Neutral Citation Number: [2013] EWHC 347 (Ch)

Case No: HC10C03729
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 25/02/2013

Before :

THE HONOURABLE MR JUSTICE HILDYARD
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Between :

	MRS ADELLE CHALLINOR and 20 OTHERS 	Claimant	
	
and  -
		
	JULIET BELLIS & CO

-	and  -

MR GEOFFREY EGAN	Defendant and Part 20 Claimant

Second Defendant and Part 20 Defendant	
			
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Andrew Sutcliffe QC, Adam Kramer (instructed by Hewlett Swanson LLP) for the Claimant
Ian Croxford QC, Clare Stanley (instructed by Clyde & Co LLP) for the First Defendant
Francis Bacon (instructed by Messrs Reynolds Porter Chamberlain) for the Second Defendant 

Hearing dates: 9-10, 11, 14-18, 21-25, 28-30 May 2012, 13 -15. 18 June 2012 
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Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

.............................

THE HON. MR JUSTICE HILDYARD

TABLE OF CONTENTS

Table of Contents
The parties: the Main Claim and the Part 20 Claim
The Claimants
The Defendant Firm
Gist of Main Claim
Gist of Part 20 Claim
Gist of claim against Mr Egan in Main Claim
Questions in issue
Summary of the nature and basis of the Claims
(1)	Claimants’ primary case in the Main Claim
(2)	Claimants’ secondary case in the Main Claim
(3)	Alternative remedies for the Claimants in the Main Claim
(4)	Claimants’ contingent claim against Mr Egan in the Main Claim
(5)	The Defendant Firm’s Part 20 claim against Mr Egan
The Albermarle investors and previous Albermarle schemes
Characteristics of previous Albermarle schemes
Relevance of previous Albermarle schemes in informing Claimants’ approach
Changes in Albermarle pattern  after acquisition of Egan Lawson by Erinaceous
Egan Lawson becomes ECS and part of the Erinaceous Group
Erinaceous Group’s developing financial difficulties
Mrs Bellis takes over the role of solicitor
Mrs Bellis’s perception of her role
Mrs Bellis and her other family interests
Albermarle Fairoaks scheme and the facts in more detail
The underlying investment: Fairoaks airport land
Purchase and funding of the Fairoaks land
SDLT changes and Erinaceous difficulties bring further complication
Chronological sequence of background events
Development of the structure
Mr Egan’s agreed funding terms
Arrangements for ownership and control of SPV
Mr Cummings becomes beneficial owner of AFL
The Engagement Letter
The “initial teaser”
Proposal for a loan note
Revised Teaser and the Teaser email
Draft Loan Notes are provided and sent out
PwC advise right of conversion not feasible
Payments start into the client account
Payments out of client account to RBS
Delay and uncertainty continues
RBS Equity Bridge repayments
Investors become aware of their treatment as unsecured subordinated lenders
Mrs Bellis’ contemporaneous Memorandum in December 2007
Events in 2008: the investors call for the return of their monies
Denouement
Issues
Scope and nature of the evidence: gaps in disclosure
Scope and nature of evidence
Are the “offering documents” part of the admissible factual matrix?
Witnesses
Observations as to the witnesses
(1)	Nature of the “investment” solicited
(a)	The evidence given on the Claimants’ subjective point of view as to the nature of the investment
(b)	Mr Egan’s point of view as to the nature of the investment
(c)	Mrs Bellis’ point of view as to the nature of the investment
(2)(a)	Was Mrs Bellis aware of the terms of the “offering documents” and did she know they had been sent to the investors?
(3)	What did the parties understand to be the role of the Defendant Firm?
(a)	Investors’ understanding as to the role of Mrs Bellis
(b)	Mr Egan’s understanding as to the role of Mrs Bellis
(4)	Requirement for investors to make payments into client account
(a) The investors’ understanding of reasons for use of client account
(iii) Mr Egan’s perception as to reason for use of client account
(iii)	Mrs Bellis’ perception as to reasons for use of client account
(5)	What did parties perceive to be required to authorize payments out of client account? Were such requirements satisfied?
(a) Claimants’ understanding
(b)	Mr Egan’s understanding as to what authority was required for payments out
(c)	Mrs Bellis’ understanding on the issue of authority
(6)	Were there any other factors operating on Mrs Bellis in making payments out of client account?
(7)	The alleged conversation between Mrs Bellis and Mr Wallis
(8)	What went wrong: the aftermath
THE MAIN CLAIM: ESCROW/QUISTCLOSE TRUST
Issue 1: was a contractual relationship established between the Claimants and the Defendant Firm?
Was there any express escrow agreement made between the Claimants and the Defendant Firm?
Was there any implied escrow agreement between them?
Contracting parties and the engagement to be demonstrated
Was there an intention to create legal relations between the Claimants and the Defendant Firm?
Can terms of sufficient certainty to establish a valid contract be implied or inferred?
Answer no different if “offering documents” taken into account
Did the Claimants have different subjective intentions?
Should a form of Quistclose trust be implied?
Nature of a Quistclose trust
Application in this case
Breach of trust in making payments to RBS
If necessary to show breach of fiduciary duty or that Mrs Bellis’s conscience affected
CLAIMANTS’ ALTERNATIVE CASE: the Defendant Firm had no authority to receive funds raised
Engagement Letter as alleged source of authority
Had Mr Cummings authority to bind AFL to the Engagement Letter?
When did he become beneficial owner of the shares in AFL?
Can a sole beneficial owner of shares informally bind a company?
Consequences if no authority to borrow and/or receive monies
Alternative contention: ratification
The need to establish “conscious awareness”
FURTHER ALTERNATIVE CLAIM IN RESTITUTION
REMEDIES/LOSSES
CLAIMANTS’ CLAIM AGAINST MR EGAN
(1)	Were representations made by Mr Egan to the Claimants as to the terms on which monies paid into the client account would be held?
(2)	Were the circumstances such as to give rise to a duty of care on the part of Mr Egan?
PART 20 CLAIM
Dishonestly procuring breach of trust
Breach of warranty of authority/collateral contract
Allegation that Mr Egan owed fiduciary duties of which he was in breach
Procuring wrongdoing by ECS
Conclusion as to Part 20 Claim
SUMMARY OF CONCLUSIONS
POSTSCRIPT
SCHEDULE A…………………………………………………………………………………………....167

The Hon. Mr Justice Hildyard : 
The parties: the Main Claim and the Part 20 Claim
The Claimants
1.	The 21 Claimants (“the Claimants”) in the main Part 7 claim (“the Main Claim”) comprise a group of investors who paid monies into the First Defendant’s client account in respect of a property investment opportunity (“the Albermarle Fairoaks scheme”) relating to development land (“the airport land”) at and around an airport property in Surrey by the name of “Fairoaks”. 
2.	The airport land had been acquired by a special purpose vehicle (“SPV”) which came to be called Albermarle Fairoaks Limited (“AFL”).  AFL was incorporated in Guernsey, originally under the name Shelco Twenty-Two Limited.  AFL has been in administration since 2010.
The Defendant Firm 
3.	The First Defendant to the Main Claim is a firm of Solicitors (“the Defendant Firm”). Its principals at the material time were Mrs Juliet Bellis (“Mrs Bellis”) and Mr Patrick Solomon. (The latter had no involvement in any of the matters in dispute and has played no part in any of these proceedings.)  
4.	The Defendant Firm acted as solicitors in the Albermarle Fairoaks scheme, and its client account was used to receive money raised from investors in that scheme.
Gist of Main Claim 
5.	The focus of the Main Claim is as to the purposes for which, and the terms on which, the Claimants made payments into that client account (“the Defendant Firm’s client account” or “the client account” as appropriate in the context) with a view to participation in the Albermarle Fairoaks scheme. The total sums invested amounted to some £2,280,000.
6.	The Claimants contend that the monies so remitted were at all material times held subject to escrow conditions, and further or alternatively, on a form of Quistclose or resulting trust for them or otherwise to their order. They claim that the payment of those monies out of the Defendant Firm’s client account constituted a breach of contract and/or trust for which the Defendant Firm is liable.
7.	The Defendant Firm contends that the monies were paid by way of immediate loan to AFL and not subject to any escrow conditions or any form of Quistclose or resulting trust.  The Defendant Firm denies that the payments it made out of its client account were wrongful in any way and rejects the claims made against it.
The Second Defendant and Part 20 Defendant 
8.	The Second Defendant to the Main Claim and the defendant in the Part 20 Claim by the Defendant Firm is Mr Geoffrey Egan (“Mr Egan”). 
9.	It was through Mr Egan that the opportunity to invest in the Albermarle Fairoaks scheme was introduced to the Claimants in the Main Claim. 
10.	Mr Egan is a chartered surveyor and a fellow of the Royal Institute of Chartered Surveyors. He was throughout the course of the Albermarle Fairoaks scheme at all material times employed by a company now called Erinaceous Commercial Services Limited (“ECS”).  ECS had previously been called Egan Lawson Ltd (“Egan Lawson”), taking its name from its two founder shareholders and directors, namely, Mr Egan and his long-standing colleague, Mr Dougie Lawson (“Mr Lawson”).
11.	The Albermarle Fairoaks scheme was the latest in a series of investment opportunities promoted by Mr Egan and Mr Lawson under the name or banner “Albermarle”. These had certain characteristics in common, as I later describe.
12.	In about August 2006, after it had brought forward and operated some 10 such Albermarle investment schemes, Egan Lawson was purchased by a public company listed on the London Stock Exchange called Erinaceous Group Plc (“Erinaceous”).  Egan Lawson was re-named ECS (although Egan Lawson did not formally change its name until 2 March 2007).
13.	Erinaceous was at the time something of a stock-market favourite.  It called itself a ‘one-stop shop’ for property services, and had grown quickly by acquisitions so that the group comprised almost 100 subsidiary companies. Inevitably its bank borrowings were substantial.
14.	After its acquisition by Erinaceous, ECS continued to carry on business using the name Egan Lawson and the Albermarle brand.  Thus the Albermarle Fairoaks scheme was promoted through ECS, using the name Egan Lawson, under the Albermarle brand.  
15.	Messrs Egan and Lawson, though now employed by ECS/Erinaceous, continued to be the individuals concerned in identifying investment propositions and presenting them to potential investors. They had developed a following of investors, akin to an investors’ club. They were usually able to rely on a loyal inner core to invest in most of the schemes, and in later schemes, to provide initial capital to attract other investors. 
Gist of Part 20 Claim
16.	In its Part 20 Claim, the Defendant Firm claims against Mr Egan a contribution by way of full indemnity from Mr Egan pursuant to the Civil Liability (Contribution) Act 1978 (“the Part 20 Contribution Claim”) if it is found liable to compensate the Claimants. 
Gist of claim against Mr Egan in Main Claim 
17.	As mentioned above, Mr Egan is also joined as the Second Defendant in the Main Claim, albeit the claim against him is in a separate document put before the Court shortly after the first day of trial (15 May 2012).
18.	Until the first day of trial, Mr Egan had appeared to be fully supportive of the Claimants’ position in the Main Claim. In particular, he had supported the Claimants’ contentions that their payments into the Defendant Firm’s client account were made subject to agreed escrow conditions.  
19.	However, just as the trial commenced, Mr Egan changed his stance to say that the payments made by the Claimants were not subject to such conditions.  
20.	Faced with this turn of events, the Claimants applied for, and I granted them, permission to bring a claim against him on the basis that the Claimants had relied on his representations that their money would be held on escrow conditions and only for the purposes above described.  
21.	Again, like the Part 20 Claim, the claim against Mr Egan is contingent: if, contrary to their primary case, the payments were not advanced on escrow terms and/or were advanced as loans without any entitlement to equity participation, then those representations were false, and the Claimants seek damages for negligent misrepresentation accordingly.
Questions in issue
22.	The questions ultimately in issue in this complex and hard fought case are: 
(1)		whether monies paid into the Defendant Firm’s client account by the 	Claimants were held subject to contractual escrow conditions binding upon 	the Defendant Firm and stipulating that such monies should not be released 	pending further instruction from the relevant Claimant or a specifically 	defined event;

(2)		whether, alternatively, such monies were held on a Quistclose-type or other 	form of resulting trust or otherwise to the order of the Claimants; 

(3)		whether in applying those monies the Defendant Firm was in breach of the 	terms or trusts under which it held those monies; 

(4)		whether, if not recoverable for breach of contract or trust, the Claimants are 	entitled to some form of restitutionary remedy in respect of the monies they 	paid into the Defendant Firm’s client account;
(5)		whether, if the monies were not held subject to binding escrow conditions 	or on trust or to the order of the Claimants, that was due to breach by Mr 	Egan of any duty he owed personally to the Claimants; and
(6)		whether, if the Defendant Firm’s application of the monies was a breach of 		contract or trust or other obligation, and it is thus liable to the Claimants, 		the Defendant Firm is entitled to contribution from Mr Egan in respect of 		that liability.

23.	In addition, there are issues of causation if loss (or a right to equitable compensation) is established.
Summary of the nature and basis of the Claims
(1)	Claimants’ primary case in the Main Claim
24.	It is the Claimants’ primary case in the Main Claim that the funds were paid out of the Defendant Firm’s client account otherwise than in accordance with the agreed conditions and purposes for and conditions on which they were paid in. 
25.	That contention is based on the following grounds:
(1)		the monies were remitted and held subject to express or implied escrow 	conditions that were never satisfied;
(2)		the monies were remitted and could only be applied for the purposes of 	equity investment in AFL, and on a form of Quistclose or resulting trust for 	the Claimants in the meantime;

(3)		in treating the monies remitted to its client account as monies immediately 	lent to AFL rather than monies subscribed for equity participation either in 	AFL or a holding company or fund, and in  applying them to reduce a 	bridging loan made by the Royal Bank of Scotland plc (“RBS”) to AFL 	(“the RBS Equity Bridge”) to enable it to acquire the airport land before 	any equity participation was definitely agreed and available and before AFL 	was under the Claimants’ control, the Defendant Firm acted in breach of the 	escrow conditions and inconsistently with the purposes for which those 	monies had been paid in.

26.	A variant of this primary case is that monies paid into a solicitors’ client account are necessarily held on trust, and if it was not the objective intention of the parties that the monies paid into the Defendant Firm’s  client account should immediately belong to AFL, then they must have been, or should be treated as having been, held on trust or to the order of the Claimants as payers, and could not be paid out without their unequivocal instructions or the Defendant Firm could be completely certain that pre-stipulated conditions for payment to AFL had been met or satisfied.
(2)	Claimants’ secondary case in the Main Claim
27.	Alternatively, the Claimants’ secondary case in the Main Claim is that AFL never properly resolved to borrow, and the Defendant Firm had no authority to receive, such monies and was in breach of trust in paying them to RBS towards the reduction of the RBS Equity Bridge. The Claimants seek to recover the money they have lost in consequence. 
28.	The Claimants’ secondary case is based on the following grounds:
(1)	 AFL’s board of directors never properly resolved to borrow monies from the     	Claimants;
(2)	the Defendant Firm was never validly authorised by or on behalf of  AFL to 	receive or acquire beneficial  ownership of the monies remitted to its client 	account by the investors (including the Claimants), so that 

(3)	a resulting trust in favour of the Claimants must automatically arise.

(4)		Further, even if the Claimants agreed to lend money to AFL (which they 	deny), it was an implied condition precedent of that agreement that properly 	executed loan notes recording the agreed terms be issued by AFL, which 	condition was never satisfied. 
(3)	Alternative remedies for the Claimants in the Main Claim
29.	In the alternative to claims for an account and repayment, the Claimants claim in restitution for unjust enrichment.  The Claimants contend in this context that:
(1)	they paid monies into the Defendant Firm’s client account under a mistake, believing that the monies they remitted to that account would be held in escrow and remain beneficially owned by them unless and until conditions of the escrow were satisfied, which they never were (“the Mistake Claim”); and
(2)	even if the Claimants agreed to lend money to AFL (which they deny), the agreement failed and was void because AFL never authorised the borrowing, so that there was a total failure of consideration (“the Failure of Consideration Claim”). 
30.	The Claimants seek relief against the Defendant Firm as follows:
(1)	damages or equitable compensation equal to the sums severally remitted, together with the costs of an administration application against AFL;
(2)	further or alternatively, an account and reconciliation in the form required by Rule 32 of the Solicitors Accounts Rules (“the SAR”) and replacement of money improperly withdrawn for the Defendant Firm’s client account (pursuant to rule 7 of the SAR); alternatively
(3)	restitution equal to the amounts remitted to the Defendant Firm’s client account by the Claimants;
(4)	interest and costs. 
 (4)	Claimants’ contingent claim against Mr Egan in the Main Claim
31.	As indicated above, the Claimants’ claim against Mr Egan is contingent upon them failing in their primary claims against the Defendant Firm.  It is based on allegations of negligence against Mr Egan personally, even though it is his position that he did what he did as an employee and director of ECS. 
32.	The basis of the claim is as follows:
	(1)	The Claimants relied on Mr Egan personally, as in previous Albermarle 		schemes, and as he must have known they would: he was their point of 		contact, and their understanding of the Albermarle Fairoaks scheme was 		solely derived from the way it was presented to them by him;
	(2)	Mr Egan solicited their investments on the basis that the Claimants would 		obtain a mix of loan and equity participation which was the hallmark of all 		previous Albermarle Schemes he had introduced to them, and that in the 		meantime their monies would be held safe on escrow terms and conditions 		in the Defendant Firm’s client account;
        (3) 	Mr Egan owed them a duty of care of which he was in breach in 	misrepresenting to them that their money was advanced on binding escrow 		terms and/or in failing to explain that their money would be on loan and 		used to repay indebtedness of AFL before the investment vehicle (be it AFL 		or a holding entity) was in their control and/or their entitlement to equity 		participation was unconditional;
	(4)	The Claimants would not have transmitted funds to the Defendant Firm’s 	client account if the misrepresentations had not been made and they had 	known the true position; so that
	(5)	Mr Egan is liable for damages in respect of their losses.
(5)	The Defendant Firm’s Part 20 claim against Mr Egan
33.	The Defendant Firm’s contingent claim for a contribution from Mr Egan by way of full indemnity if it is found liable to the Claimants is based on the following grounds:
	(1)	It was Mr Egan who required the Defendant Firm (by Mrs Bellis) to make 		payments out of its client account in breach of escrow conditions;
	(2)	in doing so, he dishonestly procured or assisted the Defendant Firm to 			commit breaches of trust; further or alternatively,
	(3)	he was in breach of fiduciary duty and/or a duty of care he owed the 			Claimants by reason of his relationship of trust and confidence with the 		Claimants (and each of them);
	(4)	he should be liable to make fair and reasonable contribution to any damages 		or equitable compensation for which the Defendant Firm is found liable.
34.	Mr Egan denies every pleaded basis of the contribution claim and seeks its dismissal in its entirety.
The Albermarle investors and previous Albermarle schemes 
Characteristics of previous Albermarle schemes
35.	The Claimants had all invested previously in one or more property investment opportunities offered to them under the brand name “Albermarle” (“Albermarle investment schemes”) through Egan Lawson and latterly ECS.  
36.	The Albermarle investment schemes which Egan Lawson organised and promoted were in each case undertaken through or comprised an unregulated collective investment scheme.  A number of examples were documented in the bundles and several were more particularly considered during the course of the trial. 
37.	Albermarle investment schemes followed a pattern, although there were variations from scheme to scheme. 
38.	They usually involved the use of a special purpose vehicle (“SPV”), either a company or, more often, a Limited Liability Partnership (“LLP”). Their hallmark was that investors would invest principally by way of debt (unsecured interest free loans), with a very small amount of their investment being referable to an “equity” interest in the SPV. The typical ratio of loan to equity would be 9,999: 1; but the equity element would in aggregate secure for the Investors control of the SPV.
39.	Sometimes when offered for investment the SPV would be used to acquire commercial property with an income stream. Sometimes (as indeed in the case of the Albemarle Fairoaks scheme) the SPV already existed and held property, and investors would ‘buy in’ with a view to expansion and further property being acquired. It was commonplace for property to be bought with the benefit of bank borrowing and other loans (including those unsecured loans from investors). 
40.	The general objective of each Albermarle investment scheme seems to have been to develop or otherwise increase the value of land identified as ripe for development, service the bank finance in the meantime with the income stream, and then sell the developed / improved land and distribute the profits. 
41.	It also seems to have been commonplace in Albermarle investment schemes for the investors’ loans to be repaid in tranches as funds became available to the SPV as value was realised from the underlying investments, and before any final realisation.
42.	The Albermarle investment schemes were intended to be tax efficient for the investors. That was the rationale of the matched loan/equity mix which was their hallmark. 
43.	Investors’ loans would be repaid over time without interest and without any charge to tax: that was the rationale of the loan element, which avoided distributions having to be by way of dividend attracting a charge to tax. 
44.	Eventually the profit from the deal (when the SPV was wound up or it was otherwise realised) would be treated as a capital gain, taxed at a lower rate than income tax (and often with the benefit of taper relief): that was the rationale (or part of it) of the equity element, which also ensured that the investors would together control the SPV to which the loans were made.  
45.	It was a fundamental feature of the Albermarle investment schemes that the investors would have or be entitled to control of the SPV used through their ownership of its equity:  in none of the Albermarle investment schemes prior to the Albermarle Fairoaks scheme was it ever contemplated that the investors would simply be lenders without control of the SPV and equity participation. Their security was in that control.
46.	Thus, in every Albermarle investment scheme, the basis on which the investors subscribed was an unqualified right to equity participation in the investment vehicle: the loan element was the machinery for repayment, the equity provided the means of control and of obtaining a profit share. Typically, the investor would join the LLP as a member, so they were investing into a corporate body in which they had equity and which the investors would together control.
47.	The two (loan and equity) were as horse and carriage: put another way, they were intended to be stapled together or at least matched and coupled. All the Claimants who gave evidence were agreed on this: and they were also adamant that they considered that the monies they subscribed remained theirs unless and until their right became unqualified, though all accepted that the documentation to evidence and certify their right might not be issued formally until some time later.
48.	The Albermarle banner came to attract a loyal following. In addition to Mr Egan and Mr Lawson, and various of their colleagues at Egan Lawson who would also usually invest themselves, an inner circle of repeat investors developed (whom Mr Croxford QC, leading counsel representing the Defendant Firm, labelled “the inner core”). 
49.	They included Mr Wallis (the 8th Claimant), European Securities (the 16th Claimant), and Black Isle (the 14th Claimant).  European Securities is a company controlled by Mr Ian Watson.  Black Isle is a company which at the material time was controlled by Mr Alan Thomson; Mr Egan owns 25% of it. 
50.	At least in the context of the later Albermarle investment schemes, and especially Albermarle Shoreham, that inner core of investors were offered the opportunity to come in to schemes at an early stage prior to a wider offering.  They thereby secured first place in the queue of those wishing to participate. This could be an advantage if the scheme was over-subscribed (as was the case, for example, in Albermarle Shoreham); and in some cases they seem to have enjoyed slightly more advantageous terms.  
51.	The basis upon which the inner core investors were invited to and did in fact invest in later schemes, and in particular Albermarle Shoreham, appears sometimes to have been quite informal. For example, in Albermarle 8 LLP (which involved an investment in property in Stafford) as in Albermarle Shoreham, inner core investors subscribed before any Information Memorandum or Application Form but instead following a letter or email from Mr Egan. 
52.	It was also a common theme of the Albermarle investment schemes prior to Albermarle Shoreham and Albermarle Fairoaks that the investors would rely on the solicitors advising the SPV both to safeguard their interests as future equity participants and also to ensure that their subscription moneys would not be released unless and until their participation and control of the SPV was safely arranged or in place (sometimes via Messrs Egan and/or Lawson as their agents or nominees).  They acted, in effect, as solicitors to the offer.  
53.	The expectation of the Claimants, as expressed by the third Claimant, Mr Andrew Kevin Cole (“Mr Cole”) was that the Defendant Firm would act for the investors as well as the investment vehicle (which they would ultimately own) and (as he put it) “be looking after our interests.” Indeed, Mr Cole told me that Mr Egan expressly confirmed this to him.
54.	I pause briefly to note that this is how the solicitor, namely Ms Helen Streeton (“Ms Streeton”), who had invariably, or almost invariably, been retained in all Albermarle investment schemes prior to Albermarle Shoreham, appears to have conceived and undertaken her role. Ms Streeton worked sequentially for Forsters, Fox Williams and Boodle Hatfield: and it was those firms who were variously instructed in relation to the various Albermarle investment schemes before Erinaceous acquired Egan Lawson, according to where she was working from time to time. 
55.	As I later elaborate, it seems to me that their habitual reliance on Ms Streeton, as well as their trust in Mr Egan, later informed the Claimants’ expectations of Mrs Bellis and the Defendant Firm in the Albermarle Fairoaks transaction.  
56.	Put shortly, for present purposes, the overall gist of the evidence given on behalf of the Claimants in this regard was that their expectation was that monies paid into the designated solicitors’ client account would not be used or released without their informed consent sought in advance before actual payment. Mr Wallis’s evidence under cross-examination captures the gist, and seemed to me to represent the position of them all:
“Q.  In which of your previous investments had this process ever taken place that somebody came back to you and said, "Mr Wallis, sir, we have your money, may we now have instructions to use it?
A.  Helen Streeton did that very frequently, my Lord.  In fact, I had say on virtually every investment I made. We had conversations once the money had actually been deposited with her.  She was very particular about the fact that it was my money and until she was happy that I was happy to depart with that money then nothing was to happen to it.”
Relevance of previous Albermarle schemes in informing Claimants’ approach
57.	The Claimants’ case is that they especially relied on three previous Albermarle investment schemes promoted after the date of the acquisition by Erinaceous of Egan Lawson in informing their understanding of Albermarle schemes in general and their approach to the Albermarle Fairoaks scheme in particular.  
58.	These were (a) the Albermarle Shoreham Investment (in which apparently all save the 2nd, 6th, 7th, 17th, 18th and 19th Claimants invested); (b) the Albermarle Croydon Investment (in which apparently all save for the 2nd, 3rd, 4th, 5th, 11th, 12th, 13th and 16th Claimants invested); and (c) the Albermarle Brighton Investment (in which apparently the 3rd, 8th and 14th Claimants invested). 
59.	The underlying investment in each case is not relevant: what is relevant is the investment model that each such investment exemplified, the modus operandi of Mr Egan in each, and the level of trust that the Claimants developed in both. 
60.	The Claimants contend that they each exemplify and demonstrate a common investment model (defined in the Amended Particulars of Claim as “the Investment Model”) which was the template for, or at least informed, the Albermarle Fairoaks scheme. 
61.	That contention provides the basis for the Claimants’ claim that certain of the terms of the Investment Model should be treated as implicit also in the Albermarle Fairoaks scheme. 
62.	The Investment Model is described by the Claimants in paragraph 7 of the Re-Re-Amended Particulars of Claim (“the RRAPC”) as follows:
“The Investment Model involved the purchase of a target property using senior debt from a third party lender combined with medium or long term equity investment from investors.  These investments were made on terms that in consideration for each “unit” of investment an investor would receive a combination of (i) equities, such as shares in a limited company, membership of a limited liability partnership (“LLP”) or units in unit trusts, and (ii) loan notes. The precise structure of the investment scheme (including the character of the special purpose vehicle used in each case, whether a company, LLP or unit trust) would vary depending on the nature of the investment and the most tax efficient solution but in each case the Investment Model dictated that the investor’s money would be dealt with on the following basis:
7.1	The investor’s money would be paid into a designated bank account (usually a solicitor’s account) and held in that account to the investor’s order until such time as sufficient monies had been raised and the special purpose vehicle was in a position to issue loan notes and equity in the manner described below.
7.2	A large proportion of the sum invested (usually 99.99%) would be treated as a loan repayable by the special purpose vehicle in accordance with the terms of loan notes issued by that vehicle to each investor.
7.3	If sufficient monies were not raised, with the result that the special purpose vehicle was not in the position to issue loan notes and equity to the relevant investor, the investor’s funds would be repaid to him (with interest , if appropriate) from the designated bank account.” 
63.	As regards these features in the context of Shoreham, Croydon and Brighton:
(1)	In the Albermarle Shoreham and Croydon schemes, the application forms 	provided for investors’ subscription moneys to be paid into a solicitor’s 	client account (the Defendant Firm in the case of Shoreham, Boodle 	Hatfield at Coutts in the case of Croydon) on escrow terms attached, the 	escrow terms being identical save as regards the identity of the escrow 	agent and its client account details. The terms included the following:
“The Escrow Sums will continue to belong to the payer unless and until released to [the Albermarle SPV] on issue of Offer Shares as provided for in the Offer [for shares and loan notes in the SPV].  The Escrow Sums will not be returned to the payer or transferred to the payer unless and until the Offer lapses without Offer Shares having been issued as provided for in the Offer. [The Escrow agents] will be entitled to retain any interest accruing on the Escrow Sums.  The costs of transmitting Escrow Sums pursuant to these terms will be deducted from the sums concerned.”
(2)	The Albemarle Croydon scheme, which involved the sale and leaseback of 	Erinaceous’s headquarters building called “Phoenix House” in Croydon. 	The Defendant Firm acted for Erinaceous and Boodle Hatfield acted for the 	SPV. In the special circumstances of that scheme, Ms Streeton expressly 	confirmed to ECS and Mr Egan (in a letter dated 17 September 2007) that, 	though there had been a drafting error suggesting another condition, the 	only operative escrow condition was the issue of equity in the form of Units 	in accordance with the offer; and it appears that the release of funds out of 	the escrow account may have preceded the formal issue and certification of 	Units.  But no such release was effected until control of the SPV was 	beyond doubt; and it is also interesting to note that it appears that Investors 	may have been (and, for example, Mr Glatman certainly was) asked for 	specific approval for release of funds given the error above described.  
(3)	However, in respect of Albermarle Shoreham, inner core investors (namely, in that scheme, Stuart Wallis, Black Isle and European Securities) were invited by Mr Egan to, and did, transfer a first tranche of funds to the Defendant Firm’s client account before any application form was available for use (and before the provision of any Information Memorandum as required for an investment of this sort).  

(4)	It is unclear in the context of Albemarle Shoreham (since the documentary evidence was sparse) what process Mr Egan used to obtain these funds; but some £2 million was raised from the early (inner core) investors.  The monies solicited by Mr Egan were received and in due course applied to complete this first stage of the Shoreham Airport purchase.  (The total consideration for the two leases purchased was £3.8 million; this was left outstanding as a loan by Erinaceous to Albermarle Shoreham (“the Erinaceous Loan”), and Albermarle Shoreham assumed responsibility for repaying a loan which Erinaceous had made to a fund introduced to Erinaceous by Mr Nicholas Cummings (Mrs Bellis brother: “Mr Cummings”) called Berkshire UK Industrial Property Limited Partnership (“BUKIP”) in June 2006 and the loan (“the Brightside Loan”) which the founder of BUKIP (Brightside) had made to BUKIP to enable it to purchase two of the underlying properties.)

(5)	The monies advanced by inner core investors at stage 1 were largely used to repay the Brightside Loan on 28 December 2006, and the balance went to Erinaceous on 29 December 2006. No investment memorandum, nor any application form, had by then been issued.

(6)	In the context of Albermarle Shoreham, the funds initially subscribed were not transferred on the terms of an express escrow; Mrs Bellis in a letter to Mr Lawson dated 21 December 2006 (“the Shoreham engagement letter”) records Mr Egan as having characterised them as to be treated as unsecured loans, even though the early round inner core investors were later asked to fill in application forms contained in the investment memorandum (“IM”) once it had been produced.  

(7)	Furthermore, in the case of the Albermarle Brighton scheme, which never proceeded beyond the stage of an initial invitation by Mr Egan (by e-mail dated 4 July 2007) to an inner circle of repeat investors to provide “some initial seed capital to push the project forward”, no escrow account nor escrow terms were provided for: “seed” or inner core investors were simply asked to transfer monies to an account at Coutts in the name of Albermarle Brighton International Arena LLP, in effect on trust. 

(8)	In the event, both Albermarle Shoreham and Albermarle Croydon proceeded and the escrow arrangements undoubtedly put in place for second tranche investors fell away. Albermarle Brighton did not proceed and the subscribed moneys were all returned to the payers.
64.	It may be apparent from all this that the preceding Albermarle schemes share similar characteristics, but with some variations: the pattern is similar but not exactly replicated. Nevertheless the Claimants rely on these preceding Albermarle schemes to establish the incorporation by usage or implication of escrow terms; and the Defendant Firm relies on them in support of its contention that it was not at all unusual for (at least) inner core investors to invest seed capital on an informal basis, well before the issue of any of the documentation ordinarily required.
Changes in Albermarle pattern  after acquisition of Egan Lawson by Erinaceous
Egan Lawson becomes ECS and part of the Erinaceous Group
65.	The acquisition of ECS by Erinaceous brought changes of considerable significance. I should mention the following.  
66.	The first is the most obvious: Messrs Egan and Lawson lost their independence and became subject to the ultimate direction and control of Erinaceous and in particular of Mr Neil Bellis (“Mr Bellis”) and Lucy Cummings (“Ms Cummings”). 
67.	Mr Bellis and Ms Cummings were, until 7 November 2007, its Chief Executive and Chief Financial Officer respectively; they were founding members of Erinaceous and between them still owned some 17% of its shares. 
68.	I formed the impression that whereas prior to the acquisition of Egan Lawson, the SPVs used for the Albermarle investment schemes were in effect treated as vehicles owned by or for the investors from their inception, afterwards, they came to be treated as subsidiaries owned and controlled (even though indirectly) by Erinaceous. 
69.	A second change, as it seems to me, is that not only did Egan Lawson become, as its subsidiary, subject to the control of Erinaceous, but it was also, to some extent at least, tied to its fortunes, and became something of a cash-cow or resource for its growing need for money as its fortunes deteriorated.  
Erinaceous Group’s developing financial difficulties
70.	Over the course of 2007 Erinaceous slid into considerable financial difficulty: its need for cash, especially in order to seek to retain its bankers’ patience, became pressing.  This undoubtedly (to my mind) translated into increasing pressure on Mr Egan to get as much money from “his” loyal investors, as quickly as possible. 
71.	As to the development over 2007 of Erinaceous’ financial difficulties, although there was some dispute before me in this respect, the following facts appear to me clear from the documentary evidence:
(1)	The group’s share price on AIM fell sharply over the course of April through September 2007, and especially sharply after the collapse of takeover talks in August.
(2)	By e-mail to Mrs Bellis and Ms Cummings (cc Mr Cummings) dated 17 September 2007 Mr Egan reported that “some of the investors are giving us a hard time as they read the press…” 
(3)	By 20 September 2007 Deloitte & Touche (auditors to Erinaceous and the group) had discovered that Erinaceous had been in breach of its banking covenants on interest cover and cashflow as a result of poor trading in the first half of the year and had insisted on putting a “going concern” qualification on the interim accounts stating their belief that there was “a material uncertainty which may cast significant doubt on the group’s ability to continue as a going concern.” 
(4)	On 24 September 2007, Mr Egan, in response to an e-mail from Ms Cummings (circulated to Mr Cummings) seeking to downplay the significance of the breaches of banking covenants and urging speedier fundraising as a “top Group priority in order to steady the banks again”, reported that:
	“Whilst we have raised a little, investors are refusing to put in money off 	the back of an unsecured loan note, particularly when they are constantly 	reading adverse press comment.  The fact that the property is overvalued, 	that the rents have been cooked up and the interest rate from Erinaceous is 	penal, do not help either.  Some of the big investors we have been talking to 	have withdrawn…owing to concerns for the group.”
(5)	By 28 September 2007 the Times, the Daily Telegraph, and the Financial Times all carried stories about the real risk of its collapse.
(6)	By October 2007 it was reported on FT.com that “Erinaceous Group, the troubled property services company, slumped a further 29% to 24p as take-over talks were called off”.
(7)	On 6 November 2007 Mr Bellis and Ms Cummings were placed on garden leave.
(8)	After unsuccessful efforts to rescue the group made by Mr Nigel Turnbull and a new board,  Erinaceous went into administration on 14 April 2008.
(9)	However, it is to be noted that it was not until 9 February 2010 that AFL followed it.
72.	There are clear signs that as the financial position of Erinaceous deteriorated over the Summer of 2007, and its difficulties with its bankers grew, Mr Bellis and Ms Cummings came to regard the Albermarle Funds, and especially those still open for subscription, as providing a source of substantial and (as they hoped) quickly available profit and funds.  In the context of Fairoaks especially, they placed considerable pressure on Mr Egan, both to maximise the return to Erinaceous and to speed up the collection of funds from his Albermarle investor following.   
Mrs Bellis takes over the role of solicitor
73.	The third change of significance I have already briefly mentioned. Whereas in all, or almost all, the Albermarle investment schemes prior to the acquisition of Egan Lawson by Erinaceous the solicitor used for the transaction was Ms Streeton (at whichever firm she happened to be at the time), after that acquisition Mrs Bellis took over the role Ms Streeton had played. 
74.	The Albermarle inner core and indeed other repeat investors had come to trust Ms Streeton to protect their interests; and Ms Streeton does appear to have done so (and in various instances herself to have invested). 
75.	Mrs Bellis had not the same experience or undivided loyalty. She was and is primarily a property lawyer; she had not the in-depth familiarity with the Albermarle investment schemes (and though admitting to a grasp of the overall structure, denied knowledge of their detail); and she was subject ultimately, as were Messrs Egan and Lawson, to control by Erinaceous. 
76.	As I explain in the next paragraphs, Mrs Bellis also had strong ties to Erinaceous and its group companies, and she and her firm were heavily dependent on Erinaceous; that dependence further discouraged any objective consideration on her part of the transactions in 2007, as well as any inclination to look after the interests of investors separately to those of Erinaceous.
Mrs Bellis’s perception of her role
77.	The fourth change was a consequence of the first three.  As it seems to me, a combined effect of Egan Lawson/ECS becoming a subsidiary of Erinaceous, Mrs Bellis’s ties and interests, and her different outlook in comparison with Ms Streeton, was that whereas before the acquisition of ECS by Erinaceous, the solicitors (in the person of Ms Streeton) to the relevant SPV in effect seemed to regard themselves as charged with the protection of the investors (as the prospective owners of the SPV), afterwards the solicitors (in the person of Mrs Bellis) were beholden to Erinaceous and viewed the SPV as part of the Erinaceous Group.  Mrs Bellis seldom, if ever, focused on the matter from the point of view of the investors.
Mrs Bellis and her other family interests
78.	As may already be apparent, Mrs Bellis had a number of family contacts in the   Erinaceous group: Mr Bellis being her husband, Ms Cummings her sister, and Mr Mr Cummings (who worked for Erinaceous as a consultant, was nominally the beneficial owner of all the shares in AFL, and came to play a significant role in the Albermarle Fairoaks transaction) being her brother. Mrs Bellis was also company secretary to Erinaceous and its numerous subsidiaries. 
79.	Mrs Bellis established the Defendant Firm in the same year as Erinaceous was incorporated. The Defendant Firm was retained and acted at all material times thereafter as solicitors of the Erinaceous companies, including (after its acquisition) ECS.  
80.	The Defendant Firm had its offices in the same building as Erinaceous in Croydon: it had a service occupancy of almost the whole of one floor of a seven-floor building and it shared a reception area (and entrance) with Erinaceous. 
81.	In a typical year, some 70% of the Defendant Firm’s fee income came from Erinaceous and its subsidiaries. Mrs Bellis told me that the Defendant Firm earned some £0.8 million from Erinaceous in 2006, and something just under £1 million in 2007. 
82.	These fees were fixed by the Erinaceous remuneration committee annually. Sometimes a proportion was attributed to a particular transaction (in the case of Fairoaks, for example, some £200,000 was attributed): but the fee arrangements were far from standard, and certainly not fixed at arm’s length.  
83.	In addition, Mrs Bellis received fees for acting as company secretary for Erinaceous and its subsidiaries (of about £40,000 per year). 
84.	Mr Egan told me he regarded her as, in effect, Erinaceous’ in-house lawyer. The heads of terms for the Albermarle Brighton investment described Erinaceous’ lawyers as the “in house legal team”. The fee arrangements I have described support the depiction. 
85.	It is not easy to accept (although she does maintain) that Mrs Bellis was independent. It is the Claimants’ case that Mrs Bellis and thus her firm were in a position of obvious conflict, and that this led to her either preferring the interests of Erinaceous or disregarding her duties to AFL and the interests of the investors who would in due course own it.
86.	Mrs Bellis’ position, and the potential conflicts of interest inherent in it, was further complicated by her own personal interests. Thus, for example, she, with her husband and her sister, also owned and controlled a company called Longmint Aviation Limited (“Longmint”). Longmint came to own a strategic part of the land at Fairoaks airport (where the petrol tanks were). 
87.	Further, these family connections and interests meant that Mrs Bellis’s financial position and the future of her firm was very closely tied to Erinaceous and its group. Although Mrs Bellis emphasised that she was not aware until September of Erinaceous’s financial difficulties, I cannot accept this: the extent of her family interests and her family connections  make it too improbable.  I find, on a balance of probabilities, that she became aware of these difficulties from her husband and sister, if not from her work, as they developed.
Albermarle Fairoaks scheme and the facts in more detail
88.	Before turning to the detail of the facts, it may assist an understanding of a story which is at once convoluted and yet in large part undisputed for me to outline certain distinguishing or critical features of the Albermarle Fairoaks scheme: especially since it differed from the previous schemes in a number of respects, and the underlying investment was both considerably larger and more complex.  
The underlying investment: Fairoaks airport land
89.	The underlying investment comprised land with commercial development potential at Fairoaks Airport in Surrey. AFL acquired this land (which was only part of the airport complex) in July 2007 from Erinaceous as part of a large and complex scheme involving (a) the acquisition of the entire airport and the airport operating company by Erinaceous and other companies on 26 July 2007 and (b) that onward sale by Erinaceous to AFL. 
90.	Amongst other things, the overall transaction involved restructuring the ownership of various land/assets via Luxembourg, Liberian and Maltese companies. There were also fiscal, listing and regulatory implications to consider, as well as bank lending arrangements.
91.	It was complicated further by the fact that the airport complex and operations came into multiple ownership, including Mrs Bellis and her family’s involvement through Longmint which I have already mentioned.  Longmint acquired the Mann Aviation group companies (an aircraft engineering and maintenance business based at the airport) and invested in a small, strategically important, part of the airport land. 
92.	Mrs Bellis’ relaxed attitude to conflicts of interest is illustrated by her lack of concern in acting for Longmint in the Fairoaks transaction, as well as for Erinaceous and AFL. Longmint also leased the ‘hectare’ of development land in the middle of the Fairoaks Airport from AFL for £60,000 per annum for 100 years because, as Mrs Bellis put it, Longmint wanted a “piece of the action”. (These were the rents that Mr Egan described as “cooked up” in his email of 24 September 2007 referred to in paragraph 71(4) above.)  
93.	Mrs Bellis was company secretary of Longmint as well as Erinaceous throughout this time and she signed the leases with AFL on behalf of Longmint. She accepts that she drafted the lease of the hectare of land for both sides, as well as acting for Longmint in registering the leases. In other words, she acted for both sides insofar as there was legal work to be done.
94.	Mrs Bellis saw nothing untoward in all this. It was pressed on me after circulating an earlier draft of this judgment that she had no reason to do so, on the footing that each of the companies concerned was well aware of her various roles.  In the case of Erinaceous and Longmint, I am sure that is so; but I do not accept that AFL and the Investors were aware, still less gave their informed consent.  In any case, the point is not really whether or not Mrs Bellis’s multiple roles conflicted; it is the fact that she had them and the extent of her and her immediate family’s interests.  I have concluded that Mrs Bellis felt able to act in these multiple capacities as well as the SPV (AFL) and representing apparently conflicting interests because she considered Erinaceous and its subsidiaries and associated companies in effect to be one entity, and to a large extent, at least until November 2007 when her husband and her sister were removed, a family affair.
 Purchase and funding of the Fairoaks land
95.	AFL was a shelf-company and had no resources of its own. The purchase price to AFL of the land and other interests at Fairoaks of some £31 million was funded by 3 loans from RBS, and an unsecured loan of £15 million from Erinaceous.   
96.	Part of RBS’ funding, the RBS Equity Bridge, was a short term bridging loan of £7 million, half of which was to be repaid on 26 October 2007 (i.e. after just 3 months), with another £3.5 million required to be repaid by 26 January 2008.
97.	The scheme required about half the borrowings to be repaid in the early course I have described out of money to be raised from the Albermarle circle of investors and (in light of its unusual size) additional investors also. 
98.	Thus the amount of funding required to be raised from investors was some £22 million. This was a far bigger funding task than Egan Lawson (and in particular, Mr Egan, who was the individual principally involved) had undertaken in previous Albermarle investment schemes.
99.	Further, and unlike most of the previous Albermarle schemes, by the time that the Albermarle investors were invited to participate, the underlying property transaction had actually already completed. Funds lent had already been drawn down and deployed. The Albermarle vehicle in question (AFL) was thus already committed to repaying the substantial bank borrowings within 3 months. AFL and Erinaceous were in effect irrevocably committed. 
100.	Consequently, as regards investors, it was not a case where if an aggregate investment target could not be achieved by a closing date, the underlying deal would not proceed. However, if outside funds were not raised by investors, Erinaceous would be left with the burden of its guarantee of the RBS Equity Bridge, and probably an economic responsibility for the other borrowings also.  Longmint would also be likely to be prejudiced too. All that would have, or potentially have, serious adverse financial consequences for Mrs Bellis’s family.   
101.	However, and as I shall return to below, the evidence of the Claimants was that although they were aware that RBS had lent monies, at no time were they informed or given any inkling of the instalment payment dates of these loans, and had no reason to believe that the monies raised from them in September were required to pay off an instalment imminently due.  Mr Egan accepted this; and Mrs Bellis could not gainsay it.
SDLT changes and Erinaceous difficulties bring further complication
102.	The complications inherent in the Fairoaks deal (given its magnitude and the multiple interests to be accommodated) were exacerbated by a further considerable complication caused by changes in UK tax provisions. These changes threatened the model or pattern that had hitherto been adopted in all (or virtually all) of the preceding Albermarle schemes.
103.	By 2007 the preferred vehicle for use in Albermarle schemes was an LLP. The advantage of the LLP was that it paid stamp duty land tax (“SDLT”) upon purchase of the land, but the investors would not pay stamp duty on joining the LLP. 
104.	However, on 13 April 2007 ECS through Messrs Egan and Lawson were advised by Boodle Hatfield that the content of the Finance Bill (which became the Finance Act 2007), might render the use of LLPs potentially tax inefficient, at least where completion of the underlying property acquisition pre-dated the investor’s membership of the LLP (as was of course the case).  
105.	It was proposed that that in those circumstances, the acquisition of ‘equity’ in the LLP by an investor would also be subject to a charge to SDLT, referable to the underlying property value.  Obviously that would be highly tax inefficient: SDLT would be payable by the LLP upon acquisition of the land, and then payable again by the investors upon their acquisition of equity. Some other SPV or structure, in the event one with a cross-border element, had to be devised. This was by no means straightforward; and it was bound to take time. 
106.	I return to elaborate on some of these complexities and their consequences later. For the present suffice it to say that from July 2007 a measure of lack of co-ordination, not to say chaos, is apparent: and so too is the increasing dominance of the interests and requirements of Erinaceous, regardless of the effect on the Albermarle investors. 
Chronological sequence of background events
107.	I turn to the chronology of the background events. Notwithstanding the fact of some 10 full days of cross-examination most of the facts are uncontroversial.  I leave until later facts substantially in dispute.  
Development of the structure
108.	I can take up the largely undisputed chronological sequence of events from 3 July 2007, when, after a period of uncertainty following the advice from Boodle Hatfield as to the SDLT complications to which I have already referred, Mrs Bellis emailed Mr Egan telling him that she had received informal advice from Nabarro as to a possible alternative structure, namely a Jersey or Guernsey “offshore fund”.  
109.	The essential features of the alternative structure envisaged for the Albermarle Fairoaks scheme were as follows:
i)	A Channel Islands exempt company would be established in time for completion to take title to the development land and borrow money for that purpose.
ii)	The shareholder of the company would be the person who would ordinarily have been chosen as the founder member of an LLP, had an Albermarle 	LLP been used as the SPV: that is to say, Mr Egan and/or Mr Lawson or Egan Lawson colleagues.
iii)	A Channel Islands unit trust would be established, which would then acquire the shares in the company from the founder shareholders (for which there would be no SDLT charge).
iv)	The company would then be liquidated and the property could be 	distributed up to the unit trust without an SDLT charge.
v)	Investors could invest in units in the unit trust.
110.	This alternative structure was untested and complicated: it would inevitably take time to develop and establish. Mrs Bellis suggested, that in the meantime, a Guernsey or Jersey company could be set up in order to purchase the land, financed as envisaged by the current plan for the LLP purchase (i.e. RBS Equity Bridge) and: 
“You would start fund raising immediately upon the basis that investors would be making a straightforward loan to the Jersey or Guernsey company which would be converted into an investment into the fund when it was up and running.”
111.	In parallel, Mr Egan had also been making enquiries and had apparently spoken to Richards Butler and also to Mr Ric Berman (“Mr Berman”, sometimes referred to as “Ric”), the Chief Executive of the specialist registered corporate finance and regulatory adviser regularly used by Mr Egan in the context of Albermarle schemes.  
112.	Mr Egan replied to Mrs Bellis as to her suggestion on 3 July 2007:
“That is virtually what Ric has been suggesting and he is registered in Guernsey, he also takes the view that in time one could list it on the AIM/Irish Stock Exchange etc.  Then grow it into a fund, adding further properties.
I have also had a chat with Richards Butler who are doing our hotel deal, and whilst they seem to agree with Boodle Hatfield they say if we just exchange contracts or hold up the formation of the LLP until the money is in, which we can do with some of our current deals (the hotel and Finsbury Sq) we can still do the normal LLP route.
So I suggest we go down both routes, the LLP’s on shore for the leisure deals and the Guernsey route for Fairoaks to grow into a fund by adding Shoreham etc.”
Thus Mr Egan envisaged creating some sort of umbrella/super-fund which could be listed, and which could acquire not only AFL but Albermarle Shoreham too.  
113.	Both Mrs Bellis and Mr Egan recognised that the ‘super-fund’ route would take yet further time to set up.  This was highlighted in Nabarro’s email and in Mrs Bellis’ email of 3 July 2007, and reinforced by Mr Berman during their discussion on 6 July 2007.  Mr Berman said it would take about 2 months to set the fund up.  He advised that a Guernsey fund was the most “sensible”, and suggested:
“Closed ended fund – 12 year life.  Put a couple of projects in it.  Then list it on Irish Stock Exchange.  Share issuance programme – premium management programme which allows [it] to issue new share [without] a prospectus – [could] have an “infrastructure fund” – substantial costs but sensible, e.g. to put Shoreham in.”
114.	However, Mr Berman also explained that this type of arrangement would be a “regulated investment”, and so would require FSA regulated individuals to be involved in soliciting investment in the UK, or only solicit investment from regulated entities or professional investors. As was later realised by Mr Egan, submitting to such regulation was likely to add complexity to the establishment and operation of such scheme. Hitherto, the Albermarle schemes had been unregulated collective investment schemes.
Instruction of Guernsey lawyers and Guernsey shelf company
115.	On 3 and 4 July 2007, Mrs Bellis approached Guernsey lawyers, Ozannes, in connection with the incorporation of an exempt company and unit trust.  Ms Helen Wyatt (“Ms Wyatt”) of Ozannes advised by email that a unit trust would take some time to establish, and the raising of money by the issue of units in a unit trust would require Control of Borrowing Order consent (“COBO consent”) from the Guernsey Financial Services Commission. 
116.	As for an exempt company, Ms Wyatt said this could either be newly incorporated (this would take about 3 working days provided all the information needed was provided), or Ozannes could provide a shelf-company “which could be used provided that the directors, shareholders, registered office and company name of that company will need to be changed and appropriate filings made with HM Greffe (the Companies registry).”  Ms. Wyatt attached an application form, which she requested be completed “regardless as to whether or not the shelf company is to be used in order that we have relevant background detail…” 
117.	The controlling hand of Erinaceous is clear from the intervention of Ms Cummings and Erinaceous. Ms Cummings took over dealing with Ozannes and emailed Ms Wyatt on 9 July 2007.  She explained (as it turned out, optimistically) that the property transaction would likely be completing in the next week, and was therefore interested in a two stage process – establish the company first, and later “the fund to sit above company and raise the equity to repay the non bank loans, and can when ready dissolve the company and transfer the assets and liabilities to the fund.”
Mr Egan’s agreed funding terms
118.	By this time, Mr Egan had already agreed terms with RBS for funding, and on 6 July 2007 Mr Gareth Beaton at RBS sent through to Mr Egan “Credit Approved Terms” for “Albermarle Fairoaks LLP”.  
119.	The facilities offered were a Senior Loan of £24 million or 60% of market value (whichever was lower), and an Equity Bridge Facility of £7 million repayable within 6 months of initial drawdown, with an interest rate of 1.5% over LIBOR “plus MLA’s”.  The source of repayment was described as being:
“from equity raised from new investors, 50% to be repaid within 3 months”
120.	Mrs Bellis and Mr Egan dealt with RBS in a telephone conference on 9 July 2007.  The SDLT issue was raised with RBS, and RBS’s solicitor (Mr Grieve at Burness LLP) agreed that the changes to the SDLT partnership provisions meant that “following any property acquisition new members/partners will now be subject to SDLT.  This corresponds with the advice given to Geoff that he should not use an English LLP”. 
Arrangements for ownership and control of SPV
121.	By 11 July 2007, it seemed as if the underlying transaction would actually complete the following week: so there was some real urgency to get the investment vehicle established.  
122.	On 11 July 2007 Ms Cummings sent through to Ozannes the completed application form, which recorded Mr Egan and Mr Lawson as being the nominated shareholders.  They were the people who at that stage were regarded as being likely to be the founding members of an LLP had one been used.  This was in conformity with previous Albermarle investment schemes: those two held the shares in substance for the investors, who would replace them and own the entity once subscription was complete and the scheme could safely proceed.
123.	Ms Wyatt provided a list of administrators who could provide corporate administration services. Ultimately Ms Cummings selected Legis Trust & Corporate Administration Limited (“Legis”).  
124.	The following day (12 July 2007) Ms Wyatt emailed Ms Cummings, pressing for a decision on the administrators, explaining that until they were in place Ozannes could not lodge an application for incorporation of a new company; there needed to be administrators because they supplied the registered office.  She also suggested that the administrators should provide corporate “nominee shareholders/directors” to get the company incorporated, with Messrs Egan and Lawson being the beneficial owners. 
125.	Legis agreed to provide a registered office facility, secretarial and administration services on the afternoon of 12 July 2007 (the precise chronology is relevant as I explain later).  That evening Ms Wyatt emailed saying that Ozannes had not been able to submit company incorporation papers because they “remain incomplete until the administrator has been appointed and a registered office determined.” 
126.	On the morning of Friday, 13 July 2007, it was decided not to incorporate a new company but to use a shelf-company.  Ms Wyatt emailed:
“it has now been decided in the interests of time to use Shelco Twenty Two Limited and to change the beneficial ownership (and later the name) rather than to incorporate a new company.
We are awaiting confirmation of whom the beneficial owner will be – it is intended to use First/Second Ovalap as nominee shareholders for the time being and to use Legis as registered office.
Please could you let us know what info you are missing regarding the change of beneficial ownership form as I would like to get this in today so that we can use the company in a transaction on Wednesday.” 
Mr Cummings becomes beneficial owner of AFL
127.	Also on 13 July 2007, after tax advice from PwC to Erinaceous that the beneficial owner ought not to be an employee of Erinaceous or of any of its subsidiaries, it was decided by Erinaceous to use Mr Mr Cummings as beneficial owner of the shares in AFL. 
128.	Mr Cummings was not an employee of Erinaceous (the relationship was as a consultant): but he was part of the family and no doubt perceived by Mr Bellis and Ms Cummings as biddable (as he proved to be). Whereas Mr Egan and Mr Lawson had regarded their beneficial ownership of the SPV in previous schemes as held for the benefit of the investors, it appears from later matters that Mr Cummings regarded himself, in effect, as a placeman for Erinaceous: by whom he was indeed placed in that position. When the interests of Erinaceous and the investors diverged, he chose to prefer the interests of Erinaceous and his family, as I explain more fully later.
129.	Ms Cummings emailed details for Mr Cummings to Ms Wyatt. Ms Cummings then asked Mrs Bellis by email to provide a lawyer’s reference for Mr Cummings to be sent to Legis (no doubt for their ‘Know Your Client’ checks).  The application for consent to change the beneficial owner was then submitted to the Guernsey authorities.  Ms Wyatt explained that “we cannot use the company for this transaction until consent to the change of beneficial ownership is received but as the application and consent request have been submitted today we do not foresee any difficulty in transacting on Wednesday 18th July.”  
130.	Consent in principle for the change in beneficial ownership was provided by the States of Guernsey Policy Council on the same day; but this was expressly subject to the proviso that there be no objection by Guernsey’s Law officers.  On 17 July 2007 HM Procureur confirmed that he raised no objection to that change. 
131.	There is a dispute (which I address later in the context of the Claimants alternative basis of claim) as to precisely when, in such circumstances, Mr Cummings became beneficial owner.  It seems to have been assumed by Mrs Bellis and Mr Cummings at the time that the consent for a change operated from 13 July 2007; and on 13 July 2007 Mrs Bellis prepared and Mr Cummings (purportedly as beneficial owner of AFL) signed a letter of engagement  (“the Engagement Letter”).  
132.	The importance of the dispute is that it affects a question whether that Engagement Letter was ever validly approved by or on behalf of AFL, and the Defendant Firm places substantial reliance on the Engagement Letter as the source of its authority to do what it subsequently did.

