a couple of meetings with her that month at which she sought to reassure them and said that completion was close. She then advised them that everything was now in the name of Maharaja Travel which persuaded them to wait a few more weeks. She later sent Mr Nayyar a list of documents which would be required, such as sales projections, registration certificates, balance sheets, shareholding patterns etc. Mr Nayyar and Mr Kang went about obtaining these documents and, together with Mr Kandiah, set up arrangements for the provision of the requisite bank guarantee.
  65. On 20 March 2002 Mr Nayyar and Mr Kang went back out to India with most of the requested documentation. They met with Ms Advani and handed over the documentation. She advised them to stay in India until the appointment was made public. They stayed for three weeks but no announcement was made and they eventually returned to the UK empty handed.
  66. By now Mr Nayyar and Mr Kang had decided that they wanted nothing more to do with the transaction and made their displeasure known to Ms Advani. She then sent a series of communications to Mr Yadav designed to secure the return of the monies.
  67. On 29 May 2003 she sent the following letter to Mr Yadav on DWS headed paper:
  68. "It is with great regret and disappointment that I inform you that the party hereby terminates by way of this communication all arrangements/engagements with yourself regarding the present matter. I bring to your attention that you personally had got in touch with myself last year (2002) informing me of your close and personal friendship with the then Union Minister for Civil Aviation Shri. Syed Shahnawaz Hussain. You had further advised that you had the minister's complete backing, cooperation and support with you and that the Union Civil Aviation Minister Shri. Syed Shahnawaz Hussain had given you the 'Mandate' for selection of the GSA for Air India for United Kingdom. To this end you requested and accepted on behalf of the Union Minister Shri. Syed Shahnawaz Hussain a payment of RS. Three Crores /- (as first instalment) which were paid by the party to you immediately, all together and in One Lump Sum into your Bank Account details of which are with us.

    Unfortunately, the party concerned have waited in vain, unsuccessfully and wastefully and without any progress on this matter for over nine (9) months now. It was unanimously felt by everyone concerned that your attitude was amateurish, unprofessional and unpleasant to say the least. In the early days you called the party and myself several times a day- then once in ten days- but of late you stopped and moreover ceased all communication and even refused to answer any telephone calls. I myself have left innumerable messages on your mobile number (0091 9810618521) and at your residence numbers..

    It goes without saying and must be stated categorically that the delay, laxity and non performance from your side has caused us severe loss of precious time, resources and money. The party therefore requires immediately and with no further delay whatsoever that the monies paid to you for the sum of Rs. Three (3) Crores /- should be paid back in One Lump Sum into MORESAND LTD, Bank Account….

    Please advise of the same immediately and promptly."
  69. This letter was sent to Mr Nayyar who showed it to Mr Kang. It elicited no comment or protest from them despite the express statement that the deposit had been paid to the person who had the mandate for the selection of the GSA and that it was requested and accepted on behalf of the Aviation Minister, Mr Hussein.
  70. A further letter was sent by Ms Advani to Mr Yadav on 11 June 2003 and apparently copied to Mr Hussein. It was in similar terms to the letter of 29 May 2003, but added the following comments:
  71. "….This is a clear matter of Fraud, Cheating and Embezzlement on your part. ….. Please….return the money. The party otherwise proposes to contact the necessary authorities (with complete circumstantial evidence) including the CVC – CENTRAL VIGILANCE COMMISSION to report this significant and very serious matter."
  72. Again this was copied to Mr Nayyar and elicited no reaction from him or Mr Kang despite the repeated statement that the deposit had been paid to the person who had the mandate for the selection of the GSA and that it was requested and accepted on behalf of the Aviation Minister, Mr Hussein.
  73. On 24 June 2003 Ms Advani sent Mr Yadav an email in the following terms:
  74. "PLEASE RETURN THE MONEY BACK ASHOK YADAV AND NEXT TIME FOOL SOMEONE ELSE - WE WILL NOT LEAVE YOU IN PEACE TILL WE HAVE THE MONEY BACK. G Advani"
  75. On 27 June 2003 Mr Kang wrote to Ms Advani enclosing details of the funds which had been transferred. At her own initiative and expense Ms Advani instituted enquiries into Avacorp and Mr Yadav's business affairs and bank accounts. She also instructed Mr Kanchan Singh to provide a legal opinion. He suggested that a letter to be sent to Mr Yadav which included the following assertions:
  76. "In the light of your consistent refusal to accept our several previous communications to you in respect of the above subject I am constrained to put you on notice in regard to the penal offences/breaches committed by you and Mr. Shahnawaz Hussain.

    You had approached us representing yourself to have the requisite wherewithal and expertise in assisting any party desirous of obtaining the above agency. As a reference and in support of your claim you had also made available copies of the GSA agreements awarded in Finland and Khazakhstan which you claimed and held out to have been facilitated by you to the respective parties.
    ….
    You, in consideration for your above services, sought and were paid by us an amount of in the following manner. Copies of relevant bank transactions are enclosed.

    Inspite of nearly a year having elapsed after the above payment and numerous meetings and telephonic conversations with you the status of our application remains unknown to us. On making enquiries we now have concrete information that you and Sh. Shahnawaz Hussain are in fact very close to each other (a fact that you had earlier also represented). It has also transpired that you, in conspiracy with Sh. Hussain, had demanded and obtained the above amount as an illegal gratification for mutual appropriation between you and Sh. Hussain which comprises an economic/penal offence in India punishable under sections 7, 8, 9 and 10 of the prevention of Corruption Act read with sections 109 and 120B Indian Penal Code. As nothing seems to have been done by you for presenting and processing our application it is further apparent that you, again in conspiracy with Sh. Hussain, have dishonestly and fraudulently misrepresented yourself to us thus inducing us to part with valuable consideration you and Sh. Hussain are hence also liable to be prosecuted for the offence of conspiracy to cheat and cheating as mandated by section 420 read with section 120B of the Indian Penal Code.

    In view of the above we demand an immediate refund of the amounts paid to you as indicated above. You are further advised that in the absence of your acknowledging the present communication and further delaying the refund of the above amounts we shall be constrained to institute appropriate criminal proceedings against you and Sh. Hussain, in India, for commission of the above offences."
  77. Mr Nayyar and Mr Kang decided that no such letter should be sent.
  78. No constructive response was ever received from Mr Yadav and no letter of appointment was ever provided.
  79. In late 2003 or early 2004 Mr Nayyar asked to meet Mr DK Singh to discuss certain matters. They met at a Starbucks near DWS's offices. Mr Kang was also present and they outlined what had occurred and sought his assistance. Mr DK Singh advised them to get independent legal advice. This advice was repeated on further occasions when Mr Nayyar contacted him and sought his help.
  80. Mr Nayyar and Mr Kang did seek legal advice and on 14 May 2004 Seymours sent a letter before action to DWS. DWS carried out an internal investigation and replied on 1 June 2004 denying any liability. Further correspondence followed and Barlow Lyde & Gilbert were instructed on DWS's behalf. On 14 August 2006 Seymours wrote a letter before action to Ms Advani. In that letter it was stated that Ms Advani had advised the Claimants at the 16 September 2002 meeting with her that Mr Yadav was a close friend of the Aviation Minister, Mr Hussain, and that "Mr Yadav had been given the mandate for selection of the GSA". That letter was responded to on her behalf by Barlow Lyde & Gilbert who referred back to their prior correspondence. The Claim Form in the present action was issued on 16 May 2008.
  81. The issues

  82. I propose to address the issues raised under the following general headings:
  83. (1) Illegality;

    (2) The duty of Ms Advani and DWS;

    (3) Personal breach of duty by Ms Advani;

    (4) The recoverability of the Claimants' losses.

