[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Manolakaki v Constantinides & Ors [2004] EWHC 749 (Ch) (02 April 2004) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/749.html Cite as: [2004] EWHC 749 (Ch)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		2nd April 2004

Mr Justice Peter Smith:

INTRODUCTION

1. This is a claim by the Claimant a Greek National, against the Defendant who at the time was a sole practitioner under the style "John Constant and Co.".
2. The claim arises out of an investment by the Claimant of US$1million and the subsequent loss of that investment. There is no doubt that the Claimant has been defrauded. The issues revolve essentially around the Defendant's role in that loss of her investment, as against her role.
3. The Claimant alleges that the Defendant was her solicitor retained by her to advise her as to the investment scheme. Part of the complicating features is the fact that the Claimant does not speak English to any significant degree. Certainly there is no prospect of her being able to understand in any intelligible way any documents written in English which are of a sophisticated nature. Having seen her in the witness box for a number of days, I form the view that she did have some limited command of English in the sense that she was able to follow sometimes simple questions and react to them before they had been translated to her, but I conclude that she had no sufficient command so as to be able to understand the large number of documents in English that were provided to her by the Defendant during the course of this transaction.
4. The Defendant is a solicitor of the Supreme Court of England and Wales, and was admitted to the roll of solicitors in 1978. Prior to that date he worked as a litigation assistant for five years and served articles for five years. He is a Greek Cypriot and many of his clients were Greek speaking. His practicing certificate was suspended from the end of October 2001 following an intervention by the Law Society as a result of this claim, but was restored subject to conditions in April 2002. It is clear however that the intervention has had a significant impact on him. He has not worked since the intervention and his time has been devoted mostly to the defence of the proceedings. In this context I refer to the witness statement of Thea Constantinides the Defendant's daughter, which sets out the impact both physically and mentally that these proceedings have had on him.
5. He appears to be a well respected member of the Greek community, participates in charitable and other matters to an extensive degree.
6. The Claimant was with her husband the operator of a successful business in Greece, selling pottery and other items of domestic use. The net profits up until the year before 1998 was something of the region of between £250,000 and £350,000, although I have not seen any accounts. The business appeared to have a large number of employees, but I suspect they were out workers working on a sale or commission basis in respect of the products.
7. She had investment property in Greece, and as a result of accumulated profits she had standing in her bank account something of the order of just over US$1million in the early part of 1998.
8. Her initial reason to visit this country in early 1998 was to look for a property in London for her daughter to occupy whilst she studied. She also had contact with a Mr Bonnisel, who lived in this country and assisted the Greek community. He would negotiate loans from banks in London charging a commission for his services. He advised her initially to buy a flat rather than rent it, and he also suggested to her that she might be well advised to make investments in England through him.
9. The Defendant has suggested in this case that the Claimant was a sophisticated financial investor throughout, and made her own decisions based on her own knowledge and expertise of the transactions the subject matter of the present dispute. Having seen her, in evidence and her answers, I reject that analysis. She may have been a successful business woman in the business of making and selling pottery, but I saw nothing to suggest that she had any kind of expertise in respect of international financing transactions.
10. It is true that she met Mr Bonnisel, and was introduced to a firm of financial investment advisors by him (JPG). As part of that introduction, she signed an agreement on the 15^th January 1998 which was witnessed by the Defendant. That agreement, although it has some of the questionable expressions in it that are to be found in international fraud documents, "this fee agreement also serves as a non circumvention and non disclosure agreement …" is basically a commission agreement whereby she agreed to pay 15% on all profits made as a result of their introduction. It is very different from the documents which were signed which led to this litigation.
11. I accept her evidence that this matter did not proceed anyway, and reject the Defendant's contention that this was evidence of her sophistication in respect of international financing transactions. Equally in this context, I reject the Defendant's evidence that he had met the Claimant before he attested this document on the 15^th January 1998. I found his evidence as to the suggestion that he met her in 1997, and then was reminded by his brother-in-law that he must have met her in 1996, unbelievable. This was one of the many instances where I reject the Defendant's evidence in this case.
12. The other parties to the action, the subject matter of a Part 20 claim by the Defendant are his insurers under his professional indemnity insurance. They have declined to offer him an indemnity, on the basis that the liability arises from a dishonest or fraudulent act or omission committed or condoned by him. In addition, the Part 20 Defendant contend that if they are wrong in that contention, they are nevertheless entitled to an indemnity from him, because on the 23^rd August 2000 he signed a declaration that he was not aware of any circumstances which might give rise to a claim, other than those that had been already notified. The Part 20 Defendants contend that he was aware of a claim when he signed that declaration, to be brought by the Claimant and that therefore under Clause 7.7 of the Policy of Insurance where any "insured who committed or condoned (whether knowingly or recklessly) any non-disclosure or misrepresentation", he is under an obligation to reimburse the insurer to the extent that it is just and equitable having regard to the prejudice cause to the insurer's interests.
13. The Part 20 Defendant's case is that if they had been informed of the potential claim in respect of US$1 million minimum they would not have agreed to insure him, or alternatively would have required him to notify the circumstances to the Solicitors' Indemnity Fund ("SIF") and would not have been liable. The policy of insurance was taken out following the termination of the mutual funding arrangements constituted by the SIF. The notification referred to would have led to a claim on the run off policy of the SIF so that in either eventuality the Part 20 Defendants would not have had a liability of the size currently facing them in these proceedings.

THE CLAIM

14. The Claimant's case is that following a discussion between her and the Defendant about the pros and cons of property investment he introduced her to an investment advisor, Mrs Rosemary Roeters-van Lennep ("RVL") who had access to secret schemes which would give her a return of 120% per cent per annum on investment of US$1 million. The Claimant contends that the Defendant assured her that the scheme was without risk, the returns were guaranteed but she would have to pay a commission of approximately half of the return to a company called Westminster Services Limited.
15. Westminster Services Limited ("Westminster") was a company incorporated in the British Virgin Islands by the Defendant on the 2^nd November 1994. The only officer of Westminster is the Defendant. He is also the only shareholder. He held the shares upon trust for another client of his Demetrios Vassiliou and his family. The trust deed produced is dated the 18^th November 1994 which records a declaration of trust to that effect. However, it emerged in evidence that in fact a further Trust deed had been created at a later date, whereby that trust deed was "cancelled" and substituted with another trust of the same date (although of course executed many years later), whereby he held the shares upon trust for Mr Vassiliou and members of his family rather than Mr Vassiliou alone. It was quite clear from the evidence that the Defendant was willing to allow documents to be backdated simply because his client requested it. This reflects his extraordinarily casual approach to matters generally.
16. I should say in the context of this case that there was not one letter of instruction sent by him to the Claimant, setting out what he was doing, and what he was supposed to charge, (even in respect of the short lived conveyancing transaction concerning the flat). Only one note of any attendance on the telephone has been produced by him, and in respect of his alleged limited duty as translator there is only one document in the whole series of events which the Defendant translated from English into Greek.
17. Not only was Westminster of course his client, he was its sole officer and shareholder. He, I find, did not disclose that to the Claimant, with the result that unknown to her he was acting for both sides on negotiations that took place concerning the fee entitlement of Westminster. In addition he was directly interested in Westminster's fees.
18. After the proposed investment was raised by the Defendant, a series of disputed events took place which ultimately led to the Claimant signing a large number of documents which came into effect on the 6^th April 1998.
19. There is much dispute between the parties in respect of the events which took place before those documents were signed, how those documents were signed and events which happened afterwards.
20. The sole witnesses who were able to give evidence in respect of these affairs were the Claimant, her daughter Kyriaki Manolakaki and the Defendant.
21. Large areas were disputed factually, extending even to the periods when it was alleged the Claimant was in this country. For example, the Claimant gave evidence that after the collapse of the conveyancing transaction in mid February 1998 she did not come back to this country until early April 1998. She gave evidence to the effect that she met RVL for the first time in April 1998, went to church with her and never met her again after 6^th April 1998.
22. The Defendant on the other hand gave evidence to the effect that she met RVL at a series of meetings in February 1998 (some of which he attended) and met her on other occasions
23. I remind myself that it is very important to assess a witness's evidence by reference to a number of matters. First, the most important method is by seeing the witnesses' performance in the witness box, their demeanour, how they answer questions and how they conduct themselves generally in the witness box. Second, it is important to consider their evidence in the light of contemporary documents, and to measure any oral testimony against such contemporary documents, especially if the oral testimony conflicts with contemporary documents. Third, it is important to appreciate for example, that the witnesses are being required to recall quite detailed events which (in this case) occurred six years ago. The events would not have seemed significant to the same degree at that time, and it would be quite wrong to hold against witnesses errors that they might make about dates and events so long ago when there are no contemporary documents to assist their memory. In this case I have already commented that the Defendant kept no contemporary notes of any telephone discussions or meetings that took place whatsoever.
24. In addition, it is important to bear in mind that merely because a witness is mistaken on some aspects or even untruthful on some aspects it does not follow that witness's evidence should be rejected entirely, and it is quite possible that the witness might be correct on other areas notwithstanding a finding that on some factors that witness might have been mistaken or even untruthful. Finally, I make allowances for the fact that the Claimant in particular did not speak English. This had two important results. First, it meant that when she was giving evidence there was not always the flow of evidence that would come from a witness speaking their own language. That caused difficulties with her, and there were occasions when translation was not always understood. That is not meant as a criticism of the translator who for my part did an excellent job, but important words can sometimes be lost in the translation. The second consequence is that cross-examination is difficult and time consuming, and the cross-examiner loses the impact of cross-examination when his questions are translated.
25. I take all of those factors into account. In taking those factors into account my impression of the Claimant was that she was essentially an honest and truthful witness. My assessment of the Defendant was that in significant areas as I set out in this judgment, I conclude he was not being truthful, and he frequently dovetailed his evidence in a way that suited him, and frankly also gave evidence that was incredible. Where there were factual conflicts of evidence between him and the Claimant I have no hesitation in accepting her evidence in preference to his, unless there were other factors which affected the credibility of her evidence.

EFFECT OF INTRODUCTION OF RVL

26. In financial terms the introduction to RVL has been a disaster. The Claimant parted with her US$1million ultimately in June 1998. She received back two payments of US$50,000 in July and August and that was the last she saw of her money. I have no doubt that RVL was a fraudster. The crucial decision for me is the extent to which the Defendant had a role in the defrauding of the Claimant by RVL.
27. The Claimant's case is that she was willing to invest her money, provided it was secure. Her case throughout the hearing before me was and remains that she would not invest unless she had a bank guarantee securing her investment. She signed numerous documents which were provided to her by the Defendant, which he did not explain or give any adequate explanation or advice in respect thereof. The Claimant contends that the Defendant had a duty that is in addition to the duty to exercise reasonable skill and care, arising out of the contract of retainer or at common law, in the conduct of her affairs having regard to the standards normally adopted in the profession, a duty not to promote or assist in the promotion, or say anything which appeared to promote a scheme of investment ("the scheme") unless he was fully qualified and competent to do so; without taking all necessary steps to ensure that the scheme was fully and properly conceived, described, documented and represented to the Claimant; without taking all necessary and proper steps to ensure that any risks were properly identified and evaluated, and that in respect of any return or anticipated return that it was realistic and reasonably achievable. Further, it is contended that he owed a duty not to introduce a person running such a scheme without taking all necessary steps to confirm the bona fides of that person and their qualification and/or ability to run such a scheme.
28. It is also contended that the Defendant had a duty to understand the nature of the scheme, so as to be able fully and accurately to inform and advise the Claimant, and that if he was unable to do that he should fully and clearly so inform the Claimant, and if appropriate advise her to seek specialist advice and in any event fully and clearly advise her against proceeding with a scheme which he could not understand, and to give full and clear advice of the risks involved in proceeding.
29. In addition, it is contended that the Defendant was under a duty not to inform the Claimant there was a bank guarantee in place until there was, and a duty to inform the Claimant if an anticipated bank guarantee was not forthcoming.
30. In addition it is alleged there was a duty in respect of conflict of interest, the need to understand fully any written documentation, and that to ensure that it correctly and fully set out the proposed transactions, rights and remedies, to advise fully and clearly on the content and effect of any written documentation, drawing attention to any unusual matter with a like duty where any proposed variations were made to an agreement.
31. The breaches are extensively set out in the Re-Amended Particulars of Claim and are in essence an allegation that the Defendant ought not to have persuaded the Claimant to invest with RVL who was totally unsuitable, and that he persuaded her to make the investment on representations that the same was secure, would have achieved 120% return, carried no risk and was subject to a bank guarantee and failed totally to advise the Claimant properly or at all in relation to the documentation. In addition it is alleged that he failed to give any advice to take independent advice, failed to disclose the existence of Westminster, the fact that the Company was a client of his and would be making payment to him in respect of the transaction and continued to act notwithstanding the conflicts between the Claimant and Westminster, allowed the so called security aspects of the deposit to be released, and finally failed to advise her at all following the failure of RVL to make the payments subsequent the first two payments and compounded that by permitting her, the Claimant, to enter into a variation of the joint venture agreement without giving her any advice.

