Patel v Naik

Where money is paid to an individual pursuant to an agreement for a specified investment, the individual may remain personally liable even if the payment was directed to companies or accounts associated with the proposed investment. The court must identify the agreement, the payments and the recipient or person directing each payment. If the agreed investment has not been made and the consideration has wholly failed, the payer may recover the money on a restitutionary basis. Damages for repudiatory breach provide an alternative where appropriate. The source of the payer’s funds does not affect the recipient’s liability where the money was paid on the payer’s behalf.

The claimant sought recovery of £54,266.55 paid during 1999 and 2000 for investment in Canadian property and property syndicates. He alleged that the defendant had induced the payments by presenting himself as an experienced property and financial adviser, but had failed to invest the money and had misappropriated it.

The payments comprised cash and cheques paid to the defendant personally, together with sums paid at his direction to Belgravia Property Developments Ltd, Plasto Ltd and Turling. The defendant contended that the claimant’s agreements were with Turling and that he was merely its employee or intermediary. The central issues were the identity of the contracting parties, the destination of the payments, whether the investment had occurred, and the appropriate basis of recovery.

1. Contractual relationship. The agreements were between the claimant and the defendant personally. The claimant had relied on the defendant’s personal representations, trustworthiness and asserted experience. The reference to Turling on the defendant’s business card did not establish that he was acting merely as the company’s agent.
2. Payments and accountability. The claimant paid £2,000 in cash and £10,000 by two cheques to the defendant personally. He paid a further £30,000 to Belgravia, £3,500 to Plasto and the sterling equivalent of C$20,000 to Turling, all at the defendant’s direction. The defendant was liable to account for each payment.
3. Failure of investment. The evidence established that the monies had not been invested as agreed. The overwhelming inference was that the defendant had misappropriated them for his own use.
4. Remedy. The primary analysis was restitutionary: the consideration for the payments had wholly failed, so the defendant was required to account for and repay the monies. Alternatively, the sums were recoverable as damages for repudiatory breach of contract.
5. Source of funds. The source of the claimant’s funds was immaterial. Even if the claimant’s wife had physically handed over the cash, she would have done so as the claimant’s agent. The cash claim was evidentially the weakest part of the case, but the judge accepted it.
6. Judgment was entered for the claimant for £54,266.55 plus interest. Further submissions were invited on the detailed calculation of interest and costs.

not stated in the judgment.