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Case No: CHANF 1999/1015
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (Rimer J)
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday 14 March 2000
B e f o r e :
LORD JUSTICE MORRITT
LORD JUSTICE ROBERT WALKER
and
SIR RONALD WATERHOUSE
- - - - - - - - - - - - - - - - - - - - -
|
REX
GOOSE
|
Plaintiff
|
|
-
and -
|
|
|
WILSON SANDFORD & Co. (A Firm)
|
Defendant
|
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Mr Richard McCombe QC and Mr Philip Marshall (instructed by Sharpe
Pritchard for the Appellant, Mr Goose)
Mr Ronald Walker QC and Miss Catherine Brown (instructed by Hextall
Erskine for the respondent, Wilson Sandford & Co.)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE MORRITT:
This is the judgment of the court.
Introduction
1. The claimant, Mr Rex Goose, farmed his own land at Hagbeach Farm, Whaplode
Drove, Spalding, Lincolnshire. He wished to acquire further agricultural land
in France. In March 1984 he met Mr Peter Bray who, Mr Goose thought, also
wanted to buy agricultural land in France. They embarked on a joint operation
to acquire such land for each of them. For that purpose Mr Bray incorporated
Intag Estates Ltd ("Intag") and retained the services of the defendant firm of
chartered accountants, Wilson Sandford & Co, on behalf of himself and
Intag. The scheme by which the agricultural land in France was to be acquired
underwent a number of modifications between May 1984 and July 1985 but common
to each variant were three crucial features. First the agricultural land in
France would be paid for by means of a loan denominated in Swiss Francs.
Second, Mr Goose's land would be required as security for one or more of the
liabilities undertaken in the implementation of the scheme. Third, a
collection of semi-precious stones ("the Stones") apparently owned by Mr Bray
or a Liechtenstein Anstalt established by him, called the Brent Foundation,
would be available, in some form, whether as security or otherwise, as a buffer
against the risks involved in the use of three currencies, namely Swiss Francs,
French Francs and Sterling.
2. In implementation of the scheme, on 25th July 1985 Mr Goose charged Hagbeach
Farm to secure to Edward Manson & Co repayment of a loan made by them to
Intag of £314,000. Of that sum £130,000 was to be remitted as part
payment of the price for a farm, La Devinniere, Nr Orleans, Cher, being
purchased by Intag for Mr Bray. The money was not used for that purpose or for
any other purpose which Mr Goose had approved. When, subsequently, Mr Goose
sought to resort to the Stones he discovered that they had not at any relevant
time been owned by either Mr Bray or the Brent Foundation and were in any event
worth only about 3% of what he had been led to believe.
3. On 15th July 1991 and again on 22nd April 1994 Mr Goose issued a writ
seeking damages from Wilson Sandford & Co. in respect of the part played in
the deception of Mr Goose he alleged had been performed by the partner
responsible, Mr Robin Wilson. Those claims were tried by Harman J between 9th
June and 13th July 1994. On 1st April 1996 Harman J dismissed both actions.
On 13th February 1998 this court ordered a new trial of some only of the
original claims which arose in the second action. That trial took place before
Rimer J between 1st October and 13th November 1998. Rimer J gave judgment on
25th January 1999. He too dismissed the second action.
4. Rimer J found that Mr Wilson had made representations to Mr Goose at a
meeting held on 19th September 1984 and in a letter dated 9th April 1985 which
he had failed to correct at a further meeting held on 18th May 1985 that (a) Mr
Bray or the Brent Foundation owned the Stones and (b) the Stones were available
as and capable of providing the requisite security in implementation of the
scheme. He decided that the second, but not the first, was made by Mr Wilson
without any honest belief in its truth. But he decided that Mr Wilson did not
intend that Mr Goose should be induced to do anything in reliance thereon. He
also found that Mr Goose did not in fact rely on such representations. Thus
the causes of action in deceit failed. Similar claims in negligence, agency
and trust failed too. The judge dealt with issues which only arose if he were
wrong on the questions of liability, namely, limitation, contributory
negligence and causation.
5. This is the appeal of Mr Goose from the order of Rimer J. His principal,
though by no means only, contention is that the judge having found that
representations were made by Mr Wilson to Mr Goose without an honest belief in
their truth failed to recognise that they must have been made with the
intention of inducing Mr Goose to act and did in fact induce Mr Goose to act by
charging his farm as security for the loan of £314,000. He contends that
the judge was wrong to have dismissed his claims in negligence, agency and
trust. In addition he contends that the judge was wrong in the conclusions he
reached in respect of limitation, contributory negligence and causation. We
will consider these submissions later. First it is necessary to describe the
factual background in some detail. As the issues before us are a good deal
more limited than those before Rimer J it is not necessary to cover all the
ground surveyed by him in his comprehensive and careful judgment.
The Factual Background
6. Mr Bray was a fraud. In 1984 he was about 60, some 16 years older than Mr
Goose. He had been convicted of offences of dishonesty on 25th April 1975 and
1st June and 16th November 1977. He had been made bankrupt on 31st January
1975 and though discharged on 13th March 1980 such discharge had been
conditional only and was revoked on 8th May 1984 for breach of condition. None
of this was known to Mr Goose. To him, no doubt, Mr Bray appeared to be the
experienced business man with considerable agricultural expertise and wealth
that he claimed to be.
7. Mr Goose and Mr Bray first met on 8th March 1984 having made initial contact
due to their mutual interest in buying agricultural land in France. Mr Bray
told Mr Goose that he had returned from Zimbabwe and wished to invest in
France. He told Mr Goose about the Brent Foundation of which he said that he
was the main beneficiary. There was a second meeting on 11th March 1984. On
this occasion Mr Bray told Mr Goose that he wanted to sell his farms in
Zimbabwe and that Brent had a collection of semi-precious stones. At an early
stage Mr Bray showed Mr Goose a list of the Stones headed "Stones delivered to
Bray" containing 33 items against each of which was noted a certificate. The
aggregate value, as shown, was over US$500,000.
8. The judge had to consider some confused and confusing evidence concerning
the ownership of the Stones. But it is not necessary for us to refer to it in
any detail for neither Mr Goose nor Wilson Sandford & Co seek to challenge
the judge's conclusion. For present purposes it is sufficient to start with
the sale of the Stones by Holford Trust Ltd ("Holford") to the Brent Foundation
in August 1982 for US$725,000. Payment was to be by 10 promissory notes given
by Brent Foundation. On 23rd August 1982 the Stones were transported by
Brink's Air Courier Service from California to a bonded warehouse at Kloten
Airport, Zurich for the account of Trinkhaus & Burkhardt ("TB"), a Swiss
bank. On 26th August 1982 TB confirmed to Barclays Bank that it was instructed
to remit the proceeds of sale of the Stones up to US$83,000 to cover the
outstandings of Mr Bray's wife. Rimer J concluded that insofar as Barclays
thereby obtained any security interest in the Stones or their proceeds of sale
it was secondary to the security held by Barclays over the house in March,
Cambridgeshire in which Mr and Mrs Bray lived. By the end of 1982 TB claimed
to be entitled to a lien on the Stones to secure to them payment of various
liabilities of Mr Bray or the Brent Foundation which, by mid-1984, amounted in
Swiss Francs and US$ to the equivalent of £25,000. The promissory notes
were not paid and in December 1982 Mr Bray instructed TB to hold the Stones to
the order of Holford. In these circumstances the judge found that Holford
sold the Stones to Mr Bray in August 1982 in exchange for the promissory notes
but that, by agreement, the sale had been rescinded by January 1983 when Mr
Bray relinquished any property in the Stones to which he might previously been
entitled. But in the hands of TB they were also subject to the lien to secure
repayment of the debts due to TB by Mr Bray or the Brent Foundation and to such
secondary security in favour of Barclays as the undertaking of TB might have
conferred. Thus by the time Mr Goose and Mr Bray met in March 1984 neither Mr
Bray nor the Brent Foundation owned the Stones which were in any event subject
to incumbrances in favour of TB and, possibly, Barclays.
9. On 9th May 1984, a week after the incorporation of Intag and the day
following the revocation of Mr Bray's discharge from bankruptcy, Mr Bray wrote
to Mr Goose setting out the scheme in the form he then proposed. Its salient,
if rather muddled, features were (1) a loan in Swiss Francs equivalent in value
to £700,000 on the initial security of guarantees of £350,000 from Mr
Goose and Mr Bray, (2) the guarantee of Mr Goose would come via NatWest Bank on
the security of Hagbeach Farm, (3) the guarantee of Mr Bray would be given by
the Brent Foundation via a Swiss bank secured on the Stones, (4) the farms,
when bought would be available for use as security for the loans thereby
enabling the amount of the guarantees to be reduced.
10. Mr Bray had been in contact with financial advisers, HarvestMinster Ltd,
who, in June 1984, introduced him to Mr Wilson a partner in the defendant
Wilson Sandford & Co. Mr Wilson was then in his thirties having been
admitted to the Institute in 1976, becoming a fellow in 1981. As we have
already indicated Mr Bray, through Mr Wilson, retained the firm on behalf of
both Intag and himself. Shortly thereafter Mr Bray introduced Mr Wilson to Mr
Goose. On 10th July 1984, in answer to Mr Wilson's request for details of
various matters including the Stones, TB sent a telex to Mr Wilson setting out
the position as they understood it to be. They gave details of the liabilities
of Mr Bray or the Brent Foundation, as at that date, amounting to the
equivalent of £25,000, for which they claimed to exercise a lien and of 86
sapphires or topaz stones valued by others, for which they disclaimed any
responsibility, at US$498,711. TB indicated that in order for the Stones to be
released they would require the release by Barclays of any obligation arising
from the confirmation given by TB to Barclays on 26th August 1982 referred to
in paragraph 8 above.
11. In July and August 1984 Mr Wilson considered the proposed scheme and its
mechanics with HarvestMinster Ltd, the advisers of a third possible
participant, Mr Anthony Riby, and a firm of tax advisers, J.F.Chown & Co.
He sought and obtained information as to Mr Goose's farm and other assets.
12. On 19th September 1984 there occurred in the Garden House Hotel, Cambridge
the first meetings of the members and directors of Intag. It was also the time
and place at which the first representations by Mr Wilson on which Mr Goose
relies were made. The meeting was attended by Mr Bray, Mr Goose, Mr Riby and
Mr Wilson and various other professional advisers. It lasted two hours. The
only written record are the minutes of the meeting taken by Mr Wilson.
According to the minutes Mr Bray, Mr Goose and two others were appointed
directors, Mr Bray was appointed the Chairman. Of the authorised share capital
of £100,000, 49,998 shares were issued to Mr Bray jointly with his wife
and another. It was recorded that further shares would be allotted to Mr Goose
"following Mr Goose's acquiring of farms via finance from Intag Estates Ltd".
Under the heading "Funding of farm purchases it was recorded that
"The paper presented to the Board was adopted in principle and this paper would
form the basis of agreement between P.J.Bray and R.Goose.."
The paper referred to purported to record an agreement between Mr Bray and Mr
Riby. So far as material it stated
"2. It is agreed that the funding of farm purchases will be from Swiss franc
borrowing supported by suitable prime bank operation to cover the requisite
guarantees of interest and capital repayments under terms generally understood
to be:-
a) Seven year minimum term loan of Swiss francs at LIBOR rates. Payment of
interest at not less than quarterly intervals. No repayment of capital until
the end of the term.
b) Support banking to add not more than 2% to the base rate for the Swiss franc
loan to cover requirements as to guarantee of interest and repayment of
capital.
3. From the above loan funds individuals will be permitted to borrow sufficient
funds to cover all purchase costs plus a fee to cover company administrative
costs not exceeding one % per annum.