STANCE OF THE DEFENDANT

32. The stance of the Defendant is primarily (ignoring the numerous factual disputes), that he introduced RVL to the Claimant honestly believing RVL was a bona fide investment broker. He did this in the belief that the Claimant knew all about these types of schemes, and did not need any advice on them; she only needing translation services which the Defendant would provide. He denied that he gave any advice in respect of the schemes, emphasising that he was not competent so to do because he did not understand how they operated, but that he acknowledged that the Joint Venture Agreement provision that RVL would hold the Claimant's funds in a blocked account was not adequate security and that further security would be taken. The security obtained was a promissory note dated 6^th April 1998 and a deed of assignment whereby RVL purportedly assigned to the Claimant the benefit of a life policy with Allied Dunbar up to a value of US$1 million until repayment by her of the money advanced by the Claimant.
33. The key limit to the Defendant's retainer is set out in paragraph 26 of the Amended Defence namely, the retainer was limited to provision of (1) translation services and (2) administrative services including writing letters of instruction to banks and the production of typed documents whose drafts had been prepared by RVL. The Defendant expressly denies that he was retained to advise generally about investment matters or about the matters which the Claimant was proposing to enter into, save he did advise that she should obtain security in relation to the proposed investments and he thereby took upon himself responsibility to advise her about security. He admits his duty to that limited extent, but his argument is that any breach of such obligations was not causative of any loss because the Claimant made her own decision to go on with the transaction notwithstanding his advice about the inadequacy of the security.
34. The fundamental legal dispute between the Claimant and the Defendant therefore is as to the extent of his duties and responsibilities to her. There is no serious dispute over his obligations if he was retained as contended for by the Claimant; the issue in reality is as to the extent of his retainer. Equally, there is no dispute that if he was retained as alleged by the Claimant he did not discharge his duties as required by such a retainer.

THE PLAYERS

35. In addition to the Claimant and her daughter and the Defendant, various other people featured in the case. The key other person was RVL. The Claimant and the Defendant first met as a result of an introduction by Mr Bonnisel who was a Greek National living in London being an acquaintance of the Claimant and a client of the Defendant. Another person who featured largely in the events but for no satisfactory reason failed to give evidence before me was Christos Cakkos, an associate of the Defendant and a mortgage broker employed by Allied Dunbar. Most of the transactions took place through the Bank of Cyprus in London, whose manager at that branch was a Mr Kounis.
36. Part of the security supposedly supplied to RVL in respect of her obligations were US Treasury Bonds alleged to belong to Vito Pigaiani an Italian National resident in Brazil. He was said to be associated with the schemes which RVL was promoting, equally a Mr Reuvin Malek, an apparently wealthy Israeli National was also associated in some way with RVL and he procured (possibly) a company in Israel of which he was (possibly) a shareholder and director, IBC Software Services Limited to give a guarantee supporting the repayment of the monies obtained by RVL. The evidence suggests that no such company exists, and it might be that the correct company name is IBCS Software Services Limited. It is entirely academic because it is not suggested that any money will ever be obtained from that source.
37. I have already mentioned Mr Vassiliou and his family's beneficial interest in Westminster. Another person who featured peripherally was Andreas Matsoulas who was said to be involved with the Greek Government as well as being a client of the Defendant and had apparently successfully invested (it is said on behalf of the Greek Government) in investment schemes. The Defendant's belief as to the success of these schemes is heavily dependent on what he says Mr Matsoulas told him. In that context also, there is a Dimitri Vittas, an economist with the World Bank who also apparently advised the Defendant as to these schemes. Originally it was proposed that Mr Vittas would give evidence but the trial came and went and ultimately his witness statement was the subject matter of an application by the Defendant for it to be adduced under the Civil Evidence Act 1995. No objection was taken to that as he was beyond the seas.

THE SCHEMES

38. Various schemes were proposed over the course of the events. The first scheme involved the Claimant depositing US$1 million in a deposit account (initially in her name) with Barclays Bank PLC at Hanover Square London. This account was to be called a "blocked funds account". This was one of the many mysterious and impressive sounding financial expressions which were introduced in the arrangements. I will say a little more about these expressions when I deal with the documentation in more detail further in this judgment.
39. The essence of the arrangement was that the Claimant was to put money in an interest bearing account where she would receive a normal return from the bank of something of the order of 6%. That account would be blocked in some way, so that the money could not be removed from it (although in whose favour and how the blocking operation operated, nobody was satisfactorily to explain). The monies remained in the blocked account for the year and at the end RVL agreed to pay the Claimant initially a return of 120% i.e. US$1.2 million. By the original documentation which was signed in March 1998 that figure was reduced to a mere 60% return but by the time the second series of documents was produced the figure had been raised again to 120%. Of that figure of return half was to be given to Westminster on the basis that it allegedly introduced the arrangement. That was not in fact the case.
40. Westminster's sole involvement arose out of what the Defendant said. His evidence was that he had heard in some vague way about investment schemes which produced quite extraordinary returns in 1996, but then in 1997 Mr Matsoulas came to see him. He was accompanied by a Mr Manners of Hanover International and RVL. Mr Matsoulas produced an official identity card issued in Greece which led the Defendant to believe he was a high ranking ministry official, he was told by Mr Matsoulas that he did not speak English and he wanted him to translate certain documents. One of those documents was a distribution of profits agreement which bears a date on the fax transmission header of 24^th June 1997. The Defendant translated the document for Mr Matsoulas who confirmed that he was aware of the nature of the document. The Defendant apparently told Mr Matsoulas that he did not understand how the programmes worked. He suggested that he speak to Mr Matsoulas privately, and when he did he asked Mr Matsoulas if he would take part in such investment if it had been introduced to him by a Greek. This is a modern twist perhaps on a "Virgilian" theme because the Defendant was concerned as he knew there were a significant number of fraudulent investment schemes being pressed in Greece. Mr Matsoulas laughed and assured him that it was all above board, the Ministry had checked RVL and it was approved by the Ministry. He said that he had no doubts about the bona fides of the people, and he was aiming at a return of 300% because he knew that Mr Manners and RVL were getting a higher yield and the Bank involved would get the higher return. The Defendant not surprisingly found these figures somewhat astonishing, which was made more astonishing because Mr Matsoulas informed him that the original investment was going to be US $1-2 million but when his Ministry acquired access to the EU funds which were not being used immediately these funds were to be directed to programmes for 18 to 24 months. At the end of that period the Ministry would then redirect the funds for the original intended purpose, and that the final amount would be in the region of US$9-12 million.
41. In effect, according to the Defendant's evidence Mr Matsoulas was telling him that the Greek Government was investing in these arrangements which would make these fabulous returns.
42. A meeting was scheduled to take place the next day but the Defendant was unable to attend, so he arranged for another person to provide translation services and Mr Cakkos was then introduced. The Defendant did not charge for his services as he was content to provide such services to the Greek Government in effect. At this meeting RVL told him that she knew Mr Vassiliou who had described the Defendant to her as being his lawyer.
43. Apparently the Defendant heard from Mr Cakkos about the subsequent meeting, and he too was astounded at the returns.
44. After that, the Defendant decided to check the existence of such schemes with Mr Vittas. The only evidence I have of Mr Vittas is his witness statement of 2^nd January 2004. He recalled the telephone conversation, to enquire about the security and the prospects of very high return investment programmes offered in the United States. He recalled telling the Defendant that he did not specialise in such schemes and that there was a wide range of such programmes. Some programmes produce good results and investments made money. Other investors lost money from investing in such programmes and some investment programmes end in litigation. His evidence is significant however, as regards the fourth paragraph:-

"I emphasised to Mr Constantinides the importance of the character and probity of investment managers and the need for proper custodial arrangements to ensure the security of funds".

45. After these events Mr Matsoulas telephoned the Defendant and told him that the Ministry had proceeded with the programme and the first payment was to be made shortly. The Defendant had no further discussions with Mr Matsoulas who is now dead.

MR VASSILIOU

46. As I said above, Mr Vassiliou was a client of the Defendant, and had been referred to at the meeting with RVL, he has known the Defendant all his life. He was an officer at Barclays Bank in Cyprus and subsequently a manager of the corporate division of Barclays Bank. The Defendant trusted Mr Vassiliou completely. His reputation was impeccable, and he too confirmed the existence of these investment programmes. He said many banks involved in investment programmes deny their existence and that it was only a small number of employees who have any knowledge of them. He explained that for the bank to admit the existence of these programmes would be dangerous because it would be forced to admit to the public at large the existence of an economy far removed from the normal perceptions of the investment world. Unfortunately, Mr Vassiliou died in March 2003.
47. Mr Vassiliou told the Defendant that if any clients of his were introduced to RVL he would expect a 50% return on any profit they made. It is difficult to see the factual justification for such an entitlement. Nevertheless that is the alleged justification for Westminster obtaining 50% of returns made by the Claimant, although it committed no funds and contributed nothing.
48. Mr Vassiliou also told the Defendant that he would pay him a substantial fee. When the Defendant was interviewed by Mr Ireland of the OSS in December 2000 he told Mr Ireland that he expected to receive somewhere between US$150,000 to US$200,000. This was to represent work which he had done between February 1998 and June 1998 (paragraph 71 of the Report). At the same time, the Defendant produced a Trust Deed dated 18^th November 1994 in relation to his shareholding in Westminster, which according to paragraph 5 has the children of Mr Vassiliou as the beneficiaries. That document has not been produced, but its date cannot be genuine for the reasons that I have already set out in this judgment.
49. Subsequently in his evidence, the Defendant suggested that he was trapped by Mr Ireland and simply plucked a figure randomly. He denied that he was ever told he would have that figure, but was totally unable to explain why he repeated the same figure to Mr Wood and Mrs Walsh who were representing the Part 20 Defendants at an interview on the 21^st February 2001, and why he repeated it to Mr Justin Fenwick QC who interviewed him on the 22^nd May 2001. Of course Mr Vassiliou would not have been able to agree a precise figure with him, because that would be dependent on the relevant returns. There was produced during the trial by the Defendant a letter dated 16^th October 1997 which Mr Vassiliou sent (round robin wise) to everybody he knew professionally. In the third paragraph he said this:-

"I therefore propose that anything over actual costs be shared equally between the two of us. The same can apply to any other business that you can introduce to me".

50. I am quite satisfied that this was in the Defendant's mind some two months later when the Claimant crossed the threshold of his offices. There is no other credible justification for Westminster having any right to participate in the profit share. On that analysis, assuming the return would be US$600,000, US$300,000 would be payable to Westminster. That would then be divided in accordance with his letter, half to Mr Vassiliou and half to the Defendant. If the figures were US$1.2 million in return then those figures will be doubled of course. It is not precise but it is in my judgment not coincidental.
51. The Defendant therefore was poised to make an extraordinary amount of money for doing very little. In this context I firmly reject his evidence to the effect that he had spent over 300 hours of chargeable time on the transactions. As I have said he told Mr Ireland that the bulk of the work was done between February and June. In evidence he suggested that this included travel time and that the work was almost always done at weekends or at night out of office hours. There is not one piece of independent evidence to suggest he spent anything like this time on these transactions. He has produced no notes, no time recordings and according to his evidence had no role seriously in drafting the documentation. If he spent 300 out of office hours on this I find it impossible to see what he was doing. This was one of the many examples of the Defendant resorting to untruths to justify the unjustifiable i.e. the large size of his fee. It should be borne in mind that his total gross fees for the year end 30^th November 1998 were £194,372. The split he gave on his insurance proposal was that 50% of it was attributable to lower risk work, crime, debt collection and children work, 10% to conveyancing residential, 5% from conveyancing commercial, 10% trust and probate and 15% to matrimonial. As a result of that he paid a premium of £5,500 on £1 million worth of cover. There is also evidence to show that he had an overdraft of something of the order of £160,000 on his office account. Matched against those factors the return on this transaction would have been unbelievably beneficial to him.
52. The arrangements if true would make all the participants as rich as Croesus. In the case of the Claimant of course she puts in the US$1 million. In the case of Mr Vassiliou and the Defendant they do, so far as I can see, nothing at all of significance. Over and above that of course the Claimant is receiving interest on the funds deposited in this blocked account from the Bank in the normal way, and RVL presumably is going to make a similar fantastic return as a result of having the privilege of the Claimant gracefully allowing her money to remain deposited in her name at her Bank.
53. I do not see how this works, and the Defendant could not see how it worked either. His evidence however is that based on what he heard primarily from Mr Matsoulas he would be able to recommend RVL and consequently any scheme she might introduce.
54. It is this kind of naivety which the fraudsters in this area exploit. The existence of fraudulent schemes is now widely known, and was widely known in 1998.

FRAUDS AND FRAUD WARNINGS

55. In September 1997 the Law Society sent out a "Yellow Card" warning to the whole profession in respect of banking instrument fraud. It was sent out with the Professional Standards Bulletin No.17. The Law Society's records indicate that 72,520 bulletins were sent out which indicated that a copy was sent to every member of the profession (including the Defendant). They had been sent directly from the OSS by a letter dated 24^th July 1997 which was sent marked private and confidential to every practicing solicitor. As will be seen from the documentation in this case a significant amount of material in that warning features in the documents. The warning starts with the observation that inter alia "Prime Bank Guarantees" are not issued by the legitimate banking community and the legitimacy of such investment must always be questioned.
56. In giving examples of the schemes the warning notice says the fraudster will often claim that these instruments are so special, that the banks are keeping them secret and therefore they will not discuss them with the general public.
57. Under the heading "Look for typical phrases some of them meaningless" in addition to "Prime Bank Guarantee" phrases "ICC (International Chamber of Commerce)", "non-circumvention and non-disclosure agreement", "good clean cleared funds of non-criminal origin", "terms of years plus one day", and the fact that "there is to be no communication with our bank other than through the normal bank channels, no phone call allowed", are all phrases to be found in the documents in this case.
58. In addition, the transactions in this case had characteristics identified in the Yellow Card as "Common Characteristics of Banking Instrument Fraud" including (references being to the lettering in the Yellow Card):-

(a) a large transaction,

(b) promises of further sizable transactions,

(e) prime bank guarantees being offered,

(f) proposals received by fax,

(h) no contact,

(i) strange weird confusing and complex transactions with hazy descriptions,

(j) overwhelming amount of the transaction description along with supporting papers,

(o) power of attorney documents may be required.

59. It is true to say that the nature of the fraud in this case is different from that contemplated by the Yellow Card in that they deal with the solicitation of investment in fraudulent instruments, where as this case is a solicitation to invest in a fraudulent investment. That difference to my mind has no significance.
60. The Yellow Card continues under the heading "Why involve you as a Solicitor?" The answer given is that the use of the solicitor provides legitimacy and respectability both as regards the provision of documentation and the provision of accounts for the receipt of money. In this case both such matters were contemplated.
61. The warning concluded with the following words:-

"REMEMBER – it if sounds too good to be true it probably is!"