    (1) Illegality

    Ex turpi causa - the law

  84. The maxim ex turpi causa non oritur action ("ex turpi causa") is a principle that prevents a claimant from using the court to obtain benefits from his own wrongful conduct. The policy underlying ex turpi causa was explained by Lord Mansfield CJ in 1775 in Holman v Johnson 1 Cowp 341 , 343:
  85. "The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causâ, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault, potior est conditio defendentis."
  86. The principle applies where the wrongful conduct has to be relied upon to advance the claim being made - see Tinsley v Milligan [1994] 1 AC 340. However, the recent House of Lords decision in Stone & Rolls v Moore Stephens [2009] 3 WLR 455 has made it clear that these are not the only circumstances in which the principle applies. As pointed out by Lord Phillips in Stone & Rolls v Moore Stephens [2009] 3 WLR 455 at paragraph 21:
  87. "The House [in Tinsley v Milligan] did not hold that illegality will never bar a claim if the claim can be advanced without reliance on it. On the contrary, the House made it plain that where the claim is to enforce a contract the claim will be defeated if the defendant shows that the contract was for an illegal purpose, even though the claimant does not assert the illegal purpose in making the claim: see Alexander v Rayson [1936] 1 KB 169, approved by Lord Browne-Wilkinson at p 370. "
  88. In the Stone & Rolls case Lord Philips explained (at paragraph 26) that the policy underlying ex turpi causa can be subdivided into two principles, of particular relevance to contractual obligations:
  89. "(i) The court will not enforce a contract which is expressly or impliedly forbidden by statute or that is entered into with the intention of committing an illegal act. (ii) The court will not assist a claimant to recover a benefit from his own wrongdoing. This extends to claims for compensation or an indemnity in respect of the adverse consequences of the wrongdoing: see Beresford v Royal Insurance Co Ltd [1938] AC 586".
  90. The Defendants contend that this is a case in which the Claimants are seeking to claim compensation or an indemnity in respect of the adverse consequences of their wrongdoing. They say that the payment of the deposit was, or would have been believed by an honest man to be, for the purpose of providing a bribe or illegal inducement. As such, the claim is brought to recover compensation for the consequences of an actual or intended illegal act and the principle of ex turpi causa requires it to be dismissed.
  91. The Claimants contend that in view of the unforgiving nature of the principle, the Court ought to be slow in finding that a contract/relationship lawfully entered into should be not enforced, particularly where the illegality relates to underlying transactions and not the performance of the contract sued under itself - see Euro-Diam Ltd v. Bathurst [1990] 1 QB 1 at 35 per Kerr LJ; that the more remote the illegality, the less likely it is that the ex turpi causa defence will be available to a defendant - see 21st Century Logistic Solutions Limited v. Madysen Limited [2004] EWHC 231 per Field J at paragraphs 17 and 18; and that this is a case in which the Claimants were not knowingly involved in unlawful conduct, are not seeking to enforce any illegal contract, and do not rely on or set up any illegality.
  92. I accept that in considering whether the ex turpi causa principle applies the degree of connection between the wrongful conduct and the claim made is an important consideration. As Bingham LJ stated in Saunders v Edwards [1987] 2 All ER 651 at 665-666:
  93. "Where issues of illegality are raised, the courts have (as it seems to me) to steer a middle course between two unacceptable positions. On the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits. On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct."
  94. This passage was cited with approval in the Court of Appeal decision in Cross v Kirkby The Times, April 5, 2000. In that case Beldam LJ stated (paragraph 77):
  95. "I do not believe that there is any general principle that the claimant must either plead, give evidence of or rely on his own illegality for the principle to apply. Such a technical approach is entirely absent from Lord Mansfield's exposition of the principle. I would, however, accept that for the principle to operate the claim made by the claimant must arise out of criminal or illegal conduct on his part. In this context "arise out of" clearly denotes a causal connection with the conduct…In my view the principle applies when the claimant's claim is so closely connected or inextricably bound up with his own criminal or illegal conduct that the court could not permit him to recover without appearing to condone that conduct."
  96. In Gray v Thames Trains Ltd [2009] 3 WLR 167 Lord Hoffman suggested that the necessary linkage or connection can be analysed in terms of causation (at paragraphs 53 to 54): :
  97. "This distinction, between causing something and merely providing the occasion for someone else to cause something, is one with which we are very familiar in the law of torts. It is the same principle by which the law normally holds that even though damage would not have occurred but for a tortious act, the defendant is not liable if the immediate cause was the deliberate act of another individual… It was Judge LJ … who formulated the test of "inextricably linked" which was afterwards adopted by Sir Murray Stuart-Smith … Other expressions which he approved… were "an integral part or a necessarily direct consequence" of the unlawful act … and "arises directly ex turpi causa" ... It might be better to avoid metaphors like "inextricably linked" or "integral part" and to treat the question as simply one of causation. Can one say that, although the damage would not have happened but for the tortious conduct of the defendant, it was caused by the criminal act of the claimant? ... Or is the position that although the damage would not have happened without the criminal act of the claimant, it was caused by the tortious act of the defendant?"

    Bribery – the law

  98. The Lord Chancellor and Secretary of State for Justice, Mr Jack Straw, has recently introduced a Bribery Bill in Parliament. He stated that:
  99. "Bribery eats away at the heart of both business and public life and has no place in British commerce. It blights free and fair competition and adds to the cost of doing business. It is particularly harmful to trade and development in the fragile economies of the developing world."
  100. The Bill is based on the Law Commission Report (LC. No. 313) Reforming Bribery. As stated in the Report in Part 1 paragraph 1.1.:
  101. "The damage and inefficiency caused by corruption, in either financial or social terms, should not be underestimated. The effective combating of corrupt practices requires an effective law of bribery".

    In this connection the Report refers to the World Bank's estimate that more US$ 1 trillion is paid in bribes annually – see World Bank, "The Costs of Corruption" (8 April 2004).

  102. In similar vein, the Privy Council observed in Attorney-General for Hong Kong v Reid [1994] 1 AC 324 at 330:
  103. "Bribery is an evil practice which threatens the foundations of any civilised society."
  104. In the same case it was said that for the purposes of the civil law a bribe is: "a gift accepted by a fiduciary as an inducement to him to betray his trust" (at 330G).
  105. In Industries and Gen. Mortgage Co Limited v. Lewis [1949] 2 All ER 573 Slade J held that a bribe for civil law purposes does not require proof of a corrupt motive, that the payment of a secret commission to a fiduciary is a bribe and involves proof of the following (at 575):
  106. "…(i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that that person is acting as agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the payment whom he knows to be the other person's agent".
  107. In relation to the criminal law, the Defendants submitted that there are at least three existing criminal offences of potential relevance to the present case, together with the accompanying respective inchoate offences of conspiracy and attempted bribery.
  108. (1) It is an offence at common law for any person to offer any undue reward to any person in a public office, in order to influence his behaviour in office, and incline him to act contrary to the known rules of honesty and integrity - Nicholls's Corruption and Misuse of Public Office (2006), at paragraph 2.08 (citing David Lanham, Essays in Honour of J.C.Smith); see also the Law Commission Report Part 2 paragraphs 2.4 to 2.8.