The Engagement Letter
133.	The Engagement Letter in relevant part read as follow: 
“Shelco Twenty Two Limited has been incorporated in Guernsey to take the legal title to the Development Land.  As you know, the usual vehicle which has been previously used for projects of this type is a limited liability partnership but, in view of the recent stamp duty land tax changes, Geoff has been advised that this is no longer appropriate.  I understand that Geoff is taking his own advice as to the structure which will be adopted for the fund raising but that, until that structure is in place, investors will be making loans to Shelco Twenty Two Limited in order, first of all, to repay the equity bridge of £7m and secondly to repay the loan which will be made by Erinaceous Group plc of the balance needed to complete (likely to be £15m)…
This firm does not have the expertise to advise on the structure which should be adopted in the future as a vehicle for investors.  As indicated above, Geoff is taking his own advice on this (initially from Ric Berman) and I understand that Lucy is also assisting in liaising with Ozannes in Guernsey.  Following my discussion with Geoff and Michael, however, I can confirm that I am agreeable to receiving the monies from investors on the basis that these monies are remitted either by way of loan to Shelco Twenty Two Limited or as an investment in whatever structure is put in place for the project and that these monies will be immediately utilised to repay monies owed to the Royal Bank of Scotland…”  
134.	Although completion of the contract for the purchase of the development land had at that time been anticipated to take place on 18 July, it was delayed until 26 July 2007.  The Defendant Firm acted as the solicitor for AFL on the transaction, and Legis, which provided the corporate directors of AFL, knew of the Defendant Firm’s role acting for AFL: it made no complaint and at the least acquiesced in it.  The transactional documents were finalised (including RBS’s requirement for Guernsey legal opinions as to whether AFL could enter into the transaction and if so by whom).  The formalities required by RBS were observed.   
135.	In completing the purchase of the development land on 26 July 2007, AFL contributed none of the purchase price from any capital of its own. As apparent from the Completion Statement, the purchase price all came from money borrowed from RBS (as to £31 million) and Erinaceous (as to £15 million). 
136.	Subsequently there was VAT to be paid on the purchase, and RBS funded a VAT Bridging Loan of £7.72 million, which was provided on 24 August 2007.
137.	On 26 July 2007 Ms Cummings emailed Mr Egan and Mr Lawson explaining that the Fairoaks Transaction would probably be completing that day.  She said:
“…so we need to sort out early round fund raising.  As you know there is not only the equity bridge from RBS but the loan from E [Erinaceous] – so this is a big task.  We need the early round loans as quickly as possible – the fund structure will take a few weeks to set up so we can offer an early subscribers discount pending  issue of the units in the trust.”
138.	Mr Egan replied the same day, saying
“I agree I have the initial teaser ready”.