62. Although it is plain that this document was sent to the Defendant his evidence was that he recorded its existence but no more. It will be seen from a time line point of view that the documents were sent out only a matter of months before he met the Claimant. The Defendant in his evidence said that he never read the Law Society Gazette and (in another area) never bothered to update himself as to the rules as to conflict of interest which is clearly germane to his ability to act both for the Claimant and Westminster.
63. The second area of instrument fraud was the document provided by the Part 20 Defendants by ICC Commercial Crimes Services "Preventing Financial Instrument Fraud" issued in 2002. Once again this was a document warning against financial instrument fraud, and helpfully at page 84 and following it provided a number of examples of sample fraud proposals. None of these documents was relevant to the issues before me directly but, they completely destroyed the credibility of the Defendant's witness Neil Sherratt. He was called by the Defendant to confirm the existence of secret high profit transactions not available to the public. He attached to his second witness statement dated 21^st November 2003 a large amount of documentation which had apparently been provided to him by a market trader employed by National Westminster Bank PLC. I hasten to add (as did Mr Sherratt) that these documents were not generated by that Bank. They were not generated by any genuine bank and Mr Sherratt's evidence was completely destroyed when Mr Pooles QC took him through the ICC document which showed that all of the material attached to his witness statement was in fact sample fraudulent material. He was forced to acknowledge that in the light of seeing that documentation so described for the first time that he had been duped, and that none of the material he put forward was actually genuine material. I need say no more about Mr Sherratt's evidence in this judgment.

ESSENCE OF CLAIMS AND ISSUES

64. In order to proceed to the next stage of the judgment I will set out in this paragraph a brief summary of the claims. The Claimant's case is that she retained the Defendant as her solicitor, initially for the acquisition of a flat and then (at his instigation) to advise her in relation to investment schemes operated by RVL. The Claimant's essential case is that at all times she was expecting to have security as regards her investment, and that the Defendant's role was to advise her as to this security. Her primary belief was that the security was to be tendered by a bank guarantee.
65. Her case is therefore that the Defendant failed to provide any security for her investment. Indeed, subject to causation Mr Stafford in his closing submissions (paragraph 34) acknowledged "There can be no other conclusion from Mr C's evidence in XX from day eight to day 14 than that he was repeatedly negligent during the period when he acted for Mrs M and that on occasions that negligence was gross".
66. The continued resistance by the Defendant arises out of two aspects. First it is alleged that his initial retainer was limited to that of a translation role only, but by the time of the events in June 1998 the Defendant conceded he had a role to advise as to the adequacy of security. The second point is the Defendant's contention that even if he was negligent it was not causative of any loss. The reason for this is that his evidence was that in June 1998 the Claimant was desperate to invest because she believed she had missed a number of opportunities, and was prepared to invest whether or not there were any securities at all. Mr Stafford accepted in closing that if I rejected that factual analysis his client in effect had no defence to the Claimant's case.
67. The issues between the Defendant and the Part 20 Defendants are threefold. First, the Part 20 Defendants contend that they are entitled to repudiate liability on the policy, because the Defendant was not only negligent, but that he was dishonest. Under Clause 6.9 of the Policy of Insurance between the Defendant and the Part 20 Defendants ("the Policy") it is provided as follows:-

"(i) The Insurer is not liable to indemnify any Insured to the extent that any civil liability or related Defence Costs arise from dishonesty or a fraudulent act or omission committed or condoned by that Insured".

68. The second matter for determination arises on the basis that the Part 20 Defendants are not entitled to repudiate liability for fraud. On or about 20^th July 2000 the Defendant sought professional indemnity insurance for the year commencing 1^st September 2000. This was the first time of professional indemnity insurance in the open market for solicitors following the end of the Solicitors' Indemnity Fund ("SIF"). Question 11 asked "Is any partner … after enquiry, aware of any circumstances which might (a) give rise to a claim or (b) otherwise affect the Insurers consideration of this insurance?". The Defendant failed to complete the answer. On 22^nd August 2000 the Defendant was asked to answer certain questions including a question "Are all telephone conversations the subject of a note on the file". This was answered in the affirmative. The Defendant has admitted that that was untrue. In this case not one note prepared by him of the numerous telephone calls said to have taken place between him and the Claimant and RVL has ever been produced.
69. On 23^rd August 2000 the Defendant signed a further declaration:-

"We certify that after enquiry of all principals and employees the proposer is not aware of any circumstances which may give rise to a claim under the statutory cover other than those that have already been notified to you. …"

70. The Part 20 Defendants' case is that these provisions amount to warranties and not representations avoiding the contract: see Dawsons v Bonnin [1922] 2AC 413.
71. Under the Law Society's Minimum Terms, clause 7.7 of the Policy provided:-

"Reimbursement

Each insured who:-

(a) committed; or

(b) condoned (whether knowingly or recklessly):

(i) non-disclosure or misrepresentation

(ii) any breach of the terms or conditions of this contract; or

(iii) dishonesty or any fraudulent act or remission,

will imburse the Insurer to the extent that is just and equitable having regard to the prejudice caused to the Insurer's interests by such non-disclosure, misrepresentation, breach, dishonesty, act or omission …"

72. Accordingly, the Part 20 Defendants contend that when the Defendant signed the declaration and the proposal, he had an obligation to reveal a potential claim that the Claimant might bring. The Part 20 Defendants contend that had he done so he would have been required to notify SIF before the 31^st August 2000 (with the result that he would have had cover under the SIF policy for that period). The Part 20 Defendants also contend that had they been informed of the potentially large claim they would not have offered the Defendant insurance. They accordingly contend that they have been prejudiced and that in so far as they are liable to provide indemnity to the Defendant in respect of the Claimant's case they should be entitled to recover the full amount which the Defendant is liable to pay the Claimant.
73. The third issue is that the Defendant contends it is not open to the Part 20 Defendants to invoke clause 7.7 by virtue of waiver and/or estoppel in the way in which they investigated the claim following his notification of it in January 2001, which the Defendant contends led him to act on the belief induced by the Part 20 Defendants that they had no intention of making any claim against him save the fraud allegation.

DOCUMENTS AND EVENTS

74. The Claimant and her daughter came to London in January 1998 to find a flat for her daughter to live in while she was a student. She discussed this proposal with Mr Bonnisel, and he advised the purchase of a flat rather than its rent. Upon arriving in England in January 1998 the Claimant again met Mr Bonnisel who had advised about making investments in England prior to her arrival. He advised her to obtain proof of the account balance and attach it to a document which he drafted. This document is dated 8^th January 1998 and has added a letter of intent and is signed by the Claimant. The letter of intent sets out that the Claimant has US$1.1 million in a commercial bank in Greece to be invested "In any secure investment portfolio subject to contract signing". The attached statement is a statement from the Bank confirming that US$1.165 million is held in the name of the Claimant (dated 9^th January 1998). As a result of that the Claimant entered into an agreement with JPG described as a fee agreement on 15^th January 1998 (the document bearing a date of 14^th January 1998). She signed this in the presence of the Defendant. I accept her evidence that the first time she met the Defendant was on 15^th January 1998. I accept that in her first witness statement she said she had met him in October 1997, but as she said in her second witness statement she reconsidered the position and formed the view that was not correct. I reject the Defendant's evidence as fantastic, that he might have met her in 1997 or even 1996.
75. These agreements ("the JPG Agreement") has some of the questionable phrases to be found in fraudulent documents, namely the non circumvention and non disclosure provisions which paradoxically operate five years after the document is executed, but otherwise is an arrangement whereby the Claimant agrees to pay JPG a fee of 15% profit made on every transaction. It is not a particularly sophisticated agreement.
76. Equally, the agreement between Hanover Worldwide Trading Limited and Mr Matsoulas to which I have already made reference is not particularly sophisticated either. Neither of these documents can be used in my judgment by the Defendant to show (a) that the Claimant was a sophisticated investor in these investment programmes and well versed in them, and (b) the programmes subsequently promulgated by RVL were bona fide and genuine as shown by the Matsoulas agreement. I reject the Defendant's evidence as fantastic that the Matsoulas agreement was entered into by him on behalf of the Greek Government in the circumstances in which the Defendant gave evidence.
77. The primary purpose of meeting the Defendant on 15^th January 1998 was to retain him on the flat acquisition. The Claimant attended with Mr Bonnisel. At that meeting also the Defendant witnessed the Claimant's signature to the JPG Agreement. He retained a copy of that together with copies of the letter of intent and the Bank statement. I reject his evidence that he stumbled upon those in the photocopier and filed them without reading them. It is clear in my mind that by 15^th January 1998 the Defendant was well aware that the Claimant had a substantial sum of money that might be available for investment.
78. In the course of the first meeting the Defendant made reference to the fact that he had access to investment schemes where as much as 120% return could be obtained of which 60% would be made available to her. This was the investment programme operation of RVL. The Defendant became aware of RVL having been introduced to her by Mr Matsoulas sometime in late 1997 after Mr Vassiliou had written his round robin letter to which I have made reference. As I have said, (and Mr Stafford conceded in his closing submissions) RVL is clearly a sophisticated fraudster. She might have deceived Mr Matsoulas; she certainly successfully deceived the Defendant, and may also have deceived Mr Vassiliou. Nevertheless the structure that the Defendant understood to operate was that (for a reason which remains obscure) Mr Vassiliou was entitled to a fee representing half of any investment profits made out of schemes produced by RVL which the Defendant introduced to clients of his. Thus for example if on a US$1 million investment the Claimant was to receive US$ 1.2 million in a year, US$600,000 of that would be payable to Mr Vassiliou. A significant amount (between US$ 150,000 to 200,000) would find its way back to the Defendant in circumstances to which I have already made reference.
79. I am quite satisfied that the Defendant raised the question of investment in January and that both he and Mr Cakkos, described as an associate of his who was a self employed consultant with Allied Dunbar, were anxious to have the Claimant invest in these schemes. The role of Mr Cakkos has remained obscure. No satisfactory reason has been given in my opinion as to why he could not have given evidence. He was to receive US$50,000 ultimately from the Defendant. Both Mr Cakkos and the Defendant had a substantial incentive in ensuring that the Claimant invested in these schemes.
80. After this initial meeting there was a short period when the flat transaction was proceeding but that ultimately petered out on 23^rd February 1998 when the Defendant on the instructions of the Claimant informed the vendors that she was not proceeding. Even in this relatively modest transaction, the Defendant never provided the Claimant with a client care letter setting out his duties and obligations and his charging rate, kept no notes of any conversations and did not even translate any documents. The only communication was to send an authority in English to the Claimant which her daughter Sandi translated for her, and the letter of 23^rd February 1998 reporting the return of the contract.
81. There is an acute evidential conflict between the Claimant and the Defendant as to the events between February and April 1998. The Defendant contends that in effect he set up meetings between the Claimant and RVL that took place in February and possibly into March. He says that he did not attend all those meetings and arranged for Mr Cakkos to attend when he was unable to attend. The Claimant flatly denies this. Her evidence is that she was called back to England towards the end of March 1998 by the Defendant. Her evidence is that she did not meet RVL until early April when the Defendant with Mr Cakkos was taking her around various banks to see whether they would give guarantees underwriting investment transactions. She says she first met RVL at the Bank of Cyprus, went to church with her on the 5^th April , met her the following day but never met her again. 
82. I prefer unhesitatingly the evidence of the Claimant. The Defendant's evidence had to be teased out of him, in the sense that the details of his case were set out in the later witness statements with no adequate explanation as to why they were not put in the earlier witness statements. Given the importance of his defence that he was merely a translator, it was surprising to see that in his fourth witness statement, which was his main witness statement, he never gave any details of how the mechanism operated on a document by document basis. That was only done when he produced his fifth witness statement which I ordered him to produce. Initially the cross-examination of the Claimant was being dealt with in what I considered to be a procedurally unfair way, because the documents were being put to her and the method of dealing with them were being put to her for the first time when she was cross-examined.
83. In early January 1998 the Defendant recommended the Claimant open an account with the Bank of Cyprus, and she opened a joint account with Sandi. In April 1998 she opened a second account in her sole name. She already had accounts with Barclays Bank PLC.
84. On 19^th January 1998 the Bank of Cyprus sent a fax to the Defendant seeking a reference for the Claimant. Accompanying the fax was a pro-forma reference which the Defendant typed on his own headed notepaper and sent back to the Bank on 20^th January 1998. In that reference he said that he had known the Claimant for over two years and that he considered her respectable and trustworthy and a suitable person to maintain an account with the Bank.
85. This was a dishonest reference. First, even on his own evidence he could not have honestly said that he knew the Claimant for two years. Second, on his own evidence he had met the Claimant on two social occasions at restaurants with others, and then next met her on the 15^th January 1998. I do not see how that factual background (which as I have said above I reject as regards events before January 1998) could enable the Defendant to give any reference of any significant weight in respect of the Claimant. Interestingly, when the Claimant's new solicitors sought transfers of the files the Defendant did not hand over all documents. One of the documents he retained was this reference; it being produced only by him in disclosure in these proceedings.
86. This is one of many instances where the Defendant's conduct falls below the standards required of a solicitor.
87. On 27^th February 1998 the Claimant gave instructions to transfer US$1 million from the Bank of Cyprus account to her branch at Barclays. The letter of authority was prepared by the Defendant in English and sent to the Claimant whilst she was staying at the Chrysos Hotel in London. Initially, he had been told the wrong address of the Bank by the Claimant. This led him to send a fax to her on the 3^rd March 1998 seeking clarification. On the 4^th March 1998 there is the solitary file note on the Defendant's file (which is actually prepared by an assistant of his, Georgina), which recounts a conversation between her and a Bank official at Barclays Bank Hanover Square. It is quite clear that it was from this conversation that Georgina discovered that the Defendant had been given a wrong address by the Claimant. Georgina did not give evidence and there are certain curious aspects about this attendance note. First, the Bank appeared to be willing to talk to anybody who telephoned and asked for details about their customers without any evidence showing that they were entitled so to do. The Claimant significantly is described as "Our client" and Georgina apparently telephoned Mr Cakkos who told her to phone the Bank and inform them not to send a letter showing the Bank statement credits as the client (i.e. The Claimant) would not wish it lying around.
88. All of these matters took place without the knowledge of the Claimant. Why Mr Cakkos would be involved at this stage is one of the many Cakkos mysteries. It does show however, that he had an involvement way beyond somebody who just happened to arrive for the purpose of translating when the Defendant was not available. The Defendant (as was the case on numerous occasions of dealing with difficult points) was quite unable to provide an explanation as to the background to this note. I do not accept his repeated answers that he did not understand what was going on.
89. On 10^th March 1998 the Defendant sent a fax to the Claimant in Athens in English. This enclosed a letter of instruction for her to sign to be sent by her to the Bank by fax. He did not provide any Greek translation of the documents. Throughout the long period of events there is, as I have said, only one occasion when he provides a Greek translation of a document written in English.
90. His contention was, that he would telephone and translate the documents over the telephone to the Claimant. On one occasion he asked the Claimant to have Sandi explain it, and on other occasions he arranged for her to see a Greek lawyer in Athens for the purpose of explanation. His evidence was vague and unreliable. The reason for this was clear. He was concerned to portray his role as being that of a mere translator. Some of the documents have phrases in them which were incapable of having a meaningful translation. He was quite unable to explain what procedure he adopted in those cases. Equally, he acknowledged that he necessarily had to understand the documents in order to explain them. He repeatedly professed an inability to understand the effects of the various documents. This was deceptive in my view. Once again it was an attempt by him to bolster his case that he was unsophisticated and did not understand the complications of these great investment schemes and how they worked, and were able to make amounts of money which appeared to defy common sense. None of this actually has any relevance to the subject matter of the complaints by the Claimant. The complaints arise out of documents that were entered into, which enabled RVL to obtain the money. The complaints are not therefore about the failure to advise and explain the investment programmes, but arise out of the failure to address the documents governing the relationship between the Claimant and RVL, the Claimant and Westminster, and the other documents executed to facilitate the investment.
91. It would have been the easiest thing in the world, if his role was that of a translator, for the Defendant simply to have written the documents out in Greek simultaneously, or provided a written explanation. I reject his evidence that he had a role limited to translation, because I find the Claimant's evidence more credible and consistent, namely that he was her solicitor for the purposes of advising her as necessary in respect of the documentation; he was not merely a translator, and that he sent documents which she signed although they were in English without any explanation because she relied upon him as her lawyer. I see nothing surprising about that, and it explains the lack of any meaningful documentation showing that the Defendant had some other role and operated in some other way. It is simply not credible for the Defendant to assert that he was in the habit of sending documents in English and then telephoning her and translating the documents without explaining them. I do not see how one can translate in that limited way.
92. The evidence shows that all of the documents were actually prepared by RVL and transcribed by the Defendant. I am firmly of the view that he merely passed them on to the Claimant without any explanation, and requested her to sign them where appropriate (marking them with three dots as to where she should sign) and did no more.
93. It follows that the Claimant received no advice in my view from the Defendant as to what the documents said, let alone what they meant.
94. Another way in which the Defendant approached his duties to tell the truth to people with casualness, is the letter of 10^th March 1998 that he drafted for the Claimant to send to Barclays Bank. The first sentence contained a lie which he knew was a lie, where it said that the account was to be converted "In order to assisting my husband in certain business transactions". The Defendant is described extensively in the document as being her solicitor. This is a further negation of his contention that he was a translator only.
95. The form of document required from Barclays was sent by fax by the Defendant to Andrew Pummell on 13^th March 1998. This was a certificate to be signed by the Bank to the effect that the US$1 million was held irrevocably and unconditionally blocked, and that the funds "are good, clean, cleared, unencumbered, legitimately earned funds …".
96. This is one of the questionable expressions referred to in the Law Society Yellow Card. It is designed to give the impression that the monies are legitimate (no doubt to resist money laundering implications). This form of words was drafted by RVL and merely passed on by the Defendant. Barclays did not fall for it.
97. On 24^th March 1998 the Claimant sent a letter of authority to Barclays. It was sent (as the fax header shows) to her initially the day before by the Defendant. This document was prepared by him following a conversation with Mr Cakkos and RVL (as evidenced in the only file note that survives). However, the Defendant prepared it from a draft provided by RVL. He simply sent it to the Claimant who sent it on to Barclays. The urgency stressed in the documents was not explained. The letter of authority was prepared by the Defendant as there is a hand written copy of his draft. He is unable to explain why it was prepared that way (as opposed to following the usual procedure of simply typing out documents prepared by RVL). That made reference to a special power of attorney dated 12^th March 1998 granted by the Claimant to RVL to which I shall make reference further in this judgment. In this case the document was faxed out to the Claimant in Athens, and her signature was attested in the presence of a police officer. None of these documents I find was ever explained to the Claimant.
98. On receipt of these documents Barclays on 6^th April 1998 instead of responding to them informed the Claimant that they were terminating the banking relationship between them and the Claimant on one month's notice. This is quite an extreme stance for the Bank to take and in my judgment plainly reflects the suspicions that they had about the whole transaction. It is plain the Bank was not willing to provide the clean certificates. Equally, the letter was potentially damning, because if subsequent status reports were requested the Bank would reply that they would be unable to express an opinion. On 13th April 1998 upon receipt of this, the Claimant wrote to the Defendant reporting it. Ultimately the Defendant drafted a letter that the Claimant sent to the Bank querying what happened, and asking for the balance of the monies to be transferred to the Claimant's account at the Bank of Cyprus. The documentation was all generated by the Defendant which he sent out to the Claimant in Athens by fax on 24^th April 1998.
99. There were produced for the trial sets of investment documents for three periods namely, March 1998, April 1998 and June 1998. The Defendant's evidence was that RVL was busily preparing many other documents for transactions that did not proceed in February and March, but he destroyed those when they did not proceed. This is part of his evidence to show that he had a peripheral role and that all of these things were taking place between the Claimant and RVL. I reject his evidence. I do not see why they would have been destroyed, nor do I see why the documents would have been preserved which had survived. In this context I reject his evidence that there was a further arrangement made in June 1998 for the profit share as between the Claimant and Westminster to revert to a 50/50 split. This evidence I find the Defendant introduced to justify the payments that were subsequently made in July and August 1998 which were US$50,000 rather than the requisite percentages in accordance with a letter signed 7^th April 1998. He was unable to explain what had happened to the missing documents which he said came into being in June 1998, nor, was he able to explain why when he came to draft a variation of the Profit Share Arrangement in November 1998 he made reference to the document signed in April rather than the ones signed in June.
100. I find that all the documents were sent out to the Claimant for signature without any attempt by the Defendant to explain them, and that she signed them without understanding what they were relying on the Defendant as her solicitor. I am quite satisfied that a key requirement of the Claimant throughout was that her investment funds would be protected as regards capital, preferably by reference to a bank guarantee, but if some other mechanism was put forward by the Defendant that would have been acceptable to her. I find that the Defendant was aware of that requirement not merely in the latter period in June 1998 but throughout. In case I am wrong however, as the key events occurred in June 1998 it does not matter if the Defendant only became aware of that requirement in June 1998. However, I should point out that his attempts to obtain bank guarantees in April 1998, the promissory note and the assignment of the life policy show inconsistency with his stance as these are all attempts to obtain security (adequate or otherwise), before June 1998.

