[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Carr v Messrs Bower Cotton (A Firm) [2002] EWCA Civ 458 (8 March 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/458.html Cite as: [2002] EWCA Civ 458

[New search] [Printable RTF version] [Help]

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Blackburne)

		Royal Courts of Justice Strand London WC2 Friday, 8th March 2002

1. LADY JUSTICE ARDEN: This is an application by Mr. Malcolm Carr for permission to appeal from the order of Blackburne J dated 19th December 2001. By this order the judge dismissed Mr. Carr's claim for damages against the defendants for some US$4m.
2. I need to say something about the background to the proceedings. Counsel has submitted in support of the application a skeleton argument which is clear and presents the documents and facts in a concise way, and accordingly it is sufficient for my purposes on this application to take in the facts from counsel's skeleton argument, paragraphs 3-13:

"3. Mr Carr is the victim of fraud. In May 1998 he was induced by two fraudsters, Charles Weaver ('Mr Weaver and Michael Adkins ('Mr Adkins'), who operated through a Bahamian company, Kelci Management Consultants Limited ('Kelci'), to 'invest' US$4m in a fraudulent investment scheme ('the Scheme'). The Scheme purported to be governed by a written agreement dated 13 May 1998 ('the Agreement'). The parties to the Agreement were Mr Carr, Kelci and BC, acting by its senior partner, Mr Paul Simms ('Mr Simms'). The purpose of the fraudsters in involving BC, a long-established firm of solicitors, was to give credence to the Scheme.

4. The role of BC under the Agreement was to act as guardian of the Fund (see clause 5 of the Agreement). Thus under the terms of clause 13 of the Agreement the primary duty of BC was to protect the Fund and only part with it if incident to a private placement or investment it obtained a guarantee for the full amount of the investment (clause 13(a)).

5. Clause 13(b) of the Agreement provided:

'[BC] without liability, shall transfer Fund upon direction by the designated Limited Power of Attorney...'

6. Mr Carr had earlier been induced to execute a Limited Power of Attorney (the 'LPOA') which authorised Kelci, Mr Adkins and Mr Weaver to:

'1) Assign and invest [the Fund] for placement into a secured investment ...

2) Contract with licensed security trading entities, banks and other financial institutions which arrange or purchase and resell quality bank instrument ...

The LPOA concluded with the following proviso ('the Proviso'):

'[Mr Adkins and Mr Weaver] are NOT authorised to make any withdrawals of the principal funds, except for the purposes stated above.'

7. Following execution of the Agreement, the Fund was duly transferred to BC.

8. On 18 May 1998 Mr Carr faxed to Mr Simms an instruction ('the Instruction') which stated:

'The funds transferred by me... to your client account... are to be applied in accordance with [the Agreement] and [the LPOA].

I instruct you to transfer the funds to the Kelci ... account in order that [the LPOA] applies.'

9. Earlier on 18 May 1998 Mr Simms had been telephoned by Mr Adkins who told him that Mr Carr had agreed that the Fund should be immediately released on the instructions of himself and Mr Weaver under the LPOA. Mr Simms told Mr Adkins that although the LPOA appeared to give him authority he wanted to make sure that Mr Carr understood the position before any transfer occurred.

10. Later on 18 May 1998 Mr Simms wrote to Mr Carr in the following terms ('the Letter'):

'This is to notify you that we have received the funds from the Yorkshire Bank.

Messrs Adkins and Weaver wish to exercise the Limited Power of Attorney to move funds to an account at Natwest Bank in Jersey under their control. They would then become responsible for providing security to you in accordance with the terms of the power of attorney, but there would be no way I could monitor this or tell you that it has happened.

As your funds are in our client account in your name and not in the name of Kelci, I am not prepared to transfer funds without any security unless you expressly so authorise me to do so by signing and returning a copy of this fax. Adkins and Weaver say that you are well aware that they are to have complete control of the funds under the power of attorney but I wish you to expressly authorise a transfer out of my account where I will have no control and hold no security on your behalf.'

11. On the morning of 19 May 1998 a telephone conversation took place between Mr Simms and Mr Carr ('the Conversation'). Mr Simms told Mr Carr that the reason he had sent the Letter was to make it absolutely clear to him that he was being asked to transfer the Fund under the LPOA to another account which was not connected to BC and over which BC had no control. He told Mr Carr he needed him to countersign the Letter so that he could have on file his authority for carrying out the transaction. Mr Carr duly countersigned and faxed the Letter back to Mr Simms.

12. On 20 May 1998 Mr Simms received a fax from Mr Weaver in the following terms ('the Fax'):

'... it appears that since we have moved our investment from Natwest to Barclays that a new bank officer unaware of the circumstances was assigned to our account. It also is apparent that since we are no longer involved in Natwest reference investments that they are no longer prepared to co-operate with us. We have decided, based upon this type of response, to transfer funds through our Unibank account...'

