Case No: 2011 FOLIO 1588
Neutral Citation Number: [2012] EWHC 2701 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date:  

Before :

HIS HONOUR JUDGE MACKIE QC
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Between :

	SALKELD INVESTMENTS LIMITED	Claimant	
	-	and –
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WEST ONE LOANS LIMITED		
		Defendant	

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Mr Tony Singla (instructed by Mishcon de Reya) for the Claimant
Mr Peter de Verneul Smith (instructed by CKFT) for the Defendant

Hearing dates: 6 July and 5 September 2012
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Judgment
Judge Mackie QC : 
1.	This is an application for summary judgment or alternatively for an order that the Defence be struck out.  The Claimant (“Salkeld”) under a previous name, invested £235,000 in what was to be a loan, arranged by the Defendant (“West One”), secured by a first charge on a house in Fulham. The Defendant’s solicitors, as a result of an identity fraud, paid the £235,000 to a fraudster before the security was in place. The Claimant says that the Defendant is, under the contract between them (“the Contract”), liable to repay the money because the loan was not secured as promised. The Defendant says that its obligations under the contract were only to use reasonable skill and care and that the agreement was subject to standard terms which show this and limit liability. The Claimant responds by denying that the standard terms were incorporated and by claiming that if they were they do not on their proper construction excuse the Defendant and in any event are unreasonable under the Unfair Contract Terms Act.
2.	 If the matter goes to trial the issues will be complex and expensive to try. Salkeld claims that there is a short cut because the essential issues are clear but West One says that the law and facts are unclear and there must be a trial. I reserved judgment, which I rarely do on a Mercantile summary judgment application, first because the admirable submissions of Counsel made me pause for thought and secondly because it seemed to me right to consider with care whether, if summary judgment on the whole claim was not appropriate, some of the issues raised might be decided or at least narrowed to shorten what will otherwise be an expensive trial examining all aspects of the fraud.
3.	The issue on a summary judgment application (it is unnecessary for me to consider the strike out application separately) is whether the Claimant can show that the Defendant has no real prospect of success. As always I bear in mind particularly the summary of the principles set out by the then Lewison J in The Federal Republic of Nigeria-v- Santolina Investment Corporation [2007] EWHC 437.
4.	The application was issued on 28 March 2012. There are witness statements from Mr Clarke and Mr Randall for the Claimant and Mr Abrahams for the Defendant. The hearing of the application on 6 July was adjourned partly to enable the Defendant to obtain evidence of conveyancing practice, in the event from Mr Miller of  Seddons Solicitors, and concluded on 5 September. There is little disagreement about the central facts but there is about the context and the practices and assumptions of bridging finance.
The facts agreed or not much in dispute
5.	The Claimant is an investment company owned and controlled by Mr Clarke. Mr Clarke’s accountant is Mr Randall of Jeffreys Henry LLP. The Defendant carries out the business of advancing short-term secured loans to borrowers seeking bridging finance.  The Defendant does not invest its own capital in the loans but finds third party investors who are prepared to lend their capital for this purpose.  For each loan the Defendant takes responsibility for obtaining security for the benefit of the investor in the form of a registered charge over a property already owned by the borrower.  In return, the investor agrees that the Defendant will be entitled to retain a percentage (usually around 20 or 25%) of the monthly interest that is paid by the borrower during the term of the loan.
6.	 In 2009 Mr Randall invested, through companies owned by his children, in a number of loans made by the Defendant. In November 2009 in connection with those loans, the Defendant provided to Mr Randall a written Client Agreement (The “Client Agreement”) containing various terms and conditions. In late 2009, Mr Randall started to introduce some of his clients to the Defendant for their own investment purposes.  This led to an agreement between Mr Randall and the Defendant in December 2009 pursuant to which the Defendant undertook to pay Mr Randall’s firm, for each investor introduced by him, a commission of 15% of the total fees earned by the Defendant on the relevant loan. Mr Randall introduced 42 loan investments to the Defendant between August 2010 and August 2011 with values of up to £550,000. The Defendant never dealt directly with any of Mr Randall’s clients. 
