A3/2006/1559
Neutral Citation Number: [2006] EWCA Civ 1419
IN THE SUPREME COURT OF JUDICATURE 
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HIS HONOUR JUDGE MACKIE)
 
Royal Courts of Justice 
Strand 
London, WC2 

Wednesday, 11th October 2006
 
B E F O R E:
LORD JUSTICE JONATHAN PARKER
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CARR
CLAIMANT/APPELLANT
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CONLON
DEFENDANT/RESPONDENT
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  (DAR Transcript of 
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THE APPELLANT APPEARED IN PERSON.

THE RESPONDENT DID NOT APPEAR AND WAS NOT REPRESENTED.
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J U D G M E N T 

1.	LORD JUSTICE JONATHAN PARKER:  This is an application by Mr Malcolm Carr, the claimant in the action, for permission to appeal against an order made by HHJ Mackie QC sitting as a High Court judge on 15 June 2006 and for an extension of time.  By his order the judge dismissed Mr Carr’s application for summary judgment on his claim against the eight defendants of the action, who are the partners in the former solicitors’ firm of Bower Cotton (“BC”), which was dissolved in April 2000.  Mr Carr appears in person to make this application and I am most grateful to him for the courtesy and skill with which he has formulated and presented his argument both on paper and orally this morning.

2.	On 13 May 1998 Mr Carr entered into an investment agreement with a company called Kelci Management Consultants Limited (“Kelci”), together with certain individuals, under which Mr Carr was to contribute to an investment scheme to be operated by Kelci and from which Mr Carr hoped to receive enormous, not to say fabulous, returns.  The agreement provided for the appointment of a solicitor who would be responsible for ensuring that funds contributed by Mr Carr to this investment scheme would be invested in some chosen form of financial instrument on secure terms.  Kelci was a client of BC and BC was duly appointed as solicitor under the terms of the agreement.  Mr Carr subsequently paid no less than US$4 million to BC, to be held by BC under the terms of that agreement.  

3.	On or about 20 May 1998, the entirety of that sum was transferred by BC out of its client account by Mr Paul Simms, the senior partner of BC and the eighth defendant in the present action, into an account of a third party, Kelly Pahl & Associates at UniBank in Copenhagen, an account over which BC had no control and with no security being taken for the transfer.  The whole of the sum involved was misappropriated and lost or stolen.  Two of the directors of Kelci, a Mr Adkins and a Mr Weaver and an American attorney, Mr Larkin Pahl, who was also a director of Kelly Pahl & Associates have, as I understand it, since pleaded guilty in a court in Florida to a fraud involving these and other monies.

4.	Mr Carr’s attempts to recover any part of the money having proved unsuccessful, he commenced proceedings in the High Court against the eight partners in BC seeking the restoration of the fund.  He claimed that he had not authorised the transfer of the funds and that BC, through Mr Simms, knew at the time the funds were being transferred that the transfer was not authorised by the terms of the investment agreement.  He went on to allege that BC was liable under the terms of the agreement to restore the fund.  He also claimed that BC had impliedly misrepresented the investment scheme as an honest and bona fide scheme.  

5.	The trial of that action took place before Blackburne J.  Oral evidence was given by Mr Carr himself and he called a Mr Hudock in support of his case.  For the defendants only Mr Simms and a Mr D’Costa, an assistant solicitor who had only recently joined BC at the time of the events in question, gave oral evidence.  In the result Blackburne J rejected Mr Carr’s claim.  He held that there was no basis for the contention that BC lacked authority to make the transfer.  In paragraph 141 of his judgment he said this:

“As I have mentioned, it did not occur to Mr Simms, any more than it did to Mr Carr, that Messrs Adkins and Weaver were fraudulent or that recourse by them to the power of attorney was for the purpose of taking control of the fund otherwise than for the purpose of investing it in the manner provided for by its terms.”

6.	In paragraph 152 of his judgment Blackburne J accepted the submission of Mr Alan Steinfeld QC, appearing for BC, that to Mr Carr’s knowledge Mr Simms transferred the funds in accordance with Mr Carr’s authority and instructions:

“… and at a time when neither Mr Simms nor anyone else on behalf of [BC] had any notice that Kelci was intending to misapply [it]”.

