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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> St Paul Travelers Insurance Co. Ltd. v Okporuah & Ors [2006] EWHC 2107 (Ch) (10 August 2006) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2006/2107.html Cite as: [2006] EWHC 2107 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		10th August 2006

His Honour Judge Hodge QC:

I: Background

1. This claim raises interesting issues as to the effect in law upon the liability for acts of deceit by one of two alleged conspirators of a fraud said subsequently to have been practised upon him by his CO-conspirator. On one view of the facts, it is reminiscent of the celebrated case of the highwaymen, Everet v Williams (1725), discussed at pages 76-8 of Sir Robert Megarry's first Miscellany-At-Law (1955). The claim arises out of a purported transfer of property at 9 Alexandra Road, Croydon CRO 6DY ("Alexandra Road") from the 3^rd Defendant, Mr Joshua Atikpapka ("Joshua"), to the 1st Defendant, Mr Victor Okporuah ("Victor"), and an intended mortgage of Alexandra Road by Victor to the Bank of Scotland ("BOS"), the original claimant. Joshua was the registered proprietor of Alexandra Road. He was also a solicitor advocate and the chairman and chief executive of the incorporated legal practice of Joshua & Usman Legal Services Limited ("Joshua & Usman"), the 2^nd Defendant. At the relevant time, he was married to Enyote, the sister of Victor's mother, and thus was Victor's uncle by marriage.
2. It is common ground that Joshua committed a mortgage fraud. He did not transfer Alexandra Road to Victor or register any mortgage in favour of BOS. Joshua & Usman drew down BOS's money and Joshua dissipated it. It now appears that Joshua was a serial fraudster. At Appendix 1 of the opening skeleton argument of Miss Tozer, who appeared for Victor, is a note of Joshua's other frauds. Joshua's relatives by marriage, including his wife Enyote and her mother, were victims of these frauds. Victor emphatically denies that he participated in the mortgage fraud relating to Alexandra Road or any other mortgage fraud. He maintains that he, too, is an innocent victim of his uncle's fraudulent activities.
3. Joshua did not discharge his existing mortgage over Alexandra Road, in favour of Capital Home Loans Ltd; nor did he repay a further mortgage which he had purported to create whilst acting as his wife's solicitor in connection with a purported sale of that property to her, before the intended mortgage transaction with BOS. Just over a year after the purported sale to Victor, the original mortgagee took possession of Alexandra Road, which it later sold to an unconnected third party. After discharging its secured indebtedness, on 23rd August 2004 the mortgagee paid the balance of the sale proceeds (£63,701.74) into Court, where I understand that that sum remains (together with interest earned).
4. With no effective recourse against Alexandra Road, BOS commenced these proceedings against Victor to recover its advance. There are now a complicated series of inter-locking claims and Part 20 claims; but the contest is essentially between (1) Joshua & Usman and its insurers, St Paul Travellers Insurance Company Ltd ("SPT"), which, having settled with BOS and taken an assignment of its claims, has been substituted as Claimant and (2) Victor. The principal claims with which I have to deal are as follows:

(1) BOS's claims (pursued by SPT as its assignee) against Victor, founded essentially on conspiracy to defraud, deceit and/or negligent misrepresentation, and against Joshua for conspiracy to defraud.

(2) Victor's counterclaim against BOS for the return of moneys mistakenly paid to it under the mortgage which never completed. On the unchallenged evidence of Trudie Flynn, these payments totalled £12,362.50 and were made each month up to and including September 2003.

(3) Victor's claim against Joshua & Usman for breach of its retainer by him as his solicitor. He claims damages and/or an indemnity against any liability to BOS together with the return of an alleged deposit of £50,000 and the mortgage instalments mistakenly paid to BOS.

(4) BOS's claim against Joshua & Usman for breaches of trust and of contract and for negligence. Although this claim has been settled, it remains relevant to the claims for an indemnity or contribution

(a) by Victor against Joshua & Usman and Joshua in relation to any sums which Victor is liable to pay to BOS, on the basis that they are liable for the same damage and

(b) by Joshua & Usman against Victor and Joshua in relation to the amount which it has paid to BOS by way of settlement.

(5) claims by Victor and by Joshua & Usman against Joshua for an indemnity or contribution or damages.

On 22nd May 2006, BOS secured an Order debarring Joshua, who is believed to be in Nigeria, from defending the claim brought against him by BOS.

5. Victor had applied to BOS for the mortgage in respect of Alexandra Road using the services of Herald Finance Ltd ("Herald"), a mortgage broker, which acted by its director, Mr Agbalaya. Victor admits that the mortgage application form is inaccurate in certain respects (although not all of those alleged by BOS). For example, it incorrectly stated that Victor was a solicitor when in reality by mid-2002 (when he was 25 years of age) he claims to have been working "as an assistant to [his] uncle Joshua, a barber, a DJ, a producer and promoter of club nights simultaneously ....[and] was also a partner in a firm called Unique Music, which operated a record store, which [Victor] managed". There are issues as to whether some of the other statements contained in the application form (e.g. as to Victor's basic gross income of £77,850, the source of the deposit being savings, and Victor's stated intention to live in Alexandra Road) were false. Victor admits that he signed the mortgage application form and that he did so for the purpose of it being used to obtain a mortgage from BOS; but he says that he signed it without reading it and that he had no reason to suspect that its contents were other than accurate and in accordance with the true circumstances. That explanation is not accepted by the Claimant.
6. I have to decide whether to reject Victor's explanation and account of this intended mortgage transaction, and his account of the earlier mortgage transactions relied on by the Claimant in support of its case of fraud against him. Those earlier transactions are relied upon in order to damage or destroy the credibility of Victor and his maternal aunt, Iraida Usman, herself a solicitor and formerly a director of and fee-earner with Joshua & Usman; to demonstrate the implausibility of their evidence; and to establish a propensity on their part to participate in, or to turn a blind eye to, mortgage fraud.

