Before: The Hon. Mr. Justice Ferris
 
 

B E T W E E N

JUDGMENT
 
DATED: 24 March, 1998

Mr. Justice Ferris:

This is my judgment in three actions (1997 B No. 1152, 1997 B No. 1151 and 1997 J No. 611) which have been tried together because they raise identical questions of law and, for the most part, of fact too. At the outset of the trial a number of other similar actions were listed for hearing at the same time, but at a comparatively early stage these actions were disposed of by agreement.

Each of the plaintiffs in the three actions in which there has been a full trial is a person who, to use what is intended to be a neutral expression, 'placed' money with a company named Sylcon Finance Limited ('Sylcon'). Sylcon paid the money which had been placed with it into an account (the No.1 account) at the Oxford Circus, London, branch of Barclays Bank plc ('the Bank'). At all material times that account was overdrawn, although none of the plaintiffs was aware of this. In October 1992 the Bank of England commenced proceedings against Sylcon on the ground that Sylcon was carrying on a deposit-taking business without being authorised under Pt I of the Banking Act 1987. In those proceedings an order was made on 6 October 1992 freezing Sylcon's assets. On 24 February 1993 Sylcon was ordered to be wound up on the petition of the Bank of England. It has proved to be gravely insolvent. The plaintiffs have proved as creditors in the liquidation for the sums which they placed with Sylcon (less certain amounts repaid by Sylcon) and for interest. However they have received a distribution of only about 12 pence in the pound in respect of the amounts claimed and there is no hope that they will receive any more from the liquidation.

In these actions the plaintiffs seek to recover from the Bank what they have lost in the insolvency of Sylcon. They say that the Bank is liable to them on various alternative grounds. These are:

(1) That the Bank is liable for the plaintiffs, money which was paid into Sylcon's account as money had and received by the Bank to the use of the plaintiffs;

(2) That the money placed by the plaintiffs with Sylcon can be traced in equity into the hands of the Bank and the Bank is liable to return it;

(3) That the Bank is liable as constructive trustee;

(4) That the Bank is liable to the plaintiffs in negligence.

Sylcon

Sylcon was incorporated on 18 November 1963. At all material times its directors were Harry Reuben and his two sons Lawrence and Ian Reuben. However the two sons seem to have played only a very minor part in the affairs of Sylcon. The day to day management of Sylcon was in the hands of Harry Reuben, who seems to have transacted all its business personally.

It is difficult to characterise the business of Sylcon at any given time. Its principal objects according to its Memorandum were to carry on activities of a financial nature, including money lending, banking, advancing and borrowing money and activities of a similar kind. But the acquisition and holding of land was also among its objects and until 1989 it owned a leasehold property of some substance at 93 Mortimer Street, London W1. As I have already mentioned, it banked at the Oxford Circus branch of the Bank, where it held a number of accounts. There was the No.1 account already mentioned. While I have not seen the bank statements for this account it is common ground between the parties that it was always overdrawn. Sylcon also held other accounts with the Bank These included a Head Office Foreign Exchange account and an account in Jersey. While the Mortimer Street property was retained unsold it seemed that Sylcon may, at least from time to time, have been a net debtor to the Bank, although the Bank was fully secured by means of a charge over the property. In April 1989 or thereabouts that property was sold. A large part of the proceeds of sale was paid into accounts of Sylcon at the Bank and thereafter, although the No.1 account remained overdrawn, Sylcon was always a net creditor of, not a debtor to, the Bank if the credit and debit balances on each account were set off against each other. Indeed after Sylcon had gone into liquidation the Bank exercised its rights of set off and accounted for a net balance of a substantial amount to the liquidator.