7.	It followed from that finding that BC was under no liability to restore the fund.  Blackburne J also rejected the allegations of misrepresentation.  He accordingly dismissed the claim.  Mr Carr’s appeal against Blackburne J’s dismissal of the claim was rejected by the Court of Appeal.  However that was not the end of the matter, for in June 2005 Mr Carr commenced the present action against the same defendants in which he seeks to set aside the orders of Blackburne J and the Court of Appeal in the earlier action, on the ground that at the trial before Blackburne J Mr Simms gave perjured evidence; and that in consequence Blackburne J’s order and hence the order of the Court of Appeal are nullities.  By paragraph 15 of his Particulars of Claim (which was settled by leading counsel) Mr Carr alleges that from at least early 1997 BC and Mr Simms were:

“…actively involved in making, promoting or facilitating bogus transactions which lacked an honest commercial purpose”.

8.	By paragraph 16 he alleges that at the material time Mr Simms, and hence BC, was aware of concerns on the part of NatWest as to the propriety of a proposed transfer of funds by BC at the request of Kelci into an account of a third party at the Jersey Branch of the NatWest, in that the signatory to the account was considered by NatWest not to be of good standing.  This is referred to in the pleading as “the NatWest warning”.  He alleges that Mr Simms was informed of the NatWest warning by a Mr Anderson in a telephone conversation, following a telephone conversation which Mr Anderson himself had had with a representative of NatWest.  On the basis of these and other alleged facts Mr Carr alleges in paragraph 17 of his Particulars of Claim that at the material time BC were on notice as to the characteristics of the proposed transfer of the fund, which should have made them aware that the proposed transfer was:

“…likely to be pursuant to a bogus transaction that lacked an honest commercial purpose and was fraudulent”.

9.	He goes on to allege in paragraph 21 of his Particulars of Claim that by transferring the fund to UniBank BC was grossly negligent, in breach of their fiduciary duty to Mr Carr and in breach of their duties under the agreement, and that they were guilty of dishonestly assisting in such breach of trust by, among other things, failing to advise Mr Carr of the NatWest warning.  On that basis damages are claimed in respect of the sum of US$4 million which has been lost and in respect of substantial expenses incurred by Mr Carr in trying to recover it.  

10.	These allegations are denied by the defendants, Mr Simms having delivered a separate Defence from the first seven defendants.  In particular, Mr Simms denies that he had the alleged telephone conversation with Mr Anderson in which Mr Anderson allegedly passed on the NatWest warning.  He denies that he ever received the NatWest warning.  That is in paragraph 17(1) of his Defence.  The Particulars of Claim then go on to refer to the earlier action and to the orders of Blackburne J and of the Court of Appeal.  In paragraph 26 of the Particulars of Claim it is alleged that those orders were procured by the perjury of Mr Simms.  Particulars of such alleged perjury are then pleaded, including a statement by Mr Simms in evidence that he had no reason to suppose that anyone was acting fraudulently.  Various verbatim extracts from the transcript of Mr Simms’ evidence at the trial before Blackburne J are included in the particulars.

11.	On the basis of those allegations, all of which are of course denied by Mr Simms, Mr Carr seeks in addition an order that the orders of Blackburne J and the Court of Appeal be set aside.  Mr Carr applied for summary judgment on this latest claim as against all eight defendants, an application which HHJ Mackie QC rejected, his order being the subject of the present application for permission to appeal.  This was in fact not Mr Carr’s first application for summary judgment, another application having been made previously to Etherton J and having been rejected.  However, it is fair to say that, as Mr Carr has explained to me this morning, the earlier application for summary judgment was not based to any extent on any alleged perjury by Mr Simms but raised different issues altogether.  

12.	Before HHJ Mackie, Mr Carr relied strongly on a document which Mr Simms had not disclosed in the earlier action and which he tells me was only disclosed to him some three days before the hearing of the summary judgment application.  This document is a schedule which was sent to Mr Simms under cover of a letter dated 1 November 2000 from a Mr Roland Jackson of the City office of NatWest.  In his covering letter Mr Jackson explained why NatWest had concluded that it could no longer act as bankers to BC.  In the course of the letter he said this:

“Your letter suggested that you would appreciate clarification of the Bank’s position on certain aspects of your practice which, you suggest, may be ‘blocking’ or ‘unhelpful’.  I have therefore taken the opportunity to review the occasions on which the bank has had concerns over business which has either been introduced to you by the bank or over sums which have actually passed through your firm’s account with NatWest.  I attach a Schedule which sets out a number of matters, involving you or your firm, which have required careful consideration by the Bank over the last few years.”

The attached schedule contains an entry in the following terms:  

“May 1998 (3).  NWB in Jersey referred to a payment of US$2.8 million received from BC for the credit of one of their customers by whom it was immediately to be paid on to a further customer at NWB Guernsey, alleged purpose of payment according to one version being for investment in a South African diamond mining operation.  The funds had come to BC from another firm of solicitors.  Whilst some information was provided by PS and others in response to the Bank’s due diligence enquiries, [PS I think is a reference to Paul Simms] the Bank remained unconvinced that the funds needed to have been routed through a chain of intermediaries.  The Bank was concerned that the funds might relate to a PBI fraud [PBI being prime bank instrument].”