II: Detailed chronology

7. Victor was born on 22nd February 1977. He left school in 1993 at the age of 16 with 5 GCSEs. On 15^th September 2000 Joshua purchased Alexandra Road for £174,950 with the assistance of a mortgage advance from Capital Home Loans Ltd, secured by a first registered charge over that property, for £139,600 (80% loan to value).
8. During 2001 and 2002 Victor successfully applied for mortgage advances to purchase four properties through the mortgage broker, Herald, acting by Mr Agbalaya. The first was 14 Percy Road, London SE25 5NA ("Percy Road"). Victor's mortgage application, signed by him and dated 2nd May 2001, was submitted by Herald to High Street Home Loans Ltd through an intermediary, Mortgage 2000 Design & Processing. The purchase price was £113,000 and Victor originally sought a mortgage advance of £101,700 (90% LTV), the source of the deposit being stated as "savings". Victor was described as employed, his occupation being stated as that of a solicitor in permanent and full-time employment with Joshua & Usman with 42 months of service, a basic gross income of £29,250 pa and a net income of £22,230. He stated that Percy Road would be his primary residence. On 13^th June 2001 Joshua & Usman wrote to High Street Home Loans in relation to Victor, stating (l) that the position that he held was that of "billing officer", (2) that his employment had commenced on 5th January 1998, (3) that his basic annual salary was £29,250, and (4) that his position was permanent. The letter was signed by Iraida Usman. There is no indication or suggestion that this was ever seen by Herald. In July 2001 Victor accepted a revised mortgage offer of £96,445 (including a £395 arrangement fee), effectively 85% LTV. The monthly payment was £654.22. The net mortgage advance to the solicitor was £95,980. Joshua & Usman's draft financial statement dated 28th August 2001 was addressed to Victor at 67a Croham Road, Croydon (Joshua's address) and showed £19,198.75 as the balance payable to complete. This was paid in cash on 9th October 2001. Completion of the purchase, financed by a mortgage advance from GMAC-RFC Ltd ("GMAC"), took place on 1 6th October 2001. Herald charged a fee of under £250; and Joshua & Usman charged £420.
9. On 6th December 2001 Victor applied, through Herald, for a "buy-to-let" mortgage advance of £100,000 to finance the purchase, for £125,000 (80% LTV), of 158 Mitcham Road, Croydon CRO 3JE ("Mitcham Road"). Victor was stated to be employed, his position being described as that of a solicitor in permanent employment with Joshua & Usman since June 1997 with a basic gross income of £29,250 pa. In January 2002 he received a mortgage offer of £100,395 (including a £395 arrangement fee). The monthly payment was £618.31. The net mortgage advance to the solicitor was £99,930. Joshua & Usman's financial statement dated 17^th January 2002 was addressed to Victor at 222 Loughborough Park (a property let to Victor by a housing trust) and (1) purported to record sums of £250 and £20,000 as monies received from Victor and (2) showed £7,174.75 as due from him for completion. An attendance note dated 18^th January 2002 records that Victor brought in the balance of the completion moneys needed to Joshua & Usman, apparently in cash. There is no documentary evidence of the payment of the earlier sums of £250 and £20,000. Completion of the purchase, financed by a mortgage advance from GMAC, took place on 22nd January 2002. Herald charged a fee of £1,000; and Joshua & Usman charged £420. By this time, Victor owned property worth £238,000, subject to mortgage liabilities of £196,840 and monthly outgoings of £1272.53 (some £15,270 pa).
10. On 24th January 2001 Victor, applied, through Herald, for a "buy-to-let" mortgage advance of £284,000 to finance the purchase, for £355,000 (80% LTV), of 2 Woodstock Road, Croydon CRO 1JR ("Woodstock Road). Victor was again described as employed, his position being described as that of a solicitor in permanent employment with Joshua & Usman since June 1997 with a basic gross income of £29,250. Although the identity, address and sort code of his bank (Abbey National) were the same as that stated in his two previous mortgage applications, his account number was different. In February 2002 he received a mortgage offer of £284,395 (including an arrangement fee of £395). The monthly payment was £1,806.37. The net mortgage advance to the solicitor was £283,930, Joshua & Usman's draft financial statement dated 14^th March 2002, again addressed to Victor at 222 Loughborough Park, recorded that £250 had been received from Victor on 12^th February 2002. (This was evidenced by a receipt.) It then went on to record a balance due from Victor to complete of £26,490.87, but only after an unexplained item: "Less £50,000". Victor paid £16,490.87 to Joshua & Usman by way of a cheque drawn on his Abbey National account on 20th March 2002. On the same day Ms Usman paid £5,000 to Joshua & Usman for the credit of Woodstock Road by way of a cheque drawn on her National Westminster account. On 21st March 2002 Ms Usman paid a further £500 in cash and a counter cheque drawn on Abbey National for £4,500 to Joshua & Usman for the credit of Woodstock Road. Victor had exchanged contracts for the purchase of Woodstock Road on 20^th March, with completion fixed for 27th March. On that day, the vendors' solicitors served notice to complete on Victor's solicitors. On 8th April 2002 completion took place, financed by a mortgage advance from Amber Home Loans Ltd. The documents do not disclose the source of the unexplained sum of £50,000 that was credited against Victor's purchase of Woodstock Road. Even after debiting Victor's Abbey National account with the cheque for £16,490.87 on 26th March 2002, Victor maintained a credit balance on that account of over £1 1,000 until the end of May 2002. Herald charged a fee for arranging the mortgage of Woodstock Road of £1,775; and Joshua & Usman's fees were the same amount.
11. By the time Victor had completed on the purchase of Woodstock Road, he owned a portfolio of three properties for which he had paid a total of £593,000, he had incurred mortgage debts in the order of £480,000, he had had to find over £1 13,000 plus the legal and other costs of purchase, and he was paying monthly mortgage outgoings in the order of £3,000. An Inland Revenue assessment for the year 2002 recorded total income of £18,360 (comprising £13,957 self-employment as a sole trader, £4,400 UK land and property and £3 UK interest). Victor's unaudited financial statements for the year ended 31st March 2002 (approved by Victor on 2nd November 2005, whilst these proceedings were pending) recorded sales of £44,937 and rents received of £33,301. After deducting cost of sales, expenditure and finance costs, Victor was left with £31,652 before depreciation. After depreciation, Victor's net profit was stated to be £17,897. Victor's balance sheet showed freehold properties at a cost, and with a net book value, of £238,000 (presumable Percy Road and Mitcham Road). Motor vehicles were shown at a cost of £49,000 and with a net book value (after 25% depreciation) of £36,750. Working schedules produced (in the middle of Victor's cross-examination, and only after I had given permission for the Claimant to serve witness summonses on Victor's accountant and book-keeper to produce their working papers) appear to show that the "sales" represented all of the sums credited to Victor's bank account during the relevant accounting year, together with estimated income from Joshua & Usman of £9,100; that the rents were derived from 222 Loughborough Road as well as from Percy Road and Mitcham Road; and that after expenses on rent and administration, agency fee, mortgage interest and repairs, the net profit on all three properties was only £7,700. In cross-examination, whilst claiming not to understand the working documentation, Victor repeatedly affirmed that he had given the book-keeper all the information that he had needed. In the year to 31st March 2001, Victor's principal bank account had received cash credits of between £50 and £600, amounting to £5,670 in total, with cheque credits of £557.26 and £1,700 in December 2000 and January 2001 respectively. Withdrawals for the year totalled about £6,000. During this period, this was an account of modest dimensions. In the following year, ending 31st' March 2002, matters changed somewhat. Beginning in October 2001 (and thus coinciding with the purchase of Percy Road) the account began to receive payments of much larger cash sums. In just 6 months cash and cheques were deposited totalling over £48,000, the vast majority in cash. The change in the way that this account was conducted, and the source or sources of these moneys, are not evidenced by any documents.
12. On l0th July 2002 Victor applied, through Herald, to BOS for a "let to buy" mortgage of £255,000 to finance the purchase from Joshua for 300,000 (85% LTV) of Alexandra Road. The source of the deposit was stated to be "savings". Victor was said to be employed, his occupation being described as that of a solicitor in permanent full-time employment with Joshua & Usman with 60 months of service. In the mortgage application form that appears in Herald's original file, the box stating Victor's basic gross income is left blank. Mr Agbalaya's fact-find document records that Victor was happy to self-certify his gross income as £29,250 basic plus rental income. The application form as it appears in BOS's files records a basic gross income of £77,850. In answer to both the questions: "Are you purchasing from a relative?" and "Do you have any business connection with the Vendor?" the "No" box has been ticked. Unity Estates were stated to be the selling agents and their address and telephone and fax numbers were given. (This was the first mortgage application in which they had been identified as the selling agents.) Contact to gain access for valuation purposes was to be through phoning the estate agent. The form contained the answer "Yes" to the question: "Will all applicants occupy property within 30 days of completion?" and "No" to the question: "Any part of the property used for business purposes?" The solicitors acting were said to be SJ Vickers & Co of Palmers Green N13 and their address and telephone and fax numbers were given. (This was the first occasion on which Victor had not identified his solicitors as Joshua & Usman.) According to the mortgage application form, no persons aged 17 or over were to occupy the property other than the applicant; and the property was to be used solely as a private residence and not for business purposes. Herald's fee for arranging the mortgage was to be £531.
13. In response to a fax request from BOS for proof of the deposit, on 30^th July 2002 Herald sent BOS a copy of Victor's Abbey National Statement of Account for July 2002 which showed a credit into the account of £50,000 on 26th July by way of "Account Adjustment". By the same letter, Herald advised BOS that Victor's new solicitors were Baker & Co of Edmonton N18 as "the previous solicitor has now left the firm". Unknown to anyone at BOS dealing with Victor's mortgage application, the £50,000 "deposit" had been transferred to Victor's account on 26th July 2002 from Joshua & Usman's account (ironically, with BOS), incurring a charge of £12; and was returned to Joshua & Usman's account on 1^st August 2002, incurring a further charge of £20. On 9^th September 2002 Joshua & Usman wrote to BOS to "confirm that we currently hold on our client account the sum of £50,000" for Victor. The letter bears the signature of Enyote Atikpapka, Joshua's wife, described as "Practice Manager". On 10^th September 2002, Herald wrote to BOS informing it that Victor had changed his solicitors to Joshua & Usman as "the person acting for him has left the company". On 13^th September 2002 Herald sent a fax to Enyote Atikpapka at Joshua & Usman stating that BOS would like confirmation that their client Victor would live at Alexandra Road and would not let the property to tenants. That confirmation was given in a letter to Herald on Joshua & Usman note-paper dated 13^th September 2002 and signed by Enyote Atikpapka. On 17th September 2002 BOS's valuer valued Alexandra road at only £250,000. The valuation recorded that the property had been in multiple occupation and that the valuation assumed that it would be converted to a single dwelling. The property was said to be in poor condition for its age, type and location, with evidence of dampness and significant timber decay.
14. Following the mortgage valuation, Victor claims to have agreed with Joshua a reduction in the purchase price to £250,000. A mortgage offer of £212,500 (85% LTV) with an arrangement fee of £300 was made to Victor on 3rd October 2002, against a stated purchase price of £250,000. The monthly payments were to be £1,142.36 over a 30 year mortgage term. This would have brought Victor's total monthly mortgage payments up to a sum in the order of £4,100. BOS submitted instructions to Joshua & Usman to act as its solicitors on or about 3rd October 2002. Anne Coomb of Joshua & Usman submitted her Certificate of Title in respect of Alexandra Road to BOS on 11^th October 2002; the price stated in the transfer was certified as £250,000 and the completion date was given as 15^th November 2002. However, Victor's signed acceptance of BOS's formal offer of the mortgage loan was not sent to BOS until 16 October; and Victor's signed direct debit instruction was not sent to BOS until the following day. Thus, BOS only released the mortgage advance of £212,500 to Joshua & Usman on 18^th October 2002. However, completion did not take place. On 7^th November 2002 an attendance note on Joshua & Usman's file (apparently by Anne Coomb) records that the writer had perused the file for an update on the matter but that there were no further instructions regarding completion of Victor's purchase of this property. The funds were therefore to be returned to BOS; and a letter was drafted for Iraida Usman to sign relating to the telegraphic transfer of the funds. Instructions to go to BOS, as Joshua & Usman's banker, to effect a return of the moneys to BOS Mortgages by telegraphic transfer were contained in a letter on the file dated 8^th November 2002. The instructions were to be signed by Iraida Usman as Chief Executive Officer of Joshua & Usman. She explains how she presumes that this letter came to be written at paragraphs 22 to 25 of her first witness statement dated 12^th June 2006. She states there that she does not recall ever being given the authority letter to sign. The moneys were not returned to BOS.
15. On 31^st January 2003 the Law Society resolved to intervene in the practice of Joshua & Usman; and the intervention took effect on 5th February 2003. An Inland Revenue assessment on Victor for the year ended 2003 (which is said to have been adjusted to agree with the taxpayer's self-calculation) recorded total income of £15,4 19 (comprising £9,029 self-employment as a sole trader, £6,108 UK land and property, and £12 UK interest). On 29th April 2004 the mortgagee sold Alexandra Road to an unconnected third party; and the surplus sale proceeds (£63,701.74) were paid into Court on 23rd August 2004. On August 2004, BOS had issued its Claim Form in these proceedings, with Victor as sole defendant.
16. On 17^th November 2004 Victor sold Mitcham Road for £162,000, redeeming the mortgage over the property in the sum of £99,592.05. The destination of the balance of the sale proceeds is not documented. In an Affidavit sworn on 21st March 2006, in response to the disclosure requirements contained in a Freezing Injunction obtained against him by BOS on 16^th March 2006, Victor deposed that he used the sale proceeds to pay for various holidays for himself and his girlfriend, to buy records and equipment for his job as a DJ, to repay debts (including gambling debts), to pay for renovations for 14 Percy Road, and to buy clothes and luxuries for himself, his son and his girlfriend, as well as using the monies for general living expenses.
17. On 14^th November 2004, Joshua was ordered to be struck off the roll of solicitors; and Iraida Usman was ordered to pay a fine of £1,000 and £1,000 costs. This followed a hearing before the Solicitors' Disciplinary Tribunal at which Joshua was found to have behaved dishonestly by misappropriating clients' funds and acting in a way that was fraudulent, deceitful or otherwise contrary to his position as a solicitor in that he had made a false mortgage application and/or supported such mortgage application by false and/or forged documentation. Paragraph 82 of the Tribunal's findings stated that there could be no doubt that Joshua had "used his position as a solicitor deliberately and cynically to steal large sums of clients' money, a substantial proportion of which belonged to Ms Usman and members of her family". In relation to Ms Usman, the Tribunal found that her admitted contraventions of provisions of the Solicitors Accounts Rules had been substantiated and amounted to conduct unbefitting a solicitor. It set the financial penalty at a very low level, but it considered a financial penalty to be necessary in order to demonstrate that a salaried partner could not escape liability for breaches of the Solicitors Accounts Rules. The Tribunal made no finding of dishonesty or impropriety in respect of Ms Usman; although it also recorded that none was alleged against her.
18. On 6th December 2004 Victor sold Woodstock Road for £440,000, redeeming the mortgage over the property in the sum of £271,280.70. On 7th December 2004, Victor received £65,063.31 from the sale proceeds into his Abbey National account. In his Affidavit of 21st March 2006 Victor deposed merely that he had used the proceeds of sale of Woodstock Road in the same way as he had used the sale proceeds of Mitcham Road. It was only on the morning of the fourth day of the effective trial (13^th July 2006), just before he went into the witness box, that Victor disclosed a letter to himself dated 7th December 2004 from Grants,-the solicitors who had acted for him on the sale of Woodstock Road, together with a completion statement. This disclosed a net balance due to Victor of £162,363.31. The letter enclosed, "as requested", cheques payable to Iraida Usman in the sum of £65,000 and to Mr Jordan Lewis in the sum of £32,300; and recorded that the balance had been telegraphically transferred into Victor's account. In his oral evidence, Victor explained that the cheque to Mr Lewis represented the repayment of a gambling debt, whilst the cheque to Ms Usman represented an interest-bearing loan which he had made to his aunt in the pretence that her creditor was not himself but an unnamed friend.
19. On 27th January 2006 Victor sold Percy Road for £170,000, redeeming the mortgage for £93,539.49. According to a letter to Victor dated 10^th March 2006 from Streeter Marshall, Victor's solicitors for the purpose of the present litigation, who also acted for him on the sale, £52,473.13 was telegraphed to the bank account of Victor's sister, £18,000 was telegraphed to Victor's own Abbey National account, and £5,000 was transferred to Streeter Marshall's client account in connection with the costs of this litigation. The moneys transferred to Victor's sister were subsequently transferred to Victor's own Abbey National account, and became subject to the provisions of the Freezing Injunction obtained against Victor by BOS from Pumfrey J on 2nd March 2006. The application for that Injunction was prompted by the discovery by BOS's solicitors (Eversheds) on 27th February 2006 of the fact that Victor had sold all three of his properties. The Freezing Injunction was continued by David Richards J on 16^th March 2006. On 21st March 2006 Victor made his Affidavit identifying his current assets and explaining (in part) the destination and dissipation of the sale proceeds of the three properties, and accounting for certain substantial movements in his bank accounts. On the 22nd May 2006 Deputy Master Nurse made his Order debarring Joshua from defending BOS's claim against him. On 15^th June 2006 BOS settled its claims against Joshua & Usman arising out of or in connection with the mortgage advance provided by BOS in relation to Alexandra Road. SPT, which had agreed to indemnify Joshua & Usman, as its indemnity insurers, paid BOS £238,500 (expressly including £55,000 in respect of BOS's costs). It did so on terms that expressly provided for the preservation of all and any causes of action and claims which BOS, SPT or Joshua & Usman might have against Victor or Joshua. On the same day, those claims were assigned by BOS to SPT; and thereafter it was substituted as claimant in these proceedings. Consequent upon such substitution, on 26th June 2006 Blackburne J ordered the discharge of the original Freezing Injunction against Victor and Joshua and granted a fresh Freezing Injunction in favour of the substituted claimant, SPT.