The “initial teaser”
139.	This “initial teaser” simply described the nature of the Fairoaks property and its potential: it did not set out the terms of investor participation.  
140.	Once ready it was then sent in draft to Ms Cummings and Mr Cummings on 1 August 2007.  On 3 August 2007, Ms Cummings made some amendments in tracked changes and sent it back to Mr Egan – “please feel free to ignore or accept as you wish.  I think we are heading for a good result on this – I hope your investors feel the same!”
141.	On 30 July 2007 Mr Cummings signed an administration agreement with Legis. This provided principally for:  
	(1)	Legis to provide (for a fee) corporate nominees to hold the Shares and to 		exercise all voting powers in accordance with “Proper Communications” 		(that is to say, instructions given by Mr Cummings as the person prescribed 		for that purpose);
	(2)	Legis to provide, at its sole discretion, up to two corporate or individual 		directors to be appointed by the legal shareholders to act as directors of 		AFL in accordance with the Articles of Association.
Proposal for a loan note
142.	On 6 August 2007 Mr Egan emailed Ms Cummings, asking her (emphasis supplied):
“Can you comment on my earlier note re security and bonus for early investors please, as I would like to include it, perhaps we give them a loan note for the Guernsey company pending the Investment Memorandum being completed, plus maybe interest at 1% above base (same as bank).” 
143.	Ms Cummings (again the controlling hand of Erinaceous is evident) agreed with this proposal: 
“Loan note from Guernsey co (now renamed Albermarle Fairoaks Ltd) would be fine – happy with the interest until the structure is in place as this should be neutral to your returns model.” 
Revised Teaser and the Teaser email
144.	On 8 August 2007 at 13.41 Mr Egan sent out a revised Teaser (“the Teaser”) under cover of an email to his investors (“the Teaser email”) to which he attached three excel spreadsheets.  The Teaser email was then sent to Ms Cummings. 
145.	The Teaser email solicited investment.  It read as follows:
     “ALBEMARLE FAIROAKS
We have just completed the purchase of Fairoaks Airport and the income producing element 160,000 sq ft on 16 acres plus 20 acres of development land has been transferred into Albermarle Fairoaks and we are now aiming to raise the equity, it has been banked by RBS.”
I attach a brief summary of the transaction and figures from which you can see that the IRR projections are 15-32% depending on how much pre-let development we undertake over the next 5 years.  The property has been acquired in a Guernsey Limited Company and we intend to create Guernsey Close Ended Fund above it controlled by the investors.  This will enable:
(1)	SIPP investors to invest in Fairoaks
(2)	Fairoaks to be merged in due course with Albermarle 	Shoreham
(3)	Ultimately a listing in the Guernsey or maybe Irish Stock 	Exchange which will give liquidity to the investments 	and Inheritance Tax and Capital Gains Tax advantages
Prior to formal fund raising in September, I am keen to offer the opportunity to invest straight away to some of our regular Investors as Shoreham was oversubscribed.
If it is possible to transfer money in the next week, I can immediately issue loan notes and ensure that a paid return of 1% above base rate can commence immediately.  If you let me know how much to earmark for you, I will send you the bank details.”
146.	Pausing there: the Teaser e-mail does not appear on its face to have been sent or circulated to Mrs Bellis: she denies having seen it and rejects the Claimants’ contention that she did. Although the Engagement Letter had identified it as a document she did need to see, she told me that she never asked to see it either (which she accepted “may have been” remiss of her).  All this is surprising and I return to it: in the meantime, I note that even if she did not see the August version she plainly had seen the earlier (June) draft containing a description of the proposed investment, but no invitation such as in the Teaser email.
Draft Loan Notes are provided and sent out
147.	Mrs Bellis’ first recorded involvement in the “fund-raising” part of the story was on 8 August 2007 when she spoke to Mr Egan and he asked her to draft a form of loan note for Mr Egan to show to the investors.  Her attendance note records: 
“(3)	What can we give them now? A Loan Note.  Me to draft 	a Loan Note.”
148.	The plan for a loan note, which at that time was envisaged to provide for a contractual right of conversion into some form of equity, is reflected in an email Mr Egan sent to Ms Cummings, Mr Lawson, Mr Pearson and Mrs Bellis (half an hour before he sent out the Teaser email):
“We are out to key investors to get some initial money now, giving them a loan note for the Guernsey Company which Juliet has promised to draft, at 1% above base.
Juliet is also sending me copies of all the docs, leases etc, so I can get Ric started on the Investment Memo…”
149.	On 13 August 2007 Mr Egan emailed Mrs Bellis chasing her for the draft loan note: 
“Any chance of a loan note, so I can collect some funds.” 
150.	On 14 August 2007 Mrs Bellis emailed Mr Egan asking for further information as to the terms of the loan notes:
“1. I imagine that it will attract interest but at what rate?
2. I am proposing that the note will be cancelled in return for an appropriate unit in the new unit trust which is being set up but there should be a long stop date in the note for repayment if the unit trust does not get formed.  Any ideas?
3. The note will have to spell out that the lender’s loan is subrogated to the Royal Bank of Scotland’s senior debt.  I assume that this is not a problem?
4. Are there any other conditions which you think ought to go in the loan note to ensure that it ties in with what investors have been told?”
151.	Mr Egan replied immediately saying:
“Thanks that’s fine, the note should be 1% over base, the rest of your comments are ok. ”
152.	He then (within minutes) sent another email answering Mrs Bellis’ question of the long stop date for repayment if the unit trust does not get formed:
“Sorry long stop date say 1 year”
PwC advise right of conversion not feasible
153.	Then, on 15 August 2007, Mrs Bellis emailed Mr Egan advising that she had received advice that the loan notes could not be convertible into equity in the unit trust:
“Draft Loan note.  On discussing this further with Price Waterhouse Cooper (who are advising on the best vehicle for the fund) they had strongly urged that there is no element of conversion in the note.  I have therefore just done a very simple note with conditions attached.  The only outstanding item of information I need from you is when you envisage paying the interest to the noteholders.  I have currently inserted quarterly in arrears.”
154.	She added, that although other documents (in particular, the property management agreements “modelled on Shoreham”) would “have to go over to Guernsey to be signed”:
“…I will obtain authorisation from the Guernsey directors for you and Dougie [Lawson] to sign the loan notes as otherwise issuing them is going to be very cumbersome”
155.	This change in what had previously been proposed (the change from a convertible loan note to a simple debt) was made unilaterally by Mrs Bellis, apparently on the basis of oral advice from PwC in discussions with Erinaceous’ director Michael Pearson of which no written record was produced or (so far as I am aware) exists. 
156.	Its significance is obvious: yet it is not even the subject of formal record, let alone proper assessment. This confirms the picture I have formed of Mrs Bellis’ indifference to the interests of the investors, and her abdication not only of any real responsibility for the overall legal coherence of the transaction as a whole (which she sought to disclaim under the terms of the Engagement Letter) but also of her most basic duties in relation to the use of her firm’s client account, and as adviser to the vehicle for the investment intended to be made by the Claimants (the SPV, AFL).  
157.	It is, however, important to bear in mind that the change was “behind the curtain”: it was not explained to investors.  The change gave rise to, or (given the SDLT problem) exacerbated, a real difficulty (which Mrs Bellis never addressed) as to how loan and equity were to be matched and coupled: but there is no reason to think that it resulted in any alteration in the investors’ own perception of the nature of the investment they intended to make.
158.	To return to the chronology, Mrs Bellis had omitted to attach the draft loan note to her email of 15 August 2007, and Mr Egan chased for this on 20 August 2007:
“2) The draft loan note was not attached, could I have it asap as I want to collect some money.”
159.	Mrs Bellis then emailed the draft loan note to Mr Egan at 10.38am on 20 August 2007. The draft Loan Note was an unsecured Loan Note “repayable on the later of one year from the date issue [sic] or when the Senior Debt shall have been paid in full” but with a power reserved to AFL to pay off early, in whole or in part. The Loan Notes, having a coupon of 1% over Bank of England Base Rate were to rank pari passu inter se and be subordinated to the rights of RBS in respect of the Senior Debt.   
160.	Pausing again, Mrs Bellis must have envisaged that Mr Egan would in due course be using the drafts “to collect some money” (since that was what he had expressly stated); but she must have understood that the drafts had not been approved by the directors of AFL (since she had not yet made any arrangements for that, nor for the delegation of authority by them).
161.	Further, Mrs Bellis appears to have made no effort to enquire what the investors had and were being told. She still did not ask to see the Teaser email, though necessarily by this time the only logical assumption she could have made was that there had opened up a material difference between what the investors had been told in the Teaser email (as to an equity investment) and what was now on offer (a loan note).  Again I return to this later. 
162.	After expressions of interest were received from investors, on or about  20 to 22 August 2007 Mr Egan sent (or had sent on his behalf) a further email (“the Loan Note Email”) to those who had responded positively. He thanked the investors for their interest and asked them to forward the money to the Defendant Firm, attaching the client account details and the loan note about which Mr Egan said:
“I have also attached the loan note (with interest) which we will be issuing pending completion of the Unit Trust.”
The remainder of the terms of the transaction will be fairly similar to Shoreham LLP...” 
163.	In the meantime, it is Mr Wallis’ evidence that he clearly recalls calling Mrs Bellis sometime between 15 and 17 August 2007 because he “wanted to speak with [her] before transferring my funds to her client account” to inform her that he was proposing to transfer a quarter of a million pounds to her firm and wished the money to be held “pending my further instructions”. Mrs Bellis denies that there was any such conversation; and the dispute is perhaps the most fundamental of the factual issues: I return to it in paragraphs 449 to 475 below. 
Payments start into the client account
164.	Monies subscribed by investors started being transferred into the Defendant Firm’s client account from around 21 August 2007.  The dates, amounts and payers are set out in the Schedule attached.
165.	Mrs Bellis’ evidence was that she spoke to Mr Egan on the telephone on 24 August 2007, during which Mr Egan instructed her that the sums which had been received from the 15th Claimant (Tenon) should be transferred to RBS.  Mrs Bellis noted in manuscript on a print out of the email: 
“GE confirms → RBS”
166.	Mr Egan, however, said that he does not recall any such conversation.  In his first witness statement he stated that he was on his boat which was docked at Poole Harbour – on a “team away day meeting” and it was “very unlikely that I would have taken a telephone call on my mobile on that date from Juliet Bellis…”  However, Mr Egan later served a second witness statement in which he now says that the “away day” was not in fact on 24 August 2007, but 31 August 2007 (which was the day that he sent the email to Mrs Bellis described below). I return to address the dispute as to this conversation later.
167.	Earlier in the afternoon of 31 August 2007, Mrs Bellis had sent Mr Egan a schedule summarising the payments which had been received into the client account for AFL, and the total was then £1.35million.  Mr Egan’s response was:
“the Fairoaks money needs to go to RBS. asap”. 
168.	On 3 September 2007, Mr Grieve (as already mentioned, a partner at Burness, RBS’s Scottish solicitors) emailed Mrs Bellis in relation to the VAT Bridging Loan and the timing of the transfer/restructuring into the unit trust (of which more below).  He also asked about the fund-raising:
“3.	I understand that our clients met or spoke last week and 	that the equity raising is progressing well and that 	approx £2 million has been forwarded to you.  My 	understanding is that this is to be remitted to the 	bank…. in reduction of the equity bridge.  Can you 	confirm that you have similar instructions.” 
169.	Since the principal contact with RBS was Mr Egan, it seems likely that it was he who had spoken with someone at RBS the previous week.  In any event, Mrs Bellis’ evidence was that she spoke to Mr Egan following her receipt of this email and he asked her to send the money to RBS “as soon as it comes in”.  This is recorded in her manuscript note written on the email. I return to this also later.
Payments out of client account to RBS
170.	On 4 September 2007 Mrs Bellis responded to Mr Grieve’s email:
“I currently hold £1,450,000 and am remitting this to the Bank today.  There is a further £250k on its way to me – there was some confusion about the payee on the cheque - and further funds are expected.  This is in reduction of the equity bridge.” 
171.	As she had foreshadowed in her email to Mr Grieve, two payments were then made from the client account to RBS which were applied to reduce the RBS Equity Bridge: £1,450,000 was paid on 4 September 2007, and £350,000 on 7 September 2007. 
172.	The RBS Bridging Payments were thus paid out of sums which had, by that date, been paid into the client account by the 2nd, 3rd, 6th to 8th, 10th to 16th and 18th and 19th Claimants. They were in fact paid early (the first instalment not in fact being due until 26 October 2007). 
173.	At the time that these payments were made, the form of the loan notes had not yet been finalised, still less authorised and agreed by AFL; COBO consent (the need or likely need for which in the context of the transaction Mrs Bellis must have been aware of from her correspondence with Helen Wyatt at Ozannes in July 2007), was still not in place; and Mrs Bellis had not undertaken the required Know Your Customer (“KYC”) checks. Mrs Bellis was well aware of all this.
174.	Furthermore, Mrs Bellis and Mr Egan knew that at the end of August / early September 2007 a unit trust would not be established in time for any of the Claimants to subscribe to it and it had not been determined how and in what form the Claimants would obtain the equity participation in and control of  AFL, the achievement of which accordingly remained uncertain. 
175.	They both appear to have had some expectation that Loan Notes could be issued promptly after Mr Egan raised loans from investors (including the Claimants): but the structure remained uncertain. None of the Claimants was advised by either Mrs Bellis or Mr Egan (or, indeed, anyone else) about these uncertainties. 
Delay and uncertainty continues
176.	The delays and uncertainties continued. Throughout August, September and October 2007 both Mrs Bellis and Mr Egan knew that no unit trust or any vehicle for equity participation had been formed.
177.	In tandem with the fund-raising, Mr Egan had apparently set Mr Berman the task of drafting an IM for equity participation through the unit trust.  
178.	On the evening of 26 July 2007 it appears that Ms Wyatt had emailed Ms Cummings, Mr Berman and Mr Egan about the formalities for establishing a fund structure.  She explained:
“Our correspondence with the Guernsey Financial Services Commission to date in connection with the take on and activities of Shelco Twenty Two Limited has been made on the basis that the ultimate structure to be put in place would not constitute a fund as only one property would be held.  I note however that this is 	not the case and that the fund will own a number of properties (possibly through subsidiaries) and a full fund application will be required. We will need to inform the Commission accordingly and submit the fund application to them” 
179.	Nothing then appears to have happened until the end of August when there was a flurry of activity from Mr Egan who seems at that time to have been trying to finalise an IM.  
180.	In an email on 28 August 2007 Mr Egan asked Mrs Bellis for updated versions of a Participation Agreement, Draft Loan Note and Property Management Agreement, explaining that “we are waiting to finalise the Investment Memorandum, which we must do asap as the rules change in October.” 
181.	In that email, copied to Ms Cummings, he asked “how is the Unit Trust formation going?”  Ms Cummings responded saying “The unit trust formation is awaiting the investment memorandum”.  At that time the unit trust under consideration was still the “super - fund” which would cover both Shoreham and Fairoaks. 
182.	It appears that Mr Egan had a meeting with Mr Berman on or around 4 September 2007 in connection with the drafting of an investment memorandum.
183.	Then on 7 September 2007 Mr Berman sent through to Mr Egan and Ms Cummings an investment memorandum for “Albermarle Infrastructure Plus Limited” (the “Albermarle Infrastructure IM”), a proposed Guernsey registered closed-ended investment company which was to be established into which both Albermarle Fairoaks and Albermarle Shoreham would be merged.  
184.	This Albermarle Infrastructure IM was, of course, consistent with the type of super-fund that Mr Egan had mentioned in his 3 July 2007 email, and which Mr Berman had explained to Mrs Bellis when they spoke on 6 July 2007 (see above). By mid-September 2007 however Mr Egan appears to have realised that having a regulated entity would be administratively burdensome.  On 17 September 2007 Mr Egan emailed Mrs Bellis and Ms Cummings saying that:
“	The meeting with compliance and Ric seems to have thrown up more complications than solutions, and he says it would take some time to start from scratch with the fund and FSA etc.  I wonder if there is a quicker route which we can do right now, either by just giving the investors shares in Albermarle Fairoaks Ltd or another and then looking at putting a fund over Fairoaks and 	Shoreham much later.”
Ms Cummings (not Mrs Bellis) responded on 18 September 2007 saying:
“I am talking to Guernsey fund managers about the structure and what we need 	to do – your idea might be the most pragmatic but I think under Guernsey GSFC regulation we will need a GPUT on top of the Guernsey company.  If Ric [Berman] is not prepared to appoint you an AR I may have to use an external fund manager which would cut in to our margin, but they would then have to 	appoint us as an AR.” 
185.	On 17 September 2007 Mr Egan emailed Mrs Bellis:
“	Some of the Investors are giving us a hard time as they read the press.  However I am sure I can make some headway with some of them if I can explain a) That 	theirloan notes are ahead of Erinaceous but behind RBS, where do I evidence that, and b) How do I get these loan notes signed and by whom. ”
186.	Mrs Bellis responded on 18 September 2007 attaching a revised draft loan note making it clear that the note-holder would rank ahead of Erinaceous. She said she would send this, together with the Participation Agreement and Property Management Agreement to the corporate directors to approve, and to authorise Messrs Egan / Lawson to sign the loan notes.
187.	Mrs Bellis did this.  She emailed AFL’s corporate directors on 20 September 2007 attaching the draft Loan Note referring to the fund raising having:
“started by way of loans to the company and lenders would like some documentation evidencing their loan”. 
188.	Mr Dickinson (“Mr Dickinson”) (acting for AFL’s corporate directors in Guernsey) did not reply until 24 September 2007 (having been out of the office until then).  His response was simply to say “Did you forward this to any of my colleagues to deal with in my absence or is it still pending?” He did not state any objection to the notion of a loan note.  He emailed again the following day having made some minor changes to the draft. He explained that KYC documentation was required, and he said that “In the meantime, we are making the application to the Guernsey authorities for the Control of Borrowing Consent for the £25 million.”  It is not clear from Mr Dickinson’s email how he got the figure of £25 million: it was not referred to in Mrs Bellis’ email.  The COBO consent was then obtained in those terms on 27 September 2007. 
189.	On 15 October 2007, by which time Ms Wyatt had been instructed to deal with the regulatory formalities in connection with the formation of the unit trust, Mrs Bellis emailed Ms Wyatt to explain a possible change in the structure (the interposition of an LLP), saying:
“Some investors prefer to invest through the LLP route rather than simply make loans to the company (which give an income but not share of the equity growth).” 
190.	By late September 2007 there were still a number of Guernsey regulatory “hoops” which needed to be jumped through, including in particular KYC documentation and COBO consent. Thereafter, Mrs Bellis was in regular email contact with Mr Egan: both were well aware that no loan notes had been issued to investors, and that they could not be issued unless and until these hurdles were overcome.
191.	On 27 September 2007, Mrs Bellis emailed Mr Egan explaining that “the loan notes” would be issued by AFL but:
“there are some regulatory issues which are having to be resolved.  In particular, the Guernsey administrators will need KYC evidence so this will be needed for those who have already participated as a matter of urgency.  Could you let me have the relevant pieces of paper for onward transmission (ie copy passport and utility bill).  The Guernsey administrators are also of the view that the issue of the notes might need to come from them.”
192.	Having by email sent on 27 September 2007 chased Mrs Bellis, stating that he wanted “to get to £3.5m quickly to get the brownie points back from RBS for paying them back early”, on 1 and 2 October 2007 Mr Egan sent some information about the investors to Mrs Bellis and Ms Cummings for the specific purpose of enabling the loan notes to be issued.  
193.	On 4 October 2007, Mr Egan emailed Ms Cummings and circulated Mrs Bellis saying that he was “determined to beat” the deadline for repayment of half the RBS Equity Bridge of 26 October 2007 and that he had “the balance of the first £3.5m waiting to go in” from further investors; but that they would “not do it until they get their loan notes.” 
194.	In his 4 October 2007 email Mr Egan also explained that he had been promised £3 million from another investor, but that “they want to go straight into the Unit Trust, do you know when that will be ready”. 
195.	On 4 October 2007, Mrs Bellis replied about the unit trust: 
“I am working on the docs. for the unit trust and will be getting them back over to Guernsey tomorrow.  Lucy tells me that Guernsey can turn this round pretty quickly and it would be better to get the money directly into the unit trust given the regulatory problems I am continuing to hit with the loan notes.” 
196.	On about 9 October 2007 Mrs Bellis was informed by Erinaceous’ Head of Tax, Mr Roy Flood, that the Chancellor of the Exchequer, in his Pre-Budget Statement, had announced that he was unravelling the changes made to the SDLT regime for LLPs in 2007.   Mrs Bellis notified Mr Egan of this change and advised that, subject to getting information from Mr Egan as to “the category of investor who is being targeted”, an LLP might be able to be used after all, not as part of the proposed unit trust, but either as shareholder of AFL or to take a conveyance of the Development Land from AFL.  She said that there was limited time to get this resolved and asked for his views. 
197.	There is an email exchange between Mrs Bellis and Mr Egan on 17 October 2007, starting with Mr Egan forwarding various KYC documents in respect of the fifteenth Claimant:
 (1)	Mrs Bellis emailed Mr Egan asking him whether Saskia (Mr Egan’s 	assistant) was “OK to chase up investors as we need some cash coming in 		next 	week to clear the £3.5m equity bridge – due 26th Oct.”  
(2)	Mr Egan’s response was “We will do it together, but so far they are 	refusing until the loan notes are available.  Plus we have about £3.5m 	promised but they will only go straight into the Unit trust.” 
 (3)	Mrs Bellis said: “If you can organise the KYC documents plus the loan note 	application (when Guernsey have signed it off) to come to me I will 	package it all off to go over to Guernsey so that the loan notes are issued as 	soon as the cash comes into my client account.  That would seem the 	quickest way of achieving the desired result?? I will be speaking again to 	Guernsey tomorrow afternoon and hope to have a further progress report 	then.”
198.	On 23 October 2007, Mrs Bellis sent to Mr Egan’s assistant (for Mr Egan’s attention) a draft application form for loan notes, explaining that she would let him know as soon as it had been approved by Ozannes.  She said that she had “asked Ozannes to let me have a draft of an application for the unit trust.” 
199.	The Senior Loan facility of £24 million had a “payment holiday” until 15 October 2007.  On that date a sum of £380,000 odd was payable to RBS as interest on the Senior Loan.  The interest on the Senior Loan was to be repaid out of the rental payments received from tenants.  These rental payments were to be collected by Egan Lawson under a Property Management Agreement (which had not in fact been executed). 
200.	On 12 October 2007, Michelle de Carteret, a senior administrator at Legis, emailed Mrs Bellis asking how much cash the Defendant Firm would be able to send to RBS in relation to the “loan facility” which “is due to mature on Monday 15 October.  Interest due on this will be £379,942.62”.  
201.	Mrs Bellis’ evidence is that she had a telephone discussion with Mr Egan between 10 and 15 October 2007, during which Mr Egan told her that she should make the payment out of the monies in the client account and that Egan Lawson would then make an equivalent payment from the rent when it was collected to RBS to reduce the Bridging Loan.
RBS Equity Bridge repayments
202.	By 26 October 2007 only £1.8 million of the first tranche of the RBS Equity Bridge (£3.5 million) due to be repaid by then had been paid.  Mr Egan’s fund-raising activities were also not going as well as had been hoped; at this time Erinaceous was getting some bad press, and Mr Egan was of course now connected with Erinaceous.  
203.	An extension of the repayment date for the first tranche was required.  That was a responsibility which fell to Mr Egan. He therefore arranged to meet with RBS, and a 1 month extension was then agreed.  
204.	The Defendant Firm contends (and I accept) that Mr Egan must by then have known (for how else would he have been able to negotiate the extension) what sums had been paid by the Defendant Firm to RBS and by when; and that he must also have known that these sums had been paid before any loan notes or units had been issued; but that even so, Mr Egan still made no protest, nor did he make any suggestion that Mrs Bellis had in any way acted wrongly in paying the money out. 
205.	However, on 13 November 2007, Mr Lawson wrote an email to Mr Egan  recognising that funds raised to date had been paid out and cautioning against raising further money if all that could be offered was a loan note. 
206.	On 22 November 2007, Mr Egan himself wrote to his investors, including the Claimants “to acknowledge” their respective sums advanced “as payment for your share in Albermarle Fairoaks Limited” and saying that: 
“For the time being this is being treated as a loan to the Guernsey Limited company, which ranks ahead of any loan made by Erinaceous but after the loan for the property from RBS.”
Investors become aware of their treatment as unsecured subordinated lenders 
207.	This was, so far as I am aware, the first written record of any communication to investors of their status as subordinated and unsecured lenders whose monies had already been paid out of the client account to which they had sent their monies. 
208.	It was put to Mr Wallis in cross-examination that his muted response to this demonstrated that the revelation that the money he had sent had already been deployed before any documents were in place did not come as a surprise: and that, on the contrary, it was what he had expected: otherwise surely, it was suggested, he would have been both astonished and angry with Mr Egan.  Mr Wallis did not accept this.  He rejected any suggestion that all he expected was a loan note, and that the money he had invested could be applied even before its finalisation. He said his anger was directed not at Mr Egan but at Mrs Bellis, to whose firm he had entrusted his money. He explained that in fact by then he had already spoken to Mr Egan who had acknowledged that “we had a significant problem in relation to this investment…[and]…was expressing really serious doubt as to whether we were actually going to get value..[and] were probably going to need to take legal action as a result.”
209.	However, Mr Wallis (and, subject to the next paragraph, I infer from the lack of any evidence to the contrary, the other investors) concluded that it was best left to Mr Egan to try to obtain the equity participation that they had expected; and none complained directly to Mrs Bellis herself about any breach of their understandings (which Mr Wallis said he now greatly regretted).
210.	Mr Glatman (on behalf of his family interests) did contact Mrs Bellis by telephone on 3 December 2007, of which he made a contemporaneous note. There is a dispute between him and Mrs Bellis (who also made a rather shorter note) as to the scope of their conversation to which I must return.  Suffice it for the present to note that Mr Glatman records that he: 
“questioned her around 5pm about the investor position in this scheme. Asked her why investors had loan notes when no reference to these in the fundraising documentation…I indicated to her that loan notes never suggested in the funding documentation and certainly no suggestion of any additional debt above base debt from bank.  Questioned if the time had not come to return money – she pointed me at Geoff Egan…” 
211.	On the same day, Mr Glatman  emailed Mr Egan as follows:
“Geoff”
As you might appreciate, I am in a slightly difficult position in view of my other discussion, but I am writing to you in the light of the recent letters which I have had from you addressed to the Mark Glatman Accumulation and Maintenance Trust and also my SIPP, as each party has invested £50,000 in Albermarle Fairoaks.
At the time of subscription in August 2007, it was clear that we were investing in an Albermarle syndicate with £24M of bank debt and the balance of the purchase price provided by investors.
There was no question of investing for loan stock, nor was there any suggestion that there would be any other debt within the investment other than the bank finance of £24M.
I would have thought that urgent consideration should be given to untangling what does appear to be a wrongful use of investor funds and to compensate and reimburse the investors accordingly.
At this stage I have to record that I am reserving my rights on behalf of both investors and would welcome some clarification of the investor position and the intentions of Erinaceous in this respect.”
The reference to “other discussion” was not explored before me.
Mrs Bellis’ contemporaneous Memorandum in December 2007
212.	Attached to an email sent to Mr Dickinson on 17 December 2007 Mrs Bellis provided a memorandum (“the December Memorandum”) setting out her perception of the history, together with a list of investors.  
213.	In the December Memorandum she described her retainer as being limited to acting on behalf of the Guernsey company in acquiring the property; as I discuss at greater length later, she said that “Geoff together with Ms Cummings of Erinaceous Group plc gave instructions to Ozannes to implement the agreed structure.” She added that the requisite documentation for loan notes and units and unit trust were, as far as she could see, ready.  
214.	By email to Mr Dickinson dated 19 December 2007 Mr Egan stated that he considered “Her note is accurate.” He went on:
“I suppose my only question is whether or not I had the authority or whether she should have accepted an instruction from me on the payment of funds to RBS.
All the investors want their money back, but I guess I may be able to talk them into leaving it in or putting more in if they could immediately take control of Albermarle Fairoaks Limited, and then forget the Unit Trust etc. Whose decision is that??” 
215.	Mr Dickinson immediately responded (by email of the same date):
“You did not have any authority to instruct on this and Juliet Bellis should not have accepted an instruction from you in connection with this company.
Please do not, under any circumstances, attempt to solicit further funds on behalf of the company and do not attempt to convince these people that they should leave money with the company.
…
Voluntary disposal of the Company would presently be the decision of Mr Cummings as he is the beneficial owner. However, the Directors here are considering various alternatives, including an outright sale of the Company’s assets to clear all outstanding liabilities.”
216.	Somewhat remarkably in the circumstances, and in light of the inadequacy of a loan note (without more) to record the combined equity/loan investment that both he and the Claimants say was ultimately envisaged, Mr Egan continued his efforts to persuade Mrs Bellis and Legis to do what was necessary to enable final Loan Notes to be issued.  
217.	In an email to Mrs Bellis, copied to Mr Dickinson and dated 11 January 2008, he said that this would “be a big relief to our people”. It may be, however, that he expected the unit trust would follow imminently: Mrs Bellis had emailed him on 6 December 2007 to say that the “unit trust and applications for units” were in final form. 
218.	Also on 11 January 2008, Mr Dickinson wrote to Mr Egan and Mrs Bellis, with reference to Mr Egan’s earlier email which included a request to him for loan notes to be issued once KYC requirements had been satisfied, as follows:
“I don’t remember saying we would issue loan notes, the format for the loan notes has not even been agreed yet.
We discussed issuing a single share for every £1,000 received (£1 for share and £999 creditor) and that, if the loan note format was eventually agreed we would convert the creditor to loan note [sic]. I also suggested that the company would issue an acknowledgement of receipt of the funds confirming the company’s intention to issue the loan notes once the scheme had been approved by our local regulator (GFSC).
However, we will not do the share issues or the acknowledgements until the KYC has been checked and I am not inclined to allow any of my people to do any further work (including the KYC check) on this company until my request for payment of outstanding fees has been met and there is an agreement for prompt payment of future fees incurred by Legis and Ozannes…”.
Events in 2008: the investors call for the return of their monies
219.	During 2008 Mr Egan continued to press for Loan Notes to be issued. However, the investors’ concerns grew; and, for example, on 7 February 2008 Mr Wallis wrote to Mrs Bellis requesting immediate return of his monies with interest and suggesting that she would wish to notify her professional indemnity insurers. This was followed by a letter to the Defendant Firm from Boddle Hatfield dated 6 March 2008 to the same intent.
220.	On 26 June 2008, Mr Egan emailed Mr Dickinson at Legis asking for Loan Notes to be issued:
“Stephen, this is the list of investors who forwarded their funds to Juliet Bellis.  They either need their money returned or loan notes issuing as soon as possible…”
	Obviously you are aware that we have asked Boodle Hatfield to pursue Juliet Bellis, but what else can we do as the clients are very anxious.  Could I have your thoughts please.  I guess they would be happy with loan notes, provide (sic) they rank ahead of Erinaceous, which was always agreed to be the case.”
221.	Mr Dickinson’s response (the same day) was to counsel against the issue of Loan Notes:
“If the company issues loan notes, the investors will have received consideration for the payments which Juliet Bellis & Co has processed and she/her firm is off the hook.”
222.	Mr Egan then asked:
“can you issue shares and/or loan notes to those investors?”
223.	Mr Dickinson, responded saying he “supposed” the directors would look at issuing shares/loan notes, but the “investors would have to confirm that’s what they wanted and that they had taken appropriate independent legal advice before making the request.  Wouldn’t be my course of action in their shoes… (sic)”.
Denouement
224.	The Claimants did not thereafter press further for Loan Notes to be issued. Instead, and apparently having decided against pressing for Loan Notes, the seventh and ninth Claimants applied for an administration order in respect of AFL in the English Court alleging themselves to be creditors of AFL.  They obtained an interim order from Mr Justice Vos on 29 January 2010.
225.	It subsequently emerged that the application was not in the prescribed form. But, whatever its merits, the effect of the application was to prompt RBS, as holders of a qualifying floating charge over AFL’s assets, to appoint their own administrators, indicating that they could not “take the risk” of the administration application being successful with an alternative investor being appointed. They appointed their own administrator the day before the return date for the hearing of the relevant Claimants’ application.  
226.	As I elaborate later, it is the Defendant Firm’s case that it was this that finally prevented AFL from issuing any Loan Notes, let alone equity, and removed any realistic prospect of AFL redeveloping the land and/or rescheduling its debt with RBS, and ultimately repaying the Claimants the monies they had loaned. 
227.	The Defendant Firm relies on this, and what it depicts as an earlier refusal of Mr Dickinson to assist in the transfer of beneficial ownership in the shares from Mr Cummings to enable the investors to attain the equity participation which had been their goal, as being causative of loss.  It denies accordingly that any loss was caused by acts of the Defendant Firm. 
228.	In point of fact, Mr Cummings and Ms Cummings refused to part with beneficial ownership unless and until they had obtained indemnities, and only then if and after a deal for the sale of assets to Augusta Westland had been completed.  
229.	But that is for later; for the present that completes this recital of the events leading up to the Claimants’ recourse to proceedings against the Defendant Firm. 
Issues
230.	Having thus outlined the basic chronological sequence of events I turn to adumbrate the fundamental issues which I must address and decide.
231.	Without determining at this stage their legal significance or consequences, the principal factual issues to which, to my mind, the evidence given must be related and assessed were as follows:
(1)	What were the perceptions and expectations of the parties as to the nature of 	the “investment” which the investors were being invited to make? What in 	that context did the Claimants understand to be the purpose and effect of the 	draft Loan Notes they were sent? 
(2)	Was Mrs Bellis aware of the terms of the “offering documents” and did she 	know they had been sent to the investors? What did Mrs Bellis consider to 	be the purpose and effect of the draft Loan Notes?
(3)	What did the parties perceive to be the role of the Defendant Firm? 
(4)	What were the perceptions and expectations of the parties as to the purpose 	and consequences of the (undisputed) requirement that the monies 	representing their investments should be paid into the Defendant Firm’s 	client account, rather than to AFL or ECS?
(5)	What did the parties perceive to be required in order to authorise the 	Defendant Firm to make payments out of its client account of the monies 	received into it from the investors?
(6)	On what basis did Mrs Bellis consider that such requirements had been 	satisfied? Why did she make the payments that she did?
(7)	Did Mr Wallis have any conversation with Mrs Bellis in or about August 	2007 and if so what do each recall was said?  More particularly, did Mrs 	Bellis agree with Mr Wallis to hold the money he had paid to his order?
(8)	If the expectation of the parties was that they would ultimately acquire 	some form of equity participation in and control of the investment vehicle 	or a unitised fund by which it was owned, as well as being lenders to AFL, 	why was that expectation not fulfilled?
(9)	Did AFL by its proper organ determine to borrow money from the 	Claimants and validly authorise Mr Egan/ECS to solicit and the Defendant 	Firm to receive into its client account for its own immediate benefit or to its 	order monies raised from the Claimants? Alternatively did it after the fact 	ratify or adopt their acts?
(10)	For whom was Mr Egan acting in his communications with the Claimants 	in soliciting funds in the context of the Albermarle Fairoaks scheme? Did 	Mr Egan invite the Claimants to rely on himself personally in making 	payment in respect of the Albermarle Fairoaks scheme?
(11)	What happened to the monies paid by the Claimants into the Defendant 	Firm’s client account and (a) for what purpose (b) on whose instructions (c) 	on what basis (d) in what circumstances and (e) when were they released? 	More particularly as to (b), on whose authority were such instructions 	given?
(12)	Was Mrs Bellis in a position where her duty and her interests were in 	conflict or where she had conflicting duties, and did these impact on her 	conduct?
232.	As is apparent from my recitation of the chronological sequence of events, much of the evidence is not disputed.  The basic factual matrix is clear and can, I think, be summarised as follows in paragraphs 233 to 244 below.
233.	With the exception of the 2nd, 6th, 7th and 17th to 19th Claimants ,all the Claimants had invested in at least one previous Albermarle Investment scheme; and each of the 1st, 2nd, 3rd to 5th, and 8th to 16th Claimants had invested in Albermarle Shoreham (also in 2007 and only a few months earlier than Albermarle Fairoaks).
234.	The IM in the Albermarle Shoreham scheme, and the application form appended to it, expressly provided that Mrs Bellis and her firm should act as escrow agent for the Albermarle Shoreham scheme, and that investors should make payment into her client account. The Defendant Firm had accepted that appointment by making available its client account for that purpose. 
235.	There was an escrow agent appointed or other escrow arrangement established in each previous Albermarle investment scheme in which the Claimants had invested.  However, the terms of the escrow provisions varied, and in some cases payment was not made into the escrow agent’s account, but into a designated account for the SPV. 
236.	The purpose of these escrow arrangements was for the protection of the investors and to ensure that the investors’ monies would not be used if the investment envisaged could not proceed.
237.	The Albermarle Shoreham scheme was the first Albermarle investment scheme in which the Defendant Firm acted as solicitor to the SPV and as escrow agent: and so it was the only Albermarle scheme prior to Albermarle Fairoaks in which the Defendant Firm had so acted. 
238.	However, Mrs Bellis “had a pretty good overall knowledge of the Albermarle structure” (as she acknowledged under cross-examination). She was aware in general terms that Albermarle investment schemes invariably offered a loan/equity mix: and that this would usually be in the case of each investor of a loan to an LLP and a capital contribution to that LLP, issued together and comprising and evidenced by a “Unit” in the LLP. 
239.	Mrs Bellis knew that in the context of the Albermarle Shoreham scheme the inner core investors had subscribed a “first tranche” of money before any IM had been prepared or any loan note and equity share produced or provided. But she also knew that all the investors expected to receive equity: the loan would be linked or “matched” (as Mr Wallis described it).
240.	In the specific context of the Albermarle Fairoaks scheme, Mrs Bellis was aware that the monies were to be held in her firm’s client account pending some future event or instruction. It was never suggested that she was to make immediate payment out of the monies; the dispute was rather as to what event or instruction was to authorise such payment and to whom.  Further, in my view, even the Engagement Letter (which Mrs Bellis had prepared) expressly envisaged “whatever structure is put in place for the project” being in place, and any regulatory requirements in Guernsey satisfied before utilisation of the monies subscribed.
241.	Mrs Bellis was also aware (not least from its name and presentation) that the transaction was being marketed as an Albermarle investment scheme, connoting features characteristic of such schemes and likely to be subscribed by the usual club of investors (or some of them at least).
242.	She was aware that, as in the context of the Albermarle Shoreham scheme, investors in the Albermarle Fairoaks scheme would expect, in due course, equity participation as well as evidence of a loan, though she may not have envisaged that these would be contemporaneous.
243.	More negatively, it follows from her own denial of having seen any communications with investors and her own depiction of Mr Egan as the conduit with them that she must have been aware, when receiving monies into her firm’s client account, that she could not be sure what they had or would be told or the terms upon which the payments were made.
244.	She also knew, when monies were received into her firm’s client account, that the Loan Notes were in draft and not final form; that they had not been formally authorised or approved by the legal directors of AFL; that she had no evidence that any investor had agreed their terms; that the requisite KYC checks had not been made; and that COBO consents were required but remained outstanding (as they did until 27 September 2007). 
245.	I turn to address other more disputed aspects of the factual matrix. But I should give my overview of (1) the scope and nature of the evidence, (2) the witnesses who appeared before me and (3) the evidence they gave.
Scope and nature of the evidence: gaps in disclosure
246.	As to (1), the events in question took place some 5 years ago; and the documentary record is incomplete. This is partly because some of it is in the hands of persons who are not parties, and partly because it would appear that there never was a documentary record made of certain key events. 
247.	Erinaceous’ administrators chose not to waive privilege; and no application fr third party disclosure was made.  Mrs Bellis’ company secretary files, which she apparently returned upon her retirement as company secretary to Erinaceous in November 2007  and which might have provided an insight into the objectives of and any instructions given by Erinaceous or its subsidiaries, were not made available. 
248.	Nor is there available any record of advice given to Erinaceous by Price Waterhouse Coopers as to the problems of convertibility (see paragraph 153 above) which appear to have led to the investors being invited to lend money without any right to equity participation (contrary to the Albermarle model). 
249.	Further, Erinaceous’ records might have contained notes or minutes revealing what Ms Cummings and/or Mr Bellis, were told, or knew and believed, as to the arrangements for payments into the Defendant Firm’s client account, or as to the pressures put on the Defendant Firm; and they might have assisted also in determining conclusively detailed points in issue of some real materiality, and especially whether Mrs Bellis ever saw the Teaser email (see below).
250.	There were material gaps in the Claimants’ surviving documents also. Perhaps most importantly, the only contemporaneous document Mr Wallis was able to disclose was his wife’s diary: his evidence was that his practice was routinely to destroy documents after a year, and he continued blithely with this practice after he must have appreciated that litigation was in prospect.  Whether retention would have helped or hindered him is a matter of speculation: but, for example, drafts of his letter after the event (see above) would plainly have been useful, at least potentially. 
251.	Other gaps included any documentary evidence of the proofs of debt apparently lodged in AFL’s administration, which the Defendant Firm argues demonstrate that the Claimants considered themselves and sought to prove as creditors of, not investors in, AFL.
252.	On both sides the process of disclosure was not beyond criticism.  Thus, certain documents that were available to the Defendant Firm were not disclosed until late in the day, on the eve of trial.  
253.	The two I have especially in mind are (i) an invoice (for £200,000) by the Defendant Firm to Erinaceous for work in connection with Albermarle Fairoaks and (ii) the transcript of a 3-hour interview of Mrs Bellis by the Administrators of AFL on 9 June 2011 in which she was asked a number of questions about Albermarle Fairoaks and gave answers that did provide material for her cross-examination before me.  I acknowledge that Counsel had advised that the transcript need not be disclosed as part of standard disclosure, and that its disclosure was not resisted when it was specifically requested shortly before trial, I consider that both those documents should have been disclosed: and I note that the invoice, as well as being obviously relevant, had been asked for by the Administrators of AFL during that interview, and Mrs Bellis had promised to provide it. 
254.	On the other hand, Mr Croxford, in his written closing, described the Claimants’ disclosure as “lamentable”. He instanced especially the failure to disclose until during the trial board resolutions of the 15th and 17th Claimants resolving to subscribe for loans invited by the Teaser-email. He described these in his oral closing (of which he provided a very helpful ‘Speaking Note’ for which I am very grateful) as the most important of all the documents.  Plainly that documentation should have been disclosed earlier.
255.	But, although regrettable, it does not seem to me that either these gaps or these criticisms go to the root of the case: and to some extent at any rate they are matters under the bridge. 
256.	For the avoidance of doubt, I do not have any reason to think that any of the lapses, gaps or failures to disclose are such as to cast doubt, or materially affect my views, on the credibility of any of the parties. Although the destruction of potentially disclosable material in the case of Mr Wallis is of itself a matter for concern, and may also suggest that the Claimants may not have been sufficiently advised as to their obligations, it does not materially affect my assessment of his evidence in relation to the dispute as to whether he did or did not have the discussion with Mrs Bellis on which he relies.
Scope and nature of evidence
257.	In the peculiar circumstances of this case, as it seems to me, there is more than the usual difficulty in determining which of the extensive evidence led and documents provided is admissible for the purposes of interpreting the scope, effect and meaning of the arrangements between the parties. 
258.	The problem is exacerbated by the curious nature of the engagements between the various parties and, especially, the almost complete dearth of communications between, in particular, the Claimants and the Defendant Firm. The documentation is voluminous; but very little of it “crossed the line” between the relevant persons between whom contractual relations are alleged to have been established. This has resulted in a plethora of legal issues and factual curiosities that have made the case considerably more complex than the simple statement of the dispute at the commencement of this judgment might otherwise suggest.
259.	Except possibly in the case of the engagement of the Defendant Firm by AFL on the terms of the Engagement Letter (see paragraph 133 above), these engagements were either not expressed in writing at all or were partly written and partly oral, part express and partly to be inferred from conduct or obvious intent. 
260.	There is no written definition of the role of the Defendant Firm in relation to the Claimants (if any) whether as regards the use of the Defendant Firm’s client account or at all; nor of the role of Mr Egan and ECS. Each one’s expectations of the other is a matter of inference.  
261.	The only alleged direct discussion between the Claimants and the Defendant Firm in the context of this transaction prior to the receipt of the monies paid into the Defendant Firm’s client account is that which Mr Wallis claims to have taken place between him and Mrs Bellis: but Mrs Bellis denies it completely. 
262.	As to communications between the Claimants and Mrs Bellis’ only admitted client, AFL, the only “offering documents” (as Mr Croxford labelled them) were the emails sent by Mr Egan to the Claimants attaching in one case the Teaser and in the other case, a draft Loan Note: and Mrs Bellis denies having seen either at any relevant time. 
263.	The ordinary position is clear. It was common ground that the parties’ subjective intentions are not usually relevant or admissible in determining the meaning of their contractual engagements, or whether the effect of the arrangements they made was such as to create a trust (see Quistclose [14] and [17] and[71]). As Counsel for the Defendant Firm put it in their closing submissions, words and acts are ordinarily to be interpreted objectively, and (in particular) words are taken as they would reasonably be understood by the person to whom they were spoken or written, not as they were subjectively understood by the person who spoke or wrote them. 
264.	It was also common ground that for background facts to be relevant to the question of interpretation, they must have been shared by “the parties”, i.e. “both parties”. The logic of this rule is clear: a reasonable person could only think that the parties intended each other to understand the words they used in the light of something that they thought both of them knew.  As Brennan J has observed in the High Court of Australia Codelfa Construction Prop Ktd v State Rail Authority of New South Wales (1982) 149 CLR 337: “an extrinsic fact known only to one of the contracting parties can shed no light upon the meaning with which that word or phrase was used by the others”. 
265.	This means that any communications between the Claimants and each other (and no-one else), or between the Defendant Firm and Ms Cummings or others but not the Claimants, are (subject to the next following paragraphs) irrelevant to the task of interpretation: they were not readily available (as to which see below) to both parties, and so could not be assumed by the reasonable man to have informed what obligations the parties should objectively be thought to have undertaken. 
266.	However, in this case, there are (as it seems to me) at least three reasons (in addition to the obvious practical point that the evidence has been led and cross-examined on all sides) why I consider it appropriate and necessary to consider the evidence given of the parties’ respective perceptions, and to broaden the scope of my review as regards other disputed evidence.
267.	First, not only are there issues of interpretation (that is, the meaning of whatever was contractually agreed); there are also issues as to what (if anything) was agreed, and even as to whether the parties intended to create contractual relations between them at all. I accept the Claimants’ submissions in closing that evidence of subjective understandings (including by subsequent conduct) as to what were the terms of the contract is admissible where the contract is not written or not wholly expressed in writing, but instead arises in whole or part from conduct and oral conversations and the implications therefrom. 
268.	Lord Hoffmann explained this in Carmichael and Another v National Power PLC [1999] AC 2042: as there will have to be direct evidence of the conduct and communications, often evidence of “a clear understanding of what was agreed” (including by conduct showing “what the parties thought they had agreed”) is evidence of what conduct and communications took place i.e. what “terms, in an objective sense, were agreed”, albeit that “of course the tribunal may reject such evidence [of subjective understandings] and conclude that the party misunderstood the effect of what was being said and done”. 
269.	Secondly, Counsel for the Defendant Firm advanced an argument that a claimant who had a positive (subjective) intention to enter into a different contract to that alleged in its pleaded case should not be permitted to obtain relief upon an objectively ascertained fiction he knows to be false. In other words, a person may not rely upon a construct of objectively ascertained facts if his actual subjective intention at the material time was the opposite. Counsel instanced especially in this context the position of the 15th and 17th Claimants, each of which by its agent signed the draft Loan Notes provided under cover of the Loan Note email.  
270.	In support of this argument, Counsel for the Defendant Firm cited in particular the decision of Hirst J in Lark v Outhwaite [1991] 2 Ll Rep 132 at 141, where having noted the approach of Buckley J in his judgment in Beesley v Hallwood Estates [1960] 1 WLR 549, in which the subjective intention of a plaintiff was accepted as being a relevant consideration, Hirst J said:
“I have no doubt that the prime test is the objective one, but it does not seem to me that the Court can be obliged completely to disregard any evidence of subjective intention (as is shown by the Beesley case) and that in a case like the present it would indeed be completely unrealistic to do so.” 
He then considered the matter objectively and concluded that there was no intention to create legal relations. Having done so he went on:
“If in addition, Mr Lee’s evidence [the claims manager of the Plaintiff’s broker] is taken into account the matter is put completely beyond doubt. .............. I am quite satisfied that the only possible construction of Mr Lee’s evidence is that he had no intention whatsoever of varying the contract, and therefore no intention of entering into any legal relationship.”
271.	Both Beesley and Lark v Outhwaite concerned, not a question of contractual interpretation, but the prior question as to whether the parties shared an intention to create binding contractual obligations at all.  In the latter context, it is readily understandable that evidence of a subjective intention to the contrary may be admissible (and see also HLB Kidsons v Lloyd’s Underwriters [2008] EWCA Civ 1206 at paragraph 64, and Attrill and others v Dresdner Kleinwort Ltd [2012] EWHC 1189 (QB)). 
272.	In my view, these authorities are probably only applicable in the context of an issue as to intention to create legal relations, and not to issues of interpretation.  But I may be wrong about that; and in any event, in this case there is an issue as to the former.  This signals to me that a review of subjective perceptions and intentions is appropriate on this basis also, so that I can determine the issue raised by the Defendant Firm on both points. 
273.	Thirdly, I consider it of some relevance in the context of determining the dispute as to whether or not there was a conversation between Mr Wallis and Mrs Bellis such as he alleges to consider whether what Mr Wallis says was discussed and agreed is consistent with his other evidence and with the evidence given by other witnesses of their expectations and perceptions. 
274.	For all these reasons I consider it appropriate and necessary to review in some detail the evidence, both written and oral, that was put before me, despite the ultimately objective nature of the enquiry primarily to be undertaken.
275.	Before turning to describe that evidence, and indicate my views as to the witnesses, it is also necessary to address the dispute between the Claimants and the Defendant Firm as to whether or not the Teaser email and Loan Note email are to be included in the admissible factual matrix.
Are the “offering documents” part of the admissible factual matrix?
276.	The issue arises in the context of the oft-cited passage of Lord Hoffmann’s speech in ICS v West Bromwich BS [1998] 1 WLR 896 (HL), where he explained that the factual matrix includes all “the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract…” 
277.	However, the test of reasonable availability is not always easy to apply, and requires restraint in its application. As Macfarlan JA said in The Movie Network Channel Pty Ltd v Optus Vision Pty Ltd [2010] NSWCA 111, “in the age of the internet, the range of materials that is “reasonably available” is virtually limitless”; stricter parameters than ease of access are essential.  
278.	The point arises in acute form in this case in relation to the “offering documents”. As indicated above, there is no positive evidence that Mrs Bellis saw the email teaser or knew that Mr Egan had sent it to the Claimants; and she firmly denied both.  The Defendant Firm submits that it follows that “these documents cannot be considered in determining whether there was an implied contract”. The Claimants contend that this is not so: both documents were plainly “reasonably available”, in that a reasonable observer would have expected Mrs Bellis as well as the Claimants to have had the documents, not least because under the terms of her engagement by AFL she had expressed the need to see “a copy of any documentation which goes out to investors”.
279.	In my view, the following parameters are discernible:
	(1)	At least where there is no direct evidence as to what the parties knew and 		did not know, and as a corollary of the objective approach to the interpret-		ation of contracts, the question is what knowledge a reasonable observer 		would have expected and believed both contracting parties to have had, and 		each to have assumed the other to have had, at the time of their contract: see 		per Vos J in Spencer v Secretary of State for Defence [2012] EWHC 120 		(Ch) at paragraphs 65 to 74;
	(2)	that includes specialist or unusual knowledge which only parties entering 		into a contractual engagement of the sort in question might reasonably be 		assumed to have; and it also includes knowledge which it is to be inferred, 		from the nature of the actions they have in fact undertaken, that they had or 		must have had;
	(3)	however, it does not include information that a reasonable observer would 		think that the parties merely might have known: that would open the gate 		too far to subjective or idiosyncratic speculation;
(4)	the fact that material is readily available or notorious may support an 	inference as to what the parties actually knew; 
(5)	but (subject to (6) below) where it is demonstrated that one or more of the 	parties did not in fact have knowledge of the matter in question such 	knowledge is not to be imputed; nor is the test what reasonable diligence 	would or might have revealed: in either case, that would be inappropriately 	to introduce impermissible concepts of constructive notice or a duty 	(actionable or otherwise) to make inquiries or investigations: and see per 	Mann J in Toth v Emirates and Another [2012] EWHC 517 (Ch) at 	paragraph 44, agreeing with the analysis in the decision of MacFarlan J in 	the Supreme Court of New South Wales in The Movie Network Channel 	case [2010] NSWCA 111 (at paragraph 97); 
(6)	the exception is that a reasonable person cannot be assumed to be in 	ignorance of clear and well known legal principles affecting or incidental to 	the contractual engagement in question: see per Vos J in Spencer v 	Secretary of State at paragraph 72.
280.	In my judgment, adopting those as the relevant parameters, if Mrs Bellis’ evidence that she did not in fact see either of the offering documents is accepted, they should be excluded from the factual matrix.  The fact that an objective observer would have expected her to see both is a factor in determining whether she did or not; but it cannot trump a conclusion that in fact she did not, if that is what is found. I return to determine that issue of fact later. 
Witnesses
281.	In addition to the documentary materials the following individuals gave evidence by witness statement(s) at trial.
282.	For the Claimants:
(1)	The First Claimant on the record, Mrs Adelle Challinor (“Mrs Challinor”);
(2)	Mr Richard Berman (“Mr Berman” sometimes referred to in emails as 	“Ric”);
(3)	The ninth Claimant, Mr Garry Watts MBE (“Mr Watts”);
(4)	Mr Mark Lewis Glatman (“Mr Glatman”, on behalf of the eighteenth and 	nineteenth Claimants);
(5)	The eighth Claimant, Mr Stuart Wallis (“Mr Wallis”);
(6)	The third Claimant, Mr Andrew Kevin Cole (“Mr Cole”);
(7)	Mr Ashok Mahtani (“Mr Mahtani”); and
(8)	Ms Helen Wyatt (“Ms Wyatt”) 
All the above save Ms Wyatt were cross-examined.  Ms Wyatt’s evidence was unchallenged. 
In addition, a Witness Statement made by Mr Dickinson of Legis in other proceedings (between AFL and the First Defendant, number HC08C03768) was introduced by hearsay notice.
283.	For the Defendant Firm and Part 20 Claimant the witnesses were:
(1)	Mrs Bellis; and
(2)	Mr Cummings, Mrs Bellis’ brother. 
Both were cross-examined. Mrs Bellis spent nearly four days in the witness box.
284.	For the Second Defendant and Part 20 Defendant the witnesses were:
(1)	Mr Geoff Egan; and
(2)	Mr Douglas Lawson.
They were both cross-examined.
Ms Saskia Hunter MRICS, Mr Egan’s secretary at ECS, also provided a witness statement but in the event was not called (so her statement is not in evidence).
285.	Of the 21 Claimants, therefore, the following individual claimants did not give evidence: 
(1)	the second Claimant, Ms Sheila Cocker;
(2)	the fourth Claimant, Mr Charles Evans;
(3)	the fifth Claimant, Mr John Kerrison and his wife Mrs Gaynor Kerrison 	(Claimant 5A);
(4)	the sixth Claimant, Mr Robert Meadows;
(5)	the seventh Claimant, Mr George Melio; and
(6)	the tenth Claimant, Mr Robert Wilson-Wright.
(7)	The fifteenth and seventeenth corporate Claimants, Tenon (IOM) Corporate 	Services Limited and Maple Investments Limited (which is owned by Mr 	Mahtani and his family), each of which filled in the draft Loan Notes;
(8)	The fourteenth and sixteenth corporate Claimants, Black Isle Property 	Company Limited (of which Mr Egan is a director and 25% shareholder) 	and European Securities Limited. 
286.	I shall address later the consequences of these absences, especially in the context of the allegations of misrepresentation, where individual reliance on the representation would have to be established.  
287.	I should also note that neither Mr Bellis (Mrs Bellis’ husband and CEO of Erinaceous) nor Ms Cummings (Mrs Bellis’ sister and CFO of Erinaceous), or Mr Pearson, or any of the persons responsible for the management of Erinaceous and its group, were called to give any evidence in these proceedings. Given the close involvement of, in particular, Ms Cummings, this is surprising: she and possibly the others might well have been relevantly examined on a number of potentially relevant issues. These include when the financial problems that beset Erinaceous were first uncovered, what Mrs Bellis knew of them, what Ms Cummings believed about what the investors expected and would get, and who in reality was controlling and directing the transaction from time to time. 
288.	That surprise may be mitigated by the fact that I understand that in two prior sets of proceedings (included in the trial bundles) relating to Longmint’s interest in the Fairoaks airport, Ms Cummings had (respectively) been found not to have been truthful about her role and knowingly to have arranged for false accounting. Although it is right to record that Mrs Bellis was adamant that the findings made by Gloster J and Sales J respectively were wrong, and I should make clear that the findings as such have not materially coloured my view, they may explain a certain reluctance to participate in further proceedings.   
Observations as to the witnesses
289.	A curiosity of this case (as I have already noted) is the lack of communication between the Claimants and Mrs Bellis and the Defendant Firm.  A consequence is that the only direct clash of evidence that I must resolve relates to the dispute between Mr Wallis and Mrs Bellis as to whether or not they had a conversation in which she agreed that she held his monies in her firm’s client account to “await his instructions” or to his order.
290.	I will return to that dispute under a separate heading.  In the meantime, my impressions of Mr Wallis can be summarised as follows: he struck me as a proud man, accustomed to financial success in a busy life, and indignant about a turn of events that, with the benefit of hindsight, smacked of carelessness on all sides, including his own. He was occasionally truculent and often defensive. He ascribed inconsistencies of detail to his busy life. I sensed a desire in him to show that he had been wiser than events on their face might suggest.
291.	As to the others of the Claimants’ witnesses, I accept Counsel for the Claimants’ description of them as intelligent and honest professionals who were doing their best to recollect events and truthfully assist me.  However, the events in question are some time past; and the process of preparation for litigation does tend to persuade even the most painstaking and careful that what seems consistent with their case now is truly what they recall was their understanding then, whereas memory may be imperfect, and conduct less consistent.  
292.	In my approach to their evidence, as to the oral evidence on behalf of the Defendants, I bear very much in mind  the observations of Lord Goff in Grace Shipping Inc and another v C.F. Sharp & Co (Malaya) Pte Ltd [1987] 1 Ll LR 207 (at 215) in the Privy Council (a case which concerned whether the parties had reached a concluded agreement some 5 years before the trial):
“In such a case, memories may very well be unreliable; and it is of crucial 	importance for the Judge to have regard to the contemporary documents and to their overall probabilities.”
293.	That is particularly so where, as here, it is apparent that the witnesses have only really sought to reconstruct events for the purposes of producing their evidence at a late stage in the process, and sometimes before having the opportunity to review the documents themselves. The evidence of the Claimants’ witnesses inevitably lacked detail.
294.	Mrs Bellis’ evidence was rather different.  It struck me that she had gone over and over the matter in her mind and no doubt with her advisers over a long period of time. She had also been involved in previous litigation, including that involving her brother and sister.
295.	Mrs Bellis is plainly intelligent and organised: and over the course of a very long cross-examination she seldom seemed at a loss. She expressed herself in carefully modulated and moderate terms throughout.  She was almost unsettlingly articulate and controlled.  She spoke in short, crisp, sentences, almost as if from a script, as the transcript of her evidence confirms. She appeared to me to appreciate the aphorism that a person is never as believable as when admitting error in hindsight: but she carefully confined her admissions.
296.	Mr Croxford (for the Defendant Firm) evoked St Paul’s first letter to the Corinthians in describing Mr Egan’s evidence.  St Paul said that he had “become all things to all men, that he might by all means save some.” Mr Egan was by no means a model of consistency; and Mr Croxford’s further depiction of his “gyrations…calculated variously to save the case of some party at one time and yet destroy that same case at another” had forensic force.
297.	But though unreliable, and rash, I do not think Mr Egan was dishonest. He is not a lawyer, and he is not a details man. He wanted to get the job done and assumed that the legal mechanics would fall into place, as they always had in other Albermarle schemes that had proceeded. He was prepared to “follow orders”: hence he did not warn the investors of the frailties in the Albermarle Fairoaks scheme caused by Erinaceous seeking to get too much profit and cash out of it. He was disingenuous in affecting surprise that the monies paid into the client account had been paid out.  However, I am in no real doubt that he always expected that investors would indeed get the combined loan and equity participation and control of AFL that they expected. In that regard, he assumed that Mr Cummings was a placeman for Erinaceous and that Erinaceous would in turn ensure equity participation and control for investors.
298.	Using the adumbration of factual issues in paragraph 231 above as an index, I think I can summarise the evidence as follows.
(1)	Nature of the “investment” solicited
(a)	The evidence given on the Claimants’ subjective point of view as to the nature of the investment
299.	First, as to the terms on which they were invited to invest (I am using that word to comprehend both a loan and an equity stake of whatever nature), the Claimants (or rather, those of the Claimants who gave evidence) were substantially as one: they were being invited to participate as equity investors who would have control of the SPV in accordance with the pattern characteristic of Albermarle investment schemes, with a matched or coupled or “stapled” loan element as the means of (in effect) tax efficient distribution.  
300.	Their perception was that although no completed package of documentation including an investment memorandum was provided (as, for example, Mrs Challinor recalled had been provided when she invested in the Albermarle Croydon scheme), the Teaser e-mail branded the Fairoaks opportunity very clearly as an Albermarle investment which followed the basic pattern of (a) payment to an escrow account or agent for (b) onward subscription for a mixed loan/equity investment in a property venture on the basis that (c) subscription moneys would be applied only for that purpose and returned if the investment did not proceed.
301.	Further, all were at one that the form of the equity was not specific, but that this was unimportant to them. It might be in shares in the SPV itself or in units in a unit trust or unitised holding entity above it; the form did not matter to any of them as long as it gave equity participation and control in the SPV whatever might be its legal form.
302.	Their perception, which I consider to be readily understandable, and which I would expect to have been the perception of all the Claimants, is captured and exemplified in this extract from the cross-examination by Mr Croxford of Mrs Challinor:
“Q.  Well, that is a matter for my Lord. I am not here to argue about your opinions, Mrs Challinor, so I am not going to follow any of that with you. But the form of documents was radically different, was it not?
A.  No. The -- what was missing from Fairoaks was an application form and an investment memorandum and a final form of loan note. But the major part of this Teaser badged this very clearly as an Albermarle nvestment and we were given information about internal rates of return. We're told that they're aiming to raise equity and we're told that if we want to subscribe early we can because the likelihood is that this may also be oversubscribed and -- but on the back of early investment our monies would receive a deposit rate of 1 percent over base but the information that was lacking meant that at no point did we think our money was therefore to be freely used, at that point.
Q.  I understand that, and I am still not going to follow your opinion, but the party that Geoff was contacting you in respect of, the Albermarle investments, was Albermarle Fairoaks. Yes?
A. Yes.
Q.  At that stage you did not know whether that was a limited liability company or a limited liability partnership.
A.  That's correct.
Q.  And from your point of view, it didn't matter which one it was. No?
A.  No, I don't think it did.
Q.  Whichever form of vehicle it was, ultimately you decided that you wanted to invest in that company or partnership?
A.  I think it's true to say it wasn't of interest to me what form it took, but, yes, we were wanting to invest in Albermarle    Fairoaks."
303.	As to the promise in the e-mail Teaser of a return of 1% above base rate from the date of payment into the Defendant Firm’s client account, none of the witnesses regarded this as introducing any substantive change, let alone materially altering the “pattern”. 
304.	Thus, as Mrs Challinor put it in her witness statement, “Although the payment of interest pending the achievement of the fund-raising target was a new feature, it made sense and did not alter the fundamental nature of what we were doing”. Earning base rate plus 1% made commercial sense as an incentive to commit money early, which it was obvious would be of benefit to Mr Egan who would want to have firm commitments both for peace of mind (“so he could see how much money he’s raised”) and to “build a book” to encourage further investment (as Mr Glatman put it). “[T]he thinking, presumably, was that it wouldn’t be fair to people coming in right at the end to receive the same treatment as those who had put their money in early” (as Mrs Challinor said in cross-examination). It was “giving us a little bit of priority” (as Mr Glatman said). 
305.	From their point of view, the Claimants did not know (or need to know) whether this was the rate on the Defendant Firm’s account or whether, as some assumed, Erinaceous would be paying the interest (or reimbursing the Defendant Firm after doing so), or whether there would be an adjustment factor in the amount of units and loan notes issued to capitalise the interest earned. (The investors knew of course that the main investment loans (matched to equity) never earned any interest.)
306.	All of the witnesses were adamant that it did not occur to them that the offer of 1% above base rate related to anything other than a return on subscribed monies whilst held in escrow as a premium for early commitment. 
307.	Thus, they were all fortified in the assumption that (as Mr Cole put it in cross-examination) “the one per cent above base was definitely to do with getting your money in early” by the “commercial nonsense” (as again Mr Cole put it) of advancing money unsecured on a speculative venture at such a rate. 
308.	As Mr Glatman explained:  “there’s no chance I would have invested in a 1 per cent over base unsecured loan where the money was disappearing to the bank and I possibly was going to end up with nothing. I would have to be a complete lunatic to do that.” 
309.	Mr Watts concurred: “I am as adamant that I can be that I would have had no interest whatsoever in advancing money on the loan” and it would be “pure folly”. So did Mr Cole: “Why would I take an equity risk for one per cent over base rate return? It’s just unheard of”, it is “commercial nonsense”.  Mrs Challinor said the suggestion would be “simply pie in the sky”. Mr Mahtani said in evidence that he got more than this risk-free from the bank.
310.	Mr Wallis was adamant: “it would not have been of the slightest interest to me.”  It was “entirely speculative, very, very dangerous, potentially where you could lose all your money and where it was ranking behind a very significant amount of senior debt. I just would never have done it.” This was particularly the case for Mr Wallis because he had been looking into Erinaceous for a merchant bank and not liked what he saw, which was why he was concerned to ensure that his money was held on escrow and that Mrs Bellis understood that. 
311.	Turning to the other “offering document”, the Loan Note email, and consistently with and no doubt predestined by their views as expressed above, the Claimants who gave evidence were again at one in dismissing the draft as no more than a temporary expedient.  They regarded it as a bit of paper intended to record the fact of early investment and the promise of interest, but restricted to the limited period before the anticipated equity/loan note was available (or the return of their monies if the investment did not proceed). 
312.	Mr Croxford, on behalf of the Defendant Firm, sought to divide the Claimant witnesses as having taken one of two courses in relation to the email Loan Note, both impermissible.  His division was into (a) one group (namely, Mrs Challinor) asserting that the words used clearly did not and could not mean what they say, and (b) the other group (namely, Mr Cole, Mr Watts, Mr Glatman, and Mr Wallis) making assumptions or drawing inferences about what the documents said without really reading them. 
313.	Mrs Challinor “would have glanced at it” but not paid it much attention because “we weren’t talking about a loan”. She says that “[A]s there was no application form with the Fairoaks documentation… we used this as a way of recording who we were” as Mrs Bellis would need “something to say who we were”. Mr Glatman would not have paid much attention because Mr Egan was just saying, by this document, that “while the money’s sitting in the solicitor’s account you’ll get interest at whatever it was, 1% over base”. Mr Cole would have “flicked through” it but it “would have been of no interest to me whatsoever.”  Mr Wallis would have “skipped through it” but “would not in any way have registered that this was being issued in isolation… from actually having shares or unit trusts or something similar”. It was like a “receipt”. 
314.	Similarly, Mr Glatman “understood the loan note to just be a convenient way of recording the amount of our investment and the coupon, and definitely not to mean that my early deposit of funds had become a loan” and also suggested that if Mr Egan had actually sought to issue the loan note, that would have been very different and have triggered an alarm bell and he would have got his money back. 
315.	Mr Cole observed that if there had been an attempt to issue a zero coupon loan note without unit attached that would have worried him, but the loan note with interest was clearly just an interim document. He just thought it was a way of confirming the interest payable, and to give paperwork to people who wanted something recording that their money had gone in.
316.	It is of some interest to note that in her evidence to AFL’s administrators on 9th June 2011, Mrs Bellis herself seemed to echo this depiction of the loan notes as “some bits of paper”. 
317.	My firm impression from them all is that they regarded the draft Loan Note they were sent as no more than a record of the fact that their money had been received, that interest would be paid on it pending application if the transaction proceeded, and that in due course they would receive a document, or two stapled documents, that would evidence both elements of their investment.  It is true that the terms of the draft recorded a different transaction; but I see no reason to disbelieve any of them when they say they simply did not contemplate being bound by such terms. 
318.	I would accept that this evidence suggests an indifference to the paperwork, and carelessness that in retrospect must be a source of regret and some embarrassment to all of them. But indifference or carelessness is one thing; cognisant acceptance is another.  I accept that none of the Claimants who gave evidence intended their investment to be regulated by those terms; and further, I do not think that any of them took either the provision of draft loan notes or their terms to signify that their monies would be available to AFL before the entitlement to equity participation was secure. I accept that this simply did not occur to any of them: an unsecured loan on those terms was beyond their contemplation.  
319.	It is true that Mrs Challinor went further than the others in that she signed the draft, as did her husband, and even had these signatures witnessed. I accept also Counsel for the Defendant Firm’s submission that Mrs Challinor did not have a credible explanation as to why she went to the trouble of signing the draft and having it witnessed.  The indications are that she and her husband were prepared to sign whatever Mr Egan put in front of them as necessary in the context of an Albermarle investment scheme they had in principle decided to invest in. But the document was headed a draft; it was not intended to be any more than that by the offeror; and as such its signature does not in my judgment bind either of the Challinors. I accept Mrs Challinor’s evidence that she only glanced at the draft and had no perception that it would substantially alter what she understood to be the fundamental character of her intended investment.  It is evidence of careless reliance on conformity with the Albemarle investment scheme pattern; but not of contractual acceptance.
320.	Similarly as to the filling in of draft Loan Notes by both Tenon and the minute noting formal approval at a board meeting of Maple of its investment of £150,000 “in return for the issuance of a 1% above base unsecured redeemable loan note by AFL”:  both signify a remarkable carelessness and reliance on everything being as expected without any further examination, but neither constitute binding arrangements. In the absence of evidence from Tenon and Maple, I have considered whether the fact of that approval must be taken to connote their acceptance of those terms; but I have concluded that it is so unlikely that either would have agreed to lend money on such terms without equity participation that the true explanation is that those Claimants, like all the Claimants who gave evidence, must have regarded the drafts as being in effect no more than a temporary receipt which did not affect the fundamental nature of their intended investment in a loan and equity mix in accordance with the Albemarle pattern. 
321.	In summary, and for the avoidance of doubt, in my judgment, none of the Claimants became bound by their terms as a matter of law: the documents being in draft only and still remaining to be completed, approved and authorised. Further, I do not consider that those terms are a reliable guide to what they expected: the expectations of those who gave evidence were as described above, and the draft Loan Notes were regarded at most as a temporary expedient to record a passing entitlement. I do not consider there to be any sufficient basis for attributing to any of the Claimants any other expectation. 
(b)	Mr Egan’s point of view as to the nature of the investment
322.	As I understood it, Mr Egan’s evidence under cross-examination was also substantially to the effect that the Loan Note was indeed just a piece of paper in the nature of a receipt for moneys received but which would not be released unless and until it was clear that the Fairoaks investment would safely close. By this Mr Egan meant in summary that investors would have the certainty both of equity participation in some agreed form and control of the SPV (whether directly or indirectly).
323.	Under cross-examination, Mr Egan described the Loan Note as “interim evidence of their investment”, but not as recording a loan such as to make the monies available to AFL. 
324.	The following exchange illustrates his stance in answer to Mr Sutcliffe:
“Q. Now, can I suggest to you that when you got this document from Mrs Bellis -- and we know you got I think the same day from her -- you didn't give the document much thought beyond it being a lawyer's piece of paper to give a record that investors had transferred money to the solicitor's account and were getting interest?
A.  That's right.  I am afraid I tended to leave the detailed documentation to the experts.
Q.  You certainly didn't consider the detail of it, minimum period of a year and the subordination provision, which in fact meant that it would lock the investors into a loan until the full £31 million had been repaid to RBS in five years' time?
A.  Well, what was discussed this morning was that it was a year.  As far as we were concerned, the year --I would have looked at the year or I was aware of the year because there was an email between Mrs Bellis and myself -- the year was a long stop date.  It wasn't a year's loan.  It was a year's long stop date on the basis that this would have taken weeks or at most more than a few weeks to actually complete the investment       memorandum, which would have its own units, which would have its own additional loan notes which would replace these loan notes.  So the year, as far as I was concerned, was a long stop. What was the other point you raised?
Q.  That it would effectively because of what's called the subordination –
A.  Well, it would always be subordinated to RBS.  Everything is subordinated to RBS.  They have the first legal charge on the property.
Q.  The 31 million, as we know, £24 million worth of it didn't have to be repaid for five years did it, over five years?
A.  That's correct, but you could have repaid it at any time if you had sold the property, et cetera.
Q.  Of course.
A.  That comes as no surprise to me that it was subordinated to RBS: it has to be.
Q.  Yes.  But this document, which you forwarded on, you didn't think changed the money, the status of the money, from being safe in the solicitor's hands?
A.  Not at all.
Q.  Mr Glatman, rather colourfully, says that he would have had to be a complete lunatic to put his money at risk in this way for base plus 1 per cent; that's Day 5, page 52?
A.  (The witness nodded)
Q.  Did you hear him give that evidence?
A.  I read it.
Q.  Would you agree?
A.  Yes.
Q.  Whether you would have put it so colourfully, you would still agree with him?
A.  Well, absolutely.  If I compare this money with the --this money at 1 per cent above that is being described as unsecured, which it isn't, if you compare that with the loan note that Erinaceous had for the balance of the funds that were to be paid on Shoreham, which was unsecured and everyone acknowledges it was unsecured, the rate there was 10 per cent above base.  Now, if you had offered -- if these investors were investors, not lenders anyway, but you would have had to have offered, you know, 10 per cent above base to entice them into doing anything like that.
Q.  Mr Cole -- Day 6, page 103 -- said: "Why I would take an equity risk for 1 per cent over base rate return?  It's just unheard of."
A.  Yes.
Q.  It's no good to say, is it, that these people were eventually going to get equity because the point the investors make is that they would not have risked their money on loan?
A.  No, it's not eventually.  To take the terminology that Mr Glatman was using, it's stapled.
Q.  You are not trying to tell the court that the investors were in the habit of making short-term loans to Albermarle syndicates?
A.  Well, they have never done it before.”
325.	As Mr Croxford emphasised strongly, both in submission and in his cross-examination of Mr Egan, this line is not easy to reconcile with either Mr Egan’s emails to Mrs Bellis in August, September and October 2007 (which I have quoted above) chasing for loan notes to assist fund raising with a view to repayment to RBS of the equity bridge loan, or Mr Egan’s verified Defence.  
326.	The latter (at paragraph 12) reads in most relevant part as follows:
“…Mr Egan told the Investors on 20 August 2007 that they would receive a loan note “pending completion of the unit trust”. The reasonable inference from this representation was that, prior to the issue of units or equity in the unit trust, or whatever “vehicle” ended up owning the asset, the Investors funds were to be available to be used for the sole purpose or benefit of AFL. Mr Egan admits that 	he did not specifically inform each of the Investors that their funds may be used to pay down the RBS Equity Bridge.  For the avoidance of doubt, it was Mr 	Egan’s belief that, following receipt of the Investors funds, AFL was in a position imminently to issue units or shares to the Investors such that they would have complete control of AFL and hence the underlying asset.  By this stage Mr Egan believed that the transaction was effectively 95% completed…”
327.	Such was the difficulty I initially felt in reconciling Mr Egan’s evidence under cross-examination by Mr Sutcliffe and his Defence and his cross-examination by Mr Croxford that I enquired of Mr Egan’s Counsel in the course of his closing submissions whether he wished to amend; but after taking careful instructions Mr Bacon confirmed that he did not. Inevitably, Mr Sutcliffe on behalf of the Claimants exhorted me to rely on Mr Egan’s answers to him as being the most reliable of what, on one view, are rather different depictions of Mr Egan’s understanding as to the nature of what was being offered to the investors.
328.	On reflection, I think the answer to the inconsistency, and the reality of Mr Egan’s understanding, lies in the same paragraph of his Defence.  Mr Egan struck me as somewhat swashbuckling in his attitude to detail.  He looked to what he assumed would ultimately be the realities, rather than what he regarded as legal formalities.  From his point of view, the Albermarle investment scheme pattern was clear; it needed tweaking, but not substantively altering, to take into account the SDLT considerations, the consequent adoption of a ‘foreign’ SPV and fund structure, and the advice of PwC; appropriate documentation would follow in due course: all would turn out well in the end.
329.	My assessment is that he believed and trusted in (a) there being no substantial impediment or delay likely to the issue of units or shares or equity so that (b) there would only be a very small period, if any, during which the investors were lenders only (and even then their entitlement to equity would follow imminently) and in consequence (c) in lay terms (and Mr Egan consistently emphasised that he is not a lawyer nor a man for detail) he convinced himself then (and with some prevarication, now) that in substance the investors were never exposed to the position of being unsecured and unsubordinated lenders at a commercially “unheard of” or “nonsensical” interest rate (as may have eventuated). 
330.	I suspect also that he expected Mrs Bellis to advise him if he was pushing ahead too precipitately as matter of law. There being no amber, still less a red, light he proceeded as quickly as possible to achieve his primary commercial objective of satisfying RBS and his ultimate employers, Erinaceous: that indeed is in substance what he told AFL’s administrators when interviewed by them, and indeed in substance confirmed to me. 
(c)	Mrs Bellis’ point of view as to the nature of the investment  
331.	Mrs Bellis did not contest that investors ultimately expected an equity stake or participation in some form.  Where her perception really differed from that of the witnesses for the Claimants was as to the relationship between the loans they were to make and that equity participation, and how the one would lead to the other.
332.	As she accepted, and as I find, she did regard the investors, both in Albermarle Shoreham and in Albermarle Fairoaks, as ultimately being entitled to such equity participation after making unsecured loans; but she was unclear, and indeed seemed careless, as to how this was to be achieved: she seems just to have assumed that it would be achieved. 
333.	In the context of Albermarle Shoreham she told me this:  
“…I have to say that at this stage I did not know the detailed structure of the Albermarle funds, in other words I did not know the split between loans and equity – my understanding was that Mr Egan would deal with whatever formalities were necessary, as he had his own documentation which he had used in the past…I did not know precisely how it would happen, but certainly accept that although these people were sending money by way of an unsecured loan in that interim period, it was always the intention that in due course they would have equity in the LLP.”
334.	I have also had particular regard to a letter dated 21 December 2006 from Mrs Bellis to Mr Lawson and Tom White which comprised the Defendant Firm’s engagement letter in that transaction (“the Shoreham engagement letter”) and described the first tranche payments as “unsecured loans” to the LLP investment vehicle; and to Mrs Bellis’ oral evidence that she did not herself know until later whether first tranche investors would receive equity or merely a loan instrument.
335.	It was urged on me that these matters coloured Mrs Bellis’s approach and support her contention that loan and equity participation were decoupled in both transactions; and that although all investors expected equity, they were nonetheless content that their monies be deployed even before they had the certainty of it. 
336.	I would accept that these matters support the Defendant Firm’s argument that the Claimants’ contention that Albermarle Shoreham was a template that should have informed Mrs Bellis’s perception of the nature of the Albermarle pattern or model is two-edged. At first blush, indeed, Albermarle Shoreham seems to support Mrs Bellis’s stance before me that at least in the context of Albermarle Fairoaks she regarded the loan and the equity participation as separate. But further consideration presents a more complex picture.
337.	First, there was no evidence that any of the investors ever saw the Shoreham engagement letter or ever understood or agreed that the money they invested would be by way of unsecured loan which could and would be used to repay indebtedness before the structure and terms of equity participation had been agreed and full subscription achieved. Mr Wallis’s depiction of shock when he was much later shown the Shoreham engagement letter carried the ring of truth. Investors were (by e-mail to them all dated 20 March 2007) kept informed in this regard, and it appears that no monies were released prior to the full indeed over-subscription, and a renewed commitment to send out both loan notes and share certificates in respect of the coupled or matched lao/equity investment. Secondly, unlike the case in the Albermarle Fairoaks transaction, by the time of the payments the investment vehicle (an LLP) had in fact already been established. Thirdly, that investment vehicle was already controlled by Messrs Egan and Lawson for and on behalf of the prospective investors. Fourthly, so far as investors were concerned, all that remained to be done was the paperwork necessary to record their investment, which was presented as no more than a ministerial process.
338.	In short, therefore, the pattern apparent from the Albermarle Shoreham scheme was that even if the paperwork was “flimsy” and notwithstanding raising cash in two tranches, investors monies would not be deployed unless and until (a) a viable structure and defined terms had been established for their ultimate equity investment (b) in a suitable investment vehicle (c) the control of which on their behalf was unconditionally secure, and (d) full subscription to ensure the transaction could be completed had been achieved.
339.	I do not feel able to determine one way or the other whether that was Mrs Bellis’s subjective perception; but equally I do not think that the Albermarle Shoreham transaction offers any real support for any contention that the investors had demonstrated they were prepared to lend without matched equity participation and control.  Furthermore, under cross-examination Mrs Bellis did not contend that it did: her contention was that Albemarle Fairoaks was simply different. 
340.	As to that, and her perception in the context of Albermarle Fairoaks itself, the following extracts from her cross-examination seems to me to encapsulate her evidence in this regard: 
“Q.  Moreover as we have seen from your notes on the Brighton draft LLP document, you knew that the investors always want equity and loan notes in Albermarles, didn't you?
A.  I knew that in terms of the Albermarle LP structure, which was what Shoreham was, and which was what -- excuse me, and what was envisaged for Brighton, that loan notes and equity would be issued together.  What was absolutely clear to me in this transaction was that investors would not have equity in Albermarle Fairoaks Limited.  It was a different structure, it was a different approach.  They would have made loans to Albermarle Fairoaks Limited and in due course the unit trust or infrastructure fund would be set up above the company and the investors would have equity participation in it.
Q.  In other words -- please confirm -- there was never an intention, on your part or indeed anybody else's, that the investors would be stuck with just a loan?
A.  Yes, that's correct.  That was the understanding throughout: that this was an interim measure, particularly during the early fund-raising; that the loans would be made to Albermarle Fairoaks Limited; that the investors would, in acknowledgement of those loans, be issued with the loan note; and that once the unit trust or the infrastructure fund was set up, then they would receive units in those, in whatever fund was set up, and the later round of investors would go straight into the unit trust or the infrastructure fund.
Q.  So you knew the terms of the loan note were what the noteholders -- you knew that the terms of the loan note were not what the noteholders would agree to?
A.  My understanding was that these moneys were coming into Albermarle Fairoaks Limited as a straightforward loan. The loan notes in my mind were, therefore, there effectively to confirm receipt of those loans.  I was fully aware that there would be, at a later date, a unit trust or infrastructure fund set up and these loan notes or these moneys would be effectively credited to the  unit trust. As I said yesterday, my original idea was to draft these loan notes so that they had an element of convertibility and Mr Sutcliffe pressed me as to why that was changed. I can only say that I had had advice from PriceWaterhouse Cooper, and I regret that I cannot find a note of that, but my clear recollection is that I was advised that for fiscal reasons there should not be an element of conversion in the notes.
Q.  Mrs Bellis, you knew at the time that these terms were not even what you say you thought the investors were agreeing to?
A.  This loan note was there to show that they had made a loan to Albermarle Fairoaks Limited.”
341.	PwC’s advice against any element of convertibility (of which no written record was provided in the evidence before the court) was (see paragraph 153 above) given some time on or before 15 August 2007. Mrs Bellis was apparently unable to tell me who instructed and paid PwC. But the fact is that any element of convertibility was thereafter abandoned; and no thought appears to have been given to a replacement mechanism to secure the agreed objective of equity participation. 
342.	The transaction and fundraising from investors carried on thereafter “undefined” (to quote the written submissions of Counsel for the Defendant Firm) without any analysis as to how investors were to be ensured entitlement to equity participation; the fund structure became a subject for the future, whilst such focus as there was fell on the loan note, and the need to pay down the equity bridge before 26 October 2007. 
343.	When asked about the extraordinary lack of documentation and lack of definition as to how equity participation was to be secured Mrs Bellis offered this in reply to questions from Mr Sutcliffe:
“I have to say, with the benefit of hindsight, I was perhaps a little surprised at the informality, but Mr Egan assured me that he had dealt with Albermarle funds in the past on exactly this basis. In other words, money would be received and the paperwork would be dealt with at a later date.”
344.	This is consistent with the view I have formed more generally as to her attitude and her assumption, which was that this was simply how things were done in Albermarle schemes, and that despite the delays and uncertainties the investors’ expectations would be met in the end, as indeed they had been in the Albermarle Shoreham scheme. 
345.	In my view, however, it is plain and obvious, and would have been plain and obvious to Mrs Bellis had she focused on the nature of what was on offer, that, without the equity participation and control of the SPV that was the hallmark or characteristic of the Albermarle pattern, no sensible investor would have agreed to invest. It simply makes no commercial sense at all to be locked into a five-year unsecured, subordinated loan that could not be repaid before RBS was repaid in full, and with an interest rate of 1% over base rate.  
346.	Furthermore, unless coupled or matched, the Albermarle model of a loan/equity mix would have been unachievable: the usual 9,999:1 loan to equity ratio was rendered impossible; and the whole point of the tax efficient structure by which principal was returned early and profit then made on equity was shot through and invalidated by the deferment of any repayment for 5 years. 
347.	I do not consider that any reasonably competent solicitor would not have appreciated all this, once properly focused on the structure.  Mrs Bellis struck me as intelligent and painstaking in her work for Erinaceous. I do not think it reasonable to suppose that she was insensible to the commercial nonsense thus inherent in the arrangements from the investors’ point of view if equity participation was not secured.  In my judgment, the reasonable and rational explanation is that she must have thought or persuaded herself that this would not come to pass.   
348.	I do not think her indifference to the risks from the point of view of investors connotes that she was unaware of them. I ascribe it to the abdication of responsibility to which I have previously referred, her assumption that all would be well in the end, and the impetus of her single-minded objective of assisting to get in the money to pay down the equity bridge which would safeguard the transaction and reduce Erinaceous’ exposure under its guarantee of the RBS Equity Bridge and its other loans in respect of the Fairoaks venture.
349.	I have puzzled over the following extract of her evidence under cross-examination by Mr Sutcliffe:
“Q.  You had no reason to believe at that point, did you, Mrs Bellis, that Mr Egan's investors would want to make unsecured loans at a time when the fund was not even up and running and there was no certainty that it would?
A.  I am afraid that I do not quite follow your question. Perhaps you could rephrase it.
Q.  I do not think I need to rephrase it.
A.  Okay, fine.
Q.  I will ask it again.
A.  Fine.
Q.  You had no reason to believe at that time, on 3 July, that Mr Egan's investors would want to make unsecured loans at a time when the fund that you have talked about was not even created and there was no certainty that it would be created.
A.  I am afraid that such a thought did not cross my mind at the time.”
	I am not entirely confident that Mrs Bellis understood quite what she was being asked, even at the second attempt. But what I think her answer really reveals and conveys is this: as above stated, if it did not cross her mind to worry about the commerciality or sense of the matter from Mr Egan’s investors’ stand-point if the loan proceeded but they did not also in due course obtain an equity stake in some agreed form, that was because she assumed that this would never happen. The Albermarle Shoreham scheme had encouraged her to assume that what she later described as “flimsy paperwork” was the norm, but that all would be well in the end; and the growing imperative to get the money in discouraged any doubting reflection.
(2)(a)	Was Mrs Bellis aware of the terms of the “offering documents” and did she know they had been sent to the investors?
350.	As I have mentioned previously it is a curiosity of the case that Mrs Bellis contends she saw neither, notwithstanding that she drafted the Loan Note and that the Engagement Letter stipulated that she would “need to see a copy of any documentation which goes to the investors”. 
351.	The email Teaser of 8 August 2007 is headed “Albermarle Fairoaks”. It is signed by Mr Egan as “Director, Albermarle Investment Syndicates”. It makes no reference at all to the Defendant Firm or to Mrs Bellis, and it was not sent or (so far as the documentary evidence goes) circulated to either (though it was to Ms Cummings and Nigel Davis and Michael Pearson of Erinaceous). 
352.	There is no documentary or any other direct evidence to suggest that Mrs Bellis saw it.  She denied consistently that she had done so. She accepted that the terms of retainer might have caused her to ask to see it; but she did not ask: “No I did not, I’m afraid.  It may have been remiss of me, but I did not.”
353.	The Claimants urged me to disbelieve this. Counsel submitted that it simply could not be believed. But I see no basis or reason for concluding, contrary to Mrs Bellis’ consistent and direct evidence and in the absence of any other, that she did at the time see the Teaser e-mail: and I decline to do so.  
354.	Further, her “remiss” failure to seek out what the investors had been told seems to me to be consistent with my earlier conclusion that she was oblivious to that side of the transactional equation.
355.	Her evidence as to the loan note is more difficult to accept, although again under cross-examination Mrs Bellis never departed from her position that she was not aware that Mr Egan had sent a draft Loan Note out to investors, did not see the covering e-mail (dated 20 August 2007) by which he did so, and did not, at that time, expect Mr Egan to send out the draft loan note (which was her draft) to investors.  
356.	The Claimants, in their written closing submissions, depicted this as being “plainly a lie that Mrs Bellis has fixed on as helping her to explain why a draft note was sent out.” (Counsel for the Defendant Firm sought to persuade me that this was not properly put to Mrs Bellis; but I am satisfied that Mrs Bellis knew that this was suggested against her and had a fair opportunity to respond.)
357.	The evidence in this regard reveals the following:
(1)	On 13 August 2007 Mr Egan had emailed Mrs Bellis: “Any chance of a 	loan note, so I can collect some funds. Thankyou.”
(2)	On 14 August 2007 Mrs Bellis advised Mr Egan by email that she was 	working on “the Fairoaks documentation” comprising (inter alia) a draft 	loan note, but asked for more information as follows:
	“I imagine that it will attract interest but at what rate?
	I am proposing that the note will be cancelled in return for 	an appropriate unit in the new unit trust which is being set 	up but there should be a long stop date in the note for 	repayment if the unit trust does not get formed. Any ideas?
	The note will have to spell out that the lender’s loan is 	subrogated [she explained in court that she meant 	subordinated] to the Royal Bank of Scotland’s senior debt.  I 	assume this is not a problem?
	Are there any other conditions which you think ought to go 	in the loan note to ensure that it ties in with what investors 	have been told?”
(3)		On 15 August 2007, as mentioned previously, she advised Mr Egan by 	email of PwC’s advice against any element of conversion and also queried 	when interest should be payable (she had for present inserted quarterly in 	arrears): that same email purportedly had a draft loan note attached;
(4)		By email to Mrs Bellis (circulated to Ms Cummings and Mr Cummings) on 	20 August 2007 Mr Egan advised “The draft loan note was not attached, 	could I have it asap as I want to collect some money?”
(5)		Mrs Bellis replied to all 4 minutes later (at 10:38) attaching a loan note;
(6)		On the same day, 20 August 2007 at 13:14 Mr Egan emailed Mr Wallis (cc 	Saskia Hunter) attaching the draft Mrs Bellis had prepared: other investors 	(especially Mr Cole and Mr Glatman and Mr Mahtani, and the next day Mr 	Melio) were sent the same soon after that;
(7)		The covering e-mail (summarised and quoted in part in paragraph 162 	above) provided the Defendant Firm’s bank account details on its second 	page, in the body of what appears to be an email originally sent by Mrs 	Bellis. Its invitation to recipient investors was in these terms:
	“Could you now forward the money to Juliet Bellis – I have 	attached the relevant Bank Details.
	I have also attached the Loan Note (with interest) which we 	will be issuing pending completion of the Unit Trust.
	The remainder of the terms of the transaction will be fairly 	similar to Shoreham LLP.” 
(8)		The draft loan note attached was quite obviously (a) only a draft, (b) 	unfinished, (c) undated, (d) not executed and (e) had at least one clause 	(clause 9.2) which was still not in settled form. (Though it is fair to 	acknowledge that the Trust Assistant at Tenon appears to have thought 	otherwise.)
(9)		On 21 August 2007 in the early afternoon Mr Egan’s secretary, Saskia 	Hunter, sent Mrs Bellis an email, attaching “a schedule of confirmed 	investors who will be sending money direct to the Juliet Bellis & Co client 	account for Fairoaks Airport.”
(10)	Early on 22 August 2012 Mr Egan sent an email to Mrs Bellis, Ms 	Cummings and Mr Pearson (which was also circulated to Mr Cummings) 	stating:
	“The money will now be trickling in, would it be possible to 	register the dates for each receipt please, so that we can pay 	the investors interest.”
(11)	That previous day Mrs Bellis received from Lloyds TSB CHAPS receipts of 	payment (for example, from Mr Cole, timed at 15:14 on 21 August 2007.
(12)	On 24 August 2007 Mr Egan received an email from Chrissy Dobson, a 	Trust Assistant at Tenon (IOM) Ltd.  This confirmed that the trustees had 	approved investment of £150,000 in the Fairoaks scheme, attached 	“competed unsecured redeemable loan notes 2007” and at the end it stated: 	“look forward to receiving our signed copy and the necessary 	documentation in due course”: I return to this in paragraph 753 below but 	pause for the present to recall that in Mrs Bellis’ handwriting (as she 	confirmed) in the right hand margin is a note stating “GE confirms > RBS”. 	No other draft Loan Notes appear to have been returned by investors.
358.	Mrs Bellis knew that the loan note “was still in draft form. It would have obviously had to go to Guernsey to get a Board resolution before it was issued”. She knew it would not be issued in that form because it may be (and was) amended in Guernsey. She knew also that no such note had been approved by Guernsey and that no Board resolution had ever been obtained. But she said she expected it to be issued “in these terms or similar.” 
359.	As noted earlier, she described it in her interview by AFL’s administrators as just a “bit of paper” that Mr Egan wanted (not that Mrs Bellis was requiring) to keep the investors happy. She told them this:
“But the loan notes were – the way in which it worked was that the money came in and Geoff was then saying, you know, the investors want some bits of paper.  That’s, put it crudely, the way it worked. And that’s the way Geoff has always worked.
Q. Right. And that didn’t give you cause for concern?
A. No.”
360.	I draw the following conclusions as to what Mrs Bellis knew about the dissemination on or about 20 August 2007 of the draft loan note that she had prepared:
(1)	she knew that Mr Egan wanted draft loan notes to provide to potential 	investors as a record of their investment and as confirmation that they 	would be paid interest;
(2)	she envisaged that the terms might be altered before they were finally 	issued but was not concerned if they were sent out in the meantime;
(3)	I infer from the e-mail from her providing her firm’s client account details 	that she probably was aware that investors would, when sent the draft, be 	asked to make payment to that account;
(4)	It may be that Mrs Bellis’ denial is in the strictest sense accurate: she may 	not have seen the actual email sent; but if she did not actually see the email 	sent to investors covering the draft loan notes she was well aware that an 	email substantively along those lines would be likely to be sent;
(5)	She did not stand back to assess the commerciality or likely acceptability of 	the terms from the point of view of investors.
(2)(b)	What did Mrs Bellis perceive to be the purpose and effect of the draft Loan Notes?
361.	The last point is reflected, as I see it, in the terms of the draft Loan Notes which Mrs Bellis prepared (described by Counsel for the Defendant Firm as “unequivocal”).
362.	Mrs Bellis admits that these terms did not reflect what the investors expected to get.  Her evidence under cross-examination reveals her approach, and I quote it at length since it seems to me to cover comprehensively both her own attitude and what she expected would be the attitude of the recipient investors:
“MR SUTCLIFFE:  At the time, Mrs Bellis, did you consider  what the investors would have made of this document which, had it been executed, would have signed them up to an unsubordinated unsecured loan at base rate plus 1 per cent for five years?
A.  You are asking me to put myself in the position of one of the Albermarle investors in 2007 having seen this document?  Is that the question you are asking?
Q.  No, I am asking you whether, at the time, you gave any thought to how the investors would have reacted to this document?  Did you possibly think that -- they were the people who were going to receive this document.  Did you think for one moment that they would have agreed to part with their money on the basis that it was an unsubordinated unsecured loan at base rate plus 1 per cent for five years?
A.  Yes, because my understanding was that Mr Egan would have communicated with them that this was an interim measure and that in due course -- I think everybody, we are all in agreement on this -- in due course they would receive equity in the fund or trust that was set up; and that it was always agreed and intended that Albermarle Fairoaks Limited would then be subsumed within that trust.  So that, therefore, at that stage, there would have been a reorganisation and their loans would have been converted into, I imagine, a small amount of equity in the unit trust, with the remainder being outstanding, as was the case in Shoreham, as loans. If you are asking me would I personally have invested at the time, I would not, but I would not have invested in Shoreham between Christmas and New Year.  I would not have invested in the way in which, it seems to me, from this case and from disclosure, in which many of these people sent their money in on the basis of very flimsy paperwork.  That's my personal opinion.
MR JUSTICE HILDYARD:  Mrs Bellis, can I ask you a question.  I am so sorry, Mr Sutcliffe.
A.  Yes.  No, do.
MR JUSTICE HILDYARD:  Your expectation was that their expectation was a convertible loan note?
A.  My expectation was originally that there should be some conversion rights, and I was told for fiscal reasons that would be a bad idea.
MR JUSTICE HILDYARD:  You were told by PwC?
A.  PwC, yes.
MR JUSTICE HILDYARD:  Now, that may be the advice for fiscal reasons.
A.  Yes.
MR JUSTICE HILDYARD:  But that does not alter, does it, your expectation of what their expectation would be?
A.  That is correct.
MR JUSTICE HILDYARD:  So you proceeded on the footing that they would not  be getting what they expected?
A.  I proceeded on the basis that they would be getting a loan note because it was a straightforward loan to Albermarle Fairoaks Limited, but that there would certainly be a restructuring of Albermarle Fairoaks Limited, and it was always anticipated that Albermarle Fairoaks Limited would be collapsed into the unit trust and the fund as soon as that was set up.
MR JUSTICE HILDYARD:  So their expectation would be met in the end?
A.  Exactly, my Lord.
MR SUTCLIFFE:  Do you accept, Mrs Bellis -- I think you do from your answer just now -- that this document at page 163 did not record the contract which you understood was intended by the investors?
 A.  It reflected my understanding of what we were doing at this particular stage in the transaction.                                       
Q.  That's not the answer to my question.  I asked you about this document.
 A.  Yes.
Q.  The terms of this document did not reflect or record the contract which you   believed at that time was intended by Mr Egan's investors?
A.  The contract which I believed the investors intended at this stage was to make a loan to Albermarle Fairoaks Limited.  It was, I fully accept, agreed by everybody that at some point in the future there would be a change to the structure which would then enable the investors to have equity in the fund or trust which was set up above Albermarle Fairoaks Limited.  So in my mind it would have been a two-stage process.  But at this stage I was absolutely clear that the money that was coming in was a loan to Albermarle Fairoaks Limited.
Q.  There is nothing in this document which gave the investors any right to insist on what you call the second stage?
A.  Yes.  No, there is not.  You are quite correct. I believe that was the thrust of his Lordship's question just now.
Q. It's pretty clear, Mrs Bellis, that Mr Egan had not grappled with these issues, had he?
A.  I don't know what Mr Egan had grappled with or not, I am afraid.
Q.  You must have done so, Mrs Bellis, mustn't you, as a solicitor?
A.  I had grappled with these issues insofar as trying to draw up a document which reflected what my understanding of the position was at that stage.
Q.  Given that you knew this document did not record the actual terms of the loan between the parties, I suggest that you did not think this was ever going to be issued as a binding loan note, did you?
A.  It was sent to Mr Egan in draft form.  I did not, at the time, think that Mr Egan was going to send this out to investors.
Q.  Indeed, it was never intended to be issued in these terms, was it?
 A.  It would have been issued in these terms or in terms similar, I believe, because this was my understanding of what the position was, as I say, at this time.
Q.  That is why you did not immediately contact AFL (i.e. Legis) in Guernsey to get a Board resolution; that's right, isn't it?
A.  At this stage, it was still in draft form.  It would have obviously had to go to Guernsey to get a Board resolution before it was issued.
Q. If you can be handed bundle A1 and go to your Defence,                                     behind tab 3.
A.  Tab 3.
Q.  Page 47.
A.  Yes.
Q.  I direct your attention to (e) on that page.  Page 47, do you see that, (e)?
A.  Yes.
Q.  "Mrs Bellis did not address her mind to the issue of the COBO or Know Your Customer requirements.  The Guernsey regulatory issues were matters which had been dealt with by Ms Cummings with the assistance of Ozannes."  That can't be right, can it, Mrs Bellis?
A.  Yes, it is unfortunately correct.
 Q.  It's no good saying that Ms Cummings dealt with it. You were party to the emails on about 13 July dealing with the question of COBO consent, weren't you?
A.  Yes, I had seen those emails.
Q.  You had emails with Mr Dickinson on 23 July that we looked at yesterday in which you said that the Erinaceous loan was already covered by COBO?
A.  Yes, after asking Ms Cummings.  I think I said I had checked with Lucy and the COBO consent covers it.
Q.  So what is your evidence?  Is it that you did think about COBO consent for this fund-raising exercise but you expected your sister to deal with it?  Or that it just never entered your mind at all?
A.  What happened was during -- with the fund-raising exercise, I inquired or I asked Lucy again, "Is the COBO consent fine?"  She said "yes".  I fully accept that I should have gone back and checked the detailed terms of the COBO consent, but I am afraid I did not, and that is an error on my part.”
(3)	What did the parties understand to be the role of the Defendant Firm?
(a)	Investors’ understanding as to the role of Mrs Bellis
363.	Rightly or wrongly in law, it seems to me likely that the investors’ understanding was that Mrs Bellis was acting for them, particularly in relation to the monies they were instructed to pay into her firm’s client account. That is how, as it seems to me, Ms Streeton had appeared to them to regard her role in previous transactions, and I sensed from all those Claimants who gave evidence that this was what they thought the requirement to pay into that solicitors’ client account connoted or reflected in the circumstances. 
364.	Once again, I think this perception is best expressed in the words of one of the witnesses. Mr Cole, in explaining to me (at my request) a paragraph in his witness statement, told me this: 
“MR JUSTICE HILDYARD:  -- you say in the last paragraph of paragraph 15 that it was your understanding that:
"The defendant would be acting for the investors in accepting my funds, which what I had also understood when remitting them for Shoreham."
A.  Yes.
MR JUSTICE HILDYARD:  Can you explain that to me, please? Why did you think the defendant could be acting for the investors?
A.  Really because on all the transactions which I've been involved in with Geoff previously, we would use a common set of solicitors, which was normally Helen Streeton at Fox Williams, and when I was involved with Legal and General we always had a common firm of solicitors involved who acted for top company and the investors.  So that was consistent all the way through and, indeed, for Shoreham when you look at the investment memorandum which raised the conversation which I had with Geoff, indeed Juliet Bellis and Co were the solicitors for the offer or memorandum, as I understood it.  It's for the top company and the investors which go together.  So it was indeed my understanding that by transferring my monies to Juliet Bellis' client account that, likewise, the intention was that Juliet Bellis would be acting for the investors and, indeed, when I spoke to Geoff about this we had that conversation because he described how the Erinaceous Group worked and the family and that she was an independent solicitor as well as being company secretary to Erinaceous but that she would be looking after our interests.
MR JUSTICE HILDYARD:  So that her firm was in effect solicitors to the offer?
A.  Yes, exactly.”
(b)	Mr Egan’s understanding as to the role of Mrs Bellis
365.	Mr Egan thought of Mrs Bellis as, in substance, Erinaceous’ in-house lawyer; and so it did indeed appear.
366.	Geographically (she shared the same office building and the same entrance to it), financially (she invoiced Erinaceous direct, and her remuneration was, in effect, determined as such by a committee of Erinaceous), self-interestedly (her husband, sister and brother were in substantial control and had a large shareholding), and in terms of the expertise she could offer as in reality its property department (with little other commercial expertise).  
367.	Further, and as appears from the chronological sequence of events set out earlier in this judgment, Mrs Bellis frequently deferred to Ms Cummings, or left her to reply to enquiries from Mr Egan: the email exchanges of 28 August referred to in paragraph 180 above provide an example.  Ms Cummings was not a director or shareholder or otherwise connected to AFL or ECS: but consistently with Mr Egan’s understanding, her interventions reflected the reality that Erinaceous ultimately controlled the transaction, and Mrs Bellis answered to her.
(c)	Mrs Bellis’ understanding as to her firm’s role
368.	It was obvious, to my mind, that Mrs Bellis herself had carefully considered, and honed, her best line of defence, and she never strayed from it: that her firm had no role except to advise Mr Egan and Mr Lawson as representing AFL in the transaction, that she never assumed or owed any duty to the investors, for whom (it is her case) she acted only in a ministerial capacity.  
369.	She had expressly stated in an email dated 22 November 2007 in reply to an email dated 9 November 2012 from Ms Wyatt of Ozannes, that she, though acting for AFL, “regarded Geoff [Egan] and Dougie [Lawson] as “the client” for the purposes of this transaction and they have approved the documentation….” 
370.	However, they were employed by ECS, and were de facto subject to direction by (in particular) Ms Cummings, as Mrs Bellis knew.   Mrs Bellis accepted that her firm was to be paid by Erinaceous (under the arrangements previously explained): she never intended to invoice AFL and never did so.  She also accepted that until 13 July 2007 her firm acted for Erinaceous (in respect of the actual property transactions); but she was adamant that after 13 July 2007 her firm was not acting for Erinaceous. Her position was that the firm acting was one called ASB Law, and that she sought to protect the interests of AFL at all times.  ASB law’s engagement letter (dated 21 June 2007) was addressed to Mrs Bellis at Erinaceous and was counter-signed in acceptance of its terms by Mrs Bellis (as Company Secretary) and her sister Ms Cummings (as Director). 
371.	Mrs Bellis’s real expertise was in property transactions.  The reality is that she had little relevant experience or expertise, and could offer next to nothing in terms of advice, beyond that; and apart from relaying advice from Nabarro Nathanson as to the structure to take account of SDLT changes, she never did so. 
372.	Once the property transactions were completed, she was content to do unquestioningly whatever was suggested to her by Mr Egan or required by Ms Cummings, unless it was patently beyond the scope of her firm’s licence (she could not handle regulatory work). 
373.	In the Engagement Letter, Mrs Bellis recorded her understanding that “most of the initial investors are likely to be those who have already invested in Shoreham.” She also made clear that her firm was not authorised by the Financial Services Authority to carry out investment business, so that it would be Mr Egan’s responsibility to ensure that any investment memorandum sent out to investors was compliant with any regulatory requirements.  However, she stated nevertheless that she would “need to see a copy of any documentation which goes out to investors”, recording that all she had seen was an early draft “Teaser” (comprising not the email Teaser but an early draft of its attachment).
374.	Mrs Bellis virtually ignored the investors, even to the point of undertaking none (or almost none) of the “know your customer” checks required, as indeed she admitted, saying (in answer to Mr Sutcliffe’s questions):
“Perhaps erroneously again, with the benefit of hindsight, I was content to accept his [Mr Egan’s] assurance that these people were not drug dealers or terrorists.”
375.	“These people”, as she described them, were not, in her perception, her clients; and owing them, as she saw it, no legal obligation, she had no regard for them. This doubly exposed the investors who had in previous Albermarle transactions come to regard Ms Streeton as protecting their interests, as Mr Egan confirmed. In answer to Mr Sutcliffe he told me:
“Q.  On the subject of Mrs Streeton, Mr Wallis told the court that the investors had built up a good relationship with Helen Streeton over the years?
A.  Yes.
Q.  That she provided a very good service?
A.  Yes.
Q.  That he regarded her as independent from you and completely safe with his money?
A.  Yes.
Q.  That she would frequently contact the investors before releasing their money to explain the position to them and check that they agreed; were you aware of that?
A.  She wouldn't telephone all of them, but I think that she would communicate with some of the key investors, yes.
Q.  Mr Wallis said she was pedantic and would come back to him even if there was the minutest change to her understanding?
A.  Extremely.
Q.  Do you know how such conversations between Mrs Streeton and investors took place?
A.  No, I don't because I don't know the detail of any of them.”                                       
376.	The truth, as I see it, is that Mrs Bellis was parachuted in by Erinaceous to replace Ms Streeton (who did have relevant expertise and on whom Mr Egan and his investor following had always safely relied), first in the Albermarle Shoreham scheme and then in the Albermarle Fairoaks scheme. This was because of her connections and her property transaction expertise (which was relevant to the initial, property acquisition, phase); and because she was, as Mr Egan depicted her, in effect Erinacous’s in-house lawyer. 
377.	The investors expected her to be as Ms Streeton had been and to regard her role in acting for the investment vehicle as in substance acting for them as its future owners. They and (I think) Mr Egan assumed they could rely on her, as they had on Ms Streeton, to counsel caution where appropriate, and to keep the investors informed in advance of any dealings with their moneys. But this was not how Mrs Bellis perceived her role; and her loyalty was to Erinaceous and her family interests. That mismatch of expectation and experience proved disastrous.
377A. This mismatch proved disastrous.  To my mind it explains, or at the least helps to explain, what I have earlier described as Mrs Bellis’s abdication of her responsibilities. These, in my judgment, plainly and obviously extended to (a) establishing precisely the intended relationship between each investor and the SPV, and what documentation and information had been given to investors in that regard (as indeed Mrs Bellis had stipulated in the Engagement Letter that she needed to see but never followed up);  (b) satisfying herself, if her firm could not advise, that appropriate advice from Ozannes and Legis was in place that the intended relationship could and would be established as a matter of legal mechanics, and that any regulatory requirements had been complied with (as again she had stipulated in the Engagement Letter, but again never followed up); (c) ensuring that the terms of that relationship had, at the least, finally been agreed and approved by Ozannes before AFL or the investors were irrevocably committed and any monies invested were released from her firm’s client account; (d) completing any KYC requirements. She did none of this; urged on by Mr Egan and the crumbling position of her family’s company, Mrs Bellis trusted that, as in Shoreham, everything would be all right in the end.  It was not. 
(4)	Requirement for investors to make payments into client account 
 (a) The investors’ understanding of reasons for use of client account
378.	All of the Claimants who gave evidence were (as it seemed to me) at one in drawing comfort from the fact that payment was to be made into a solicitor’s client account, both because that resonated with them as being consistent with the Albermarle “pattern”, and because it appeared to them to connote or confirm that if the scheme could not proceed their money would be safe and returned to them. 
379.	As to their understanding of the purposes of paying into a client account they were uniform, not to say formulaic, in their conviction that it was to ensure that the monies were kept safely under the control of someone in whom they could trust unless and until the scheme could proceed to completion, so that if it did not proceed (as in the case of Albermarle Brighton) the monies would be paid back in full. 
380.	None understood that their money could be used in the meantime, except to demonstrate their intention to invest if the scheme did proceed. They further appeared all to trust Mr Egan and (in the case of Fairoaks, as in the case of Shoreham) Mrs Bellis to determine the point at which the scheme was sure to proceed.
381.	Mrs Challinor’s evidence in answer to Mr Croxford is representative:
“Q.You knew that the property had already been purchased by that company?
A.  Yes.
Q.  How on Earth was that company putting your money to work if it was simply going to sit on deposit?                                       
A.  It wasn't going to be able to put our money to work until we were in a position whereby we could be offered ownership in that company and, at this point, when the monies were in, we weren't being -- we were being told that this was an Albermarle investment and therefore the expectation was that at the point at which our monies      were to be put to work -- in your words -- we would have some form of documentation, be it an investment memorandum, an application form, a subscription form, a membership agreement, something similar which would then say categorically what would happen at the point our monies were used.
Q.  And do you say that was something you had in mind at the end of August when you read this email and the attached papers?
A.  That's exactly what I understood this to mean, that we would be -- we were putting our money in early but that the outcome would be that we would have an investment in Albermarle Fairoaks.
Q.  And that must have seemed quite uncertain to you, therefore, as to what was proposed?
A.  I don't think it was uncertain.  We hadn't dealt with a Guernsey limited company before.  I'm not au fait with what the particular rules were but it was quite clear it was going to be a little bit more complicated but, again, our monies were being asked to be placed in a solicitor's client account and therefore our thoughts were, well, they'll stay there and if it can't all work out, we will get the money back.
Q.  Can't all work out by when?
A.  There were never -- there was no timing to referred to on this but there was an aim to raise equity so we knew there was an amount of money that they were looking to raise in respect of Fairoaks and we knew that there was an idea to create a fund above, which in fact the idea subsequently we know was dropped, but we knew there were further machinations to go through before this could be completed in the way other investments had been completed.
Q.  Surely you were curious about what these machinations might be and how long they might take?
A.  Well, I don't suppose that we imagined that we were talking years but we were aware that we were being asked for repeat information in terms of the KYC requirements of the funds, so I suppose we did think it would take a little longer.”
382.	I also find as a fact that although investors knew (for example, from the Teaser email) that RBS had assisted in financing the transaction, none of them was aware of the tight repayment schedule, nor (more particularly) of the terms of the RBS Equity Bridge and the commitment to pay back in instalments beginning in October 2007. 
(iii) Mr Egan’s perception as to reason for use of client account
383.	It will be recalled that Mr Egan, who had a minority interest in one of the Claimants, Black Isle, had, until the eve of trial, supported the Claimants’ case based on contractual escrow, but then changed his stance. 
384.	Once again, I think the essence of his revised case as to why monies were to be paid into the Defendant Firm’s client account can best be seen in an extract from his oral evidence:
“Q.  See, what I understand you to be saying to the AFL administrator and what I believe your evidence to this court is, is that when money is taken into a solicitor's account before an investment memorandum is issued, it is to be held safe by that solicitor awaiting the IM and it is not provided as a loan; it is as simple as that, isn't it?
A.  It's certainly not a loan.  It is to be held safe until they are a hundred per cent that the remainder of the transaction can be closed.
Q.  That is the whole reason, I suggest, why it goes to a solicitor's account, not the bank account of the LLP or the company?
A.  Correct.
Q.  And ordinarily, if you give money to a company for immediate use, you pay it straight to the company.  Do you agree?
A.  Yes.
Q.  Everyone could understand that?
A.  Correct.”
385.	Thus, as I understood him, Mr Egan, considered it would not be “safe” to release the money for AFL’s use unless and until there was the certainty that the transaction could and would close in accordance with the investors’ expectations. 
386.	So far as he was concerned (as I understood him), closure (and thus “safety”) would entail (a) sufficient equity fundraising and investors to enable the scheme to proceed (though no fixed amount seems to have been specified); (b) ownership and control of the investment vehicle which controlled the property asset on behalf of and for the benefit of investors so that the value in that vehicle would be available to them; and (c) agreement on the terms and form of the equity shares and loan notes to be issued to investors such that “the solicitors” were “100% certain that the documents could catch up”. 
387.	He considered this all to be in conformity with the invariable pattern in this regard of all Albermarle schemes. Until then, the investors’ money would be held in the client account, to be applied when safe, or else returned to them (as in the Albermarle Brighton scheme when it did not proceed with interest).
388.	As to the overall prospect of the transaction closing, he seemed to have little doubt; and he was comforted in this by the fact that Erinaceous had guaranteed the RBS Equity Bridge. As to the documentation, he was sanguine: it had followed in Albermarle Shoreham and it would follow again. As indicated previously, I also gained the impression that he expected Mrs Bellis to warn if in any doubt whether the investors’ expectation of equity participation and control of AFL by them or on their behalf could be met. 
389.	Where ultimately he disagreed with the Claimants was as to whether, in the specific context of the Albermarle Fairoaks transaction, there was ever any actual contractual agreement on escrow terms (especially as regards “first tranche” investors who advanced monies prior to the issue of any Investment Memorandum, the document in which escrow terms would typically be expressed).  
390.	On the issue as to whether those investors ever agreed or intended to make unconditional loans such that the monies paid into the client account would immediately belong to AFL, he remained at one with the Claimants.  
391.	However, his case as to what would suffice to constitute sufficient certainty prior to the issue of definitive documentation remained unclear and variable throughout.
(iii)	Mrs Bellis’ perception as to reasons for use of client account
392.	Mrs Bellis’ position is clear from the following quotation from the transcript of her cross-examination by Mr Sutcliffe:
“Q.	What I do not understand Mrs Bellis is if, as you say, these monies were to be treated as immediate loans going to RBS, why should the funds come to you?  Wouldn't it have made more sense for them to go straight to the AFL RBS bank account?
A.  Mr Egan was keen for the monies to come through my client account so that he could log the money coming through, as I think was the case with the early round of fundraising in Shoreham.  He was keen to ensure that those people who came in early got some sort of enhanced return for their investment and, secondly, he thought that it would probably be sensible for me to keep a record of who came in when.
Q.  It would be perfectly clear from an RBS bank statement, what monies were being paid into that AFL account, wouldn't it?
A.  Yes.  I can only reiterate that Mr Egan specifically did request to come into my client account so that the date of receipt could be easily ascertained and logged and I believe there is somewhere an email that says something like that.
Q.  I suggest to you that you only leave money in a solicitor's client account if it is to be held or decisions are to be taken as to how it is to be used?
A.  The decision taken and the reason why it came to my client account in my mind was so that it could be used to reduce the equity bridge.  That was the sole purpose of the early round of fundraising.”
393.	Mrs Bellis plainly recognised at trial the importance to her case that it should be accepted that she had no uncertainty as to the reason and basis on which the investors were remitting monies to her firm’s client account; and she never admitted to any doubt that the monies received into her firm’s client account were intended for application in reduction of the RBS Equity Bridge, and belonged to AFL from the moment of their receipt.
394.	She conceded under cross-examination that if she had been at all uncertain as to the basis on which monies were being paid into her firm’s client account she would have been bound to check with the payers.  This was the exchange between Mr Sutcliffe and Mrs Bellis in this regard:
“Q.  Mrs Bellis, you knew that the investors were paying substantial sums of money into your account?”
A.  Yes.
Q.  Your client account?
A.  Yes.
Q.  And not AFL's RBS account?
A.  Yes.
Q.  Because it was a solicitor's client account where their      money would be safe as it had been on previous Albermarles, didn't you?
A.  I knew they were paying money into my client account. My understanding and genuine belief was, and still is, that that money was to be utilised for the benefit of  AFL and principally to repay the loan to the RBS equity bridge.
Q.  Think carefully about this question, if you would.  Do you accept that, if you were uncertain as to the basis on which moneys were being paid into your client account, your duty as a solicitor with third party's money in a client account required you to contact the payers of the money to check the basis on which the money was received or, alternatively, to hold on to that money?
A.  If I had been uncertain, then you are correct.  But I was not uncertain.
Q.  Mrs Bellis, you didn't care, I suggest to you, because you assumed it would work out and you simply didn't bother to consider your duty to the investors, did you?
 A.  That's not correct.”
395.	She repeated this assertion of certainty on almost every day of her cross-examination over the course of 4 days. The same point was injected into her evidence relating to the dispute as to whether she had any conversation with Mr Wallis, which I come to later.  In a more general context the following extract (from her cross-examination by Mr Sutcliffe) is illustrative:
“There was no question, in my mind, that there was any escrow or holding to order. The monies belonged to AFL as soon as they arrived in my client account.  That was my understanding.”
396.	In this she was supported by the terms of the Engagement Letter (the authenticity of which the Claimants did not accept until the eve of trial), and in particular her reference in it to being agreeable to receive the monies from investors “upon the basis that… these monies will be immediately utilised to repay monies owed to Royal Bank of Scotland.”
397.	She rejected any parallel with Albermarle Shoreham in this context, as well as the specific suggestion put to her that the required investment memorandum for Albermarle Fairoaks, had one been produced, would have had escrow terms as in the Shoreham memorandum earlier that same year. Her case is clear from the following extract from the transcript of her cross-examination by Mr Sutcliffe:
“Q. You would have assumed that when an investment memorandum was produced, it would have escrow terms like the Shoreham memorandum earlier that year?
A.  It would have had terms attached to it but it would not have had escrow terms in terms similar to Shoreham because it was always clear to all parties that this early round of fundraising would be used to repay the equity bridge to Royal Bank of Scotland.  Therefore it would not have contained the various conditions which we saw in the Shoreham documentation.
Q.  As the solicitor receiving investors' money into your client account, it was your responsibility to ensure you understood the basis on which this money was being received, wasn't it?
A.  Yes.
Q.  It was your responsibility to ensure that others were putting together an investment memorandum and getting regulatory consents together on the correct basis?
A.  That, as my later endeavours make clear, was the responsibility of others because as I have said in the letter, I did not have the expertise to advise on the structure and I was reliant upon others to liaise with the Guernsey regulatory people.
Q.  What I do not understand Mrs Bellis is if, as you say, these monies were to be treated as immediate loans going to RBS, why should the funds come to you?  Wouldn't it have made more sense for them to go straight to the AFL RBS bank account?
A.  Mr Egan was keen for the monies to come through my client account so that he could log the money coming through, as I think was the case with the early round of fundraising in Shoreham.  He was keen to ensure that those people who came in early got some sort of enhanced return for their investment and, secondly, he thought that it would probably be sensible for me to keep a record of who came in when.
Q.  It would be perfectly clear from an RBS bank statement, what monies were being paid into that AFL account, wouldn't it?
A.  Yes.  I can only reiterate that Mr Egan specifically did request to come into my client account so that the date of receipt could be easily ascertained and logged and I believe there is somewhere an email that says something like that.
Q.  I suggest to you that you only leave money in a solicitor's client account if it is to be held or decisions are to be taken as to how it is to be used?
A.  The decision taken and the reason why it came to my client account in my mind was so that it could be used to reduce the equity bridge.  That was the sole purpose of the early round of fundraising.”
398.	She was also asked whether it occurred to her, and if so whether it concerned her, that on that basis she would in effect be agreeing to operate her firm’s client account as an AFL bank account in England, with herself as signatory (which would not only be an unusual and inappropriate use of a solicitor’s client account, but could also risk bringing AFL onshore for tax (and SDLT) purposes). Her answer was that it simply did not occur to her.
399.	This lack of focus on risks is consistent with my general appreciation of her conduct in the matter as previously described. For the reasons I have identified earlier, she took it as read that investors were prepared, in return for the promise of a loan/equity package in line with the Albermarle pattern, to make available monies to be used in due course to pay down the RBS Equity Bridge on the basis of what she described as “flimsy paperwork” and which she herself would not have regarded as a sufficient basis for an investment. 
400.	However, I consider that Mrs Bellis must, as an intelligent and experienced solicitor, have appreciated that she could not properly treat as belonging immediately to AFL monies paid in to her client account on terms which to her knowledge were not only not yet documented but which had not yet even been determined, let alone agreed, either by the investors or AFL itself. 
401.	Further, as it seems to me, a fundamental premise of Mrs Bellis’ contention that the investors were aware and intended the money they remitted to her firm’s client account would immediately belong to AFL is her alleged supposition that the monies would be used to pay down that indebtedness. But Mrs Bellis had no reason to think that the investors were aware of the instalment payments due in respect of AFL’s borrowing (whether under the RBS Equity Bridge or otherwise). 
402.	She must have known, and I find that she did know, that to treat such monies as belonging to AFL, and to pay them to RBS on its behalf on that basis, was to act in anticipation of a position, which she knew still to be uncertain, being subsequently regularised, confirmed and documented, with the inevitable inherent risk that it would not be so.  
403.	That the risk had not eventuated in the context of the Albermarle Shoreham scheme may explain, at least in part, why she took it. She may also have been comforted by her assumption that, in practical terms even if not legal formality, Mr Egan could be taken to speak for “his” band of investors (as indeed she asserted in her witness evidence she believed he had).  But that, in my judgment, does not alter the fact that what she was doing was taking a risk with other people’s money; and that blind faith could not excuse or justify such an abdication of responsibility and breach of basic principles, as well as of the SAR.
404.	In short, I do not accept that Mrs Bellis can ever in truth have had the certainty that she so frequently asserted in evidence that investors had committed the monies they remitted to her firm’s client account for immediate use in reduction of the RBS Equity Bridge.  Assumption that all will be well, and indifference to the risk that it might not be, is one thing: certainty is quite another. Indeed, in my judgment, she knew enough to know that she could not be certain.
(5)	What did parties perceive to be required to authorize payments out of client account? Were such requirements satisfied?
(a) Claimants’ understanding 
405.	There is no evidence that any of the Claimants were aware that the monies he or she had remitted to the Defendant Firm’s client account had been paid out until much later, in about November/December 2007.  When they did find out that their money had been paid out of the Defendant Firm’s client account the evidence of the Claimants who appeared before me was of “shock” and “distress” and being “horrified”. That invites the question as to what they perceived to be the requisite authority for payments out from the client account of the monies they had remitted to it.
406.	I have already discussed their perceptions (which I infer as a matter of probability was the perception of all the Claimants) as to the purposes of requiring payment into a client account, and their expectation that those monies would be kept “safe” until it was clear that the Albermarle Fairoaks scheme could proceed without impediment to its completion, with their equity participation agreed and needing only formal documentation. 
407.	Inherent in that is that the Claimants were content for the monies to be released once it was “safe” without further instruction from them. Counsel for the Claimants accepted this in the course of closing argument, except in the case of Mr Wallis (whose evidence was to the effect that he expected Mrs Bellis to confirm with him before making any payment out). 
408.	The difficulties in giving sufficient legal definition to the concept of the monies being required to be held until it was “safe” to release them were vividly illustrated in the repeated amendments to the Particulars of Claim: formulation after formulation did not quite seem to capture the concept.
409.	In their final formulation, paragraph 18 of the Claimants’ pleading was amended to read as follows:
“18. 	The investors   [Erinaceous] and the Firm expressly 	and/or impliedly agreed (in the circumstances 	particularised below) (“the Agreement”) that the 	investors’ monies would be paid into the Firm’s client 	account on the following basis:
18.1	The investors’ monies would be held in escrow in the 	Firm’s client account, remaining beneficially owned 	by the investors;
18.2	The monies would earn interest at 1% above base rate.
18.3	The Firm could only release such funds to a Fairoaks 	vehicle, and only if the following conditions (“the 	Agreed Condition”) were satisfied:
a.	There existed a Fairoaks vehicle which owned (directly or through a wholly owned subsidiary) the Fairoaks property (“the Fairoaks Investment Vehicle”); and
b.	Claimants had (or would acquire at the point of release of the funds) legally enforceable rights against the Fairoaks Investment Vehicle to (i) equity (in whatever form) in that Vehicle, which would be 100% owned by investors, and (ii) zero coupon loan notes from that Vehicle or a wholly owned subsidiary, (i) and (ii) being in the tax efficient proportion of equity to loan notes of 1:9,999 or similar.
18.4	If it became clear to the Firm that the conditions in 	18.3(a) and (b) could not be satisfied within a 	reasonable time, the Firm would be obliged to return 	the money to Claimants with accrued interest at the 	above rate.
Alternatively, the Agreement was that the investors’ monies would be held in the Firm’s client account, remaining beneficially owned by the investors, to their order.”
410.	I shall return to consider whether the terms as pleaded are sufficiently certain for the purposes of establishing a valid contract; for the present it is sufficient to record them as the Claimants’ final shot at defining in words their understanding as to the terms on which the monies were held in the client account. 
411.	For completeness, however, I should here record that in permitting the Claimants to amend paragraph 18 of their RRAPC to rely on this further (and in the event, final) iteration of their case in this regard (as I did in my Ruling on 18 June 2012) I expressly made clear that I was not adjudicating as to the merits of the amendment, nor indicating satisfaction with their clarity or consistency. A point in the case being whether the terms alleged are sufficiently clear to satisfy the requirement of certainty, I considered that I would unfairly and unnecessarily foreclose the matter if, during the sound and fury of the hearing, I were to refuse to permit the Claimants to put forward what they considered to be their best case. 
(b)	Mr Egan’s understanding as to what authority was required for payments out
412.	Consistently with his perception of the purposes of requiring payment into the Defendant Firm’s client account, the upshot of Mr Egan’s evidence, as I see it, is that he did not consider that any further instruction or confirmation was needed to authorise Mrs Bellis to make payment out of that client account to RBS in payment of instalments due in respect of the RBS Equity Bridge once “safe” to do so (see paragraph 384 above).
413.	He emphasised that he “relied on the solicitors concerned to be satisfied in that way.” His position, as confirmed to Counsel for the Claimants in cross-examination, was that the monies in the client account “should only have been released, they should have been held safe, until the solicitor could be absolutely certain that units, whatever they are called , shares and loan notes, could be issued.” 
414.	Mr Egan contended that he did not consider himself to have any authority to direct or instruct Mrs Bellis and her firm to make payments out of their client account.  He did regard it as his function to push the transaction along, and to do his utmost to see to it that the interest and instalment payments due in respect of the RBS Equity Bridge were paid, early if possible.  But it was for Mrs Bellis to advise and restrain him if that was not possible or not “safe”.
415.	There is no doubt that Mr Egan did press Mrs Bellis to make payments out of the firm’s client account to pay down the RBS Equity Bridge, and became increasingly pressing as the instalment due date of 26 October 2007 approached.
416.	It is also the case that, in comments on Mrs Bellis’ December Memorandum he stated:
“Her note is accurate.  I suppose my only question is whether or not I had the authority or whether she should have accepted an instruction from me on the payment of funds to RBS.”
417.	However, Mr Egan denies ever giving any formal instruction to Mrs Bellis to effect payment. He stated in his first Witness Statement that he “was not in a position to give a formal instruction to Juliet Bellis” and that he “certainly did not intend that Juliet Bellis do anything consequent upon that email which would put her in breach of her obligations to her clients” (amongst whom he included the investors). 
418.	He added that he was not an employee, director or officer of AFL; he was only an employee of ECS; he was not an agent for the investors either; Mrs Bellis knew all this and so 
“it must have been clear to Juliet Bellis from the facts that I had no authority to provide any formal instruction to her to remit the investors’ monies to RBS.”  
419.	Mr Egan urged that the only written record of an alleged instruction was his email to Mrs Bellis of 31 August 2007 in which he said (in reply to an email from Mrs Bellis informing him of payments from investors into the client account totalling £1,350,000)  “Thanks, the Fairoaks money needs to go to RBS asap”, and an earlier handwritten note of hers on an email dated 24 August 2007 from Tenon (notifying her that £150,000 had been sent to that client account) which reads “GE confirms -> RBS”. 
420.	In short, Mr Egan accepts that he pressed; just as he pleads that he was under great and increasing pressure from Erinaceous (and in particular, the CFO, Mr Pearson); but not that he had authority or intended to instruct.
421.	His appreciation that he might have asserted an authority that he did not have are manifest both from his reaction to the December Memorandum (see paragraph 416 above) and from his efforts to present himself as surprised that Mrs Bellis had paid out to RBS monies paid into her firm’s client account by the Claimants. Thus, he expressed himself in December 2007 to Mr Glatman as having been “shocked” when the documentation did not follow like clockwork after the monies had been paid out to RBS; but as he explained under cross-examination:
“Shock that monies had been paid away and then not supported by the documentation.  I mean, I cannot say it was shock – I cannot say it was shock that the monies had been paid away because I knew the monies had been paid away.  I cannot deny that I knew they had been paid away.  It was a shock that they had been paid away and then not followed up with documentation…
They should not have been paid away.”
422.	Mr Egan’s evidence is not satisfactory, and his role gives ground for real concern.  It is obvious, and I find, that he did encourage Mrs Bellis to remit to RBS the monies “his” investors paid into her firm’s client account as soon as possible, knowing that the paperwork was not in order, and even the basic structure had not yet been agreed.  His attitude, as it seems to me, was that what the investors did not know they would not mind, provided it all turned out well in the end and they made money, as had indeed been his experience in the Albermarle Shoreham scheme. 
423.	His initial and sustained attempts to deny that he knew that the monies had been paid out were disingenuous: he knew full well they had been as indeed he later admitted (see paragraph 421 above).  I would accept Mrs Bellis’ depiction of him, insofar as his explanation of his conduct in this particular matter is concerned, as “not a credible or reliable source of information.” His versions of events did more than once change to suit his cause.
424.	On the question whether he gave instructions to Mrs Bellis, I consider that the documentary evidence is the surest guide so far as the true facts are concerned; and the rest is a matter of interpretation. I accept Mr Egan’s contention that he was not in a position, and had no authority (express or implied), to give instructions to Mrs Bellis as to the use and payment out of monies remitted to her firm’s client account; that Mrs Bellis, if she thought about the matter at all, could not have thought he did; and his emails to her, although plainly pressing for payment, were not intended by him, nor reasonably taken by her, to be instructions on which she could safely and properly act without more.
 (c)	Mrs Bellis’ understanding on the issue of authority
425.	As noted previously, the Engagement Letter, which Mrs Bellis drafted and was not countersigned by any director of AFL or by its legal owners, but by Mr Cummings “as beneficial owner of the shares…”,  purported to establish the scope of her retainer by AFL “to act on its behalf in the Fairoaks Airport transaction”.
426.	The Engagement Letter also included the following statement: 
“I can supply a standard form of loan note if that would assist but I must emphasise that any such document will need to be approved by Ozannes in Guernsey as the legal requirements in Guernsey may be different.   If any other type of documentation is required (for example a unit in a fund) then this will have to come from Ozannes as it is outside the scope of my firm’s expertise.”
427.	Mrs Bellis’ case was that she was entitled to make payments out to reduce or repay the RBS Equity Bridge as and when directed to do so by Mr Egan, whom she said she regarded as acting on behalf of AFL and the investors.
428.	She told me that she regarded Mr Egan as “the prime mover in the transaction in the sense that he was sent draft leases, he was sent the draft loan agreement with RBS and he was integrally involved in all aspects of the fundraising in the sense that he obtained the credit approved terms [sic]….Mr Egan has always…was, to my mind, central to the Albermarle funds….” 
429.	She was adamant in this regard. I gained the firm impression that Mrs Bellis understood all too well, by the time of trial, that her best line was to assert repeatedly that she had always relied on Mr Egan and never had any doubt as to his authority to speak for and on behalf of all persons interested at all material times.  Indeed, I sensed she had become convinced of this in her own mind. 
430.	However, in my view, she cannot have had any such certainty at the time. On the contrary, I have no doubt that Mrs Bellis was conscious at the time of the legal deficiencies, both as regards Mr Egan’s authority and as regards the legal paperwork: she struck me as legalistic and precise.  She accepted under cross-examination that she knew that Mr Egan had no “formal delegated authority from the Guernsey directors”. As already noted previously, she knew that loan notes had not been finalised or authorised, and that she could have no certainty as to the terms on which the investors had agreed to remit funds into her firm’s client account. Even if she assumed that, if these matters were regularised in accordance with her somewhat sketchy expectations, Mr Egan’s authority would be confirmed, she cannot have thought that it was safely in place.
431.	In my view, the truth as noted before, is that, at the time, Mrs Bellis acted on the assumption that a position that she knew to be uncertain in law would in due course be regularised.  She went along with Mr Egan’s approach of “transaction first, legal niceties later.”  She knew that the approach had worked in the Albermarle Shoreham transaction; she presumably persuaded herself that it would work again; and payment in reduction of the RBS Equity Bridge (which Erinaceous had guaranteed) was in line with the commercial interests of Erinaceous and the group. She comforted herself that as a commercial matter, Mr Egan could be regarded as “Mr Albermarle” and a conduit to “his investors.” But in doing so, she must have known that she was allowing commercial exigencies and assumptions to displace legal uncertainties.
432.	Put another way, I do not believe that she ever believed that as matter of law Mr Egan (to quote her third Witness Statement of 17 April 2012) “had authority” to make decisions on behalf of the fund as well as on behalf of “his investors”; she proceeded on an assumption that seemed commercially reasonable and advantageous at the time, but she never had reason to be satisfied, and never was satisfied, as to its legal cohesion and integrity. 
433.	This also, in my judgment, explains the inconsistencies in Mrs Bellis’  evidence on the issue at trial, and what appeared to me to be her obvious discomfort when pressed to explain what she believed to be the source of Mr Egan’s authority.  
434.	This was particularly evident to me in the context of her effective cross-examination by Mr Bacon (on Mr Egan’s behalf) with regard to her changing (and to my mind, obviously unreliable) evidence as to the payment of £379,942 to RBS from her firm’s client account on 15 October 2007. 
435.	In this regard, when questioned by the Erinaceous Administrators (in June 2011) she had stated that the transfer was expressly directed by Legis.  But when questioned by Mr Bacon she said she had been “clearly mistaken” and had given “a slightly misleading answer to the question from Dundas & Wilson”. Her revised version was that, once again, it was Mr Egan who had given the instruction, though there was not the slightest suggestion of that in her earlier interview.
436.	As to what she had told Legis, in her December Memorandum, she introduced a further variation: that it was Mr Egan and Ms Cummings “of Erinaceous Group plc” who had given instructions to implement the structure and for the remittance of monies received from investors to RBS to reduce the equity bridge.
437.	All this is to my mind redolent of reconstruction in the context of an appreciation that her assumption that she could pay out to RBS once advised to do so by Mr Egan had been misplaced and a consequent need to build up a different justification for having proceeded as she had done.
438.	This is, to my mind, further confirmed by her conduct in relation to the balance of some £100,057 remaining in her firm’s client account after paying the £379,942 to RBS, which she sat on until August 2009, ignoring instructions to her from Legis. By then, of course, Legis had made clear to her that they considered she had had no authority to pay out the monies remitted to her client account by investors, and she cannot have had any good reason not to return the monies or interplead.  
439.	In that context, it was put to her by Mr Sutcliffe that she retained the monies to assist Erinaceous, a suggestion which she rejected; but I accept that then, as throughout, her assumption that the requisite documentation would be put in place in the end was buttressed by the imperative of paying down the RBS Equity Bridge which Erinaceous had guaranteed. 
(6)	Were there any other factors operating on Mrs Bellis in making payments out of client account?
440.	The Claimants contend that in acting as she did, with such disregard for the lack, not only of any settled documentation but any definition as to how the expectations of the investors were to be met, Mrs Bellis was also influenced by the personal interests of herself and her family, causing her to ignore (or at least discount) risks to the Albermarle Fairoaks scheme investors in pursuit of such interests.  
441.	I feel I should also record my conclusion that Mrs Bellis did demonstrate, to my mind, a capacity for self-delusion where it suited her and her family interests, be it about conflicts of interest, or the reliance on Mr Egan’s instructions she asserted, or the propriety of simply disbursing monies without any certainty as to the terms on which they were paid or the authority on which they were received and to be disbursed, or (later) the use for her own and family’s advantage of Mr Cumming’s alleged beneficial ownership of the shares in AFL.  
442.	Lacking from her evidence, to my mind, was any sense of responsibility to those (the investors) who she must have known relied on her (whether in such a way as to found legal liability or not) and any ability to distinguish clearly between her own and her family’s interests and the interests of those involved in the Albermarle Fairoaks scheme. 
443.	I consider that Mrs Bellis looked at the transaction as another Erinaceous venture, in which in effect, even if not in theory, she acted for the Erinaceous Group. That was what she was accustomed and paid to do. Her family controlled Erinaceous and the Erinaceous Group: in default of any evidence to the contrary from Ms Cummings and Mr Bellis, I have no reason or evidence to doubt that the company and the group, including ECS, were (in the words of Mr Egan) “run almost like a family company with one family in absolute control…”  
444.	I note in point of detail, but to my mind revealing detail, that in her December Memorandum on the matter to Mr Dickinson dated 17th December 2007 (see paragraph 213 above), and before the dangers of such an admission were as obvious as they became, she volunteered that it was Ms Cummings as well as Mr Egan whose instructions she followed in remitting monies to RBS. She later sought to re-write this: for example, in her 4th and main trial witness statement, she tried to explain away the reference and stated categorically that “at no time did Lucy give me instructions to remit funds to RBS; all instructions came from Mr Egan.” I prefer her contemporaneous, less careful, account.
445.	I do consider, and so find, that as Erinaceous’ financial problems deepened in September 2007 and onwards (see paragraph 71 above), the imperative of getting money in to reduce Group indebtedness supplanted any other considerations. If Mrs Bellis at least by then had any uncertainty, as I consider she must have had, it was certainly not in the interests of Erinaceous, Longmint, or her family interests to raise them: the commercial imperative was to get in the investors’ money, keep the deal afloat, and keep the bank at bay.  
446.	Thus, whereas Mr Egan might, in earlier Albermarle investment schemes,  have expected Ms Streeton to restrain him if commercial preferences overstepped legal bounds and to “save him from being a hot-headed estate agent”, in the context of the Albermarle Fairoaks scheme, he told me he consistently felt under huge and growing pressure to raise funds:“I was continually pushed, pushed, pushed to raise money.” 
447.	I take into account that it is in Mr Egan’s interest to try to explain his own actions, which are the subject of valid criticism (and not least his failure to explain to investors that the monies he raised were immediately being used).  I also take into account that he had good reason to get money in whereby to discharge instalments due to RBS: the relationship with RBS was important, and he wanted “brownie points” to enhance the prospect of loans to meet later funding needs. But his depiction of the pressure on him from Erinaceous to get money in from investors had, to me, a clear ring of truth.
448.	In summary, I consider that the personal interests of Mrs Bellis and her family, and the increasing domination of the interests and needs of Erinaceous, do assist in explaining what might otherwise seem to be Mrs Bellis’ inexplicable indifference to the interests and expectations of the investors, and her passive acceptance of frailties, uncertainties and deficiencies in the legal structure from their point of view.
(7)	The alleged conversation between Mrs Bellis and Mr Wallis
449.	So far, I have been concerned to set out the factual background leaving aside the particular position of Mr Wallis and the dispute surrounding it. There is a clear conflict of evidence between Mr Wallis and Mrs Bellis as to whether or not they had a conversation during the course of which she assured him she would not utilise any funds paid by him into the Defendant firm’s client account pending his further instructions.  Mr Wallis is adamant they had this conversation; Mrs Bellis is equally adamant that they did not.  I turn to that now.
450.	Mr Wallis says that he clearly recalls calling Mrs Bellis on 15/16/17 August 2007 because he “wanted to speak with [her] before transferring my funds to her client account”. 
451.	He says he obtained her number from Mr Egan after asking Mr Egan why they were not using Ms Streeton of Boodle Hatfield, and recalls calling her from his St Paul’s office, introducing himself to Mrs Bellis, and telling her he was proposing to transfer a quarter of a million pounds to her firm and wished the money to be held “pending my further instructions. She gave me the assurance that I sought. She specifically confirmed to me that she would seek my authority before utilisation of the funds… The conversation was brief and to the point”. He then gave Mrs Bellis his number so that she could contact him to take instructions. 
452.	He told me that he distinctly remembers the conversation, which was a short one. He thought it very likely he used the words “escrow, awaiting my further instructions”; “This was the whole reason for my call and “escrow” was an expression I used when talking to Helen Streeton and other solicitors over many years”. 
453.	He explained the reason why Mrs Bellis’ name signalled alarm bells (as it had not on Albermarle Shoreham) and caused him to want express comfort from her: he had been investigating Erinaceous for a merchant bank and knew that they had serious problems. He told me that there had been speculation and gossip in the City as early as July 2007 that Erinaceous was in breach of its bank covenants. 
454.	The immediate persuasiveness of his account was not assisted by the fact that the date he suggested in his first witness statement as being the date of the alleged conversation he says he had with Mrs Bellis “before transferring…funds to her client account” in fact was after the date on which he did in fact transfer funds; nor by the fact that he stated the conversation was immediately preceded by one with Mr Egan, and the revised date for the conversation was a date when Mr Egan was away on holiday.  Then he changed this and suggested that on reflection he was as certain as he could be that the date of the conversation was 16 or 17 August 2007. 
455.	However, Mr Egan did confirm Mr Wallis’ evidence that Mr Wallis called Mr Egan in August 2007 and asked for Mrs Bellis’ number so that he could call her and check her out for himself or similar (that was Mr Egan’s recollection, although he could not remember whether the latter point was on Shoreham or Fairoaks). He confirmed that Ms Streeton used to telephone key investors before releasing money (hence Mr Wallis wanting the same treatment here).                                            
456.	Mr Egan also confirmed that Mr Wallis had told him in late 2007/early 2008 about the Wallis/Bellis call, and that this was why Mr Wallis was so angry with Mrs Bellis (who had not in fact called Mr Wallis for instructions). They agree that he was not told immediately after the call in August, but Mr Egan confirmed that “I was told subsequently” and certainly well before February 2008. 
457.	Mrs Bellis denies the conversation. Her initial case was that she did not recall the conversation but if it took place she thought it was not on the terms Mr Wallis alleges. However, by the time of her oral evidence her stance had hardened and she was adamant that no conversation had taken place. She described why she was sure this was so in answering questions from Mr Sutcliffe,  rationalising as follows:
“MRS BELLIS: I am very sure in my own mind that this conversation did not take place, I do not recall it, but I fully accept that memories are not always 100 per cent accurate. However, I believe that if this conversation had taken place I would have recalled it because, although I am not 100 per cent certain of what Mr Wallis is saying that he told me, the substance of it seems to me that he was asking me effectively to give him an undertaking to hold the money to his order.  He's used variously the term "escrow", I think in his third witness statement he says that on reflection he may have used the word "escrow". But leaving aside whatever technical terms he may have used, the substance I think of what he is saying -- and I am sure your Lordship will correct me if I am wrong -- is that he was asking me for an  undertaking that I would not release his money without his express authority.  Now, it is drummed into solicitors from a very early age that all undertakings must be considered carefully and recorded on the file. There is no note on the file.  If I had given an undertaking, there would have been a note on the file.
MR JUSTICE HILDYARD:  I think what he said, in case it helps you, is that it was his standard to say, and he said to you, that the money was to be held to await his further instructions.
A.  Thank you, my Lordship.  I am grateful for that.  If he had said that to me, I would have interpreted that as an undertaking to him, if I had said, "Yes, I confirm that", I would have been undertaking to him that I would not release those funds without his instructions and that would have been recorded on my file.  I appreciate that, although I do try to take file notes of conversations, invariably some do not get noted up. That is, I am afraid, the reality of it.  Every solicitor I think would like to believe that they note everything but, in reality, things do get missed.  
But if there had been a conversation with someone who said, "I am sending you a substantial sum of money and you are not to pay it out unless you get specific instructions from me", that would have been noted because I would  have treated that in my mind as an undertaking. The third point is this.  If that conversation had taken place, it would have run counter to everything which had been discussed beforehand, which is fully reflected in the contemporaneous documents, that I had understood and still do understand: that the money which was going to come into my client account would be used to repay the RBS loan (in other words, it would be my client's money, Albermarle Fairoaks Limited's money). If this conversation had taken place, I would have immediately contacted Mr Egan, Michael Pearson, Ms Cummings, whoever was available, Mr Egan I would guess, to say, "Look, I have had this conversation.  What is going on?  I have obviously had to confirm to Mr Wallis that I will not release his moneys, but this directly runs counter to what I have understood throughout this transaction."                             
So I have thought about this very, very carefully. I have tried to rack my memory, and I am now certain that this conversation did not take place because, as I said earlier, although I cannot recall it, I have thought about all the other supporting factors in case my memory was defective.
MR SUTCLIFFE:  If you could pass bundle A1 back to Mr Tozzi and go to your witness statement, which is in front of you.     			
….
What I want to be clear from you, Mrs Bellis, is this: is your evidence that Mr Wallis is lying to the court and that you and he had no telephone conversation at all in August 2007?
A.  I had no --
Q.  No, wait until I have finished my question.  Or are you saying that the conversation might have happened but you are not sure whether the conversation was as Mr Wallis  says?
A.  There was no conversation with Mr Wallis.”
458.	With an even more precise, numbered, breakdown of the process whereby she came to be sure that the conversation simply never happened she repeated this “speech” (as Mr Sutcliffe depicted it) a few minutes later. 
459.	This repetition of her thought processes long after the event in question did not, to my mind, add an impression of veracity.  Mrs Bellis was not a spontaneous witness: I formed the impression that she had gone over and over in her mind what, in respect of key issues, she should say: the result was impressive in terms of its clarity, but considerably less so in terms of its immediate credibility. Her precision seemed rehearsed: her evidence struck me as truthful in its detail, but incomplete.
460.	The dispute is thus acute: there is no middle ground, and ex post facto rationalisation by each has hardened their respective positions. The passage of time, and the natural tendency for witnesses to convince themselves ever more strongly of their version of events in the meantime, makes the dispute difficult to resolve on the basis of their own evidence.  The firmer guide is the documentation. Of particular importance is a letter dated 7 February 2008 which, after the unsettling events of November 2007, the confirmation of deep financial problems in the Erinaceous group, and the forced departure from Erinaceous of both Ms Cummings and Mr Bellis, Mr Wallis sent to Mrs Bellis.
461.	That letter, which Mr Wallis drafted with the help of Mr Egan and (they both think) Ms Streeton, is  stamped as having been received on 8 February 2008, and is headed Albermarle Fairoaks Ltd.  It read as follows:
“I am writing to you directly as I am becoming increasingly concerned about my position as an investor in the above company. My views are shared by other investors, who fully support my action on their behalf.  We have all been regular supporters of the Albermarle Syndicates for approximately 5 years and have been pleased with their performance thus far. 
I submitted £250,000 to you on or around 4th September 2007 [sic] based on the profile for the transaction prepared by Erinaceous Commercial Services. This indicated that you as the lawyer concerned would hold funds in your dedicated client account until the entire fund was closed, KYC checks had been concluded on all investors, and the fund’s corporate documents issued to those investors.
However, I am led to believe that the fund raise for the project is unlikely to be completed which means that funds should  immediately be returned to investors plus the interest earned to date.
Having enquired about the matter further, I have been informed that you have remitted funds totalling some £2m without the appropriate closing of the fund or authority from Legis to the Royal Bank of Scotland.  I am informed by my lawyers that this is in breach of your fiduciary duties and breaks Law Society rules.
I now require this situation to be sorted out to my complete satisfaction, with all monies deposited with you for myself and other investors returned immediately with interest.  Failure to do this within the next seven days will force me to take this matter up formally with my own lawyer and to alert the Law Society to what I am informed is a serious breach of your duties.
Presumably you will wish to notify your professional indemnity insurers regarding the issue.
I look forward to hearing from you by return”
462.	The most striking thing about the letter in the present context, of course, is that there is no mention in it, or even a hint, of the disputed conversation. Nor was it mentioned in either of two following letters in the nature of letters before action respectively dated 6 March 2008 and 20 March 2008 from Boodle Hatfield to the Defendant Firm (drafted by Ms Streeton, on behalf of Mr Wallis). 
463.	Indeed, there is no reference to the conversation in any contemporaneous or near-contemporaneous documentation at all.
464.	Inevitably, this was the focus of extended cross-examination of Mr Wallis and Mr Egan by Mr Croxford. I am bound to say that what Mr Wallis offered as an explanation for there being no mention of the conversation in any of the letters in February and March 2008 was not, in my view, compelling. 
465.	He said that he had discussed the conversation in question with Mr Egan when they were drafting the first, and with an unnamed assistant at Boodle Hatfield (“not Helen Streeton”) but had felt (and he acknowledged that it “may have been a wrong decision”) that it was not appropriate to mention the conversation in question 
“purely because it would have been a contentious issue, potentially, and what we wanted to do was to focus on what we wanted to do, which was to get our money back or get the issue completed satisfactorily. If we had an issue in there, and there clearly was an issue about, first of all, whether I had had the conversation with her and if I had the conversation with her, which I had, exactly what was said, that would have been the focus of the letter, as distinct from actually trying to sort of establish what we thought our rights were.” 
466.	In his first witness statement (made on 7 November 2011) Mr Wallis had attributed more specifically to Boodle Hatfield the decision to make no reference to the conversation in question: “For reasons of conciseness, I think, they chose not to include reference to it in these letters.”
467.	Neither a desire for conciseness nor a desire to avoid a source of contention seems to me to be a compelling explanation of the omission; and (unless possibly it was a desire not to differentiate his position from that of other investors, which was not suggested by Mr Wallis nor (accordingly) put to any witness) none suggests itself.  
468.	Furthermore, the third letter (dated 20 March 2008) refers to an escrow, stating as follows:
“Our client Mr Wallis sent to you on 4 September 2007 a sum of £250,000 to be held in escrow. It appears to us that you breached these escrow arrangements and your implied solicitors undertaking by sending these monies without his consent…”
	Mr Wallis, under cross-examination, suggested that he may not have seen this letter until it had already gone out and had no input into it. Even if that is so, if Mr Wallis had (as is his evidence, as already related) previously discussed the disputed conversation with someone at Boodle Hatfield, and seems very odd that an implied undertaking should have been put forward, rather than the express one which Mr Wallis says (in substance) Mrs Bellis gave him.
469.	Neither Ms Streeton nor anyone else from Boodle Hatfield provided a witness statement. Of course, that may be because of anxieties about waiver of privilege; but whatever the reason, the fact is that on this important point there was no corroboration of an important aspect of the matter from individuals able to give it.
470.	The first occasion on which the alleged conversation was mentioned was at an acrimonious meeting on 28 October 2009 attended by Messrs Egan, Wallis, Bellis and Cummings, Mrs Bellis and others. Each side accused the other of lying about the terms on which the monies were held in the Defendant Firm’s client account and as to who had authorised the payments out to RBS. It does not appear to be suggested that the terms of the conversation were explained. There is a dispute as to whether Mr Wallis said at that meeting that he had a tape recording of the conversation which “confirmed his version of events”: Mr Wallis strongly denies this: I do not think I need to resolve that one way or the other.
471.	By early 2010 Mr Wallis, along with other claimants, had instructed Mr Dunnill, then at the firm of Heatons.  Heatons sent a letter on their behalf pursuant to the relevant pre-action protocol on 18 May 2010.  Once again no mention was made of the terms of the alleged conversation.  The first mention made in any document was in the Particulars of Claim in November 2010.
472.	I have concluded on the available evidence and the balance of probabilities that the conversation which Mr Wallis has convinced himself took place did not actually do so, or at least not in the terms he has suggested.  The inconsistencies of his account, the lack of any independent corroboration of it, and (most especially) the absence of any reference to it in the contemporaneous documentation or until so long after the event, have ultimately persuaded me to this conclusion.  
473.	I should make clear, however, that I do not think Mr Wallis was being knowingly untruthful. I think he has genuinely convinced himself that a conversation had taken place: my sense is that he simply cannot now believe that he would have left himself so exposed and wishful thinking as to what he should have done became an assumption that he had done it.  
474.	This is not at all unusual: and it does not signify dishonesty.  I do not accept the suggestion in the Defendant Firm’s written closing that the explanation is that Mr Wallis hoped to extract money out of the Defendant Firm’s indemnity insurers and “was prepared to say just about anything to pursue that.”  I do not think that my finding more generally undermines the credibility of Mr Wallis, nor the other Claimant witnesses; nor does it prove that there was no escrow arrangement, still less that none can be implied.  
475.	Equally, my conclusion means that I reject the invitation to me in the Claimants’ written closing that Mrs Bellis was, by her denial, seeking to bolster her defence and that this casts doubt on her credibility generally.  The dispute as to the conversation is an important issue: but to my mind, for those reasons, a discrete and self-contained one.
(8)	What went wrong: the aftermath
476.	I discuss later, under separate headings below, the facts specifically relevant to (a) the Claimants’ alternative or secondary claim based on the contention that the Defendant Firm never had authority to receive monies into its client account as immediate loans to AFL because no organ of AFL ever authorised such lending and (b) the claims of (i) the Claimants and (ii) the Defendant Firm against Mr Egan.  But I turn lastly, in dealing with facts relevant to all the claims, to the denouement and what went wrong. This is principally relevant to issues of causation; but it also sheds a revealing light on the attitude of Mrs Bellis.
477.	A combination of factors came together to undermine the commercial viability of the Albermarle Fairoaks scheme, including the following:
(1)	the funds borrowed were of a far higher order than in previous Albermarle 	schemes,  
(2)	the complexities caused by SDLT changes necessitated a Guernsey 	structure  and  alterations to the basic Albermarle model of investment in an 	onshore LLP, which caused conceptual problems and much delay;
(3)	delays undermined confidence;
(4)	the repayment schedule agreed by Mr Egan, even after he renegotiated an 	extension, was simply too accelerated properly to be achieved in light of the 	above;
(5)	fundraising coincided with a sudden and eventually disastrous decline in the 	fortunes of Erinaceous, making it all the more problematic.
478.	Even so, the investors might still have opted to pursue investment rather than demand repayment but for three factors:
(1)	One was their appreciation, guided strongly by Mr Dickinson, that the risks were too great, given the magnitude of indebtedness;
(2)	A second was the decision in the end of RBS to opt for administration (which commenced on 9 February 2010);
(3)	But in the meantime a third was the extraordinary conduct of Mr Cummings, with the assistance of both Ms Cummings and Mrs Bellis, in effectively hijacking AFL by using or purporting to use his beneficial ownership of the shares to wrest control of AFL from Mr Dickinson and take it up for himself and his two sisters. 
479.	Focusing on point (3) in paragraph 478 above, AFL (by its corporate directors) in January 2008 instructed Boodle Hatfield to act for it and to instigate proceedings against the Defendant Firm (as indeed was done, by Claim no. HC08C03768) to recover the firm’s files in relation to the Albermarle Fairoaks transaction.  Access to those files had, not a little surprisingly, given Mrs Bellis’ insistence that she acted only for AFL, been denied.  
480.	Just as surprisingly, the reaction of Mr Cummings and Ms Cummings, acting together with Mrs Bellis, was not to accept directions from the Court, but to take steps to remove the Guernsey-appointed directors and themselves take control to put a stop to the proceedings.
481.	This was accomplished by dint of Mr Cummings, apparently on the basis of being beneficial owner of the shares, procuring the transfer of the shares into his own name and replacing the Guernsey directors by himself and Ms Cummings.  His excuse for doing this was his alleged concern (to quote from Mrs Bellis’ instructions to Counsel which were in evidence) “that proceedings had been issued by the Claimant without his knowledge and that he was being denied any information as to the affairs of the Claimant.”
482.	Mrs Bellis acted for Mr Cummings in doing this and for AFL thereafter in bringing an end to the proceedings against her. Not for the first time she saw no conflict in her positions.  The proceedings were terminated; and for good measure her firm was then paid substantial fees due to her out of the monies that she had retained on the excuse that she was unclear to whom they belonged.
483.	I rehearse the episode for two principal reasons. One is that it goes a long way to explaining, in my view, why the investors could not realistically be expected to do anything other than to enforce their legal rights in circumstances where the investment vehicle had been used against them. The second is that it illustrates the indifference to the interest of others (including the investors) who might reasonably have expected at least objective consideration, which Mr Cummings, Ms Cummings and Mrs Bellis, brother and the two sisters, were capable of when in single-minded pursuit of their own interests.
484.	After this long recitation of the chronology and further analysis and findings on the facts, I turn to the legal issues which must ultimately determine the case. I propose to do so under 4 main headings or chapters: (1) the main claim, based on contractual escrow or a Quistclose or other resulting trust; (2) the Claimants’ alternative claim based on the Defendant Firm having had no authority to receive monies on behalf of AFL; (3) the Claimants’ contingent claims against Mr Egan; and (4) the Defendant Firm’s Part 20 claim against Mr Egan.

