Charles Claire Llp & Anor v Kevin Harold Woolgar

A commercial intermediary who represents that customers are paying factory prices, while secretly adding amounts for his benefit, may be liable in deceit. Where money is transferred for the specific purpose of paying suppliers, a Quistclose trust may arise, and diversion of the money may constitute breach of trust. Agency depends on whether the intermediary acted to affect the principal’s legal relations with third parties; arranging purchases and onward sales as principal does not establish agency. An implied contract may arise from the parties’ conduct where necessary for business efficacy, including obligations to pass on purchase funds without undisclosed additions. A bad-faith trade mark claim requires assessment of the applicant’s intention at the filing date by reference to the principles in [2024] UKSC 36.

The claimants operated a golf-products business and engaged the defendant under a consultancy arrangement to source products, negotiate prices and assist with design. They alleged that he used related Chinese businesses and altered or permitted alteration of invoices so that they paid more than factory prices, retaining secret commissions. They brought claims in deceit, trust, agency, contract and negligence, and challenged the defendant’s registration of an Ai logo trade mark.

The defendant denied taking commissions and brought counterclaims for unpaid consultancy fees, product-related sums and a royalty on Ai clubs. The central issues included whether the invoices involved secret commissions, whether the transferred funds were held on a purpose trust, whether an agency or implied contractual relationship existed, and whether the trade mark was owned by the claimants or registered in bad faith.

1. Secret commissions and deceit. The defendant had represented that the claimants were paying factory prices and that their money would be passed to suppliers. The evidence established that he knowingly increased prices, directly or through related businesses, and benefited from the difference. The elements of deceit were satisfied, including falsity, knowledge, intention that the representations be acted upon, reliance and loss. The claimants succeeded.
2. Purpose trust. The money transferred to the defendant for payment of particular suppliers was subject to an express purpose. A Quistclose trust arose. The defendant had only a limited right to the money and was obliged to apply it to the stated purpose or return it. Amounts diverted for his benefit were paid away in breach of trust, entitling the claimants to equitable compensation and, if pursued, proprietary remedies.
3. Agency. The defendant did not act so as to affect the claimants’ legal relations with the factories. The factories contracted with Atop Far East as principal, which assumed the payment risk. The claimants therefore failed to establish agency or fiduciary duties.
4. Implied contract. Following the end of the consultancy arrangement, the parties’ conduct gave rise by necessity to an implied contract. Its terms included an obligation to pay suppliers all purchase funds received and not to manipulate invoices for the defendant’s benefit. The defendant breached those terms. Conversely, where the claimants had confirmed orders and paid deposits, they were obliged to pay balancing sums due on three product invoices.
5. Counterclaims. The defendant was entitled to unpaid monthly consultancy fees because the requirement to particularise hours concerned the form of the invoice and was not a condition of payment. He was also entitled to the royalty for Ai clubs supplied by him after assuming the tooling risk, but not for clubs supplied directly by the factory where he had not funded the tooling. His claim for three unconfirmed Ai, Crystal and Predator orders failed.
6. Trade mark. The consultancy agreement personally bound the defendant in relation to the intellectual-property assignment clause, and the words “hereby assign” were sufficient to effect an assignment between the parties. However, the Ai development did not arise from the contractual Services because the claimants had declined to fund the tooling and the defendant developed the range at his own economic risk. The ownership claim therefore failed. Applying the principles in [2024] UKSC 36, the claimants did not prove that the application was made in bad faith. The invalidity claim failed.
7. Damages and consequential hearing. The court accepted an adverse inference from the defendant’s deletion or suppression of relevant documents and assessed secret commissions at 25% of the relevant payments. It also allowed 50% of the staff, management and professional costs incurred in the HMRC investigation as losses directly flowing from the deceit. A consequentials hearing was directed.

First-instance judgment. No prior appellate decision is stated in the judgment.