III: Course of the Trial

20. The trial was first listed before me on Thursday July 2006. Mr Ian Croxford QC and Mr Hugh Evans of Counsel appeared for the Claimant and for Joshua & Usman; and Miss Stephanie Tozer of Counsel appeared for Victor. There was no attendance by Joshua. I was told that the trial had been moved back from a date earlier in the week by agreement between the parties in order to accommodate Miss Tozer, who had been appearing in a case in the Technology and Construction Court that had unexpectedly overrun. Miss Tozer began by applying for an adjournment of the trial. That application was supported by a Witness Statement dated 4th July 2006 from Victor's solicitor, Ms Sian Haxton. The reasons were set out in a Skeleton Argument from Miss Tozer dated 5th July 2006. That application was vigorously opposed by Mr Croxford for the reasons set out in his Skeleton Argument dated 5^th July and it lasted for most of the day. I dismissed the application to adjourn the trial for reasons that I gave in an extemporary judgment delivered on the afternoon of Thursday July. I refused Victor permission to appeal that decision. I then heard (in the absence of the Claimant) an application by Streeter Marshal1 to come off the record as Victor's solicitors. I refused that application for the reasons that 1 gave in a further extemporary judgment delivered later that afternoon. I then called Mr Evans (who had been patiently waiting outside) back into Court and communicated the substance of (but not the reasons for) my further decision to him. I adjourned the trial until Monday 10^th July 2006 to enable Victor and his legal representatives to consider their positions and to make their final preparations for trial. I used the intervening Friday to pre-read the Trial Bundles. At that stage they were five in number, arranged as follows:

A: Statements of Case and Orders.

B: Witness Statements, Witness Summaries and Civil Evidence Act Notice.

C: Freezing Injunction Orders and Affidavits.

D1: Chronological documents and documents relating to Victor' s three previous property purchases.

D2: Copy bank statements for Victor and Joshua & Usman.

On 6th July Mr Agbalaya had attended Court in answer to a Witness Summons served upon him by the Claimant requiring him to produce Herald's mortgage files relating to Victor's four mortgage advances and to two mortgage advances made to Ms Usman in relation to 54 Canmore Gardens, Streatham, London SW16 5BD ("Canmore Gardens") and 15 Whimbrel Close, Sanderstead, Surrey CR2 ORW ("Whimbrel Close"). (It transpired that the latter file had originally related to an earlier abortive transaction concerning another property, 42 Penistone Road, Streatham, London SW16 5LU.) The documents so produced by Mr Agbalaya were copied and incorporated in a further trial bundle, which became Bundle F.

21. When the trial resumed on Monday 10^th July 2006, Miss Tozer again appeared for Victor, still instructed by Streeter Marshall. She had prepared a written skeleton argument dated 9th July 2006, with an appendix detailing Joshua's fraudulent activities. Miss Tozer also produced a further trial bundle, which became Bundle E, comprising (1) certain originally disclosed documents, (2) certain documents abstracted from Mr Agbalaya's files and (3) a supplemental witness statement from Victor dated 10th July 2006 commenting on the contents of Joshua & Usman files relating to Victor's retainer of them in matters other than the purchase of Alexandra Road. To this bundle there was later added (a) to Section 1 the documents produced by Victor on 13^th July relating to the sale proceeds of Woodstock Road and (b) as section 4, a supplemental witness statement from Ms Usman dated 10^th July 2006 commenting on her disposal of the original solicitors' practice of Usman & Co in the light of the late evidence of Mr Sivaganeshan. Later during the trial, Mr Croxford produced a further bundle, which became Bundle G, containing material which he deployed in the cross-examinations of (1) Ms Usman and (2) Victor.
22. Although I had had the benefit of Mr Croxford's written opening submissions dated 5^th July 2006 (with dramatis personae, chronology and list of properties), Mr Croxford opened the case to me at some length. I then heard from Mr Agbalaya, who had been summoned to attend Court to give evidence by the Claimant. He gave evidence as to the completion of Victor's several mortgage application forms in accordance with the terms of the witness summary dated 27th June 2006; and he was cross-examined by Miss Tozer. His evidence lasted for about an hour. Having rejected an application by Miss Tozer to exclude his evidence, I then heard from a solicitor, Mr Sivaganeshan, who was also summoned to give evidence by the Claimant. He gave evidence in accordance with the terms of the witness summary dated 27th June 2006; and he was also cross-examined by Miss Tozer. The only relevance of his evidence was to seek to undermine Ms Usman's reliability and credibility by contradicting an account in her original witness statement that she had disposed of her former solicitor's practice of Usman & Co to Mr Sivaganeshan. It was to this issue that Ms Usman's supplemental witness statement was directed. In the event, Mr Sivaganeshan was only in the witness box for about 15 minutes. His evidence, which I accept, was peripheral on any view, and has not materially influenced my approach to this case.
23. I next heard from Mr Craig Brown, an underwriting manager with BOS Mortgages. His witness statement was dated 12^th June 2006. He explained BOS's documents and underwriting criteria and processes and how BOS had relied on Victor's mortgage application and the other information supplied by him or on his behalf. However, he had had no direct involvement with Victor's mortgage application with BOS; and his evidence consisted largely of a reconstruction, based on the documentary material, of the likely thought processes of the actual underwriter (Sarah Robertson) at a time when it had been thought that she would not be available to give evidence at trial. His evidence, which extended into Tuesday 11^th July, lasted about an hour and 25 minutes. I then heard from Ms Robertson, whose statement was dated 21st June 2006, and who gave evidence, confirming Mr Brown's evidence, for about an hour. The witness statement of Trudie Flynn, dated 13^th June 2006, was treated as read. The Claimant's case closed with the admission in evidence, under the Civil Evidence Act, of attendance notes made by Charles Parry, at the time a solicitor with Eversheds and acting for BOS, of his telephone attendances upon Victor on 16^th September, 27th October, 8th and 17^th December 2003. These records were largely unchallenged by Victor, save as indicated at paragraphs 84 to 86 of his first witness statement.
24. For Victor, I heard first from Ms Iraida Usman, one of his aunts. Her witness statements were dated 12th June and 10^th July 2006. She was cross-examined at length by Mr Croxford for almost 6 hours over the afternoon of Tuesday 11^th and almost the whole of Wednesday 12^th July 2006. I was told that she was scheduled to return to Egypt that evening. At the conclusion of Ms Usman's evidence, I entertained an informal application by Mr Croxford arising out of Victor's failure to produce any documentation accounting for the whole of the balance of the sale proceeds of Woodstock Road. I was told by Miss Tozer, on instructions, that Victor did not have the solicitors' file relating to the sale of Woodstock Road, that he did not recall the name of the solicitors who had acted for him on the sale, and that earlier that day he had driven around South London trying to recall or identify the solicitors concerned. Mr Croxford indicated that his solicitors had approached the matter from the other end and, through inquiries of the purchaser, had identified the solicitors who had acted for Victor on the sale, whose details were provided to Streeter Marshall. For reasons that I gave in an extemporary ruling delivered that afternoon, I ordered that Victor was to use his best endeavours to produce documentation comprising the completion statement and/or otherwise recording or evidencing the payment and destination of the proceeds of sale of Woodstock Road by 10 o'clock the next morning.
25. When the Court resumed the next morning, Mr Croxford complained that Victor's accountants' files and working papers, for which the Claimant's present solicitors (Barlow Lyde & Gilbert) had been asking since 15^th June 2006, and which Mr Croxford had wanted to consider in advance of his cross-examination of Victor, were still not available in Court. I adjourned until 11 o'clock to enable further inquiries as to their whereabouts to be made, but these bore no fruit. Mr Croxford accepted that the Court should proceed to hear Victor's evidence. It was then that I was informed by Miss Tozer that what she had told me the previous afternoon had been incorrect: Victor had recovered the relevant file from the solicitors who had acted for him on the sale of Woodstock Road the previous morning, but he had been concerned that its disclosure would reveal to his aunt, Ms Usman, that she had received £65,000 from the sale proceeds, when he had led her to believe that this had been a loan from a friend of Victor, and that it was this friend, rather than Victor himself, who had required her to pay interest on the loan. It was at this point in the proceedings that, without serious opposition from Mr Croxford, I gave Miss Tozer permission to re-amend paragraph 20 of her Part 20 Particulars of Claim to claim contribution from Joshua & Usman and from Joshua if BOS's claim against Victor should succeed on the basis of deceit and/or conspiracy as well as misrepresentation.
26. I then heard evidence from Victor, whose witness statements were dated 12th June and 10^th July 2006. His evidence, which lasted about seven and a half hours in total, occupied the remainder of Thursday 13^th July and almost all of Tuesday 18^th July. (The court did not sit on this trial on the intervening Friday and Monday in order to accommodate the prior commitments of counsel; although at 2pm on the Friday I did hear a short application from the Claimant for permission, which I gave, to abridge time for the service upon Victor's accountant and book-keeper of witness summonses to produce his financial and accounting documentation and supporting and working papers.) Before Victor's evidence resumed on the Tuesday, Victor's accountant, Michael Olujitan, answered his summons, produced the documents that he said that he had been able to find before court that morning, and explained why the documents he had produced were so limited in their number and scope. Victor's evidence concluded at about 3.40 pm. At the end of his evidence, Victor tendered a short one-page document headed "Statement for the judge" which, after Miss Tozer had read it and indicated that she was content for me to receive it, I read and placed at the end of Section 3 of Bundle E. Although the book-keeper had not responded to the witness summons served upon him, I was invited to take no action by Mr Croxford in relation thereto. I adjourned the trial to Friday 21st July 2006, and directed service of written closing submissions (1) by the Claimant by 10am on Wednesday 19^th July and (2) by Victor by 4pm on Thursday 20^th July 2006. At that stage, I indicated that I envisaged receiving guillotined oral submissions on the morning of Friday 21st July and delivering an extemporary judgment on that afternoon, which was the last day of my scheduled sittings in London.
27. Written closing submissions (together with the requested Claimant's schedule of alleged lies and Victor's response and each party's suggested findings of fact) were duly served in accordance with the stipulated timetable. However, Miss Tozer's written closing submissions were far longer and more detailed than I had envisaged. Accordingly, at 6.45pm on Thursday 20^th July 2006 I sent an email to all counsel notifying them that I feared I would have to reserve judgment after all because, having considered Miss Tozer's written submissions and ancillary documents, I had, with regret, come to the conclusion that there might be a perception that an extemporary judgment, delivered under pressure of time the following afternoon, would not do full justice to those submissions. In the event, Mr Croxford took the opportunity to produce a supplementary written closing note dated 21st July; and the closing submissions extended into Friday afternoon, concluding at about 3.45pm. I thereupon reserved judgment. For pragmatic reasons, at Miss Tozer's request I extended Victor's time for appealing my decision to refuse him an adjournment of the trial (permission for appealing which I had previously refused) until after the handing down of my substantive judgment.
28. Since reserving judgment, I have received a series of emailed notes and further submissions from counsel as follows: (1) from Miss Tozer with closing references on 21^st July, (2) from Miss Tozer (whilst away from Chambers) on 27th July, (3) from Mr Croxford and Mr Evans in reply on 28^th July, (4) from Miss Tozer in rejoinder on 31st July 2006, and (5) from Mr Evans in rebuttal on 3rd August 2006. I have endeavoured to take all of these further submissions into account in this judgment.

