Foglia v Family Officer Ltd & Ors

Summary judgment may be granted in a fraud claim where the defendant has no real prospect of defending it and no compelling reason requires a trial. The court must nevertheless exercise considerable caution, avoid a mini-trial and consider whether fuller investigation may materially alter the evidence.

The court may test a defendant’s account against contemporaneous documents, agreed facts and logic. Where the cumulative evidence makes every innocent explanation fanciful, speculative hopes that further investigation may produce an answer do not require a trial. The civil standard of proof applies, although the seriousness and inherent improbability of fraud require cogent evidence and careful scrutiny.

The claimant was the beneficial owner of funds held through an Italian fiduciary company in an account at a Cayman bank. A person impersonating an authorised signatory procured the transfer of €15 million to an English account held by the first defendant, a company controlled by the fourth defendant. The claimant recovered approximately €11.46 million through disclosure orders, freezing orders and proprietary injunctions.

The claimant alleged that the fourth defendant participated in the fraud and caused the proceeds to be distributed for his own benefit, that of his wife and that of companies he controlled. The respondents denied involvement and maintained that they believed the money belonged to an Italian businessman under an investment agreement.

The claimant applied for summary judgment on proprietary, knowing receipt, dishonest assistance and unjust enrichment claims. The central questions were whether the respondents had a real prospect of defending the claims and whether further factual investigation supplied a compelling reason for trial.

1. Application granted. Although summary determination of a fraud claim is highly unusual and requires considerable caution, dishonesty creates no legal bar to summary judgment. The court had to decide whether the defence was truly fanciful, while avoiding a mini-trial and allowing for the possibility that further evidence might emerge.

2. The court could critically test the respondents’ account against contemporaneous documents, agreed facts and logic. This did not require resolving conflicting oral evidence or assessing witness credibility as at a trial. The civil standard of proof would apply at trial, but the seriousness of fraud and the respondents’ fiduciary position required a cautious appraisal of whether any honest explanation remained realistically possible.

3. Three cumulative evidential features were decisive. First, the telephone used to initiate the fraud had been bought by an employee of the first defendant, and the calls were made near its office. That evidence was damaging but just capable of innocent explanation. Secondly, money was rapidly used to discharge personal and corporate liabilities which could not credibly be characterised as investments. Thirdly, spoofed emails contained apparent earlier messages from the fourth defendant which neither the genuine recipient nor his employer had received. The respondents supplied no innocent explanation for those manufactured email chains.

4. The email evidence probably sufficed by itself. Taken with the telephone and payment evidence, it made any innocent account fanciful. The respondents ultimately needed a coherent explanation for all three matters. The asserted clash of improbabilities did not justify a trial because it confronted evidence containing an element of practical impossibility and clear indications of dishonesty.

5. The proposed further investigations were speculative. The respondents had pursued no concrete evidential avenue during the seven months following the application, and identified nothing likely to answer the decisive evidence. There were therefore no reasonable grounds for believing that fuller investigation would alter the material available to a trial judge or affect the outcome.

6. Judgment was entered against the first and fourth defendants for €3,543,368 plus interest. The first defendant was liable in unjust enrichment and knowing receipt, and the fourth defendant in dishonest assistance. Judgment was also entered against the recipient companies for their respective unrepaid receipts. Had summary judgment not been granted, the court would have made a conditional order for payment of the outstanding sum or equivalent security.

This was a first-instance application within ongoing Commercial Court proceedings. Before the application, the claimant had obtained non-party disclosure orders, proprietary injunctions and a worldwide freezing order from Carr J, Phillips J, Jacobs J and Cockerill J. No appellate history is stated in the judgment.