Schenk v Cook & Ors, Court of Appeal - Queen's Bench Division, February 09, 2017, [2017] EWHC 144 (QB)

Resolution Date:February 09, 2017
Issuing Organization:Queen's Bench Division
Actores:Schenk v Cook & Ors
 
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Neutral Citation Number: [2017] EWHC 144 (QB)

Case No: HQ14X01272

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 09/02/2017

Before :

MR JUSTICE GREEN

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Between :

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Richard Walford (instructed by Fladgate LLP) for the Claimant

The Fourth and Sixth Defendants in person (Mr Bawany)

The other Defendants did not attend and were not represented

Hearing dates: 23rd - 29th November 2016

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Page 2

INDEX

MR JUSTICE GREEN:

A. Introduction: Outline of Facts and Conclusion

(i) The fraud

  1. This trial concerns a claim that various Defendants engaged in a sophisticated fraud. This fraud had two stages to it.

  2. In the first stage through a series of representations which were knowingly false the Defendants induced the Claimant to enter into an agreement whereby he was to invest in existing medium term notes (``MTNs'') with a very short invest-by date and a very high return. The Claimant in reliance upon these representations transferred a first tranche of CHF 3m into the control of the Defendants with a view to the MTNs being acquired. However no such bonds were ever acquired. Almost immediately the bulk of the money was either paid to the Defendants or dissipated through a series of corporate vehicles ultimately owned by various of the Defendants.

  3. This led to the second stage. Following a series of demands for payment, clarification and explanation, the Defendants agreed to meet the Claimant. The meeting took place on 2nd June 2008. At the meeting a series of yet further false representations were made. The Claimant was told that his CHF 3m had been invested in the shares of a company, Fluid Leader plc (``Fluid Leader''), which was imminently (the next day) to be re-admitted to the PLUS stock exchange. Fluid Leader was marketed to the Claimant as an exciting prospect. It was the owner of a patent application which, so it was said, would prove very profitable in the oil and gas sector. It was in particular represented to the Claimant that forthwith upon listing shares in Fluid Leader would be sold and the Claimant would receive by way of return a sum representing a substantial profit on the investment.

  4. The representations were reduced to writing and included (a) a representation that shares had already been purchased for and in the name of the Claimant and (b), an express promise that the shares, once traded, would be sold by the end of June 2008. In fact, when the representations and promises were made (i) no shares had been acquired for the Claimant and (ii) in any event the Fluid Leader shares were subject to a lock-in agreement which in effect precluded them from being sold for 12 months following trading, so that the representation that they could be sold forthwith after admission was false. Moreover, once Fluid Leader was in fact admitted to listing its performance plummeted and its shares were suspended in 2009. The Claimant received neither any shares in Fluid Leader nor any returns on their sale. Indeed the Claimant's total investment disappeared into the hands of the Defendants.

  5. The Claimant alleges that he was defrauded at every stage and seeks recovery of his CHF 3m together with interest.

    (ii) Conclusion on the liability of the Defendants

  6. This scheme was in my judgment from the outset a scam and a fraud knowingly perpetrated by the Defendants collectively upon the Claimant. The Defendants each played different roles in the overall plan with some playing larger roles than others. In my judgment the ring leaders were Mr Cook, the First Defendant, and Mr Sun, the Fifth Defendant. The Claimant has framed his case in a variety of different ways but they boil down to a claim that the Defendants collectively engaged in a dishonest plan to steal his money and in my judgment this core allegation is made out to the requisite standard of proof required in civil fraud cases alleging dishonesty and in relation to the torts in issue. Each Defendant is therefore liable.

    (iii) The appeal of the Fourth and Sixth Defendant

  7. The Fourth and the Sixth Defendants are in actual fact a single natural person, Mr Akbar Bawany (``Mr Bawany''). His Defence to the claim was struck out by the Master as a consequence of his failing to comply with an Unless Order. Mr Bawany has appealed against this order. For reasons explained elsewhere in this judgment I permitted Mr Bawany to participate fully in the trial of the merits of the claim against him. However this was without prejudice to the position upon his appeal. In the event I have found that Mr Bawany is liable to the Claimant on the merits of the claim so that the outcome of the appeal is academic. However, I have addressed Mr Bawany's appeal and for reasons set out in Section E of the judgment below it does not succeed.