    (2) Under section 1(2) of the Public Bodies Corrupt Practices Act 1889 ("the 1889 Act"):

    "Every person who shall by himself or by or in conjunction with any other person corruptly give, promise, or offer any gift, loan, fee, reward, or advantage whatsoever to any person, whether for the benefit of that person or of another person, as an inducement to or reward for or otherwise on account of any member, officer, or servant of any public body as in this Act defined, doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed, in which such public body as aforesaid is concerned, shall be guilty of an offence".

    (3) Extending the law into the private sector, section 1(1) of the Prevention of Corruption Act 1906 ("the 1906 Act") provides:

    "…If any person corruptly gives or agrees to give or offers any gift or consideration to any agent as an inducement or reward for doing or forbearing to do, or for having after the passing of this Act done or forborne to do, any act in relation to his principal's affairs or business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal's affairs or business … he shall be guilty of a misdemeanour, and shall be liable … on conviction on indictment, to imprisonment for a term not exceeding 7 years or to a fine, or to both."

  109. Part 12 of the Anti-terrorism, Crime and Security Act 2001 ("the 2001 Act"), which came into force on 14 February 2002, extended these offences to cover conduct overseas, as follows:
  110. (1) By section 108 of the 2001 Act:

    "(1)     For the purposes of any common law offence of bribery it is immaterial if the functions of the person who receives or is offered a reward have no connection with the United Kingdom and are carried out in a country or territory outside the United Kingdom.
    (2)     In section 1 of the Prevention of Corruption Act 1906 (c 34) (corrupt transactions with agents) insert this subsection after subsection (3)—
    "(4)     For the purposes of this Act it is immaterial if—
    (a)     the principal's affairs or business have no connection with the United Kingdom and are conducted in a country or territory outside the United Kingdom;
    (b)     the agent's functions have no connection with the United Kingdom and are carried out in a country or territory outside the United Kingdom."

    (2) By section 109 of the 2001 Act:

    "(1)     This section applies if—
    (a)     a national of the United Kingdom or a body incorporated under the law of any part of the United Kingdom does anything in a country or territory outside the United Kingdom, and
    (b)     the act would, if done in the United Kingdom, constitute a corruption offence (as defined below).
    (2)     In such a case—
    (a)     the act constitutes the offence concerned, and
    (b)     proceedings for the offence may be taken in the United Kingdom.
    (3)     These are corruption offences—
    (a)     any common law offence of bribery;
    (b)     the offences under section 1 of the Public Bodies Corrupt Practices Act 1889 (c 69) (corruption in office);
    (c)     the first two offences under section 1 of the Prevention of Corruption Act 1906 (c 34) (bribes obtained by or given to agents)."

  111. As to the inchoate offences:
  112. (1) Under sections 1 and 1A of the Criminal Law Act 1977 (as amended) there is a statutory offence of conspiracy, which may relate to offences committed either within or without the United Kingdom:

    "The essence of the offences of both statutory and common law conspiracy is the fact of combination by agreement. The agreement may be express or implied, or in part express and in part implied. The conspiracy arises and the offence is committed as soon as the agreement is made; and the offence continues to be committed so long as the combination persists, that is until the conspiratorial agreement is terminated by completion of its performance or by abandonment or frustration or however it may be. The actus reus in a conspiracy is therefore the agreement for the execution of the unlawful conduct, not the execution of it. It is not enough that two or more persons pursued the same unlawful object at the same time or in the same place; it is necessary to show a meeting of minds, a consensus to effect an unlawful purpose. It is not, however, necessary that each conspirator should have been in communication with every other." – see Halsbury's Laws, Volume 11(1) (2006 re-issue), at paragraph 66.

    (2) Section 1 of the Criminal Attempts Act 1981 provides that:

    "(1) If, with intent to commit an offence … a person does an act which is more than merely preparatory to the commission of the offence, he is guilty of attempting to commit the offence…
    (2) A person may be guilty of attempting to commit an offence to which this section applies even though the facts are such that the commission of the offence is impossible.
    (3) In any case where-
    (a) apart from this subsection a person's intention would not be regarded as having had an intent to commit that offence; but
    (b) if the facts of the case had been as he believed them to be, his intention would be so regarded,
    Then, for the purposes of subsection (1) above, he shall be regarded as having had an intent to commit that offence.
    (4) This section applies to any offence which, if it were completed, would be triable in England and Wales as an indictable offence, other than-
    (a) conspiracy…
    (b) aiding, abetting, counselling, procuring or suborning the commission of an offence…"
  113. An issue of potential importance in the present case is whether an attempted civil law bribe is sufficient to engage the principle of ex turpi causa, or whether it is necessary to prove an actual bribe.
  114. In principle it would seem that an attempt should be sufficient to do so, and the contrary was not strongly argued. It involves an act which is more than preparatory which is done with the intent to bribe. As appears from Lord Mansfield's statement of policy in Holman v Johnson, the principle of ex turpi causa can extend to immoral as well as illegal acts and may apply to improper conduct evincing serious moral turpitude. Bribery involves serious moral turpitude. The moral turpitude involved on the part of the briber is much the same in the case of an attempted bribe as it is in the case of an actual bribe. That that involves sufficient turpitude to bring in to play the principle of ex turpi causa is borne out by the approach of the criminal law.
  115. Under the Prevention of Corruption Act 1906 it is necessary to show that the gift or consideration is "corruptly" given or offered to the agent. "Corruptly" means not "dishonestly" but purposely doing an act which the law forbids as tending to corrupt – see Cooper v Slade [1858] 6 HLC 746; R v Wellburn 69 Cr.App.R. 254.
  116. However, it is not necessary to prove that the agent received the gift or consideration or even that he was aware of what was going on. It is sufficient if the apparent purpose of the transaction was to affect the conduct of such a person corruptly – see Jagdeo Singh v The State [2006] 1 WLR 146. If, for example, a person solicits money on the basis that it would be used to bribe an agent then the offence is committed, even if that person never intended so to use the money and the agent is unaware of what was happening. If the intention of the person making the payment was to pay a bribe in contravention of the 1906 Act then an offence would therefore be committed regardless of whether or not any money was actually received by the agent or whether or not the intermediary ever intended to pass the money on to the agent.
  117. To similar effect is the criminal law relating to attempts. It is not necessary to show that anyone was in fact corrupted by what may have been no more than a mere attempt to make a corrupt payment in contravention of the Act - see Criminal Attempts Act 1981 s. 1(1). This is so even if the attempt was bound to fail because the commission of the full offence was, on the true facts, impossible - See R v. Shivpuri [1987] 1 AC 1. The criminal law of conspiracy also provides support for the view that the ex turpi principle may be engaged by acts falling short of an actual bribe.
  118. Finally, all the allegations of wrongful conduct made in the present case involve serious allegations which are denied. Although the standard of proof in civil proceedings is the balance of probabilities I have well in mind what Lord Nicholls said in In re H [1996] AC 563, 586, as recently endorsed by the House of Lords in In re B [2009] 1 AC 11:
  119. "…the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability".