4. Individual borrowers will satisfy the company auditors, financial advisors
and bankers as to the security for their borrowings and this security will be
made available to the company and through it to the support bankers. ...
6. Providing that the above conditions are complied with the responsibility of
borrowers will be for their portion of the funds on an individual basis and not
as joint and several guarantors."
13. The Stones were mentioned in the context of the value which each
participant was bringing into the venture. In that context Rimer J found that
Mr Wilson referred to them as "Peter's stones or in some like way" and, in that
they were obviously intended to play a part in the scheme, impliedly
represented that they were available for use in it. Rimer J also held that Mr
Wilson did not, as Mr Goose had alleged, make any representation that they were
worth approximately US$500,000.
14. Mr Riby dropped out of the scheme in early October 1984. Thereafter Mr
Wilson sought further information from Mr Goose as to his assets "which can be
pledged in support of the borrowing in Swiss Francs". On 11th October 1984
Mr Wilson wrote to Mr Bray recording various telephone conversations he had had
with Mr Schaefer of TB. He wrote
"..Mr Schaefer states that in his opinion the stones held in Zurich are of very
low value and will not cover the Swiss debts which you have. This is obviously
in direct contradiction to the value shown in the Telex which I hold and I have
no way of knowing the true value myself.
However, I am convinced that we will need to realise some of these stones both
to pay the Swiss debts when they are finally agreed and also to inject capital
into [Intag].
It would therefore be of enormous help to me if we could now sort out the Swiss
situation once and for all. You were going to let me have a list of points to
write to Mr Schaefer on and I would ask you to let me have these urgently. I
will then send that letter and will suggest to Mr Schaefer that he attends on
us in the UK at the earliest opportunity. At the same time, it is also
essential that we obtain a valuation of the gems, totally independently, so
that the true market value can be established; I think it is fair to say that
the market in gems at the present time is weak and we will need to decide the
amount which we need to raise at the present time."
At a meeting of the board of Intag held on 17th October 1984 attended by Mr
Bray and Mr Goose it was reported that a compromis for La Devinniere had been
signed by Mr Bray and that the purchase of the farm would be for FF.5,227,540
and that negotiations had opened to secure a lease (with an option to purchase)
of land at Sainte Marie, near Montmorillon. On the following day Mr Goose
advanced £50,000 by way of loan to Intag as to £25,000 for the
deposit on La Devinniere and the balance for working capital. The board of
Intag resolved to acquire La Devinniere on 27th November 1984. On 11th
December 1984 Mr Schaefer of TB wrote a strongly worded letter to Mr Wilson
confirming TB's claim and warning that if it were not met by 30th January 1985
the Stones would be sold for the best price obtainable which TB estimated was
approximately Sw.F.5-10,000.
15. In addition to wishing to buy agricultural land in France Mr Goose was in
the process of buying a holding of 28 acres adjacent to Hagbeach Farm for
£80,000 and buying out his brother's share in a further 72 acres at a cost
of £63,000. He obtained a valuation of Hagbeach Farm from Chestertons in
the total sum of £585,000. On 25th January 1985 Mr Bray and Mr Goose went
to International Commerce Bank in London with their proposition to buy land in
France financed by a loan of Swiss Francs to be secured on the land so acquired
and on the Stones. Following that meeting Mr Bray wrote to Mr Wilson setting
out the revised scheme he then proposed for a three stage operation. The
stages as proposed were (1) £450,000 should be borrowed in sterling on the
security of Hagbeach Farm (excluding the farmhouse) with which, after settling
certain liabilities of Mr Goose, would be used to complete the purchase of La
Devinniere, (2) Sw.Fr. 3m should be borrowed on the security of the Stones,
other properties of Mr Bray and La Devinniere from which the sterling loan
raised at stage 1 would be repaid, (3) the income of Hagbeach Farm, La
Devinniere and a rented farm at Gracay, Nr Vierzon, Cher estimated to amount to
£190,000 per annum would be applied as to £90,000 pa in payment of
the interest due on the Sw. Fr. loan leaving a balance of £100,000 pa
sufficient over 7 years to repay the Sw.Fr. loan.
16. Mr Wilson relayed the details of the revised scheme to Mr Francis, a
finance broker. Mr Francis then sought a loan of £400,000 from Edward
Manson and Company Ltd ("Manson") to Intag by way of implementation of stage 1.
Mr Goose saw a copy of the letter from Mr Francis to Manson dated 12th
February 1985 and agreed with the proposal. It was no part of that proposal
that the Stones should form part of the security for the Sterling loan or the
Swiss Franc loan from which it was to be repaid. On 20th February 1985 Manson
offered Intag an 18 month term loan of £400,000 on the security of
Hagbeach Farm and the guarantees of the directors of Intag, the initial
drawdown not to exceed £380,000.
17. At the end of March 1985 Mr Goose contacted the manager of the branch of
NatWest in Spalding to see if that Bank might make a better offer of stage 1
finance than Manson had. He gave him some information and then contacted Mr
Wilson inviting him to speak to the manager and see what terms might be
available. Mr Wilson reported the outcome of his enquiries to Mr Goose in a
letter dated 9th April 1985. This letter contains the second set of
representations on which Mr Goose relies. The material terms are
"Mr John Wilson at [NatWest] is processing an interim finance application for
£450,000. This will consist of £135,000 for yourself and
£315,000 for [Intag]. Your own monies will be to replace the £60,000
advance to the Company and also will allow you sufficient money to complete the
purchase of the land from Gallahers.
The [Intag] £315,000 is required to meet the payments to Societe Generale
at Bourges due on 10th and 16th April.
Security: As security for these loans, the tranches 1,2 & 3 (excluding the
farmhouse) of your own land will be pledged together with an undertaking to
deliver P.J.Bray's gems to be held to the order of [NatWest]. The gems will
rank as prior security ahead of your own land."
Rimer J concluded that the letter contained representations by Mr Wilson to Mr
Goose that the Stones were (1) owned by Mr Bray or the Brent Foundation and (2)
available and capable of providing security for the stage 1 loans as envisaged
in the letter.
18. In the event NatWest did not come up with any offer. By a letter dated
29th April 1985 Manson revised its offer. The revised offer was for an 18
month term loan of £314,000. It was to be secured by the joint and
several guarantees of Mr Bray and Mr Goose and a first legal charge on
specified parts of Hagbeach Farm. The offer stipulated that the loan was to
be used to assist in the purchase of La Devinniere. On 10th May 1985 Mr Bray
wrote to Manson on behalf of Intag accepting the revised offer.
19. In the meantime, Mr Wilson had received a letter dated 30th April written
by solicitors acting for the Royal Bank of Scotland pressing for payment by Mr
Bray of a judgment debt with interest and costs of some £19,800. The
solicitors made clear that in the absence of a satisfactory response to their
offer to accept payment by instalments, bankruptcy proceedings would be
commenced on 7th May 1985. Mr Wilson had also had a telephone conversation
with Mr Goose on 30th April. On 1st May he wrote to Mr Bray stating
"Please find enclosed copy letters received today from Penningtons and you will
see that we have until 7th May in order to avoid bankruptcy proceedings being
commenced.
I also had a rather agitated phone call from Rex Goose last evening (Tuesday)
explaining that he was now making it a prior requirement that his £50,000
loan to [Intag] be repaid before he gives a charge over his Farm. He was almost
insistent that we proceed to selling some of the gems as soon as possible, and
indeed I am beginning to believe that this is going to become absolutely vital
in order to settle your personal debts such as Schaefer (who keeps phoning),
Penningtons, probably Barclays Bank on your house and now Rex Goose. I have
received another reminder from John Dewhurst for the balance of £2076.25
and obviously pressure is increasing. If we proceed to completion this week on
the strength of Rex Goose's security then all will be well, but if not, I do
think we should instigate the sale of some of the gems as soon as possible.
Perhaps we can discuss this first thing on Thursday morning when I hope this
letter will reach you."
The solicitors for Royal Bank of Scotland wrote again to Mr Wilson on 15th May
1985 confirming that bankruptcy proceedings had been commenced against Mr
Bray.
20. On 18th May 1985 there was a meeting at Mr Bray's house in March between
him, Mr Goose and Mr Wilson. Mr Wilson and his family were on their way from
Brighton to Harrogate and had arranged to call in on Mr Bray. Mr Bray asked Mr
Goose to drive down from Spalding to consider with Mr Wilson an offer of
finance from Banque Populaire. Mr Goose knew nothing of Mr Bray's debts to TB
and Royal Bank of Scotland or of the bankruptcy proceedings launched against Mr
Bray. It is at this meeting that, as alleged by Mr Goose, Mr Wilson made the
further representations on which he relies. The nature of the representation
relied on is complicated by the terms of the order of the Court of Appeal
directing a new trial.
21. In the trial before Harman J and in the retrial before Rimer J there was
evidence as to the course of the meeting. Mr Bray, Mr Goose and Mr Wilson
went through a manuscript list of points concerning finance for the scheme. In
relation to point 5 the notes of the discussion prepared by Mr Wilson indicated
that only £90,000 would remain from the stage 1 sterling loan from Manson
for use by Intag as working capital. Thus there would be nothing for the
acquisition of the land at Gracay or the outstanding amounts due for La
Devinniere. As Rimer J recorded
"Under the heading "Capital a/c", Mr Wilson wrote:
La Devinniere £480,000
Gracay £200,000
--------
680,000
less 1/3 = 250,000 ex trust sales
--------
Rolling balance from Banque Populaire} 430,000
Secured on Devinniere & Gracay }"
The "ex trust sales" was a reference to the Stones. The original figure was
£230,000 but, as the note shows, was altered to read £250,000. At
the trial before Harman J Mr Goose contended that it was Mr Wilson who
suggested that the figure should be increased to £250,000. Mr Wilson
denied the allegation. Harman J accepted the evidence of Mr Wilson and held
that Mr Wilson did not make any statements to Mr Goose or in Mr Goose's
presence that afternoon to the effect that the Stones were available for sale
or that they could produce £250,000. The Court of Appeal upheld this
finding of Harman J but directed a retrial of the issues of misrepresentation
at this meeting
"to the extent that the same arose out of the failure of Mr Wilson to correct
the misrepresentation made by Mr Bray and/or to correct any misrepresentation
found to have been made by Mr Wilson on any earlier occasion but excluding any
claims based on an actual oral statement by Mr Wilson at the..meeting."
Rimer J recorded that before him
"Mr Wilson said that those figures would have come from Mr Bray, since he did
not know them. However, he agreed that he had made an input here. He wanted to
see a capital injection into Intag and recommended an injection of one third of
the total acquisition cost. This pointed to a figure of about £230,000,
which was the original "ex trust sales" figure he wrote down. Mr Bray then
volunteered, as Mr Goose agreed in cross-examination, that it should be put up
to £250,000. It was, and the alteration is apparent from the note. Mr
Wilson agreed in evidence that the £250,000 would be raised from a sale of
the stones, and that Mr Goose would have understood that, although a letter he
wrote shortly afterwards suggested that he understood the money might also need
to come from Zimbabwe. At this time the US$/£ exchange rate was about
US$1.24, so that the sterling equivalent of the existing, but now elderly,
valuations, was some £400,000. Mr Goose's evidence was that Mr Wilson said
that the £250,000 would be raised from the stones."
22. On 28th May 1985 Mr Wilson wrote to Mr Bray to inform him that TB had set a
deadline of 6th June by which their debt was to be satisfied failing which they
would institute proceedings against Mr Bray and "the stones will be sold over
your head". In June 1985 Mr Bray embarked on an acquisition of control of a
confirming house called W.Allison Ltd. Originally this episode also gave rise
to alleged misrepresentations made by Mr Wilson to Mr Goose. Rimer J rejected
them and his conclusions in that respect are not now challenged. Accordingly
we can pass on to 20th June 1985 when Mr Bray wrote to Mr Goose indicating that
he was going to France to complete the documentation for a £300,000 loan
from Banque Populaire to be used in the purchase of La Devinniere and suggested
that if Mr Goose completed the Manson loan then Intag would repay Mr Goose's
loan of £50,000 made on 18th October 1984 (see para.14) and lend him
enough to clear other borrowings of his.
