St Paul Travelers Insurance Co. Ltd. v Okporuah & Ors

Factual and Procedural Background

This claim concerns the legal effect of deceit liability involving two alleged conspirators in a mortgage fraud relating to a property at 9 Alexandra Road, Croydon ("Alexandra Road"). The property was purportedly transferred from the 3rd Defendant, Joshua, to the 1st Defendant, Victor, with an intended mortgage to the Bank of Scotland ("BOS"), the original claimant. Joshua, a solicitor advocate and chairman of the incorporated legal practice Joshua & Usman Legal Services Limited ("Joshua & Usman"), committed mortgage fraud by not transferring the property to Victor or registering a mortgage in favour of BOS, and dissipated the mortgage funds. Victor denies involvement in the fraud and claims to be a victim of Joshua's actions.

BOS, unable to recover the advance from the property due to Joshua's failure to discharge prior mortgages, commenced proceedings against Victor to recover the mortgage advance. The proceedings involve complex interlocking claims principally between Joshua & Usman (and its insurers St Paul Travellers Insurance Company Ltd ("SPT"), who settled with BOS and were substituted as claimant) and Victor.

The principal claims include BOS's claims against Victor for conspiracy to defraud, deceit, and negligent misrepresentation; Victor's counterclaim for return of mistaken payments; Victor's claim against Joshua & Usman for breach of retainer; BOS's claim against Joshua & Usman for breaches of trust and negligence (settled but relevant for indemnity/contribution claims); and claims for indemnity or contribution among Victor, Joshua & Usman, and Joshua.

Joshua was debarred from defending the claim and is believed to be in Nigeria. Victor applied for the mortgage via Herald Finance Ltd ("Herald"), a mortgage broker, with inaccuracies in his mortgage application form. The court must decide whether Victor knowingly participated in the mortgage fraud or was an innocent victim.

The trial involved extensive witness evidence, including mortgage broker Mr Agbalaya, solicitor witness Iraida Usman, Victor himself, and BOS underwriting witnesses. The court considered the credibility and reliability of witnesses, the accuracy of mortgage applications, and the financial dealings underlying the property purchases.

Legal Issues Presented

1. Whether Victor knowingly participated in a conspiracy to defraud BOS by making a fraudulent mortgage application and assisting Joshua in misappropriating the mortgage advance.
2. Whether Victor's misrepresentations caused BOS to suffer loss and if he is liable in deceit and conspiracy.
3. Whether Victor's counterclaim for return of mistaken payments to BOS succeeds.
4. Whether Victor's claims against Joshua & Usman for breach of retainer and indemnity are defeated by the ex turpi causa principle.
5. The appropriate apportionment of liability and contribution between Victor and Joshua & Usman under the Civil Liability (Contribution) Act 1978.

Arguments of the Parties

Claimant's Arguments

• Victor knowingly participated in a conspiracy with Joshua to defraud BOS by making a fraudulent mortgage application and assisting in the misappropriation of the mortgage advance.
• BOS relied on Victor's false statements in the mortgage application, which caused the mortgage advance and consequent loss.
• Victor's lies and conduct destroyed his credibility and demonstrate deliberate deceit.
• Victor's claim against Joshua & Usman is defeated by the ex turpi causa principle due to his involvement in the fraud.
• Victor and Joshua should be held equally liable for BOS's loss and share contribution equally.

Defendant's Arguments

• Victor denies participation in the mortgage fraud and maintains he was an innocent victim of Joshua's fraudulent conduct.
• Victor claims he signed the mortgage application without reading it and had no reason to suspect inaccuracies.
• Victor contends that Joshua alone misappropriated the mortgage advance and that Victor did not benefit from it.
• Victor asserts his counterclaim for return of mistaken payments to BOS.
• Victor disputes that the ex turpi causa principle defeats his claims against Joshua & Usman.
• Victor submits that his share of liability for contribution should be nil or very small compared to Joshua's.

Table of Precedents Cited

Court's Reasoning and Analysis

The court conducted a detailed evaluation of the evidence, focusing on the credibility and reliability of witnesses, including the mortgage broker, Victor, and his aunt Iraida Usman. It applied established legal principles regarding the standard of proof in fraud cases, the assessment of witness lies, and the totality of evidence rather than segregating it by party.

The court found Victor and Ms Usman to be dishonest witnesses whose evidence was largely fabricated to support Victor's case. The court accepted the mortgage broker's evidence that Victor supplied false information knowingly. It found that Victor deliberately misrepresented his occupation, income, and source of deposit in multiple mortgage applications, including the application for Alexandra Road.

The court held that Victor and Joshua conspired to defraud BOS by submitting a fraudulent mortgage application and by fabricating the existence of a £50,000 deposit through sham transactions between their accounts. The court rejected the argument that Joshua's subsequent misappropriation of the mortgage advance broke the chain of causation from Victor's deceit, holding that the loss to BOS was caused by Victor's fraudulent conduct as part of the conspiracy.

The court applied the ex turpi causa principle to defeat Victor's counterclaims and claims against Joshua & Usman, finding that Victor's claims arose directly from his own fraudulent conduct. Regarding contribution, the court found Victor and Joshua equally liable due to their essential and crucial roles in the fraud, despite Victor not having received any of the mortgage advance funds.

Holding and Implications

Judgment was entered for the Claimant (SPT as assignee of BOS) against Victor and Joshua in the sum claimed for deceit and conspiracy to defraud.

Victor's counterclaim for return of mistaken payments to BOS failed. Victor's claims against Joshua & Usman for breach of retainer and indemnity were defeated by the ex turpi causa principle.

The court held that Victor and Joshua are equally liable for the loss suffered by BOS and should share contribution equally under the Civil Liability (Contribution) Act 1978.

This decision directly affects the parties by establishing Victor's liability for deceit and conspiracy in relation to the mortgage fraud and denies him remedies against the solicitor firm. The ruling clarifies the application of causation and ex turpi causa principles in complex fraud conspiracies but does not establish new legal precedent beyond the application of existing authorities.