    Illegality - the facts

  120. I find that the evidence establishes that the "deposit" or "consultation fee" or "initial incidentals" of £400,000 was a payment that was made in order to get the GSA. The understanding was that if it was paid then the Claimants would get the letter of appointment; if it was not, then it would go to some other travel agent.
  121. Although there would have been documentary formality requirements to be met after the letter of appointment was issued, it was not envisaged that these would create any difficulty. The crucial stage was to get the letter of appointment, which was meant to be irrevocable. Once that had been secured then the GSA would follow. Getting the letter of appointment therefore in effect meant getting the GSA. To ensure that it was obtained the Claimants were willing to and did make the £400,000 payment.
  122. The evidence that this was the intended and understood purpose of the payment was very clear.
  123. Mr Nayyar's cross examination included the following:
  124. "Q. So she said, did she, "If you can get the £400,000 deposit,
    the deal would be yours"?
    A. Yes.
    Q. By which you understood her to mean that if you paid that
    money you would get the GSA?
    A. Correct.
    Q. There was no doubt about that in your mind?
    A. No.
    ….
    Q. So when you paid the money you expected the letter of
    appointment to follow immediately; correct?
    A. That is right.
    Q. You did not expect there to be any period during which Mr.
    Yadav would be carrying out all the work necessary for you to
    get the letter of appointment except in so far as that could
    be squeezed into 72 hours?
    A. Correct.
    Q. That was something for which you were prepared to pay
    £400,000?
    A. Correct.
    Q. You got the impression here that it would, basically, be the person who came up with the money first?
    A. I would say.
    Q. So if you came up with the £400,000 deposit, you would get it,
    and if you did not she would give it to Mr. Kumar?
    A. Again, it was coming from her; yes.
    Q. But that is what you understood her to be saying?
    A. Yes.

    Q. Mr Nayyar, you are an experienced businessman who is capable of exercising an independent judgement, are you not?
    A. Yes.
    Q. And you knew that what you were being told that if you came up with £400,000 you would get the GSA and if you did not, you would not?
    A. That is what she told me, yes. She told me and Mr. Kang as well.

    Q. But you see the point. It did not really matter who the applicant was; as long as the paid the money they could have the GSA. That was your understanding.
    A. Obviously, that is what Gauri said, yes.
    Q. That was your understanding.
    A. Yes."

  125. Mr Kang's cross examination included the following:
  126. "Q. Did it come to this? Provided you paid the deposit of £400,000 to the consultant, you would get the letter of appointment.
    A. Yes.
    Q. And if you did not pay the £400,000 somebody else would get it?
    A. "You definitely will not get it if you do not pay", yes, my Lord."
  127. I find that the evidence establishes the following striking features of the proposed transaction:
  128. (1) The Claimants were required to make a payment of £400,000 before they secured the GSA.

    (2) The Claimants' payment of £400,000 was meant to secure the GSA for them. Conversely if the payment was not made, the Claimants would not obtain the GSA.

    (3) The Claimants did not believe that their payment of £400,000 would reach Air India or the Indian government.

    (4) With the possible exception of legal fees of £250,000, the Claimants neither knew nor cared about the destination of the remaining part of the £2 million cost of the GSA.

    (5) An irrevocable letter of appointment to the GSA was meant to be issued to the Claimants within 72 hours of their initial payment of £400,000.

    (6) In so far as the Claimants believed that their payment of £400,000 was for "services" which Mr Yadav would perform, they were mainly to be performed within the period of 72 hours between the Claimant's payment of £400,000 and the issue of a letter of appointment in the Claimants' favour.

    (7) The Claimants did not know what specific "services" Mr Yadav would provide, in return for their £400,000, save that he would take care of their application, would save it from getting "lost" and would get it to "the front of the queue".

    (8) The Claimants believed that Mr Yadav in performing his "services" would exercise his influence as a politician, as a former Minister and as a friend of the Civil Aviation Minister.

    (9) Mr Nayyar had no obvious qualifications for selection for the purposes of the GSA.

    (10) The letter of appointment would be issued in the Claimants' favour at a time when neither Air India nor the government of India had conducted any due diligence into the capacity or the suitability of the Claimants for the GSA and in the complete absence of documentation other than the backdated application letter.

    (11) The letter of appointment could and would be issued to whichever of two rival travel agents first made a payment of £400,000 at Mr Yadav's direction.

    (12) The Claimants paid the first £13,000 of their payment of £400,000 in cash, for which they neither sought nor obtained a receipt.

    (13) The Claimants paid the remaining part of the initial payment of £400,000 by way of transfer to the bank account of a BVI company in Hong Kong, again without obtaining any receipt.

    (14) The Claimants did not expect any reference to their anticipated payment of (in total) £2 million to appear in either the GSA or the letter of appointment.