23. On 21st June 1985 Mr Goose went to see Mr Tongue of Roythornes, Mr Goose's
family solicitors. This was not the first time that he had done so in
connection with his association with Mr Bray. The first occasion was on 20th
September 1984 the day after the first meeting of Intag. He telephoned him for
advice on 23rd November 1984. On 6th March 1985 he consulted Mr Tongue again.
On that occasion Mr Goose claimed, but Rimer J did not accept, that he had
asked Mr Tongue "to check out" Mr Bray. On 22nd March 1985 Mr Goose went to
Roythornes with Mr Bray. In addition Roythornes were acting on behalf of Mr
Goose in deducing title to Hagbeach Farm for the purpose of the charge to be
given to Mansons. On this occasion, 21st June 1985, Mr Goose showed Mr Tongue
the letter from Mr Bray. Mr Tongue advised him in no uncertain terms that
nothing Mr Bray had done was inconsistent with him being a con-man and that
"the longer the situation continued the more likely it was that he was a
con-man". Unfortunately Mr Goose did not accept this advice.
24. On 3rd July 1985 Mr Goose telephoned Mr Tongue. Mr Tongue's attendance
note records
"You still did not know whether you would actually go to Manson, but the
essence was that you wanted some money quickly. It seemed that you had been
offered the renting of two further farms next to Devinniere, each of 500 acres,
and you were going ahead with that.
Putting to you that you had not told us the full story, and you agreed that you
had information that you had not passed on to us. Pointing out that on that
basis we could not really advise you, and you fully accepted this. You had
weighed the advice we had given you very carefully, but because of what you
also knew, you had decided to proceed despite that advice. You appreciated our
efforts on your behalf, and that legally our advice was entirely correct.
You had that day learned from an independent source that Bray had plenty of
money. Pointing out to you that in that case the question arose as to why he
didn't use that money instead of chasing round to Manson or such outfits. You
said the money was all tied up, but we pointed out that if there was security a
Bank would provide the bridging.
We assured you that we would do the best we could in the circumstances, and you
expressed your confidence in that. We wished you well in all your ventures in
France, but legally our advice would have to be to hasten slowly and with
caution."
Mr Goose told Rimer J that the undisclosed information was that, as Mr Bray had
told him, at some unknown time Mr Bray was to come into an unspecified sum of
money by way of commission in a transaction in Zimbabwe concerning a metal wire
company. On 16th July 1985 Mr Tongue wrote to Mr Goose giving him firm
advice not to proceed with the Manson deal. He warned him
"... if the worst happens you will lose your English land, and if that is
insufficient to meet the loan, you could lose the house and buildings and any
other assets you may have, and in the last resort may even have to go
bankrupt."
25. On 25th July 1985 the Manson deal was completed. Mr Goose charged Hagbeach
Farm, excluding the Farmhouse, to secure £314,000 borrowed by Intag from
Manson. Of this sum, £8,716 went in fees and expenses, £147,314 was
remitted to Mr Goose, £26,268 was retained by Intag as working capital and
£130,000 was remitted to Banque Populaire. The application of the latter
sum has not been established. It is sufficient to record that it was not used
in the purchase of La Devinniere, as it should have been, or otherwise for the
benefit of Intag or Mr Goose. The assumption has been that it was used to pay
other creditors of Mr Bray or otherwise for his personal benefit.
26. The subsequent events may, for present purposes, be shortly narrated. By
October 1985 Intag had defaulted on the payment of interest on the Manson loan.
Mr Goose took steps to salvage what he could from the wreck but without
success. On 11th February 1986 a receiving order was made against Mr Bray.
In March 1986 Mr Goose obtained from an assistant in the Official Receiver's
office in Cambridge three large dustbin liners full of documents containing
amongst other documents copies of Mr Wilson's letters to Mr Bray dated 11th
October 1984 and 28th May 1985 (see paras 14 and 22). In April 1986 he sought
to redeem the Stones from TB with money he borrowed from NatWest but withdrew
at the end of that month when a Sotheby's valuer advised him that they were
only worth between US$10,000 and US$15,000. On 20th May 1986 Mr Goose
complained to the police about the conduct of Mr Bray who, on 1st November
1989, was convicted of various offences of dishonesty arising from his
involvement in the scheme for which he was sentenced to 4 years imprisonment.
On 4th June 1986 Intag was compulorily wound up. In July 1986 Mr Goose, who
had been sued by Roythornes for unpaid fees, counterclaimed alleging negligence
based on the allegation that on 22nd March 1985 he had instructed them "to
check out" Mr Bray. On 20th October 1987, a bankruptcy order was made against
Mr Goose. His counterclaim against Roythornes was stayed on 1st June 1989. On
his discharge from bankruptcy on 20th October 1990 his trustee in bankruptcy
assigned to Mr Goose the cause of action, if any, he had had against Wilson
Sandford & Co. But on 22nd May 1991 Mr Goose's application to remove the
stay on his counterclaim against Roythornes was dismissed.
The Proceedings
27. The writ in the first action was issued on 15th July 1991. No claim or
allegation was made in that action relating to misrepresentations made at the
meetings on 19th September 1984 and 18th May 1985 nor in the letter of 9th
April 1985. Discovery in the first action took place at the end of 1993 or the
beginning of 1994. It was in consequence of the documents then disclosed by
Wilson Sandford & Co., which Mr Goose had not previously seen, that the
second action was commenced by writ issued on 22nd April 1994. The actions
were consolidated and a consolidated statement of claim was served on 25th
April 1994. The terms of the scheme, defined as the Joint Venture, were set
out in paragraphs 3 and 4. In paragraphs 14, 22 and 27 Mr Goose alleged that
at the meeting held on 19th September 1984, in the letter to Mr Goose dated 9th
April and at the meeting held on 18th May 1985 Mr Wilson represented to him
that
a) that the Gemstones were owned by the Brent Foundation and/or Mr Bray;
b) that the Gemstones were available for and capable of providing security in a
sufficient sum for the promotion of the Joint Venture..;
c) the Gemstones were worth approximately US$500,000 [at least £250,000 in
the case of the meeting held on 18th May 1985]; and
d) the Joint Venture would not involve any real risk to Mr Goose's assets and
that his interests would be safeguarded.
Mr Goose alleged that each representation was false and fraudulent, negligent
or in breach of contract. In paragraphs 55 and 56 Mr Goose sought equitable
compensation on the footing that Wilson Sandford had knowingly assisted Mr Bray
in fraudulent and dishonest breaches of trust as set out in paragraph 5
thereof. Paragraph 5 alleged breaches of fiduciary duty on the part of Mr
Bray in making fraudulent misrepresentations as to the value of the gemstones,
the substance of his other assets, the involvement of Intag in the acquisition
of the interest in W. Allison Ltd and failure to disclose his bankruptcy and
previous convictions. In paragraph 5(6) Mr Goose claimed that Mr Bray had used
the assets of Intag not for the purposes of Intag but for his own purposes.
Particulars of the assets and purposes were set out in schedule 1 and included
the £50,000 lent by Mr Goose on 18th October 1984 and £314,000
borrowed from Manson on 25th July 1985. The alleged acts of knowing
assistance were set out in Schedule 2 and consist, in effect, of all the
activities of Wilson Sandford & Co. involved in acting as auditors and
accountants for Intag.
28. As we have indicated, after a trial lasting from 9th June to 13th July
1994, Harman J dismissed both actions. Mr Goose's appeal was partially
successful in that on 13th February 1998 the Court of Appeal ordered a new
trial of the allegations made in the second action of misrepresentation arising
from what was said or written at the meeting held on 19th September 1984 and in
the letter dated 9th April 1985 and, to the extent indicated in paragraph 21
above, from what was said or done at the meeting held on 18th May 1985. In
addition a new trial was ordered in respect of the constructive trust and
equitable claims to which we have referred and of all issues of reliance,
causation, loss, contributory negligence, limitation and/or laches and the
appropriate form of relief.
29. The retrial before Rimer J took place from 1st October to 13th November
1998. For the reasons he explained he did not read the judgment of Harman J.
We have not read it either. The evidence in chief before Harman J was treated
as the evidence in chief before him on which the witnesses were then
cross-examined. Rimer J did not find either Mr Goose or Mr Wilson to be a
reliable witness. In the case of Mr Goose he considered that some parts of
his evidence were obviously wrong, other parts were embellished and that in at
least one instance he invented an allegation to fit in with Mr Tongue's
attendance note. Overall he concluded
"I therefore view Mr Goose's evidence with considerable caution. On those
matters on which there are material factual conflicts, I have concluded that I
cannot safely place reliance on it save where it is supported by other reliable
evidence."
Rimer J described Mr Wilson as a careless and uninquiring accountant whose
professionalism and integrity occasionally fell below proper standards. He
issued a statement of affairs for Mr Bray which Harman J and the Court of
Appeal had described as disgraceful and he wrote a letter which was untruthful.
Rimer J did not accept that Mr Wilson had acted dishonestly throughout. His
approach was
"..in assessing the case against him with regard to the occasions on which he
is alleged to have made misrepresentations, I regard it as safer to have
primary regard to what he actually knew, and was doing, by the time of each of
such occasions."
30. The judge concluded that Mr Goose had not established a primary liability
in respect of any of the causes of action on which he relied. Thus the claims
based on misrepresentations, whether fraudulent, negligent or in breach of
contract and for equitable compensation for knowing assistance in a fraudulent
breach of trust all failed. The judge also considered, on the assumption that
he was wrong on primary liability, the defences of limitation, contributory
negligence and causation. He concluded that all the claims, if otherwise
sustainable, were time barred, insofar as contributory negligence was relevant
that Mr Goose was 75% at fault and that damages for many of the heads of loss
for which compensation was sought were not recoverable.
31. We propose to deal with questions of primary liability first under the
general headings of (1) misrepresentation and (2) knowing assistance in a
dishonest breach of trust. If and insofar as any primary liability arises we
will then consider the defences relied on under the headings of limitation,
contributory negligence and remedy.
(1) Misrepresentation
32. In paragraph 27 above we have summarised the representations alleged by Mr
Goose to have been made at the meetings held on 19th September 1984 and 18th
May 1985 and in the letter dated 9th April 1985. At the retrial before Rimer
J the representation we have summarised in sub-paragraph d) was not pursued,
but the other three were. It is convenient to deal with the meetings and the
letter in chronological order.
The Meeting held on 19th September 1984
33. Rimer J found that Mr Wilson (i) referred to the Stones as being Peter's
stones; (ii) made no representations that they were worth approximately
US$500,000; but (iii) insofar as they were obviously intended to play a part in
the French venture, impliedly represented that they were available for use in
it. Mr Goose does not appeal against the second of those findings.
34. With regard to the first of those findings Rimer J considered that the
reference to the Stones as Peter's stones conveyed that the stones belonged to
Mr Bray and were his to deal with. In the light of his conclusion that by
1984 the Stones did not belong to Mr Bray or the Brent Foundation he decided
that the representation was false. Wilson Sandford & Co. contend that the
judge was wrong because the statement the judge found that Mr Wilson had made
was purely referential without any implication regarding ownership. Of
course, such a statement may be purely referential or descriptive as in
"Cleopatra's needle" or "Lincoln's Inn". Whether or not it is will depend on
the context. In the context of the meeting held on 19th September 1984 and
the discussion of the scheme and the paper to which we have referred in
paragraphs 12 and 13 above we have no doubt that the conclusion to which the
judge came was the correct one.