IV: The witness evidence

(i) Preliminary observations

29. Since this is essentially a fraud case, I bear in mind the observations of Lord Nicholls of Birkenhead in In re H (Minors) [1996] AC 563 at pp 586-7 on the standard of proof to be applied in cases of alleged serious wrongdoing and in particular his observations that:

"When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the evidence is established on the balance of probability. Fraud is usually less likely than negligence.... The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established. "

30. I am also acutely conscious that the issue is whether the Claimant has sufficiently proved that Victor was a knowing party to a mortgage fraud practised against BOS in relation to Alexandra Road; and that I should be astute to guard against each of the four potential types of prejudice identified at paragraph 17-45 of Phipson on Evidence, 15^th ed., (2000) as described at paragraph 23 of Miss Tozer's closing submissions.
31. I have borne in mind, as I was invited to do by Miss Tozer, the observations and warnings to be found at paragraph 66 and following of the judgment of Peter Smith J in EPI Environmental Technologies Inc v Symphony Plastic Technologies Plc [2004] EWHC 2945 (Ch) directed to assisting trial judges in how they should arrive at factual conclusions. I have particularly borne in mind the passage at paragraph 74. During the course of this trial, I have reminded myself of the guidance on lies to be found in the decision of the Court of Appeal in the case of R v Lucas [1981] QB 720. I am conscious that people sometimes tell lies for reasons other than a belief that they are necessary to conceal guilt of the charge alleged against them: people may lie in an attempt to bolster up an honest case, or out of shame, or out of a wish to conceal discreditable behaviour from family, friends or colleagues. As Peter Smith J observed at paragraph 74 (ii) of the EPI case:

"A witness may lie in a stupid attempt to bolster a case, but the actual case nevertheless remains good irrespective of the lie. A witness may lie because the case is a lie."

With his Supplemental Closing Note, Mr Croxford included the standard JSB Direction on Lies ("the Lucas direction"); and I have borne its terms in mind. I acknowledge that, if and to the extent that he has lied, Victor may have had reasons for doing so which are not connected to the particular mortgage fraud alleged against him. If he has told lies, one of the issues I have to decide is why he did so and what their purpose was.

32. In evaluating the credibility and reliability of the witnesses I have had regard to the objective facts and documents, the motives of the parties and their witnesses and the overall probabilities of the case. Where the witness evidence has been challenged, I have had regard in particular (but not exclusively) to the following:

(1) The consistency of the witness's evidence with what is agreed or clearly shown by other reliable evidence to have occurred.

(2) The internal consistency of the witness's evidence.

(3) The consistency of the witness's evidence with what he has said on other occasions.

(4) The credit of the witness in relation to matters not germane to this litigation.

(5) The appearance, conduct and demeanour of the witness when giving evidence.

33. The Claimant's case in conspiracy against Victor was that he participated and assisted in a mortgage fraud perpetrated by Joshua against BOS. As identified by Miss Tozer at sub-paragraph 3 (a) of her closing submissions, the claim was that Victor knew of and participated in Joshua's plan to take BOS's advance without completing the transfer of Alexandra Road to Victor and without registering a valid legal charge against the property in favour of BOS. For understandable reasons, Miss Tozer did not seek to argue that Victor had been engaged in a more limited conspiracy with Joshua to defraud BOS by making a fraudulent mortgage application, assisted by the fraudulent production of evidence of a non-existent £50,000 deposit. Likewise, Mr Croxford submitted that such a limited conspiracy, followed by a second, and discrete, fraud, practised by Joshua alone, in misappropriating the mortgage advance, which included Victor as his unwitting victim as well as BOS, although possible, was unlikely, and was made improbable by the three factors that he identified at paragraphs 8 through 10 of his written closing submissions. Nevertheless, it seems to me that I am bound to consider all the issues properly raised by the evidence and statements of case. Clearly, I cannot find a fraud or conspiracy more extensive than is alleged in the pleadings; but I see no reason why I should not find a fraud or conspiracy that is more limited in its scope than that alleged by the Claimant. If there is credible evidence which, if accepted, leads me to a particular conclusion within the scope of the statements of case, the fact that, for sound tactical reasons, neither party's counsel invites me to reach that conclusion should not deter me from discharging my judicial oath by arriving at that conclusion: compare, in the criminal context, the recent decision of the House of Lords in R v Coutts [2006] UKHL 39; [2006] 1 WLR 2154 holding that the duty of a trial judge is to leave an alternative compromise verdict to the jury if there is credible evidence to support it, irrespective of the wishes of trial counsel.
34. In her written closing submissions Miss Tozer invited me to adopt a two-stage analysis of the evidence of the alleged conspiracy, asking, first, whether the Claimant had adduced sufficient evidence to raise a prima facie case; and if so (but only if so) asking, secondly, whether Victor's evidence shed sufficient doubt on the evidence adduced by the Claimant that the Court could not be satisfied, on the balance of probabilities, that Victor was involved in the conspiracy. Mr Croxford criticised this analysis as unrealistic and over-elaborate. He invited me to look at the totality of the evidence, regardless of its source; the real question was: what is the evidence before the court, not who adduced it. Documentary evidence was not to be ignored; and evidence elicited in cross-examination was just as much evidence as that adduced in chief. I accept Mr Croxford's criticism and reject Miss Tozer's two-stage approach. I cannot ignore the evidence given by and on behalf of Victor in deciding whether there is a case for him to answer. In fairness to Miss Tozer, I am not sure that she maintained to the full her original position in oral submissions and in the face of Mr Croxford's criticism. Accepting that 1 should be concerned with the totality of the evidence, her submission became that the Claimant could not be said to have proved its case if there was not enough evidence there on its positive case. Whatever Miss Tozer's modified position may involve, I am satisfied that Mr Croxford's approach is the one that I should adopt.
35. Finally, I make the trite observation that I must decide the case on the evidence that is before me, and I must not speculate upon what other evidence might have been given. Anne Coomb was called by neither party. She was a conveyancing solicitor with Joshua & Usman and was described as its Chief Financial Officer, a title commented upon by Ms Usman at paragraph 26 of her first witness statement. Ms Coomb had had the conduct of Victor's earlier conveyancing transactions; and, although Joshua had the conduct of the Alexandra Road matter, she dealt with it on Joshua's behalf on those occasions (increasingly frequent during the latter part of 2002) when Joshua was in Nigeria. Neither party explained their reasons for not calling Ms Coomb; and I cannot speculate upon the content of her evidence.