  129. I find that in making the payment of £400,000 the Claimants knew that it was not a "deposit" as it was not being paid to Air India or to any agent on its behalf. I find that they also did not consider they were making a payment for services. Although the deposit was described as a "consultation fee" there was no expectation that there would be any significant, if any, consultation work carried out. This is borne out by the fact that the understanding was that the letter of appointment would be issued within 72 hours of the payment being made. There would no realistic possibility of meaningful consultation work being carried out in such a short time frame.
  130. I find that the reality is, as the Claimants knew, that the payment was made in order to get the GSA, and to get the GSA regardless of the merits of the Claimants "application" either in itself or by comparison to that of other actual or potential applicants. As they knew, there was no proper application. The letter of appointment and thereby the GSA was going to be granted to the Claimants on the back of a single, short, backdated application letter.
  131. The Claimants did not know exactly how it was that Mr Yadav was going to get the GSA appointment for them. However, it is obvious and was appreciated by them that a contract of this nature and significance should only be awarded on the basis of the merits of the application made. In this case, as they knew, it was going to be awarded on the basis of a third party payment.
  132. The award of such a contract would have to be made by a person(s) who was mandated by Air India to do so and therefore owed a fiduciary duty to Air India. If the award of the contract was to be made on the basis of a payment rather than on the merits of the application (not being a payment to Air India itself) then it must necessarily involve a breach of fiduciary duty.
  133. In Seymours' letter of 14 August 2006 it was stated on the Claimants' instructions that they were advised by Ms Advani at the meeting of 16 September 2002 that "Mr Yadav had been given the mandate for selection of the GSA". If that is what the Claimants believed when they made their payment then they were paying a secret commission to Air India's mandated agent in order to get the GSA. Even if it was not clear to the Claimants whether the mandate rested with Mr Yadav, Mr Hussain or someone within Air India, it was clear to them that whoever was so mandated the payment to Mr Yadav could and would secure the GSA from him.
  134. In the above circumstances I find that the payment was made in the knowledge and with the intent that it would obtain the GSA for the Claimants from whoever was mandated to award it, and that it would do so regardless of the merits of their application or that of other actual or potential applicants. I also find that the Claimants must have known and did know that this would involve a breach of duty on the part of whoever was mandated to make the decision to grant the GSA on behalf of Air India.
  135. It was argued strongly on behalf of the Claimants that they were innocents in all this and did not appreciate that any impropriety was involved. They were not experienced in doing business in India. They relied on Ms Advani who was a solicitor with a reputable firm, DWS. Everything they did was at the behest of Ms Advani and she gave them various reassurances about the transaction. It was inconceivable to them that a reputable solicitor would involve and encourage them in an improper or illegal transaction.
  136. I have no doubt that the Claimants did rely upon Ms Advani and were reassured by her involvement and encouragement. However, the Claimants were experienced businessmen. It was obvious that the payment they were being asked to make and the letter of appointment they were going to get in return was highly irregular, and they knew this. The payment itself was made partly in cash and partly to a BVI company in Hong Kong; it was not documented; there was no written agreement relating to it or record or receipt; it was not being made to Air India; it was not being made for any identified or plausible services. It was, as they knew, being made to get the GSA. As they understood the position, the payment would secure it from Mr Yadav or from whoever else had the GSA in their gift.
  137. I accept the Defendants' contention that the involvement of Ms Advani was not a talisman that entitled the Claimants to abdicate all responsibility for their conduct. In this context, the following passage from the evidence of Mr Kang is noteworthy:
  138. "Q. So is your evidence that as long as Gauri Advani told you to do it, even if it is something that you would otherwise have regarded as dishonest, you would still do it?
    A. My Lord, yes, that was the case. Gauri Advani is a solicitor. We did that, as she asked. We did exactly what she asked."
  139. The Claimants also sought to rely on the fact that the deposit was meant to be returnable in 72 hours if no letter of appointment was issued as showing that it cannot have been an out and out bribe. However, that simply meant that if the payment did not achieve its intended purpose then it would be returned. If does not mean that that purpose was not a corrupt purpose.
  140. Reliance was also placed on the fact that an earlier Air India GSA to the UK had been granted without a tendering process and apparently to a company which had not previously been involved in the travel agency business. However, the fact that there may have been something suspicious about an earlier GSA selection does not mean that suspicious circumstances surrounding a GSA selection a number of years later could be ignored.
  141. In the light of the above findings I am satisfied that the payment of £400,000 was intended to be a bribe in civil law terms. It was made with the intention of procuring that whoever was mandated to grant the letter of appointment, and thereby in effect the GSA, would grant it to the Claimants, and do so on the basis of a payment rather than of the merits of the application. That would involve a breach of fiduciary duty by that mandated person and it was a payment made in order to induce a breach of such duty.
  142. It was suggested that that would not be so if the principal was aware of this and consented to it but there was no evidence that Air India was so aware, it is inherently improbable that Air India would consent to any such arrangement, and the Claimants certainly took no steps to disclose the payment to Air India. Indeed it was apparent from Mr Kang's evidence that he had no positive belief that any of the £2 million would go to Air India.
  143. It was also suggested that there can be no bribery or intended bribery without identification of the fiduciary in question. However, I consider that it is sufficient if payment is made, as here, as an inducement to a fiduciary to betray his trust, even if the identity of the relevant fiduciary is not known for certain. It would be surprising if the Claimants could escape the consequences of wrongful conduct because their attempts at bribery failed to focus sufficiently on who would be bribed.
  144. I am not in a position to make any findings as to whether as a matter of fact there was a bribe. It is not clearly established on the evidence who was mandated to make the decision in relation to the GSA or whether and, if so, to whom, any part of the payment of £400,000 was passed on by Mr Yadav.
  145. However, for reasons set out above I consider that proof of a payment which is intended to be a civil law bribe is sufficient to engage the ex turpi causa principle. It is not necessary to establish that the intended illegal purpose has been effectively carried out.
  146. In the above circumstances it is not necessary to decide whether, on my findings, there has been a breach of the criminal law. Given that Air India is a company which is run as a commercial concern, albeit owned by the Indian government, and that the exact role (if any) of Mr Hussain is not clear on the evidence, I have doubts as to whether the law concerning public bodies and officers is engaged. Whether the 1906 Act is engaged is clearly more arguable, but I make no ruling on that.
  147. In the present case there is a very clear and close connection between the wrongful conduct and the claim made. The wrongful conduct consists of the payment which was made and the damages being claimed is that payment. On any view the making of the payment for an illegal purpose was an effective cause of the loss suffered.
  148. I accordingly conclude that the Defendants have made out their defence of ex turpi causa and that the Claimants claim accordingly fails.
  149. For completeness, I should add that it was submitted that where the claim is for damages for breach of a duty of care and the circumstances are such as to give rise to a defence of ex turpi causa in respect of that claim then no duty of care arises in respect of the kind of loss suffered. It is not necessary to reach any conclusion on this issue, but some support for that approach is to be found in Lord Phillips' judgment in the Stone & Rolls case at paragraphs 81 to 86.
  150. (2) The duty of Ms Advani and DWS

  151. The Claimants' primary case against the Defendants was for negligent breach of Ms Advani's duty of care and skill as the Claimants' solicitor. Even if she was not so retained the Claimants advanced claims in negligent misstatement, breach of fiduciary duty and breach of duty of care.
  152. The claim against DWS was based on the allegation that DWS was vicariously liable for Ms Advani's actions and/or that they were within her actual or ostensible authority.
  153. Vicarious liability – the law

  154. The essential question is whether the tort is so closely connected with the employment that it would be fair and just to hold the employer vicariously responsible.
  155. In the Privy Council decision in Bernard v Attorney General of Jamaica [2004] UKPC 47 Lord Steyn put the matter as follows at para 18:
  156. "The correct approach is to concentrate on the relative closeness of the connection between the nature of the employment and the particular tort, and to ask whether looking at the matter in the round it is just and reasonable to hold the employers vicariously liable."
  157. He referred to and cited (in para 19) the following passage from Lord Nicholls' judgment in Dubai Aluminium Company Limited v Salaam and Others [2003] 2 AC 366 at para 23:
  158. "… Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm's business or the employee's employment."

  159. Lord Steyn than added:
  160. "Throughout the judgments there is an emphasis on the proposition that an employer ought to be liable for a tort which can fairly be regarded as a reasonably incidental risk to the type of business he carried on."
  161. These passages, together with other leading cases, were referred to and considered in the recent Court of Appeal decision in Gravil v. Carroll [2008] EWCA Civ 689. They summarised the position as follows (per Sir Anthony Clarke MR at para 21):
  162. "…the essential question is…whether the tort is so closely connected with the employment, that is with what was authorised or expected of the employee, that it would be fair and just to hold the employer vicariously responsible. In answering that question the Court must take account of all the circumstances of the case, as Lord Steyn put it, looking at the matter in the round. The authority showed that it would ordinarily be fair and just to hold the employer liable where the wrongful conduct may fairly and properly be regarded as done while acting in the ordinary course of the employee's employment [Per Lord Nicholls]. This is because an employer ought to be liable for a tort which can fairly be regarded as a reasonable incidental risk to the type of business carried on [per Lord Steyn]" .