35. Wilson Sandford & Co also contend that the judge was wrong to have
concluded that the representation was false in that Mr Bray had no right or
title to deal with the Stones. It is contended that Mr Bray was entitled to
deal with them as either the buyer or seller in possession or at least as the
person in possession. We do not accept that submission either. On the
judge's finding, to which we have referred in paragraph 8 above, in September
1984 Mr Bray was neither a buyer nor a seller. He had formerly been a buyer
but was no longer. The discharge of the contract of purchase by mutual consent
did not make him a seller. In any event Mr Bray was not in possession. The
Stones were in the possession of TB. In the light of their lien Mr Bray was
not entitled to possession as against TB even if, which he was not, he had been
entitled to possession against Holford. Accordingly we see no reason to come
to any different conclusion to that of the judge as to the making of the first
implied representation and its falsity.
36. The judge also determined that there was implied in the express reference
to Peter's stones the further representation that the Stones were freely
available for use in the French venture and that insofar as they might be
incumbered such incumbrances were capable of being discharged without recourse
to the Stones themselves. The judge considered that this implied
representation was also false because the Stones were subject to the lien of TB
and the limited security to Barclays conferred by the confirmation TB gave in
August 1992. Wilson Sandford & Co do not challenge that conclusion.
37. Thus Mr Wilson's express reference to Peter's stones gave rise to two
implicit misrepresentations. Rimer J rejected the contention that they gave
rise to a liability in negligence. He also considered that Mr Wilson had an
honest belief in the first implied misrepresentation but not in the second.
None of those findings is challenged. Thus the sole issue arising from the
events of 19th September 1984 meeting is whether the implied misrepresentation
that the Stones were all freely available for use in the French venture without
resort either to the Swiss loan or the Stones themselves to redeem the
incumbrances gave rise to a liability in deceit.
38. The judge resolved that issue in favour of Mr Wilson. He did so on two
grounds. First he considered that Mr Wilson did not thereby intend to induce
Mr Goose to enter into any transaction. Second he held that Mr Goose did not,
in committing himself in due course to providing security for the Manson loan,
rely on anything Mr Wilson said or wrote. Mr Goose challenges both those
conclusions. In our view the second conclusion can only be properly reviewed
in the light of the circumstances prevailing immediately before Mr Goose
charged Hagbeach Farm to Manson on 25th July 1985 and therefore after the
letter of 9th April 1985 and the meeting held on 18th May 1985. But we will
deal with the first conclusion at this stage as 19th September 1984 is the
relevant time for that purpose.
39. In considering whether the elements in the tort of deceit had been
established the judge correctly directed himself as to the relevant standard of
proof by reference to the statement of Lord Nicholls of Birkenhead in Re H
and Others (Minors)(Sexual Abuse: Standard of Proof) [1996] AC 563, 586
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.
Fraud is usually less likely than negligence."
With regard to the ingredients of the tort of deceit he considered by reference
to the speech of Lord Maugham in Bradford Third Equitable Benefit Building
Society v Borders [1941] 2 AER 205, 211 that four things need to be
established, namely,
"(i) a representation of fact; (ii) the making of it with knowledge that it is
false; (iii) the making of it with the intention that it should be acted upon
by the plaintiff, or by a class of persons which will include the plaintiff, in
the manner which resulted in damage to him; and (iv) reliance on the
representation by the plaintiff resulting in damage."
He pointed out with regard to the first requirement that the representation
must be material because of its tendency or likely result to induce the
representee to act on the faith of it in the kind of way in which he is proved
to have acted. With regard to the third requirement Rimer J said
"Deceit is a deliberate tort by which A misleads B with the actual intention of
inducing him to act in a particular way. If there is no such intention, or if B
acts in claimed reliance on the misleading in a way which was not intended,
there is no remedy in deceit. See Peek v. Gurney (1873) 6 L.R.H.L. 377,
in particular per Lord Cairns, at 411 to 413, an authority referred to by
Viscount Maugham (note Lord Cairns' example about the house sale); and see also
Tackey v. McBain [1912] AC 186; Kitcher v. Fordham and Another
[1955] 2 Ll.L.R. 705, at 707, 708, per Sellers J; and Clerk & Lindsell
on Torts, 17th Ed., para. 14-29."
40. As we have already indicated the judge acquitted Mr Wilson of dishonesty in
relation to the first but not the second implied representation. It is
important to understand the basis for the distinction. It was that
"In referring to the stones as Peter Bray's stones, I find that Mr Wilson was
relaying what he genuinely believed to be true and about which he had no doubt
or reasonable grounds for doubt. Although, as I find, he was wrong in
attributing ownership to Mr Bray rather than to Holford, there was nothing
dishonest in the attribution. I reject the allegation that his
misrepresentation as to title was made fraudulently so as to found a claim in
deceit.
In so far, however, as Mr Wilson's reference to "Peter's stones" also implied
that any incumbrances were capable of being discharged otherwise than out of
the stones themselves or the proposed Swiss loan, I regard that as raising a
more difficult question. Mr Wilson knew the stones were encumbered. He knew of
no other assets which might be used to discharge the incumbrances; and, as I
have said, he knew enough about Mr Bray to know that the probability was that
there were none: either some stones would have to be sold in order to procure
their release, or else part of the proposed Swiss loan would have to be applied
in redeeming them. Further, although in his letter of 7 August Mr Schaefer had
said that he did not regard the Barclays telex as legally binding, Mr Wilson
had taken no legal advice on the point and had not obtained Barclays' view on
it. Accordingly, considerations of prudence with regard to the availability of
the stones pointed towards including the Barclays liability as a real rather
than an imaginary fetter. However, as the stones were only secondary security
for Barclays, I find that Mr Wilson could also reasonably take the view - and
did - that the incumbrances were, in total, relatively immaterial compared with
what he regarded as the substantial gross value of the stones. I find, however,
that at the time of this meeting, he did not honestly believe that the stones
could be released from the incumbrances except by a sale or by recourse to the
proposed Swiss loan; and he did not disclose that to the meeting."
The judge accepted that the reason Mr Wilson did not reveal the incumbrances
was because, in the absence of Mr Bray's consent, their disclosure would have
involved a breach of client confidentiality. He rejected that as
justification for Mr Wilson's failure to disclose the incumbrances and
concluded that Mr Wilson
"..therefore joined in painting a picture as to the availability of the stones
which showed only part of the truth; his implied statement as to the extent of
their availability for the venture was, to his knowledge, untrue; and that was,
on the face of it, dishonest."
41. We have already indicated the reasons why the judge rejected the allegation
of deceit in respect of the representations made by Mr Wilson at the meeting
held on 19th September 1984. They both relate to reliance. But it appears to
us that there is a prior, but closely connected, question to which the judge
did not expressly refer. To establish liability in deceit it is incumbent on
the representee to show that the representor intended his statement to be
understood by the representee in the sense in which it is false. In most cases
this is not a problem because if the representor claims that he intended his
words to bear a meaning they do not then he is not likely to be believed. But
where a representation is ambiguous then the representee must do more than show
that in its ordinary meaning the representation was false. Thus in
Akerhielm v De Mare [1959] AC 789 the defendant had stated in
representation (c) that "one third of the share capital had been subscribed in
Denmark". In fact some of them had been allotted to persons resident in Kenya
for services rendered in Denmark. The judge held that the representors
honestly believed the statement in the sense in which they understood it. But
the Court of Appeal took a different view. In the Privy Council, Lord Jenkins
giving the advice of the Board, at page 805, said
"The Court of Appeal construed the language of representation (c) as they
thought it should be construed according to the ordinary meaning of the words
used, and having done so went on to hold that on the facts known to the
defendants it was impossible that either of them could ever have believed the
representation, as so construed, to be true. Their Lordships regard this as a
wrong method of approach. The question is not whether the defendant in any
given case honestly believed the representation to be true in the sense
assigned to it by the court on an objective consideration of its truth or
falsity, but whether he honestly believed the representation to be true in the
sense in which he understood it albeit erroneously when it was made. This
general proposition is no doubt subject to limitations. For instance, the
meaning placed by the defendant on the representation made may be so far
removed from the sense in which it would be understood by any reasonable person
as to make it impossible to hold that the defendant honestly understood the
representation to bear the meaning claimed by him and honestly believed it in
that sense to be true. But that is not this case. It cannot be said that
representation (c) could not have been understood by any reasonable person in
the sense attributed to it by the Baron in his evidence, or that it was
impossible that he should honestly have understood it in that sense, and
honestly believed it in that sense to be true. He gave evidence to the effect
that he did understand representation (c) in that sense, and did honestly
understand it in that sense to be true, and was not cross-examined on either of
those points, (For the general proposition that regard must be had to the
sense in which a representation is understood by the person making it, see
Derry v Peek (1889) 14 App Cas 337; 4 T.L.R.; Angus v Clifford
[1891] 2 Ch 449; 7 TLR 447; Lees v Tod (1882) 9 Rettie 807, 854,
which authorities must in their Lordships' view be preferred to Arnison v
Smith (1889) 41 Ch. D. 348; 5 TLR 413 so far as inconsistent with
them).
42. The same point arose in Gross v Hillman Ltd [1970] 1 Ch. 445. The
judge had read the two letters relied on by the representee separately and had
decided that so read the representations contained in each of them were true.
The Court of Appeal considered that the letters should have been read together
and that so regarded they falsely represented that the company in question was
"a going concern". Cross LJ, with whom Harman and Widgery LJJ agreed, at page
459, said
"Finally, I come to the representation that the company was a "going concern",
which was made if one reads the two letters together, as I think one should.
If James intended the letters to convey the impression that the company was a
going concern, or was willing that a recipient should get that impression,
clearly he was guilty of fraud, because he knew very well that it was not a
going concern. But although that is, in my view, the impression that the
letters read together would naturally create, James cannot be held guilty of
fraud unless he intended or was willing that they should be read in that
way."
43. In argument in this court Counsel for Wilson Sandford & Co. submitted
that the implication found by the judge to have been false was not shown to
have been the sense in which Mr Wilson intended it to be understood. Certainly
we have not been directed to any part of the comprehensive judgment of Rimer J
in which he could be said to have arrived at a conclusion on this point adverse
to Mr Wilson. Counsel for Mr Goose suggested that the proposition formulated
in the advice of the Privy Council in Akerhielm v De Mare could not be
applicable because Mr Wilson had never claimed that he did not intend his words
to be understood in the sense of the implication found by the judge. In our
view that is an inadequate response. The onus of proving deceit rested on Mr
Goose. It was for him to demonstrate that Mr Wilson had intended the
reference to "Peter's Stones" to be understood in the sense that they were
available for use in the French venture because any incumbrances to which they
were subject were capable of being discharged otherwise than out of the stones
themselves or the proposed Swiss loan. There is no finding of the judge to
that effect and, in our view, no basis on which this court could supply the
omission.
44. Indeed we consider that the way the judge dealt with the issue of intention
to induce Mr Goose to act on the representation indicates that he would have
rejected any such contention. Having referred to the fact that he had rejected
the allegation that Mr Wilson made representations as to the value of the
Stones he continued
"If, however, precise values were not being discussed, and so were not material
to the discussion, then it was also unnecessary to disclose relatively
immaterial incumbrances. Even if Mr Wilson's omission to disclose the
incumbrances can be regarded as dishonest, it was, as I find, not dishonesty
which was motivated by any intention on his part to induce Mr Goose to enter
into any transaction in reliance on what Mr Wilson may have been implying. It
was dishonesty motivated by Mr Wilson's instinctive wish to preserve client
confidentiality.