13.	Mr Carr, as I have said, relies strongly on this document, which came to light only shortly before the summary judgment application, as being in effect a smoking gun so far as the honesty or otherwise of Mr Simms’ evidence is concerned.  I should say that it is accepted at least by the first seven defendants that the US$2.8 million there referred to was a transfer made by Mr Simms on Kelci’s instructions on 7 May 1998, albeit they assert that it did not involve any funds of Mr Carr.  Mr Carr also relies on a number of extracts from previous evidence of Mr Simms in support of his allegation of perjury.  In particular, I should refer to a passage in the cross-examination of Mr Simms before the Solicitors’ Disciplinary Tribunal in 2003 when Mr Simms was answering questions put to him by Mr Timothy Dutton QC.  I must, I think, read the full extract:

“Q: (Mr Dutton) I am going to turn to another question and it is this:  you gave evidence in the High Court proceedings in the matter of Carr v Bower Cotton.  Do you remember that?

“A: (Mr Simms) Yes.

“Q: In cross-examination you accepted that if profits of 40 per cent per week were being promised in a transaction, that would be indicative of fraud; is that right?

“A: I do not know if I used that word, but I indicated that at the time the Carr transaction arose, I believed that a profit of 100 per cent per annum was an achievable one but if the figures were much more extravagant I certainly did not think in the context of the Carr transactions, what they were claiming to do, that those returns would be achievable.

“Q:  40 per cent per week is not in the normal commercial world …

“A: Correct.

“Q: … an achievable return, is it?

“A: Not normally no.

“Q: Such a return is indicative of fraud is it not?

“A: It is a possible indication that the party offering it is unlikely to be able to achieve it.

“Q: And therefore possible indication of fraud?

“A: Possible.”

14.	Mr Carr submits that Mr Simms’ protestations that he had no reason to think that any dishonest activity might be involved in this investment scheme cannot stand in the light of what he describes as Mr Simms’ admission in the extract that I have read, that the investment scheme involved some elements of possible indication of fraud.  He also relies on other matters which are set out in his written skeleton arguments, including an undated witness statement by Mr Anderson in which he confirms the telephone conversation in which he passed on the NatWest warning to Mr Simms.  Mr Carr also relies on the findings of dishonesty later made against Mr Simms in the proceedings before the Solicitors’ Disciplinary Tribunal in which the evidence which I have just read was given.  

15.	So Mr Carr says that although the allegation of perjury is a most serious one, nevertheless on the admissions of Mr Simms there is no need for a trial on that issue and judgment ought to be granted summarily.  

16.	The judge gave Mr Carr’s application for summary judgment short shrift, pointing out that the NatWest schedule had not been pleaded and that, in any event, it is virtually impossible to obtain summary judgment in a case of alleged fraud.  

17.	The judge did, however, observe to Mr Carr that the points on which he relied might well be very good ones to make in cross-examination of Mr Simms at trial or in the course of Mr Carr’s submissions at trial.  

18.	Despite everything that Mr Carr has said to me this morning and despite everything he has said on paper in his skeleton arguments, I confess that I find myself in entire agreement with the judge.  I can see no possible basis upon which the Court of Appeal could be persuaded to interfere with his order dismissing the application for summary judgment.  

19.	In the first place, as the judge said, the claim which Mr Carr now makes based upon the schedule attached to the NatWest letter will need to be pleaded, and to that end permission to amend will have to be sought.  Paragraph 16 of the Practice Direction supplementing CPR part 8 in paragraph 8.2(5) makes it clear that a claim of notice or knowledge must be specifically pleaded in the statement of case.  But in any event, quite apart from any point based upon the requirements of pleading, allegations of criminal conduct such as perjury are simply not suitable to be determined on a summary application.  

20.	As I indicated to Mr Carr in the course of his submissions, I entirely accept that the material upon which he relies calls for an explanation from Mr Simms, but Mr Simms is plainly entitled, in my judgment, to the opportunity to put forward a proper explanation if he is in a position to do so.  In other words, this is a matter on which Mr Simms must be allowed the benefit of a trial.

21.	For that simple reason I agree entirely with the approach on which the judge took, and whilst not underestimating the force of the points which Mr Carr has made, I am of the clear view that if this matter were to go to a full Court of Appeal the appeal would have no real prospect of success.  

22.	So with thanks to Mr Carr for his submissions once again, I must refuse this application for permission to appeal.

Order: Application refused.