THE MARCH INVESTMENT AGREEMENTS

101. The first document is described as a special power of attorney dated 12^th March 1998. This was faxed out to the Claimant and it was executed by her in the presence of a police officer. The Defendant gave no explanation to the effect of this document. He was unable to explain why the document was necessary (it having been drafted by RVL). It was not limited (although he professed not to understand that) to a particular transaction. It purports to give RVL the full power to invest on behalf of the Claimant in respect of all investments and transactions for a period of a year and one day, and also a power to appoint another attorney. Placed in the wrong hands this is a very powerful weapon. For example, as I have already observed, it was referred to in the correspondence with Barclays Bank but they refused to participate in the arrangements as their letter of 13^th March 1998 addressed to the Defendant made clear. Coupled with the power of attorney, was a further surprising document executed on the 16^th March 1998 whereby, in consideration of giving RVL the power of attorney, the Claimant undertook to continue maintaining a minimum balance of US$1million in her account for a period of one year and one day. She further undertook not to operate the account during that period. Thus by effect of the two documents she promised to keep the money in the account and not to touch it whilst at the same time giving RVL full dominion over it. This is quite extraordinary. Yet nothing is heard from the Defendant about this surprising arrangement.
102. The next document is a "Distribution Of Profits Agreement" between Westminster and the Claimant. This simply agrees that the profits are to be divided equally between the Claimant and Westminster. Although she had no direct interest in it apparently, RVL prepared this document. Although the Defendant was the sole shareholder of Westminster it was executed by Miss Vassiliou on behalf of Westminster. Whilst the Defendant executed one document on behalf of Westminster all other documents were apparently executed by Miss Vassiliou rather than him. No explanation was given by him as to this arrangement, but in my judgment it was further to conceal his role in Westminster. That is reinforced by Clause 2 which provides for all the profits to be paid to the Defendant's client account "the solicitors for the Investor". Paragraph 1 contained a lie which the Defendant acknowledged namely, that Westminster was to enter into a blocked funds investment programme. Westminster contributed nothing, and risked nothing. It was merely a vehicle to siphon off profits for Mr Vassiliou and the Defendant and Mr Cakkos.
103. The next document is the "Joint Venture Agreement". This is between RVL and the Claimant. RVL was given power to negotiate on behalf of the Joint Venture parties with people described as "Program Managers" to secure the best possible terms and procedures. The Claimant provides US$1million in order to enter into a "Blocked Funds Investments Programme" and to provide all necessary documentation so as to facilitate the transaction. RVL is obliged to ensure that the funds are protected at all times by being blocked in the client's own Bank for one year and one day. The profits are to be 60% payable into the Defendant's client account to be distributed according to the distribution of profits agreement. RVL is to be paid by the project financing "program managers". Thus one has to appreciate that these funds on deposit are attracting bank interest, 60% to the Claimant and further sums payable to RVL. The enormity of these figures never troubled the Defendant.
104. The document introduces a non disclosure/non circumvention clause and they agree not to disclose any names, or any other information. This part of the agreement has a duration of 60 months. Finally, the agreement is said to be governed by the laws of the United Kingdom, which the Defendant acknowledged was a nonsense.
105. No explanation has been given as to the phrase "blocked funds investment programme". It is a meaningless phrase of the type identified in the Yellow Card. No explanation has been given as to what a blocked funds account was. Thus the Defendant was quite unable to explain in whose favour the blocking advice operated and who could lift it. As later documentation shows when the monies were transferred into a blocked account in the name of RVL she was able to lift the blocking. Of course she had a power of attorney and could have used that to lift any blocking of an account in the name of the Claimant. The Defendant suggested that no bank would operate on the basis of the power of attorney but it is difficult to see why that would be the case provided the power of attorney was proven to be a genuine document.
106. The next document is a "Letter of Intent", dated 18^th March 1998. This is a statement by the Claimant saying she has US$1million of "good clean and cleared funds of non criminal origin" to invest. That as I have already observed is a badge of fraud description. The main purpose of the agreement is the clause which says:-

"I specifically recognise Westminster Services Limited as the responsible party for introducing me to this venture and agree I will at no time make contact with any Bank or Financial Institution involved in this transaction without receiving the express written consent of my authorised Attorney [RVL]".

107. This clause has two self serving effects. First, it makes it difficult for the Claimant subsequently to argue that Westminster provided nothing. Second, it introduces a well known procedure in these kind of frauds of requiring her not to contact the Bank; all communications are to be through RVL her authorised attorney. This was signed in the presence of a Mr Lionis an attorney in Athens. His attested signature was arranged by the Defendant, but no attempt was made to translate or explain this document by him to the Claimant and there is no evidence to show that the Claimant obtained any advice from Mr Lionis (assuming he would be in a position to give any advice).
108. The next document is a document headed "Non solicitation of funds between the Claimant and RVL". The purpose of this was to provide protection in effect against allegations subsequently made as to the suitability of investment, plus it says

"I [the Claimant] am fully aware that the information presented from you is not for the purpose of the solicitation of funds, or an offering in any way, but is for my general knowledge and I confirm that I have requested this information of my own free will and choice.

I affirm that any funds that I place with Blocked Funds Investment Program for investment purposes are done so at my specific request and authorisation".

109. The document is meaningless; its purpose as I have said, appears to provide protection in the event of subsequent complaint to suggest that the funds are not solicited, but were voluntarily put forward by the Claimant.
110. All of these documents were faxed out to the Claimant by the Defendant on 23^rd March 1998. Interestingly, whilst the covering letter was written in Greek he provided the English headings for the joint venture agreement, letter of intent, non solicitation of funds and distribution of profits. This suggests that he had difficulty translating those into any meaningful Greek phrase, which was proven to be the case in cross-examination. The letter simply told the Claimant to sign the documents in the presence of a solicitor or police officer at the place marked by the three dots.
111. All of these documents were created by RVL. The Defendant merely transposed them and passed them on to the Claimant. No explanation was given to the Claimant as to the meaning of these documents, although they were written in a language which she did not understand, in sufficient detail to be able to take on board the contents of legal documents. Even if she could read English the documents would require significant explanation because of the strange phrases to be found in them. A significant explanation would have been required also to explain the inter relationship between the Blocked Funds Investment, the Profit Share Arrangement, the Joint Venture Agreement and how the whole thing was to operate. The Defendant did none of this. He did not in addition disclose his relationship with Westminster.
112. These documents are very worrying. By the documents the Claimant surrenders the control over US$1million to RVL and gives her power to invest it in unidentified programmes as she thinks fit. If the arrangements make profits they are then split between the Claimant and Westminster for no apparent purpose. The documents contain self serving expressions designed to protect the other party. No significant obligations are assumed by RVL; indeed there is technically no obligation expressly on her to return any of the funds.
113. No competent solicitor in my judgment could have advised a client to enter into these. It should be borne in mind that the Defendant on his case did not even attempt to give any advice; he was merely RVL's postbag. That of course is another badge of fraud identified by the Yellow Card. The fraudsters tried to impose professional people between them and the victims, so as to clothe an appearance of legitimacy on their transactions. Thus the Claimant received documents from her solicitor without comment which she was asked to sign. He thereby legitimated the transactions and clothed them with an air of respectability.
114. The March transaction documents were never implemented.