Moreover, I anyway regard as quite unreal the suggestion that anything which Mr
Wilson said at this meeting was said with the intention of inducing Mr Goose to
commit himself to anything. It plainly could not have been intended to induce
the Manson loan or any like sterling loan: the three stage operation of which
that formed stage 1 was not thought of until 1985. All that was being discussed
in September 1984 was the raising of a single Swiss franc loan by Intag,
followed by loans by Intag to each participant, with each participant being
liable only for his own loan. The stones were, however, not intended to
represent security for anything other than Mr Bray's loan; and so Mr Wilson
cannot have intended Mr Goose to rely in any way on what he may have implied
about the stones. Putting this part of the case against him at its highest, his
representations may have gone to the extent of the net realisable value of the
stones. No doubt their value, and more particularly their gross value, would be
of the highest relevance when Intag's loan proposals were put to the banks. But
how much the banks might be prepared to lend on them was exclusively up to
them; and, if they overlent on the stones, that would and could not expose Mr
Goose to a greater personal risk than he was prepared to take on, because the
stones were anyway not going to be available as security for his loan. They
were simply irrelevant to any liability to which he might be prepared to
subject himself.
In this connection, I have not overlooked Mr Goose's evidence that the stones,
or some imprecise proportion of them, were intended to represent a so-called
buffer against currency fluctuations for the benefit of all participants.
However, I regard this evidence as something of a red herring in the context of
this particular issue. I accept that some such idea was discussed with Mr Bray.
But the way in which it was intended to work, or might have worked, was never
put on paper and appears never to have received any concrete consideration.
Nothing that Mr Wilson may have said at the September 1984 meeting could have
induced, or been intended to induce, Mr Goose to act in any foreseeable way in
reliance on some belief that the stones would provide him with the benefit of
some supposed buffer. He could only thereafter have so acted if some concrete
buffer proposal, as part of the Swiss loan transaction, had actually been
worked out and agreed - but it never was.
I find, therefore, that even if the non-disclosure of the incumbrances made Mr
Wilson's unqualified references to "Peter's stones" a dishonest
misrepresentation, it was not one which satisfied the third requirement listed
in the Borders case. I reject the claim that it induced Mr Goose to
commit himself to the Manson loan. That cannot have been actually intended by
Mr Wilson, nor can he be presumed to have intended it. It was as remote an
event as Lord Cairns' mortgage in the example given at p.411 in Peek v.
Gurney, supra. I reject Mr Goose's claim in deceit based on the September
1984 meeting."
45. It is submitted that the judge wrongly confused motive with intention,
failed to have regard to the presumption of intention arising from the making
of a dishonest representation and wrongly restricted the necessary intention to
inducement to act "in the manner which resulted in damage to him". We deal
with each of these contentions in turn.
46. It is correct, as counsel for Mr Goose submitted, that the relevant
question relates to the intention of Mr Wilson not the motive which lay behind
it: Derry v Peek (1889) 14 App.Cas.337, 365. But it is not suggested
that the judge is precluded from considering motive in deciding whether the
representor had the necessary intention. It appears to us that in the passage
from his judgment in which the judge considers the question of intention his
references to motive are used in this, legitimate, sense. In the first
paragraph of the passage from the judgment of Rimer J we have quoted in
paragraph 44 he twice refers to the question whether the dishonesty (if any)
was motivated by an intention to induce Mr Goose to enter into any transaction.
But in the succeeding three paragraphs he deals with the intention of Mr Wilson
without any further consideration of motive. In our view it is clear that the
judge's conclusion related to the intention of Mr Wilson not his motive.
47. It is also correct, as counsel for Mr Goose submitted, that if a fraudulent
misrepresentation is found to have been made it will give rise to a rebuttable
presumption of fact that the representor intended the representee to act in
reliance on it: Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co.
Ltd [1995] 1 AC 501, 542A; Barton v County NatWest Ltd [1999]
Ll.L.R.(Banking) 408, 421. There is obvious sense in such a presumption for
if the representor did not intend the representee to act on the faith of his
statement why did he lie. But we cannot accept the criticism of the judge's
judgment that he failed to appreciate the existence and force of the
presumption. It is true that he did not refer to any of the authorities which
recognise its existence. But in the last paragraph of the relevant passage we
have quoted in paragraph 44 the judge held that
"That (sc.the charge to secure the Manson Loan) cannot have been actually
intended by Mr Wilson, nor can he be presumed to have intended it."
48. The third criticism arose from the judge's summary of the third principle
he deduced from the speech of Lord Maugham in Bradford Third Equitable
Benefit Building Society v Borders [1941] 2 AER 205, 211 namely that the
representor should have intended that the representation "should be acted on by
the plaintiff...in the manner which resulted in damage to him". It was
suggested at one stage in the argument that this formulation wrongly restricted
the requisite intention. We would agree if the statement was taken to require
the representor to intend to induce the specific action taken by the
representee in reliance on the misrepresentation. The more normal formulation
is that the representor should intend to deceive the representee, with intent,
that is to say, that it shall be acted upon by him. Clerk & Lindsell 17th
Ed. Para 14-29. It appears to us that the additional limitation arose from
observations of Lord Hatherley in Barry v Croskey (1861) 2 J & H
117, quoted by Lord Cairns in Peek v Gurney (1873) L.R. 6 E & I
Appeals 377 at pp.412/3 and subsequently applied in Tackey v McBain
[1912] AC 186. But in those contexts it is limited to cases in which the
fraudulent misrepresentation was made to someone other than the plaintiff. In
this case the representation was made directly to Mr Goose. But, in any event,
there is no indication in the passage from the judgment of Rimer J that he did
in applying the principle wrongly restrict it. He referred to the absence of
any intention on the part of Mr Wilson to induce Mr Goose "to enter into any
transaction" or "to commit himself to anything". He considered that the
Stones were "simply irrelevant to any liability to which he might be prepared
to subject himself". These were findings of fact open to the judge on the
evidence before him.
49. For these reasons we agree with the judge's decision to reject Mr Goose's
claim in deceit arising from the statements made by Mr Wilson at the meeting
held on 19th September 1984. In our view it was not established that Mr Wilson
intended Mr Goose to understand his references to "Peter's stones" as carrying
the implication that they were available for use in the French venture because
any incumbrances to which they were subject were capable of being discharged
otherwise than out of the stones themselves or the proposed Swiss loan. In
addition we agree with the judge that "even if Mr Wilson's omission to disclose
the incumbrances can be regarded as dishonest" the statements were not made
with the intention to induce Mr Goose to enter into any transaction in reliance
on his statements.
The letter dated 9th April 1985
50. Rimer J found that the letter, the relevant terms of which we have quoted
in paragraph 17, reflected a deal negotiated by Mr Wilson with Mr John Wilson,
the Manager of the branch of NatWest Bank in Spalding. He considered that the
reference to "P.J.Bray's gems" was a misrepresentation because it conveyed
"that they were Mr Bray's stones" which, given his finding as to Holford's
title, they were not. But, as in the case of the meeting held on 19th
September 1984, he found that Mr Wilson honestly believed that Mr Bray was
entitled to the Stones. He concluded that the letter contained no
representation express or implied that they were worth US$500,000. Mr Goose
does not appeal from any of these conclusions. Wilson Sandford & Co
sought to uphold the judge's decision on the basis that the terms used were
purely descriptive and were true because Mr Bray was in possession of the
Stones. We reject both those points for the same reasons as in the case of the
statements made at the meeting held on 19th September 1984.
51. Rimer J accepted the submission for Mr Goose that the letter represented
that the Stones were available as, and capable of providing, the security
therein described and that such representation was false. He did not consider
that it implied that the Stones were not then subject to incumbrances rather
than that such incumbrances could be redeemed otherwise than from the proceeds
of sale of some of them or by raising the requisite funds from elsewhere. He
held
"I accept that Mr Wilson still believed that the stones were of substantial
value, although less than US$500,000. But it was by now obvious that Mr Bray
was unable to find the money to discharge the incumbrances; and that the only
way they could be discharged was either by selling the stones (to which no
doubt Trinkhaus would have assented) or by raising money elsewhere; and the
Barclays position had still not been resolved. Given these facts, the vice of
the letter is that it was so drafted as to mislead Mr Goose into believing that
the prior security over the stones could be given when Mr Wilson knew it could
not."
The judge considered that the misrepresentation was dishonestly made by Mr
Wilson in that he wrote what he did knowing that it was untrue.
52. However, as in the case of the earlier meeting, Rimer J rejected the claim
in deceit on the ground that the third requirement he deduced from the speech
of Lord Maugham in Bradford Third Equitable Benefit Building Society v
Borders [1941] 2 AER 205, 211 had not been established. First, he found
that Mr Wilson did not intend and could not be presumed to have intended that
Mr Goose should rely on what he wrote in this letter in subsequently agreeing
to charge Hagbeach Farm as security for the Manson loan. Second, he was not
satisfied that when writing the letter Mr Wilson intended to induce Mr Goose to
charge Hagbeach Farm as security for a NatWest loan on the understanding,
derived from the letter, that an effective undertaking to NatWest so as to give
a good prior security over the Stones could be given. He found it difficult to
accept that Mr Wilson, whose role was only that of an accountant acting for
Intag and Mr Bray "had any motive or intention to induce Mr Goose into acting
in some way in reliance on what he was writing". In an important passage in
his judgment Rimer J elaborated on these conclusions. He said
"I accept that in many cases of alleged deceit it will be possible to infer the
necessary intention merely from the making of the misrepresentation: indeed,
often there will be no other material from which the finding as to intention
might be made. I do not, however, feel able to draw such an inference in this
case. The essence of what Mr Wilson was doing was reporting as to a possible
transaction, which still awaited NatWest's approval (no loan offer had yet been
made, and in fact none was ever made). It might well anyway have come to
nothing but, if it was to come to anything, it was obvious that it would need a
good deal of further working out. It was, moreover, a transaction in which
professionals for both Mr Goose and NatWest would be likely to be involved,
something which Mr Wilson knew perfectly well. He knew that, had a loan been
offered and proceeded with, NatWest would in the ordinary course have made its
own investigations about the stones, their value and the title to them and
would have unearthed the incumbrances and the need to have them discharged
before the proposed security could be given. He also knew that Roythornes would
probably make like investigations on Mr Goose's behalf, since Mr Goose's
interest in the validity, enforceability and worth of the prior security was
likely to be just as great as NatWest's: in fact, it was likely to be greater,
since NatWest might perhaps have been prepared to place primary reliance on its
security over Hagbeach Farm.
I accept that considerations such as these do not, by themselves, show that the
representor did not have the requisite intention for deceit purposes. However,
I regard them as factors which I must bear in mind in assessing whether Mr
Goose has overcome the onerous evidential burden of proving the necessary
intention on the part of Mr Wilson. In deciding this issue, the consideration
which carries most weight with me is the lack of motive. A proposing house
vendor who lies to his proposing purchaser that his house is free of subsidence
may well ordinarily be presumed to have intended to induce the purchaser to
buy, even though he might foresee the possibility or the likelihood that the
purchaser would first have a survey done which would reveal the lie. But Mr
Wilson was in a rather different class. He was not acting as a principal in the
matter. He was simply a chartered accountant acting on behalf of a rather
unsatisfactory client, Mr Bray. Why should he have decided to embark upon the
deliberate and dishonest misleading of his client's business associate, with
the intention of deceiving him into believing that an undertaking to deliver
the stones to NatWest would constitute a good prior charge over them? What had
he to gain? As far as I can see, he had nothing to gain: but he had a
reputation and career to lose.
Having giving this issue careful consideration, I conclude that it is probable,
and I find, that what motivated Mr Wilson in writing what he did was not any
sort of intention to induce Mr Goose to act in some way in reliance on what he
wrote; and I find that he had no such intention. I find that what did motivate
him was an intention to keep Mr Bray's liabilities confidential; and I consider
it probable that he also had in mind that the liabilities would in fact be
discharged out of the Intag moneys which were, according to the letter, to be
paid to Societe Generale.
