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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Sodeca SA v N E Investments Inc & Ors [2002] EWCA Civ 97 (30 January 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/97.html Cite as: [2002] EWCA Civ 97

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mrs Justice Hallett)

		Royal Courts of Justice Strand London WC2 Wednesday, 30th January 2002

1. LORD JUSTICE WARD: Lord Justice Longmore will give the first judgment.
2. LORD JUSTICE LONGMORE: This is an appeal from an order for summary judgment made by Mrs Justice Hallett on 26th July 2000. She decided that Mr Edward Armaly PhD had no reasonable prospect of a defence to a claim of at least $7.5 million. The reason for this was that he had been given $10 million by and on behalf of the claimants for the purposes of investment. She held that he had applied it by transferring it from an account under his control at Barclays Bank in London to an account also at Barclays in London in the name of Santa Maria Enterprises Ltd under the control of a Mr Kumar. Mr Kumar then obtained bankers' drafts for the amount in the account in favour of a Banque Piquet in Switzerland. Banque Piquet refused to open an account for Mr Kumar but issued new drafts. Mr Kumar was then arrested in France while he was in possession of those drafts. The sum of money represented by the Banque Piquet drafts was then frozen by the criminal prosecuting authorities in Switzerland. The Swiss courts are in the process of deciding what is to be done with those funds and, we are informed today, considerable sums amounting to almost $5 million have in fact been released to the claimants since the date of Mrs Justice Hallett's judgment.
3. Mrs Justice Hallett held that the transfer made by Dr Armaly to the account in the name of Santa Maria Enterprises Ltd was made in breach of the duty he owed to the claimants as a trustee of their monies since the transfer was not made pursuant to any plan to invest the monies. If necessary, she was prepared to conclude that Mr Armaly had been fraudulent. The importance of that was that the case had been argued before her on the basis that Mr Armaly was not personally responsible, but that the company which had agreed to do the investments (a company called Lycia) was responsible, and that Mr Armaly could only be personally liable if he had been fraudulent. The judge nevertheless held that he was personally liable for breach of trust, thus feeling able to pierce the corporate veil. She therefore gave judgment in the sum of $7.5 million.
4. It is not entirely clear from the face of the judge's order whether she was intending that to be a judgment in respect of a claim for the return of the money, which would be a claim for money had and received, or a judgment for damages to be assessed on the basis of a breach of trust and fraud, with the $7.5 million being an interim payment. Mr Ralls QC today has submitted that the intention of the judge was to make an award of damages to be assessed, with an interim payment of $7.5 million. That matters, in the light of subsequent events, to a very considerable degree because there is now (but was not before Mrs Justice Hallett) a claim for $92 million for consequential loss, which of course, if the judgment were to stand, would be uncontestable by Mr Armaly, save as to amount, because determinations of breach of trust and fraud have already been made.
5. Partly for that reason, partly because almost $5 million has been recovered and partly because I, for my part, am satisfied that there are other compelling reasons for a trial, it seems to me to be right that this court should set aside the summary judgment granted by Mrs Justice Hallett on the basis of Part 24.2 of the Civil Procedure Rules. Those other reasons have been identified by Lord Justice Clarke when he gave permission to appeal in this case. I can identify them shortly as follows:

(1)There will have to be a trial in any event in respect of the claims against the first and now the fifth defendants, which will to some extent cover the same ground as the judge covered when giving her summary judgment.

(2)The second defendant is, and has been for some time, unwell and his advisers are thus hampered in obtaining instructions from him.

(3)There is still no explanation of title to the funds.

(4)As Lord Justice Clarke put it, the relationship between the claim for the return of the monies and the claim for damages.

6. Accordingly, the case looks very different now from the way it might have looked to Mrs Justice Hallett and, without any criticism of her, it seems to me to be right that there should be a trial. The less I say about it from now on, therefore, the better. I would, for my part, allow this appeal.
7. LORD JUSTICE SEDLEY:I would simply add to what my Lord has said my own appreciation of the economy and realism with which both counsel have dealt with this appeal before us today. Mr Ralls has rightly recognised that the impasse into which his own case was driven by an over-successful application for summary judgment has made it inevitable that it will have to be unravelled on appeal. For the rest, I agree both with what my Lord has said and with the order he proposes.
8. LORD JUSTICE WARD:I agree that the appeal should be allowed and I endorse everything that my Lord, Lord Justice Sedley, has said in praise of both counsel. They have done everything that possibly could be done on behalf of their respective clients.
Order: appeal allowed with costs here and below; interim payment of costs of £40,000 (£25,000 in respect of costs below and £15,000 here); application to discharge the freezing order referred to the judge in the Commercial Court; counsel to lodge an agreed draft minute of order.