(ii) Mr Agbalaya

36. I accept Mr Agbalaya as an honest and (save possibly in one respect, concerning the completion of the details of Victor's basic gross income in the Alexandra Road mortgage application) an accurate witness. There was no evidence or suggestion that he was himself a party to any mortgage fraud or that he received any moneys other than the fees properly payable to Herald, which in the case of Alexandra Road was the relatively modest sum of £531. I am satisfied that the information he used to fill in Victor's several mortgage application forms was supplied by Victor himself and by no-one else. I accept Mr Agbalaya's evidence that he took Victor through each mortgage application form separately and that he elicited all relevant information from Victor separately on each occasion. Mr Agbalaya's evidence to that effect is supported by (1) the fact that Mr Agbalaya's file for each property contained a separate mortgage questionnaire or mortgage fact-find and (2) later forms contained subtle variations from previous forms, which information could only have come from Victor. In the case of Alexandra Road, it is quite clear that he did not simply lift Victor's basic gross income from an earlier form; and different estate agents and (more significantly) solicitors were identified (with full supporting details). I accept that, as Mr Agbalaya said in answer to a question from me, he would not even have referred back to the previous applications which, in the case of the previous two, were buy-to-let applications, and thus self-funding. I accept Mr Agbalaya's evidence that Victor told Mr Agbalaya that he was a solicitor permanently employed full-time with Joshua & Usman, and not a "solicitor's aide", and that Victor did so on each occasion that Mr Agbalaya completed a mortgage application on Victor's behalf. I acknowledge that Mr Agbalaya accepted in cross-examination that Victor had told him that he also did other things, such as a barber and DJ; but I also accept Mr Agbalaya's evidence that Victor had said that he could not prove his income from these sources and that is why Victor had opted for the self-certification route. I find that that is the reason why these other jobs were not mentioned in the application form. If anything, Mr Agbalaya's evidence on this point adds to the veracity of his evidence overall. (It is unnecessary for me to make any finding as to whether Mr Agbalaya believed all that Victor was telling him.)
37. I accept that the stated basic gross income of £77,850 was not inserted at Mr Agbalaya's initial interview with Victor; but I am satisfied that the information came from Victor. Mr Agbalaya said that the relevant box was likely to have been blank when the form was submitted to BOS; but in this I consider that the overwhelming probability is that Mr Agbalaya was genuinely mistaken. Because of the need, appreciated by Mr Agbalaya, to apply a multiplier to Victor's income in order to ascertain the maximum permissible advance, it is most unlikely that Herald would have submitted a mortgage application form with the income box uncompleted. Mr Agbalaya emphasised to Victor the need to supply this information. Miss Richardson said in evidence that she doubted whether the processing team would have keyed an application form into the computer with the income box blank; and by the time the form reached her desk, the income would have been stated in it. As Miss Tozer pointed out at sub-paragraph 58 (iv) of her written closing submissions, there is no reference on BOS's system to any telephone call to Mr Agbalaya requesting the figure. It is possible that Victor supplied the figure to an associate of Mr Agbalaya; but I am satisfied that the figure came from Victor and no-one else. Indeed, at paragraphs 43 and 44 of his first witness statement, Victor acknowledges that he gave this figure to Mr Agbalaya as his total income, without expenses deducted. Victor's concern there was to justify the figure, not to deny that he supplied it.

(iii) Iraida Usman

38. At paragraph 47 of her written closing submissions, Miss Tozer submitted that the furthest that I could properly go in relation to Ms Usman's evidence is to reject it. It would be wholly wrong, she submits, for me to make the findings of fact that the Claimant requests against Ms Usman, given that there are no pleaded allegations against her, that she is not a party to these proceedings, and that she was not legally represented. Up to a point, I accept this submission. But Ms Usman (who is a qualified solicitor) was tendered by Victor as a witness to support his evidence of his work for Joshua & Usman, the fact and extent of his savings with Joshua, her surprise that they were not more than £50,000, and Victor's concern at his alleged discovery, after completion, that Alexandra Road was tenanted. I must therefore form a judgment on Ms Usman's reliability and credibility as witness, bearing in mind her professional status as a qualified solicitor.
39. Having seen Ms Usman in the witness box for about 6 hours, I am entirely satisfied that her credibility was destroyed, that she is not an honest witness, and that her evidence should be rejected. Miss Tozer relies on the findings of the Solicitors' Disciplinary Tribunal and the case of Conlon v Simms [2006] EWHC 401 (Ch), [2006] 2 All ER 1024; but, as stated at paragraph 87 of the Tribunal's Findings, no dishonesty or impropriety was there alleged against Ms Usman. For the reasons given by Mr Croxford at paragraph 3 of Schedule 3 to his written closing submissions, I am satisfied that Ms Usman was dishonest in her letter to High Street Home Loans of June 2001, written with reference to the Percy Road mortgage application, when Ms Usman gave details of Victor's permanent employment with Joshua & Usman as a billing officer and a basic annual salary of £29,250. I am satisfied that she lied to the Court when she said that she believed the information she had sent in that letter. Ms Usman displayed a marked reluctance about, and hesitation in, answering questions about Victor's stay in a hostel and receipt of state benefits in 1998-1999. I am satisfied that Ms Usman lied in her evidence to the court about Victor's level of earnings and ability to save. I am satisfied that she has made up the evidence in her witness statement about the fact and level of Victor's savings with Joshua and that she has never had any genuine belief in it. For the reasons given by Mr Croxford, I am satisfied that her account of the reasons for "lending" £10,000 to Victor to assist him in the purchase of Woodstock Road is both implausible and false. She was visibly making up her account of the reasons for this £10,000 "loan" as she went along, even prefacing her evidence with the words "I think I remember this a bit better now". Her account was not reconcilable with the evidence of the state of Victor's bank account. I am satisfied that Ms Usman's account of her own earnings at Joshua & Usman, and when she was paid, was neither consistent nor believable; and that she was endeavouring to overstate her income in order to mitigate the false information as to her income given in her mortgage application forms for Whimbrel Close and Canmore Gardens. I am satisfied that Ms Usman lied both in the forms themselves and in her evidence about them to the Court. I expressly reject Ms Usman's evidence that false figures for her income were incorrectly inserted by someone else after she had signed the relevant mortgage application forms: Ms Usman could give no satisfactory explanation for signing the forms with the income figures blank and I reject her evidence that she did so. She displayed a marked reluctance about answering questions about the income figures given in the mortgage application forms; and when I warned her of the privilege against self-incrimination, she declined to answer any more questions about the mortgage application forms. I am satisfied that I can attach no credence to Ms Usman's account of Victor's complaints about finding squatters in Alexandra Road or her response thereto. Her evidence can lend no support to Victor's evidence that he felt let down by Joshua over the Alexandra Road property. I am satisfied that I can attach no credence to Ms Usman's account of her response to the letters of complaint from Goldsmith Williams concerning 5 Montague Place and 42 Tulse Hill, which I found impossible to reconcile with the final paragraph of Ms Usman's own letter of 6th November 2002 asking the recipient to mark all future correspondence for Ms Usman's attention. Although I cannot speculate about what her evidence would have been had Mr Croxford been able to question her about the £65,000 Ms Usman received from the sale proceeds of Woodstock Road, I note that, because of the deception practised upon the Court, as well as the Claimant, by Victor as to the destination of those sale proceeds, the Court was denied the opportunity of receiving Ms Usman's evidence on this matter.
40. It is unnecessary, and inappropriate, for me to make any finding that Ms Usman was engaged in concert with Joshua in a family enterprise of making money by engaging in the presentation of serial fraudulent mortgage applications. I do find that she was not an honest witness and that her evidence should be rejected and can lend no support to Victor's case. Moreover, having found that Ms Usman has told lies, I must ask myself why she has done so. I am entirely satisfied that she did so in order to assist her nephew, Joshua, who tendered her as a witness in his support of his case; and that the reason for her lies is that Victor's case is a lie.