In the event, no NatWest loan was offered. Even if the letter was calculated to
induce Mr Goose to rely on it in some way in connection with such a loan, he
did not do so. Nor did he rely on it in a like manner. He claims to have relied
on it in a manner of a quite different character, namely in taking the Manson
loan, being a transaction in which the stones played no part. I find, as I have
said, that Mr Wilson did not intend that; and nor can he be presumed to have
intended it. I find that the deceit claim based on this letter fails."
53. This passage is criticised by counsel for Mr Goose on the same grounds as
before. It is contended that the judge failed to distinguish motive and
intention, failed to pay proper regard to the presumption arising from the
making of a fraudulent statement and wrongly restricted the requisite intention
to inducing Mr Goose to enter into the transaction then under consideration or
some other comparable transaction.
54. There can be no doubt in this case that Mr Wilson is to be taken as having
intended Mr Goose to understand the representation in the sense he knew to be
false for in relation to prior security it was express, not merely implied from
the reference to "P.J.Bray's gems". But we still reject the criticisms made of
the judgment of Rimer J.
55. First, as in the case of the earlier meeting, the judge again referred to
Mr Wilson's motivation. But it is equally plain that he did so in order to
arrive at a conclusion as to Mr Wilson's intention. His conclusion on this
issue was, evidently, one of fact. In our view it is legitimate to consider
motive or its absence in reaching a conclusion on intention. Second, though
the judge did not refer to the cases in which the presumption arising from
fraudulent misrepresentations is recognised he paid regard to the presumption.
Twice he found that Mr Wilson did not intend and could not be presumed to have
intended to induce Mr Goose to act in reliance on his misrepresentation.
Third, he did not wrongly restrict the requisite intention. He rejected the
contention that Mr Wilson intended "to induce Mr Goose to act in some way in
reliance on what he wrote". As the judge pointed out there was no connection
between the letter and the subsequent actions of Mr Goose on which he
relies.
56. For all these reasons we consider that the judge was right to reject the
claim of Mr Goose for deceit arising out of the terms of this letter.
The Meeting held on 18th May 1985
57. We have already explained, in paragraph 21 above, the limited nature of the
issue which arose at the retrial in relation to the events of this meeting.
Before Rimer J it was contended on behalf of Mr Goose that by recommending the
initial one third contribution which was then increased to £250,000 by Mr
Bray Mr Wilson was party to the deceit said to have been practised by Mr Bray
in promising £250,000. Rimer J rejected the submission because he
considered that the order of the Court of Appeal precluded him from considering
it. He said
"It is not possible to advance the argument without placing reliance on Mr
Wilson's oral statement at the meeting recommending that Mr Bray should put up
one third of the gross cost of the two farms. But the order prohibits such
reliance. It requires me to assume that Mr Wilson remained silent at the
meeting and that only Mr Bray made any representations."
This is disputed by counsel for Mr Goose. They contended that the judge was
not bound to ignore what Mr Wilson said at the meeting.
58. In our view it is clear that the order of the Court of Appeal excluded from
consideration any claim based on any actual oral statement of Mr Wilson. The
basis for the order is apparent from paragraphs 154-156 of the judgment of the
Court of Appeal to which the order gave effect. The Court said
"154 The next point relates to Mr. Wilson's role at the meeting in Mr. Bray's
home on 18 May 1985. We have summarised the relevant evidence at paras 59 - 62
above. Mr. Goose claims that the essence of the representation made by Mr.
Wilson on this date was that the gemstones could be sold and when sold they
would realise £250,000, and that there would still be sufficient stones
left to provide further valuable security on the basis of which long-term
borrowing could be made. It was therefore necessarily represented that the
gemstones were available for use as security, and that they were worth at least
£250,000 and that they were owned by Mr. Bray.
155. This was another occasion on which the judge made a mistake. The issue
turned on the identity of the person responsible for the statement which is
recorded in Mr. Wilson's note as "less 1/3 = 250,000 (ex
trust sales)". Mr. Goose asserted that it was Mr. Wilson's statement, while
the judge recorded Mr. Wilson as saying that it must have been Mr. Bray who
made the statement and that he merely recorded it. In fact Mr. Wilson told the
judge that the figure of one third was indeed his recommendation, which he made
for the reasons we have recorded earlier in this judgment (para 63), and that
he believed he wrote down `230' and that Mr. Bray said "make it `250'".
156. This small mistake on the judge's part, while contributing to our anxiety
about the safety of his overall findings, does not affect our view of the
safety of his finding on this particular issue. On an occasion when Mr. Bray
was present, presenting new proposals following his discussions with Banque
Populaire, it would have been natural for Mr. Bray to make the running, and we
see no reason to doubt the soundness of the judge's findings that on this
occasion Mr. Wilson did not make any relevant representations about the
availability or value of the gemstones. On the other hand he did nothing to
correct what Mr. Bray was now saying, a matter which might have to be borne in
mind if on a retrial he was found to have made earlier positive representations
on this issue."
We do not understand the order or the reasons for it to require the court to
assume on the retrial, contrary to the facts, that Mr Wilson said nothing.
What is precluded is a finding that he made any representation other than one
arising from a failure to correct any representation made by Mr Bray at the
meeting or a failure to correct any representation made by Mr Wilson on some
earlier occasion.
59. The only pleaded allegation of a representation made at this meeting by Mr
Bray is contained in paragraph 26 of the consolidated statement of claim to the
effect that
"..Mr Bray stated that Mr Bray would contribute £250,000 to the proposed
purchase of La Devinniere and Gracay farms "ex trust sales", by which was meant
sales of the gemstones belonging to Mr Bray and/or the Brent Foundation."
This was rejected by the judge on the footing that it was not a representation
of an existing fact. However he approached the matter on the footing that
implicit in the statement was a representation that (i) Mr Bray or the Brent
Foundation owned the Stones, and (ii) such stones were worth at least
£250,000.
60. With regard to the representation as to ownership of the stones the judge
considered that nothing new had come to the notice of Mr Wilson by 18th May so
that he was under no duty to correct either anything said by Bray at the
meeting held on 18th May 1985 or by Mr Wilson himself at the meeting held on
19th September 1984 or in the letter dated 9th April 1985.
61. With regard to the representation of value the judge observed that he had
not found that Mr Wilson had previously made any representation as to value and
so had said and done nothing in this respect requiring him to make any
correction. Mr Bray had, of course, made an implied statement as to the net
value of the Stones amounting to at least £250,000. This was not
corrected by Mr Wilson. As to Mr Wilson's failure in that regard the judge
said
"Mr Wilson was (as I find) in no position to know whether that was right or
wrong. I accept his evidence that he still believed the stones to be of
substantial value; and there is no evidence of their actual value at this time.
I do not consider it was part of his duty to tell Mr Goose that Mr Bray might
not be able to realise that much. Until Mr Bray attempted a sale, it was
unknown how much they would realise. That was obvious, even to Mr Goose, and Mr
Goose did not need Mr Wilson to tell him that. It was not part of Mr Wilson's
function to question his client's stated intentions in front of Mr Goose. Mr
Goose and Mr Bray were two businessmen negotiating a deal. Mr Wilson was Mr
Bray's adviser. Mr Goose had advisers of his own: and they were giving him all
the advice he needed as to the risks in the venture."
62. Rimer J also considered the representation contained in the letter of 9th
April 1985 as to the Stones' freedom from incumbrances and availability as
prior security for the loan then contemplated. This, he pointed out, remained
uncorrected. The judge's overall conclusion was that no new representations
whether orally or by silence were made by Mr Wilson at this meeting.
63. Counsel for Mr Goose contended that the judge was wrong in failing to find
that Mr Wilson should have corrected Mr Bray's representation as to value. It
is suggested that Mr Wilson knew that the incumbrances, the further debts by
now apparent from the correspondence with the solicitors for Royal Bank of
Scotland and the pending bankruptcy petition would prevent the sum of
£250,000 or anything approaching that sum becoming available from the
proceeds of sale of the Stones. The total known liabilities of Mr Bray are
said to have amounted to £155,000 as at 1st May 1985 and are unlikely to
have been reduced by 18th May. But this contention was directly addressed by
the judge in the passage from his judgment we have quoted in paragraph 61
above. We do not read that passage as involving any finding that Mr Wilson did
not have an honest belief in the truth of what Mr Bray said. If the Stones
fetched anything like the figure which had been mentioned before then there
would be sufficient to pay off the debts, thereby disposing of the bankruptcy
petition, and still leave £250,000 available.
64. But we would go further. The alleged statement of Mr Bray clearly involved
accepting that the Stones would be sold and that something less than the
proceeds of sale of all the Stones could and would be made available. Plainly
this representation differed from that found by the judge to be contained in
the letter of 9th April 1985 to which we have referred in paragraph 51 above.
To that extent the statement of Mr Bray corrected the statement previously made
by Mr Wilson. We see no reason why Mr Wilson's acquiescence in the statement
of Mr Bray should not be treated as discharging any remaining obligation of Mr
Wilson to correct his previous misrepresentations.
65. For these reasons we agree with Rimer J that no new representations were
made by Mr Wilson at the meeting held on 18th May 1985. In addition we
consider that the statement of Mr Bray was sufficient correction of the
previous statement made by Mr Wilson as to the availability of the Stones to
provide the security referred to in the letter dated 9th April 1985.
Inducement and Reliance
66. In paragraph 38 above we indicated that having considered the prior
questions arising in respect of the two meetings and the letter we would return
to the fourth requirement of a liability in deceit that the representee should
have been induced to act in some way to his detriment by reliance on the
representation. In view of our conclusions thus far the point does not arise
for we have decided that in respect of each of the representations relied on
one or more of the first three requirements, as described in paragraph 39
above, have not been established. Nevertheless as this was one of the two
grounds on which the judge dismissed the claims in deceit we should deal with
it. In addition closely related issues, to which we will refer separately and
later, arise in respect of Mr Goose's alternative claims in negligence and
breach of fiduciary duty founded on the representations contained in the letter
dated 9th April 1985.
67. Rimer J approached this issue on the assumption that he was wrong on all
the prior issues so that he had to consider whether or not Mr Goose was in fact
induced to enter into the Manson loan by anything Mr Wilson said or wrote.
The judge rejected the submission that the Stones were at all times irrelevant
to any security Mr Goose might give. He pointed out that though, apart from
the personal guarantees, Hagbeach Farm was the only security for the loan from
Mansons the Stones were relevant to it as providing security for the Swiss
Franc loan with which the Manson loan was to be repaid.
68. But the judge also decided that Mr Goose had convinced himself that the
Stones were worth US$500,000, but had done so by relying on sources other than
Mr Wilson. Rimer J considered that Mr Goose saw his only prospect of being
repaid the £60,000 he had lent to Mr Bray or Intag to lie in proceeding
with the transaction. The judge also pointed out that Mr Goose could not be
certain as to the value of the Stones but was not prepared to go to the expense
or trouble of having them valued or checked. Rimer J thought that Mr Goose was
impressed by Mr Bray and had confidence in him notwithstanding the advice of
Roythornes.
69. The conclusion of Rimer J was
"I do not accept Mr Goose's case that, in committing himself to the Manson
loan, he relied on anything that Mr Wilson ever said or wrote. I do not believe
him. I find it remarkable that it was not until 1994 that he remembered that he
had, as he now claims, been misled by the meetings of 19 September and 18 May
and by the letter of 9 April. Those meetings were within his knowledge from the
moments they respectively happened; and the letter was in his possession from
10 April. If anything Mr Wilson had said at those meetings or in that letter
had any material impact on him, then I would have expected him to raise it with
Mr Wilson by no later than 1986, by when the balloon had gone up. I find that
the reason he raised no complaint until 1994 that Mr Wilson had misled him,
even if only innocently, about any of the matters of which he now complains is
because he did not consider that Mr Wilson had misled him.
