Al Khudairi & Anor v Abbey Brokers Ltd & Ors

A broker entrusted with loan proceeds to hold them pending a specified transaction may owe contractual and fiduciary duties to the borrowers. Those duties are breached where the broker diverts the money for its own purposes, thereby preventing the agreed transaction.

A false statement of present intention can found deceit. Dishonest assistance requires assistance in a breach of fiduciary duty and conduct contrary to normally accepted standards of honest behaviour, assessed by reference to the defendant’s actual knowledge of the relevant facts.

The claimants borrowed money secured on their property. They alleged that the defendant broker advised them to raise the money to facilitate transfers of flats to their children and agreed to hold the net advances pending those transfers.

The money was instead paid into an account operated for the benefit of one defendant and was rapidly used to discharge his liabilities. The claimants sought repayment, equitable relief, damages for deceit and liability for dishonest assistance.

1. Contractual liability. The net advances were to be held by Abbey pending the proposed transfers. Abbey was therefore obliged to repay them on reasonable notice. Judgment was given for £1,348,546.86, with appropriate credit for sums previously repaid.
2. Fiduciary duty. Abbey acted as the claimants’ agent and undertook to act for them in relation to the loan and intended property transfers. In those circumstances it was a fiduciary. By directing payment into the De Mel Account while contemplating use of the money for Mr Silva’s benefit, Abbey acted against the claimants’ interests and disabled itself from carrying out the agreed arrangement. It thereby breached its fiduciary duties. Equitable compensation remained to be assessed.
3. Deceit. Mr Silva represented that the money would be held for the property transfers, although he did not intend that to occur. The claimants relied on the representation and suffered loss. A false statement of intention is a misrepresentation of fact. Damages were therefore awarded against Mr Silva, to be assessed, with interest.
4. Dishonest assistance. Mr Silva and Mr De Mel each assisted Abbey’s fiduciary breaches. Applying Royal Brunei Airlines v Tan [1995] 2 AC 378, Twinsectra Ltd v Yardley [2002] 2 AC 164, Barlow Clowes International Ltd v Eurotrust International Ltd [2006] 1 WLR 1476 and Abou-Rahmah v Abacha [2007] 1 Lloyd’s Rep 115, dishonesty was assessed objectively by normally accepted standards, informed by what the defendant actually knew. Knowledge of every detail of the breach or the precise identity of the victim was unnecessary.
5. Mr Silva knowingly caused the money to be diverted for his own purposes. Mr De Mel, possessing banking experience, knew or suspected the account’s illicit purpose and that client money was being used to discharge Mr Silva’s liabilities. Both were liable for dishonest assistance and equitable compensation to be assessed.
6. The claim for knowing receipt against Mr De Mel was not pursued because he had not beneficially received the money. An account was ordered in respect of the £150,000 paid to Wharfland from the earlier mortgage.