7.	Mr Randall first introduced Mr Clarke to the Defendant in March 2011, when he told Mr Clarke of an opportunity to participate in a loan which the Defendant was intending to make. Mr Randall sent to Mr Clarke the terms of the Defendant’s offer, together with a report and a valuation of the property over which security for the loan was to be obtained. Mr Clarke asked Mr Randall to communicate to the Defendant that he would be willing to invest but completion was delayed and the investment did not proceed. No Client Agreement was provided to the Claimant nor was Mr Clarke made aware of the existence of such a document.
8.	Mr Abrahams says that in late March 2011 he realised that the Claimant and others introduced by Mr Randall had not signed a Client Agreement. He says that he had a conversation with Mr Randall who indicated first that he was comfortable to proceed and have the Claimant sign a revised form of Client Agreement in due course and secondly that the Claimant was aware of the existence of standard terms.  The revised agreement was signed on or around 8 August 2011. Mr Randall strenuously denies that any conversation of that kind took place until July 2011 (i.e. after the loan had been made). There is a stark conflict of evidence which can only be resolved, if it has to be, at trial. Mr Randall also denies that he has ever had authority to bind the Claimant or other clients to agreements. 
9.	On 18 April 2011, Mr Abrahams sent an email to Mr Randall, asking him to communicate another offer to the Claimant.  The Defendant’s offer was contained in a Terms Sheet that was attached to Mr Abrahams’ email.  The Terms Sheet provided that:
i)	The Loan (“the Loan”) was to be advanced by the Defendant to an individual purporting to be Mr Massimo Barbini (“the Borrower”).
ii)	The total amount of the Loan to be advanced by the Defendant to the Borrower was £570,000.
iii)	Security for the loan would be obtained by the Defendant in the form of a registered charge over a residential property purportedly owned by the Borrower (“the Property”), a three storey, mid terrace, three bedroom freehold house in Fulham, London SW6.
iv)	The Property had an open market valuation of £950,000.
v)	The term of the Loan was to be 7 months.
vi)	The Borrower would pay an interest rate to the Defendant of 1.25% per month from which the Defendant would pay to the Claimant a net interest rate of 1% per month.
10.	Also attached to the email from Mr Abrahams was a valuation report which the Defendant had obtained from De Villiers Chartered Surveyors dated 7 April 2011, stating that the market value of the Property was £950,000.
11.	On 18 April 2011, Mr Randall forwarded Mr Abrahams’ email and the attachments to Mr Clarke.
12.	On 19 April 2011, Mr Abrahams sent a further email to Mr Randall, informing him that up to £235,000 of the Loan was available for the Claimant. On 19 April 2011, Mr Randall sent an email to Mr Abrahams in which he communicated the Claimant’s acceptance of the Defendant’s offer. Mr Randall obtained due diligence from the Claimant which he passed to the Defendant. He received the advance monies into his firm’s client account and then paid them on to the Defendant.
13.	The emails relied on by the Claimant  as constituting the contract between the parties contained a footer which provided that:
 “West One Loans does not enter into any form of contract by means of Internet e-mail.  None of the staff of West One Loans are authorised to enter into contracts on behalf of the company in this way.  All contracts to which West One Loans is a party are to be documented by other means.” 
14.	On 20 April 2011, the Claimant and the Defendant entered into a Trust Deed relating to the Loan. The Trust Deed recorded that the parties had previously entered into an agreement “on the terms set out in the term sheet which is appended to this Deed (as may be varied in writing by the Trustee and the Beneficiary) which sets out details of, inter alia, the loan account number, the Property, the term of such advance, the monthly loan rate, the management fee and the net monthly amount due from the Trustee to the Beneficiary”. Under Clause 2 of the Trust Deed, the Defendant agreed that “it will at the request and cost of the Beneficiary deal with the Property and the Loan and will make such applications and execute and do all such documents acts and things as may be necessary to enable the interest of the Beneficiary in the Property to be protected and for the security granted by the Borrower to the Trustee to be perfected”.