THE APRIL DOCUMENTS

115. As I have said above I accept the Claimant and her daughter's evidence that they came over in early April at the request of the Defendant. I accept the Claimant's and her daughter's evidence that they came because the Defendant told them that Barclays had agreed to give a guarantee. I accept her evidence that the Defendant picked them up at the airport and took them round various banks together with Mr Cakkos and ultimately found that the Bank of Cyprus were willing to give a guarantee; this being the occasion when the Claimant met RVL. At this stage the question of an assignment of life insurance was also mentioned. By this time of course, Barclays had indicated an unwillingness to proceed. It seems relatively clear that the Defendant made the first visit to Barclays in an attempt to persuade them to go ahead. Barclays' decision a few days later was to write the letter of 6^th April terminating the banking arrangements.
116. An additional document was also obtained in April, which was the promissory note dated 6^th April 1998 executed by RVL in the presence of the Defendant promising to pay US$1million to the Claimant on 6^th May 1999. She says that she never knew about this and I accept her evidence. This did not add to the security in any way beyond introducing an express obligation within the jurisdiction of England and Wales on the part of RVL to repay US$1million. Other than that it provides no security at all. RVL has no permanent address or assets within this jurisdiction, and the reality is anybody seeking to enforce the promissory note would be chasing shadows.
117. As a result of these events various further documents I have said were signed. The first was the promissory note. Second, on 6^th April 1998 the Claimant signed an authority to the Bank of Cyprus directing the transfer of US$1million from her account to RVL's account with the Bank of Cyprus. The Claimant's sole signatory account and RVL's account were opened in early April. Pursuant to an order I made during the trial, the Bank of Cyprus has delivered some (but possibly not all) documents in respect of this dispute. RVL applied to open an account on the 2^nd April. In the notes it is said that she was introduced by "AG – existing customer". Correspondence in respect of her accounts is to be addressed to the Defendant. He apparently gave a reference but no copy has survived. He said the reason for this non survival was because he gave the reference at the counter. On the same day the Claimant opened a fresh account. The same introduction is given. This account (No.560) was a seven day notice US$ deposit account and the opening credit was £1,000,050 credited from Barclays Bank. On 6^th April 1998 the US$1million was transferred to RVL's account pursuant to an authority signed by the Claimant on the same day. Thus on 6^th April 1998 her monies departed into an account belonging to RVL over which she had no control and by which time RVL had the power of attorney of 12^th March 1998.
118. The March documents were then adapted to the events in April 1998. The joint venture agreement was altered by increasing the return from 60% to 120%. In addition, the Claimant had the benefit, if that is the right word, of the promissory note. She also had an assignment of a life policy with Allied Dunbar on the name of RVL. This assignment was (unusually) drafted by the Defendant. However, it is difficult to see how the assignment actually achieved anything without further investigation. Recital (4) recites that the benefit of the policy is vested in certain members of RVL's family, the assignment then recites that RVL and the Claimant have agreed that the policy should be assigned up to US$1million to the Claimant. No consideration appears to have been given as to how that could be consented to by the other members of the family or whether there was any power to impose that on them. Clause 2 of the operative part of the Deed says that the assignment has priority over the assignment of the policy in favour of members of the assignor's family, without explaining how that can be achieved.
119. The document therefore poses more questions than answers. Even the underlying life policy has no significant value so far as I can discern. It is either a whole life policy or a term policy with no accrued surrender value at any given time. Thus the two documents of supposed extra security obtained by the Defendant provided no security whatsoever.
120. The distribution of profits agreement was changed on 6^th April 1998 so that the Claimant obtained 70% and Westminster obtained 30%. The Claimant said this was to reflect the fact that the US$200,000 was to be a bonus and they should not have a share of that part of it. The next day the Defendant, having spoken to Mr Vassiliou, realised that he had made an arithmetical mistake and that the true ratio to give effect to that suggestion should be 58/42. The Defendant explains this in his fifth witness statement. What is quite extraordinary is that he was willing on the 6^th April 1998 to discuss solely with the Claimant the distribution of profits agreement, agree a variation of 50/50 to 70/30 then the next day speak to Mr Vassiliou who complained about that split, and go back and renegotiate the agreement with the Claimant to reduce the percentage from 70 to 58%. Both parties were clients of his and he was effectively the conductor of the negotiations for both sides. He was also substantially interested because of the arrangements he had put in place with Mr Vassiliou to which I have already made reference. I do not see how any solicitor could properly discharge his functions as acting for a client (i.e. the Claimant) in that manner.
121. Thus on 6^th April 1998 all the fraud documents were put in place and the purported extra security was no security at all. The Claimant did not obtain any bank guarantee although I accept she believed that that was the purpose of the exercise. At that stage RVL's account was not technically blocked, but fortunately the funds were not removed. On 18^th April 1998 the Defendant sent a handwritten letter to the Claimant in Greece requiring her to send it to the Bank of Cyprus by fax. That letter withdrew her consent in relation to the 6^th April authority and confirmed that the funds should remain in the account of RVL blocked as directed by her for a period of 40 calendar days from 22^nd April 1998. This document followed the familiar way in that no explanation for it was given by the Defendant. Apparently on 17^th April 1998 RVL had given the Bank of Cyprus an irrevocable instruction to block the funds on her account until it received an authenticated irrevocable Bank instruction issued by the Bank of Austria. Upon receipt of that the Bank of Cyprus was to transfer the funds to the Bank of Austria. If that Bank instruction was not received RVL irrevocably instructed the Bank of Cyprus 20 days later to transfer the money to the account of the Claimant. Although this document is described as an irrevocable undertaking, there is nothing to suggest that it would be irrevocable in the sense that so far as I can see RVL was able to make it revocable. I do not see the Bank of Cyprus bound themselves to act in a particular way in reliance on the undertaking. This document was also drafted by RVL. On the 17^th April 1998 the Bank of Cyprus provided a certificate to the effect that the Bank had US$1million in the accounts of RVL and that the funds were available to her on first call and her account was in good standing with the Bank. It also acknowledged that the funds were good, clean and clear funds of non criminal origin. Finally, it stated that the Bank was prepared to block those funds and issue appropriate documents upon her request and that that blocked funds account should at all times be non callable. This was of course another document drafted by RVL; it follows in part the form of mandate which Barclays refused to sign. Its meaning is obscure. On the 17^th April 1998 RVL issued another irrevocable authority blocking the account for 41 days from 22^nd April 1998 whereupon US$1million was to be transferred back to the Claimant. The Bank of Cyprus clearly required confirmation of that from the Claimant. That led to her signing the handwritten letter of authority of 18^th April 1998. The Defendant had bound himself to the Bank of Cyprus to procure that letter of instruction from her (with an indemnity) on 17^th April 1998.
122. The events secured were apparently a proposed investment via a firm of solicitors, Bower Cotton. On 6^th May 1998 RVL sent the Defendant a curious fax headed "Private and Confidential (for your information only John)". It referred to a conference call that day (which presumably took place between her and the Defendant). She was going to instruct the Bank of Cyprus to transfer US$1million to the Client Account at Bower Cotton in her favour to be blocked with an undertaking to transfer the money back 40 days later. The last sentence of the letter is instructive "It goes without saying that this transaction would not be possible without your help and co-operation". The Defendant was unable to explain that sentence. I did not believe him on that. It is quite clear that he had an important role in this potential transaction, but was unwilling to explain it.
123. The next events took place around 11^th May 1998. The Bank disclosure documents show US$1million still standing to the credit of the account of RVL. An internal note records her visiting the Bank on 11^th May 1998 requesting a new block deal of 366 days. On the same day the Claimant sent an authority to the Bank via the Defendant authorising it to transfer the US$1million to RVL's account No.560. The Defendant said this authority was required and prepared by the Bank of Cyprus. It is difficult to see why it was necessary as the money was already in the account, and had been since 6^th April 1998. The monies were transferred into a one year money market account in the name of RVL (No.797). This was then to be held in a 366 day blocking arrangement in the same way as was originally proposed in April. The Defendant had a significant role in this as appears from the correspondence that passed between him and the Bank revealed as a result of the disclosure order. The Bank had no direct communications with the Claimant for example, but received her authority via the Defendant.

EVENTS IN JUNE 1998

124. These were the key events. As a result of the transactions effected in June 1998 the pretence of any blocking arrangements or any other security was removed and the Claimant in effect lent US$1million unsecured to RVL. In the events that had happened she received back two payments of US$50,000 in July and August, but apart from those payments (Mr Vassiliou receiving a similar amount) she has received no payment whatsoever.
125. By this time the Defendant acknowledges he had a duty to ensure that the Claimant obtained security. He accepted in the course of cross-examination that the Claimant was looking for a secure investment and in effect that no later than March he was responsible for obtaining security for her. He equally acknowledged it was crucial that any transaction provided security for her.
126. The essence of the Defendant's Defence is that the Claimant decided to abandon any hope of security through a desperate desire to enter into the investment programmes in June, threw caution to the winds and ignored his advice that the security was not as good as it might be. During closing Mr Stafford submitted that the Defendant advised there was no security, but I do not think that is a proper reading of his evidence (T10, 950 and following). It also reflects paragraph 46 of his fourth witness statement. I do not understand him to be saying to the Claimant that if the bank guarantee was not obtained the Claimant would have no security whatsoever. In my judgment he gave a misleading impression by suggesting that the security was diluted whereas in fact it was non existent. The promissory note and the assignment of life insurance provide no security at all.
127. On 2^nd June 1998 the Claimant faxed to the Defendant a letter of authority dated 1^st June 1998 addressed to the Bank of Cyprus. This had been sent out by the Defendant some six hours earlier at 13.20. He sent it under cover of a handwritten letter in Greek where he said he enclosed a letter from the Bank, and that Sandi was to translate it, the Claimant was to make a photocopy and it should be signed and sent by fax to the Bank. Thus he did not even attempt to translate the document to the Claimant. The first paragraph authorised the Bank to unblock the US$1million, and allow them to be transferred to a "prime bank to be nominated by [RVL]". It is not clear what a prime bank is. The second paragraph provided the transfer of the funds was conditional upon receiving a prime bank guarantee from the very Bank to which the funds are to be transferred, and the third paragraph referred to a bank guarantee which should be for repayment to the Bank of Cyprus on behalf of the Claimant of US$1million plus interest at 6%. The time for payment was 366 days from 11^th May 1998.
128. The Bank disclosure documents show that at about 17.24 on the same day the Claimant sent a hand written letter to the Bank asking them to communicate urgently with her, because she did not know what was happening, and could not communicate by telephone. Not surprisingly, the Claimant was unable on being recalled to remember the circumstances of the conversation. Mr Stafford for the Defendant submitted that this was evidence which showed that the Claimant had an active role. I do not accept that for one minute. What is significant is that whatever the result of that fax, the Claimant sent the letter of authority back to the Defendant for onward transmission to the Bank.
129. There are doubts about what a prime bank guarantee is, but nevertheless it is clear that by this letter it was supposed that the Claimant would continue to have security. Equally, the suggested enforcement of the guarantee via the Bank is a little curious, but, still reinforces the point that the Claimant at 1^st June was perceived to be requiring a guarantee security and to be obtaining it.
130. Unknown to the Claimant the guarantee changed in the sense that on 4^th June 1998 RVL wrote to the Bank cancelling the blocking instructions dated 11^th May 1998, and confirming that she would provide in due course instructions regarding the transfer of funds to another bank. The letter continues: "the transfer will occur only on receipt by you of a bank guarantee from the recipient bank in my favour". What is interesting, is that the Defendant wrote a letter in virtually identical terms to the Bank of Cyprus on the same day. He also gave an undertaking to indemnify the Bank against any loss but relegated the Bank's obligation (like RVL's letter) to merely checking the guarantee was properly executed. Drafts of these letters were obtained from the Bank. It is clear that the Bank received a letter dated 4^th June and probably the third paragraph which referred to a bank guarantee in her favour was drafted by the Bank. Also on the file are two draft letters written by RVL cancelling the 11^th May 1998 instruction, and a second letter containing a letter to be sent by the Bank to her confirming again the monies were good clean and cleared funds and are to be transferred against an acceptable negotiable bank instrument issued by a prime double A rated bank as from 5^th June 1998.
131. The Defendant never told the Claimant that the guarantee was to be in the favour of RVL.
132. Also on the same day, the Defendant sent a further handwritten letter to the Claimant enclosing a handwritten letter for her to sign, confirming that her instructions of 11^th May 1998 were withdrawn. No explanation was given; he merely said that the Bank required the letter to be withdrawn. The Claimant faxed that letter and signed it. She wrote on it in Greek for the attention of Mr Coumanidis, the Customer relationship executive employed by the Bank of Cyprus.

