Gore & Anor v Mishcon de Reya

A Quistclose trust arises only where, objectively construed, the parties intended that transferred money would not be at the recipient’s free disposal, but would be used exclusively for identified payments and returned if that purpose failed. Clear terms and circumstances are required; an advance payment subject to a personal repayment obligation is insufficient. Money in a solicitor’s client account is held on trust, but the relevant trust and beneficiary depend on the terms on which the money was received. Dishonest assistance requires knowledge of the fiduciary obligation and dishonest assistance in its breach. Serious allegations remain subject to proof on the balance of probabilities.

Two claims were tried together against the defendant solicitors. The claimants alleged that money paid into the defendant’s client account was subject to Quistclose trusts, that a partner dishonestly assisted a breach of fiduciary duty, and that the firm was vicariously liable for an unlawful conspiracy.

The first claim concerned approximately US $3.5 million transferred through Simmons & Simmons on behalf of KC and Merlion. The second concerned £224,500 paid directly by Mr Gore. The money was released on the instructions of the defendants’ client, Mr Shephard. Roth J had previously dismissed KC’s summary judgment application in [2013] EWHC 2319 (Ch). The central issues were the objective terms on which the money was transferred and what the defendant’s partner knew about those terms.

1. Quistclose trusts. The court adopted the formulation in Bieber v Teathers Ltd [2012] EWHC 190 (Ch), as qualified by the Court of Appeal in [2012] EWCA Civ 1466. The payer must show an objective intention that the money should remain outside the recipient’s general assets, be used exclusively for identified payments, and be returned if that purpose cannot be fulfilled. Subjective intention to create a trust is unnecessary, but the parties must intend an arrangement having that effect.
2. The transfers through Simmons & Simmons did not preserve KC’s beneficial interest. The funds were treated as ADEL’s money, and the relevant instructions stated that they were to be held to the account of MKC and to Mr Shephard’s order. Those statements were inconsistent with any Quistclose trust. The same conclusion applied to Mr Gore’s payment.
3. There was no uncertainty requiring Mishcon de Reya or its partner to seek instructions from the payers or return the money. MKC was the relevant client for the purposes of the Solicitors’ Accounts Rules. No breach of those rules was established.
4. The dishonest assistance claim failed. The claimants did not prove that Mr Steele knew that Mr Shephard had received the money subject to fiduciary obligations or that he dishonestly assisted any breach. The retainer was not a sham, and the evidence did not establish dishonesty in relation to these transactions.
5. The conspiracy claim also failed. There was no conspiracy and no knowing use of unlawful means. Both claims were dismissed.

This was a first-instance trial. The judgment records that Roth J had dismissed KC’s earlier summary judgment application, with judgment dated 23 May 2013 and citation [2013] EWHC 2319 (Ch). The present court determined the claims after trial and dismissed both.