15.	On 21 April 2011, the Claimant’s investment of £235,000 was transferred to the Defendant’s solicitors who advanced the full amount of the Loan, apparently to Mr Barbini. At this point neither the Claimant nor Mr Clarke had received or was aware of the existence of a Client Agreement.
16.	An attempt by the Defendant’s solicitors to register a charge over the Property was rejected by HM Land Registry on the basis that the Borrower was not in fact Mr Barbini and did not have any interest in the Property. It came to light that the true Mr Barbini had been the victim of identity theft, and had neither received the Loan nor given a charge over the Property. The Loan has not been repaid and no security was obtained for it. 
 The evidence of Mr Miller
17.	At the first hearing Mr de Verneuil Smith for the Defendant contended, as part of his case that the duty of his client was limited to one of taking reasonable care, that it was legally impossible for a lender to obtain a charge over a property before a loan was advanced. I declined to accept this as a proposition without evidence. I permitted Mr Smith to obtain evidence from a conveyancer. The Defendant sought to rely on a factual statement from its transactional solicitors. Mr Miller is a partner at the firm of Seddons and is the head of secured lending. He has over 12 years of experience in respect of bridging loans. He says that it is possible but very unusual to obtain a registered charge before releasing loan monies to a borrower. Such an arrangement would only be possible if the borrower agreed to it. Further it is not standard practice for bridging lenders or residential mortgage lenders to obtain a registered charge before releasing loan monies to a borrower. The standard market practice for bridging loans and for residential mortgages is that funds are released to the borrower before a registered charge is effected. In more than 1000 bridging loan matters which Mr Miller has dealt with he has never had an instruction from a lender to register a charge before releasing a loan to a borrower.  However Mr Miller accepts that it would have been entirely possible for the Defendant to have obtained a registered charge over the Property before advancing the Loan to the Borrower. 
18.	The contention of impossibility was therefore misconceived but obtaining a charge before making the loan would in practice be unusual in a bridging finance deal.  
The Claimant’s case and the Defendant’s response
19.	The Claimant seeks recovery of £235,000 (together with interest). Mr Singla summarises his client’s case as follows. The Contract was concluded when the offer contained in Mr Abrahams’ emails of 18 and 19 April 2011 was accepted by the Claimant on 19 April.  In order to identify the terms of the Contract, it is therefore necessary to have regard only to the Terms Sheet, the valuation report, and the relevant factual background.  The background includes the Defendant’s own marketing materials in particular the “Company Profile” and the “Investor Presentation”, which state repeatedly and unequivocally that all loans shall be secured. (Both Counsel made detailed submissions about these documents pointing to aspects which assisted their cases. The documents must be read as a whole. They are replete with indications to the potential customer that the Defendant offers a secured loan based on a conservative approach and valuation but they also contain warnings that bridging finance is only suitable for sophisticated investors and identify potential risks-although not the one that arose in this case. Further the presentation may not have been seen by the Claimant before the contract was entered into and may  not be part of the factual matrix.) Against this background, the Defendant was obliged under the terms of the Contract to obtain valid security for the Loan and not to advance any funds to the Borrower until valid security had been obtained. Since it is common ground that the Defendant failed to obtain security but nonetheless advanced the Loan, the Claimant’s case is that the Defendant has acted in breach of contract. 
20.	The pleaded case is more elaborate as Mr de Verneuil Smith points out. The Claimant claims that by express and/or implied terms of the contract the Defendant was required to repay the investment as required, had promised to obtain valid security for the benefit of the Claimant and not to advance any part of the Loan before it had obtained valid security, and to  enforce the security on the Claimant’s behalf if the Borrower failed to repay the Loan. The Claimant also pleads that pursuant to an implied term and/or a tortious duty of care, the Defendant was obliged to exercise reasonable care and skill in arranging the Loan and performing the terms thereof, including when taking steps to obtain a registered charge over the Property. It is also contended that pursuant to an implied term and/or a tortious duty of care, the Defendant was obliged to ascertain the true identity and address of the Borrower, to ascertain whether the Borrower owned or had any interest in the Property, to determine the creditworthiness of the Borrower, to obtain valid security in respect of the Loan and not to advance any part of the Loan to the Borrower before obtaining valid security. The Defendant denies the Contract as alleged by the Claimant and says that the Contract was governed by the Client Agreement which Mr Randall knew contained the Defendant’s standard terms. The Client Agreement contains none of the absolute duties alleged by Claimant and includes a limitation of liability clause.