    Actual and ostensible authority – the law

  163. If an agent is expressly or impliedly authorised to carry out certain acts, their principal will be liable for the consequences of those authorised acts (even if carried out in an unauthorised manner) based upon the existence and scope of that actual authority. However if the act in question is not so connected with the class of authorised acts as to be a mode of doing some act within that class then it has no connection whatever with the discharge of any authorised duty, and the principal is not liable.
  164. Ostensible authority is based upon a representation by the principal to the effect that the apparent agent has their authority to act, even if the apparent agent did not in fact have that authority. It is not generally possible for the apparent agent to clothe themselves with ostensible authority by making representations to the effect that they have authority.
  165. DWS accepted that where authority of an agent is general or given by an instrument not under seal or orally then it is construed liberally, with regard to the object of the authority and to the usages of trade or business – see See Bowstead & Reynolds on Agency, 18th edition, paragraph 3-013 and Pole v Leask (1860) 28 Beav. 562 at 574.
  166. DWS also accepted that an agent has implied authority to do whatever is necessary for, or ordinarily incidental to, the effective execution of his express authority in the usual way - see Bowstead & Reynolds at paragraph 3-018, and Pole v Leask at 574-575.
  167. As to ostensible/apparent authority:
  168. (1) the general principle is usefully summarised in Bowstead & Reynolds at paragraph 8-013:

    "Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority"

    (2) there must be a representation by the principal to the third party (which can be express, or implied from a course of dealing, or made by permitting the agent to act in some way in the conduct of the principal's business with other persons) - see Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, Armagas v. Mundogas SA [1986] 1 AC 717 (HL) and Bowstead & Reynolds at paragraph 8-017;

    (3) a person without actual authority cannot generally clothe himself with ostensible authority by representing that he has that authority - See Freeman & Lockyer at 505;

    (4) since ostensible authority involves a representation by the principal as to the extent of the agent's authority, no representation by the agent as to the extent of his authority can amount to a 'holding out' by the principal – see Attorney-General for Ceylon v. Silva [1953] AC 461 at 479.

  169. It is not contended that DWS itself made any specific representation of relevance to the Claimants about the existence or scope of Ms Advani's authority. Whether her actions fell under her actual authority from DWS, whether they were incidental or necessary to that authority, and/or whether they fell within the ostensible authority of DWS (based on the way in which she was permitted to conduct business for DWS) therefore depends upon whether her actions can be said to fall within her actual role and/or the usual role and business of a solicitor performing her role.
  170. Whether an action falls within the usual course of a solicitor's business falls to be considered objectively. Accordingly, it is necessary to consider how it would appear to reasonable and competent people in the Claimants' position and whether objectively it would appear to be business of a nature conducted by a solicitor performing her role.
  171. The role of Ms Advani

  172. Ms Advani's role at DWS was within the loosely framed "India Group" at the firm, where she was principally focussed on marketing and business development, conducting little fee earning work. Whilst DWS accepts that it would have been within Ms Advani's role to introduce contacts who might be interested in doing business together, they contend that it would not extend to the kind of deal broking and execution role alleged by the Claimants.
  173. Ms Advani was first employed by DWS's predecessor firm, Denton Hall, as an Indian Qualified Lawyer, initially on a one-year contract. Ms Advani commenced her employment in the Energy Group on 15 March 1996.
  174. Following the expiry of the initial one-year period, Ms Advani was offered a further one-year employment contract, which extended her period of employment to 13 March 1998. She was again retained as an Indian Qualified Lawyer, based in the Commercial Litigation department.
  175. On 29 September 1997, Ms Advani joined Denton Hall's "India Group", which, at that stage, was headed by partner, Ms Lynn McCaw. The letter outlining the changes to her role states: "Your role will be predominantly to develop business for the India practice…".
  176. At the relevant time, Ms Advani's role, whilst intending to involve some fee earning work (corporate transactional work), was principally to be a marketing and business development role. This was because of her extensive contacts with business people in India.
  177. Given this role, from November 1997, part of Ms Advani's remuneration was incentivised. A letter dated 12 December 1997 from Ms McCaw sets out the terms of Ms Advani's commission entitlement. This provided that she would be paid 5% of fees billed from work done by the firm for clients or projects introduced to the India practice by Ms Advani, up to a maximum of £250,000 per annum. The details of the arrangements were subsequently modified through mutual agreement in 2003.
  178. Ms Advani was promoted to the role of Senior Solicitor on 1 January 2001; the emphasis at that stage was clearly on client development, albeit that Ms Advani still carried out a small amount of fee earning work.
  179. The Claimants contend that Ms Advani's role was not limited to marketing and business development but that she also carried out advisory work. They point out that she was and was promoted as being a senior solicitor. They further point out that the description of her role included "management of complex client matters/projects". They also rely on internal reviews and correspondence as reflecting the scope of the work carried out by her. In particular they rely upon:
  180. (1) a "Fee Earner's personal review" in respect of Ms Advani which said that what she enjoyed about her existing role was "… advising on legal financial and technical aspects of investing in India. Also exchange control regulations, industrial licensing and government policies relating to overseas investment and privatisation";
    (2) a "Skills Review" which describes Ms Advani as doing "… all my own writing work which includes letters advising clients on regulatory issues … and (negotiating) my negotiating skills are excellent. This may be related to tendering for work and then negotiating with State and Central Government on behalf of clients".
    (3|) Ms Advani's letter of advice to Mr Yadav on the 4 March 2002 regarding the Bell Helicopter matter in which she stated that "This is a substantial amount of work that will have to be done by our litigation and aviation partners to be able to commence this action. It will be my privilege to assist you on this important action … I look forward to hearing from you whether you are happy for me to proceed on your behalf to consider the issues that I have outlined above".
  181. I find that Ms Advani's role at DWS was primarily one of marketing and business development. Her job was to introduce clients to the firm with the aim of DWS being entrusted with fee earning legal work, which would be carried out by others. However, Ms Advani was and was held out to be a solicitor and her role did on occasions extend to providing legal advice or assistance.
  182. DWS stresses the fact that the Claimants never formally became clients of DWS and that Ms Advani did not follow any of the firm's file opening or other new client/new matter procedures in respect of the Claimants. Further, there was no formal letter of retainer or client care letter, nor did the Claimants pay any fee for Ms Advani's services.
  183. However, whilst there was never a formal solicitor/client relationship between the Claimants and DWS, a solicitor and/or his or her firm may well assume a duty of care to a potential client before that stage is reached. For example, it would be by no means uncommon for legal advice and assistance to be given to a potential client for the purpose of seeking to persuade him or her to become a client.
  184. Ms Advani could therefore have assumed a solicitorial and advisory role towards the Claimants prior to any formal retainer being made, but the crucial question is whether as a matter of fact she did so.
  185. The Claimants contend that Ms Advani's role in the present case was essentially that of a transactional lawyer. They stress the following actions of Ms Advani as supporting this:
  186. (1) She telephoned from DWS's office and introduced a potential business opportunity to Mr Nayyar, as she was authorised to do as accepted by Mr Rosenheim in his second witness statement;

    (2) She secured agreement that legal fees of £250,000 would be paid if the GSA was awarded;

    (3) She negotiated on the Claimants' behalf to reduce the overall price from £2.4 million to £2 million;

    (4) She told the Claimants to set about incorporating a JV company to take up the appointment if granted;

    (5) She wrote the application letter for them, amended it, and told them to print it on Maharaja Travel notepaper;

    (6) She introduced them to Mr Yadav;

    (7) She sent a fax from her hotel in India in March 2003 with a list of matters that needed to be addressed;

    (8) She provided a GSA for proposed amendments to be marked up.