THE MAIN CLAIM: ESCROW/QUISTCLOSE TRUST
Issue 1: was a contractual relationship established between the Claimants and the Defendant Firm?
485.	I start with the Claimants’ primary case that escrow arrangements were agreed between themselves and the Defendant Firm.
486.	An escrow arrangement must depend upon an enforceable contract or undertaking.  As I noted in my judgment at an earlier stage in these proceedings (in the context of an application by the Defendant Firm for their summary disposition), [2011] EWHC 3249 (Ch), the doctrine of escrow is strictly applicable only to deeds.  It is (to quote Lord Denning MR in Alan Estates Ltd v W.G. Stores Ltd [1982] Ch 511, 520) a “relic of medieval times”) rooted in the rule that a deed only has effect as such upon being delivered. A deed delivered as an escrow becomes a deed only when the escrow condition is fulfilled, though if and when the condition is fulfilled title passes as at the date of the escrow.
487.	The notion has, however, been translated into other contexts; and (as is indeed reflected in documentation relating to other Albermarle transactions) escrow accounts, escrow agency and escrow arrangements are commonplace and accepted in commercial transactions, denoting that notwithstanding transfer of a fund or property by X to Y property in the fund does not pass from X to Y until satisfaction of the agreed escrow event or condition.  
488.	The essence of such an arrangement is a contractual agreement or undertaking not to treat the funds transferred by X as the property of Y unless and until the escrow event or condition is satisfied. The effect is that X cannot undo or recall the transfer pending fulfilment of the escrow event; but Y cannot use the funds as his own until such fulfilment.
489.	An escrow arrangement is similar to two other arrangements for the retention of an interest in property notwithstanding its transfer or delivery: a retention of title (or Romalpa) clause, and a Quistclose purpose trust.  But whereas escrow arrangements and retention of title provisions are creatures of contract, a Quistclose trust may exist despite the absence of any contract at all between the parties.  
490.	A classic Quistclose trust (which derives its nomenclature from the case of Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567) arises where one person makes a loan to a borrower for a specific purpose where the borrower is not free to apply the money for any other purpose. The duty of the recipient not to use funds transferred to it for any purpose other than the purpose for which it was transferred, and to return any funds not so used, which is the hallmark of a Quistclose trust, is fiduciary not contractual: see per Lord Millett in Twinsectra Ltd v Yardley and others [2002] 2 AC 164 at 186F. That is so even if the arrangements giving rise to the trust are contractual in origin.
491.	Here, the Claimants’ primary pleaded case depends on establishing a contract; and it is to the issue whether the admissible factual matrix supports the making of a valid contract of escrow capable of legal enforcement to which I turn first. 
Was there any express escrow agreement made between the Claimants and the Defendant Firm?
492.	In paragraph 18 of the RRAPC (which, in its final iteration, I set out in paragraph 409 above) the Claimants allege the agreement on which they rely to have been expressly or impliedly agreed.  
493.	However, the particulars which are given under the heading “Particulars of Agreement Formation” are directed to establishing an implied contract; and none of the witnesses (apart from Mr Wallis) suggested any express agreement.
494.	The Claimants accept that (leaving aside for the present the position of Mr Wallis) there was no written contract, nor indeed were there any material communications written or oral, between any of the (other) Claimants and Mrs Bellis. 
495.	Nor do the Claimants allege that Mr Egan (or anyone else) acted on behalf of the Defendant Firm so as to bring about such a contract with them through his agency.  
496.	In such circumstances I did not understand the Claimants ultimately to pursue any claim based on express contract, save in the case of Mr Wallis.  In any event I consider that such a claim would be hopeless on the basis of the evidence before me.
Was there any implied escrow agreement between them?
497.	Accordingly, except as regards Mr Wallis, the Claimants’ case must be based on there being an implied contract, to be inferred from the way that the parties conducted themselves in relation to each other.
498.	The question therefore is whether any contractual relationship between the several Claimants and the Defendant Firm may be inferred from the admissible circumstances, and if so, whether its terms are sufficiently clear and certain to be given contractual effect.
Contracting parties and the engagement to be demonstrated
499.	As to the parties to the alleged contract, in the RRAPC, the Claimants pleaded that the implied contract was entered between the Claimants, the Defendant Firm and also Erinaceous. 
500.	In the course of trial, and in closing, the focus of the Claimants’ case in this regard was on the alleged agreement between them and the Defendant Firm: no real basis for establishing a contract to which Erinaceous were party was advanced, although they continued to rely on exchanges between Mr Egan, Mr Lawson, Ms Ms Cummings and Mr Pearson as denoting knowledge, belief and agreement that the monies paid by or on behalf of the Claimants were not being made as loans to AFL, but subject to the escrow arrangements pleaded. 
501.	It is, of course, important to distinguish between (a) any contract of loan between the Claimants and AFL and (b) any contract of escrow or retention of title between the Claimants and the Defendant Firm.  However, and equally obviously perhaps, the one may impact on the other. 
502.	Put shortly, if the monies were remitted to the Defendant Firm’s client account with the intention on the part of the payers (the Claimants) of making an immediate loan to AFL then that is inconsistent with any contract of escrow. 
503.	If, on the other hand, the shared intention was that the funds had to be retained in that account pending some further event (whether automatic or at their say-so), and in the meantime remain the Claimants’ monies and/or monies held to their order, then the inference of an engagement on the part of the account holder, the Defendant Firm, is plainly necessary. The engagement may not be contractual in nature; it may be based in equity/trust, and imply fiduciary obligations (as in the case of a Quistclose trust): but it is not inconsistent with, and may give rise to, the inference of a contract.  
504.	Further, the question as to whether the requirement for payment into the Defendant Firm’s client account, and its acceptance that its account would be used for that purpose, unequivocally implies a contractual relationship with the payers melds into the question as to the reasons for  the monies being so remitted. 
505.	In light of the interplay between the two, the Claimants perceived the real issue not to be one as to contractual formation (as to which they submitted there was no real difficulty), but one as to the terms of the engagement agreed.
506.	That was not how the Defendant Firm perceived the matter, as Mr Croxford made quite clear in his own closing submissions. He repeatedly stressed (describing them as “Cheshire & Fifoot points”), that to establish an implied contract of escrow the Claimants must demonstrate satisfaction of the ordinary requirements of any contract, including an intention to create legal relations, offer, acceptance and consideration. 
507.	In a sense, I think both parties are both right and wrong. The Claimants, as it seems to me, have too easily dismissed the point; the Defendant Firm has become trapped in its own classification.  The fact is that the issues of formation and interpretation are not hermetically sealed; but they do each need to be addressed and satisfied. 
508.	In addressing these points, and in light of the dispute as to whether the relevant “offering documents” were common to the parties, and for comprehensiveness in case of subsequent challenge, I shall deal with the issue of formation (and then interpretation) in two stages.  In line with my factual conclusions, at the first stage I shall assume that Mrs Bellis was indeed not aware in fact of either “offering document”; on that basis the principal conduct in relation to the Defendant Firm relied on by the Claimants in this case is the sending of money by them, to the Defendant Firm’s client account (held at Lloyd’s TSB) rather than to AFL or an account of AFL or of Erinaceous. 
Was there an intention to create legal relations between the Claimants and the Defendant Firm? 
509.	The burden of proof on the issue of intention to create binding contractual obligations where there is no express contract, and the question is whether a contract should be implied, rests on the proponent: see Modahl v British Athletics Federation [2001] EWCA Civ 1447, [2002] 1 WLR 1192 at [100], where Mance LJ said:
“Where there is an express agreement on essentials of sufficient certainty to be enforceable, an intention to create legal relations may commonly be assumed. It is otherwise when the case is that a contract should be implied from the parties’ conduct. It is then for the party asserting a contract to show any necessity for implying it.”
510.	Ordinarily, a process of offer by one and acceptance by the other will be evident and will provide a firm basis for the relevant shared intention to make a contractually binding agreement.
511.	As Counsel for the Defendant Firm submitted, where conduct other than express offer and acceptance is relied on, the starting point is to consider what the relevant conduct is and factual material from which it is alleged that a contract may be inferred.  
512.	To be relevant the conduct must “cross the line” between the parties: it must be conduct of one in relation to the other which cannot be explained in any other way than that the objective intention of both was to create legal relations. However, as it seems to me, express communication between the parties may not be necessary: it is the appreciation of each of the conduct of the other in the context in which such conduct takes place, and the necessary referability of such conduct to the assumption of contractually binding obligations, that is of the essence.  
513.	Obviously the conduct relied on must precede the date from which it is alleged the contract was established. Accordingly, the factual nexus must (except as described later) be confined to the period prior to 21 August 2007, the date on which money was first received.  The first such receipt was on 21 August 2007 (from Mr Cole) in the sum of £400,000. Further amounts were received between 22 August and 24 August: £50,000 from Mr Glatman’s A&M Trusts, £250,000 from Black Isle Property and a further £50,000 from Mr Glatman’s SIPP on 22 August; £250,000 from HWC Fiduciare on 23 August; and £150,000 from Tenon on 24 August.  Other receipts and their dates are set out in a schedule marked ‘A’.
514.	The Claimants considered any issue as to intention to create legal relations to be clearly and unequivocally answered by the fact that the Defendant Firm made available its client account in the context of the Albermarle Fairoaks scheme for the purpose of receiving subscription payments: by making available that account for receipt into it of monies subscribed by the Claimants, the Defendant Firm must necessarily have undertaken contractual obligations to them in respect of such receipt.  
515.	Further, and as pleaded in ‘Particulars of Agreement Formation’ under paragraph 18.4 of the RRAPC, it is the Claimants’ case that Mrs Bellis was well aware from previous Albermarle Investment Schemes, and in particular from the Albermarle Shoreham scheme in which the First Defendant had itself acted as escrow agent, that the Investment Model provided for investors’ moneys to be held in escrow, and usually by a solicitor escrow agent: the template, in other words, called for the Defendant Firm to undertake contractual obligations to the Claimants.  
516.	The Claimants also relied in this context on the SAR, which govern every solicitor’s practice. The rules applicable at the relevant date were the SAR 1998. In summary:
(1)	All money that does not belong to the solicitor (solicitor’s money is called ‘office money’ in the SAR) must be held in a separate client bank account (Rules 13 to 15). Money may only be withdrawn from the client account when properly required for payment on behalf of the person on whose behalf the money is being held or on their instructions (Rule 22(1)(a) and (e)) or for other limited reasons which do not apply here.
(2)	Where a solicitor is trustee (called a ‘controlled trust’), money must be held for the beneficiary (Rules 8, 13 and 22). Where a solicitor is stakeholder, money must be held for the depositor (Rules 13(i), 22 and 26 to 27). Where money is accepted on terms that it is “to the sender’s order”, money must be held and then returned on demand (Rule 13 note (v)).
(3)	A solicitor has a duty to replace money improperly withdrawn from a client account (Rule 7).
(4)	Accounting records must be kept showing all dealings with client money (which includes all third party money), and reconciliations performed every five weeks, and the solicitor must retain for two years all authorities for the withdrawal of money (Rule 32). A full accountants’ report must be produced within six months of the end of each (at least annual) accounting period (Rule 35).
(5)	Under the accounting guidelines (Appendix 3) a solicitor should “ensure there is supporting evidence showing clearly the reason for the payment, and the date of it” for each payment from the client account (paragraph 4.2).
517.	The essence of the Claimants’ argument in this regard, as I understand it, is that the SAR, whether or not directly enforceable by persons whose monies have been paid into a client account, underpin the relationship between a solicitor and such persons; and signify acceptance by the solicitor of enforceable obligations not to apply such moneys unless and until entirely clear that such application would be consistent with the purposes for and the conditions under which the payment made into the relevant client account was made.
518.	Against this, and rejecting any suggestion of any intention to create any contractual relationship between the Claimants and his clients, Counsel for the Defendant Firm submitted that the only conduct common to the parties was equivocal, and did not necessarily connote any engagement or contractual relationship between the Claimants and the Defendant Firm at all, just as payment into a bank account in the name of AFL would not connote any contractual relationship between the bank and the payers. 
519.	Counsel for the Defendant Firm submitted that the test is one of necessary inference: that the court must be persuaded by the payer that the payment into the client account is consistent only with the payer having intended to make a contract; “in other words, that this conduct cannot be explained in any other way”. 
520.	They submit that in all the circumstances the Claimants have failed to discharge the burden upon them to demonstrate an intention to establish a contractual relationship between themselves and the Defendant Firm; they say that the intention to make loans left no room for any such contractual relationship and that the Claimants fall at the first fence. Or in other words: the contract of loan between the Claimants and AFL precludes any such contractual relationship as the Claimants now seek to imply between themselves and the Defendant Firm. 
521.	Counsel for the Defendant Firm prayed in aid that it is obvious that there may be a variety of circumstances in which payment into a solicitors’ client account is made, without giving rise or being referable to any contractual engagement. They caution that it would be “surprising and impracticable if every time a solicitor received money into a client account the solicitor was thereby at risk of having concluded an implied contract with the payer merely because of the payment.”  
522.	As to this, as appears from my earlier description of her evidence, Mrs Bellis was quite clear: payment into her firm’s client account was for convenience of collection and recording only; the payers were making loans to AFL; from the moment the monies arrived she admitted to no doubt that they were intended to and did belong to AFL as monies loaned to it to enable it to pay down the equity bridge; she acted throughout for AFL and nobody else; and her firm’s receipt of the monies was purely ministerial; the making available of her firm’s client account did not connote there to be any contractual engagement between her firm and the Claimants, and none is necessarily to be inferred from their conduct or hers.
523.	Further, the Defendant Firm rejected the Claimants’ contention that the making available of the Defendant Firm’s client account must be seen and construed in the context of previous Albermarle investment schemes where the client account of the solicitor to the investment vehicle was utilised as the collecting point for monies to be held in escrow.  
524.	Counsel for the Defendant Firm contended that the Defendant Firm’s involvement as solicitor to the SPV in the Albermarle Shoreham scheme was a wholly inadequate basis for a submission than an otherwise equivocal act of paying into a client account was rendered demonstrative of an intention to establish a contractual relationship between payers and the Defendant Firm. 
525.	They further contended that this in effect amounted to a plea that there was a “course of dealing” such that the terms of one transaction, the Albermarle Shoreham transaction, should be transposed or read into the Albermarle Fairoaks scheme in order both to establish contractual intention and to provide or supplement the terms of the contract said to have resulted. It was submitted on the Defendant Firm’s behalf that this was misconceived: first, the history of one previous transaction could not amount to a course of dealing; secondly, and in any event a “course of dealing” in a previous context might be invoked to supplement the terms of a subsequent contract but could not be invoked to establish the preliminary question as to whether a contract was ever intended at all. 
526.	As I have indicated, the mismatch in the approach of the parties, as so often in this case, has added to the difficulty of satisfactorily addressing the issues in a neatly sequential way, and then in deciding between the competing, but not necessarily corresponding, arguments. 
527.	I have in the end concluded on this aspect of the argument as follows:
(1)	I reject the Defendant Firm’s contention that an immediate loan was 	intended. It seems to me clear from the factual background that the 	objective intention was that the monies paid into the Defendant Firm’s 	client account were not immediately to belong to AFL, and they were to be 	parked pending finalisation of the Loan Note terms, KYC checks, COBO 	consents, and formal authorisation on behalf of AFL. Indeed, although the 	Defendant Firm contended that its belief was that Mr Egan was “raising 	money by way of straightforward loan to AFL” I did not understand it to c	ontend that the monies subscribed could be released to AFL before then;
(2)	I accept the Claimants’ contention that, objectively, the provision by the 	Defendant Firm of that account, and the instructed use of it by the 	Claimants for the purposes of the transaction was in the circumstances 	plainly and unequivocally referable to a shared intention that the monies 	paid in should be retained separately from the monies of AFL, and that 	payment out to or at the direction of AFL should await some further event 	or instruction, pending which the monies would be held safe for the payers; 
(3)	I consider that the resulting consequence is that Mrs Bellis must objectively 	be taken to have accepted that she had assumed obligations to the payers 	such as to require her to keep the monies they had invested in her firm’s 	client account unless and until the terms on which the monies paid in were 	clarified and the regulatory requirements fulfilled.
(4)	The circumstances (and the inferences to which in my judgment they give 	rise) which I regard as especially relevant are as follows:
a)	the objective probability, there being no sensible indication to the contrary, that the purpose of requiring an investor to make payment into the client account of the solicitor’s firm acting for the investment vehicle is to keep such monies separate and apart from the investment vehicle and under the control of the solicitor pending some further defined event;
b)	the inference to be drawn that the solicitor does engage with the payer not to make payment out of that account in the meantime;
c)	the fact that all monies in a solicitor’s client account are held subject to the SAR and the inference to be drawn in that and the other circumstances (in my judgment) that a solicitor’s firm accepts binding obligations to any person paying monies into its client account not to apply such moneys unless and until entirely clear that such application would be consistent with the purposes for which, and/or the conditions under which, the payment made into the relevant client account was made (and see also paragraphs 560 to 568 below);
d)	Mrs Bellis’ knowledge of and involvement in the  Albermarle Shoreham scheme, and especially the use of her firm’s client account in that context;
e)	Mrs Bellis’ knowledge of and involvement in drafting loan notes for use in the Albermarle Fairoaks scheme which she knew were not in final form when receiving monies into her firm’s client account, so that she cannot have known at that point what were the final agreed terms on which investors were parting with their money (whether   or not she knew about “the offering documents”);
f)	the further inference that, as an experienced solicitor, Mrs Bellis must have known that the terms on which the monies paid in to her firm’s client account remained unclear and would need to be clarified before she could accept any instructions from or on behalf of AFL with regard to the application of those monies;
g)	the fact (as noted previously) that so many regulatory requirements remained to be completed, and the terms of the investment remained so uncertain;
h)	last but not least, the fact that the investors were not told and did not know, and Mrs Bellis can have had no reason to think that they did know, about either the date of instalment payments due under the RBS Equity Bridge and its terms or (consequently) that their monies were needed immediately to pay instalments. 
528.	In the result, therefore, I do not accept the Defendant Firm’s case that (a) all it was doing was providing an account into which investors in the Albermarle Fairoaks scheme, such as the Claimants, would pay their money for immediate use, or to the immediate order, without more, of AFL and that (b) there is nothing to signify, nor was there any objective intention to establish, any relationship such as to give rise to enforceable obligations of any kind between the Claimants and the Defendant Firm. It is, however, a different matter whether those obligations were intended to create legal relations or be capable of creating and constituting a contract. 
Can terms of sufficient certainty to establish a valid contract be implied or inferred?
529.	As to that, I do not think that the evidence supports any more legally definite or more intricate obligation than that set out above; and more specifically, I do not consider that the evidence supports the Claimants’ primary case that escrow terms (in any of the various iterations) were implicitly agreed such as to establish a contract. Nor do I think that as pleaded they would have had the requisite degree of certainty required to constitute an enforceable contract setting out defined escrow conditions or terms. 
530.	Further reflection has confirmed me in my view that, save possibly in the case of the last iteration pleaded (see below), the terms suggested are at once too intricate and yet too vague to be safely implied or inferred and given contractual effect.  The variety of alternative formulations offered further support that conclusion: it is difficult enough to establish an implied contract of sufficient certainty even when the terms avowed are settled.  
530A.	For the avoidance of doubt, I confirm that (at the request of Counsel for the Claimants further to receipt of an earlier draft of this judgment) I have specifically considered whether the last and simplest iteration of the Claimants’ alternative case, quoted in paragraph 409 in the last sentence (beginning “Alternatively…”) has the requisite certainty to found a contract.  I accept that this final iteration is neither itself intricate nor vague; and I do not doubt that such a term (simply to hold to the payer’s order) might in other circumstances found a contract. However, in this case, and perhaps ironically in view of my criticism of the earlier iterations, I do not think that the objective intention of the parties would be captured by that simple formulation. In my view, the parties’ objective intention was that the monies should be kept in the client account pending either an instruction or an event: but the event (“safety”) was not sufficiently defined to satisfy the requirements of certainty in the context of a contract. It may be that another way of looking at this, as urged by the Defendant Firm, is that the circumstances are not such that an intention to establish a contract can be inferred: but, as the result is the same, it is not necessary for me to determine which is the most accurate formulation; and, as indicated previously, it seems to me that the dividing line between the question of certainty of term and intention to create contractual relations is often an indefinite one. 
531.	I do not think the gaps can be made good by importing the terms of the Albermarle Shoreham escrow arrangements. Although escrow arrangements of some sort were part of what Mr Egan called the Albermarle “pattern”, there were variations in their form. I do not accept that the form in Albermarle Shoreham establishes a template to govern future Albermarle investment schemes nor an established  course of dealing such as to justify its implication. 
532.	Moreover, the Albermarle Shoreham “pattern” does not necessarily assist the Claimants as much as they appeared to me to suggest. I have had well in mind the point made on behalf of both Mr Egan and the Defendant Firm that in the Albermarle Shoreham scheme (on which the Claimants place so much reliance as a template) there were two stages, and at the first stage the first tranche investors (including Mr Wallis) do appear to have made payments to the investment vehicle, the proceeds of which (some £2 million) were applied to reduce that investment vehicle’s indebtedness to (amongst others) Erinaceous before any documentation had been finalised. There were no escrow arrangements at that first stage (though there were at the second stage, as set out in the Information Memorandum eventually issued). 
Answer no different if “offering documents” taken into account
533.	As indicated previously, I have so far been considering the question whether the escrow conditions pleaded were impliedly agreed without reference to the “offering documents”.  
534.	However, if such knowledge were to be assumed, and the factual nexus extended accordingly, my conclusions would be substantially as stated above. I would, however, feel fortified in my conclusion that the investors/Claimants did not intend the monies they were required to pay into the Defendant Firm’s client account to be immediately available to AFL, and that the draft Loan Notes promised in the email Teaser and sent later should be regarded as intended to be a purely temporary record of receipt and promise of payment of interest pending full subscription and finalisation closing of the transaction. 
535.	Objectively construed, in my view the email Teaser (which was circulated to potential investors Mr Egan and which Mrs Bellis says she did not see): 
(1)	sets the Albermarle Fairoaks transaction fairly and squarely in the context of, and as following the same basic pattern (loan/equity mix) as, Albermarle Shoreham and previous Albermarle Fairoaks schemes;
(2)	draws recipient regular investors’ attention to the fact that the investment property has already been acquired in a Guernsey Limited Company to be owned by a Guernsey Close Ended Fund controlled by (equity) investors, with facilities from RBS;
(3)	makes clear that what is on offer is “equity”;
(4)	solicits offers on the basis of a projected 15-32% Internal Rate of Return (“IRR”);
(5)	draws attention to the fact of oversubscription in the Albermarle Shoreham scheme;
(6)	so as to enable them to avoid the risk of reduced participation in consequence of oversubscription, offers regular investors the opportunity “straight away” to “earmark” and guarantee their equity participation at their nominated amount in return for pre-commitment of funds by payment into a nominated bank account (in the event, the Defendant Firm’s client account) for onward investment, with such funds to generate in the meantime (pending investment) a paid return of 1% above base rate;
(7)	promises evidence of that pre-commitment in the form of loan notes to be issued immediately;
(8)	mentions that the scheme “has been banked by RBS” but does not draw attention to any particular borrowing, still less any imminent repayment obligation.
536.	As to the sending of the draft Loan Notes (which I would include in the factual matrix, whether or not Mrs Bellis in fact knew that the drafts had been sent):
(1)	the document was incomplete and obviously a draft;
(2)	it would require revision and completion before execution (I consider Mr and Mrs Challinor’s signature as signifying not acceptance of the terms but record of receipt, see paragraph 319);
(3)	its terms should if read have aroused concern and invited enquiry, but I accept the evidence of all the Claimants who gave evidence that none of them focused on its terms at the time, and either did not read it and assumed that there was no substantial departure from the Albemarle pattern (as in the case of Mr Wallis) or proceeded on the careless but honest assumption that it was a purely temporary expedient: I take one or other as indicative of the likely reaction of all the Claimants, and find accordingly. 
537.	In summary, whether or not the “offering documents” are taken into account, the evidence is, in my judgment:
(1)	sufficient to negate any objective intention to make an immediate unsecured, subordinated loan at a miserly interest rate, and to establish an objective intention that Mrs Bellis and the Defendant Firm should treat the monies remitted as continuing to belong to the payers, and as requiring to be kept safe for them accordingly unless and until it was clear that they had agreed clear and certain terms for, or directed, its release; but
(2)	insufficient, and lacking requisite certainty and detail as to the terms on which the money would be available to (or for the use of) AFL, to establish a contract of escrow whether on the terms pleaded or at all.
538.	Given the latter conclusion I do not think it necessary to deal at length with Counsel for the Defendant Firm’s further ‘Cheshire and Fifoot’ point that the ordinary requirements of offer, acceptance and consideration are not fulfilled: and in particular as to the latter that the Engagement letter between the Defendant Firm and (purportedly at least) AFL already committed the firm to receive monies into client account, and that consideration was past.  
Did the Claimants have different subjective intentions?
539.	My conclusion also means that Counsel for the Defendant Firm’s final argument against there being found to be any contractual intention, based on a premise of a subjective intention to the contrary, is otiose. I deal with it only in case the matter proceeds further, and differently.
540.	That final argument was to the effect that the subjective intention of a party, though not ordinarily relevant or admissible, may be admissible to displace the outward objective appearance of intention to create legal relations and agreement. In other words, whereas evidence of subjective intention would not ordinarily be permissible in deciding issues of contractual interpretation, it may in certain circumstances be admissible in deciding issues of intention to create legal relations and formation.
541.	As will be apparent already, I would reject the argument. I do not consider that any of the Claimants subjectively intended to make an immediate loan to AFL, whether on the terms of the draft Loan Notes or otherwise.  For the avoidance of doubt that is my view even in the case of the Claimants who purportedly filled in Loan Notes and approved them: I find as a fact that none of the Claimants subjectively intended to make an unsecured subordinated loan without stapled equity and cooperative control of the investment vehicle.
Should a form of Quistclose trust be implied?
542.	Although I have found against the Claimants’ case based on a contract, express or implied, I have nevertheless concluded that the Claimants did not intend the monies they paid into the Defendant Firm’s client account thereupon to belong to AFL, and trusted Mrs Bellis to keep their money safe until their objectives were reliably fulfilled and secured.   The next question, therefore, is whether those circumstances are such as to give rise to a Quistclose or some similar form of trust.
Nature of a Quistclose trust
543.	The true or doctrinal nature of a Quistclose trust has long been debated; but Lord Millett’s characterisation of it as a sub-species of a resulting trust probably holds sway. In Twinsectra Ltd v Yardley and others [2002] 2 AC 164, Lord Millett explained its juridical nature as follows:
“68.  Money advanced by way of loan normally becomes the property of the borrower.  He is free to apply the money as he chooses, and save to the extent to which he may have taken security for repayment the lender takes the risk of the borrower’s insolvency.  But it is well established that a loan to a borrower for a specific purpose where the borrower is not free to apply the money for any other purpose gives rise to fiduciary obligations on the part of the borrower which a court of equity will enforce…
69.  Such arrangements are commonly described as creating “a Quistclose trust”, after the well-known decision of the House in Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567 in which Lord Wilberforce confirmed the validity of such arrangements and explained their legal consequences.  When the money is advanced, the lender acquires a right, enforceable in equity, to see that it is applied for the stated purpose, or more accurately to prevent its application for any other purpose.  This prevents the borrower from obtaining any beneficial interest in the money, at least while the designated purpose is still capable of being carried out.  Once the purpose has been carried out, the lender has his normal remedy in debt…This depends on the intention of the parties collected from the terms of the arrangement and the circumstances of the case.
…
71.  A settler [payor] must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant.  If he enters into arrangements which have the effect of creating a trust, it is not necessary that he should appreciate they do so; it is sufficient that he intends to enter into them.
…
73. A Quistclose trust does not necessarily arise because money is paid for a particular purpose. A lender will often inquire into the purpose for which a loan is sought in order to decide whether he would be justified in making it.  He may be said to lend the money for the purpose in question, but that is not enough to create a trust; once lent the money is at the free disposal of the borrower…
74.  The question in every case is whether the parties intended the money to be at the free disposal of the recipient: In re Goldcorp Exchange Ltd [1996] 1 AC 74, 100 per Lord Mustill. His freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose, for as Lord Wilberforce observed in the Quistclose case…:
	‘A necessary consequence for this, by a process simply of 	interpretation, must be that if, for any reason, [the purpose 	could not be carried out,] the money was to be returned to 	[the lender]: the word ‘only’ or ‘exclusively’ can have no 	other meaning or effect.’
…
76. Equity’s intervention is…[justified because it]…is unconscionable for a man to obtain money on terms as to its application and then disregard the terms on which he received it. The duty is not contractual but fiduciary.  It may exist despite the absence of any contract at all between the parties…; and it binds third parties as well, as in the Quistclose case itself.  The duty is fiduciary in character because a person who makes money available on terms that it is to be used for a particular purpose only and not for any other purpose thereby places his trust and confidence in the recipient to ensure that it is properly applied.  This is a classic situation in which a fiduciary relationship arises, and since it arises in respect of a specific fund it gives rise to a trust.
…
100. …the Quistclose trust is an entirely orthodox example of the kind of default trust known as a resulting trust.  The lender pays the money to the borrower by way of loan, but he does not part with the entire beneficial interest in the money, and in so far as he does not it is held on resulting trust for the lender from the outset...When the purpose fails, the money is returnable to the lender, not under some new trust in his favour which only comes into being on the failure of the purpose, but because the resulting trust in his favour is no longer subject to any power on the part of the borrower to make use of the money …
101. …A trust must have certainty of objects. But the only trust is the resulting trust for the lender. The borrower is authorised (or directed) to apply the money for a stated purpose, but this is a mere power and does not constitute a purpose trust. Provided the power is stated with sufficient clarity for the court to determine whether it is capable of being carried out or whether the money has been misapplied, it is sufficiently certain to be enforced. If it is uncertain, however, then the borrower has no authority to make use of the money at all and must return it to the lender under the resulting trust.  Uncertainty works in favour of the lender, not the borrower…”
544.	Norris J, in a summary of the above principles which the Court of Appeal approved on appeal (see the recent decision of the Court of Appeal Raymond Bieber & Others v Teathers Limited [2012] EWCA Civ 1466, which was delivered on 14 November 2012, and to which the parties’ respective Counsel helpfully drew my attention whilst this judgment was in the course of preparation), added this:
“it is implicit in the doctrine so described…that the specified purpose is fulfilled by and at the time of the application of the money. The payer, the recipient and the ultimate beneficiary of the payment (that is, the person who benefits from the application by the recipient of the money for the particular purpose) needs to know that property has passed.”
545.	Building on that, a subsidiary ground for Norris J’s decision in declining to accept that the complex arrangements made in that case gave rise to a Quistclose trust was that the criteria for the exercise of the power were (see paragraph 42 of his judgment at [2012] EWHC 190 (Ch)) 
“imprecise and highly subjective matters quite different from the usually encountered directions to use the money to acquire property, or to obtain a good marketable title or a first charge, or to pay a dividend or to pay the balance outstanding on a loan agreement for a car or to pay a publicity agent.” 
	However, Norris J’s main ground for his decision was the incompatibility of the alleged trust with express contractual terms binding on the parties.
546.	On appeal, the Court of Appeal upheld Norris J’s decision on the main ground; but as I read it Patten LJ’s judgment (with whom Sullivan and Arden LJJ agreed) did not confirm the subsidiary ground. In his judgment, Patten LJ also emphasised the following in the context of the arrangements said in that case to give rise to a Quistclose trust (the numbering has been added by me):
(1)	“In deciding whether particular arrangements involve the creation of a trust and with it the retention by the paying party of beneficial control of the monies, proper account needs to be taken of the structure of the arrangements and the contractual mechanisms involved.”
(2)	“It is necessary to be satisfied not merely that the money when paid  was not at the free disposal of the payee but that, objectively examined, the contractual or other arrangements properly construed were intended to provide for the preservation of the payor’s rights and the control of the use of the money through the medium of a trust.”  
(3)	“Critically this involves the court being satisfied that the intention of the parties was that the monies transferred by the investors should not become the absolute property of [the ultimate payee]…but should continue to belong to the investors unless and until the conditions attached to their release were complied with.”
547.	Thus, in Twinsectra, monies paid by Twinsectra (T) to a solicitors’ client account subject to an undertaking by the solicitor (S) to retain the monies “until such time as they are applied in the acquisition of [identified] property on behalf of our client” (X) were held on resulting trust for T, subject only to a power to pay the vendor (V) out of the property. When the solicitors (S) paid the monies to another firm of solicitors (L) also acting for their client (X) following assurances by L on behalf of X that the money would be used in the acquisition of the property paid out to X and he used the money for a different purpose (not the purchase of the identified property) that was held to be a breach of trust by S. (T claimed that L had dishonestly assisted that breach of trust, but in the circumstances the claim ultimately failed.)
Application in this case
548.	Translated into the present case, the investors are in the position of Twinsectra (T), AFL is in the position of the client borrower, and the Defendant Firm may be in the position of the Solicitors (S).  Just as in Twinsectra, the commitment (if any) is given by the borrowers’ solicitors. The question is whether such a commitment was given (or implicit) and if so whether it constituted a trust obligation, or whether in reality the Defendant Firm simply had a ministerial function to act as receiving agent for its client (AFL), as Counsel for the Defendant Firm contend.
549.	Of course, in the present case there is nothing as clear and explicit as the undertaking in the Twinsectra case. Indeed, reflecting their arguments on the contractual issues, Counsel for the Defendant Firm submitted that not only was it not a party to, but it was not even aware of, any document or communication which on any reasonable reading could be taken to convey an intention on the part of the investors that the monies they remitted should remain their monies to be applied only for purposes defined with sufficient precision to give rise to a trust.  Further, and in the same circumstances they contended that Mrs Bellis had certainly not accepted any obligation to the investors of a fiduciary nature. 
550.	Put shortly, Counsel for the Defendant Firm maintained throughout that there was no “mutual intention” or any sufficient certainty of exclusive purpose from which a Quistclose trust might arise. They concluded in the context of this issue with the submission that the claim that there was a Quistclose resulting trust between each of them and the Defendant Firm was: 
“impossible to understand.  There was no relationship of lender and borrower between the Claimants and the Defendant Firm.  The monies were not advanced by the Claimants by way of loan to the Defendant Firm, with a power to use those monies for particular purposes. Such relationship as existed between any Claimant and the Defendant Firm was that the Defendant Firm was recognised as being the agent of AFL undertaking a ministerial function for its client.”
551.	I am not persuaded by this.  As it seems to me, the lack of writing does not necessarily mean that the circumstances are not such as to give rise to a Quistclose trust, though of course the burden of demonstrating that such a trust may be inferred in such circumstances is inevitably heavier. Nor does the fact that in this case, the trustee is not the borrower make the argument “impossible to understand”. The Quistclose trust analysis or doctrine is plainly capable of extending to the three-party situation in this case, as it did in Twinsectra. More generally, I consider that Counsel for the Defendant Firm adopted too restrictive a view as to what might be regarded as a form of Quistclose trust.
Trusts analogous to classic Quistclose trusts 
552.	I accept that in a classic Quistclose case it is the combination of (a) the exclusiveness of the purpose, (b) the sufficient definition of the exclusive purpose to enable its satisfaction to be clearly determined, (c) the communication of that purpose to the immediate recipient of the monies and (d) the direction (express or implied) for return of the monies to the payer if the exclusive purpose is no longer capable of being satisfied that negates any intention on the part of the payer to part with the entire beneficial interest in the monies in the meantime. As Lord Millett explained, it is that retention of beneficial interest unless and until the purpose can be fulfilled that gives rise to the resulting trust in favour of the payer. 
553.	Stipulation of an exclusive purpose for the loan may be the classic, but in my judgment is not the only, circumstance of which the immediate recipient is cognisant and which negates an intention on the part of the payer, to pass away beneficial ownership so as to give rise to such a resulting trust.  
554.	The crucial question, as it seems to me, is as to the terms on which (objectively determined) the Defendant Firm received investors’ monies into its client account, and whether such terms negate any intention that such monies should belong immediately to AFL, such that the account holder is bound to hold such monies for the payer pending receipt or satisfaction of a clear direction or pre-stipulated event providing for or triggering transfer of ownership to AFL.  
555.	As was discussed in argument, nomenclature, or over-rigid characterisation, has bedevilled this case. At an earlier stage, debate over the appropriateness of the term ‘escrow’ in any context other than deeds clouded the real issue; and at trial, rigid analysis of the characteristics of a classic Quistclose trust, as if that was the only form of resulting trust, obscured the real question I have identified.
556.	As Lord Millett emphasised in Twinsectra (at page 192F-H):
“I do not think that subtle distinctions should be made between “true” Quistclose trusts and trusts which are merely analogous to them.  It depends on how widely or narrowly you choose to define the Quistclose trust.  There is clearly a wide range of situations in which the parties enter into a commercial arrangement which permits one party to have a limited use of the other’s money for a stated purpose, is not free to apply it for any other purpose, and must return it if for any reason the purpose cannot be carried out.”
557.	In my judgment, once excessively strict characterisation is abandoned and the essential question is understood, some of the difficulties that seemed to arise in consequence of the lack of documentation, and the paucity and uncertainty as to the communications between the parties, fall away (or at least are materially attenuated). 
558.	The focus then becomes not so much on whether there was a sufficient definition and shared understanding of the purpose for which loans were made, but more on 
(1)	what in all the admissible circumstances can have been the objective 	intention of the parties in making and accepting payments into the 	Defendant Firm’s client account before the terms of any loan had been 	finally agreed, if not to hold the money pending agreement or some future 	instruction or event;
(2)	what can have been the objective intention of the parties if the terms of the 	loans were never finally agreed or the future instruction or event was never 	given or did not occur; and 
(3)	whether (objectively) there ever was, or arose, any sufficient basis for Mrs 	Bellis to treat the monies without enquiry of the payers as belonging to 	AFL. 
559.	Twinsectra assists in this regard also in confirming the characterisation of monies held in a solicitor’s client account. In his speech Lord Hoffmann said this (at paragraph 12):
“Money in a solicitor’s client account is held on trust. The only question is the terms of that trust.” 
560.	As to that question, and in answer to Counsel for the Defendant Firm’s more general argument that it cannot be right that every payment by a person who is not a client into a solicitor firm’s client account connotes retention of a beneficial interest in the monies paid by the payer, the Claimants relied further on the factual background specific to this case.  In particular, their Counsel emphasised the following matters (each of which I accept and find accordingly):
(1)	the lack of any sensible explanation in all the circumstances for the 	requirement for payment into a client account other than (a) to prevent its 	being available to the ultimate intended recipient pending some further 	event or instructions and (b) to provide that in the meantime it is to be held 	under the control of a solicitor for the benefit of the payer;
(2)	the marketed and obvious characterisation of the transaction as an 	Albermarle investment scheme with the basic characteristics common to 	such schemes, in none of which had the investors ever made unsecured 	loans without an immediate right to a matched equity investment element;
(3)	the Claimants’ familiarity with those basic characteristics, and their 	expectations accordingly that what they would obtain by subscribing money 	was a combination of a loan and ‘equity’ participation (albeit that the 	documents to evidence that right might follow after the application of the 	monies invested);
(4)	the arrangements in Albermarle Shoreham, which took place only a few 	months before, and in which the Defendant Firm was both adviser and 	escrow agent, and where monies were required to be remitted to the same 	client account with the Defendant Firm acting as escrow agent on terms set 	out in a document attached to the Information Memorandum for that 	transaction and expressly agreed between the investor and the Albermarle 	Shoreham vehicle, Albermarle (Shoreham) LLP, as a term of the 	application form required to be subscribed; 
(5)	the inherent unlikelihood that the Claimants would ever have agreed to lend 	monies without any security, on terms that were not finalised, without 	control of the SPV (AFL) and so without any identified right to, or ability to 	require to be made available to them, some form of ‘equity investment’ in 	AFL or in a fund above it;
(6)	the fact that at the time of the transfer of the Claimants’ monies, Mrs Bellis 	knew that no formal and final documentation had been provided to them, 	still less agreed by them;
(7)	the fact that in this case (unlike what might be thought the more standard 	case) the monies to be remitted to the client account came from a number of 	persons;
(8)	all giving rise to the inference that, at the very least pending the agreement 	of formal documentation and the completion of any steps necessary to 	ensure there was no impediment to its issue and signature, the monies 	transferred should be held to the order of the payers;
(9)	the fact that, as a solicitor, and in light of her previous experience in respect 	of the Albermarle Shoreham transaction, Mrs Bellis could be expected to 	know, and did know, all the above and that (a) it was necessary for AFL’s 	directors formally to approve borrowing in accordance with specified and 	formal documentation before accepting money from investors (and the 	concomitant repayment obligation to them) and (b) it was not permissible 	for her to accept and apply monies received from investors unless and until 	‘know your customer’ and Consent to Borrowing (“COBO”) and any other 	regulatory requirements in Guernsey had been completed. 
561.	As to (1) in paragraph 558 above, even if, as I have earlier concluded, these factors are not sufficient to establish a contract in terms certain enough to be enforceable at law, I consider that they do connote (a) that the monies paid by the Claimants into the Defendant Firm’s client account  were not thereupon immediately to belong to or be subject to the directions of AFL; and (b) that until the final agreement on the terms of any loan and the finalisation of KYC and regulatory consents the monies were to be retained in that client account at least (c) pending agreement, some future instruction by or on behalf of the Claimants, or the happening of a pre-stipulated event (the achievement of “safety”).
562.	As to (2) in paragraph 558 above, it also seems to me that it is to be inferred from the same circumstances that if, for whatever reason, the scheme failed, or no definitive agreement (whether or not documented) could be reached as to the terms of the loan, then the monies should be remitted back to the payers, and not to AFL.
563.	As to (3) in paragraph 558 above, and whether there ever was, or arose, any sufficient basis for Mrs Bellis to treat the monies as becoming the property of AFL if (as I have found) they belonged to the payers when remitted to and received in her firm’s client account, the answer is to my mind clear from Mrs Bellis’ own evidence. 
564.	It is Mrs Bellis’ own case that she never knew even that draft loan notes had been sent out to investors; and in any event she accepted that she understood that the drafts were incomplete and would require amendment too. It must follow that she knew that no terms had been agreed for the loans, whether or not the terms included machinery to ensure equity participation.  
565.	Furthermore, I have already found that she can never have had any real certainty, either as to what the investors were being told (since on her case she never saw the Teaser email and never made any enquiry in that regard, or at all of any of the Claimants) or as to how the expectations she knew them to have of a matched equity entitlement were to be met. 
566.	Having become a trustee for the Claimants upon receipt into her firm’s client account she and her firm could not in equity foreclose the beneficiaries’ interests and become trustee in respect of the same monies for another person without the most unequivocal instructions from her beneficiaries or else complete certainty that they had directed payment to AFL on conditions that had unequivocally been met.  As it seems to me, her case in answer to the contractual claim, and her evidence generally, makes it impossible for her to comply with these requirements.
567.	In that context, any uncertainty as to what directions were given or are to be implied as to the release of or transfer of beneficial interests in the monies does not undermine the trust; it undermines the ability of the trustee to do anything other than seek direct instructions from the beneficiaries or remit the monies back to them: see Twinsectra at paragraph 101. 
568.	See also per Chadwick J (as he then was) in Bristol and West BS v May, May & Merrimans [1996] 2 All ER 801 at 819:
“In Target Holdings Ltd v Redferns (a firm) [1995] 3 All ER 785 at 795, [1995] 3 WLR 352 at 362 Lord Browne-Wilkinson made it clear that he accepted that moneys held by solicitors on client account are trust moneys. Absent any express trust imposed by the client at the time that the moneys are paid to the solicitor, it seems to me that the trust which attaches to clients' moneys (in cases within this second category) is an implied trust imposed in order to give effect to the Accounts Rules made under s 32 of the 1974 Act [i.e. the Solicitors' Accounts Rules 1986, then 1991, then 1998]. The solicitor's obligations under that trust are the obligations imposed by the rules. It follows that a payment made out of clients' moneys to or to the order of a third party which is not authorised by, or 'properly required' on behalf of, the client is a payment made in breach of trust.”
568A	In this context, Counsel for the First Defendant have urged on me (in relation also to paragraph 527(4)(c) above especially in their comments on an earlier draft of this judgment which was circulated to them) that the trust to which Chadwick J above refers is a trust for the benefit of the solicitor’s client, and not the payer, and the duties are accordingly owed to the client, and not the payer. I would add this in deference to their concerns. Of course, in the May, May and Merrimans case the various firms of solicitors whose client accounts were being utilised to hold the proceeds of loans made by the plaintiff building society were in each case acting on each side of the lending transaction. However, and as set out in paragraph 516 above, the SAR expressly require all money that does not belong to the solicitor to be held in a separate client account, and not all monies held in a solicitor’s client account are held for a client of that firm. The question is not who the firm’s client is, but on whose behalf or to whose order or instruction the money is being held. It is for the solicitor to establish that with certainty; and his or her duty is not to withdraw that money from the client account unless and until clearly authorised to do so by the person on whose behalf or to whose order or instruction the money is held.  That accords with a basic principle of the law of trust and trustees, that a trustee must ensure that he or she knows who the beneficiaries are and the terms of the trust in question.
569.	Counsel for the Defendant Firm argued that the objective inference of arrangements such as in equity to be characterised as in the nature of a trust is not enough: only actual knowledge and acceptance that Mrs Bellis was to hold the monies remitted to her firm’s client account not for AFL, but for the Claimants, could be said to engage her conscience sufficiently to fix her with fiduciary obligations.  They argued strenuously that it would be “utterly perverse” to conclude that she had undertaken any implied engagement to “people whom she had never met, not entered into any discussions with or given any solicitor’s undertaking to” and that any suggestion that Mrs Bellis actually knew that the monies were to be held for the Claimants and not her client AFL was “not only inherently improbable but simply not reconcilable with the contemporaneous documents.”   
570.	They supported this with the following points:
(1)	Mrs Bellis had given very clear advice to Mr Egan in early July that the 	SDLT change and the delay in the setting up of a unit trust meant that he 	should solicit “straightforward loans” to AFL.
(2)	She did not see the Teaser or the Loan Note Email, but even if she had these 	would not have led her to question that Mr Egan would or might be 	implicitly representing to his investors (people whom she had never met 	and whom she believed Mr Egan wanted to protect) that the deal would be 	anything other than a straightforward loan.
(3)	She had drafted only a Loan Note, and she had not been asked to draft any 	form of agreement which gave the Claimants a right to equity, and indeed 	had been advised by PwC that the Loan Notes could not be convertible.  
(4)	Of course she (and Mr Egan, and the Claimants) all had an expectation that 	the Claimants would in due course be given equity in the unit trust, but it is 	(so it was submitted) ludicrous to suggest that she knew or appreciated that 	they had only sent their money on terms that it was to be held for some 	indeterminate time until that eventuality occurred.  Her email to Mr Egan 	on 15 August 2007 expressly deals with the possibility that such eventuality 	would not occur.
(5)	There is no evidence that she knew and appreciated that the corporate 	directors (people she regarded as functionaries) had not authorised the 	raising of loan finance (if that was the case) or that if asked they would not 	have authorised it.
(6)	There is no evidence that when she made the transfers to the RBS on 4 and 	7 September 2007 she knew or appreciated that she was to hold monies on 	behalf of the Claimants who had by then invested.
(7)	Short of a proven allegation of dishonesty it is inconceivable that a solicitor 	of 30 years standing, with an unblemished professional record, would have 	transferred money to RBS had she believed the Claimants had any interest 	in such funds.  
(8)	The person whom Mrs Bellis reasonably expected was acting for Claimants 	and might have been expected to warn her was Mr Egan. Far from putting 	her on notice that she should hold monies on trust/escrow for Claimants or 	hold it “safe” (an expression not found in any contemporaneous 	communication from Mr Egan) he positively tells (or at least encourages) 	her to send it to RBS reinforcing her belief that this is authorised and 	appropriate.
571.	These points have immediate forensic force; and I have considered and reflected on them with care; but I am ultimately not persuaded that they alter the legal analysis in the particular circumstances of this case.  
Breach of trust in making payments to RBS
572.	The reason lies, to my mind, in the distinguishing feature of this case which is the fact that there is no doubt that upon receipt into the client account the monies paid in by the Claimants were immediately impressed with a trust, not because (at that point at any rate) Mrs Bellis’ conscience was affected but because of the nature of a client account and the circumstances of the payment as adumbrated above (and see especially paragraphs 527 and 537).  
573.	Once in that trust, with Mrs Bellis (or her firm) as trustee, Mrs Bellis was bound to establish with certainty who was the beneficiary, and once she had established that to act only in accordance with directions from that beneficiary of which she could be entirely certain.  
574.	She was certain of neither. I have already held that, despite her oft-rehearsed protestations to the contrary, she simply could not have had, and I have further held (insofar as necessary) that she did not have, any such certainty. 
575.	Not only is it a primary duty of a trustee to establish immediately the terms of the trust and the identity of its beneficiaries: but also (and as already set out) the SRA requires that, and requires certainty of instruction. It does not matter, to my mind, whether that is characterised as a factor affecting the trustee’s conscience; whatever the terminology, the duty and the obligation are inherent and unavoidable. 
576.	As I see it, there is no need in this case to enter into the debate whether, as Lord Browne-Wilkinson suggested in Westdeutsche, no trust can be imposed by law unless and until the trustee’s conscience is affected (see especially at pages 705D-E and 709D) or whether, as Lord Millett would have it (and a number of other cases support him, see Underhill and Hayton, ‘Law of Trusts and Trustees’, 18th ed. at 22.7) a resulting trust arises where the circumstances in which the property was provided disclose that the disponor did not intend to, or did not effectively, part with his beneficial interest (a “default resulting trust” being the machinery of equity to ensure that his continuing beneficial interest is recognised and enforceable).  
577.	There is, in my view, probably no need either to enter the further debate whether, under a resulting trust of that kind, the trustee owes fiduciary duties beyond the duty to restore the trust property on demand if still in possession of it (see again Underhill & Hayton ibid.) 
578.	In this case, in my judgment, the trust and that limited fiduciary obligations are inherent in the fact that Mrs Bellis made available her firm’s client account and, in the events as they unfolded after doing so but before receipt of the Claimants’ monies, could not have been and was not certain whose directions she could follow.  In thereafter proceeding regardless, she inevitably breached her duties as trustee. That, in my judgment, is sufficient to establish liability. 
If necessary to show breach of fiduciary duty or that Mrs Bellis’s conscience affected
579.	However, if it is necessary to show that a fiduciary relationship with more extensive fiduciary obligations and their breach, and/or that Mrs Bellis’s conscience (as that is understood in equity) was affected, the fact of both is supported, to my mind, by the following facts (as in each case I have found them):
(1)	Mrs Bellis, as a qualified and ordinarily competent solicitor must have known that (a) monies required to be paid into her firm’s client account for the purposes of the Albermarle Fairoaks transaction were held on trust and subject to the SAR; (b) it was her duty to establish the terms of that trust and the identity of the person(s) entitled under it; (c) she could not be certain either as to the terms on which the payment was made or the identity of the person(s) immediately entitled, since neither was yet the subject of any definitive or complete agreement; (d) pending at the very least the finalisation of such terms, complete certainty as to the person(s) entitled and what event, mandate or instructions would constitute an authority to make payments out to a third party, she was bound to retain such monies safely in that client account;
(2)	Mrs Bellis knew from her experience of acting for the SPV in the Albermarle Shoreham scheme and her role in the Albermarle Croydon scheme that this is indeed what the investors were likely to expect;
(3)	Mrs Bellis knew also that AFL had not approved either the borrowing or the final terms of loan notes, and that the terms of any investment were not only incomplete but also subject to conditions of KYC and COBO which had not been fulfilled;
(4)	Mrs Bellis accepted that she would not herself have contemplated proceeding to commit money to AFL on the basis of the documentation available;
(5)	Mrs Bellis was in a position of conflict of interest in acting for Erinaceous, AFL and Longmint, such as to require particular care before preferring Erinaceous and Longmint interests;
(6)	I have concluded that although Mrs Bellis assumed all would work out in the end, she knew also that the legal requirements had not yet been satisfied.
580.	Further, as regards the monies paid away later, in 2009:
(1)	The Defendant Firm knew that on 11 December 2007 Mr Dickinson told 	Mrs Bellis by email that he did not know that funds “from potential unit 	loan note holders” had gone to RBS and asked for confirmation and stated 	“Please can I ask you not to make any further payments… unless you have 	our express permission to do so” (underlined in the email). (This was after 	Mr Glatman’s call on 3 December 2007 questioning the payments out.)
(2)	Then on 13 December 2007, Mr Dickinson emailed RBS under the heading 	“VERY URGENT”, copying Mrs Bellis, to say that the monies sent to RBS 	“simply do not belong” to AFL and asked for their return to the Defendant 	Firm’s client account. 
(3)	This is as plain an indication as can be that the human embodiment of one 	of AFL’s two corporate directors thought that the money sent to RBS did 	not belong to AFL and therefore can only have belonged to the Claimants, 	as Mrs Bellis accepts. 
(4)	From that point onwards the Defendant Firm was on clear notice of a lack 	of authority by AFL and proprietary claim by the Claimants.
(5)	Mrs Bellis’ explanation in interview was that “I quite frankly felt at that 	stage I was not quite certain who I could safely take instructions from.  So I 	hung on to the money”. Mrs Bellis’ explanation in oral evidence was that 	she thought Mr Dickinson was confused or wrong, she “did not really 	understand where he was coming from” and:
(6)	“there was clearly, in my mind, at this stage, some considerable difficulty in 	determining who had the real authority to give instructions for Albermarle 	Fairoaks Limited… at that stage I therefore felt it sensible to hang onto the 	money. I had had a direction instruction from Legis not to pay monies out, 	therefore if Mr Egan had subsequently said to me to pay money out, I 	would not have done so.”
(7)	In spring 2008 there was then intimation of a claim that the money was held 	on escrow. Plainly from then on, in my judgment (and I so find):
	a)	Mrs Bellis knew that the AFL directors thought the money was the 		Claimants’ and paid out without authority.
	b)	Mrs Bellis knew that the Claimants thought there had been an escrow 		and it had been breached.
	c)	Mrs Bellis knew that the Claimants had a possible trust or other 	proprietary claim (whether against the Defendant Firm, AFL or RBS).
	d)	Mrs Bellis knew that she should have contacted all the Claimants, 	especially those whose money was still in the account. Yet she 	deliberately chose not to do so, in order to protect herself and 	Erinaceous. 
581.	I record that Counsel for the Defendant Firm objected to these points on the grounds that they amounted to an allegation of dishonesty which had not been pleaded nor properly put to Mrs Bellis. There would be force in this if the Claimants were advancing a plea of dishonesty as such or by necessary implication: however, these points are not relied on for that purpose, but only to support the contention that Mrs Bellis was in a fiduciary position and/or her conscience was affected, which the Defendant Firm submits is a vital ingredient of the case against it as it has always understood it. As such, it seems to me these factors may legitimately be taken into account; and in my judgment they support the conclusions I have expressed. 
582.	Accordingly, not on the basis of contractual escrow, nor on the basis of a classic Quistclose trust, but rather on the basis of an analogous form of resulting trust of which Mrs Bellis was in breach, I have concluded that the Claimants succeed in their primary case.
CLAIMANTS’ ALTERNATIVE CASE: the Defendant Firm had no authority to receive funds raised 
583.	I address next the Claimants’ alternative case that, even if there was no escrow nor any form of Quistclose trust arrangement by reference to the basis on which the claimants’ monies made payments into the Defendant Firm’s client account, the Defendant Firm held the monies on trust and must account for them, or alternatively is liable to pay restitutionary compensation, on the basis that AFL never validly authorised the borrowings, nor the receipt into the Defendant Firm’s client account of monies for AFL’s own use which it would be liable to repay with interest. 
584.	Although the legal analysis of their consequences is of some complexity, the facts relevant to the Claimants’ alternative case are relatively clear and straightforward.
Relevant facts as to AFL’s management, constitution and ownership
585.	It is first necessary for me to paint in some details as to AFL and its management and ownership. 
586.	AFL was incorporated in Guernsey. As is usual in English law also, the authority to manage its business is, under its Articles of Association, vested in its board of directors. More particularly, the powers of the company to borrow money are expressly allocated to its board. 
587.	The relevant Articles are in the following terms:
(1)	Article 95 provides:
“The Board may exercise all the powers of the Company to borrow money and to mortgage hypothecate pledge or charge all or part of its undertaking property and uncalled capital and to issue debentures and other securities whether outright or as collateral security for any liability or obligation of the Company or of any third party”
(2)	Article 96 provides:
“The business of the Company shall be managed by the Board who may exercise all such powers of the Company as are not required to be exercised by the Company in general meeting subject nevertheless to these Articles and to such regulations as may be prescribed by the Company in general meeting but no regulation so made shall invalidate any prior act of the Board. The general powers given by this Article shall not be limited or restricted by any special authority or power given to the Board by any other Article.”
(3)	Article 99 provides:
“The Board may at any time by power of attorney under the hand of such person or persons duly authorised in that behalf appoint any person or any fluctuating body of persons whether nominated directly or indirectly by the Board to be the attorney of the Company for such purposes and with such powers and discretions and for such periods and subject to such conditions as the Board may think fit…”
588.	Also potentially relevant are the following Articles:
(1)	Article 9, which provides (in relevant part):
“Except as ordered by a court of competent jurisdiction or as required by law the Company shall not be affected or bound by or compelled in any way to recognise (even when having notice) any equitable…interest in any share…or any other rights in respect of any share except an absolute right to the entirety in the registered holder…”
(2)	Article 60, which provides:
“The quorum for a general meeting shall be two Members present in person or by proxy” (“Member” being defined in Article 1 as including “registered holder of a share and vice versa and any person entitled on death disability or insolvency of a member.”) 
589.	At all material times until 9 June 2009 (when Mr Cummings purported to appoint himself and Ms Cummings as directors of AFL in their place) the directors of AFL were corporate entities, namely Ovaco Limited (“Ovaco”) and Lapco Limited (“Lapco”): both being Guernsey companies whose directors (including Mr Stephen Dickinson) were appointed by Legis.  
590.	The registered shareholders of AFL were at all material times until June 2009 companies (First Ovalap Limited and Second Ovalap Limited) who were the nominees of Legis and who subscribed AFL’s Memorandum of Association. 
591.	In June 2009, Mr Cummings (apparently on the advice of Guernsey lawyers) purported to requisition and hold (on 9 June 2009) an Extraordinary General meeting at which it was resolved (amongst other things) that the shares of First Ovalap Limited and Second Ovalap Limited should be transferred to Ms Cummings and Mr Cummings respectively. 
592.	Until 9 June 2009, none of Mr Bellis, Mrs Bellis, Mr Cummings, Ms Cummings, Mr Egan or Mr Lawson was ever a director of AFL, nor of Ovaco, Lapco, or Legis; and at no time was Erinaceous, Mr Bellis, Mrs Bellis, Mr Cummings, Ms Cummings, Mr Egan or Mr Lawson a registered shareholder of AFL.
593.	There is no evidence, nor any assertion, of (a) any decision by the Board of AFL to borrow money, nor of (b) the grant of any authority to Mr Egan or Mrs Bellis or anyone else to borrow or receive money on its behalf. When Ms Cummings, by email (copied to Mrs Bellis) dated 18 July 2007, sought the agreement of the AFL directors to operate the AFL bank account, Mr Dickinson made clear that only the AFL directors (through their usual Legis signatories) could deal with such matters. 
594.	The unchallenged evidence of Ms Wyatt of Ozannes, Guernsey legal advisers to Legis and its appointees and directors, and the (hearsay) evidence of Mr Dickinson, was that the directors of AFL did not even know of the receipt of moneys into the Defendant Firm’s client account or any supposed loans. Mrs Bellis confirmed in cross-examination that she did not dispute this.
595.	The reaction of Legis and Ozannes, when the transfers out to RBS of the monies sent to the Defendant Firm’s client account became known to them, was, as set out in an email from Mr Dickinson to Mr Egan dated 19  December 2007:
“You did not have any authority to instruct on this and Juliet Bellis should not have accepted an instruction from you in connection with this company.”
596.	It will be recalled that Mrs Bellis did not dispute that Mr Egan was not “formally” authorised on behalf of AFL: “he did not have any actual authority, any formal delegated authority by AFL, that’s correct.”  I infer that she did know that at the time too. She also knew that the authority of AFL’s Board was required to issue AFL loan notes.  She simply proceeded on the basis that Mr Egan was “Mr Albermarle”, organising this Albermarle fund as he had organised the Albermarle Shoreham scheme: “he had arranged for the finance, he had organised the valuation, and he was now carrying out the early round of equity funding.” 

