Gresport Finance Ltd v Battaglia

For limitation under section 32(1) of the Limitation Act 1980, reasonable diligence is assessed contextually. The inquiry assumes a claimant who wishes to discover the relevant fraud, concealment or mistake, but ordinarily requires something to put the claimant on notice of a need to investigate.

The claimant bears the burden of showing that discovery would have required exceptional measures which it could not reasonably have been expected to take. An agreed arrangement requiring communications to pass through a trusted intermediary may make direct inquiry of another participant an exceptional measure, where nothing has occurred to arouse suspicion.

An appellate court may overturn findings of fact only where the trial judge was plainly wrong.

Gresport Finance Ltd held cash and securities for its beneficial owner. Mr Battaglia acted as its agent and fiduciary by transmitting the owner’s instructions to its corporate administrator. The administrator was expected to act on those communications without contacting the owner directly.

The deputy High Court judge held that Mr Battaglia had caused some unauthorised payments and a securities transfer. The judge awarded £941,917, including interest, and rejected the limitation defence because the relevant concealment could not with reasonable diligence have been discovered more than six years before proceedings began. The judge dismissed claims concerning other payments because their lack of authority had not been proved.

Mr Battaglia appealed against the reasonable-diligence finding. Gresport cross-appealed against the rejection of the remaining payment claims and relied, alternatively, on section 21 of the Limitation Act 1980. The central issues were whether the concealment could reasonably have been discovered earlier and whether the challenged factual findings were plainly wrong.

1. Both the appeal and the cross-appeal were dismissed. Henderson LJ delivered the judgment, with which Floyd and McFarlane LJJ agreed.

2. Section 32(1) of the Limitation Act 1980 asks whether the claimant could, with reasonable diligence, have discovered the relevant fraud, concealment or mistake. The inquiry assumes a desire to know and investigate. That assumption has practical meaning only where there is something to put the claimant on notice of a need for investigation. The content of reasonable diligence depends on the particular context: paras [41], [48]–[50].

3. Nothing had put Gresport, its administrator or its beneficial owner on inquiry before 7 August 2007. Their agreed arrangements required instructions to pass through Mr Battaglia, who was a trusted intermediary. Payments to accounts connected with his asset-management activities were not inherently suspicious. Direct communication between the administrator and the beneficial owner would have departed from the agreed arrangement and constituted an exceptional step. Gresport therefore could not with reasonable diligence have discovered the concealed lack of authority earlier: paras [52]–[58].

4. The trial judge had mistakenly inferred that the beneficial owner must have met Mr Battaglia after December 2006 and received a later portfolio statement. Properly understood, the evidence showed that the owner could estimate the sale proceeds from the December statement and the prompt sale of the securities. Removing that adverse inference strengthened, rather than undermined, the judge’s conclusion on reasonable diligence: paras [53]–[58].

5. The alternative arguments under section 21(1)(a) and (b) of the Limitation Act 1980 raised difficult questions but were unnecessary once the section 32 defence failed. The court declined to determine them: para [58].

6. The cross-appeal challenged factual findings and therefore had to satisfy the plainly-wrong threshold. Gresport retained the burden of proving that each payment was unauthorised. Defects in Mr Battaglia’s untested evidence did not require the judge automatically to accept Gresport’s case. The judge was entitled to distinguish payments made to recipients connected with Mr Battaglia from those for which no such connection was proved. His cautious assessment, including his treatment of the Bank Syz payments, was open on the evidence: paras [60]–[67].

1. Court of Appeal (Civil Division): In [2018] EWCA Civ 540, dismissed Mr Battaglia’s appeal on limitation and Gresport’s cross-appeal concerning the remaining payments.
2. High Court, Chancery Division: In [2016] EWHC 964 (Ch), the deputy judge upheld the portfolio claim and part of the payments claim, rejected the limitation defence under section 32 of the Limitation Act 1980, and awarded £941,917 including interest.