  187. The Defendants contend that none of these matters involved acts of a solicitorial nature being carried out or expected to be carried out by Ms Advani prior to the date on which the money was paid over and lost, with the possible exception of the drafting of the application letter. As to that, they contend that it is not sufficient on its own to give rise to the cause of action or to any inference that Ms Advani was acting within her authority in her subsequent alleged activities, and that on the face of it, it must have been seen by the Claimants to have been inconsistent with an authorised act in that she encouraged them to back-date the letter so as to deceive the recipient.
  188. The Defendants emphasise the following matters as showing that Ms Advani assumed no solicitorial or advisory role:
  189. (1) No letter of retainer was prepared or provided to the Claimants and no file opening or other client procedures were carried out;

    (2) No fees were charged or discussed for the work she was carrying out as opposed to the £250,000;

    (3) The £250,000 had more of the characteristics of a success fee and the Claimants were not clear as to whether it was to be paid to her or to the firm;

    (4) Ms Advani's apparent encouragement of the deal and detailed involvement with Mr Yadav was inconsistent with a solicitor giving advice to the Claimants as her clients;

    (5) There were no features of legal advice in her discussions, as opposed to stipulation of what had to be done as a commercial requirement to obtain the GSA;

    (6) The Claimants' constant refrain that they did everything because "Gauri Advani told us" is not consistent with any ordinary role of a solicitor. It appears that they regarded her as the promoter, superintendent and guarantor of the transaction, rather than as their legal adviser.

  190. The Defendants point out that on the Claimants' own case Ms Advani:
  191. (1) actively promoted the deal with Mr Yadav to them;

    (2) guaranteed to them that if they paid the money to Mr Yadav they would get the GSA;

    (3) encouraged them to make that payment;

    (4) dictated all their actions.

  192. They submitted that none of these activities is within either Ms Advani's marketing role as held out by DWS or within the ordinary course of a solicitor's business. It is no part of the business of a solicitor to guarantee the outcome of a transaction, to act as a go-between or intermediary in negotiations between their client and a third party such as Mr Yadav, or in effect to stipulate the way in which the transaction was to be managed, as asserted by the Claimants.
  193. I accept the Defendants' contentions on this issue. I find that Ms Advani's role in respect of the GSA transaction can best be described as being one of deal broker. She did not merely introduce the opportunity to the Claimants; she actively sought to persuade them to go ahead with it, assisted them in doing so and directed them as to what to do. Of particular importance are the agreed legal fees of £250,000. This could not have been a fee reflecting legal work done or to be done. Even if the letter of appointment had been issued and the GSA had gone ahead the amount of legal work involved would have been minimal. It would have been necessary to adapt the GSA precedent agreements to suit this appointment and carry out certain transaction related work but nothing that could ever begin to justify a £250,000 fee. It was said that in foreign transactional deals solicitors do sometimes charge on a fixed fee basis, but one would still expect that to bear some relation to the work to be carried out and charging rates. I find that the £250,000 was effectively to be Ms Advani's commission for successfully broking the deal. Out of that commission she would pay any legal costs involved but this was her fee rather than DWS's fee and it was in reality a commission payment rather than a payment for legal services. Further, it is significant that the Claimants were unclear in their own minds whether this was a fee due to Ms Advani or DWS.
  194. That Ms Advani had a personal role and stake in the deal and was not merely a legal advisor is borne out by her actions and the letters she wrote in an attempt to recover the money in 2003. These vehement and strongly worded letters were not the work product of a dispassionate legal adviser. It is also significant that she personally paid for searches to be carried out on Avacorp and instructed Mr Kanchan Singh on her own initiative.
  195. Further evidence of her personal role is provided by her parallel involvement with the proposed GSA deal with Mr Kumar. It was his evidence that Mr Anwar and Ms Advani were acting together. It is clear that the extensive involvement of Mr Anwar was not for altruistic reasons and that he was expecting to be paid something if the deal went ahead. The same applies to Ms Advani.
  196. The alleged guarantee given by her is also of significance. Although the claim was not pursued at trial, the Claimants' pleaded case, backed by a statement of truth, was that this involved a liability as a personal guarantor. This would clearly be outside any solicitorial role and indeed that claim was always made against Ms Advani personally rather than DWS.
  197. I find that the deal broking role carried out by Ms Advani goes far beyond her employed role either as a marketing and business developer or as a solicitor. It was mainly being carried out for her personal gain rather than that of DWS.
  198. I also find that the facts and matters set out in paragraphs 151 and 152 above were known to the Claimants and that objectively it would be apparent to reasonable and competent people in the Claimants' position that she was not performing a solicitorial or legal advisory role, and that her allegedly negligent actions were not so closely connected with the employment that it would be fair and just to hold DWS vicariously responsible.
  199. It was Mr Kang's evidence that Ms Advani's job was to get the GSA for them and that the "price" for her doing this was £250,000. His evidence included the following:
  200. "A. In this case, it was not a normal solicitor buying a house or
    anything. She was the head of the business opportunity and there was a price for that she was charging. It was not as a normal transaction, I would say, where you are buying a house or you are sending a letter to another party. That was not my understanding. This was for the GSA in India. At DWS, she is working as head of that department, leading the way to do this. That is my understanding. It was not an everyday solicitor which I would usually will use, my Lord.
    Q. What did you think you were going to get for £250,000, Mr Kang?
    A. My Lord, this was the appointment of the GSA to Maharaja Travel.
    MR. JUSTICE HAMBLEN: I am sorry. The what?
    A. The appointment letter, appointing Maharaja Travel as a GSA in the UK and Ireland for Air India.
    MR. FENWICK: I want to be absolutely clear about this. You thought that you were going to be paying to Ms. Advani or to DWS – we will come back to that in a moment -- £250,000 in exchange for them getting you a letter of appointment as GSA for Air India? Have I correctly understood your evidence?
    A. I understood that the total price that Ms. Gauri had given us was £2 million. Out of that £250,000 would be her fee. That was said to Mr. Nayyar and that is what I believed. That is my understanding.
    Q. My understanding was that the work they were going to do for that fee was to get you the GSA?
    A. My Lord, from day 1, everything to do with the application, everything to do in India, that needs to be done, that was the fee we were paying. She was asking for the fee for that much."

  201. In essence Mr Kang was saying that Ms Advani's job was to get the GSA and £250,000 was the price she was charging for that. That is not the role of a solicitor or a marketing and business development person acting in a solicitor's firm. It was, however, an accurate description of Ms Advani's role. As a deal broker her job was to ensure that the deal was done, if she did so it would lead to significant personal reward.
  202. I accordingly conclude that Ms Advani was not acting within her actual or ostensible authority as a solicitor employed by DWS and that DWS is not vicariously liable for her actions.
  203. (3) Personal breach of duty by Ms Advani