Dispute of fact as to the authority of Mr Egan
597.	The fact that so much was left to be done by Mr Egan, and indeed had been done by him before ever Legis was involved or AFL adopted as the SPV, is the foundation (together with the Engagement Letter) for the Defendant Firm’s answer to the Claimants’ alternative case.  
598.	The case made on behalf of the Defendant Firm is that notwithstanding that the express authority of AFL’s directors was not in place, nevertheless Mr Egan and ECS and the Defendant Firm did have actual authority, under express or implied contracts of agency with AFL, to solicit (in Mr Egan’s case) loans on behalf of AFL and (in the Defendant Firm’s case) to receive the loan monies into its client account and disburse them on Mr Egan’s direction. 
Defendant Firm’s case that Mr Egan/ECS and the Defendant Firm had actual authority  
599.	The building blocks of the Defendant Firm’s case that the authority of Mr Egan/ECS to raise and of the Defendant Firm to receive money on behalf of AFL was inherent in the true nature of his relationship with AFL and Legis can, I think, be summarised as follows:
(1)	AFL was SPV acquired to be a creature of Mr Egan and Mr Lawson: it was 	they who were initially put forward to be beneficial owners of its shares and 	it was always intended to be subject to their control;
(2)	However, after PwC’s advice that for fiscal reasons it was unwise for an 	employee of Erinaceous or any of its subsidiaries to be a beneficial owner 	of the SPV’s (AFL’s) shares, Mr Cummings was selected (he being a 	consultant with close ties to Erinaceous, but not an employee or director) to 	be a “placeholder” of the shares;
(3)	In light of its status as a Guernsey corporation, and to present the vehicle as 	being controlled offshore, Legis were instructed to provide their 	administration and corporate management services for a fee (the essence of 	their trust and corporate business being to provide such services for 	numerous clients); 
(4)	Legis was not paid to make commercial decisions but was paid to provide 	offshore corporate services itself and via its Ovalap creatures; 
(5)	As part of those services Legis provided corporate directors; but the reality 	is (as in other offshore structures) that such directors were not in reality 	decision-makers: they were ciphers, their business in reality being to 	arrange and perform the formalities of corporate administration but not to 	become engaged in actual management or themselves make substantive 	decisions;
(6)	Provided that what the corporate directors were asked to do was intra vires 	AFL and not apparently inappropriate for AFL to do (which is where the 	exercise of a tiny residual discretion lay) then the directors, were expected 	by the shareholders, and were contractually obliged to do as they were 	asked by or on behalf of the beneficial owners; 
(7)	In the present case, the corporate directors had been in place for only a few 	days when the Albermarle Fairoaks transaction completed; everything had 	been negotiated and finalised before they were even appointed.  They did 	not negotiate with the vendors; they did not negotiate the borrowing with 	RBS; 
(8)	It was an integral part of the pre-existing package that Legis was to 	implement that (a) Mr Egan would carry on with fundraising, (b) the 	Defendant Firm would be solicitors for AFL, (c) the Defendant Firm would 	receive the monies solicited by Mr Egan into its client account and (d) the 	Defendant Firm would immediately pay those monies to RBS towards the 	reduction of the RBS Equity Bridge;
(9)	Neither AFL’s corporate directors nor its legal shareholders had any real 	substantive, still less any independent, role in terms of decision-making: 	their role was to put in place what was required to ensure a proper record;
(10)	In short, the role of Legis and its appointee corporate directors and 	shareholders was, and was always intended to be, substantively ministerial 	and administrative, and they were to act at the behest and on the 	instructions of Mr Egan and/or the beneficial owner: the fund raising, and 	Mr Egan’s authority on AFL’s behalf to solicit funds, make arrangements 	for its receipt and direct its application were inherent aspects of the purpose 	for which AFL was acquired and were taken as read.
600.	The Claimants do not substantially dispute that it was always expected that Mr Egan would be the individual responsible both for soliciting funds and, after taking advice, determining the best structure whereby to translate the Albermarle investment scheme for use in the context of Albermarle Fairoaks; nor that it was intended that the funds raised would be used to repay first (though investors were not made aware of the instalment repayment dates) the RBS Equity Bridge of £7 million and then the loan made by Erinaceous. 
601.	However, further or in the alternative to their case that it was never envisaged by them, or indeed by Legis or its appointees, that funds raised would be applied before a structure was in place that would afford them, upon payment, the right in return for the mixed loan and equity participation that was the hallmark of the Albermarle investment model, the Claimants contend that whilst fundraising and the application of funds at the direction of Mr Egan might have been expected, the borrowing and receipt of funds was never validly authorised by AFL’s directors in the manner required by AFL’s Articles of Association. 
602.	In this regard, they contend that it is not good enough to resort to characterisation of AFL as merely “a creature” of Messrs Egan and Lawson, and to the Legis corporate directors as ciphers and little more than “titular directors”, simply there to provide “the formal structure and no more.  The idea that they were “decision makers” is…far-fetched”. 
603.	They submit, further, that even if that was so, only the board of directors can validly bind the company; and the fact, even if proved, that they would take dictation does not attenuate the requirement for formal process.
604.	I accept the Claimants’ submissions. In my judgment, the attempt on the part of the Defendant Firm to conjure actual or implied authority from the depiction of AFL as a creature, and its directors as ciphers, is misconceived, and their resort to cases such as Re Hydrodan [1994] BCC 161 and Thames Valley Housing v Elegant (Guernsey) Ltd & Ors [2011] EWHC 1288 (Ch) is misplaced.
605.	Those cases, in my view, concern a very different question: the liability of persons who actually directed the affairs of a company, but were not in name or legal nicety de jure directors of it.  But that is not, in my view, the question in this case.  I do not consider that there is anything in those cases that bears on the question here which is whether what was done can be treated as valid and binding on AFL notwithstanding that it was never approved by any person or body which had lawful power to bind it.
606.	I have concluded that neither the pre-packaged nature of the arrangements (which is in any event a broad but inaccurate depiction), nor the fact that AFL’s de jure directors were providing an offshore corporate service business and would no doubt have been amenable to instruction, alters the fact that a company may only be legally bound by its proper organs as stipulated by its constitution, except possibly where all its corporators (being more than one) are agreed and there is some outward expression and record of their informed agreement thereby to bind the company.  
Engagement Letter as alleged source of authority
607.	As to the Engagement Letter, which was purportedly signed on behalf of AFL (under its then name, Shelco Twenty Two Limited) by Mr Cummings as the beneficial owner of its shares, the Defendant Firm’s case is that thereby it agreed and was authorised (a) to receive monies from investors upon the basis of those monies being remitted either by way of loan to AFL or as an investment in whatever the structure put in place for the project (as to the form of which it was agreed Mr Egan would be taking his own advice, initially from Mr Berman) and (b) immediately to utilise the monies so remitted to repay monies owed by AFL to RBS.
Had Mr Cummings authority to bind AFL to the Engagement Letter?
608.	The dispute between the parties in this context is not the terms of the Engagement Letter (as to which see paragraph 133 above) but as to whether Mr Cummings, when he signed it, had authority to bind AFL to its terms as its beneficial owner.
When did he become beneficial owner of the shares in AFL? 
609.	It is common ground or at least not disputed that 
(1)	Mr Cummings, by whom it was signed purportedly for AFL, was not (and 	never became) a director or a shareholder of AFL: if he had authority it was 	only as beneficial owner of AFL;
(2)	Although he became a ‘placeholder’ as a temporary measure until the 	investors took control of AFL (as Mrs Bellis and Mr Cummings both 	agreed in cross-examination), he did not discuss at any length, if at all, the 	terms of the Engagement Letter, the purpose of which really was to ensure 	the Defendant Firm’s valid appointment;
(3)	He was asked to sign the Engagement Letter by Mr Pearson of Erinaceous, 	and not by Mr Egan or the investors (who were and remained oblivious of 	both the Engagement Letter and its terms);
(4)	At the time of his signature, there were no directors in place, and the 	requisite declaration of trust by the legal owners was not made by them 	(being Legis’ nominee shareholders) until 19 July 2007 (some 6 days after 	the date of the Engagement Letter);
(5)	That declaration was made, and could only be made, following final 	approval for a change in beneficial ownership being granted by the 	Guernsey HM Procureur on 17 July 2007;
(6)	As Mrs Bellis confirmed under cross-examination the de jure Directors 	never saw the Engagement Letter: Mrs Bellis said that “to be quite honest, 	[I] forgot about it…”; and 
(7)	Although Ms Cummings (at Erinaceous) and Ms Wyatt (at Ozannes) were 	the persons primarily engaged in securing the change in beneficial 	ownership, it is clear that Mrs Bellis was well aware when Mr Cummings 	signed the Engagement Letter  that the change of beneficial ownership had 	not yet finally been approved by the Guernsey authorities;
(8)	Helen Wyatt expressly notified Mrs Bellis by email on 13 July 2007 (in the 	afternoon) that “We cannot use the company for this transaction until 	consent to the change of beneficial ownership is received but as the 	application and consent request have been submitted today we do not 	foresee any difficulty in transacting on Wednesday 18 July.” 
(9)	In the event, the Guernsey authorities dealt with the matter expeditiously: 	provisional consent (subject to there being no objection by the Law 	Officers) was given late on 13 July 2007. However, there then appears to 	have been some further deliberation by the authorities into concerns 	whether Erinaceous had been mixed up in some fraud and Helen Wyatt was 	asked by the Guernsey authorities not to pass on the provisional consent 	until expressly advised.  HM Procureur in Guernsey eventually provided a 	certificate of no objection on 17 July 2007.
610.	What is disputed is whether even before the declaration of trust, Mr Cummings had already become beneficial owner.  The Defendant Firm contends that the critical sequence was as follows: 
(1)	On 13 July 2007 Mr Harwood (a Partner at Ozannes) completed/signed a 	“Notification of Change of Beneficial Ownership” (“the Notification”) in 	respect of the shares in Shelco Twenty Two Limited.  
(2)	Mr Harwood made a declaration that the particulars in that Notification 	were “true and correct to the best of my knowledge and belief.”  The 	“particulars” included at paragraph (j) a cross-reference to the schedule 	overleaf containing “details of the registered and beneficial owners”.  The 	Schedule describes Mr Cummings as “Beneficial Owner.”  
(3)	Ms Wyatt’s evidence is that the Notification was, as its name suggests, a 	form which “notifies the authorities that nominee subscribers supplied by 	Ozannes would hold the two shares in the company, and Mr Cummings 	would be the beneficial owner”. 
(4)	Legis was told that Mr Cummings was to be the new beneficial owner on 	the morning of 13 July 2007 and a couple of hours later Ms Cummings sent 	through to Carol Rowe of Legis a Client Personal Details form signed by 	Mr Cummings.
(5)	Later that day Ms. Wyatt copied Ms Rowe in on the email to Ms Cummings 	which confirmed that Ozannes had submitted the Notification to the 	Guernsey authorities.
(6)	The Defendant Firm contends that it is therefore plain that on 13 July 2007 	Ozannes had instructed their nominee shareholders that henceforth they 	were to hold the shares as nominees for Mr Cummings.  
(7)	They make the further point that Legis had sent out their terms of business 	to Ms Cummings on 12 July 2007, and Mr Cummings had, in signing the 	Client Personal Details Form, accepted Legis’ terms of business, under 	which he was liable for their fees.  
(8)	Thereafter, on 19 July 2007 two declarations of trust were executed by the 	nominee shareholders in which they “acknowledge and declare” that they 	each held one share on trust absolutely for Mr Cummings. 
(9)	It is the Defendant Firm’s case that as a matter of their true construction, 	these instruments confirmed the pre-existing nomineeship/bare trust which 	had been in place since 13 July 2007.  
611.	There was no evidence of Guernsey law before me as to why the consent of the Guernsey authorities was needed, nor more particularly as to the role of “HM Procureur” in this exercise. Counsel for the Defendant Firm submitted that there is no equivalent under English law to which the Court can or should take cognisance. 
612.	As it seems to me, the question that arises in default of any evidence as to any special rule of Guernsey law is simply as to (a) the construction of the relevant declarations of trust and (b) the effect of the stipulation as to the necessity for the advance consent of the relevant Guernsey authorities, adopting ordinary principles of construction on the usual assumption that Guernsey law is the same as English law in that regard.  
613.	As to (a) and the construction of the declarations of trust, these read in operative and relevant part as follows:
“DECLARATION OF TRUST
WE, [FIRST][SECOND] OVERLAP LIMITED of etc.,
HEREBY ACKNOWLEDGE AND DECLARE that we hold One fully paid share of £1.00 each in the company called
SHELCO TWENTY TWO LIMITED
(hereinafter called “the Share”) registered in our name as nominee of and Trustee for
Mr Nicholas Richard Cummings of etc.,
(hereinafter called “the Owner”), that we are not under any duty to monitor, enhance or preserve the value of the said share and WE UNDERTAKE AND AGREE to retain the share certificate in safe custody and not to transfer deal with or dispose of the Share save as the Owner may from time to time direct, subject only to us receiving satisfactory due diligence in respect of any subsequent transferee or beneficial owner.
FURTHERMORE WE irrevocably assign to the Owner the right to receive any dividends which may be declared on the Share together with all profits or other monies which may be paid or payable to us from time to time upon the Share or in respect thereof, AND WE FURTHER AGREE AND UNDERTAKE to exercise our voting power as Holder of the Share in such manner and for such purposes as the Owner may from time to time direct or determine.
DATED etc.”
614.	I do not see anything in that wording sufficient to justify the conclusion that in equity beneficial entitlement had already passed to Mr Cummings. In so far as reliance is placed on the word “acknowledge” as connoting that, I think it is misplaced: it is too slender a reed to take that weight. In my judgment, the words support what I would take to be the ordinary presumption that such an instrument is intended to take effect from and after its date.
615.	As to (b) and the effect of the need for the consent of the Guernsey authorities, I agree with Counsel for the Defendant Firm that the absence of any Guernsey law advice makes it difficult, perhaps impossible, to assess whether the need for consent is in legal effect a condition precedent to the effectiveness of any declaration of trust.  But my decision on point (a) makes it unnecessary and inappropriate to take this further.
616.	In short, I consider that until the declarations took effect beneficial ownership and legal interest remained undivided, and thus Mr Cummings did not become beneficial owner until 19 July 2007 and cannot have had standing to bind AFL when he purported to sign the Engagement Letter as such.
617.	The interesting question that would otherwise have arisen as to the ability of a single beneficial owner of shares in a company to bind that company in that capacity does not, therefore, strictly arise. I shall address the question in this context only briefly, for comprehensiveness.
Can a sole beneficial owner of shares informally bind a company?
618.	The essence of the Defendant Firm’s case that such a beneficial owner of shares could bind the company is that Mr Cummings’ beneficial ownership “was tantamount to legal ownership – the nominee shareholders held on bare trust for him, and were contractually obliged to follow his instructions.”  
619.	Counsel relied in this context on the approval by Lord Hoffmann in Meridian Global Funds Management Asia Ltd v Securities Commission [1995]  2 AC 500 (PC) of the statement in Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd [1983] Ch 258 that 
“the unanimous decision of all the shareholders in a solvent company about anything which the company under its memorandum has power to do shall be the decision of the company.”
620.	In fact, that proposition is derived from the much older statement to like effect in the seminal company law case of Salomon v Salomon & Co Ltd [1897] AC 22. The “unanimous consent rule” is also often associated with Re Duomatic Limited  [1969] 2 Ch 365 and referred to as “the Duomatic principle”. 
621.	However, in my view, the proposition is to be applied with circumspection, and not so as to allow decisions to be made and binding upon a company without the knowledge of its directors or members and at the whim of persons of whom in theory at least the company has no notice (such as beneficial interests in shares). 
622.	In particular, in my judgment, although there may be circumstances where the consent of all beneficial holders of shares may be treated as binding (see Shahar v Tsetsekkos [2004] EWHC 2659 (Ch) at [67]) if objectively manifested (see Schofield v Schofield [2011] EWCA Civ 154, [2011] 2 BCLC 319), the Court should be slow to treat as binding on a company decisions made or acts done by the beneficial holders of shares in a company where (as here)
(1)	the decision is one within the general powers of management entrusted to 	the directors;
(2)	the directors are not aware of the decision;
(3)	there is nothing to suggest that the interests of the company have not been 	addressed;
(4)	the beneficial ownership of the shares is vested in a single person, whose 	decision-making process is not manifest (and see per Oliver J (as he then 	was) in Re New Cedos Engineering Co Ltd [1994] 1 BCLC 797 at 814, 	doubting that a company could be 
	“bound by the lonely soliloquies of the person who 	happened to be the sole survivor of the registered 	shareholders”.
(5)	The doubt is all the greater in the case of a single beneficial 		owner, who has no legal relationship with the corporate body 		at all.
623.	Accordingly, in this case, I would not have been disposed to treat as binding on AFL the signature of Mr Cummings on the Engagement Letter, even had I accepted that he was by then the beneficial owner of all its shares (which I have not).  
Consequences if no authority to borrow and/or receive monies
624.	Before addressing the alternative defence of subsequent ratification, I turn to consider what (subject to that alternative defence) the consequences are if, as I have concluded, AFL had not properly and validly authorised the borrowings or the receipt of monies from the Claimants into the Defendant Firm’s client account when the payments into that account were made.
625.	The Claimants accept that if the monies had been advanced by them directly to AFL, the fact (if established) that the borrowings were not authorised would not have prevented legal and equitable title passing to AFL, thus confining the Claimants to a claim in restitution (for total failure of consideration).  Assuming no escrow or any form of Quistclose trust, the payments would be characterised as out-and-out payments, with nothing to qualify the intention to pass ownership: see Westdeutsche, and also Re Goldcorp Exchange Limited (in receivership) [1995] 1 AC 74.
626.	However, as in the context of their case on a form of Quistclose trust, the Claimants contend that what makes the difference, and compels a different conclusion, in this case is the interposition of the Defendant Firm and the unauthorised receipt of the moneys, not into an account of AFL’s, but into the client account of the Defendant Firm, which is necessarily a trust account, with legal ownership and beneficial ownership being divided. 
627.	Put another way, and quoting the Claimants’ Closing Submissions, the problem for the Defendant Firm is that if it did not have authority to receive money for AFL, the beneficial title did not vest in AFL, but cannot have been intended to vest in the Defendant Firm, and therefore must have remained in the Claimants (as the only remaining candidates, given that “the equitable, or beneficial interest, cannot remain in the air…” (per Lord Wilberforce in Vandervell v IRC [1967] 2 AC 291 (HL) at 1412)) . 
628.	The trust asserted arises, not by reference to the intention of the payer, but in a sense the lack of intention: it being clear both that equitable title was not meant to pass to the transferee, and that it cannot go where it was meant to go, it remains with the transferor. 
629.	Mr Croxford roundly rejected this analysis.  He characterised the notion of an automatic bare resulting trust arising upon the failure of a transaction as “legally illiterate”. He said it was conspicuously unsupported by any authority. He submitted that the question was always as to the intention of the transferor, whether express or implied, to retain title.  He analysed Westdeutsche, In re Goldcorp and the two cases of  Vandervell v IRC [1967] 2 AC 291 and In re Vandervell’s Trusts (No. 2) [1974] 1 Ch 269 as demonstrating that the intention, actual, inferred or presumed in every case was the touchstone.
630.	Notwithstanding Mr Croxford’s forceful advocacy, and mindful of the spectre of illiteracy, I have concluded that the Claimants’ analysis is, in the peculiar circumstances of this case, correct, and that the analysis is supported by authority. 
631.	In Vandervell v IRC, the transferor/would-be settlor procured the transfer of  shares to which he was beneficially entitled to the Royal College of Surgeons (“the RCS”), on condition that the RCS then granted an option over them to his trustees.  He did so, not because he wanted to recover the shares himself but rather in order that, after he had used the shares as a vehicle to make a gift to the RCS, his trustees would then get them back and hold them for his children.  He had no intention or wish to retain for himself any equitable ownership in the shares: on the contrary, retaining any equitable interests in the shares had extremely adverse tax consequences.  Unfortunately for him, the beneficial interests he was creating in the option were not stated with sufficient precision, and the trusts failed.  It was held that the equitable interest in the shares was held on resulting trust for him, though that was the last thing he intended; and he was charged to tax accordingly.
632.	In his speech in the House of Lords, Lord Upjohn explained how the resulting trust arose in this way (at 313E to 314B):
“If A intends to give away all his beneficial interest in a piece of property and thinks he has done so but, by some mistake or accident or failure to comply with the requirements of the law, he has failed to do so, either wholly or partially, there will, by operation of law, be a resulting trust to him of the beneficial interest of which he had failed effectually to dispose. If the beneficial interest was in A and he fails to give it away effectively to another or others or on charitable trusts it must remain in him. Early references to Equity, like Nature, abhorring a vacuum, are delightful but unnecessary.  Let me give an example close to this case.
A the beneficial owner informs his trustees that he wants forthwith to get rid of his interest in the property and instructs [them] to hold the property forthwith upon such trusts as he will hereafter direct; that beneficial interest, notwithstanding the expressed intention and belief of A that he has thereby parted with his whole beneficial interest in the property, will inevitably remain in him for he has not given the property away effectively to or for the benefit of others.  As Plowman J said ([1966] Ch 261, 266): “As I see it, a man does not cease to own property simply by saying ‘I don’t want it.’ If he tries to give it away the question must always be, has he succeeded in doing so or not?”
633.	Now, of course, the present case is not a case of gift; nor is it one where there is a pre-existing equitable interest in specific property. However, as it seems to me, the like principles apply, since the payment was not intended for the recipient and the recipient had no authority to receive it for anyone else. The money, like the wrongly addressed letter, must be returned to sender, address (as it were) unknown.
634.	I should stress that this is an unusual case.  As the Claimants accepted, as indicated above, failure of consideration would not lead to the transferor retaining its equitable interest; it is doubtful whether mistake would either; and property may pass even in a transaction induced by fraud.  It is the combination of the receipt into a trust account of borrowed monies where the borrower had not authorised the borrowing or such receipt, that, in my judgment, makes the case exceptional.
Alternative contention: ratification
635.	The third factual foundation of the Defendant Firm’s case that Mr Egan and the Defendant Firm must be taken to have been duly authorised (respectively) to fund raise and receive funds on behalf of AFL depends on events later (some considerably later) in the chronological sequence: the Defendant Firm relies on those subsequent events as amounting to effective express or implied ratification of authority.
636.	There are, as I see it, three strands to the Defendant Firm’s case in this regard; and it may help to separate these out.  
637.	One strand is the contention that Mr Dickinson, in effect, adopted the raising and receipt of funds, albeit after the event. A second strand is that AFL was procured to ratify both, after Mr Cummings, Ms Cummings and Mrs Bellis obtained control of it and removed Legis and its appointees.  A third strand is that the Claimants (or at least some of them), having elected to pursue remedies as creditors by seeking an administration order in respect of AFL on that basis, must now be treated to have accepted that the loans are to be treated as valid, their alleged status as creditors being inconsistent with any claim under a trust.
638.	The essentials of the first strand of the Defendant Firm’s case (based on Mr Dickinson’s adoption of the borrowing and receipt and payment out of funds remitted to the client account) can be summarised as follows:
(1)	Mr Dickinson was aware from an email to him from Mrs Bellis dated 20 September 2007 that fund raising by way of loans to AFL had started: Mrs Bellis’ email to him of that date (which was circulated also to Ms Cummings) so informed him, notified him that “lenders would like some documentation evidencing their loans” and attached (among other documents) an “instrument so that the company permits directors of [ECS] (who are administering the fund raising) to sign each loan note so that they can be issued quickly without having to go over to you….It would be helpful if you could let me have some relevant board minutes plus executed documents as soon as you have been able to consider the paperwork attached.”
(2)	He raised no objection, and on 25 September 2007, Mr Dickinson wrote to the Guernsey Financial Service Commission inviting them to consider granting “permission under the Control of Borrowing Ordinances [“COBO”] for consent to raise up to £25,000,000 by way of unsecured loan notes…”;
(3)	Even when on 11 December 2007, and having been informed by Mr Egan that “you have transferred funds you have received from potential unit/loan holders to the Company’s loan account at the bank”, Mr Dickinson by email to Mrs Bellis required her not to make any payments to any of AFL’s accounts and asked for details in respect of all amounts already sent, he did not suggest that the raising of funds had not been authorised. 
639.	In my judgment, this argument also is misconceived. Again, the question is whether thereby AFL is bound in law: and again the answer is in its constitutional arrangements.  Even if Mr Dickinson did go along with the fundraising, that would not bind AFL.  As it is, and as the Claimants pointed out, there is no evidence that Mr Dickinson ever appreciated or proceeded on the basis of the loans being on agreed terms such that AFL became entitled to the monies as its own. In my judgment, the first strand of the Defendant Firm’s case on ratification fails.
640.	The second strand of the Defendant Firm’s case on ratification is woven from later events and, in particular, the actions of Mr Cummings and Ms Cummings after they took control of AFL in June 2009. 
641.	No specific act of ratification is relied upon; it is submitted that ratification should be implied from 
(1)	the fact that, after her appointment as a director of AFL Ms Cummings made and signed a witness statement, purportedly on behalf of and with the authority of AFL, dated 5 October 2009, and in opposition to an application by some of the Claimants for an administration order in respect of AFL in which she recounted in detail the “fund-raising process undertaken by Mr Egan, the advances made by the Claimants and the payments made out of the client account to the RBS”; and 
(2) 	the signature by Ms Cummings, as a director of AFL, of the Statement for Affairs for its administration, in which she referred to the Claimants as “creditors of AFL” and/or “investors” or “AFL’s investors”;
(3)		the Claimants’ own evidence that they submitted proofs in the administration as creditors, which the Administrators accepted as such; and
(4)	Mrs Bellis’ own evidence that she was authorised to pay money by Ms Cummings and Mr Cummings acting as directors of AFL (including payment to her own firm of fees out of monies held in client account).  
642.	The Claimants contend that none of these facts and matters evidences ratification. They make the following points (which in substance I quote from their Closing Submissions):
(1)	AFL (through its directors) had already (in 2008) sought to persuade RBS 	to pay the money back to the Claimants. 
(2)	The alleged ratifier was a director in June 2009, but it is the Board which 	has the power to borrow and authorise receipt of money, and therefore to 	ratify the same: there was no board resolution (as would be expected) or 	delegation of authority and therefore Ms Cummings’ actions alone would 	have been insufficient to ratify. 
(3)	In any case, the relevant paragraphs of Ms Cummings’ witness statement, 	provided in opposition to the administration application and said to amount 	to the ratification, do not provide any clear adoption of the loans or 	payments on behalf of AFL. Those paragraphs refer 	several times to Mr 	Egan raising funds on the basis of loan notes being 	issued. They also refer 	to the fact of Mr Egan confirming that the money should be paid out. 	However, this does not necessarily mean (and, on his own evidence, did not 	mean to Mr Egan) that funds were 	to be on loan or that AFL adopted the 	payments. The loan note document is not the same as there being a loan and 	Ms Cummings does not refer to the loan or adopt an obligation to the 	investors on behalf of AFL.
(4)	A clear ratification would be required; this was never done. The Defendant 	Firm seems to accept this: its plea in the Part 18 Response 49 is not that 	these paragraphs in Ms Cummings’ statement were themselves ratification 	but that they are “evidence that the directors had, by that stage, ratified the 	making of the three payments”.
(5)	Notably, the Defendant Firm did not call any direct evidence from Ms 	Cummings to support the allegation, and no notice or explanation was given 	to enable the administration proceedings witness statement to be relied 	upon as a hearsay statement.
(6)	In any event, the alleged ratification comes too late. If the resulting trust 	arose in favour of the Claimants with the Defendant Firm as trustee, as the 	Claimants contend, and was then breached, a ratification of the void ‘loan’ 	over two years later cannot somehow erase the trust and breach of trust. 	Ratification can bind a company to a contract it was not bound to, but not 	erase other legal consequences.
(7)	As Bowstead and Reynolds observes, as approved in a slightly earlier form 	by the Court of Appeal in The Borvigilant [2003] EWCA Civ 935 per 	Clarke LJ at paragraphs 59 to 90:
		“Ratification is not effective where to permit it would 		unfairly prejudice a third party, and in particular—
		(6)	ratification may not be recognised if it will affect				proprietary rights in either real or personal 				property…which have arisen in favour of the 				third party or others claiming through him since 				the act of the unauthorised agent;
		(7)	the ratification of a contract can only be relied on 			by the principal if effected within a time after the 				act ratified was done which is reasonable in all 				the circumstances.”
(8)	Here, the prejudice to the Claimants is clear: the Claimants have an 	equitable property right which (on the Defendant Firm’s case) would be 	lost, the Claimants have other legal claims which (on the Defendant Firm’s 	case) would become barred; so the supposed ratification came too late.
643.	I accept the Claimants’ submissions: even taking into account Ms Cummings’ witness statement in other proceedings as if it were admissible, none of the factors relied on by the Defendant Firm constitute clear ratification. 
644.	In any event, if (as I consider to be the case) the borrowings and receipt of the Claimants’ monies were not initially authorised, I do not consider that ex post facto ratification after the Claimants had sought to recover the monies could in law or equity remove from the Claimants and vest in AFL the entitlement to payment out of the Defendant Firm’s client account.
645.	In that connection, my conclusion earlier that the Claimants never intended to make an immediate loan to AFL without a matched entitlement to equity participation means that the Defendant Firm’s contention that if the Claimants intended a loan it is neither unfair nor inequitable to hold the Claimants to the loan which they intended to make by a process of subsequent ratification falls away. 
646.	The third strand relied on, in effect that the Claimants (or some of them) ratified or adopted the characterisation of their payments into the Defendant Firm’s client account and their own status as loan creditors by seeking an administration order over AFL in that capacity, likewise fails: in my judgment, the act of some of the Claimants in seeking to protect their interests in that way would not be sufficient to deprive them of the right to repayment under a resulting trust or (subject to what follows) compensation for its breach.
The need to establish “conscious awareness”
647.	The Defendant Firm correctly draw a distinction, in the context of this alternative way in which the Claimants put their case (as in the context of their primary case), between a case where a fund said to be held on resulting trust still exists (where the determination that the trust does exist is sufficient to establish in turn the trustee’s obligation to return the fund) and a case where (as here) the trustee has disposed of the fund.
648.	However, for the reasons previously stated, I consider that Mrs Bellis and the Defendant Firm were under fiduciary obligations and/or had the requisite “conscious awareness” that they could not be certain as to the basis on which the funds were held; and that is sufficient to make good for the Claimants their claim that the payments out of the client account were breaches of trust for which the Defendant Firm should be held liable.  
649.	Put shortly, the Defendant Firm plainly became a trustee of the funds remitted to its client account: and no duty of a trustee is plainer than that of establishing, before dealing with the monies or property subject to the trust, the terms of the trust and the identity of its beneficiaries (both present and prospective).
650.	I would also rely in this context on the facts and matters referred to in paragraphs 579 and 580 above.
651.	Accordingly, in my judgment, the Claimants’ alternative case is also well-founded.
FURTHER ALTERNATIVE CLAIM IN RESTITUTION
652.	At least by the standards of this rather expansive judgment, I shall deal more briefly with the Claimants’ alternative case in restitution for unjust enrichment, which on the view I have taken of the case it is not necessary for them to establish.
653.	As adumbrated in paragraph 29 above, that alternative case is put on two bases: (1) the Mistake Claim; and (2) the Failure of Consideration Claim. On the views I have taken in respect of the Claimants’ primary claims, neither in the event arises. 
654.	As to (1) and the Mistake Claim, although I have rejected the Claimants’ contractual claim (that there was established a binding contract of escrow), I have upheld their claims that the monies they remitted to the Defendant Firm’s client account remained theirs beneficially under a form of Quistclose or resulting trust. In such circumstances, there seems to me to be neither room nor justification for a restitutionary claim: there was no unjust enrichment of either of the Defendants.
655.	As to (2) and the Failure of Consideration Claim, again my conclusion, that the monies which the Claimants remitted to the Defendant Firm’s client account remained theirs in equity under a form of resulting trust, makes unnecessary and unavailable any alternative basis of claim such as this.  
656.	The question whether a claim for restitution on grounds of the unjust enrichment of the Defendant Firm thus arises only if I am wrong in my principal conclusions.
657.	Furthermore, the Claimants accept that they would have no claim in restitution (whether on grounds of mistake or total failure of consideration) if there was a binding loan made by them to AFL: their claim is premised on there being “no loan and no authority to receive money for AFL.” 
658.	The Claimants contend that on the premise above described the Defendant Firm was unjustly enriched, and a restitutionary claim based on either ground lies, if and to the extent that the monies paid into its client account were not held by it on trust either for the Claimants or for AFL: in such circumstances, its receipt was not ministerial.  
659.	The Claimants deny the availability of any defence on ground of change of position, since in paying the monies in its client account to RBS the Defendant Firm “had all the warning lights flashing but ignored them and paid the money away.” 
660.	The Defendant Firm rejects any such claim.  On its behalf it is contended that (a) there was no “mistake” only (at most) a “misprediction”; (b) the receipt of monies was subsequently ratified on AFL’s behalf; (c) the Claimants cannot rely on total failure of consideration in light of their claims as creditors to seek an administration of AFL; and (d) the defence of change of position is available to it since it applied the monies it received on what in good faith it considered to be the instructions, and in the interests, of its client AFL. 
661.	As to (a), the authority relied on for the Defendant Firm is Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193 (PC). In that case, the Privy Council rejected a claim based on restitution based on a mistake as to the nature of a transaction on the following basis:
“28. Their Lordships turn to Dextra's claim to recover its money as having been paid to the BOJ under a mistake of fact. To succeed in an action to recover money on that ground, the plaintiff has to identify a payment by him to the defendant, a specific fact as to which the plaintiff was mistaken in making the payment, and a causal relationship between that mistake of fact and the payment of the money: see Barclays Bank Ltd. v W J Simms, Son and Cooke (Southern) Ltd. [1980] 1 QB 677, 694. In the opinion of their Lordships, there are difficulties with regard to the second and third of these elements in the present case.
29. Their Lordships turn then to the second element, viz. that Dextra must have paid the money to the BOJ under a mistake of fact. It is the contention of Dextra that the money was paid under a mistake, in that Dextra had intended to make a loan. The difficulty with this proposition is that this does not appear to have been a mistake as to a specific fact, like for example a mistake as to the identity of the defendant, but rather a misprediction as to the nature of the transaction which would come into existence when the Dextra cheque was delivered to the BOJ, which is a very different matter: see Birks, Introduction to the Law of Restitution, pp. 147–8. In that passage, Professor Birks explains the rationale of this distinction in terms relevant to the present case, as follows: 
	‘The reason is that restitution for mistake rests on the fact 	that the plaintiff's judgment was vitiated in the matter of 	the transfer of wealth to the defendant. A mistake as to the 	future, a misprediction, does not show that the plaintiff's 	judgment was vitiated, only that as things turned out it was 	incorrectly exercised. A prediction is an exercise of 	judgment. To act on the basis of a prediction is to accept 	the risk of disappointment. If you then complain of having 	been mistaken you are merely asking to be relieved of a 	risk knowingly run …
	The safe course for one who does not want to bear the risk 	of disappointment which is inherent in predictions is to 	communicate with the recipient of the benefit in advance of 	finally committing it to him. He can then qualify his intent 	to give by imposing conditions, or sometimes by making a 	trust …’
 Here, unfortunately, Dextra failed to communicate directly with the BOJ to make sure that the BOJ understood that the money was being offered as a loan. Instead, it left the communication of this vital matter to its agent, Phillips. Dextra's misplaced reliance on Phillips led it to assume that a loan would result; and this prediction proved to be mistaken. But a misprediction does not, in their Lordships' opinion, provide the basis for a claim to recover money as having been paid under a mistake of fact.” 
662.	I am not myself persuaded that the true characterisation in this case of the causative reason for the payment by the Claimants into the Defendant Firm’s client account is a misprediction as to the true effect of that payment, rather than a mistake (the distinction drawn by Professor Birks, and to some extent reflected in Dextra, being between a mistake as to the present and a mistake as to the future (which was labelled a misprediction). In Dextra, the claimant (Dextra) drew a cheque on its bankers in favour of the defendant (Bank of Jamaica).  It did so on the assumption that a secured loan agreement would be concluded between them: but none ever was. As is apparent from the passage of its advice quoted above, the Privy Council held that the payment was not paid under a mistake of fact as to the present but on the basis of a misprediction as to the future (that a loan agreement would be entered into). In the present case, it is a nice point, as it seems to me, whether the operative mistake was as to the present effect of paying into the Defendant Firm’s client account or as to the future consummation of the transaction they all intended. As it seems to me both were operative; and that in such circumstances a claim for restitution on grounds of mistake should be available (subject of course, to the various defences, if available). But even if that is incorrect, and no claim lies for mistake, that does not address the alternative way the Claimants put their case (total failure of consideration).
663.	I have already addressed and rejected both (b) and (c) in paragraph 660 above:   see paragraphs 635 to 645 above as to the suggestion of ratification (which I there reject) and paragraphs 646 (as to the effect of asserting status as creditors in seeking an administration order in respect of AFL, which I have held not to preclude a claim). I would conclude, if the matter required decision (which, as explained, on the view of the matter I have taken, it does not), that the reasoning of the House of Lords in Westdeutsche in overruling Sinclair v Brougham [1914] AC 398 applies so that the alternative claim based on failure of consideration, and advanced on the premise that the borrowing was unauthorised by AFL, should succeed, subject to any other equitable defences, and in particular, any change of position on which the Defendant Firm may rely. 
664.	In that regard, and as to (d) in paragraph 660 above, I consider that my conclusion that Mrs Bellis made the payments without any sufficient certainty either as to the basis on payments had been made by the Claimants into her firm’s client account or as to her firm’s authority to receive such payments precludes realistic reliance on the defence asserted of bona fide change of position. 
665.	To borrow the language of Moore-Bick J (as he then was) in Niru Battery Manufacturing Co v Milestone Trading Ltd [2002] EWHC 1425 (Comm), affirmed [2003] EWCA Civ 1446, absence of good faith “is capable of embracing a failure to act in a commercially acceptable way…”; and see also Knox J’s formulation of “commercially unacceptable conduct in the particular context involved” in Cowan de Groot Properties Ltd v Eagle Trust Plc [1992] 4 All ErR700, 761 (quoted by Moore-Bick J in Niru at paragraph 128).
666.	Accordingly, I would have been disposed to find in favour of the alternative claim in restitution: but in light of my primary conclusions I consider that I need make no final determination.
Section 61 Trustee Act 1925 and any equitable defences
667.	The Defendant Firm’s last cri de coeur is that if, contrary to all its submissions, the court finds that it is otherwise liable (as I do), it should not be required to make compensation and should be excused on grounds that Mrs Bellis acted honestly and reasonably for the benefit of her firm’s client, AFL, and should be relieved from liability under section 61 of the Trustee Act 1925. 
668.	I do not consider, on the basis of my findings, that any resort to section 61 of the Trustee Act 1925 is available. 
669.	It is well established that the section is to be narrowly construed and restrictively applied (see Re Alsopp [1914] I Ch 1 in the context of a predecessor section) and that all three circumstances specified in the section must co-exist and persuade the court in the exercise of its discretion that relief is appropriate.
670.	The three statutorily specified circumstances are that the trustee must have acted (1) honestly and (2) reasonably such that he ought fairly (that is to say, in fairness to himself and other persons who may be detrimentally affected) to be excused. I do not consider that Mrs Bellis acted reasonably; and in my judgment, her conduct fell short of the high standards expected of her position: put another way, and again echoing the words of Moore-Bick J in Neru (see above), she failed to act in a commercially acceptable way. 
671.	I would not, in any event, consider it appropriate in all the circumstances to exercise my discretion in her firm’s favour and thereby deprive the Claimants of proper recourse and remedy for the payment out of the monies they had entrusted to her.
672.	Other equitable defences were floated, without any real elaboration: acquiescence, laches, and the general equitable maxim that he who comes to equity must come with clean hands, and equity follows the law.  I shall be as short in answer as was their presentation: in the circumstances I do not accept that any resort to these defences avails the Defendant Firm.
REMEDIES/LOSSES 
673.	The trust funds no longer being available, the Claimants seek equitable compensation for breach of trust.  
674.	They sought, in the alternative, damages for breach of contract; but since I have not accepted their case in contract, that does not arise.  
675.	The measure they submit to be appropriate is the money that the Defendant Firm would have been obliged to return to the Claimants if the funds had not been paid away, together with costs incurred to date, including costs of some £94,715 in pursuing the administration application.
676.	To this the Defendant Firm has erected a variety of arguments in support of its contention that the payments out did not cause the Claimants any recoverable loss. These include the following:
(1)		If Mrs Bellis had sought “formal” authority from the Claimants, her first 	port of call would have been to ask Mr Egan.  He would probably have 	obtained that formal authority: the Claimants would probably have done 	exactly as he asked them to because they trusted him, and because they 	were clearly each inclined to embark upon an investment which 	(objectively at least) involved a loan and in which the prospect of an 	“equity” investment being available in the medium term was contemplated 	by all involved;
(2)		If Mrs Bellis had realised that formalities might be gone through and had 	sought formal authority from Guernsey, for example, by the Engagement 	Letter being sent to Legis back in July or subsequently following up to 	ensure that Legis approved of such terms, the corporate directors would in 	all probability have given it.  Mr Cummings could have instructed the 	nominee shareholders to ensure it was agreed, and if the directors refused, 	they would have been replaced.  Some arrangement would have been 	concluded so as to enable the Defendant Firm and Mr Egan to fulfil the 	roles which they were always expected and understood to occupy.
(3)		If formal authority had been obtained exactly the same course of events 	would have followed.
(4)		If the Claimants had been given loan notes and/or shares that in itself would 	not have avoided loss – indeed the loss was precipitated by the Claimants’ 	decision to bring the Administration Application.  
(5)		The effective cause of the Claimants not getting “value” was:
(a)	their own decision not to take loan notes and shares, alternatively 