I have found that, in so far as Mr Wilson's letter of 9 April made a
misrepresentation as to the stones' freedom from incumbrances, it was not one
which was intended to or can even be presumed to have intended to induce the
Manson loan, which was a transaction of a character materially different from
that contemplated by the letter. If that conclusion is wrong, I find that,
anyway, by 9 April 1985 Mr Goose had already convinced himself that the stones
were worth US$500,000, or some £415,000; and by the time of the Manson
loan he anyway only expected Mr Bray to bring £250,000 into the venture
from the stones. The letter of 9 April said nothing about value, and could not
have led Mr Goose to believe that the stones were worth even as much as
£250,000. It did not, strictly speaking, even imply that they were free
from incumbrances: it at most implied that any incumbrances could be discharged
without recourse to the stones or the proposed loan. I find that the letter of
9 April 1985 had no effect in inducing Mr Goose to enter into the Manson
transaction and that he placed no reliance on it in doing so. It follows, in my
judgment, that Mr Wilson's misrepresentation in that letter (whether
characterised as deceit, negligence or breach of fiduciary duty) was not
causative of any of the loss which Mr Goose claims to have suffered in
consequence of the Manson transaction.
I also find that, such was Mr Goose's determination to proceed with the French
venture, a disclosure to him of the Trinkhaus and Barclays incumbrances would
not have deterred him from going ahead. He would not have regarded them as
material in the light of the value he attached to the stones. He did not turn a
hair when, in November 1985, he learnt of the Trinkhaus charges: he did not
rush to Mr Wilson and complain he had earlier misled him. Nor did he so
complain in the 1991 action, although his case in it was that Mr Wilson was his
own accountant. Mr Goose was convinced the stones were very valuable, any such
charges would have been relatively immaterial, and they would not have stood in
the way of the raising by Mr Bray of the promised £250,000. He said in
cross-examination that knowledge of a prior charge of £25,000 would not
have worried him in the context of stones worth £400,000. It was Mr
Goose's firm belief that Mr Bray could and would, one way or another, raise
£250,000 which was the motivating factor in his taking on the Manson loan.
In summary, I find that, from the start, Mr Goose was determined to proceed
with the Intag venture, his enthusiasm to do so never faltered and there came a
point when he considered he could not pull out of it. He was given sound advice
by his solicitors that he would be unwise to do so, but he thought he knew
better. I find he was not induced to enter into the Manson loan by anything Mr
Wilson said, wrote or implied; and that nor did he place reliance on anything
Mr Wilson said, wrote or implied in his decision to do so. I reject all Mr
Goose's claims based on the meetings of 19 September 1984 and 18 May 1985 and
the letter of 9 April 1985."
70. Counsel for Mr Goose submitted that the factors relied on by the judge did
not warrant his conclusion. They identified five such factors, namely (1) the
value of the Stones, (2) the recovery of £60,000, (3) the desire for quick
repayment, (4) Mr Goose's opinion of Mr Bray and (5) the rejection of the
evidence of Mr Goose. We will consider each in turn. But first it is
necessary to reiterate the assumption on which the point is to be considered.
The question of inducement arises from the misrepresentations relied on.
Though initially they were many and of widely varying effect, on this appeal
they were limited to (a) the representation made at the meeting held on 19th
September 1984 that the Stones were all freely available for use in the French
venture without resort either to the Stones or the Swiss Loan to redeem the
incumbrances, (b) the representation contained in the letter dated 9th April
1985 that Mr Bray could redeem the Stones otherwise than from their sale or
from other borrowings, and (c) the representation made by Mr Bray and
uncorrected by Mr Wilson at the meeting held on 18th May 1985 that
£250,000 could and would be contributed to the proposed purchases of land
in France from the proceeds of sale of the Stones. It is to be assumed that
each of those representations continued up to 25th July 1985 when Mr Goose
executed the charge over Hagbeach Farm in favour of Manson. But it is obvious
that representation (c) necessarily qualified and to that extent superseded
representations (a) and (b).
71. In challenging the five factors to which the judge referred counsel for Mr
Goose asked rhetorically whether it could be assumed that Mr Goose would have
proceeded with the transaction had he known the truth. He emphasised the
relevance of the further debts due by Mr Bray to Royal Bank of Scotland and the
bankruptcy petition presented against him. Thus the value of the Stones was
tied up with the amounts secured on them and Mr Bray's ability to sell them.
Quick recovery of the £60,000 previously lent could not be facilitated by
charging Hagbeach Farm with a further loan. If Mr Goose had known the truth
his opinion of Mr Bray must have changed for the worse.
72. But, in our view, these points go well beyond the much narrower issue
before the court. There was no obligation on Mr Wilson, indeed quite the
opposite, to disclose the general financial state of Mr Bray. The proper
question is would Mr Goose have acted differently if the three
misrepresentations relied on had never been made. In this connection it is
necessary to have regard to the circumstances prevailing in July 1985. With
regard to the value of the Stones Mr Goose's opinion was derived from sources
other than Mr Wilson and therefore wholly unaffected by any of the
misrepresentations relied on. The desire for a speedy recovery of the
£60,000 previously lent would not have been tempered if the
representations had not been made. Nor would Mr Goose's opinion of Mr Bray
have been coloured by the omission of any of the misrepresentations. Likewise
the rejection of the evidence of Mr Goose was a matter for the judge. He did
not regard Mr Goose as reliable and was, in our view, fully justified in
rejecting his contention that he had been induced to enter into the charge of
Hagbeach Farm to secure the Manson loan by anything said or written by Mr
Wilson.
73. In our view the conclusion of Rimer J was a decision on a question of fact
to be determined in the light of all the evidence before him, including the
oral evidence of Mr Goose. We see no reason to disagree with his conclusion.
It follows that on this ground also we would dismiss all the claims based on
deceit arising from representations made by Mr Wilson at the meetings held on
19th September 1984 and 18th May 1985 and in the letter dated 9th April
1985.
Negligence/Agency
74. Originally Mr Goose claimed that the representations on which he relied
had, if not made fraudulently, been made negligently. Rimer J rejected the
claim in respect of the representations made at the meeting held on 19th
September 1984 on the ground that Wilson Sandford & Co. or Mr Wilson owed
no duty of care to Mr Goose. There is no appeal from that decision. It is not
suggested that a claim in negligence arising from the events of the meeting
held on 18th May 1985 is open to Mr Goose in the light of the terms of the
order for the retrial quoted in paragraph 21 above. Accordingly the question
of negligence arises only in relation to the letter of 9th April 1985. Rimer J
considered that issue in conjunction with another arising from Mr Goose's claim
that in negotiating with NatWest Mr Wilson had acted as his agent.
75. In relation to negligence Rimer J found that
"Mr Wilson wrote a letter [9th April 1985] which concealed this problem
[redemption of the prior incumbrances]. I find that, in failing to do so and in
implying what he did about the availability of the stones as security, Mr
Wilson committed a breach of the duty of care in tort which he owed Mr Goose in
reporting to him on the proposed NatWest transaction."
Wilson Sandford & Co. do not challenge this conclusion. Rimer J then
pointed out that the proposed transaction on which Mr Wilson was reporting went
no further; instead the Manson loan was taken up, but on different terms. The
judge found that when Mr Wilson wrote the letter dated 9th April 1985 he did
not and could not reasonably foresee that Mr Goose would rely on what it
implied about the Stones when subsequently deciding whether to commit himself
to the Manson loan. This finding is not appealed either. Accordingly it would
appear to us that the claim in negligence necessarily fails.
76. In relation to agency Rimer J held that
"Mr Wilson also committed a breach of a duty which can, I consider, properly be
regarded as a fiduciary duty. When he wrote his letter of 9 April, Mr Wilson
was acting for three principals, including Mr Goose and Mr Bray. That did not
put him in breach of the "double employment" rule referred to by Millett L.J.
at p. 19 of the Mothew case, because Mr Goose knew that he was so
acting. But he did commit a breach of "the duty of good faith" also referred
to by Millett L.J. because, as I find, he intentionally preferred Mr Bray's
interests by concealing the incumbrances from Mr Goose, whereas the due
discharge of that duty to Mr Goose at least required the disclosure of those
matters. I find, therefore, that the misleading in the letter of 9 April 1985
also constituted a breach of a fiduciary duty owed by Mr Wilson to Mr Goose. I
do not, however, consider that the breach of that duty went any wider than
that."
Wilson Sandford & Co. do not challenge that conclusion either.
77. When the judge came to deal with the issue of reliance he found, in the
passage from his judgment we have quoted in paragraph 69 above, that the letter
of 9th April had no effect in inducing Mr Goose to enter into the Manson
transaction and that he placed no reliance on it in doing so. The judge
therefore concluded that Mr Wilson's misrepresentation in that letter "(whether
characterised as...negligence or breach of fiduciary duty) was not causative of
any of the loss which Mr Goose claims to have suffered in consequence of the
Manson transaction". These conclusions are challenged by Mr Goose for much the
same reasons as those advanced in relation to his deceit claims.
78. It was submitted that it was foreseeable that if the NatWest loan did not
proceed then the failure accurately to report the negotiations with NatWest
might have continuing effect. But if a representation is to have continuing
effect it must be reconsidered in the light of the intervening subsequent
events. In this case the misrepresentation contained in the letter was
substantially qualified and superseded by the events of the meeting held on
18th May 1985. And with regard to the breach of fiduciary duty there was no
duty on Mr Wilson to reveal all he knew about Mr Bray's financial affairs. As
the judge found it was no part of Mr Wilson's role to make any wider disclosure
about what he knew about the Stones.
79. We see no reason to come to any different conclusion from that of the
judge. As counsel for Mr Goose recognised the issue of inducement and the
outcome of the appeal in that respect is to a substantial degree the same for
negligence and breach of fiduciary duty as in deceit.
(2) Dishonest Assistance by Mr Wilson in the breach of fiduciary
duty by Mr Bray
80. Such a claim is founded on the statement of principle by Lord Selborne LC
in Barnes v Addy (1874) LR 9 Ch.App. 244 at 251 that
"strangers are not to be made constructive trustees merely because they act as
agents of trustees in transactions within their legal powers, transactions,
perhaps of which a Court of Equity may disapprove, unless those agents receive
and become chargeable with some part of the trust property, or unless they
assist with knowledge in a dishonest and fraudulent design on the part of the
trustees."
It is now clear from the advice of the Privy Council in Royal Brunei
Airlines Sdn Bhd v Tan [1995] 2 AC 378 that the stranger assisting with
knowledge must himself be dishonest. As Lord Nicholls of Birkenhead said
(p.392F)
"Drawing the threads together, their Lordships' overall conclusion is that
dishonesty is a necessary ingredient of accessory liability. It is also a
sufficient ingredient. A liability in equity to make good resulting loss
attaches to a person who dishonestly procures or assists in a breach of trust
or fiduciary obligation. It is not necessary that, in addition, the trustee or
fiduciary was acting dishonestly, although this will usually be so where the
third party who is assisting him is acting dishonestly. 'Knowingly' is better
avoided as a defining ingredient of the principle, and in the context of this
principle the Baden [1993] 1 W.L.R. 509 scale of knowledge is best
forgotten."