After Sylcon had collapsed, criminal proceedings were commenced against Mr Harry Reuben and his two sons. The charges against all of them included charges arising from the contravention of s 3 of the Banking Act 1987, which I will come to later. Mr Harry Reuben was also charged with fraudulent trading and various acts of dishonesty. In the event the proceedings were not continued against Mr Harry Reuben because of his serious ill-health. He has since died. In February 1995 Lawrence and Ian Reuben pleaded guilty to five counts of neglect in relation to Sylcon. They were originally sentenced to six months imprisonment on each count, the sentences to run consecutively. On appeal these sentences were reduced to twelve months in total.

Evidence of the Plaintiffs

I now turn to the evidence concerning the circumstances in which each of the plaintiffs came to place money with Sylcon. I will take them in the order in which they made their earliest payment to Sylcon.

Mrs Brown

Mrs Rosalind Brown is the plaintiff in action 1997 B No. 1151. She and her husband Philip knew Mr Harry Reuben socially for about 40 years and they attended the same synagogue. Mrs Brown herself never visited Sylcon's offices or dealt directly with Mr Reuben in placing her money with Sylcon. These matters were done on her behalf by her husband, Philip Brown. Unfortunately Mr Brown is suffering from ill health and was not fit to attend court

His witness statement was admitted in evidence under the Civil Evidence Act, but he could not be cross-examined on it. Mrs Brown did attend court and was cross-examined, but what she said was, of necessity, based on what her husband had told her. Mr Brown said that he spoke to Mr Reuben at a wedding which they both attended on 1 September 1987. Mr Reuben told Mr Brown that he was involved in investment banking. At the time Mr and Mrs Brown were looking to get a better rate of interest on their money than they were receiving from the building society accounts in which they currently held it. Mr Reuben said that if they placed their money with him he could pay a large rate of interest because he invested on the money market and the more he had to invest the larger the rate of interest would be. Mr Brown asked where their money would be if they invested with Mr Reuben and Mr Reuben said it would be with Barclays Bank on the money market.

After discussions between themselves, Mr and Mrs Brown decided to place some money with Mr Reuben and to open two separate accounts, one of which would be for the benefit of Mrs Brown's handicapped son from her first marriage. Before doing so, however, Mr Brown had a meeting with Mr Reuben at Sylcon's office. Mr Reuben said that the accounts would attract interest at Barclays Bank base rate plus 1 or 2 % and that their capital could only increase. He also said that the Brown's money would initially be deposited with Barclays Bank but that he would look for profitable deals and property which would assist the Browns to increase their capital. Mr Brown's evidence as to the dates and amounts of deposits with Sylcon was, I think, based on a reconstruction of his memory from the available documents. There is, however, no real doubt about these deposits. The first deposit into the No.1 account in the name of Mrs Brown was made on 14 September 1987. Further deposits were made in 1988 and 1989 and the credit balance on August 1st 1989 was r23,786. There were two deposits into the No.2 account, one in 1987 and the other in 1988. The balance after the second of these deposits on 17 November 1988 was £8723. All the deposits were made by cheque. Mr Brown was given a paying-in book, somewhat like an ordinary bank paying-in book, which he used when making deposits. The credit slips have the name 'Sylcon Finance Limited' upon them and the counterfoils showing the amounts deposited were stamped and dated with a rubber stamp bearing Sylcon's name.

Mr and Mrs Brown received for each account an annual statement headed 'Mrs Rosalind Brown (No.2 Account) in account with Sylcon Finance Limited'. In his witness statement Mr Brown said that these showed not only the balances of the accounts but also the interest which had accrued, but as I read them they do not in fact include accrued interest on the balances.

Mr Brown said that neither he nor his wife saw any need for a guarantee of their money 'because of our relationship with Harry Reuben and also the fact that we knew our money was with Barclays Bank'.

During 1992 Mr Brown drew out of the No.1 account a total of £11,000 without informing his wife that he was doing so. Although the account was in the sole name of Mrs Brown, Mr Reuben raised no difficulty about this. He appears simply to have paid out the money when asked to do so by Mr Brown.