INTERNAL NOTE 4^TH JUNE 1998

133. With the Bank documents there was disclosed an urgent internal memo from a Mr Angelides of the legal department to Mr Kuonis/Coumanidis concerning RVL. That note appears to have been written on the same day. There is no reason to suppose the note is a fabrication. It recounted a conversation with the Defendant and Mr Angelides. It recounted that the Defendant gave him some background to the tendered transaction. It recounted that the need to transfer the funds arose because the other party would not accept the Bank of Cyprus on the pretext that it was not substantial enough, i.e. approximately 4,500^th in "the Almanac". Mr Angelides explained that the group was actually 600^th and that Mr Constantinides commented that this could have made a difference, but Mr Angelides advised that no one had asked about the point. The note also recorded Mr Constantinides advising that the basis for lack of information to the Bank was as a result of both customers and he having signed confidentiality agreements. Mr Angelides' comment was that the Bank should not have been excluded, because it had certain duties to abide by but Mr Constantinides said they could not change the confidentiality agreements, but he said that he assured Mr Angelides that there was no question the whole transaction was completely above board.
134. Mr Angelides advised Mr Constantinides that the Bank required a revised instruction from the Claimant, to that one provided on 1^st June, and he agreed to obtain another instruction to include only the first paragraph of the letter of 1^st June and to delete the remainder. The note then continues:-

"In view of the fact that the overall transaction may unravel I told JC that the Bank would examine the position tomorrow a.m. and confirm to him what if any additional documents would be required".

135. Mr Constantinides affected not to recall this discussion either. It is clear however, that he had some recollection of events because, he refers to the 1^st June 1998 letters in his fourth witness statement, and says that shortly before 15^th June 1998 RVL told him the proposed guarantee was unworkable, and proposed an assignment of some treasury bonds owned by an associate of hers an Italian by the name of Vito Pigaiani.
136. The Bank sent to Mr Constantinides a revised mandate to be signed by the Claimant which was backdated to 1^st June 1998. It was sent to him on 5^th June 1998 under cover of a fax from the Bank of that date. The diluted letter simply deleted all paragraphs of the original letter of the 1^st June 1998 save one, and merely authorised the Bank of Cyprus to unblock the account and to transfer it to a deposit account with a prime bank to be nominated by RVL. It was sent by fax to the Claimant by the Defendant on 15^th June 1998 at 18.48. She sent it back on 16^th June at 13.34. As I have said earlier the Defendant had had the document from the Bank for 10 days. He was unable to explain why he sat on that document for so long.
137. There is a significant dispute between the Claimant and the Defendant over these events. The Defendant's evidence is that the Claimant was in London on the 15^th June 1998. His evidence then recounts a series of meetings starting at the Bank of Cyprus where he says the Claimant, RVL and Mr Cakkos attended. Initially he said in his evidence it was about 9.30 but he adopted Mr Kounis' diary entry showing a meeting with him at 9.00 am, because it suited him. He then said that he and RVL went to the Millennium Hotel to meet Mr Pigaiani where he occupied a suite. He had an interpreter, a Portuguese woman who spoke fluent English. Mr Pigaiani produced a passport. It was an Italian passport. He confirmed he had known RVL for some time and that he transacted certain business with the assistance of RVL and he was willing to assign the treasury bonds to RVL only, and that the assignment would be limited in time. His lawyer was with him, and his lawyer gave the Defendant the identity number of the bonds (the cusip number). He then allegedly returned with RVL to the Bank where the Claimant and Mr Cakkos were patiently waiting. There was an explanation about the assignment of the bonds not being made to the Claimant, he saying that was not as good as if the bonds were assigned to her. The Bank was asked to confirm the existence of the bonds by reference of the cusip number on the Bloomberg screen on their computers. They were unable to do that, so they spoke to Societe Generale who faxed them over to the Bank. He with RVL then went back out to see Mr Pigaiani, where his lawyer conveniently prepared security documents which were signed by Mr Pigaiani. He said that he told the Claimant that the Bank would require authorisation for unblocking of the funds. The letter was typed by his secretary and wrongly dated 1^st June 1998, but the error was not spotted until after the proceedings.
138. All of this is flatly contradicted by the Claimant. First she says that in June she was never in London, she never met RVL, she never went to the Bank of Cyprus and the only communication she received was the revised letter of authority dated 1^st June 1998. I am satisfied that the Defendant has invented all of this evidence. It is an extraordinary story. There is no documentary evidence to support it and a significant amount of contemporary evidence to contradict it. First, even allowing for the meeting with Mr Kounis taking place at 9.00 a.m. a considerable amount of meeting and travelling has to occur within a hour and a half, because the faxed transmission document from Societe Generale is timed at 10.31. Initially, when I raised questions with the Defendant about the timeframe of the meetings, he suggested that the whole thing was completed shortly before lunch. He changed his evidence after he was shown the Bank's note. The second factor against it, is that when his solicitors contacted Mr Kounis on 26^th November 2003 about this meeting on 15^th June, they were told over the telephone that according to Mr Kounis' diary entry the Defendant attended on 15^th June, and from other evidence in RVL's file (which has not been disclosed) she also attended. He could not confirm whether they attended together or not, but he had no record of the Claimant attending. He stated he could not recollect having seen the Claimant at the Bank with either the Defendant or RVL separately or together, and all instructions were received by fax through the Defendant who was acting on her behalf. I can well understand why the Defendant did not call Mr Kounis, he would not support his case. Equally, the letter of authority was faxed out on the 15^th June to Athens. Given the fact that on the Defendant's case the Claimant appears to have spent a large amount of time sitting in the Bank of Cyprus waiting for him to report the various meetings, I find it incredible for him to suggest that the revised authority was suddenly remembered and raised by Mr Kounis at a café after all the meetings had taken place. He had the authority for 10 days and I cannot see why it would have been overlooked at that time. It would have been the easiest thing in the world for it to have been typed and signed by the Claimant if she was at the Bank. Accordingly, I reject his evidence that the Claimant was in London and attended meetings as he suggests.
139. This last document is a crucial one, because it unblocks the accounts (assuming the blocking mechanism was effective) and released the money to RVL unconditionally.
140. The Bank records show the money was released to Mr Pigaiani via Oakhaven apparently a United States Corporation the next day. That was the last the Claimant saw of her money.
141. The so-called security of the Treasury Bonds is non existent. Looking at the Bloomberg screen does not show anybody owning any Treasury Bonds let alone Mr Pigaiani. The Bank disclosures revealed a letter signed by RVL addressed to Mr Pigaiani dated 14^th June 1998 confirming she accepted a Deed of Assignment of three Treasury Bonds, subject to verification, to be transferred on receipt of a Deed of Assignment on June 15^th 1998. That suggests an element of pre-planning before any of the events of 15^th June. The second document is a declaration signed by Mr Pigaiani dated 15^th June where he said he had assigned to RVL three named Treasury Bonds for a period of one year. The document confirms that the assignment was to be for nobody else. The third document is a statement of debtor, dated 15^th June 1998 said to be under the "Universal Commercial Code Financing Statement Form UCC-1" whereby Mr Pigaiani signs this statement to be presented to a "Filing Officer" identifying him as a debtor, RVL as a secured creditor and details for the Filing Officer. Somewhat curiously, RVL is also described as an assignee of the secured party and that statement was filed under a security agreement signed by the debtor authorising a secured party to file the statement. The Filing Officer is not identified.
142. According to the Defendant all of these documents were printed off by Mr Pigaiani's lawyer when he returned to the Millennium Hotel with RVL. This is all a nonsense. The documents are meaningless, and are classic fraud instruments of the type identified by the Yellow Card. The Uniform Commercial Code Financing Statement is pure fiction so far as I can see. The declaration shows that only RVL was supposed to be the beneficiary of the assignment (thereby giving the Claimant no security whatsoever). The letter of the 14^th June 1998 simply confirms that any security is to be in favour of RVL.
143. On 5^th June 1998 the Bank had given the good clean cleared funds certificate required by RVL. The Defendant had given an undertaking to the Bank to obtain from the Claimant the revised authority dated 1^st June 1998. On 15^th June 1998 RVL authorised the transfer of US$1million to Mr Pigaiani at the Investment Corporation City Bank Miami.
144. The Defendant's evidence is that the Claimant was determined to proceed with the transaction, and was determined to proceed despite the Defendant allegedly having expressed to her concerns over previous weeks about the adequacy of the security. I simply do not accept any such conversations took place as the Defendant alleges. I accept entirely the Claimant's evidence that as far as she was concerned she was to have a bank guarantee.
145. The reality is that RVL has perpetrated a fraud on the Claimant. The arrangement started with promises of a large amount of money, secured by a blocked account and/or a bank guarantee. The monies during this period between April and June were on deposit accounts. The sting occurred in June. The letter of authority of 1^st June 1998 suggested that they would be released conditional upon a bank guarantee being obtained. Suddenly the bank guarantee was no longer viable. The Defendant unquestioningly accepted that (and that is amplified in the conversation between Mr Angelides and him). In that conversation the Defendant plainly lied to Mr Angelides about the nature of the transactions. There were no confidentiality agreements involving him for example. If there was a suggestion that the Bank of Cyprus was not acceptable, it presumably must have come from RVL and was part of her design to obtain the funds free from any security. That was facilitated entirely by the Defendant. The security of the Treasury Bonds was an illusion and no reasonably competent solicitor could have thought otherwise. It does not need the understanding of international financing transactions; it is plain from a brief perusal of the documents that no security is being offered. Further the Defendant never addressed the issue of why guarantees were going to RVL, the person whose obligations were supposedly being underwritten.
146. It follows that the vital releasing of the monies occurred because the Defendant completely failed the Claimant. I do not accept that the Claimant would have simply agreed to the releasing of the monies without any security in June 1998. It militates against the stance reiterated in various documents and in her evidence.

REJECTION OF DEFENDANT'S EVIDENCE

147. I have rejected the Defendant's evidence and preferred that of the Claimant in all key areas. I do so for a number of reasons.
148. First, I found his procedure and the justification for the procedure of transmission of documents incredible and the Claimant's version far more acceptable. Second, I found his demeanour as a witness to be unsatisfactory. Frequently, he professed not to be able to understand the key documents. This was part of his desire to give the impression that it was all far too complicated for him. Third, I found his inability to recall conversations whenever hard questions were put to him in cross-examination unconvincing. He was at times able to remember apparently, matters of great detail (although they frequently did not appear in his witness statement) when he was putting a case forward.
149. His conduct was questionable in relation to various transactions. For example, the backdating of the Vassiliou Trust Deed, his reference to the Bank of Cyprus, his refusal to tell the Claimant's lawyers the history of the matter and the evasive answers to their enquiries together with a selective production of documents when purporting to return the file all show that his integrity is questionable. In relation to the enforcement of the guarantee against the Israeli company he plainly participated in the preparation of a false affidavit of service.
150. He told a number of lies. They are summarised in paragraph 20 of the closing written submissions of the Part 20 Defendants. Thus he concealed the true relationship of Westminster from the Claimant's new solicitors. He told the Claimant's new solicitors that there were no other documents prior to the 6^th April 1998. He lied about when he met the Claimant. He lied to his insurers when he told them that all telephone conversations were subject to the file notes stating in cross-examination that this was "not literally true". He told Mr Kounis on 6^th April 1998 when asked about the transaction that all he knew was that it was a commercial transaction, admitting in cross-examination that he knew far more about that and asserting that he agreed not to reveal anything because if he did so the Bank would decline to become involved. He lied about having signed confidentiality agreements. He told the court that he regarded the blocked account as being as good as a guarantee, providing the Claimant with complete security (T1094/11-15) yet in his witness statement he said that he did not regard it as complete security.
151. In addition he was prepared to translate and put into circulation documents which told lies. Thus the letters to which I have made reference and the documents contained false statements which he knew were false.
152. One document which I have not mentioned yet is a release and satisfaction document. This was sent to the Claimant on 16^th August 1999. It was a document which the Defendant contended that RVL required at that time to be signed by the Claimant before she would release the monies (long of course after they were due and long after any payments had ceased). No explanation was given for the document and I reject the Defendant's contention that he explained the effect of it to the Claimant. Fortunately she did not sign it. The document contains a significant number of errors and inconsistencies when compared with the Defendant's evidence. First it is supposed to be a release of obligations under the agreement executed on 6^th April 1998, whereas his case was that the true relationship was governed by a lost document executed in May or June. The second recital wrongly recites that the Claimant received US$200,000 whereas in fact she only received US$100,000 (the balance being remitted to Mr Vassiliou), the agreement is for payment of US$1,600,000 to the Claimant which is a substantial shortfall on what was promised by that time, in exchange for that she released RVL and any other entity trust or affiliation from all manners of cause of actions and all demands relative to the investment. The release was also stated to extend to all other parties who might have had any involvement whatsoever relative to the transaction, and was to remain strictly confidential and private. This was plainly a draft created by RVL. I accept the Part 20 Defendant's closing submissions that this was not gestated by the Defendant recreating the agreements referred to in a fax dated 20^th December 1999 from RVL to the Defendant. The primary reason for that acceptance is a fact that this document was sent to the Claimant so far as I can discern under cover of his letter of 16^th August 1999.
153. The major iniquity of this document however, is that it could be construed as a release of any claims that might be brought against the Defendant by the Claimant. It might not have that effect in law in England and Wales, but it is by no means clear what law governed it and would have presented an obstacle to any claim. It could also of course have extended to a release of Westminster, and certainly released RVL and anybody else associated with the transaction. The idea that the Defendant as solicitor for the Claimant could proffer this document to her by a letter without any kind of formal explanation is unbelievable. He was clearly by that stage in a situation of conflict. This was of course a compounding of the conflicts because he was always in a situation of conflict in respect of the relationship between the Claimant and Westminster, and then introduces this document to absolve Westminster and himself from any liability for the consequences of what has gone on with regard to the Claimant's money.