81. Rimer J decided that there was no fiduciary duty owed by Mr Bray to Mr
Goose in the first place. That was sufficient reason to reject Mr Goose's
claim. He referred to the decision of La Forest J in Lac Minerals v
International Corona Resources Ltd [1990] FSR 441 and the passage from the
judgment of Wilson J in Frame v Smith (1987) 42 DLR 81 to which he
referred in which the common features of a relationship giving rise to
fiduciary duties were identified. They were (1) the fiduciary has scope for
the exercise of some discretion or power, (2) the fiduciary can unilaterally
exercise that power or discretion so as to affect the beneficiary's legal or
practical interests and (3) the beneficiary is peculiarly vulnerable to or at
the mercy of the fiduciary holding the discretion or power. Rimer J considered
that none of these features existed in the relationship between Mr Bray and Mr
Goose. The judge also quoted with approval from Professor Finn's The
Fiduciary Principle 1988 p.64 that
"The critical matter in the end is the role that the alleged fiduciary has, or
should be taken to have, in the relationship. It must so implicate that party
in the other's affairs or so align him with the protection or advancement of
that other's interests that foundation exists for the `fiduciary
expectation'."
Rimer J considered that there was no foundation for any such expectation in
this case.
82. Counsel for Mr Goose contend that the judge took too narrow a view of what
is required and what the duties of Mr Bray were. They pointed out that Wilson
J in Frame v Smith referred to the three features as those possessed by
the relationships by then found. She did not suggest that the categories were
closed. They also pointed out that La Forest J himself recognised that the
existence of a fiduciary relationship was a question to be determined in the
light of the specific facts and circumstances surrounding the relationship.
They rely on the judgment of Millett LJ in Bristol and West Building Society
v Mothew [1998] Ch 1. At page 18A Millett LJ described a fiduciary as
"..someone who has undertaken to act for or on behalf of another in a
particular matter in circumstances which give rise to a relationship of trust
and confidence. The distinguishing obligation of a fiduciary is the obligation
of loyalty. The principal is entitled to the single-minded loyalty of his
fiduciary. This core liability has several facets. A fiduciary must act in
good faith; he must not make a profit out of his trust; he must not place
himself in a position where his duty and his interest may conflict; he must
not act for his own benefit or for the benefit of a third person without the
informed consent of his principal. This is not intended to be an exhaustive
list, but it is sufficient to indicate the nature of fiduciary obligations."
83. Counsel for Mr Goose illustrate their submission by relying on United
Dominions Corporation Ltd v Brian Pty Ltd (1985) 60 ALR 741. In that case
SPL charged the intended joint venture property to secure its own debts as well
as the joint venture debts. The fact that the joint venture agreement had not
by then been concluded did not preclude a fiduciary relationship because the
prospective joint venturers had embarked upon the joint venture business (per
Mason, Brennan and Deane JJ at page 747) and acted upon the proposed agreement
(per Dawson J at page 751). The majority held that by the time SPL gave the
charge there was a relationship giving rise to fiduciary obligations. It is
suggested that in this case too the relationship between Mr Bray and Mr Goose
was a fiduciary one. They embarked on a joint venture together. Mr Bray set
up the vehicle, Intag, through which it was to be carried on. Intag and Mr
Bray himself had been funded by Mr Goose's loans aggregating £60,000. At
the time of the Manson loan Intag or Mr Bray was actually in possession of La
Devinniere.
84. We have no difficulty in recognising a fiduciary relationship to have
arisen at the time when Mr Goose executed the legal charge over Hagbeach Farm
to secure the Manson loan. £130,00 of the loan thereby obtained was to be
transmitted to Banque Populaire where, it would appear, it was under the
control of Mr Bray. We have no doubt that Mr Bray was under a fiduciary duty
to Mr Goose to ensure its proper application for the purposes of the joint
venture. Likewise due to the link between this loan and the proposed Swiss
Loan (for which the Stones were to be used as security and from which the
Manson loan was to be repaid) we consider that Mr Bray was under a fiduciary
duty to ensure the due application of the Stones for the purposes of the joint
venture. But this conclusion is of no avail to Mr Goose because it was neither
alleged nor established that Mr Wilson played any part in the misapplication of
either the sum transmitted to Banque Populaire or the Stones.
85. Thus Mr Goose alleged in paragraph 3 of the consolidated statement of claim
that the joint venture and associated fiduciary duties arose in March and April
1984. But at that stage there was no concluded agreement, there was no
embarkation upon the joint venture itself as envisaged in United Dominions
Corporation Ltd v Brian Pty Ltd (1985) 60 ALR 741, 747 and 751 and Mr Goose
was not at the mercy or under the control of Mr Bray so as to give rise to a
fiduciary duty owed by the latter to protect the former such as was envisaged
by La Forest J in Lac Minerals v International Corona Resources Ltd
[1990] FSR 441, Wilson J in Frame v Smith (1987) 42 DLR 81 or Millett LJ
in Bristol and West Building Society v Mothew [1998] Ch 1. Thereafter
Mr Goose lent £60,000 to Mr Bray or Intag. But this was not by way of
implementation of or embarkation on the joint venture but a loan preparatory to
it. In any event it was repaid from that part of the Manson loan as was paid
to Mr Goose. In our view it is not possible to identify any fiduciary
relationship between Mr Bray and Mr Goose before the Manson loan was drawn down
and secured on Hagbeach Farm. Equally it is clear that Mr Wilson played no
part in the breach of the duty which then arose.
86. Before the judge and before us there was some debate whether such a claim
lies for breach of fiduciary duty generally or only those which also involve
the misapplication of property. Counsel for Mr Goose relied on the reference
in the advice of the Privy Council in Royal Brunei Airlines Sdn Bhd v
Tan [1995] AC 378, which we have quoted in paragraph 81 above, to
`fiduciary obligation' generally. Rimer J recognised the logic of the
submission but did not find it necessary to decide whether to make the
extension of the accessory liability he considered that it would involve.
Counsel also relied on the view of Morritt LJ in Brown v Bennett [1999]
BCLC 525 that there was force in the argument.
87. Since then the Court of Appeal has given further consideration to the point
in Satnam Investments Ltd v Dunlop Heywood & Co. Ltd [1999] 3 AER
652. In that case a firm of surveyors which had acted for the claimant and
had in that capacity obtained confidential information of commercial importance
disclosed such information to a competitor of the claimant which used it to its
own advantage. One of the claims made by the claimant was to the effect that
the competitor had dishonestly assisted the surveyors to break their fiduciary
duty of confidence owed to the claimant. On this basis the judge held that the
competitor held the property it had bought because of the information it had
obtained from the surveyor on a constructive trust for the claimant. In the
judgment of the Court delivered by Nourse LJ the judge's conclusion was
described as surprising, unprecedented and contrary to commercial good sense.
After referring to Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
and Barnes v Addy (1874) LR 9 Ch.App. 244 the court stated that "Before
a case can fall into either category [knowing receipt or knowing assistance]
there must be trust property or traceable proceeds of trust property". The
Court was prepared to assume that confidential information may be treated as
property yet, as it could not be traced into the property bought because of the
disclosure of the confidential information, there could be no constructive
trust of the property so bought. However the Court went on to say (p.671)
"As for knowing assistance, of which dishonesty on the part of the accessory is
a necessary ingredient..we would not have wanted to shut out the possibility of
such a claim's being successful if the judge had made a finding of dishonesty
against [the competitor].."
For Mr Goose it was submitted that, in the circumstances, the requirement for
trust property or traceable proceeds of trust property was no more than a
passing reference and did not reflect a decision of the Court binding on us.
88. We agree that the statement that "there must be trust property or traceable
proceeds of trust property" is not a decision binding on us. Moreover in view
of our conclusion on when the fiduciary duty of Mr Bray arose we do not have to
decide the question whether trust property or traceable proceeds thereof are
essential ingredients of liability under this head. The sum of £130,000
transmitted to Banque Populaire and the Stones themselves would have been
sufficient for that purpose. However we feel that the statement quoted above
may be so compressed as to admit of misunderstanding. It applies to both the
alternatives recognised by Lord Selborne in Barnes v Addy. In the case
of the first, "knowing receipt" there must, by definition, be or have been
trust property or its traceable proceeds of sale. But it is not a
prerequisite of liability that it is still in existence at the time the claim
form is issued. In the case of the second, "knowing assistance", it is not a
requirement of liability that any property should have been received or handled
by the defendant. The issue is whether the dishonest breach of trust in which
the defendant assisted must have involved the misapplication of trust property
or its proceeds of sale. The formulation of the principle by Lord Nicholls of
Birkenhead (paragraph 80 above) does not embrace such a requirement. Whether
or not such a requirement is an essential feature of this head of liability is
not a point we have to decide and, like the Court of Appeal in that case, we
would not like to shut out the possibility of such a claim in its absence.
89. The judge followed his consideration of this topic with the conclusion, on
the assumption that Mr Bray's fiduciary duty arose in April 1984, that
"In any event, I find that the case is not established on the facts. Certain of
the breaches of duty alleged against Mr Bray are that he did not disclose
matters he should have done. I can understand how A can assist B in the
misapplication of a trust fund. I do not understand how A can assist B not to
disclose something (particularly something, such as B's prior bankruptcy and
convictions, of which A is ignorant). Wilson Sandford did nothing to prevent Mr
Bray from telling Mr Goose whatever he liked nor did they assist him in
declining to do so. Other breaches alleged against Mr Bray are that he made
fraudulent misrepresentations. Again, I do not understand how anything Wilson
Sandford said or did can have assisted Mr Bray to make those representations.
Mr Bray made them and that was that: he did not need or receive any assistance
from Wilson Sandford in doing so. The suggestion that the assistance derived
from like representations made by Mr Wilson appears to me to take Mr Goose
nowhere. All that means is that Wilson Sandford may themselves have been guilty
of deceit; and, in so far as there might also be any suggestion that Wilson
Sandford and Mr Bray were conspiring in the matter, then there might perhaps be
a claim in conspiracy: but no such claim is made.
It appears to me that the complaint against Wilson Sandford really has nothing
to do with accessory liability of the Royal Brunei Airlines type.
Allegations of deceit are made against them. That case is either well founded
or it is not. Having held that it is not, I find that there is nothing left on
the facts of this case on which a case of accessory liability can be founded. I
decline to find that any of Wilson Sandford's activities on behalf of Intag
(set out in Schedule 2 to the consolidated statement of claim) was performed
dishonestly so as to assist Mr Bray to work a fraud on Mr Goose. I reject this
claim."
90. Counsel for Mr Goose criticise this conclusion too. We do not find it
necessary to go into the details of the criticisms. None of the matters
referred to in paragraph 55 or itemised in Schedule 2 to the consolidated
statement of claim touch on a breach by Mr Bray of the only fiduciary
obligations to Mr Goose we consider ever arose.
91. For all these reasons, which differ somewhat from those of the judge, we
would dismiss the claim based on dishonest assistance by Mr Wilson in the
breach by Mr Bray of fiduciary obligations owed by him to Mr Goose.
Conclusions
92. It follows that we would dismiss the appeal of Mr Goose from the order of
Rimer J dismissing Mr Goose's action against Wilson Sandford & Co. The
judge dealt also with a number of issues which arose if liability had been
established, such as limitation, contributory negligence and causation. As he
explained, it was appropriate that he should do so in order that any appellate
court which took a different view on liability should have the benefit of his
findings of fact relevant to these secondary issues.
93. We heard argument on the issues of limitation and contributory negligence
but not on causation. We are not the primary fact-finding tribunal.
Accordingly the reasons why Rimer J dealt with these issues do not apply. It
is, in any event, a difficult task to perform when there are several
inter-related prior issues. If the consideration of the subsequent issues
proceeds, as it must, on the assumption that the prior conclusions are wrong
there can be, as in this case, a large number of possible assumptions depending
on the number of permutations of the inter-related conclusions. The expression
of alternative findings on such a range of alternative, presently hypothetical,
assumptions is not a profitable use of the time of this court and would
infringe the overriding objective contained in CPR 1.1(1)(e). Accordingly we
express no view on any of the subsequent issues determined by Rimer J.
94. For all these reasons we dismiss this appeal.
Order:- Appeal dismissed with Costs.
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