21.	 The Defendant puts forward six grounds for resisting the application of which I consider that only the second , third and fourth require determination on this application:
-	The  debt claim is unreal and there are good grounds to find that the Defendant did not promise expressly or impliedly to repay the Loan and interest.  I consider that to the extent that the pleaded case makes a claim in debt it is hopeless.
-	The Claimant’s claim based upon express or implied warranties that security would be obtained and no advance made before security was obtained is subject to good defences as to construction and unreasonableness of the implied terms.
-	The Defendant has reasonable grounds for claiming that the Client Agreement was incorporated  by reference to the email footer.
-	The Defendant has reasonable grounds in support of the defence that the Client Agreement was known to Mr Randall, that his knowledge is to be imputed to the Claimant and that the Client Agreement was therefore binding.
-	The Defendant has reasonable grounds in support of the limitation of liability in the Client Agreement not being found to be unreasonable under the Unfair Contract Terms Act. In my view this fact sensitive point cannot be decided at the summary judgment stage.
-	The Defendant has reasonable grounds in support of the defence to the allegations of negligence. In my view this claim too is unsuitable for summary judgment.
I therefore turn to the three issues which arise.
Terms of the contract-more detail
22.	Mr Singla submits that the running assumption between the parties, as evidenced by the email exchanges, the Terms Sheet, the Valuation Report, and the Defendant’s own marketing materials was that the Defendant would only make the Loan to the Borrower once security had been obtained and hence the only risk to which the Claimant would be exposed was if the amount of the security obtained by the Defendant subsequently proved to be insufficient.  This is also borne out by the terms of the Trust Deed which is a post-contractual document but is nonetheless relevant evidence of what the parties had previously agreed. Accordingly, insofar as the Defendant chose to advance the Loan to the Borrower before it had obtained a registered charge, the Claimant contends that the Defendant did so entirely at its own risk. Even if the Court takes the view that the parties to the Contract must have contemplated that the Defendant would advance the Loan to the Borrower before it had obtained a registered charge over the house. Mr Singla submits that the Defendant was nonetheless under an absolute obligation to obtain security. If the Defendant advanced the Loan to the Borrower on the basis only of security documents (as in fact happened), it was still liable to the Claimant for breach of contract if those security documents subsequently turned out to have been forged.
23.	Mr de Verneuil Smith argues that the background knowledge that was reasonably available to the parties and specifically the standard market practice of bridging lenders is wholly inconsistent with construing the retainer as containing an absolute warranty that registration of the charge would take place before the release of loan monies to the borrower.  The standard and reasonable practice of bridging lenders and residential mortgage lenders is precisely the converse practice: to release loan monies before registration is achieved but in reliance upon the security documentation completed by the borrower and the priority period granted by the Land Registry priority search. The Claimant’s construction is therefore highly unreasonable, unusual and contrary to universal market practice of bridging lenders. The Defendant is a professional arranger and provider of bridging loans. It cannot ordinarily be found to guarantee results and the evidence is that bridging lenders do not as a matter of course promise not to release loan monies until a charge is registered.
24.	The Defendant’s construction that the obligation was to do all things reasonably required to secure the loan of the Defence is a much more reasonable one and is supported by the background facts. The Company Profile stated :
“The service offered to clients includes the entire management of their lending operation. The management company obtains loan applications, processes each application by taking up all necessary references where applicable, obtains chartered surveyors valuation, prepares and submits the facility letter and finally instructs solicitors to perfect a legal charge over the property or properties offered as security…”
25.	The terms relied upon by Claimant can only be implied if they spell out in express words what the Contract, read against the background facts, would reasonably have been understood to mean (AG of Belize v Belize Telecom [2009] 1 WLR 1988). It is not obvious or reasonable for a party to promise the outcome of something beyond its control, namely, the conduct of the borrower in proceeding with the loan. 