(b)	the fault of Legis (Mr Dickinson) who refused to do anything until he got paid.
(6)		Mr Egan was the party who in fact caused the breach of trust by leading 	Mrs Bellis to believe that the Claimants were content for their money to be 	paid to RBS.
677.	I am not ultimately persuaded by any of these arguments.
678.	As to (1), I have accepted the witness evidence on behalf of the Claimants that they would never have lent money without the unqualified and clear right to a combined loan and equity participation. I do not accept that any of them would have made 5-year term, unsecured, subordinated loans at an interest rate of 1% over base rate without the practical certainty that the transaction would achieve the level of support to proceed as planned and that they would at all material times have control of the investment vehicle through equity participation in it.   
679.	I have also accepted the Claimants’ basic argument that the explicit requirement of all investors to pay into the Defendant Firm’s client account, rather than to AFL (which Mrs Bellis accepted she knew from at least 18 July 2007 had its own bank account at RBS with Guernsey administrators as the only authorised signatories), is realistically only explicable on the basis that such monies were to be segregated from AFL (by not being held in its account) and would not immediately belong to AFL but be held as client monies pending some further event or instruction. The fact that Mrs Bellis, who did her own book-keeping, chose to credit such monies to a client ledger with the rubric “Albemarle Fairoaks Limited – Fairoaks Airport” does not, in my judgment, indicate anything more than that the monies had been sent in relation to that transaction, and in any case cannot upset the objective intention, as I have found it to have been, that the monies should not immediately be available or belong to AFL itself.  
680.	I should add that I accept the Defendant Firm’s contention that all the witnesses for the Claimants agreed that they anticipated and accepted that the monies they subscribed could be used before they had received formal documentation: Counsel for the Defendant Firm labelled this the ‘decoupling’ of the issue of the documents from the use of investors’ money. However, what is really important in this context is not what the investors’ expectations were as regards formal documentation but what they regarded as the substantive nature of the investment that such documentation was to record.  
681.	As to that, none of them accepted or expected that their money could be used unless and until the investment vehicle was established, the transaction was sure to proceed and there was no substantive impediment to the issue of formal documentation to evidence a matched loan and equity investment, so that all that remained to be done was simply a formal or ministerial act of delivery of such documentation “in due course”. 
682.	I do not think there is any basis or justification for re-writing history in the manner contemplated in (2) and (3) above. The fact is that authority was not obtained, and it is not useful to speculate whether it would have been. The Defendant Firm must, in my view, succeed or fail on the basis of what in fact it did, rather than on the basis of what it might have done.
683.	Further, even if the Engagement Letter (the document on which the Defendant Firm places most reliance as establishing its authorisation to receive moneys from investors) had been formally approved by Legis and AFL, I do not accept that this would have authorised or justified the receipt of funds into the Defendant Firm’s bank account on behalf of (and treated as belonging to) AFL unless and until the Defendant Firm could be certain (which I have held it cannot have been) of the basis on which such monies had been paid, and  the terms on which payment was made was certain and had been formally authorised and offered by AFL, and accepted by the payers. Even the Engagement Letter expressly envisages that a “structure is to be put in place for the project” so that it is clear whether investor monies are remitted by way of loan or as an investment.
684.	Moreover, as events unfolded in September 2007, and concerns about the financial position and prospects of Erinaceous grew, any assumption on the part of Mrs Bellis that she could safely receive and pay out monies without knowing the terms on which they had been paid became even more unjustifiable. I appreciate that most of the monies had by then been paid out to RBS; but at least £230,000 came in after 28 September 2007 which Mrs Bellis cannot reasonably have thought she was entitled to receive for payment to AFL in the knowledge that no settled structure was in place and without establishing the true nature of the payment into her firm’s client account. 
685.	I note in that regard that in an e-mail dated 11 October 2007 which he circulated to Mrs Bellis and was in effect in reply to her email to him of 10 October 2007 (in which she made clear no structure was yet in place for the investment vehicle), Mr Pearson of Erinaceous identified the need for agreement of a structure for the investors as “a key issue to resolve ASAP as without solving this the barrier to receipt of property fund loans remains”. In this he expressed what must have been obvious to Mrs Bellis all along.
686.	More generally, I do not consider that the speculation (on which the Defendant Firm’s submissions in this context are based) as to what might have been in different circumstances than in fact obtained is helpful or permissible. But if speculation were appropriate, in my judgment, the likelihood is that if the formalities had properly been observed, the barrier expressly acknowledged by Mr Pearson would have prevented money being paid into the Defendant Firm’s client account being treated as belonging to AFL for so long as the structure and terms of payment in remained uncertain.
687.	In other words, if Mrs Bellis and her firm had complied with their obligations they would not have obtained authority to treat as belonging to AFL and pay out to RBS the monies paid into the client account by the Claimants. 
688.	I do not accept, therefore, the Defendant Firm’s submission that “If formal authority had been obtained exactly the same course of events would have followed.”
689.	As to (4) in paragraph 676 above and the application made by some of the Claimants for an administration order (which eventually caused RBS itself to exercise its powers to appoint an administrator) it was, as it seems to me, open to each of the Claimants, at any stage until subscription of equity, to decline to proceed further and demand repayment of their monies and take any steps (including applying for administration) to protect those monies or secure repayment. I do not accept that the application for an administration order was what caused the loss. What caused the loss was the payment of their monies to RBS without authority and in breach of trust.
690.	Further, it seems to me that the application made is entirely understandable given the risks and uncertainties made clear by the unilateral conduct of Ms Cummings and Mr Cummings in using the latter’s position as a placeman to wrest control of AFL away from Legis to themselves, and using that control to insulate themselves from documentary disclosure and to pay the Defendant Firm its charges.
691.	As to (5) in paragraph 676 above, I accept, of course, that the measure of equitable compensation for breach of trust has to be assessed as at the date of judgment and not at an earlier date, and that in some cases the facts known at trial may lead to the conclusion that no loss has in fact been suffered (see per Lord Browne-Wilkinson in Target Holdings Ltd. v Redferns [1996] 1 AC 421 at 437H and 437E). But I do not see that later events have reduced, still less eradicated, the loss in this case. In my judgment, the Claimants were justified in concluding that, in the circumstances I have described, the prospect of obtaining “value” was uncertain and probably illusory; and that the Claimants were entitled to elect to seek to recover in full the sums that were supposed to have been held on trust for them.
692.	As to (6) in paragraph 676 above, I address later (especially in the context of the Defendant Firm’s Part 20 claim against him) whether Mr Egan was the party who in fact caused the breach of trust; for the present suffice it to say that I do not consider his role to be such as to reduce the liability of the Defendant Firm to the Claimants.
CLAIMANTS’ CLAIM AGAINST MR EGAN
693.	It was made clear in their Closing Submissions that the Claimants’ claim against Mr Egan is an alternative claim advanced only if and in case the Claimants’ primary claim that the monies paid by the Claimants were held on escrow conditions or subject to a form of Quistclose trust fails. However, the Claimants did state that “it may still succeed if Cs succeed against D on the alternative basis that a resulting trust arose automatically as a result of D’s lack of authority from AFL.” 
694.	In the event, I have found against the Claimants on their claim based on escrow, but for them on both (a) their claim based on some form of  Quistclose trust and (b) their claim based on a resulting trust as a result of lack of authority.  I shall address the claim against Mr Egan in case I am wrong in my conclusions as to (a) and given that the alternative claim is pursued in the case of (b).
695.	The Claimants’ claim against Mr Egan, brought when Mr Egan changed his position (on the first day of trial) as to whether or not escrow terms had been intended and agreed, is based on negligent misrepresentation. 
696.	The claim is that Mr Egan impliedly represented that (a) the monies paid into the Defendant Firm’s client account by the Claimants would be held on conditions of escrow, and that in any event this was his (Mr Egan’s) belief; (b) he understood the Defendant Firm to have accepted the escrow conditions, and did not expect those monies would be or believe that they might be released by the Defendant Firm until the escrow conditions were satisfied; (c) he understood and believed that Erinaceous, ECS, and AFL (as promoters, arrangers and prospective borrowers respectively) all understood and accepted that those monies were not intended to belong to AFL until the escrow conditions were satisfied.
697.	Neither side has been consistent: the Claimants have repeatedly reformulated their position as to what the escrow conditions were. Mr Egan has performed the volte-face already described, it being his position at trial that he did not believe that monies paid into the Defendant Firm’s client account would there be held subject to an escrow on receipt, but rather could be used for the benefit of AFL (subject to the proper lawful authority of AFL being obtained).
698.	It is clear that the Claimants trusted Mr Egan, and expected to obtain the matched equity and loan mixed participation which was the hallmark or characteristic of an Albermarle investment scheme, and were not (at least until the end of 2007) troubled by the lack of documentation to evidence their investments. 
699.	It is also clear that Mr Egan considered them to be investors who would be equity participants in whatever was fixed upon as the most efficient vehicle. He never conceived that they might be treated as confined to being merely unsecured, subordinated lenders; his expectation was that the investors would in due course be provided with some form of equity broadly in accordance with the Albermarle model, and that all would be well in the end, as it had been in previous Albermarle schemes.
700.	But trust and shared expectations are not the same thing as, and may have developed quite apart from, representations.  It is much less clear whether what the Claimants did and expected was influenced by representations made to them by Mr Egan; whether Mr Egan assumed responsibility for and invited reliance upon those representations; and also whether they relied on Mr Egan in an individual capacity or simply as the person within ECS whom they had become accustomed to dealing with routinely. 
701.	I turn to discuss (1) first, whether any representations were in fact made by Mr Egan, (2) secondly, whether the circumstances were such as to give rise to a duty of care on his part (3) if so, what was the scope of that duty.
(1)	Were representations made by Mr Egan to the Claimants as to the terms on which monies paid into the client account would be held?
702.	The Claimants largely (indeed, as I read their pleading, exclusively) base their case on inferences from the Teaser and Teaser email, a subsequent follow-up e-mail of 20 August 2007, and implied representations. As noted above to be typical for this case, there was otherwise next to no express communication between the relevant individuals, namely the various investors, Mrs Bellis and Mr Egan.
703.	Insofar as advanced at all, any contention that the Claimants relied on any express representations made by Mr Egan was only (and at best) half-heartedly pursued. In that context:
(1)	Ms Challinor’s belief that her money was “held in escrow by solicitors and was therefore safe” was based on her understanding that the solicitors would, in respect of that element of the transaction, be acting for her.  She at one time seemed to suggest that this belief might have been encouraged or confirmed by a conversation with Mr Egan; but under cross-examination she accepted she could not be sure of the terms of such a conversation some 5 years previously, simply remembering its gist as being him saying something along the lines of “well Fairoaks is another good one. It’s like Shoreham. Are you in?”
(2)	Mr Glatman referred in his witness statement to a conversation with Mr Egan about the proposed Albermarle Fairoaks scheme, stating that he thinks that Mr Egan indicated that monies subscribed early would be “held, pending completion of the fundraise” and that nothing Mr Egan said disabused him of his understanding that “as with previous transactions, the monies transferred to the solicitors’ client account would be held in escrow, and that once sufficient monies had been raised, the deal would then be done and monies released in return for the issue of shares and loan notes, which would follow in due course”. But under cross-examination he presented all this as “an inference” from his discussions with Mr Egan rather than something Mr Egan had in fact said.
(3)	Mr Watts’ recollection was hazy and he could not remember any specific conversation with Mr Egan.    
(4)	Mr Cole referred in his witness statement to discussions with Mr Egan during July/August 2007 both on the telephone and in person, from which he says that he understood from Mr Egan that “if either the [equity bridge] of £7m could not be repaid in full or for some other structural reason the investment could not be made, then as with the Brighton investment…the investors funds would be returned.”  
Under cross-examination Mr Cole embellished on this, stating that his understanding from his conversations with Mr Egan was that the money was “going into a solicitors client account until the Jersey close-ended fund was set up, at which time the unit trust would be completed and issued and the money would be transferred from the solicitors client account into the vehicle at the top.” 
Mr Cole had not said this either in his witness statement or in the Further Information supplied on his behalf, which he signed. He later admitted that he may have inferred this and that though he had tried his best to reconstruct events he had no clear recollection of what precisely was said and when.  
I do not doubt Mr Cole’s honesty: but I do think the embellishment was a reconstruction without factual foundation beyond the fact that Mr Cole had come to believe its accuracy, before being challenged.
(5)	Mr Wallis stated in his witness statement that when informed by Mr Egan that his investment should be paid into the Defendant Firm’s client account he queried why Ms Streeton of Boodle Hatfield was not being used, and upon Mr Egan telling him that “this was a requirement of the deal as Mrs Bellis was Erinaceous’ solicitor” expressed his wish to “confirm that my money would be held by Mrs Bellis in escrow waiting my further instructions” whereupon Mr Egan gave him Mrs Bellis’s telephone number.  
Under cross-examination Mr Wallis, though insistent on his conversation with Mrs Bellis, did not elaborate on his conversations with Mr Egan, and accepted the difficulties of trying to remember what was said in conversations several years ago. I do not consider that the evidence supports any suggestion of any express representation as to the escrow arrangements by Mr Egan to Mr Wallis: I find that none was made.
(6)	Mr Mahtani did not suggest that Mr Egan made any oral representation to him.
(7)	None of the other Claimants gave evidence.
(8)	Mr Berman is not a Claimant: but when giving evidence on their behalf he did not suggest that Mr Egan made any express representation to him in this regard.
704.	None of the above, in my judgment, comprises or connotes an express representation on the part of Mr Egan that investors’ monies would be held subject to escrow conditions. 
705.	No explicit representation is to be found in the Teaser, its covering e-mail or the 20 August 2007 e-mail with draft Loan Note to potential investors who had expressed an interest after receipt of the Teaser either. In reality, the Claimants’ case on those documents is not so much on what is expressly stated in them but on the inferences they contend should be drawn from the description of the Albermarle Fairoaks scheme as another Albermarle scheme similar to Albermarle Shoreham.  
706.	In particular, the Claimants rely on the absence of any warning that their monies might be deployed before they had any legal entitlement to equity participation and control of the investment vehicle.  In other words, the Claimants rely not so much on any explicit representation but on inferences and implication from the manner in which, against the background of previous Albermarle investment schemes, the opportunity to invest in the Albermarle Fairoaks scheme was presented.
707.	In CRSM v Barclays Bank plc [2011] EWHC 484 Hamblen J addressed the law on misrepresentation in some detail. As to implied representations he explained (at paragraph 220): 
“220. In relation to implied representations the "court has to consider what a reasonable person would have inferred was being implicitly represented by the representor's words and conduct in their context": per Toulson J in IFE v Goldman Sachs [2007] 1 Lloyd's Rep 264 at para. 50. That involves considering whether a reasonable representee in the position and with the known characteristics of the actual representee would reasonably have understood that an implied representation was being made and being made substantially in the terms or to the effect alleged.” 
708.	In this case, the representations relied upon are (it is pleaded on behalf of the Claimants) to be implied from:
(1)	the Albermarle Investment Model, the inclusion of (admittedly varying) escrow arrangements, and “the invariable rule that… at the same time as the investors’ monies were released from the escrow the investors would gain 100% ownership and control of the investment vehicle”;
(2)	the presentation of the Albermarle Fairoaks investment as similar to previous Albermarle investment schemes, especially Albermarle Shoreham, and the branding of the investment as an Albermarle scheme in the Teaser and elsewhere;
(3)	the references in the Teaser and elsewhere to ‘investors’ and ‘invest’ and never to ‘lenders’ or ‘lend’;
(4)	the invitation to such investors to pay into what was obviously the client account of a solicitors’ firm which those investors who had invested in Albermarle Shoreham would recognise to have been the appointed escrow agent for that transaction;
(5)	the fact that Mr Egan never told any of the investors that their money would be treated as a loan and used before the structure had been established and was in their control;
(6)	the fact that it was reasonable that Mr Egan knew (as in fact he did know) from their past consistent history of investments that the investors would never be interested in risking their money in an unsecured subordinated term loan, or a loan which was only convertible if a unit trust was set up, or any investment in which the investors did not have control of the investment vehicle;
(7)	The investors’ subjective understanding that the moneys would be held on escrow conditions in the client account, and the fact that none was told of the equity bridge or of any instalment payments being due on loans from the RBS (or any other lender); 
(8)	Mr Egan’s own case (until the first day of trial on 10 May 2012) that the monies were to be held on escrow;
(9)	The fact that the draft interim loan notes reasonably appeared to be “just pieces of paper to record the amount of investment and the rate of return…and not something intended to characterise the monies received as a loan rather than an equity investment”;
(10)	The understanding that a reasonable reader would form of the Teaser and the email to which it was attached: that investors were investing to obtain an equity stake and their money would be applied for that purpose and not disbursed until then. 
709.	On behalf of Mr Egan it is submitted that none of this, separately or compositely, amounts to a representation such as might have caused a representee in the circumstances and with the characteristics of the Claimants reasonably to believe that monies they paid into the Defendant Firm’s client account would be held subject to contractually binding escrow conditions. 
710.	In particular, it is submitted on his behalf that no representation can reasonably be implied that some standard escrow arrangement common to all Albermarle investment schemes would apply to the Albermarle Fairoaks scheme.  
711.	Mr Egan relied especially on the following:
(1)	he only ever suggested, at most, (in an email to potential investors who had expressed an interest after receipt of the Teaser) that Albermarle Fairoaks was “fairly similar” to Albermarle Shoreham (as in many ways it was): he never suggested the two were identical;
(2)	the Claimants themselves accepted that the Albermarle Fairoaks scheme was unusual in important respects;
(3)	there was no settled “Investment Model” common to all Albermarle schemes and no representation that there was can be spelt out: a number of the prior Albermarle investment schemes did not involve escrow terms at all;
(4)	in his e-mail of 20 August 2007 to potential investors, he invited them to forward “the money to Juliet” and also attached what he described as the loan note (with interest) which we will be issuing pending completion of the Unit Trust”, from which Mr Egan maintains it was reasonably to be inferred that “prior to the issue of units or equity in the unit trust, or whatever “vehicle” ended up owning the asset, the investors funds were to be available to be used for the sole purpose or benefit of AFL”; and
(5)	the repeated amendments to the Claimants’ formulation of what they must demonstrate were standard conditions impliedly represented to govern the escrow arrangements is fatal to the Claimants’ contentions.
712.	It is further submitted on behalf of Mr Egan that if by words or conduct he caused the Claimants to believe that monies paid into the Defendant Firm’s client account were to be held on escrow terms, what induced that belief was not a representation of fact, but of intention, expectation or belief which gives rise to no actionable misrepresentation.
713.	As to the implied representations alleged, I accept, not without hesitation, the submissions made on behalf of Mr Egan that neither by his conduct, nor by anything he wrote or said to the Claimants or other investors, did Mr Egan make an implied representation of fact such as would have caused a reasonable representee in the position and with the known characteristics of the Claimants (or any of them) to believe that the monies they paid into the Defendant Firm’s client account would be held subject to defined and contractually binding escrow conditions. 
714.	My hesitation in this context has been increased by the consideration that there is a narrow dividing line between (a) a representation that there would be binding escrow terms applicable and (b) a representation that monies paid into the Defendant Firm’s client account would be held “safe”.  The differences are not only more real to a lawyer than to an investor; but even viewed with a legal lens they are not always easy to distinguish. The confusion in terminology throughout the case is testament to that. But the differences are important in this context: for though I do not accept any representation was made as to (a), I do accept that a representation was made as to (b).
715.	As in the context of the Main Claim, I accept that the investors, and a reasonable representee in their position and with their characteristics, were and would reasonably have been encouraged and confirmed by what was said and done in their expectation and belief that their monies would be held in the Defendant Firm’s client account and would not be released unless and until “safe”  in terms of there being no impediment to them receiving what they regarded themselves as having bargained for (and see above for an elaboration of what “safe” meant).
716.	As it seems to me, the reality of the matter is that everything that was said and done by Mr Egan in this regard tended to encourage and confirm the belief in the investors that they could trust him as they had in the past, and that, as in the past, their money would be held for them unless and until it was clear that in due course they would receive in return for their monies the mixture of loan and equity that was the hallmark or characteristic of the Albermarle schemes (or as Mr Egan himself described it in his first witness statement “integral to the Albermarle syndicates”). 
717.	However, on the basis of the conclusions that I have reached earlier (in the context of the Claimants’ main claim) the representations made by Mr Egan were, as it happens, true.  The Claimants’ claim against Mr Egan does not therefore arise. 
718.	I turn to the question whether Mr Egan owed a duty of care in case, once again, I am wrong in the conclusions I have reached.
(2)	Were the circumstances such as to give rise to a duty of care on the part of Mr Egan?
719.	The Claimants suggested that the “real battleground between the parties turns on the duty of care.”  That is because Mr Egan denies that he personally owed any such duty, and contends that any such duty would only be owed by ECS, his employer and the company of which he was a director. 
720.	As a corollary of the fact that a limited company is a separate person in law having the benefit for its participants of limited liability (subject to certain exceptions), the starting point is that an individual who makes negligent misstatements whilst contracting on behalf of a company of which he is an employee or director does not thereby, and without more, assume personal responsibility for the truth or accuracy of the statements made, which is a necessary ingredient for liability.  
721.	However, the fact of acting as a director or agent of a limited company is not an absolute exemption from a claim in negligent misstatement; a director or other agent of the company may on the facts be treated as having assumed personal responsibility for the negligent misstatement (or the negligent provision of services), if it was reasonable for the third party who claims to have relied on that director or agent to have concluded that such director or agent to have accepted personal responsibility. 
722.	Neither the test nor the result is reached by applying any doctrine of company law whether under common law or statute; both are reached by relying on the requirement for an assumption of responsibility as a necessary ingredient of liability under the tort of negligence in the relevant context. It is not the position of the defendant within the company, nor the rules which govern his relationship with the company, which is important; the question is whether the defendant has taken on a personal commitment in addition to the obligations of the company. 
723.	It also follows from the analysis, and the necessity to apply the laws of tortious liability rather than rules or provisions of company law that a director or other agent would not escape liability where assumption of responsibility is not a necessary ingredient for tortious liability, for example, in deceit (see Standard Chartered Bank v Pakistan National Shipping Corp (No. 2) [2003] 1 AC 959 (HL)). 
724.	The point typically arises in acute form when the company is not available to be sued (for example, because it is insolvent), so that the alternative analysis of vicarious liability would be to no avail.  That is indeed the position in this case.
725.	Especially given Mr Egan’s late and sudden change of case, the Claimants concluded it to be both impractical and in all probability futile to seek to join ECS: that would have required its restoration to the register, ECS having been dissolved following its liquidation, and the pursuit of any relevant insurer if it had a run-off policy, most Professional Indemnity and D&O cover being on a ‘claims made’ basis. (These points may well explain, as the Claimants suggested, why the Defendant Firm had not sued ECS and why Mr Egan has never sought to join ECS for contribution.)
726.	The question raised is a composite one: whether the circumstances are such as to justify a finding of personal assumption of responsibility by Mr Egan notwithstanding that he was acting as an employee or director of the company (ECS). The Claimants expressly disavowed any claim in deceit.
727.	Three authorities require particular consideration. The leading one is Williams v Natural Life Health Foods [1998] 1 WLR 830, being a decision of the House of Lords.  Lord Steyn, who gave the only reasoned speech, emphasised in allowing the appeal that (contrary to the view of the majority in the Court of Appeal) it is not enough to show that a company acted principally through a particular individual and that such individual had been trumpeted as having particular personal experience and special expertise, and a prominent role in the transaction in question. Nor is it sufficient (see 835C)
“that there should have been a special relationship with the principal [the company].  There must have been an assumption of responsibility such as to create a special relationship with the director or employee himself.”
728.	Further:
“the touchstone of liability is not the state of mind of the defendant. An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff. Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene. Subject to this qualification the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff.”
729.	As to assumption of responsibility, Lord Steyn then went on:
“…it is important to make clear that a director of a contracting company may only be held liable where it is established by evidence that he assumed personal liability and that there was the necessary reliance.”
730.	The facts pleaded by the Claimants as denoting the assumption of  responsibility by Mr Egan of a personal duty of care are that:
(1)		it was Mr Egan who broked the Fairoaks investment scheme to the 	investors;
(2)		he did so using a badge (‘Albermarle’) that made no reference and carried 	no resonance with either Erinaceous or ECS: it was the badge and his 	involvement that was important, the identity of the corporate vehicle being 	neither obvious nor important;
(3)		he knew much more about the investment and Erinaceous and the 	Defendant Firm’s role and understanding of it than the investors (and was 	fully aware that he did);
(4)		he knew that the investors trusted him as a result of a long relationship: they 	were in effect members of an investment club and were his contacts, not 	those of Erinaceous or ECS;
(5)		he knew that the investors would rely on his presentation in deciding 	whether to transfer funds to the Defendant Firm.
731.	Mr Egan denies any personal assumption of responsibility. It is submitted on his behalf that an objective assessment of the facts (that being the assessment required, see Henderson v Merrett Syndiates Limited [1994] 2 AC 145, 181B-C) makes it obvious he did not: he acted throughout as an employee and director only. Further, it is submitted that reliance on the individual by each claimant must be demonstrated, and that this has not been demonstrated in any case, but least of all in the case of those Claimants who have not given any evidence. Thirdly, it is submitted that it is all the more difficult to show the requisite “crossing of the line” (see above) where substantively the reliance asserted is on implied and not express representations.
732.	I consider that, at least outside the context of the giving of and reliance on advice in the nature of professional advice, or advice over the imprimatur of an individual asserting professional or other special expertise (as for example in the case of Merrett v Babb [2001] QB 1174, in which Mr Babb was found personally liable in respect of a mortgage valuation report which he signed personally, writing his own name and professional qualifications at the end of it), the court will (and in my view, should) be slow to find that a director or employee of a company has assumed personal responsibility when discharging functions on its behalf. 
733.	The Claimants recognised this; but they depicted the present case as a striking example of one where the special circumstances amply justified a finding of personal assumption of responsibility.  The strong personal ties between Mr Egan and “his” investors pre-dating the involvement of ECS and Erinaceous, and Mr Egan’s description of himself in the Teaser as being a director of “Albermarle Investment Syndicates”, a trading name or brand but not a legal entity, and his frequent use of that description from Spring 2007 (after expressly agreeing with Ms Cummings that he could do so) are circumstances materially out of the ordinary. 
734.	Further, I think there is some force in Mr Sutcliffe’s submission that a distinction should be drawn between cases (such as Williams v Natural Life) where the negotiations in the course of which the misstatement are the prelude to a contract with the company and cases (as here, and as in Merrett v Babb) where there is no contractual relationship with either the company or the director or agent. 
735.	These points and the curiosities described above have given me pause for thought. However, I have eventually concluded that, although out of the ordinary, the circumstances are not, overall, such as to justify a finding of personal assumption of responsibility on the part of Mr Egan. 
736.	I am comforted in that overall assessment by the fact that none of the Claimants who gave evidence understood Mr Egan to be acting in his own right: all understood him to be employed by and acting for Egan Lawson/ECS or possibly Erinaceous; and none of them suggested that he or she had relied on him having assumed some special commitment beyond or separate from that which he owed in acting for his company. 
737.	The nearest any of them got to an assertion of personal assumption of responsibility was the following exchange between Mr Bacon (for Mr Egan) and Mr Watts:
“Q.	You were aware that Egan Lawson had been taken over in 2006 by Erinaceous Group?”
A.  Yes, I was.
Q.  That he had then become an employee -- whether he was a director or whatever, he was an employee of the Erinaceous Group?
A.  Without specifically having focused on the point, yes, that would have been a self-evident conclusion to have drawn, yes.
Q.  And that he wasn't dealing with you, therefore, in a personal capacity.
A.  Well, that may be true in a strictly legal sense. However, it was -- and he would absolutely I am sure support this, that he was dealing with me personally based on his personal contacts with me, and would not have been seeking to mislead me because of the fact that he could hide behind a corporate veil.  So I think it's      --
Q.  I can assure you he is not seeking to do that.  But his position is that he is and was at all material times to your knowledge an employee of Erinaceous Group?
A.  Clearly it is difficult for me to deny that because it is self-evident, I just hadn't thought about it at the time. 
Q.  Thank you.  I didn't mean to interrupt.  When you had received investment notices in the past --
A.  Um-hum.
Q.  -- you were aware that they were provided to you on behalf of Egan Lawson, and then in turn by ECS, Erinaceous Commercial Services, and that he wasn't          supplying them to you in his own personal capacity?
A.  Exactly so.  To a certain extent, nothing had changed.”
738.	That seems to me to reflect the reality: the Claimants’ connection was with Mr Egan and they followed him to whatever company he was working for: but they understood him to be working for a company and to be dealing with them as part of the ordinary course of his work for the company: it matters not whether it was Egan Lawson, ECS or Erinaceous.
739.	I have reached my conclusion without regard to the terms of the Investment Memoranda issued in previous Albermarle investment schemes which specifically stated that investors should carry out their own investigations and that the directors of Egan Lawson Limited did not assume any responsibility for the accuracy of representations in the relevant Investment Memorandum. I would, if necessary, have concluded that these earlier Information Memoranda  do not provide a template for Albermarle Fairoaks or foreclose the assumption by Mr Egan of personal responsibility in a case where no such Information Memorandum was provided. 
740.	I would also accept the submission on behalf of the Claimants that the exclusion in the Investment Memoranda I have seen would not (restrictively construed as they must be) have covered the case of a misrepresentation as to the existence or not of escrow arrangements.
741.	My conclusion absolves me, as I see it, from the necessity of determining the issue which would otherwise arise as whether reliance had been established, especially in the case of Claimants who gave no evidence of it.  Reliance must of course be established in addition to proof of assumption of personal responsibility.  As Lord Steyn said in Williams v Natural Life (at 836E-F):
“If reliance is not proved, it is not established that the assumption of personal responsibility had causative effect.”
	As I say: I do not think that, in the event, my decision is required; suffice it to say that I should have thought individual reliance would be required to be demonstrated, and it would not suffice to rely on an inference of the likelihood of reliance without express confirmation by the individual claimant of the fact of it. (For the avoidance of doubt, such reliance does not, of course, have to be demonstrated in the context of the Claimants’ main claim: and see per Patten LJ in Bieber & Others v Teathers [supra] at paragraph 11.)
742.	My same conclusion also means that I do not think it necessary or appropriate to address Mr Egan’s further defence based on disclaimers of responsibility in the draft IM and in the Information Memoranda in previous Albermarle investment schemes. 
PART 20 CLAIM
743.	I turn lastly to the Defendant Firm’s claim under CPR Part 20 against Mr Egan for contribution. I focus on the various heads of claim; the parties have agreed that the question of apportionment of any liability should be held over to a further hearing after consideration of this judgment.  
744.	It is common ground that under section 1(5) of the Civil Liability (Contribution) Act 1978 (“the 1978 Act”) the judgment in the Main Action will be conclusive as regards the Part 20 Claim as to any issue determined by that judgment in favour of the person from whom the contribution is sought (here, of course, Mr Egan).
745.	The 1978 Act provided (by section 1(1)) a statutory right of contribution to a person liable in respect of damage suffered by another person to recover from any other person “liable in respect of the same damage (whether jointly with him or otherwise)”. 
746.	It is clear from the Court of Appeal’s decision in Charter plc v City Index Ltd [2007] EWCA Civ 1382, [2008] Ch 313 that liability can be said to be for the “same damage” whether or not that liability arises in tort or contract or in restitution: in that case, it was held that even though a claim for knowing receipt might generally be described as restitutionary, that did not preclude it being treated as an action concerned with recovering compensation for the purposes of the 1978 Act (and that liability to compensate should be equated with liability in respect of damage in the same context).
747.	The Defendant Firm pleads the following bases of contribution against Mr Egan:
(1)	If there was a contractual escrow agreement concluded between the 	Claimants and the Defendant Firm, Mr Egan is liable for procuring its 	breach by telling Mrs Bellis to make the payments she did out of her firm’s 	client account to RBS: but I have held that no such contract was 	established, so this basis is redundant; 
(2)	If the Defendant Firm held the monies paid into its client account by the 	Claimants on trust for them, then Mr Egan knew of such trust and that 	payments out constituted a breach of its terms, and so dishonestly assisted 	or procured such breach: I have held that such monies were held on 	resulting trust, of which the Defendant Firm was in breach: so this basis 	does require assessment;
(3)	It having been held in the Main Caim that Mr Egan did not have authority 	to act on behalf of AFL, and that monies were received into and paid out of 	the Defendant Firm’s client account on the basis that he warranted he did 	have such authority, he was in breach of his warranty of authority, 	alternatively of a collateral contract between him and the Claimants that 	their monies would be held subject to escrow conditions;
(4)	Mr Egan stood in a relationship of trust and confidence with each of the 	Claimants such as to give rise to fiduciary duties on his part, of which he 	was in breach in not disclosing the true nature of what was proposed;
(5)	If Mr Egan committed wrongful acts whilst acting in his capacity as a 	director of ECS, he should be held liable for directing or procuring ECS to 	commit the same.
748.	I address bases (2) to (5) below.

