Summary

Whilst an individual had persuaded the claimant company to invest funds in a particular trading transaction, as no separate and personal duty of loyalty and fidelity by that individual had been established, the claimant company failed to make good its claim to a proprietary share of a property purchased as a result of a fraudulent conspiracy whereby its funds had been invested elsewhere.

Facts

The claimant company (S) sought a declaration that the first defendant company (V) and the second and third defendant receivers (L) held the proceeds of a property upon a constructive trust for beneficiaries that included S, and that S was entitled to an account of the sums due to it under the trust and to payment. A fraudulent conspiracy had been carried on by two individuals (C) whereby traders, including S, were induced to advance money to an offshore company (T) by false representations that the money would be used by T for trading transactions of a particular type. In fact the money advanced by the traders was not used by T for such transactions but had instead been used in a "cross-firing" operation involving transfers between bank accounts held by T, V and other companies controlled by C with the object and effect of falsely inflating V's turnover, profit and assets. Those profits enabled C to purchase a valuable house in Kensington. The sham basis of V's trading activities was discovered and L were in due course appointed joint receivers. They entered into settlement agreements with C, as a result of which the Kensington property was sold and £5.2m was paid to them out of the proceeds, which they still held. S contended that the proceeds represented property in which it had a proportionate beneficial interest where the property was or was to be regarded as having been purchased with profits improperly made by C (namely the realised inflated value of shares) in breach of a fiduciary duty he personally owed S with regard to the application by T of the advances that S had made to T. V and L resisted S's claim as unfounded, submitting that on the facts C had owed no personal duty to S with regard to the application of the money it had paid to T, so that the basis of the claim had to fail.

Held

In the circumstances, whilst C's assurances had persuaded S to invest in T, S had not been so persuaded on the basis that C was assuming a collateral fiduciary duty towards S as to how he would procure T to handle S's investments. Whilst C's assurances to S no doubt involved dishonest misrepresentations about T in respect of which a claim in deceit might be available, S's attempt to characterise them as giving rise to a separate and personal duty of loyalty and fidelity by S was groundless. Accordingly, S had failed to make good its claim to a proprietary share of the £5.2m.

Judgment for defendants