26.	Lastly and alternatively, pursuant to CPR 24.2(b) there is a compelling reason why summary judgment should not be granted on the basis of an implied term because such an implication would have very significant repercussions for bridging lenders who might now face a wave of litigation based upon the standard market practice constituting a breach of an implied term only to release loan monies after a registered charge is obtained. I reject this submission. The facts relating to the doing of the deal are unusual and the dispute arises because the transaction was not documented as competently and clearly as it would have been in most cases.
Terms of the Contract- decision on assumption that Client Agreement is not incorporated as part of the Contract
27.	The issue, assuming for the moment that the Client Agreement does not form part of the contract, is whether the agreement is to be read to impose  on the Defendant an absolute obligation to obtain security  or simply  a duty to use reasonable care. The detailed analysis by Counsel of each alleged express or implied term comes back to that.
28.	My first reaction was that the obligation in this case is clearly an absolute one but having heard submissions and read the cases, in particular Platform Funding Ltd v Bank of Scotland Plc [2009] 1 QB 426, I consider that this is a point that must go to trial.
29.	 Platform was a case about a surveyor in which three very distinguished former Commercial judges largely agreed on the relevant principles but were divided about their application to the facts. Moore-Bick LJ said this;
30.	 It is now accepted without question that when a person is instructed to act in a professional capacity he assumes an obligation to exercise that degree of skill and care which is to be expected of a reasonably competent member of the profession. The issue in this case, however, is not whether that principle applies to surveyors and valuers – it was accepted, quite rightly, that it does (see, for example, the observations of Lord Templeman in Smith v Eric S Bush [1990] 1 AC 831 at 850-851, [1989] 2 All ER 514, 87 LGR 685) – but whether that is the limit of their obligations, unless by their terms of engagement they have expressly promised to achieve a particular result.
31.	It has been observed on many occasions that those who provide professional services do not generally give an unqualified undertaking to produce the desired result. Thus in Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 3 All ER 99, [1975] 1 WLR 1095, [1975] 2 Lloyd's Rep 325 Lord Denning MR said at p 1100D:
32.	“Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.”
33.	I am inclined to think that the reason why the law does not ordinarily construe the contract in such cases as giving rise to an unqualified obligation owes more to the nature of the services themselves, the context in which they are to be provided and the fact that the desired result is not one which any professional person can reasonably guarantee, than to the fact that the provision of the services involves the exercise of special skill. In other contexts the law has no difficulty in implying an unqualified obligation to achieve the desired result. For example, if one employs a skilled craftsman to make a table, the law will normally imply a term that the table will be reasonably fit for its purpose; and as Lord Denning observed, again in Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners “. . . when a dentist agrees to make a set of false teeth for a patient, there is an implied warranty that they will fit his gums: see Samuels v Davis [1943] KB 526, [1943] 2 All ER 3, 112 LJKB 561.”
34.	In principle, therefore, although there is every reason to assume, in the absence of a term to the contrary, that a professional person has undertaken no more than to use reasonable skill and care in relation to matters calling for the exercise of his professional skill and expertise, there would seem to be no good reason why one should make a similar assumption in relation to other aspects of his instructions. As to those, one would expect to construe the terms of engagement in each case to ascertain the precise nature of the obligations undertaken, without making any prior assumption that they are qualified or unqualified. The engagement of a photographer to take a portrait photograph of a particular person provides an illustration. The photographer undertakes no more than to exercise reasonable professional skill and care in and about the creation of the image, but there is no obvious reason why one should assume, in the absence of a term to the contrary, that he did not accept an unqualified obligation to photograph the right person. On the contrary, one might think it more natural that he should have done so. (The Lord Justice then goes to review cases which it had been suggested indicated a different approach but did not , as he saw it, do so)… [30] A number of conclusions may be drawn from these decisions. Perhaps the most obvious is that although there is a presumption that those who provide professional services normally do no more than undertake to exercise the degree of care and skill to be expected of a competent professional in the relevant field, there is nothing to prevent them from assuming an unqualified obligation in relation to particular aspects of their work. Whether a professional person has undertaken an unqualified obligation of any kind in any given case will depend on the terms of the contract under which he has agreed to provide his services.
