Gresport Finance Ltd v Battaglia

Factual and Procedural Background

This case involved a claim by Company A against Defendant for approximately 1.187 million Euros alleged to have been wrongly paid away over a period of about 26 months, together with the value in Swiss francs of a portfolio of investments and securities wrongly removed from Company A's account at Bank B. The trial took place over three days in February 2016 before Judge Bompas QC in the High Court, Chancery Division.

In his reserved judgment dated 28 April 2016, the judge held that the portfolio claim succeeded in full, but the payments claim succeeded only in relation to payments made either to a particular bank account (the ROSS account at Bank C) or to a payee (Company D) connected with Defendant. Judgment was given for Company A for a principal sum plus interest totaling 941,917.

Most transactions, except one payment made on 8 October 2007, occurred more than six years before the claim form was issued on 7 August 2013. Defendant pleaded limitation, relying on the six-year limitation period. Company A sought to rebut this defence by relying on sections 21 and 32(1)(b) of the Limitation Act 1980, alleging fraud or fraudulent breach of trust and deliberate concealment by Defendant.

The judge found that Company A had established deliberate concealment by Defendant under section 32(1)(b), and that Company A could not with reasonable diligence have discovered the concealment before 7 August 2007, thus defeating the limitation defence. The judge also considered but rejected Company A's alternative argument under section 21(1)(a) because Defendant was not shown to be in possession of the misappropriated property.

Both parties appealed different aspects of the judgment. Defendant appealed the finding on reasonable diligence regarding discovery of concealment. Company A cross-appealed on findings relating to certain payments and beneficial receipt of funds by Defendant.

The factual background established that Company A was incorporated as a vehicle to hold assets for a third party, Beneficiary, who had a complex background involving a group of companies previously subject to criminal proceedings. Defendant was an asset management consultant who acted as an intermediary between Beneficiary and Company A's administrator, Company E.

Company A’s bank account with Bank B was controlled by Company E, which acted on instructions relayed by Defendant. Several bank accounts connected to Defendant or his associated companies received payments that were disputed by Company A.

The judge found Defendant owed fiduciary duties and contractual duties to Company A to act only on Beneficiary's instructions and not to make unauthorised dispositions. Some payments were found authorised or reimbursed, while others, particularly those to accounts connected to Defendant, were found unauthorised.

Legal Issues Presented

1. Whether Company A could, with reasonable diligence, have discovered Defendant's deliberate concealment of facts relevant to its right of action before 7 August 2007, thereby affecting the limitation period under section 32(1)(b) of the Limitation Act 1980.
2. Whether the circumstances of the case fell within section 21(1)(a) of the Limitation Act 1980, concerning fraud or fraudulent breach of trust by Defendant as a trustee.
3. Whether Defendant was liable for breach of fiduciary duty and breach of mandate in relation to specific disputed payments and transfers.
4. Whether the judge erred in his findings of fact on the authorisation and beneficial receipt of certain payments.

Arguments of the Parties

Defendant's Arguments

• The judge was wrong to conclude that Company A could not with reasonable diligence have discovered the concealment earlier than 7 August 2007.
• The judge failed to properly consider that Beneficiary was a competent accountant who could have discovered the fraud earlier.
• Beneficiary exercised supervision over funds and received portfolio statements, which should have put Company A on inquiry.
• Company E could have contacted Beneficiary directly to discover the breaches.
• The judge’s adverse credibility finding regarding Beneficiary’s evidence about meetings was flawed and led to a mistaken conclusion.