EVENTS SUBSEQUENT TO 15^TH JUNE 1998

154. As I have said the monies went to Mr Pigaiani on 15^th June. The Claimant received two payments of US$50,000, the September payment did not materialise and the Defendant received a letter from RVL dated 12^th September 1998. This was the beginning of years of evasions by RVL and false justifications as to why the money was not repaid. First, she said it was not possible to proceed (in June) on the blocked funds investment programme, and therefore they went on what was called a reconstruction opportunity based on a US Treasury Bond deposit. She decided to opt for one of two options namely, to abandon the joint venture and (perhaps unsurprisingly) to take advantage of the powers to renegotiate investments contained in page one paragraph four of the JVA. In fact the authority is only to negotiate in respect of the blocked funds investment programme, so this was false. RVL then said that she decided to go for the reinvestment option which produced less returns (reducing the return to a mere 100%). She suggested that the distribution of profits agreement should be amended accordingly, and complained that the problem was that the investment was only US$1million, whereas she was used to investing in large sums of US$100 million. Finally, it said that the letter constituted a formal variation of the Joint Venture Agreement. She promised a payment on 19^th October 1998 (carefully avoiding the fact that the September payment had not been met). All of this letter is an attempt to justify events which happened in June retrospectively. I am quite satisfied none of it is true and it is all fraudulent. The Defendant merely passed it without comment to the Claimant under cover of his letter of 18^th September 1998. On 22^nd September 1998 the Claimant sent a fax following a telephone conversation saying that she was concerned that she did not know if her funds were secured and complaining about the ability of RVL to change the programme and the fact that she is not sure who is guaranteeing it.
155. This letter ought to have been regarded by the Defendant as being nonsensical when it referred to security and changing guarantees. If his story had any credibility he would have written back to the Claimant and reminded her of the events (as he saw it) that occurred in June 1998 that she knew that there were to be no guarantees. In fact he did not reply to the letter at all which demonstrates significantly that I can place no credence on his version of events in respect of June 1998. Nothing further happened (in particular the Defendant apparently took no further steps to pursue RVL or anybody else). All communications from RVL were subsequently by fax where usually no address was given or the addresses are hotels. She simply ceased to be available for direct contact. On 6^th November 1998 the Defendant again sent the Claimant RVL's letter and asked her to sign a variation of the Distribution of Profits Agreement. No warning was given about this, and I find it incredible that he felt able simply to send a document to the Claimant unilaterally proposing a variation of the profits reducing her share to 50% and increasing that of Westminster's to 50% without any explanation. After 1^st November 1998 it provided that the profits were to be 56/46, another (although latter) variation. Once again this document is inconsistent with there having been a variation in June. The insertion of the 50% on US$1million in my opinion is to provide a retrospective justification for the fact that payments of US$50,000 only were made, when in fact payments of US$58,000 ought to have been paid in accordance with the variation letter of 7^th April 1998. This is the start of the Defendant looking to protect his and Westminster's position at the expense of the Claimant. The Claimant agreed the variation and sent it back to the Defendant.
156. From then over the next two years or more there was repeated inconclusive correspondence from RVL with the Defendant. In this correspondence she and various lawyers on her behalf made numerous promises of repayment of the money. None of these was genuine. On being pressed in cross-examination to explain why proceedings were not brought, the Defendant repeated what he had said in his witness statement that the Claimant and her husband had issued death threats to him and RVL. I reject that evidence.
157. This included the ludicrous proposal that the Claimant would be content with a guarantee from an Israeli company IBC Software Service Limited owned by a Mr Malek said to be a wealthy associate of RVL. The form of guarantee dated 7^th May 1999 was not given of course by Mr Malek but was given by a company (which probably does not exist under that name) in Israel. Not only is the guarantee worthless (that has been shown by the subsequent unsuccessful proceedings) on the verified acceptance clause referred to at the bottom there was a further trap which could be said that the Claimant if she accepted it was in quotation marks "full and final settlement" so that it could have been said that she could not have pursued any further proceedings against RVL. This never occurred to the Defendant.
158. Nor did it occur to him that proceedings should be brought against RVL.
159. On 3^rd January 2000 RVL sent another long and irrelevant fax to the Defendant. Her address was usually given as being of Denver, Colorado. She claimed that she had a moral obligation to the Claimant, and therefore because of that moral obligation she was willing to pay the Claimant out of her personal funds. She then said that any further steps of a threatening nature on the part of the Claimant towards her and the Defendant would have the result that she would not keep her obligation and have to disclose the Oakhaven investment to the local authorities. This is a threat which suggests that the investment with Oakhaven is somehow tainted with illegality. She suggested that there would therefore be further delay in trying to get the US$1million back from Oakhaven which could not be extracted because of the supposed death of its main officer. She then magnanimously agreed to pay money out of her own pocket.
160. The letter is a work of fiction and bears no relation to the legal liabilities she assumed. At the very least on the terms of the promissory note she had an obligation to repay the monies in May 1999.
161. The Claimant then instructed new solicitors who wrote to the Defendant on 6^th January 2000 requesting information, and requesting files to be handed over (enclosing authority). The next day the Claimant received a fax from RVL now apparently in Johannesburg once again saying the expected payment was not forthcoming but would come later.
162. I have already observed that the Defendant failed properly to hand over all the files. His reasons for this, that it is traditional for Greeks to have more than one lawyer acting simultaneously in different transactions, is unreal. He was not acting as a Greek lawyer, nor were the Claimant's solicitors. RVL in a letter of 12^th January 2000 promised repayment on 21^st January 2000, but that day came and went like all the others without repayment. The Claimant sent a reminder fax to the Defendant. Correspondence then passed between the Defendant and Anselm S. Herrmann an attorney in Rosebank acting for RVL. The Defendant rebuffed the approach on the basis that RVL had been making continuous promises setting time limits and breaking them and continually failing to make any payments as required by the agreement. A long detailed letter was then received from Anselm S. Herrmann dated 28^th January 2000 commenting on the inadequacy of the documentation leading to a denial that the Claimant was entitled to any monies. This was on the basis that the original agreement was "novated and varied when the funds were advanced to Oakhaven". The letter makes it clear that the Defendant well knew all about this (as indeed he did). There is reference to a full absolute and release document (none has been produced executed by RVL) and the preposterous suggestion that she signed that without proper advice and under duress. Finally, it suggested repayments should be suspended until the matter can be fully investigated.
163. On 2^nd February 2000 the Defendant sent "copies of our file of papers in relation to this matter". He did not do any such thing. Large numbers of documents were not supplied. On 8^th February 2000 the Defendant (no doubt out of desperation) wrote to Mr Pigaiani in Brazil seeking information as to the capital. That never received a reply. On the 11^th February 2000 the Defendant had a telephone conversation with Mr Herrmann and for the first time prepared an attendance note of the conversation.
164. On the 18^th February 2000 the Claimant's new solicitors posed a large number of questions at the Defendant. Without going into that letter in any detail, it is clear that questions were being raised over the Defendant's role in the affair. On 6^th March 2000 the Defendant replied, but the information provided there was by no means complete. The Claimant's new solicitors chased the matter up. On 16^th June 2000 the Defendant provided some replies but they too were deceptive. For example, item one stated there were no other documents. Item 4(v) identified the officers of Westminster as being clients of the Defendant, and that the document was signed by an officer of Westminster to which the reply was "Please see above". He failed of course to acknowledge that he had signed one document as an officer of Westminster, that he was the officer and that the other documents were signed by Miss Vassiliou. Under item 5 he said there was no agreement for the payment of his fees, but that he understood Westminster would have paid certain fees at the end of the investment programme. In that context of course he totally failed to reveal the large sum that he was expecting to obtain.
165. The Claimant submits that the conduct of the Defendant prior to September 1998 was gross incompetence as the Claimant's solicitor. The Claimant submits that the subsequent conduct which I have set out above shows an attempt by the Defendant to cover up his own admissions. That culminated in the insurance proposals and the willingness on his part to prepare documents to protect his position including lying and being evasive in the course of his evidence. The Claimant submits this is part of the course of conduct of cover-up rather than a continuation of dishonest conduct on the part of the Defendant.

THE ISSUES AS BETWEEN THE DEFENDANT AND THE PART 20 DEFENDANTS

166. I have already summarised those issues. The Part 20 Defendant contends that any liability arises from the dishonest or fraudulent act or omission committed or condoned by the Defendant.
167. The Part 20 Defendants contends that the relevant test to be applied as regard dishonesty is that applied in Twinsectra Limited v. Yardley [2002] 2 AC 164 where Lord Hutton said at page 182D:-

"Your Lordships should state that dishonesty requires knowledge by the Defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape the finding of dishonesty because he sets his own standards of dishonesty and does not regard as dishonest what he knows would offend the normal accepted standards of honest conduct".

168. As the Part 20 Defendants concede, this has two requirements. First, there must be a finding that the conduct was dishonest by the ordinary standards of reasonable honest people, and second, that he must realise by those standards his conduct was dishonest. As Lord Hutton says he cannot set his own standards.
169. It is to be noted that the provision covers dishonesty committed or condoned. The Part 20 Defendants contend that they were entitled to repudiate because the Defendant was dishonest.
170. He received a detailed claim letter from the Claimant's new solicitors dated 4^th January 2001. He passed this on to his insurers and PI Direct on behalf of the underwriters immediately sought an explanation as to why the claim had not been notified to SIF in 2000. It observed that correspondence had passed between the Defendant and the Claimant's new solicitors culminating in a letter of 6^th June 2000. They also initially considered invoking the reimbursement provisions which have ultimately been raised in the Part 20 Defendants' counterclaim. Initially, the Defendant on 24^th January 2001 wrote saying that he thought the matter had been referred to in the proposal form (which was plainly wrong). In view of the concerns over the non disclosure, on 23^rd January 2001 PI Direct on behalf of the underwriters reserved all rights under the policy in respect of an indemnity. The OSS delivered a report dated 20^th February 2001 following an inspection on 26^th September 2000 and subsequent interviews. Although the Defendant challenged aspects of that report and in particular what he said at a meeting on 15^th December 2000 (paragraph 68 and following), I reject his subsequent evidence that those matters were in effect trapped out of him by Mr Ireland for the reasons I have set out earlier in this judgment. This is reinforced by his lack of challenge to the contents of the report, when it was sent to him.
171. He was interviewed by Mrs Walsh and Mr Wood on behalf of the underwriters. He reiterated that he would have obtained fees from Westminster between US$150,000 to US$200,000. It was put to him that the transaction read like a fraud, but he denied that RVL was a fraudster and had claimed that she put the money into a company, but then the money could not be returned as the director had died. He told Mr Wood that he did not think initially it was a fraud, but came to think it was in the middle of 2000 when no money was forthcoming. That of course was flatly contrary to the evidence he gave before me where he insisted he believed the money was going to be returned. He was unable to explain why there were no letters, nor was he able to explain why he did not notify the matter in August 2000, except that he did not think there would be a claim. As a result of this interview the underwriters retained Reynolds Porter Chamberlain and they wrote to the Defendant on 12^th April 2001 raising the issue as to fraud only, and requested that the Defendant attend a consultation with Mr Justin Fenwick QC to answer questions whereupon he would advise insurers whether or not a refusal of indemnity would be justified. Six items of concern were expressly raised. These run from the receipt of the Yellow Warning Card in September 1997, the lack of any detailed correspondence or proper records of any advice given to the Claimant, failure to consider the risks of the Claimant's proposed investments and to advise her even though he had introduced RVL, willingness to draft or reproduce documents which he did not understand, which he knew were spurious and fraudulent, failure to disclose the financial interest of Westminster and failure, critically or otherwise, to question the allegedly very large profit returns.
172. That interview took place on 22^nd May 2001. As a result of that interview Mr Fenwick QC apparently advised that their suspicion of dishonesty or fraud was justified and accordingly Reynolds Porter Chamberlain wrote to the Defendant on 29^th June 2001 declining an indemnity in respect of the policy. They did not raise at that time the question of indemnity in the event that they failed to establish the fraud justification for declining the indemnity.
173. The Defendant was sued by the Claimant by the present proceedings issued on 3^rd January 2002. There was a default judgment entered on 5^th April 2002 which was set aside by Mr Alan Boyle QC on 7^th March 2003 after Deputy Master Weir had refused to set aside a default judgment on 15^th August 2002.
174. The Defendant issued his Part 20 claim on 23^rd October 2002 seeking an indemnity on the basis that the court might find him negligent but not dishonest. The Part 20 Defendants served a Defence on 20^th November 2002 denying liability on the grounds of fraud. On 5^th December 2003 it served an amended Part 20 defence counterclaim seeking an indemnity under Clause 7.7 of the Policy of Insurance in the event that the Part 20 Defendant was found liable to provide the Defendant with an indemnity. In an amended Reply the Defendant set out the reasons why he signed a declaration that he did. He gave four grounds as to why he did not feel it was necessary in effect to reveal the dispute when he signed the declaration on 23^rd August 2000. First, he acknowledged he received letters set out above from the Claimant's new solicitors. In addition, he had received a letter from the Claimant on 13^th September 1999. There was a dispute as to the true meaning of this letter, it being written in Greek. I am satisfied that the letter says:-

"John, I have not heard anything regarding the money, I do not know what is happening and who is messing about, however, I hold you responsible for all the procedure. Can you not understand in what a difficult position I am in regarding the obligations I have got myself into in the bank … I cannot understand why you want to cover for [RVL] and you do not proceed legally. Incidentally we need the money urgently because we have suffered huge losses with our company's goods following the earthquake".