13. BC thereafter duly transferred the Fund to the Unibank account where it was misappropriated."

3. The grounds of appeal relate to the question whether Mr. Simms had authority from Mr. Carr to transfer the moneys at the initiative of Mr. Weaver and Mr. Adkins to the Unibank account. The skeleton argument explains at paragraph 17 that the potential sources of the authority were the limited power of Authority there defined as the LPOA, the instruction, which was a letter dated 18th May 1998 from Mr. Carr to Mr. Simms, which was contemporaneous with the initial transfer of funds to the defendant's client account, the countersigned letter dated 18th May 1998, and the authority given in the course of a conversation held the following morning.
4. On 12th February 2002 I received the application on paper. I then refused it. I have now reconsidered the matter and I am satisfied that I should give permission to appeal. Before I go into my reasons I would explain that counsel has told me that the form of investment contemplated was a form of bank investment programme, namely that moneys would be placed with the bank, and then the bank would arrange the investment and provide the secured investment for the purposes of clause 13(a) of the LPOA. Counsel has also told me that it would be his contention that, if Mr. Simms transferred the moneys in breach of the LPOA, there was a breach of an express duty under the LPOA and thus the exemption from liability in clause 14(iii) would not apply.
5. I now give my reasons for giving permission in this matter. First, I am satisfied that there is a real prospect of success in challenging the judge's holding that the defendant had no obligation under the LPOA and the Instruction to ascertain the purpose of the investment. I have summarised the LPOA by quoting from counsel's skeleton argument. What the judge said was this. I now read from paragraph 128 of his judgment:

"In my judgment, nothing in either the investment agreement or in the power of attorney obliged Bower Cotton before transferring the monies on the instructions of Kelci, Mr Adkins or Mr Weaver acting on the authority conferred on them by the power of attorney, to ensure that the purpose for which the transfer was being made was an investment of the kind permitted by the power of attorney. Much less did it require Bower Cotton to transfer the fund only if the transfer was directly into such an investment. The power of attorney conferred power on the persons named (Kelci and Messrs Adkins and Weaver) to deal with Mr Carr's funds in the particular ways set out in it. In my judgment, once those to whom, under the power of attorney, authority was given to effect withdrawals of the fund and to invest the same for 'placement into a secure investment' gave to Bower Cotton an instruction to transfer the fund, Bower Cotton were entitled and indeed obliged - in the absence of knowledge on their part that the agent was intending to misapply the monies or otherwise act contrary to the terms of the power of attorney - to act on the instruction. It was not their obligation, either under clause 13(b) or under the power of attorney, to take steps to ensure that those claiming to act under the authority of the power of attorney would apply the fund as the power of attorney required."

6. As I see it, there is a real prospect of success for the reasons given in the skeleton argument, that the judge took too narrow a view of the obligations of the defendant. In particular, the LPOA contained a proviso that the attorneys, Mr Adkins and Mr Weaver, were "not authorised to make any withdrawals of the principal funds except for the purposes stated above." It seems to me arguable that Bower Cotton were at least obliged to obtain confirmation that the funds were withdrawn for a proper purpose within the scope of the investment agreement in LPOA. Second, the facts are that Mr. Carr was invited to authorise a transfer to National Westminster Bank. After he had given his authority Mr. Adkins and Mr Weaver asked Bower Cotton to transfer the money to another bank, Unibank, and it was from that account that the moneys were appropriated. So Mr Carr's authority for a transfer to Unibank was never in terms sought. It seems to me that this is a matter which may also afford a real prospect of success on appeal.
7. Third, in my judgment it is arguable that the judge misdirected himself as to the correct issue in paragraph 129 of the judgment, when he said this:

"This is in accord with the general principle of the law of agency that, in the absence of notice to the contrary, a third party acting in good faith is entitled to assume that an agent is exercising a power conferred upon it by a principal for a proper purpose. See, for example Rolled Steel Limited v British Steel Corporation [1986] Ch 246 at 292. See also Chitty on Contracts Volume 2 paragraph 32-067."

8. It is arguable that the real issue was whether the defendant had a duty to seek confirmation that the transfer was within the LPOA in view of the proviso which I have read. It is submitted in the skeleton argument that the defendant could have checked that the ultimate receipt of the investment fell within clause 13(a) of the LPOA. As I see it, that may be a more difficult argument but nonetheless I am satisfied that it is one that can properly be made on appeal.
9. Fourthly, the judge held that there was no obligation, by virtue of the Instruction, to inquire whether the payment to Kelci was for a proper purpose. As counsel has submitted in his skeleton argument, the judge did not take into account the restriction in the Instruction to utilisation of the funds in accordance with the LPOA.
10. Fifthly, as respects the countersigned Letter, I have already made the point that the transfer was not to National Westminster Bank as stated in the letter but to another bank. In addition, Mr. Moverley Smith submits that the words at the beginning of the second paragraph, that Messrs Adkins and Weaver wished to exercise the limited power of attorney, means that Bower Cotton should have sought confirmation as to the propriety of the purpose for which the movement of funds was desired. Following the conclusions I have reached, it seems to me that this too must be an arguable issue. Sixthly, as respects the Conversation, it seems to me that there must also be a real prospect of success on the arguments sought to be raised as regards this conversation as nothing was said in that conversation to diminish what was said in the letter, nor to explain to Mr. Carr that the transfer was not to be to National Westminster Bank.
11. For all those reasons I am satisfied that I should give permission to appeal. It will be limited to the issue identified by counsel, namely whether the defendant had authority to pay the funds to Unibank as requested by Messrs Adkins and Weaver.
Order: Application allowed; costs to be costs in the case.