Company A's Arguments

• The judge correctly found that the concealment could not have been discovered with reasonable diligence before 7 August 2007 due to the deliberate arrangements to channel all instructions through Defendant.
• The judge was correct to reject the limitation defence on the basis of section 32(1)(b) and to reject the alternative section 21(1)(a) argument.
• The judge’s factual findings on the unauthorised nature of payments to accounts connected with Defendant were supported by evidence and reasonable inferences.
• The judge’s adverse credibility findings concerning Beneficiary’s evidence on December 2006 meetings were erroneous but did not undermine the overall conclusion.
• The judge erred in not finding liability for certain payments, but the cross-appeal threshold for overturning findings of fact was high.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Paragon Finance Plc v D B Thakerar & Co [1999] 1 All ER 400	Test for discovery with reasonable diligence under Limitation Act 1980, section 32(1)(a)	The court applied the principle that the limitation period does not start until the claimant could with reasonable diligence have discovered the fraud or concealment, measured by a standard of reasonable but not excessive diligence.
Law Society v Sephton [2004] EWCA Civ 1627, [2005] QB 1013	Clarification of the concept of reasonable diligence and assumption of claimant's desire to investigate fraud or concealment	The court endorsed that reasonable diligence implies a desire to know and investigate, and the limitation period is postponed until discovery or reasonable diligence could have led to discovery.
Peco Arts Inc v Hazlitt Gallery Ltd [1983] 3 All ER 193	Meaning of reasonable diligence varies with context	The court recognized that reasonable diligence depends on the context and involves what an ordinarily prudent person would do, not necessarily exhaustive investigation.
Henderson v Foxworth Investments Limited [2014] UKSC 41	Standard of appellate review of factual findings	The court confirmed that appellate courts should not interfere with trial judge’s factual findings unless plainly wrong or no reasonable judge could have reached that conclusion.
Lewis v Ramachandren Narayanasamy & Anr [2017] EWCA Civ 229	Application of appellate review principles to factual findings	The court reiterated the high threshold for overturning factual findings on appeal, emphasizing deference to trial judge’s evaluation of evidence.

Court's Reasoning and Analysis

The court began by identifying the core issue on Defendant's appeal as whether Company A could, with reasonable diligence, have discovered Defendant’s concealment before 7 August 2007 under section 32(1)(b) of the Limitation Act 1980. The court accepted the judge’s finding that Defendant deliberately concealed facts by abusing his power to give unauthorised directions and that these breaches were unlikely to be discovered for some time, satisfying the test for deliberate concealment under section 32(2).

The court examined the arrangements whereby Company A, acting through its administrator Company E, agreed to receive instructions solely via Defendant, deliberately distancing itself from direct contact with Beneficiary. This arrangement was instrumental in making the concealment effective and discovery difficult. The court agreed with the judge that only exceptional steps, such as direct communication with Beneficiary, could have revealed the concealment earlier, and such steps were not reasonably required.

The court considered Defendant’s grounds challenging the judge’s reasoning, including Beneficiary’s competence as an accountant, his receipt of portfolio statements, and the possibility of Company E contacting Beneficiary directly. The court found these arguments insufficient to undermine the judge’s conclusion, as there was no evidence that these factors would have put Company A on inquiry or triggered an obligation to investigate.

The court also addressed the judge’s adverse inference that Beneficiary must have met Defendant after December 2006, concluding that this inference was not supported by the evidence. Removing this adverse finding did not alter the overall conclusion that Company A could not have discovered the concealment earlier.

Regarding Company A’s cross-appeal, the court acknowledged the high standard required to overturn findings of fact and found that the judge’s cautious approach in distinguishing between payments connected to Defendant and others was reasonable. Although some credibility assessments were flawed, the overall factual findings were not plainly wrong.

The court noted the judge’s acceptance that Defendant owed fiduciary and contractual duties not to make unauthorised dispositions and that liability would attach for breaches of those duties. The court found no error in the judge’s application of these principles to the evidence presented.

Holding and Implications

The court DISMISSED both Defendant’s appeal and Company A’s cross-appeal.

The direct effect of this decision is to uphold the trial judge’s judgment that the limitation defence fails because Company A could not with reasonable diligence have discovered the concealment before 7 August 2007, and that Defendant is liable for breach of fiduciary duty and breach of mandate in respect of certain unauthorised payments and transfers connected to him.

No new legal precedent was established; the court applied well-established principles concerning limitation periods, reasonable diligence, and appellate review of factual findings to the specific facts of this case.