(iv) Victor Okporuah

41. The Court's impression of Victor is crucial to this case. Victor came over as an intelligent man. Initially, in chief, he seemed engaging; but as his evidence progressed in cross-examination, his attitude and manner changed; and by the second day of his cross-examination, he was overtly hostile, surly and a most reluctant witness. Judged by reference to each of the criteria identified at paragraph 32 above, I am entirely satisfied that Victor's credibility and reliability were completely destroyed in the witness box. The reality is that Victor and the truth are not even on terms of passing acquaintance. I am convinced that Victor's whole evidence was an implausible and impertinent tissue of falsehood and evasion. His entire conduct of this litigation has been rooted in deception and obfuscation. He has deliberately sought to prevent the full story of the proceeds of sale of Woodstock Road emerging; and 1 am satisfied that he has deliberately refrained from assisting the Claimant and the court by providing the documentation which would support, and explain, his unaudited accounts and inland revenue assessments and would give a full and fair view of his financial situation at the material time. Victor said in evidence that he had given his book-keeper all the information that he needed; yet he professed not to understand the working papers when they were belatedly produced. Victor has only himself to blame if adverse inferences are drawn against him on the basis of the figures that actually appear in his own accounting and tax records and documents: it was for Victor, and not for the Claimant, to proffer evidence and qualification or explanation from Victor's accountant and book-keeper if the figures are not to be taken at face value. Extracting relevant documentation and information from Victor has been like drawing teeth. Miss Tozer cited the Court of Appeal's decision in Al-Sabah v Grupo Torras SA, unrep., 2^nd November 2000, at paragraphs 29,34-6, 39, and 44-61 (and especially 59-61) as indicative of the general approach which should be adopted to a defendant's evidence in a case of this type. But as the passage at paragraph 60 indicates, that was a case, unlike the present, where the judge noted that the relevant defendant's credibility had not been destroyed in the witness box.
42. Victor has admitted to a number of lies. First, he lied to Charles Parry of Eversheds when he said on 27th October 2003 that he had only one other property (namely that identified in his mortgage application, Woodstock Road). Miss Tozer submits that his explanation at paragraph 86 of his first witness statement is perfectly plausible. I am satisfied that this explanation not only does him no credit, but is not the entire truth: having seen Victor in the witness box for over 7 M hours, I am satisfied that Victor also wanted to conceal the extent of his property dealings from BOS because of the doubts that they would cast upon the genuineness of his mortgage application. Secondly, he lied through Miss Tozer on 12^th July about his ignorance of the solicitors who had acted for him on the Woodstock Road sale; and he compounded this by not owning up when details of the solicitors were handed to Streeter Marshall. His explanation -that he did not want Ms Usman to know that he was the source of an alleged loan to her of £65,000 -would be discreditable if true; but I am satisfied that it is a lie. If it were true, it would mean that Victor had not only lied to his aunt; but that he had been using part of the proceeds of sale of a property whose purchase she said that she had helped to finance -a contribution which she said had never been returned to her -and charging her interest as well; and this despite the fact that she claimed to have lent him a total of £15,000 in or around May 2004. I am satisfied that Victor deliberately refrained from revealing the truth until after his aunt had left the witness box (and, as I was led to believe, the country) so that Ms Usman could not be cross-examined on the matter. I am satisfied that the £65,000 payment was not a loan to his aunt at all; rather he was seeking to salt the money away beyond the reach of the Claimant, then BOS. Thirdly, on his own account, Victor had lied to his aunt about the source of the £65,000- In fact, I am satisfied that this lie was one to the court, because Victor's account was not true. Fourthly, Victor accepted in cross-examination that he knew that he had had to disclose all of the sale proceeds of Woodstock Road in his affidavit of 21st March 2006; yet he had failed to give a full and frank account of them. I have already rejected Victor's proffered explanation that he had not wanted his £65,000 "loan" to be revealed to his aunt. He offered no explanation as to why his compendious reference in his affidavit to the repayment of "gambling debts" did not refer in terms to a cheque to Jordan Lewis for £32,500; and I am not satisfied that this was the reason for this payment.
43. I am satisfied that Victor dishonestly failed to disclose to the housing trust that was his landlord that he was renting out 222 Loughborough Road at a profit rental. It is inconceivable that it would have allowed that state of affairs to continue if it had known about it. If I accept Victor's evidence to the court as to the level of his earnings from the barber's shop on Brixton Hill in the second half of the 1990s, then clearly Victor must have been fraudulently claiming benefits, and legal aid, at that time. Victor was driven to accept under cross-examination that he was not earning big sums of money in 1998. On any view, Victor gave a grossly (and, in my judgment, deliberately ) misleading impression in paragraphs 9 through 13 of his first witness statement as to his working history and the fact and level of his savings with Joshua. Miss Tozer was driven to concede that Victor was mistaken insofar as his evidence to the Court specifically related to his income during the period 1998-9; but mere mistake cannot explain or excuse the gross inaccuracy of his evidence. I am entirely satisfied that Victor has massively and deliberately overstated the level of his earnings in his witness statement and in his oral evidence to the court. The reality is that his disclosures as to his earnings and the level of his income vary depending upon the identity of the recipient of the disclosure and the purpose for which the disclosure is required: benefits officers, the legal aid authorities, and the inland revenue receive a different account from that provided to prospective mortgage lenders and the court.
44. In paragraph 9 of his witness statement Victor described himself as having "a tendency to spend". In cross-examination he described a love of expensive cars. In re-examination he disclosed that he had lost more at poker than he had won. On his own evidence, his shop was a loss-making venture. The documentation, such as it is, is consistent, and consistent only, with relatively modest earnings. Victor's account of huge earnings from jobs such as barbering, acting as a DJ and promoting raves is grossly implausible and I am satisfied that it is a lie. I am entirely satisfied that Victor had nothing even beginning to approach the level of income that would have been necessary to support the level of savings that would have been required to sustain his apparent level of investment in houses and his expensive car or cars. (The sale of a second Mercedes suddenly emerged in Victor's evidence when I pointed out that his stated explanation for the source of a deposit of £18,000 into his Abbey National account on 7^th March 2002, namely the sale of a Mercedes, did not tally with the nature of his complaint to the East Kent Magistrates dated 11^th December 2002: he said that he had owned two Mercedes at the same time and had sold them in quick succession.) I accept Mr Croxford's submission at paragraph 8 of Schedule 2 to his written closing submissions that Victor's fundamental problem was that he needed to explain how he had managed to have saved up over £200,000 over a relatively short period of time in order to fund the purchase of four properties and a £49,000 Mercedes; and that this led Victor to lie in the several respects identified by Mr Croxford. The fact that these lies were wearing rather thin was appreciated even by Victor; and it was this that led him, on the second day of his evidence, to come up with a wholly new account: that part of the money, which soon became a large majority of the funds, had come from unidentified friends, whose names at first he could not remember and later refused to give. When pressed with the omission of any reference to this in his witness statement, Victor said that this was something he had forgotten. This was an example of a witness deliberately chopping and changing his evidence under the pressure of cross-examination.
45. I accept Mr Croxford's submissions (at paragraphs 9 and 10 of Schedule 2 to his written closing submissions) that Victor lied in and about his earlier mortgage applications and in relation to his first three property purchases. In addition to the points made by Mr Croxford, I would observe (1) it is clear that Victor applied for his mortgage for Percy Road on an owner-occupier basis, but soon after its purchase he let it out. Based on his dealings with 222 Loughborough Road and the later properties, I am satisfied that Victor always intended to let Percy Road out. (2) Victor's earlier assertions in his first witness statement that the deposits for all his property purchases were funded from his own savings was demonstrably false on the documents in the case of Woodstock Road, where it was demonstrated that £10,000 was provided by Ms Usman. (3) The assertion in paragraph 23 of Victor's first witness statement that when he bought the properties, he always paid the deposits in cash was demonstrably false on the documents in the case of Woodstock Road, where he paid £16,490.87 by cheque. I accept Mr Croxford's submissions in Schedule 2 to his written closing submissions that Victor lied (1) in his mortgage application for Alexandra Road and in his evidence about it to the court (paragraph 12); (2) about the existence, and thus the source, of the £50,000 deposit for Alexandra Road (paragraph 13); and (3) about the existence, and loss, of the diary (paragraph 14). In paragraphs 30 and 31 of his first witness statement Victor acknowledged that until recently he had not known who had completed the mortgage application form for Alexandra Road, and that he had been mistaken in his previous assertion that Joshua had given him the form to sign. If true, this shows that Victor had no real recollection of how the mortgage application form was completed and signed, as Victor effectively acknowledged at paragraphs 28 and 34. The assertion (in paragraph 28) that he answered all of Mr Agbalaya's questions "honestly and truthfully" cannot stand with Mr Agbalaya's evidence, which I prefer. I am prepared to accept that Victor may not have bothered to read the mortgage application form before signing it; but if that was the case, I am satisfied that it was because Victor knew that it contained material misstatements of fact, and was content with them. I am satisfied that it was Victor who told Mr Agbalaya that the selling agents were Unity Estates and I reject Victor's contrary evidence in paragraph 62 of his first witness statement. The suggestion that Mr Agbalaya obtained this information from Joshua was rejected by Mr Agbalaya and is inherently implausible: The identity of the selling agents was a matter which was required to be, and was, stated in the mortgage application form. It must have been raised by Mr Agbalaya when going through the form with Victor, particularly in relation to the point of contact for BOS's mortgage valuer. Victor's answer, if he was honest, would have been that there were no agents because he was buying from Joshua, who should be the point of contact. Thus, there was no reason for Mr Agbalaya to approach Joshua at all. I am satisfied that Victor lied in his evidence to the court on this matter. Mr Croxford's account of Victor's inconsistent explanations as to the source of the deposit is incomplete: They in fact began a little earlier, with Victor's unchallenged conversation with Charles Parry on September 2003 when Victor said that he had given Joshua a £50,000 deposit and believed that this was paid into Joshua & Usman's account, an explanation substantially repeated in Victor's undated letter at El111 1, written in response to Russell Cooke's letter of 8^th October 2003 at E/1/4. I should also add that I find Victor's allegation that he was saving with Joshua, and at the same time lending money to him, so that Joshua could sort his business out, inherently implausible: why lend money to Joshua if he was already holding money on Victor's behalf? I find Victor's lack of any effective action in response to his discovery that Alexandra Road remained tenanted after the intended completion date (and, on his account, his receipt of the keys to the property) wholly inconsistent with his assertion that this was a genuine purchase, initially for Victor's own occupation. I find his admitted omission to take any steps, either before or after the intended completion date, with regard to the drawing up or the costing of plans for the conversion of Alexandra Road into self-contained flats, or the making of an application for planning permission in relation thereto, wholly inconsistent with his professed intentions in this regard. Since the vendor, Joshua, was his uncle by marriage, and, on Victor's account, a father figure at this time, there could have been perceived to be no impediment to pursuing these matters, even in advance of exchange of contracts or completion. I am satisfied that Victor's true intention was not to live in Alexandra Road and then to develop it, but rather to continue to let it out.
46. I am satisfied that Victor lied in his affidavit when he said that he had sold his Mercedes CLK 55 for about £10,000 towards the end of 2005. I accept Mr Croxford's comments at paragraph 17 of Schedule 2 to his closing written submissions in relation to this alleged "sale". I should add that in cross-examination Victor accepted that the car had been worth in the region of £35,000. I reject Miss Tozer's submission that Victor had genuinely forgotten Mr Croxford's request for the registration and insurance documents. He was asked to produce this documentation on the morning of Thursday 13^th July. When asked for this when his evidence resumed on the morning of Tuesday 18^th July, Victor denied having been asked for it; although he did produce a letter (for which he had not been asked) dated 17^th July 2006 regarding his enrolment on a part-time computing and maths course for the 199912000 academic session. He had clearly been carefully considering during the adjournment what further documentation he could produce in order to bolster his case. I consider that he deliberately refrained from producing the registration and insurance documentation for the Mercedes because he knew that it would not assist his case. I also accept the points made by Mr Croxford in paragraphs 18 through 20 of Schedule 2 to his closing written submissions (apart from the alternative suggestion that Victor has another property which he has told no one about: this was never put to Victor and there is no evidential basis for it).
47. I am satisfied that Victor is a thoroughly mendacious individual whose evidence cannot be trusted in any material respect. His credibility was completely destroyed in the witness box. I am entirely satisfied that he was not lying in a stupid attempt to bolster a genuine case, but rather because his whole case is a lie.

(v) Miss Robertson and Mr Brown

48. It is convenient for me to take the evidence of these two witnesses together. There was no suggestion that either witness was dishonest or untruthful. In a skillful cross-examination, Miss Tozer demonstrated that the three matters which had weighed heavily with BOS in approving Victor's mortgage application were the high credit score, the positive identification of Victor at his stated address, and the fact of the £50,000 deposit. Time and again, Miss Robertson and Mr Brown relied on the high credit score achieved by Victor to outweigh all the adverse information and comment from the fraud team. The credit score may have been the main underwriting tool; but the fallacy underlying the underwriting team's approach was that it was the information on the application form that had, at least in part, driven the high credit score; and the fraud team's comments cast doubt on the accuracy and reliability of the information on the application form. The fraud team's comments threw into doubt whether Victor was indeed a solicitor, whether he was working full- time for Joshua & Usman on a permanent basis, and consequently upon the level and security of his income. These doubts about the accuracy of the information on the application form never led the underwriting team to reconsider the high credit score. One should not be unduly critical about Miss Robertson personally: her approach was endorsed by Mr Brown; and she had passed the file up the line and a senior colleague had approved her approach. The failures, such as they were, would seem to me to have been systemic rather than individual. Miss Robertson could not specify what particular information was relevant to the credit score. Mr Brown's evidence was that the nature of Victor's stated occupation as a solicitor would not have affected the credit score; although he was clear that Victor's stated occupation as a solicitor did make him eligible for the enhanced income multiplier of 3.5 (rather than 3.25) originally required by Victor. It was quite clear from the evidence of the two BOS witnesses that they did not regard the information and comments from the fraud team as casting doubt on the information in the mortgage application form. As Mr Brown put it, he did not think that the application was "dodgy".

V: Findings of Fact

49. Based upon my assessment of the witnesses and their evidence (as set out in Section IV above) I make the following findings of fact:

(1) Victor and Ms Usman told significant lies in documents before the court; and they lied repeatedly in their evidence.

(2) In the five years up to and including 2002, Victor had limited earnings, very probably in the range of £20,000 to £30,000 pa net before tax.