  204. In case it hereafter be held that the ex turpi causa defence is not made out and there was no material illegality it would be relevant to consider whether, in those circumstances, there would be any personal breach of duty by Ms Advani. I consider that I should make findings to cover that eventuality, despite the submissions to the contrary by Ms Advani's counsel. For the reasons set out above I have found that, even if the ex turpi causa defence could not be relied upon, DWS would not have been in breach of any duty owed to the Claimants.
  205. For the reasons outlined above I do not consider that Ms Advani ever acted as the Claimants' solicitor or that she assumed any duty to provide legal advice to them. Her role was essentially that of a deal broker. In so far as she was acting in that capacity on behalf of the Claimants she would be acting as the Claimants' agent and as such would owe to them a duty of skill and care as well as a fiduciary duty. That she was acting on the Claimants' behalf is borne out by her stated negotiation of the price downwards from £2.4 million to £2 million. Although the Claimants did not specifically advance a case that Ms Advani was acting as a deal broker, they did contend that even if she was not acting as a solicitor she assumed a responsibility to them in respect of advice given and representations made, and the deal broking nature of Ms Advani's role as a matter of fact would be relevant to whether or not they did so. They also contended that she in any event owed them fiduciary duties.
  206. The allegation made of breach of fiduciary duty is that Ms Advani preferred her own interest and those of DWS over the interests of the Claimants, and hence positively advised them to proceed, but without giving any consequent/necessary advice, or taking any steps, to protect their position. The duty of a fiduciary would not usually involve a duty to take positive steps of this kind. In any event, in so far as a duty as a fiduciary arose out of Ms Advani's deal broking role there would no conflict of interest. In that context it was in both the Claimants' and her interest to seek to ensure that the deal was done.
  207. It was said that negligent misstatements had been made by Ms Advani in relation to the guarantee or assurance given that the letter of appointment would be issued within 72 hours, failing which the deposit monies would be returned, and that payment to a company account in Hong Kong was usual Indian business practice. However, these were more statements of opinion or belief than of fact and I am not satisfied that any material negligent misstatement of fact has been proved.
  208. Alternatively, it was contended that these assurances involved an assumption of responsibility and a breach of duty of care. In this connection I find that Ms Advani knew from the aborted attempt to get Mr Kumar to pay a deposit for the GSA that security for any such payment was an important matter and a deal breaker as far as Mr Yadav was concerned. When, shortly thereafter, the Claimants raised with her concerns about the return of the deposit and the possibility of guarantees she assured them that as a UK lawyer she was their guarantee. This was intended to and did reassure the Claimants and they relied upon it in determining to go ahead and subsequently to pay the deposit. In fact, as Ms Advani would have known, her involvement provided no legal protection at all. An appropriate guarantee or an escrow arrangement would have done so but, as was probably intended, since she knew this would be a deal breaker, her reassurances steered the Claimants away from insisting on any such protection. She similarly provided assurances which placated them when Mr Kang expressed reservations about making payments to company bank accounts in Hong Kong.
  209. Whilst Ms Advani owed no general duty to advise the Claimants, in circumstances where she was in fact acting as a deal broker and her advice and assistance was being specifically sought I consider that she did owe a duty to exercise reasonable skill and care in and about such advice and assistance as was given. As Ms Advani knew, the Claimants had real concerns about the security of the payment of the deposit and its return and were seeking her advice and assistance. As a person who was acting as a broker of the deal she would have known how those concerns could meaningfully be addressed, as had recently been brought home to her by the abortive proposed deal with Mr Kumar. Instead of so informing them she palmed them off with an assurance which was of no real or legal value. I am satisfied that she was negligent in so doing. I am also satisfied that in addressing and seeking to answer the security concerns specifically raised by the Claimants she owed them a duty of care having assumed a responsibility to take reasonable care in so doing and/or as broker of the deal. In this regard I accordingly find that, but for the issue of illegality, the Claimants would have proved negligence and breach of duty by Ms Advani.
  210. Ms Advani contends that, even if that were so, the effective cause of any loss would have been the Claimants' own choice and obvious negligence in deciding to pay the deposit without any security or guarantee. I accept that this would have involved causative fault on the part of the Claimants but I do not accept that that fault would be so significant as to break the chain of causation or to be regarded as the sole effective cause of the loss. In particular, these were steps which the Claimants probably would have sought to take if her assurances had not been given, and indeed the avoidance of any such steps being taken was most probably the purpose of her providing those assurances. If such steps had been insisted upon then, as in the case of Mr Kumar, the deal would probably not have gone ahead.
  211. In the circumstances set out above, I consider that both in terms of blameworthiness and causative potency the primary responsibility for the Claimants' loss would rest with Ms Advani and that the just and equitable apportionment in the light of the Claimants' contributory negligence would be 20% Claimants and 80% Ms Advani.
  212. If there had been no material illegality I would accordingly have held that Ms Advani was in breach of a duty of care owed personally by her to the Claimants and that she was liable for 80% of their recoverable damages.
  213. The recoverability of the Claimants' losses

  214. £13,000 of the deposit was paid by Mr Kang from his personal account while in India in mid-September 2002. £370,259 was paid by Moresand on 26 September and 2 October 2002. Prima facie it is Mr Kang and Moresand who have suffered the loss of the deposit.
  215. The Defendants contend that any duty of care was owed to Mr Nayyar and Mr Kang and not to their companies and that accordingly any claim for company losses fails.
  216. Ms Advani knew that Mr Nayyar conducted his business through Holiday Mood and indeed Holiday Mood was referred to in the backdated August 2002 letter which she drafted as the "flag ship" company for the purpose of the GSA application. She was therefore well aware that Mr Nayyar's business, Holiday Mood, was involved in the proposed transaction and would have expected Mr Nayyar's business vehicle rather than just Mr Nayyar personally to be so involved.
  217. It was the unchallenged evidence of Mr Nayyar in his third witness statement that at his fourth meeting with her at the end of August 2002 he told her that he had identified Moresand as a potential business partner and that Moresand was Crystal Travel and was the business of Mr Kang. He told her that Moresand was a reputable company which had been trading since 1983, that the idea was that he would explore the matter with Mr Kang and Moresand and that they would all meet up if Mr Kang wished to be involved, as indeed happened.
  218. Ms Advani was therefore aware that Mr Kang's business was Moresand, and that, as reflected in her reference to 20 years experience in the backdated application letter, it was involved in the proposed transaction and again she would have expected Mr Kang's business vehicle rather than just Mr Kang personally to be so involved.
  219. At the time she gave the assurance which I have found to be negligent Ms Advani would therefore have been aware of the likely involvement and reliance of all the Claimants. The fact that she may not have known which of the Claimants thereafter contributed to the payments actually made does not in my judgment affect the question of to whom the duty of care was owed at the time that care was meant to be exercised.
  220. In the above circumstances I am satisfied that Ms Advani's duty of care as found was owed to all the Claimants and that it is artificial to seek to separate out the duties owed to the personal Claimants from those owed to their business vehicles.
  221. I therefore hold that, were it not for the plea of illegality, each of the Claimants could claim for his/its loss, and that the total damages claimable would be £380,259, subject to contributory negligence. I hold that the relevant Claimants are Mr Kang and Moresand, but, if it be relevant to trace who contributed funds into Moresand's account and to identify all personal contributions made, the total loss would still be claimable. Those personal contributions are as set out in paragraph 57 above.
  222. Conclusion

  223. I conclude that the Claimants' claim fails because both Defendants have made good their ex turpi causa defence. I would in any event have held that DWS owed no relevant duty to the Claimants and was not liable to them for Ms Advani's actions. However, if the ex turpi causa defence could not be relied upon and there had been no material illegality I would have held Ms Advani to be personally liable for 80% of the Claimants' losses.
  224. In their pursuit of the "ultimate dream" of a GSA the Claimants were prepared to make whatever payment was needed to secure it, regardless of legalities. Mr Kumar told the Court that there is an old Indian saying to the effect that you count the fruit, not the trees. In this case the Claimants, as they knew, should have counted the trees and acted accordingly and they must bear the losses incurred as a result of their failure to do so.


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