  8. B. Introduction: The Procedure Adopted

    (i) Parties: Observations

  9. There is before the Court (i) the trial of various tortious claims against the Defendants; and (ii), an appeal by Mr Bawany (the Fourth and Sixth Defendants) against the declaration made by the Master that his Defence had been struck out for non-compliance with an Unless Order made on 8th November 2016 and entering judgment against him.

  10. The position against each of the Defendants is as follows.

  11. The First Defendant (Mr Cook), apparently resides in Thailand. He did file a Defence but no longer instructs solicitors. Although he was on notice of the trial he did not appear to defend the claim. On the 23rd November 2016, the first day of the trial Mr Cook sent an email to the Court copied to the Claimant's solicitors and Mr Bawany. It stated:

    ``I am a defendant in a matter you will commence hearing at 10:30am on Wednesday. Unfortunately I will not be able to attend due to a lack of funds. I live in the far north of Thailand and have driven 10 hours to Bangkok to catch a flight to London but the funds promised to me, to pay for this and the accommodation and living expenses were not delivered. I have limited means indeed I have only 15,000 baht which needs to support myself and my partner for another 2 to 3 weeks, yours, Philip Cook.''

    On the 25th November 2016 Mr Cook sent a further email to the Claimant's solicitors and the Court, copied into Mr Bawany. In this Mr Cook makes clear that he was in receipt of amended pleadings served by the Claimant. In his email he says that the facts are ``clearly wrong on a number of fronts''. In particular he objects to the allegations of control (by him). He observes that the trial should be stopped and time allowed for additional witness statements to be prepared. As to his (non) attendance he states this was due to a lack of the ability to finance the air fares and costs. In an exchange of emails between Mr Bawany and Mr Cook occurring during the trial and produced by Mr Bawany they both seek to attribute blame to the other.

  12. The Second Defendant (Mr Stramandino) was properly served but throughout took no part in the proceedings and also did not appear to defend the claim. The only information available to the Court about Mr Stramandino was that provided in an email of February 2015 from a person describing himself as a ``friend of Pietro Stramandino''. He states that Mr Stramandino was at that stage on vacation with his Chinese family in Shenzhen, but would be back by mid-March 2015. However Mr Stramandino was fully aware of the claim and he had told his friend that he had absolutely nothing to do with the case save to introduce the Claimant to Mr Bawany who worked for Mr Cook. Mr Stramandino denied receiving any commission for the transaction and had no idea as to what had happened. The ``friend'' however suggests that the Claimant contacts Mr Tristan Loughrey who, it was said, seemed to know ``all [the] story and was at the time the boss of Pietro Stramandino''.

  13. The Third Defendant (Mr Steeve Couture) was never served. He is not therefore a proper Defendant in these proceedings. This judgment does not apply to him.

  14. In this judgment I refer generally to the Fourth and Sixth Defendant in the singular. The Fourth Defendant (Mr Bawany) accepts that the Sixth Defendant (ANA Holdings) is his trading face. He says (Skeleton paragraph [2]): ``The Fourth Defendant was an introducer whilst ANA Holdings is his trading style''. In fact ANA Holdings is not a legal personality at all and references to ``ANA Holdings'' are in fact references to Mr Bawany. They are one and the same. Mr Bawany, having dispensed with his solicitors and counsel, represented himself at trial.

  15. The Fifth Defendant (Mr Sun) claims to be in India but his actual whereabouts are unknown and he has also declined to take part in the proceedings. Mr Bawany drew my attention to a Public Statement issued by the Jersey Financial Services Commission (``JFSC'') of the 18th January 2016 which records that following an investigation into the fitness and propriety of Mr Sun in his conduct whilst acting as the Managing Director of Centurion Management Services Limited (``CMSL'') - a company that plays a significant role in this litigation - it was considered necessary by the JFSC to issue Mr Sun with directions preventing him from engaging in any employment with any registered person or performing any function or service falling within the definition ``financial services business'' without having applied for and obtained the prior written approval of the Commission. Mr Bawany says that Mr Sun was aware of everything that went on in this case and he in fact blames Mr Sun for the fraud. In February 2015 Michael Sun sent an email to the Claimant's solicitor concerning the address to which the solicitor should send relevant documents. Mr Sun did not in fact provide an address instead indicating that he would contact his legal representative to seek their permission for...

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