35.	At  Paragraph 48 of Platform Rix LJ summarised the relevant considerations that ordinarily apply to construing a professional retainer:
“(1) that the default obligation is one limited to the taking and exercise of reasonable care; (2) that it requires special facts or clear language to impose an obligation stricter than that of reasonable care; (3) that a professional man will not readily be supposed to undertake to achieve a guaranteed result; and (4) that if he is undertaking with care that which he was retained or instructed to do, he will not readily be found to have nevertheless warranted to be responsible for a misfortune caused by the fraud of another.” 

36.	The role of the Defendant, as an arranger and packager of bridging finance is not a common and conventional one like that of a solicitor or accountant and is thus less easy to classify. The role may not be very common even within the world of bridging finance. The role of the Claimant also requires consideration- it appears to be a sophisticated investor but there is debate about that. Further imprecision arises from the fact that the terms of the contract, including any terms to be implied, must be found not in a written agreement but in the background material and in an informal sequence of emails. The issue is fact sensitive for the reasons set out in Platform. The answer, Moore-Bick LJ points out, depends on such matters as the nature of the service to be performed, the context and how far the end result is one which a professional person can reasonably guarantee. Indeed there may be within one contract some duties which are absolute and others which are only to take reasonable care. These are matters on which a Defendant is entitled to insist on evidence at a trial and it would not be right for me, despite my firm first impression, to reach a decision solely on the written material now available.  
37.	 Although one is always sceptical about claims by a Defendant that there needs to be a trial to determine the factual matrix this seem to me a justified exception. So there will be leave to defend on that issue. This is however a case which should not take long to get ready for trial and I will be receptive to requests for a truncated timetable and an early hearing. 
The Client Agreement
38.	Mr de Verneuil Smith for the Defendant contends that the Client Agreement is incorporated into the contract and that as a result of its terms the Claimant cannot succeed and, at the least, should not have summary judgment. The Client Agreement has to be read as a whole and in context but Mr de Verneuil Smith contends that it is wholly inconsistent with an absolute warranty to obtain security over the relevant property, to repay the loan, or to pay interest. Instead it provided that the Defendant would instruct solicitors to do all such things as were reasonably required to obtain good and marketable title (cl 2(vi)), would collect repayments due under the loan on behalf of the client (cl 2(ix) and in the event of a default would commence proceedings on behalf of the client and take reasonable steps to recover the loan. If the Client Agreement forms part of the contract this would be a relevant argument with some force. Further the Agreement contains a clause limiting liability- albeit one which Mr Singla argues does not assist the Defendant in this case. So it is necessary to consider whether the Claimant can show that there is no real prospect of the Client Agreement being incorporated into the Contract. Mr de Verneuil Smith relies on three grounds, separately and cumulatively, for claiming that the Claimant cannot show that.
The email footer
39.	I have set out above the email footer which states that the Defendant contracts not by email but only by other documented means. The footer does not refer to terms and conditions. Mr Smith argues that, with the other indications this would have caused the Claimant to be aware that the contract would only be on the terms of the Client Agreement.  He argues that the pre-contract emails incorporated by reference the Client Agreement. He says that the question turns on whether sufficient notice was given of this incorporation and that question is not suitable for summary judgment/strike out.  He relies on  Rooney v CSE Bournemouth Ltd [2010] EWCA Civ 1364 where the Court of Appeal overturned the strike out of an allegation that terms had been incorporated by reference. In that case the foot of a form of work order included the words “terms and conditions available upon request”. Toulson LJ said at §16:
“In the factual context I disagree with the judge's conclusion. He concluded that the words conveyed no more than that terms and conditions were available in the sense that there were terms which might be included at the customer's request. I can see that grammatically the words could be construed that way, but it is not a construction which I would expect to occur to a businessman in the position of the parties. The work order was intended to be sent to the customer for signature as a contractually binding order rather than a form of pre-contractual negotiation. It would also be commercially most odd to have a contract for the performance of services where, instead of it containing any detailed commercial terms, eg as to payment, the contractor devised such terms but left them for inclusion only at the customer's request.
