Keyser: Defendant straightforwardly liable as principal
A businessman who refused to repay a £626,000 loan made by a law firm partner from a client’s funds without their consent has been ordered to make good the money.
His Honour Judge Keyser QC, sitting as a High Court judge, rejected David Bond’s argument that the loan was made to a limited company – albeit one he controlled – and so he was not personally liable for its repayment.
The claim was brought by Cheltenham private client law firm Wiggin Osborne Fullerlove (WOF). In January 2015, then partner Mark Payne lent the money from the client account of an estate held by a trust without its permission.
The previous year, he had arranged for the trust to make a short-term loan of about £1m to another WOF client, with its authority.
Mr Payne was introduced to Mr Bond by another of his clients. He said he did not undertake any due diligence in respect of him as a result. He also said he had also been impressed by Mr Bond’s status as a barrister, although he never practised.
Mr Payne said he acted as he did because of Mr Bond’s urgent need for the loan and he had intended to seek retrospective approval. He said he thought he was helping Mr Bond over a short cash flow issue in his shipping container business, and that the trust would also benefit.
The loan was initially for a fixed term of 30 days at 10% APR and it was then renewed as a loan repayable on demand at an interest rate of 5% APR. The money was not repaid, despite Mr Bond saying at points that it would be.
In December 2015, this and other actions led to Mr Payne being asked to resign from WOF with immediate effect, which he did, and reports made to the Solicitors Regulation Authority.
WOF also repaid the £626,000, together with interest, out of its office account. The firm was in turn indemnified by its insurer, Axis Speciality Europe, to the extent of £602,000.
In 2016, WOF began proceedings against Mr Payne for breach of the partnership agreement in various respects, including making the loan, and the following year Axis brought its own proceedings against him for breach of the contract of insurance between Axis and the partners in WOF.
The court recorded that, in March 2018, after agreement had been reached with WOF and Axis, Mr Payne’s proposals for an individual voluntary arrangement were approved and the proceedings against him stayed.
In 2019, Mr Payne was struck off [1] over 11 counts of misconduct in all, one of which related to this matter. He admitted acting without the client’s authority and that he had given a false explanation of the payment to WOF’s accounts department.
Mr Bond claimed in his witness statement that “there was never at any time, any intent, mention, suggestion or understanding that the claimant’s client’s loan was entered into in a personal capacity by myself”.
HHJ Keyser found [2] agreement for the loan was reached orally. No mention was made of a specific company to which the loan was to be made and he said Mr Payne viewed it as being “a personal assistance to Mr Bond”, as well as a sound investment for his trust client.
He concluded that Mr Bond was “straightforwardly liable as principal” for the money and, if he was wrong on that, liable jointly with a corporate principal.
“The furthest that the matter can possibly have gone (though I find that it did not in fact go this far) is that Mr Bond was acting for a disclosed but unidentified principal; that is, that he was acting for an unspecified company within the group of companies connected with Mr Bond.”
In a section assessing Mr Payne’s credibility as a witness, HHJ Keyser said he looked beyond the plain fact that he had been struck off for misconduct which involved an element of dishonesty.
He noted evidence that “it was at least contributed to by work-related stress and associated depressive illness”, while only one of the 11 offences “involved a motive of personal gain, and that one appears to have concerned misappropriation of client funds in the misguided expectation that Mr Payne would be able to repay them before their appropriation was discovered”.
Further, Mr Payne had no financial interest in the outcome of the proceedings: “There is no apparent reason why he should give false evidence to assist WOF in these proceedings, especially when his involvement as a witness has involved revisiting some of the matters that led to his professional downfall.”
In “all material respects”, the judge continued, his evidence was “credible when tested against the documentary record” and his oral evidence “carried conviction”.
Mr Bond, however, was “much less satisfactory as a witness”, HHJ Keyser found, with his unwillingness to give “simple answers to simple questions” most likely down to “a lack of straightness and candour”.