As Mrs Brown did not herself deal directly with Mr Reuben and was not present when her husband spoke to Mr Reuben about her money, her evidence about the representations or agreements made between Mr Reuben and Mr Brown is of little value. She did, however, attend and give evidence in person at the trial and she was cross-examined. She spoke about being attracted by the high rates of interest offered by Mr Reuben, her understanding that the money was in the Bank and that it was 'as safe as the Bank of England' and '1000% safe'.

In cross-examination Mrs Brown said that she understood that her money:

"was to be put on the money market, together with other people's money and Mr Reuben's money to make a more sizeable amount to invest."

Mrs Brown accepted that she had given a wrong answer to Auerbach Hope (a firm of accountants who carried out certain investigations on behalf of the Bank of England at about the end of 1992) when she said that the accounts were not interest bearing. She sought to explain this by saying that Lawrence and Ian Reuben had contacted her and her husband and asked them to say nothing about interest. She also had to accept that her husband had given a statement to the Bank of England which made no mention of his withdrawal from the No.1 account and that her initial claim to the liquidators of Sylcon failed to take this into account. She sought to explain this by saying that she was responsible for the paper work and that she may have done this before she knew about the withdrawal of £11,000. She was asked about an answer she had given to Auerbach Hope's question about the terms of the loan, which she had described as 'Loan to the company repayable on demand'. She said that this was what Auerbach Hope had told her to write, but it seems from her subsequent answers that whatever answer may have been suggested to her was intended to encapsulate the effect of what she and her husband had told Auerbach Hope about the circumstances.

While I think that, with the exception of the answer to Auerbach Hope in relation to interest, both Mr and Mrs Brown have been doing their best, both in their evidence to the court and in earlier statements, to give a truthful account of matters about which they feel extremely bitter, I cannot accept their evidence as establishing a belief on their part that their money was to go to the Bank in a form which made it identifiable as their money or which gave them a direct claim against the Bank. I think that the following exchange between Mr Beltrami and Mrs Brown at the end of her evidence puts the matter fairly:

"Mr Beltrami: Mrs Brown, you did not think that you were a customer of Barclays did you?

A: No, I knew that Sylcon was a customer of Barclays and I thought that, as far as we were concerned, our money was in Barclays and therefore we felt that it was completely safe.

Q: You were a customer of whom?

A: Sylcon.

Q: Yes, and Sylcon were a customer of Barclays?

A: Yes.

Q: And when Sylcon collapsed, did you go to Barclays to ask them for your money back?

A: No."

Mrs Jacobs

Mrs Pamela Jacobs (the plaintiff in action 1997 J No.611) is a daughter of Mr Harry Joseph, who died in 1990 and who was the uncle of Mrs Sylvia Reuben, the wife of Harry Reuben. It seems that Mr Joseph had himself placed money with Sylcon and that it was on his encouragement that Mrs Jacobs did the same. Mrs Jacobs said in her evidence that on 13 April 1989 she withdrew £10,000 in cash from her building society account. On the same day she went to Sylcon's office with Mr Joseph and her sister Mrs Frances Goodman. She gave the £10,000 to Harry Reuben and Mr Joseph asked Harry Reuben to invest it with his (that is Mr Joseph's) money 'that was already with Barclays Bank on the money market'. She went on to say in her witness statement that:

"My clear understanding, as a result of discussions with Mr Reuben, was that Sylcon Finance was to invest the money I was depositing with Mr Reuben on my behalf at Barclays."

Mrs Goodman, who was the plaintiff in an action which was settled at an early stage of the trial, also deposited money with Sylcon on this occasion. Mrs Jacobs said that her father agreed with Mr Reuben at the meeting on 13 April 1989 that the interest on her and her sister's deposits would be:

"as agreed previously with him i.e. 3% above Barclays Base Rate with interest to be compounded quarterly."

But she also said that it was agreed that all interest payments to which she would be entitled on her deposited moneys would be paid to her mother in her lifetime.