17. Since this is not an appeal from a trial of a preliminary issue but an appeal from an order striking out part of the defence, the issue is only whether CSE's construction is reasonably arguable. In my judgment it is the more likely construction on the present material, although there may be evidence of a more detailed nature about the underlying contractual framework and contractual background.”
40.	Mr Smith says that equally it would be wrong for the Court to strike out or order summary judgment on the incorporation by reference defence. I disagree. As I have pointed out the footer does not refer to terms and conditions but to the basis of contracting. The Defendant clearly did contract by email, whatever the footer said. The Defendant also recorded the deal in writing in the Trust Deed in terms which were consistent with the footer and which could give the Claimant no reason to believe that that a further Client Agreement was required. Further the Defendant carried the contract through to the point of receiving and paying away the money. This first point does not assist the Defendant.
Agency
41.	It is common ground that Mr Randall knew of and was familiar with the Client Agreement and that loans were commonly made subject to its terms and also that he came by that knowledge otherwise than through his work for the Claimant. The Defendant contends first that Mr Randall was the Claimant’s agent and secondly that his knowledge is imputed to his principal. The Claimant disputes both propositions.
42.	Mr de Verneuil Smith says that there is a powerful case that Mr Randall was the Claimant’s agent for information and communication regarding the investment. Mr Randall had a pre-existing professional relationship with the claimant.  The evidence shows that Mr Randall was often engaged by clients to act as their agent for communications with the Defendant. Mr Randall was engaged by the Claimant to provide investment advice and that advice led to Mr Randall introducing the parties. The emails leading to the Contract were sent by Mr Randall to the Defendant. It was Mr Randall who entered into the Loan on behalf of the Claimant and carried out the tasks I have referred to when setting out the facts.
43.	The Claimant does not accept that Mr Randall acted as its agent in the legal sense of the term.  Mr Randall neither had, nor regarded himself as having, authority to bind the Claimant.  Rather, the role played by Mr Randall is properly characterised as that of an “intermediary” or “introducer”: see Bowstead & Reynolds on Agency (19th edition) at paragraph 1-019. This is borne out by the email exchanges that took place between Mr Clarke, Mr Randall, and Mr Abrahams and which culminated in the conclusion of the Contract. That correspondence demonstrates that the parties understood that Mr Randall did not have authority to enter into the Contract on behalf of the Claimant, but was merely acting as an intermediary. 
44.	Even more significant, according to Mr Singla, is the fact that Mr Randall had a pre-existing arrangement to be paid by the Defendant for introducing investors.  The fact that Mr Randall was to receive remuneration from the Defendant for introducing the Claimant is impossible to reconcile with the suggestion that he concluded the Contract whilst acting as the Claimant’s agent.
45.	On this issue the facts are clear and will not change if there is a trial. The relationship is derived from an examination of the relevant documents all of which have been disclosed. In answering the question whether someone is an agent one has to consider what is meant by an agent in the context as the word has different meanings. The essence of an agent in this context is the power to change the legal relations of another, his principal (see Chitty on Contracts, 30th edition 31-001). Mr Randall had no such power for the reasons given by Mr Singla. He was essentially an intermediary. The decisions to invest were taken by the Claimant alone and were seen to be so. The only concluded contractual document was signed by the parties themselves. Mr Randall made the introduction, in a sense as the paid agent of the Defendant. There is no prospect of the Defendant being able to show that the relationship was a relevant one of principal and agent. 
46.	If Mr Randall were an agent in the relevant sense Mr de Verneuil Smith would rely upon Article 95 of Bowstead on Agency which provides:
“(1) The law may impute to a principal knowledge relating to the subject matter of the agency which the agent acquires while acting within the scope of his authority.
(2) Where an agent is authorised to enter into a transaction in which his own knowledge is material, knowledge which he acquired outside the scope of his authority may also be imputed to the principal.”
47.	Mr Smith cites Permanent Trustee Australia Co. Ltd v FAI General Insurance Co (2001) 50 NSWLR 679 at §89 Handley JA said:
“Where the agent acts within his authority with the knowledge in question present to his mind, the principal should be bound by that knowledge, however acquired. I see no basis for ignoring any part of the agent's knowledge, present to his mind, when he is doing the authorised act. The source of the knowledge seems irrelevant. What must matter is the agent's state of mind when doing the authorised act.”