175. The Defendant never replied to that letter.
176. Under Clause 7.7 the Part 20 Defendants are entitled in any event to reimbursement to such extent as is just and equitable by reason of non disclosure, misrepresentation, breach, dishonesty, act or omission, if the insured committed or condoned (whether knowingly or recklessly) non disclosure or misrepresentation or any breach of the terms of the contract or was guilty of any dishonesty or any fraudulent act or omission.
177. The Part 20 Defendants rely upon the correspondence to which I have made reference above. I reject Mr Stafford's submissions as to the meaning of the letter of 13^th September 1999. The phrase " I hold you responsible for all the procedure" cannot be seriously said to mean simply that the Defendant was supposed to get on with the proceedings. It is plainly a complaint about the Defendant's conduct and the circumstances in which the Claimant had found herself by that time. Any lingering doubts are clearly dispelled when one looks at the correspondence in 2000. Nor do I accept that the fact that the Defendant was receiving telephone calls from the Claimant and her husband during this period, has any impact on whether or not circumstances arose which ought to have led him to believe a claim might be made. I should say the Claimant denies the thrust of those conversations. Nor do I regard the sending of an invitation to the wedding on 15^th July 2000 as significant; I accept the Claimant's evidence that this was to embarrass the Defendant about the circumstances which had arisen.
178. I have already observed that the Defendant told a lie in relation to telephone conversations in the answers sought from him as part of his proposal. As regards the declaration, he was required to certify that he was not aware of any circumstance which might give rise to a claim under the statutory cover other than those that have already been notified. It was made quite clear that any applicant for insurance should notify to SIF all new claims and circumstances which might give rise to a claim before 31^st August 2000. The reason for that of course is because that was the end of the SIF statutory period and the new insurers wanted to ensure that all liabilities potentially were dealt with under the existing SIF policies and not brought home to them in the next year's insurance.
179. Mr Stafford drew to my attention the Solicitors' Indemnity Rules 1999 which govern the relationships of the solicitors and their insurers at that time. Under Clause 19 Condition 19.1 a member is obligated as soon as practicable to give notice of (a) any claim made or intimated and (b) the receipt of a notice of intention to make any claim.
180. Under 19.2 it was provided that a member "may" also give notice in writing of any circumstances of which the member becomes aware, which may give rise to a claim, but the notice would only be effective when given if the circumstances known represen sufficient ground for a genuine and reasonable supposition on the part of the member that those circumstances might give rise to a claim the subject to an indemnity under rule 13.
181. It will be seen that the declaration signed on the 23^rd August 2000 also stated that the proposer was not aware of any circumstance which may give rise to a claim under the statutory cover.
182. Looking at the correspondence I do not see how that declaration could have been honestly signed by the Defendant without referring to the possibility of a claim to be brought by the Claimant.
183. It follows therefore, that subject to further argument based on the Part 20 Defendants' conduct if I reject the refusal to indemnify on the grounds of fraud, that the Defendant has failed to disclose the potential claim. That is both a misrepresentation and a breach of contract as the statements are expressly made contractual provisions by virtue of the recital. On his initial proposal for insurance dated 20^th July 2000 the Defendant has failed to answer the question whether or not any partners were aware of any circumstance which might give rise to a claim. That was picked up when the Part 20 Defendants required the express declaration. Nevertheless, the Defendant was unable to explain why that was left blank. It seems to me inevitable that he hoped to avoid answering it because he was aware by that time a claim was in the offing. I refer to the answers that he gave to Mr Ireland which I have referred above. It is also borne out by the tone of the letters he was writing to RVL's American advisors as set out in his letter of 18^th August 2000. It is quite clear that by this time he well knew that whatever his own role, RVL was a fraudster and he well knew that the Claimant had reached a level of exasperation with the whole affair to the extent that she had notified solicitors who had asked searching questions in the correspondence where he gave evasive answers and in some cases downright lies as I have set out in this judgment.

WAIVER/ESTOPPEL

184. It is said that the Part 20 Defendants are estopped or have waived any right to invoke the indemnity under Clause 7.7.
185. The short answer to this is that by virtue of the recital the statements become contractual terms, see Dawsons v. Bonnin [1922] 2 AC 413. The effect of those clauses is to negative the argument for example deployed in the case of Pan Atlantic v. Pine Top [1995] 1 AC 501. In that case the House of Lords held that an underwriter could not avoid a contract for non disclosure of material circumstance unless he could show that he had actually been induced by the non disclosure to enter into the policy under the relevant terms. The Dawsons case makes all statements contractual.
186. Of course the Part 20 Defendants are not seeking to avoid the policy for non disclosure. They seek to avoid the policy on the grounds of fraud. If that is unsuccessful they then wish to invoke Clause 7.7 of the contract of insurance to seek an indemnity. I do not see how therefore the question of materiality arises given the contractual nature of the Clause.
187. If I was wrong in that, it is difficult to see how the non disclosure could be anything other than material. In this context I was taken to parts of the judgment in Pan Atlantic where Mr Stafford submitted that it was a requirement for the underwriter actually to give evidence to the effect that he had been induced to enter into the contract of insurance, see page 571 per Lord Lloyd of Berwick. Mr Stafford elevated this to a submission that the Part 20 Defendants could only show what the underwriters would have done by actually calling an underwriter. I do not accept that is what the House of Lords requires. The key word in Lord Lloyd's judgment at page 571G is the word "normally". I do not see why the underwriters' intentions cannot be given by evidence of somebody who has spoken to the underwriters. In paragraph 15 of Mrs Walsh's witness statement, she plainly recounts that, had the underwriters been notified of the circumstances, they would not have agreed to insure his practice or would have required him to report the matter to SIF. Although Mr Stafford cross-examined her on that paragraph he did not until his closing speech make any submission as to the admissibility of her evidence as regards the underwriters. Had he done so, the matter could have been easily addressed. I do not think it is fair to the Part 20 Defendants (assuming Pine Top has the meaning Mr Stafford contends) for nothing to be said and the matter raised only in closing speeches.
188. In reality, evidence has been given as to the underwriters' intention. It is not direct evidence; it is hearsay evidence. I note of course Pine Top was a decision before the Civil Evidence Act 1995 came into force. I do not see that it can be said that the evidence of intention by an underwriter has to be proven in a special way not required of any form of evidence in court. I accordingly reject the submission that there is no evidence of what the underwriters would have done.
189. It seems to me self evident in any event that faced with this claim they would have declined to take on the insurance or would have required him to report it to SIF. In either eventuality, the Part 20 Defendants would not have been faced with meeting this claim. They have therefore suffered a significant prejudice in that they will if the liability is established be required to provide a full indemnity when, had the Defendant behaved properly in accordance with the contractual obligations, they would not have paid anything. In those circumstances it is only just and equitable that, if Clause 7.7 arises, he should provide them with a full indemnity as to the total liability they might incur to the Claimant via the policy of insurance.
190. I reject any suggestion that there has been any estoppel or waiver. Those matters address to a decision whether or not to repudiate the policy. I do not see how any of the matters referred to by the Defendant can possibly amount to a waiver. They all occur during the period when the Part 20 Defendants had repudiated the policy. There was never any question of them considering and deciding not to invoke Clause 7.7; their stance was that 7.7 had ceased to exist because the policy had been repudiated by them because of the Defendant's fraud. I do not see how the Defendant can possibly have believed otherwise, and I do not see how he can be said to have conducted himself on a belief that there would be no claim brought under Clause 7.7.
191. It follows therefore that I reject the Defendant's contentions that the Part 20 Defendants cannot evoke Clause 7.7.
192. That leads to the major conclusions that are necessary in this case namely the question of the conduct of the Defendant as regards the Claimant, and the conduct of the Defendant as regards the Part 20 Defendants.

CONCLUSION ON MAIN ACTION

193. It is difficult to overstate the level of failure on the part of the Defendant. I have rejected his limited retainer argument. If I was wrong on that, it was plainly incumbent on him to spell out that his role was a limited one rather than a general retainer as a solicitor. He failed even in that task.
194. He bore scant regard to the Yellow Card, his duties as regards clients and potential conflicts that might arise between his client and other clients and him and his client.
195. He failed to give any advice at all of any significant nature in relation to these transactions. He should have viewed the transactions with great suspicion; instead he surrendered his independence to RVL and allowed himself to become a mere cipher for meaningless documents prepared by her as part of her fraud exercise.
196. I have already observed he was willing to backdate documents, write fraudulent references and draft documents which contained untrue statements.
197. Against this backcloth, he prepared the Profit Share Agreement, which was drafted by RVL and completely failed to disclose his interest in Westminster.
198. He never considered adequately in any way the Claimant's desire for her monies to be protected. He never considered what the blocking mechanism so called was, and whether it protected her; he never questioned the need for RVL to have a wide ranging power of attorney, and he never properly addressed any of the documentation which he put under his client's nose for her signature.
199. The manner in which he procured the client's execution of documents was completely unsatisfactory. Contrary to his even limited role he never provided a proper mechanism for translation. The idea that documents should be explained over the telephone as opposed to be written out in Greek is quite extraordinary.
200. He never addressed with any critical eye the self evidently suspicious profitability of the schemes.
201. Finally, his duties were completely ignored when the Claimant's money was removed as a result of the actions taken on the 15^th June 1998.
202. After the transaction went wrong, his performance became even worse. He failed properly to address his client's written concerns. He accepted unquestioningly RVL's letter of 12^th September 1998 "revising" arrangements, which revision he simply passed to his client without comment. As part of that exercise he also drafted a revised profit share arrangement with Westminster benefiting, again giving no explanation or justification.
203. During the course of the long and protracted negotiations with RVL he put forward for consideration by his client a draft deed of release which would also absolve him, Westminster and Mr Vassiliou from many potential claims she might bring.
204. When the new solicitors were involved he suppressed documents. He also gave evasive and dishonest answers to those solicitors when they were seeking to investigate matters on behalf of the Claimant.

CONDUCT AS REGARDS THE PART 20 DEFENDANTS

205. He made a false declaration to obtain insurance as regards telephone conversations being the subject of a file note , he attempted to avoid answering the questions to any claims and he gave a dishonest declaration to obtain the insurance.

CONDUCT DURING THE TRIAL

206. I have already commented on the Claimant's performance and the Defendant's performance. I am quite satisfied that the Defendant lied extensively in his evidence. I do not accept the criticisms of the Claimant and Sandi as set out in Mr Stafford's written closing submissions are justified.
207. The key matter for consideration in reality is whether or not the Defendant was dishonest as required by the test in Twinsectra referred to above.
208. There is no doubt that after the matter went wrong he acted in a dishonest way. I accept Mr Lloyd's submissions that this was part of a cover-up exercise.
209. The important consideration is how his conduct before the 15^th June 1998 should be considered. That, as Aldous LJ said in Mortgage Express v. Newman [2000] PNR 745 at page 753, is a jury question. Equally it is not an easy question to answer although it is the sort of question judges and juries throughout the country and through every day answer without needing to analyse a large number of authorities.
210. I was troubled about the finding of dishonesty against the Defendant in respect of this transaction because profit motive is usually a major factor in dishonesty. He only obtains money if the arrangement is a success. It is difficult to see how he acted dishonestly when he only stood to gain if the fraud was not actually a fraud. There is no evidence to show that he has personally benefited from the transaction in any other way.
211. I put this to Mr Pooles QC in his closing submissions. His response (T13 page 1684) was that applying the Twinsectra test the Defendant necessarily has to have knowledge that what he is doing will be regarded as dishonest by honest people. As Mr Pooles QC has submitted, the Defendant in his first three answers in cross-examination acknowledged that it was dishonest to withhold information wilfully from one's client, to lie to clients and to lie to third parties. He did all of these things. He knew they were wrong. I have to be careful to weigh answers that are given by reference to what the Defendant appreciated at trial as against what he appreciated and believed at the time the events took place. He was cross-examined extensively for many days. I am satisfied that during the course of his evidence as I have said, he lied and I have rejected his evidence extensively.
212. I am satisfied that the liability arises from dishonest or fraudulent acts or omissions committed or condoned by the Defendant in accordance with Clause 6.9 of the Policy of Insurance. The main fraud was that by RVL. I accept that the Defendant was taken in by her. He was plainly mesmerised by the large amount of money that he believed would come his way as a result of this proposal. This so overwhelmed him that he cast aside all his professional duties and standards. I have set out extensively all the dishonest acts that he took. I am satisfied that, whilst he might not have obtained the money on the evidence unless the transaction had proceeded, he nevertheless condoned RVL's fraud (by his abject surrender of duties and responsibilities and lies) but also, he knew what he was doing was dishonest. I appreciate the line between gross incompetence and dishonesty in this case is a very fine one, but having seen his performance and his inability to explain large amounts of the documentation and transactions, the way in which he conducted himself in relation to the transaction afterwards, my firm conclusion is that he acted in a dishonest way. There were numerous occasions when, if he had stopped for one minute and consider everything the Claimant would not have been deprived of her money. The Defendant has repeatedly denied that he was dishonest, but to my mind that is setting his own test of honesty which is not permissible as shown by the Twinsectra case.
213. As a consequence, the Defendant I find is liable to the Claimant for breach of fiduciary duty in accordance with the re re amended Particulars of Claim as opposed to negligence.
214. If I am wrong, it is plain he was negligent in discharge of his duties to the Claimant.

CONTRIBUTORY NEGLIGENCE

215. Given the basis of the finding of fraud, contributory negligence does not arise as it is not a plea sustainable in defence to a claim based on fraud. In any event no proper particulars of contributory negligence have been given and I reject any suggestion that the Claimant had been contributory negligent in any way. She was (however implausible the transaction) entitled to be protected by the Defendant. This is not a case of the Claimant being mesmerised by the figures; I accept that she was cautious and only went through with the transaction because she believed she was protected. The fact that she was not protected arose out of the complete failure on the part of the Defendant. If the Defendant was only negligent, I would find there was no contributory negligence on the part of the Claimant. If he failed, that caused the loss; not her actions.

CONCLUSION ON PART 20 CLAIM

216. It follows that the Defendant's Part 20 claim against the Part 20 Defendants should also be dismissed.
217. In case I am wrong, and the Defendant establishes that he was merely negligent as opposed to dishonest, and is thereby entitled to an indemnity against the Claimant from the Part 20 Defendants I determine that they are entitled to succeed on a counterclaim by virtue of his non disclosure and his consequent liability under Clause 7.7 and that it is just and equitable that he provide a full indemnity to them for the liability they may have to incur on his behalf to the Claimant.

FURTHER INQUIRY

218. At the moment I have in mind awarding the Claimant interest on the judgment rate from 15^th June 1998 (8%). That seems to me to compensate her for the loss she has sustained. If the Claimant wishes to seek damages on a different basis and a further inquiry as contemplated, then that can be explored when this judgment is handed down.