(3) Victor had no substantial savings. He made no, or no substantial, personal contribution to the deposit moneys paid on the purchase of Percy Road, Mitcham Road and Woodstock Road. These were mostly provided by another or others, the most likely source being Joshua, together with (in the case of Woodstock Road) Ms Usman.

(4) Victor deliberately lied in his mortgage applications concerning Percy Road, Mitcham Road, and Woodstock Road. In particular, he deliberately lied when he stated that he was a solicitor, that he was providing the deposit himself or from his own savings, and that he was in permanent full-time employment with Joshua & Usman, earning a basic gross income of £29,250. I entirely reject the suggestions that these were mistakes made by Mr Agbalaya; that Victor relied on Mr Agbalaya to complete the forms accurately; and that Victor was unaware that these misstatements had been made. His evidence to this effect was a further series of lies. In the case of Percy Road, I am satisfied that Victor compounded his lies by causing Ms Usman to provide the mortgage lender with a supporting, but dishonest, letter.

(5) Even applying the criminal standard of proof, I am sure that Victor lied in his mortgage application concerning Alexandra Road. In particular, he deliberately lied when he stated that he was a solicitor, that he was providing the deposit from his own savings, that he was in permanent full-time employment with Joshua & Usman, that he intended to live in Alexandra Road and not to let it out, and that he was not purchasing from a relative. To give verisimilitude to this, he lied about the involvement of Unity Estates as the selling agent and provided their contact details. On his own case, he lied when (as I find) he said that he had no business connection with the vendor. I am sure that it was Victor who provided the figure of £77,850 for his basic gross income; and that this was a further lie in the double sense that he was not earning this from Joshua & Usman or at all. Again, I entirely reject the suggestions that these were mistakes made by Mr Agbalaya; that Victor relied on Mr Agbalaya to complete the form accurately; and that Victor was unaware that these misstatements had been made. Again, Victor's evidence to this effect was a further series of lies.

(6) Again applying the criminal standard of proof, I am sure that Victor and Joshua conspired together to defraud BOS, initially of £250,000, and, after Alexandra Road was valued at £250,000 rather than the £300,000 for which they had hoped, of the lesser sum of £212,500; and that, with this aim in view, they agreed that Victor would make a fraudulent mortgage application, and that Joshua would lend his assistance to it in whatever way might be required. In furtherance of this conspiracy, and in support of what they both knew to be a fraudulent mortgage application, I am satisfied that Joshua and Victor acted in concert together in the pantomime transfer and virtually immediate re-transfer (at a total cost in terms of transfer fees of £32) of £50,000 between the bank accounts of Joshua & Usman and Victor in order to pretend to BOS that Victor actually had the "deposit" in his bank account as savings when in fact he did not and in reality Victor had no money at all to pay any deposit for Alexandra Road. I am also satisfied that Victor and Joshua acted in concert together in procuring the letters to be sent from Joshua & Usman (a) to BOS dated 9^th September falsely confirming that Joshua & Usman currently held £50,000 for Victor and (b) to Herald (for onward transmission to BOS) falsely confirming that Victor would be residing at Alexandra Road and would not be letting the property to tenants. I reject the submission that Joshua could and would have committed the fraud even if Victor had not been involved in the plan: as explained in paragraph 51 below, Joshua needed to involve Victor, or some other equally compliant individual, in any attempt to raise money on the security of Alexandra Road. I am prepared to accept that, as the owner of Alexandra Road, Joshua may well have initiated the fraud; but I refuse to accept that Victor's role was subordinate: it was vital to the success of the fraud; and Victor willingly lent himself to it.

(7) Again applying the criminal standard of proof (and notwithstanding that he is debarred from defending BOS's claim) I am sure that Joshua was a serial fraudster who committed a number of other mortgage frauds whilst acting alone, and who also defrauded BOS of its mortgage advance of £212,500 in relation to Alexandra Road.

50. It is at this point that I part company with Mr Croxford's analysis of the case. He invites me to find that Joshua and Victor never intended to complete a transfer of Alexandra Road from Joshua to Victor and never intended to complete its mortgage in favour of BOS. He invites me to find that Joshua never stole the mortgage moneys from Victor but that they shared the proceeds of their fraud. He submits that it is possible, but unlikely, that there were two separate frauds, one involving a fraudulent mortgage application (involving both Joshua and Victor) and the other (involving Joshua alone) which included Victor as his unwitting victim as well as BOS. He submits that this is rendered very improbable by the three factors that he identifies at paragraphs 8 through 10 of his written closing submissions. The reason why Mr Croxford urges this analysis of the facts upon me is that it places him on stronger ground in resisting any claim for damages, contribution or an indemnity by Victor against Mr Croxford's other client, Joshua & Usman, thereby benefiting its insurer, SPT. Miss Tozer, on the other hand, invites me to find that Joshua fraudulently converted the mortgage advance to his own use; that Victor did not know of, and was not involved in. Joshua's misapplication of the mortgage advance; and that Victor is just as much a victim of Joshua's dishonesty as BOS. She submits that it is not open to me to find that Victor benefited from any part of the mortgage advance since this was never put to him by Mr Croxford; and that it is wholly implausible that Victor should assume a liability, whether actual or potential, for the mortgage advance, and agree to pay monthly instalments of both capital and interest to BOS for an indefinite period, without obtaining Alexandra Road, or receiving any part of the proceeds of the fraud, simply in order to assist his uncle Joshua. She points to the wholly different nature of the earlier mortgage transactions in which Victor had been involved, which had always proceeded to completion; and to Joshua's propensity (as established in the proceedings before the Solicitors' Disciplinary Tribunal) to defraud members of his own family.
51. I acknowledge the force of the point made by Mr Croxford that if, as I accept, Victor was not introducing any of his own moneys into the purchase of Alexandra Road, any purchase from Joshua must have been intended to be at an effective consideration of only £212,500 (the amount of the mortgage advance), against a mortgage valuation of £250,000; and that such a sale at an undervalue is very unlikely to have been acceptable to Joshua. However, I cannot regard this fact as sufficient to displace the force of Miss Tozer's submissions: there was no evidence that Victor had himself benefited from any part of the mortgage advance; and, absent any benefit to Victor, why should he have gone along with this particular mortgage fraud, thereby exposing himself to claims by BOS. As Mr Croxford himself acknowledged, if completion of the sale and mortgage did not take place, this fraud was likely to come to light unless it was first unwound. Yet, if it was unwound, where was the benefit to Victor? In my judgment, it is relevant to bear in mind the history of this mortgage transaction. Contrary to Miss Tozer's submission, Joshua needed to involve Victor, or some other compliant individual, in any transaction calculated to generate money from Alexandra Road because Joshua had already (in July 2001) secured an advance against the property in the region of £158,000 in connection with a sale to his wife which he had never completed, and without redeeming his existing mortgage over the property: he could not safely offer the property for sale on the open market. Despite that, on Victor's evidence at paragraph 62 of his witness statement, Joshua had apparently at some point in time placed the property on the market with Unity Estates. From what I have learned about Joshua and his property dealings, he seems to me to have been a pretty shrewd operator; but his instruction of selling agents must, in any event, have given Joshua some idea of the property's true value. Initially, Victor had sought a mortgage advance of £250,000 against a stated purchase price of £300,000, Given the extent of the eventual mortgage downvaluation (£50,000), and the mortgage valuer's comments about the property in his report, I consider it unlikely that Joshua had genuinely believed the property to be worth as much as £300,000: the likelihood is that he was hoping to secure a mortgage advance equal to or approaching the property's true worth, but was also hoping that the mortgage valuer would not pick up on this. In this, Joshua was disappointed; but because of his desperate financial situation, he had no alternative but to reduce the stated selling price to accord with the mortgage valuation and to accept a correspondingly reduced mortgage advance of £212,500 as all that he could squeeze out of the property.
52. For these reasons I find

(8) That Joshua fraudulently converted the mortgage advance to his own use; and that Victor did not know of, and was not involved in, Joshua's misapplication of the mortgage money. I accept that Joshua, as Joshua & Usman's chairman, was its controlling mind and acted as such when using the authority afforded to him by his position to misappropriate BOS's mortgage advance. It follows that I also find that it was Victor's intention that BOS should have a secured loan, and to repay that loan in accordance with its terms. Miss Tozer invites me to find that the cause of BOS's loss was Joshua's intervening act in taking the money and not any representations on the mortgage application form. Since this really raises an issue of law, I shall deal with it in the next section of my judgment.

53. Miss Tozer invites me to find that Joshua also took Victor's deposit of £50,000 from Joshua & Usman's client account. As stated above, I am entirely satisfied that this was not Victor's money; and I therefore reject Miss Tozer's invitation.
54. Miss Tozer invites me to find that none of the misrepresentations in the mortgage application form in fact influenced BOS in determining whether to make the mortgage advance. She develops her submission at paragraphs 59 through 63 of her written closing submissions. Mr Croxford's position is set out at paragraphs 15and 16 of his written closing submissions. He accepts that no liability can attach for any misrepresentation which did not influence BOS; but he submits that BOS plainly placed reliance on the mortgage application form signed by Victor.
55. I unhesitatingly accept Mr Croxford's submission and reject that of Miss Tozer. I am entirely satisfied that BOS proceeded to make the mortgage advance in reliance on the accuracy of the information contained in the application form which was, to Victor's knowledge, false in the material particulars I have outlined above. I accept that BOS may have closed its eyes to the implications of certain of the comments made by its fraud team; but I am satisfied that BOS did not do so consciously, knowing the information in the application form to be false, or recklessly, not caring whether it was true or not. I also reject Miss Tozer's argument that the fact that comments from the fraud team were ignored demonstrates the immateriality of the matters in the application form to which they related. I am satisfied that BOS would never have proceeded with the mortgage advance had it known that Victor had deliberately lied in his mortgage application form in the respects that I have outlined in my finding of fact numbered (5) above. Apart from anything else, the inclusion of Victor's true income would have led to the rejection of the application out of hand since the amount of the requested advance would have far exceeded any appropriate income multiplier. I also accept Mr Brown's evidence (confirmed by Miss Robertson) that if Victor's asserted employment mix had been disclosed, this would have led to the rejection of the application. I am further satisfied that BOS would never have proceeded with the mortgage advance had it known that the deposit did not exist or that the controlling mind of the solicitor's practice that was confirming the existence of the deposit was both related to the applicant and also the vendor of the property. Indeed, had the truth been told by Victor in his mortgage application form, I doubt whether Mr Agbalaya would have thought it worthwhile submitting it to BOS; and had he done so, I seriously doubt whether the information would even have been inputted into BOS's computer, still less that the application would have proceeded from the processing section to the underwriting team. I therefore find (9) That Victor's misrepresentations caused BOS to make the mortgage advance.