48.	However Mr Singla cites authorities in support of the proposition that the knowledge of an agent is not attributable to the principal where that knowledge was acquired outside the scope of the agency relationship: e.g. Mountford v Scott (1818) 3 Madd 34 at 40 and Taylor v Yorkshire Insurance Co [1913] 2 IrR 1 at 21. He recognises that the then Hoffmann LJ in El Ajou v Dollar Land Holdings Ltd [1994] 2 All ER 685 at 702 seemed to call into question the earlier case law.  However he submits that those observations cannot, to the extent that they might affect this case, survive the decision of the Court of Appeal in  PCW Syndicates v PCW Reinsurers [1996] 1 WLR 1136 where at 1147-1148 the Court of Appeal held that an agent to insure was not under a duty to disclose information acquired other than in its capacity as an agent for the assured.  
49.	The knowledge issue is a complex and controversial one which I need and should not evaluate in view of my conclusion that a relationship of agency does not arise between Mr Randall and the Claimant. Bowstead’s discussion of Article 95(2) is much more cautious that the Article itself. The cases involve special considerations particularly those of insurance and none of them are close to the facts of this case. In the ordinary way a solicitor or accountant who acts for a client will not be expected or permitted to disclose to the principal confidential knowledge acquired when acting for other clients. It would be illogical to impute to a principal knowledge of facts that the agent had no right to disclose to him. This factor in a sense reinforces the conclusion that the relationship is not one of agency. The problem does not arise in this case because, as I see it, the Mr Randall was not acting as the agent in law of the Claimant.
The conversation
50.	The third ground relied on is the Defendant’s disputed claim that the Client agreement and its applicability were expressly discussed and  agreed in March , not as Mr Randall recalls , in July. If the Defendant is right about that then the Client Agreement may well apply. So this aspect must go to trial as I cannot resolve that issue at this stage. However it seems to me that the Defendant may have difficulties in establishing that the recollection of Mr Abrahams is to be preferred. First the burden of proving the conversation lies on the Defendant not the Claimant. Secondly one would generally expect a conversation of this significance, taking place months before anything was signed to give effect to it, to be recorded in some way in writing. Thirdly as a matter of probability it seems more likely that the shortcomings in the documents would have been  identified in July than in March and that this would be put right quickly, not slowly, given the obvious importance of secured loans being fully and properly documented. Assuming as one does a conflict of recollection between two honest business people these factors are likely to be very significant. It follows that if the matter is taken to trial the Court may well award indemnity costs if Defendant loses on this point for substantially these reasons.
51.	It follows that the Claimant has established that the first and second grounds have no prospect of success. The third ground will go to trial if the Defendant still wishes to press it. 
Client Agreement- exclusion of liability
52.	Counsel argued thoroughly the question of whether or not, if the Client Agreement is part of the contract, the exclusions of liability would assist the Defendant. Determination of this issue may well be unnecessary and I therefore defer a decision upon it. 
Conclusion
53.	There will be leave to defend on the question of what the obligations of the parties under the Contract were. There is no prospect of the Defendant establishing that the Client Agreement formed part of the contract unless its unpromising claim based on a telephone conversation succeeds. 
54.	I shall be grateful to receive, not less than 72 hours before the hand down of this judgment, corrections of the usual kind and a draft order both preferably agreed, together with a note of any points Counsel wish to raise at the hearing. If Counsel and solicitors are able to agree directions for trial and send them to me in writing for approval I will dispense with attendance at the hand down. Aside from questions around the need for the adjournment I would expect to reserve the costs of the application until trial. As I have already indicated this case should be tried soon and I will give directions to that effect. The lawyers will know better than me whether, despite the fact that split trials can be a menace, it would be right to try first the issues other than negligence- it may be that the overlap of evidence on the issues means that there will be little potential saving.
55.	I thank Counsel and solicitors for the able way in which this application was prepared and presented.