Dishonestly procuring breach of trust
749.	The Defendant Firm’s claim for contribution under this head (dishonestly assisting or procuring breaches of the resulting trust I have held arose) is based upon the plea that Mr Egan (a) gave instructions on which Mrs Bellis relied in making payments out of her firm’s client account of £1,450,000 on 4 September 2007 and £350,000 on 7 September 2007 (b) knowing that such payments would constitute breaches of the terms on which such monies had been paid into that client account, or, alternatively, having deliberately abstained from enquiring as to whether such payments would involve breaches and reckless as to the same. 
750.	Mr Egan denies that the payments were made in accordance with instructions received from him, and denies that he gave or had any authority to give such instructions to the Defendant Firm.  He rejects any suggestion that he was dishonest, noting also that the Claimants did not suggest any such thing and distanced themselves from any such suggestion. 
751.	Mr Bacon, on behalf of Mr Egan, also made the point that the allegation of dishonesty was not put to him. Mr Croxford excused this on the footing that “it was an impossible task to confront him with dishonesty” given that the issue only arises on the hypothesis denied by the Defendant Firm (of there being escrow arrangements or a resulting or Quistclose-type trust). Mr Bacon did see the force of this; and in any event, I consider that Mr Egan knew that it was being said that he was implicated if indeed a contract or trust was established. I consider it is not unfair to allow the allegation to be considered. It is, however, well established that dishonesty must be clearly demonstrated: and any rational explanation which is consistent with honesty will be likely to be sufficient to displace it.
752.	As to the issue whether Mr Egan gave Mrs Bellis payment instructions, the Defendant Firm relied on (a) an alleged telephone conversation between them “on or around 24 August” during the course of which it is suggested by Mrs Bellis he instructed her to transfer to RBS sums received into her firm’s client account from Tenon; (b) an email from Mr Egan to Mrs Bellis dated 31 August 2007 in which he stated that “the Fairoaks money needs to go to RBS asap asap”; and (c) a (further) telephone conversation between them on or around 3 September 207 during which, so Mrs Bellis says, Mr Egan confirmed that money should be transferred to RBS “as soon as it comes in”.
753.	As to (a), Mrs Bellis referred to the alleged conversation in her witness statement and relied on a manuscript note in her writing on the face of an email from Tenon dated 24 August 2007 which reads “GE confirms -> RBS”. But under cross-examination by Mr Bacon she admitted that she “had no clear recollection of this telephone conversation” and suspected that it probably had taken place later.  Mr Egan was not asked about the conversation.  I do not think the evidence is such as to infer from it an instruction given by Mr Egan to Mrs Bellis. See paragraph 136.
754.	As to (b), Mr Bacon on behalf of Mr Egan described this e-mail of 31 August 2007 as “no more than Mr Egan chivvying her along” which did not amount to an instruction or direction. I broadly accept this: I do not consider that this e-mail is realistically characterised as an instruction or direction either.  
755.	The reality, as I find, is that the e-mail did no more than confirm Mrs Bellis’ predisposition, despite having no certainty as to the terms on which the monies had been remitted or the directions that she could follow (see, for example, paragraph 578 above) that she should pay out to RBS as soon as possible: a predisposition consistent with (and to my mind explicable at least in part by reference to) what I find she must have been well aware were the obvious interests of Erinaceous. But for that, she would not and could not realistically have taken the email to constitute an instruction or direction mandating her to effect a transfer. 
756.	Counsel for the Defendant Firm submitted, further, that even if Mr Egan did not instruct Mrs Bellis, he did request her to make the transfers and that the Defendant Firm should be entitled to an indemnity or contribution from him on the principle established by the House of Lords in Sheffield Corporation v Barclay [1905] AC 392; they referred also to Yeung Kai Yung v Hong Kong and Shanghai Banking Corp. [1981] AC 787. 
757.	The principle relied on was stated in the following terms by the Earl of Halsbury LC (at page 397):
“In Dugdale v Lovering (1875) LR 10 CP 196 Mr Cave, arguing for the plaintiff , put the position thus: ‘It is a general principle of law when an act is done by one person at the request of another which act is not manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from the person who requested that it should be done.’ This though only the argument of counsel was adopted and acted upon by the court, and I believe it accurately expresses the law.”
758.	It is, however, important to bear in mind the basis of the principle. This is that the circumstances in which the request is made are such as to give rise to the inference of a promise by the person making the request to indemnify the requested person if actioning the request causes actionable injury or damage to a third party: see Yeung Kai Yung at 798G.  Such an inference will most easily be made when the requested party is undertaking a statutory duty or a common law duty of a ministerial character: see Sheffield Corp v Barclay at 399 and Welch v Bank of England [1955] 1 Ch 508 at 509 and 548-549 (cited in Yeung Kai Yung). It is also likely to be inferred as a matter of policy where the request is fraudulent but the requested party has no knowledge of the fraud: ibid. 
759.	Neither circumstance applies in the present case: and in my judgment the circumstances in this case do not support the inference. Moreover, and in any event, where the request is from a person purportedly but not properly on behalf of another, I doubt the principle has any application: the recourse of the requested party is for breach of warranty of authority.
760.	Again, as to (c) in paragraph 752 above, the evidence of the alleged conversation is a manuscript note by Mrs Bellis on the margin of an e-mail, this time from Mr Iain Grieve of Burness & Co (the firm acting for RBS) to Mrs Bellis dated 3 September 2007. Item 3 of that e-mail read as follows:
“I understand that our clients met or spoke last week and that the equity raising is progressing well and that approx £2 million has been forwarded to you.  My understanding is that this is to be remitted to the bank…in reduction of the equity bridge.  Can you confirm that you have similar instructions.”
As previously noted, the manuscript annotation reads: “GE – yes- get it over -> RBS as soon as it comes.”
761.	Mr Egan at first disputed having had the conversation at all, saying that he “would not have said that…why would I have said that?” He later appeared to accept he might have said something along those lines but would not have intended any transfer until it was “safe”.
762.	I did not find Mr Egan convincing in this regard: I accept that he did confirm that the monies were to be transferred as soon as they arrived: and that this accorded with his strong desire and objective to ensure that the RBS Equity Bridge instalment payment was met. But I accept that Mr Egan, not being a solicitor, would not have expected Mrs Bellis to make a transfer unless entirely satisfied on reasonable grounds that it was proper to do so. Again, in my view, the reality is that Mrs Bellis acted in line with her assumptions as above described.
763.	In any event, I think it plain, and have previously found, that Mrs Bellis knew that the arrangements with the investors were still uncertain or incomplete, and that AFL had not authorised the borrowings.  The references in the email from Mr Grieve of Burness & Co of 3 September to equity raising must have further added to the uncertainty. I do not accept that Mrs Bellis transferred monies because she felt she could rely on Mr Egan having authority; she was guided by unquestioning assumption, indifference to the risk for investors inherent in that assumption, and the growing imperative of ensuring RBS was paid.
764.	I would add, in that regard, that Mrs Bellis’ insistence that Ms Cummings never once instructed her to make the payments and that she never regarded herself as acting for Erinaceous, or in accordance with the overall direction of Ms Cummings (her sister, with whom she lived), or with an eye to its interests, struck me as both inherently unlikely and in my subjective assessment not believable. I reject that evidence accordingly.
765.	It will be recalled that in her memorandum to Mr Dickinson dated 14 December 2007 she referred to having received “instructions from Geoff Egan and Ms Cummings to reduce the equity bridge”; and also that she told the Administrators of AFL in her interview at Dundas & Wilson on 9 June 2011 that it was Legis which gave her the relevant instructions. The best she could do as to the latter was to accept in cross-examination that she had given “a slightly misleading answer”. All this reinforces my sense that Mrs Bellis’ later story that she relied only on Mr Egan is contrived.
766.	Lastly under this sub-heading, I do not accept the suggestion that Mr Egan was dishonest in the sense necessary to establish liability for dishonest assistance. The test for dishonesty in such a context has been much debated at the highest level and there have been a number of decisions since that have considered the application of the tests that have emerged. 
767.	There is a helpful review of these authorities in Brown v InnovatorOne plc [2011] EWHC 119 (Comm), paragraphs 1046 to 1054.  Hamblen J summarised the “combined test” that has been prescribed and adopted as having two elements as follows:
“(1)  The subjective element – The Court must consider the defendant’s subjective state of mind and what the defendant actually knew and understood; and
(2)  The objective element – The Court must consider whether or not, with that state of mind, knowledge and understanding, the relevant conduct is dishonest, applying an objective standard of dishonesty.”
768.	As stated by Morgan J in Aerostar Maintenance International Ltd v Wilson [2010] EWHC 2032 at paragraphs [183 to 184], for the most part (and as to (1)), dishonesty is to be equated with conscious impropriety; and as to (2), what is meant by saying that the standard is objective is that a person is not free to set up his own standards of honesty; thus
“If by ordinary objective standards, the defendant’s mental state would be judged to be dishonest, it is irrelevant that the defendant has adopted a different standard or can see nothing wrong in his behaviour.”
769.	In my judgment, Mr Egan was not acting with conscious impropriety in encouraging Mrs Bellis to pay out to RBS monies received from investors into her firm’s client account. 
770.	Mr Egan placed especial reliance in this connection on an email dated 4 September 2007 from Mrs Bellis to him attaching (amongst other things) a “Loan Note as approved and ready to go.” He contends that this demonstrates that it was reasonable for him to conclude, as he states he did conclude, that the loan transaction was in order and had been authorised by Legis before any payments were made.  
771.	I was not entirely convinced by this: it struck me as elevated in its importance and embellished with hindsight.  But I accept the more general point that Mr Egan believed that all would be well in the end, albeit without either a full (or any real) understanding of the legal mechanics whereby the desired result could be achieved, or any sustained effort to ascertain when that end would be; but this was not conscious impropriety. He had a clean heart; even if his head was sometimes filled with somewhat rash assumptions.
772.	I do not consider that this rashness crossed the line over to recklessness of a nature sufficient to establish dishonesty. I do not think the evidence suggests indifference to a suspected truth: gross want of caution is not proof of dishonesty: and see The Kriti Palm [2006] EWCA Civ 1601 at [256] to [259] (also quoted by Hamblen J in Brown v InnovatorOne at [1055]). Further, although I accept that “assistance” has a wide meaning and that (as Counsel for the Defendant Firm submitted, referring to Baden v Societe Generale [1993] 1 WLR 509 at 574-575 and Underhill and Hayton ‘Law of Trusts and Trustees’ (18th ed.) at 98.53) there is not a requirement that what was done had the consequence that a loss was suffered I am not persuaded that Mr Egan’s conduct, though regrettable, did substantially “assist” or facilitate the commission of the breach of trust. 
Breach of warranty of authority/collateral contract
773.	The Defendant Firm pleads that the Teaser and/or the Loan Note emails contained an express or implied warranty by Mr Egan (alternatively Egan Lawson) that he (alternatively Egan Lawson) was a duly authorised agent of AFL for the purposes of raising investment funding, and that (on the basis that in fact neither was authorised, as I have found) he was in breach of that warranty of authority.
774.	The Defendant Firm also pleads that if the investors paid “on some form of escrow”, the Teaser and/or the Loan Note emails contained an express or implied representation by Mr Egan to the investors that the following collateral terms would have binding contractual effect:
(a)	their investments would be held by the Defendant Firm;
(b)	their investments would not be loans to AFL;
(c)	alternatively, if the investments were loans, they would be on terms that their investments would be held on trust by the Defendant Firm until Interim Loan Notes were issued to investors.
The Defendant Firm pleads that if that collateral contract was so concluded, Mr Egan was in breach of it, because the Investments were released before the conditions agreed were satisfied.
775.	Mr Egan denies that the Teaser and/or the Loan Note emails contained any express or implied warranty or any such representations (express or implied); he denies both the collateral contract pleaded and that he was in breach of it. He avers that in any event the investment monies were released by Mrs Bellis and not by him and that, furthermore, everything he did was as an employee of, and in discharge of duties entrusted to him by, ECS and there is no basis for holding him personally liable in such circumstances.
776.	As I have set out above, not one of the Claimants contended that Mr Egan warranted that he was personally a duly authorised agent of AFL for the purposes of raising investment funding; and not one contended that he or she had read the Teaser and/or the Loan Note emails as giving rise to the inference that he was. Looking at the matter objectively, I do not consider that either of the documents, or the circumstances, supports the Defendant Firm’s case in this regard: and I reject both formulations of that case (that is to say, whether couched in terms of breach of warranty of authority or breach of collateral contract) accordingly.
Allegation that Mr Egan owed fiduciary duties of which he was in breach
777.	The Claimants do not assert that Mr Egan was their fiduciary. However, the Defendant Firm pleads that in the circumstances he stood in a relationship of trust and confidence with each (or some) of the investors, and owed them fiduciary duties (a) to act loyally and faithfully in their best interests; (b) of full and frank disclosure; and (c) not to allow his personal interests or the interests of third parties to conflict with his duties to the investors. In their written closing submissions, Counsel for the Defendant Firm characterised Mr Egan as “the paradigm fiduciary”.
778.	The Defendant Firm’s case in this regard is that in consequence of such duties he was obliged but failed (a) to disclose to the investors that Mr Egan proposed to, as he did, give instructions to the Defendant Firm to disburse the investors’ monies paid into its client account to repay instalments due in respect of the RBS Equity Bridge and/or interest payments prior to satisfaction of any escrow conditions; (b) to seek their informed consent to that, and (c) not to give such instructions unless and until he had obtained their informed consent; (d) to disclose to the investors any of the following: (i) the terms and instalment repayment dates of the RBS Equity Bridge; (ii) that AFL was indebted to RBS in the sum of £31 million; (iii) that their investments would be subordinated to such indebtedness to RBS; (iv) that their investments were “highly risky”  because unless the fund-raising target was reached and the RBS Equity Bridge repaid in time, AFL might never be able to repay the investments.
779.	Mr Egan denies that he personally stood in a relationship of trust and confidence to the investors and thus denies both any fiduciary duties and any breach by him of any of them. Once again, Mr Egan makes the point that at all times he acted in his capacity as an employee, alternatively a director of ECS and had no autonomous role personally. He accepts that he “co-authored” the Teaser but denies that this gave rise to any fiduciary obligations.
780.	As accepted by both parties, whether someone is a fiduciary, and if so, what duties that person owes in that capacity, are questions of fact. The types of relationship that may be so characterised are not closed; the definition is open-textured.  Thus, in Bristol & West Building Society v Matthew [1998] Ch 1, Millett LJ provided the following definition (at page 18A-B):
“A fiduciary is 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 may not act for his own benefit or 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. They are the defining characteristics of the fiduciary. As Dr Finn pointed out in his classic work Fiduciary Obligations (1977), p.2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”
781.	That the investors trusted Mr Egan in general terms is not in doubt or dispute. The investors looked to him to select and recommend investments; and they had come to trust his judgement. I have little doubt that they associated the Albermarle brand with him, and took comfort from his continuing involvement. I have little doubt that their experience in previous Albermarle schemes had encouraged them to be less exacting in their expectations of proper record and full explanation than would otherwise have been the case.
782.	I also consider that Mr Egan was plainly and obviously remiss in failing to explain the funding arrangements: in particular, it is extraordinary that he did not ensure that the investors were aware of the terms of the RBS Equity Bridge and, in particular, the instalments that were due. His personal optimism was misplaced and rash; he let “his” investors down when that optimism was proved to be ill-founded. His disregard for proper process and paperwork seems inexcusable once its effect is revealed.
783.	I have also been concerned by indications that Mr Egan was aware of frailties in the structure and economics of the Albermarle Fairoaks scheme that he did not reveal to investors but of which he complained to Ms Cummings and Erinaceous when they sought to blame him for delays in fundraising.  
784.	I have particularly in mind the email sent by Mr Egan to (I assume) Ms Cummings some time after 24 September 2007 (the heading appears to have been deleted, but it appears to have been in reply to an email from Ms Cummings of that date in which she referred to breaches by Erinaceous of its banking covenants and adverse press reaction) from which I have already quoted in paragraph 71(4) above.  That email began:
“I feel it is unreasonable for you to lay the group’s problems at Dougie’s and my door particularly as we have no say in how the group is run
1)	Albermarle Croydon was overpriced as Neil kept pushing it and it thus proved difficult to raise equity ...
2)	Fairoaks. We are unable to do a proper fund raise until the Unit Trust is in place …”
785.	That email illustrates not only the pressures Mr Egan was under (from Ms Cummings and Erinaceous) and Mr Egan’s doubts and discomfort, but also the disparity in the information available to Mr Egan compared to that available to the investors, who were not told about the overvaluation, or the cooking up of the rents or of the penal interest rate payable to Erinaceous. The disparity put the investors at a disadvantage and meant that they were in point of fact reliant upon him and others for fair description of what was truly involved.
786.	Nevertheless, I do not consider that he personally undertook obligations such as to characterise him as a fiduciary.  It was not him or even his employer ECS to whom the investors entrusted their monies/investments. He did not act, and they did not understand him to be acting, personally for them or on their behalf. He acted for ECS, and accepted the direction of Ms Cummings and Erinaceous, both in identifying the investment opportunity to be made available to investors and in inviting expressions of interest in and participation in it through (as he envisaged) the usual mix of equity and loan. Mr Egan was not personally a party to any transaction with any of the investors: and there was not in law entrusted to him, nor did he have their authority to exercise, any power or discretion which might affect their interests. Lastly, the relationship between him and “his” investors was commercial in character and did not, as I see it, oblige him to act exclusively in their interests.
787.	In short, though critical of the way Mr Egan conducted himself, I do not accept this basis for the Defendant Firm’s claim to contribution either.
Procuring wrongdoing by ECS
788.	Faced with the difficulty of establishing personal assumption of responsibility or fiduciary obligations on the part of Mr Egan, the Defendant Firm pleads, in the last of its alternative bases for contribution, that Mr Egan directed or procured Egan Lawson/ECS to commit any acts established to have been wrongful.
789.	The Defendant Firm did not elaborate upon this line of argument beyond citing and commending to my attention in oral submissions two authorities, namely Standard Chartered Bank v Pakistan National Shipping Corpn and others (Nos 2 and 4) [2002] UKHL 43, [2003] 1 AC959 and MCA Records Inc & Anor v Charly Records Ltd & Ors [2002] BCC 650.
790.	In my judgment, the following principles may be derived from those authorities:
(1)	Just as in the context of criminal liability, no-one can escape the clutches of the criminal law by the simple device of showing that he had carried out his frauds in his capacity as a director of a company and in circumstances where his acts were to be attributed to the company, so in the context of tortious liability, a person’s status as a director cannot invest him with immunity if the ingredients of the relevant tort are made out against him: see the Standard Chartered case at paragraphs [39] and [40]).
(2)	“Thus, there is no reason why a director of a company should be in any different position to a third party and therefore it is possible that a director can be capable of becoming a joint tortfeasor by procuring and inducing the company, for which he works to carry out a tortious act”: see MCA Records at p667E-F, quoting Aldous LJ in Williams v Natural Life Health Foods [1998] 1 WLR 830 at paragraph [21].
(3)	“However there are good reasons to conclude that the carrying out of duties of a director would never be sufficient to make a director liable”: ibid at 667F, although Chadwick LJ suggested it was unwise ever to say never in this field (see MCA Records at paragraph 49).
(4)	Thus, “a director will not be treated as liable with the company as a joint tortfeasor if he does no more than carry out his constitutional role in the governance of the company – that is to say, by voting at board meeting”: that is “what policy requires if a proper recognition is to be given to the identity of the company as a separate legal person”: see per Chadwick LJ in MCA Records at paragraph 49.
(5)	However, “there is no reason why a person who happens to be a director or controlling shareholder of a company should not be liable with the company as a joint tortfeasor if he is not exercising control through the constitutional organs of the company and the circumstances are such that he would be so liable if he were not a director or controlling shareholder”: again see per Chadwick LJ in MCA Records at page 668G.
791.	In the present case, in my judgment, Mr Egan cannot be said to have stepped outside his remit as a director/employee or acted otherwise than in the discharge of his obligations as he perceived them as such.  Accordingly, I do not consider there to be any basis for holding Mr Egan liable to make contribution as a joint tortfeasor with ECS.
Conclusion as to Part 20 Claim
792.	It follows that, in my judgment, the Defendant Firm’s Part 20 claim for indemnity or contribution fails and should be dismissed accordingly.

