Simetra Global Assets Ltd v Ikon Finance Ltd (Simetra)

The Court of Appeal allowed the appellants' appeal and ordered a retrial because the trial judge's reasons were inadequate on the core issues of dishonesty and reliance. The case concerned claims in dishonest assistance, deceit and conspiracy arising from confirmations issued by Ikon that purported to show large trading-account balances which in truth corresponded to demo (notional) accounts. Key legal principles applied included the elements of dishonest assistance (as summarised in Group Seven Ltd v Notable Services LLP) and the elements of deceit. The court emphasised appellate restraint but held that a judge must give adequate reasons, in particular when contemporary documents appear to contradict oral evidence. The appeal succeeded because the judge failed to analyse and explain crucial contemporaneous documents, the meaning of the October 2014 correspondence, the role and possible knowledge of Grant Thornton, and the interaction between witness testimony and documentary evidence.

Background and parties. The appellants (Simetra and Richcroft) alleged they were victims of a Ponzi-style fraud operated by George Daskaleas and companies including GStar FX Inc. The Ikon respondents owned the trading platform on which the purported trading took place and provided written confirmations in October 2014 stating large account balances. The appellants sued Ikon for dishonest assistance in breaches of fiduciary duty by Daskaleas, and for deceit and conspiracy; there was a separate claim concerning a capital reduction under section 423 of the Insolvency Act 1986 (not separately decided in this judgment).

Procedural posture. This was an appeal from Robin Knowles J sitting in the Commercial Court ([2018] EWHC 2624 (Comm)), following a 13-day trial at first instance. The judge dismissed the appellants' claims, finding no dishonesty on Ikon’s part and that the appellants had not relied on Ikon’s confirmations; he also described the lead claimants evidence as wholly unconvincing.

Nature of the claims/applications. The appellants sought (i) to hold Ikon liable for dishonest assistance in breaches of fiduciary duty by Daskaleas and his companies; and (ii) damages for deceit and conspiracy in respect of payments made to investors after the October 2014 confirmations (approximately US$18.5 million). They sought, alternatively, equitable relief including consequences of section 423 of the Insolvency Act 1986.

Issues before the Court of Appeal. The court identified the central issues as:

• whether Ikon acted dishonestly when providing account-balance confirmations, and
• whether the appellants relied on those confirmations as referring to real funds.

Court's reasoning succinctly. The Court of Appeal accepted the general legal framework for dishonest assistance and deceit and reinforced the principle that appellate courts should show restraint. However, applying authorities on adequacy of reasons (including Flannery and English v Emery Reimbold), it concluded that the trial judgment failed to engage meaningfully with a mass of contemporaneous documentary material (monthly trading statements, internal emails, the sequence and wording of confirmations and Grant Thornton correspondence), did not analyse the true meaning of the October 2014 correspondence, and did not properly assess the expert and witness evidence in that documentary context. The judge also did not address, or did so inconsistently, the pleaded case against Daskaleas and the necessity of finding a primary fiduciary breach for a secondary dishonest-assistance claim. The court held that these defects meant the critical findings were unexplained and that a retrial before a different judge was required; the court expressed no concluded view on the ultimate merits.

Wider context. The court noted that ordering a retrial is a serious step and a last resort, but concluded it was necessary because the first-instance judgment made serious and inadequately reasoned findings (including adverse findings about the appellants' witnesses) which could not safely stand.

Appeal allowed and the case remitted for retrial. The Court of Appeal held that the trial judge's reasons on the decisive issues (whether Ikon acted dishonestly in issuing confirmations and whether the appellants relied on them) were inadequate: he failed to analyse or explain the significance of contemporaneous documents, did not properly address the pleaded primary breach by Daskaleas on which any secondary liability would depend, and did not reconcile witness evidence with objective documentary material. For those reasons the first-instance judgment could not safely stand and a retrial before a different judge was ordered.

Appeal from the Commercial Court (Robin Knowles J) whose judgment is reported at [2018] EWHC 2624 (Comm); appeal heard in the Court of Appeal leading to this judgment [2019] EWCA Civ 1413.