VI: Conclusions of law

56. Miss Tozer submits (at paragraphs 14 and 15 of her opening skeleton, paragraph 64 of her written closing submissions and in her post-trial emails) that even if I am satisfied (as I am) that Victor made false representations and that these influenced BOS, the Claimant still cannot succeed because it cannot show any resulting loss. She invites me to find that the cause of BOS's loss was Joshua's intervening act in taking BOS's mortgage advance and not any representation on the application form. But for Joshua's misappropriation, BOS would have received the security for which it had bargained. In this connection, she cites Clerk & Lindsell on Torts, 19^th ed. (2006) paragraphs 2-78 through 2-95 and the decision of Moore-Bick LJ sitting at first instance in Man Nutzfahrzeuge Ag v Freightliner Ltd [2005] EWHC 2347 (Comm) at paragraphs 229 and following.
57. I reject Miss Tozer's submission. Applying the test at paragraph 2-78 of Clerk & Lindsell, it cannot here be said that Joshua's subsequent fraud constituted an event of such impact that it "obliterated" Victor's earlier wrongdoing. The £212,500 mortgage advance was the proceeds of Victor's deceit and its procural was the very objective of his conspiracy with Joshua. Admittedly, BOS's loss would have been diminished had the sale of Alexandra Road to Joshua proceeded and the mortgage in favour of BOS been completed; but the loss was actually suffered by BOS when, as a result of Victor's deceit and in furtherance of his conspiracy with Joshua, the mortgage advance passed from BOS to Joshua & Usman. As Moore-Bick LJ noted at paragraph 234 of his judgment in the Freightliner case, the argument that Joshua's later dishonesty broke the chain of causation can only succeed if the earlier fraud had substantially lost all of its potency. That is clearly not the case: but for the earlier fraud the mortgage advance would never have reached Joshua & Usman and Joshua would never have had the opportunity to make off with it. As Mr Croxford submitted, Victor conducted his fraud in circumstances where he knew, and intended, that he was dealing with a dishonest solicitor; yet he arranged for the funds to be put into his hands. Had Victor not nominated Joshua & Usman as his solicitors, BOS would never have instructed them in relation to the mortgage advance: and BOS would never have placed the mortgage advance in Joshua & Usman's hands. It is quite foreseeable that there should be no honour amongst thieves; and Victor cannot properly complain that his dishonest CO-conspirator and facilitator proved to be even more dishonest than Victor himself had anticipated, and that Joshua pocketed the gains for himself.
58. I therefore find, to the criminal standard of proof, that all of the necessary ingredients of the tort of deceit are established against Victor. I also find, to the same high standard of proof, that Victor and Joshua successfully participated together in a conspiracy dishonestly to defraud BOS of its mortgage advance of £212,500. There must be judgment for the Claimant in the sum claimed against Victor and Joshua.
59. Victor's counterclaim against BOS for the return of his monthly mortgage repayments fails. On his own evidence, by April 2003 at the latest, Victor knew that completion had not taken place; yet he continued to make the mortgage payments until September 2003. Thus, it seems to me that there was no relevant mistake. Even before April 2003, Victor was on actual notice of a problem over completion when he discovered that Joshua had failed to deliver up vacant possession of the property to him. In any event, any claim by Victor against BOS is defeated by his own fraud and the ex turpi causa principle.
60. Victor claims against Joshua & Usman for breach of its retainer by him as his solicitor. Clearly this claim fails to the extent that it relates to the loss of Victor's non-existent deposit of £50,000. In my judgment, it also fails to the extent that it seeks an indemnity against, or damages in relation to, Victor's liability to BOS for the mortgage advance and Victor's mortgage repayments. I accept Joshua & Usman's submission that Victor's claims against it are defeated by the ex turpi causa principle. Miss Tozer denies that the ex turpi causa principle can defeat the claim. She refers me to paragraphs 3-02 and following of Clerk & Lindsell, and particularly paragraphs 3-19 and 3-23; and she relies on the decision of the Court of Appeal in Sweetman v Nathan [2003] EWCA Civ 1115, [2004] PNLR 89.
61. Clerk & Lindsell identify three relevant factors at paragraph 3-19:

(1) The claimant's conduct must have been so clearly reprehensible as to justify condemnation by the court. In my judgment, that is certainly the case with Victor's conduct here.

(2) The claimant's conduct must be so much a part of the claim against the defendant as to justify refusing any remedy to the claimant: there must be a sufficient connection with the claimant's damage. It is to this requirement that the Sweetman case is relevant.

(3) In some types of case, there has to be some "proportionality" between the claimant's conduct and that of the defendant: the defence does not apply where the defendant's conduct was an excessive response. I am not satisfied that this factor is applicable in the present case. A more relevant consideration here would seem to me to be whether the defendant's conduct has wholly obliterated the effect of the claimant's own wrongdoing. I have already held (in paragraph 57 above) that that is not the case here.

62. I turn then to the second of the three factors and to the Sweetman case. As Miss Tozer acknowledges, it is a case with which I am familiar because I acted for the (assumed) dishonest claimant in that case. He sued his former solicitor and the solicitor's firm for negligence in the conduct of a conveyancing transaction on the basis that the solicitor had negligently failed to discover that the proposed purchaser was a worthless shell company, and the purchase price was never paid. The claimant, together with the solicitor, had fraudulently obtained a loan from a bank in connection with the transaction. When the claimant failed to repay the loan, the bank obtained judgment against the claimant, his solicitor, and the solicitor's firm on the ground of the fraud of the claimant and his solicitor. The claimant alleged that as a result of the negligence, he had incurred loss, including interest on the loan, the arrangement fee, and other losses, resulting in his bankruptcy. The Court of Appeal held that, although the claimant's fraud on the bank was a "but for" cause of his loss, the claim in negligence should not be struck out on the basis that, given the fraud finding, the claimant had no prospect of success in any action against his solicitor for negligent conveyancing. The key factors were that: (1) the claim against the solicitor for negligence was conceptually entirely separate from the fraud upon which both of them had been engaged: there was force in the analogy with a case I had posited at paragraph 42 of the judgment; and (2) the negligence action could be pleaded and proved without reliance upon any part of the fraud assumed to have been committed on the bank. The Court of Appeal endorsed the pragmatic approach to these problems advocated by Bingham LJ in Saunders v Edwards [1987] 1 WLR 1116 at 1134:

"Where the plaintiff's action in truth arises directly ex turpi causa he is likely to fail…. Where the plaintiff has suffered a genuine wrong to which the allegedly unlawful conduct is incidental, he is likely to succeed."

63. In my judgment, the Sweetman case is clearly distinguishable from the present case. Here, Victor's claim against Joshua & Usman is not conceptually entirely separate from the fraud upon which I find that he had been engaged with Joshua. The claim against Joshua arises not out of his negligence but out of his own deliberate dishonesty. The factors that I have identified at paragraph 57 above seem to me to be relevant in this connection also. Here, the negligence action against Joshua & Usman cannot properly and sensibly be pleaded or proved without reliance upon any part of the fraud perpetrated upon BOS. Had Victor been suing Joshua & Usman alone, alleging negligence in failing to complete his purchase and mortgage, Joshua & Usman would have defended on the basis that this was all part and parcel of a fraudulent conspiracy by Victor and Joshua to obtain and expropriate the mortgage advance from BOS. Assuming honesty on the part of Victor in the conduct of his claim, he would have had to confess and avoid: admitting that he had been party with Joshua to a conspiracy to defraud BOS, but asserting that Joshua had acted outside the scope of the conspiracy by double-crossing him. At this point, the principle that an action will not be founded upon an immoral or illegal act if it can be pleaded and proved without reliance upon such an act would no longer be capable of invocation by Victor. Finally, and adopting a pragmatic approach, it would seem to me that this is not a case where Victor can be said to have suffered a genuine wrong to which his own wrongful conduct is merely incidental; rather, it seems to me that Victor's claim in truth arises directly ex turpi causa and therefore fails.
64. I turn then to the claims for contribution between Joshua & Usman and Victor under the Civil Liability (Contribution) Act 1978. Mr Croxford accepts that, despite being a fraudster, Victor has a claim for contribution under the Act against Joshua & Usman because they are affixed with the fraud, and stand in the shoes, of Joshua. However, for the reasons set out at paragraph 17 (b) of his written closing submissions, he submits that the only sensible division of responsibility is 50/50. Miss Tozer submits that Victor's share should be nil, or alternatively very small, for the reasons she advances at paragraphs 51 and 65 of her written closing submissions. Both parties pray in aid the decision of the House of Lords in the case of Dubai Aluminium v Salaam [2002] UKHL 48, [2003] 2 AC 366.
65. I have borne all of these competing submissions, and the guidance afforded by the House of Lords decision, in mind. In my judgment, and contrary to Miss Tozer's submission, I consider that in terms of gravity of fault and potency of causal contribution, Victor and Joshua are equally liable for BOS's loss; and therefore that there should be a substantial measure of equality between them in the distribution of the burden of liability. The role of each of them was essential, and crucial, to the making of the mortgage advance. Although the loss sustained by BOS would have been reduced had the purchase and mortgage been completed, Joshua would have been in no position to have made off with the mortgage advance had he not (because of his known dishonesty) been put forward to act as his solicitor by Victor. I reject Miss Tozer's submissions that it is plain that the real cause of the loss is Joshua's acts, with Victor's actions forming only the background; and that the relative moral positions of Victor and Joshua are sharply contrasting. I prefer Mr Croxford's submission that Victor was a mature man who was both essential, and willingly lent himself, to the fraud. I note that in the Dubai case the House of Lords said that in order to achieve equality, the court was entitled to have regard to the extent to which some parties to the fraud, but not others, remained in possession of considerable sums of misappropriated moneys which were proceeds of the fraud. Miss Tozer seized upon this, submitting that on the evidence it was Joshua, and not Victor, who had benefited from the fraud. I acknowledge the force of this point. But it seems to me that I am in no position properly to judge the overall outcome to Victor. Joshua has chosen not to participate in the trial; and I cannot trust anything that Victor has told me. True it is that there is no evidence that Victor ever received any of the BOS moneys; but it is clear that he has derived substantial sums from the sale of the three earlier properties for which he has not properly accounted. On the view that I take that Victor made no, or no substantial, personal contribution to the purchase of any of these earlier properties, I am in no position to say whether, and to what extent, Joshua has truly benefited at Victor's expense from the Alexandra Road transaction: Victor's loss on that property may have been off-set by gains on the other properties for which, but for Joshua's flight to Nigeria, Victor might otherwise have had to account to Joshua. Bearing in mind that, in the context of his contribution claim, the burden falls on Victor, I am not satisfied that he has demonstrated that I should adopt any other approach to the distribution of the burden of liability than Mr Croxford's suggested 50/50 division. I therefore determine that Victor and Joshua (and thus Joshua & Usman) should contribute equally to the Claimant's claim.