SUMMARY OF CONCLUSIONS
793.	My conclusions may be summarised by reference to the questions adumbrated in paragraph 22 above as follows. 
794.	As to (1), the Claimants’ argument that the monies paid into the Defendant Firm’s client account by the Claimants were held subject to contractual escrow terms binding on the Defendant Firm fails: the difficulties that the Claimants had in defining the terms and conditions of the contract reflect the fact that no sufficiently certain agreement can be discerned or inferred.
795.	As to (2), I do not consider that the facts are such as to give rise to a classical Quistclose trust, with the payment and receipt of money being expressly stipulated or acknowledged to be for a defined and exclusive purpose. However, in my judgment, the combined effect of the fact that (a) the Claimants’ monies were required to be and were paid into a trust account, and (b) were not (I have found) objectively or subjectively intended to belong upon receipt to AFL, was that the Defendant Firm held such monies on trust for the Claimants and subject to the SAR.
796.	As to (3), having thus become a trustee for the Claimants upon receipt into her firm’s client account of the monies they had paid, Mrs Bellis and her firm could not, in all the circumstances, in equity foreclose the beneficiaries’ interests and become trustee in respect of the same monies for another person without the most unequivocal instructions from her beneficiaries or complete certainty that they had directed payment to AFL on conditions that had unequivocally been met. Such instructions were never received; and no such certainty was ever achieved.  
797.	The Claimants’ alternative case that a resulting trust arose upon receipt of the Claimants’ monies into the Defendant Firm’s client account because such receipt on behalf of AFL was not authorised succeeds also.
798.	On the basis of the conclusions above, there is no need or basis for the Claimants’ further alternative claim in restitution: I would have been disposed to accept that case, but I make no final determination in that regard.
799.	The Claimants’ case against Mr Egan is, on that basis, otiose; but in any event, I do not consider that the circumstances are such as to justify imposing liability upon him personally: in my judgment, Mr Egan did not owe any personal duty to the Claimants, nor did he make any actionable misrepresentations to them.
800.	I do not consider there to be any basis for the Defendant Firm’s claim for contribution against Mr Egan personally: in my judgment, he did not assume personal responsibility or fiduciary duties to the Claimants; he did not give any warranty of his authority to bind AFL and/or the investors; he did not procure wrongdoing by ECS; nor did he dishonestly assist the Defendant Firm in its breaches of trust.
801.	Accordingly, and in summary:
(1)	the Claimants succeed on their Main Claim, and would do so on their 	Alternative Claim; they are entitled to relief accordingly;
(2)	their claims against Mr Egan are unnecessary;  
(3)	the Defendant Firm’s Part 20 claim against Mr Egan fails.
802.	I would invite Counsel to prepare a draft Minute of Order and to fix a date for a further hearing after formal judgment to deal with that and other consequential matters.  In the meantime, I am most grateful to them, and those instructing them, for their patience and their considerable assistance. 

POSTSCRIPT
803.	A postscript such as this is unusual: but I have found this an unusual case. Its purpose is to explain that after circulating an earlier version of this Judgment in draft and invited Counsel to identify any patent errors or omissions, or any matters that they considered lacked sufficient and required further explanation, I received a number of helpful suggestions. They were advanced succinctly but politely:  I am grateful to Counsel for them: I have sought to take all of these into account and indeed to address many, though not all, of these suggestions in this final version. 
804.	I would add a few miscellaneous observations, which I have found difficult to assimilate into the main body of this judgment and may be more helpfully addressed by way of this postscript.
805.	First, Counsel for the Defendant Firm have queried my findings as to the intention of the parties, given (as is indeed the case) that many of the Claimants did not give evidence.  I would offer the following clarification:
(1)	Ultimately, the question whether a trust (or contract) is to be implied depends upon the objective intentions of the parties as derived from all the admissible circumstances: I have explained why in the particular circumstances I have also addressed the subjective intentions of the parties (the principal reason being that the Defendant Firm sought to rely on subjective intention as disqualifying reliance on objective intention).
(2)	I have also sought to explain why, in the case of particularly identified claimants who might have been supposed to have had a contrary intention, I have concluded that nevertheless a resulting trust, by way of implication and/or by operation of law, arises.
(3)	I have not considered there to be any basis for concluding that other claimants (those who did not give evidence but who were not specifically identified as being persons to whom a contrary subjective intention should be attributed) had any subjective intention such as to disqualify them from relying on the objective intentions of the parties as I have found them to be.
(4)	Except in the context of misrepresentation claims there was no need to establish any form of reliance (and see per Patten LJ in Bieber v Teathers at paragraph 11). 
(5)	Whilst I remained surprised that no evidence at all (even of a formal nature) was offered by some of the Claimants, I do not think this, in the circumstances as I have found them, deprives them of a claim.
806.	Secondly, Counsel for the Defendant Firm politely queried my references to Mrs Bellis/the Defendant Firm having “abdicated” responsibility, and have sought clarification of the basis on which Mrs Bellis/the Defendant Firm had any responsibility or owed any obligations to the Claimants, her only client (as they presented the matter) being AFL. As to this:
(1)	I have sought to explain the basis on which, in my judgment, the monies paid by the Claimants into the Defendant Firm’s client account were there held on trust for them.
(2)	The responsibilities of a trustee to establish the terms of the trust and the identity of the beneficiaries are trite and basic, seem to me to be reinforced by the SAR and if anything heightened in the case of a solicitor who has chosen to make available his or her firm’s client account; and they are not discharged by an expectation that all will be well in the end.
(3)	It may be (as Lord Millett has suggested writing extra-judicially) that while the money remained in the Defendant Firm’s client account and there held on trust for the payers (as I have concluded) the payers are to be treated, for that purpose, as the Defendant Firm’s clients: see Trust & Trustees, vol. 17, No. 1, February 2011.
(4)	 It was suggested at the hearing, I think in response to a question from me, but without elaboration, that in advising a SPV which is to hold the investment assets, and any fund which may be the ultimate investment medium, and thus acting as (in effect) solicitor to the offer, a solicitor may owe a duty of care to the investors whose vehicle that SPV is to be. In circumstances such as these, and especially if the solicitor is aware, or at least on notice, that (a) no other legal adviser is advising them as a body and (b) in preceding analogous transaction they have come to rely on the solicitor acting for the SPV to have regard to their interests, that does seem to me at least arguable. However, I am aware that these may be deep waters: and in default of detailed argument, I simply leave the argument open, and I base my judgment on the factors referred to earlier, and not that argument.
807.	Lastly, Counsel for the Claimants have sought clarification whether or not the costs expended in seeking an administration order in respect of AFL (of some £94,715.18) are recoverable: they contend that they should be, on the basis that they were incurred as a result of a breach of trust. However, in their written closing submissions, Counsel for the Defendant Firm contended that the application was made on a basis (that the applicants were creditors of AFL) which was inconsistent with the basis of the Claimants’ claims in these proceedings, and that such costs were unreasonable and should be irrecoverable. I do not think this was expressly addressed before me at the oral hearing: and I shall hear further argument in that regard after delivering this judgment.

							SCHEDULE A
Claimant No	Claimant Name 	Investment amount	Date of investment		
First and 1(a)	Mrs Adelle Challinor and Mr Paul Challinor 	£100,000.00	28/09/2007		
Second 	Ms Sheila Cocker	£100,000.00	31/08/2007		
Third	Mr Andrew Kevin Cole	£100,000.00	21/08/2007		
Fourth	Mr Charles Evans	£30,000.00	31/10/2007		
Fifth and (5a)	Mr John Kerrison and Mrs Gaynor Kerrison	£100,000.00	25/09/2007		
Sixth	Mr Robert Meadows	£100,000.00	29/08/2007		
Seventh	Mr George Melio	£100,000.00	03/09/2007		
Eighth	Mr Stuart Wallis	£250,000.00	04/09/2007		
Ninth	Mr Garry Watts	£100,000.00	03/10/2007		
Tenth	Mr Robert Wilson-Wright	£100,000.00	04/09/2007		
Eleventh	Mrs Amanda Garner & Mr Andrew Cole A/C LM Cole	£100,000.00	21/08/2007		
Twelfth	Mrs Amanda Garner & Mr Andrew Cole A/C JA Cole	£100,000.00	21/08/2007		
Thirteenth	Mrs Amanda Garner & Mr Andrew Cole A/C CAJ Cole	£100,000.00	21/08/2007		
Fourteenth	Black Isle Property Company Limited	£250,000.00	22/08/2007		
Fifteenth	Tenon (IOM) Corporate Services Limited (as Trustee for Bright Cook & Co. LTD 2006 Employee Trust Re. Mr Cook and Family Sub Fund	£150,000.00	24/08/2007		
Sixteenth	European Securities LTD	£250,000.00	23/08/2007		
Seventeenth	Maple Investments LTD	£150,000.00	17/09/2007		
Eighteenth	Mr Mark Glatman, Mr Keir McGuiness, Mr David Taylor and Miss Stephanie Miles (as trustees for The Mark Glatman Accumulation and Maintenance Trust)	£50,000.00	22/08/2007		
Nineteenth	BWSIPP Trustees LTD (as trustees for BWSIPP Mark Glatman - 0761)	£50,000.00	22/08/2007