On 13 April 1989 Sylcon wrote to Mrs Jacobs a letter in the following terms:

"Dear Mrs Jacobs

We are writing to confirm that you have opened with us a Current Account and that you have lodged with us the sum of £10,000 (ten thousand pounds only) which has today been placed to the credit of your new account.

The writer of this communication namely Mr H Reuben together with our Company have pleasure in confirming our guarantee for the full repayment to you of the whole of the balance standing to the credit of your account at any time.

We are pleased to have the opportunity of doing this business with you and would like to assure you of our best attentions and services at all times."

On 5 January 1990 a further sum of £3000 was credited to Mrs Jacob's account at Sylcon. Mrs Jacobs did not know about this at the time. She said that her father told her subsequently that he had deposited this sum by way of gift to her out of the proceeds of a business which he had sold.

After Mr Joseph's death in May 1990 Mrs Joseph received from a Swiss bank a cheque for £74,375 which appears to have been money to which she, or perhaps the estate of Mr Joseph, was entitled. I do not find it necessary to inquire as to this entitlement. It will suffice to say that Mrs Joseph indicated that she proposed to keep for herself the odd £4375 and to divide the balance of £70,000 equally between Mrs Jacobs and Mrs Goodman.

In anticipation of the receipt of this money Mrs Jacobs and Mrs Goodman went to see Mr Reuben at Sylcon's offices on a day or two before 22 May 1991. They told Mr Reuben that they had a further amount to invest and wanted reassurance that it was quite safe to do so because they could not afford to lose the money or to run risks. Mr Reuben said that the money would go into the Bank's Oxford Circus branch; that he could arrange a meeting with Mr Adamson the manager; that he had millions of pounds invested in Barclays; and that they could not use a safer institution. Mr Reuben also said that:

"our new deposit would be put together with the other monies with Barclays on the money market and this was how he was able to yield the higher rate of interest."

On 22 May 1991 Mrs Joseph, Mrs Jacobs and Mrs Goodman went together to Sylcon's office. They gave Mr Reuben the cheque for £74,375 drawn by the Swiss bank in favour of Mrs Joseph and asked him to credit £4375 to Mrs Joseph's account and £35,000 each to the accounts of Mrs Jacobs and Mrs Goodman. There was more talk about interest on this occasion. Mr Reuben confirmed that the rate would be 3% above the Bank's base rate. Mrs Joseph asked him how he could give such a good rate. He replied that because Sylcon had millions deposited with the Bank collectively he could command a higher rate of interest. There was also talk about tax and Mr Reuben said that this was paid at source and there was no need to declare interest on their tax returns.

After the visit to Sylcon on 22 May Mr Reuben, on behalf of Sylcon, wrote to Mrs Jacobs confirming that the balance standing to the credit of her current account with Sylcon was £48,000.

When the winding-up order was made in respect of Sylcon on 24 February 1993 the Official Receiver began to make enquiries about Sylcon's affairs. He submitted a number of questions to various persons, including Mrs Jacobs, who replied on 5 April 1993. In response to a question as to the terms on which she paid money to Sylcon and the interest payable, Mrs Jacobs said:

"The terms on which these monies were invested were as follows. Harry Reuben agreed to pay interest at a higher rate than the bank and this I gave to my mother."

There is no reference in any of Mrs Jacobs' answers to her money being with Barclays Bank or to any belief on her part that Sylcon was to increase it in some way on her behalf with the Bank. Mrs Jacobs sought to explain this by saying that she thought the Official Receiver's questions were in relation to Sylcon, not Barclays.

Mrs Jacobs also answered a questionnaire submitted by Auerbach Hope. Her answers to that questionnaire also make no reference to the Bank. In response to a request to state the terms of investment she said 'Given by late father to Sylcon Finance to hold.' She answered the question 'Was the account interest bearing' with a simple 'No.' In the witness box she sought to explain that this was because she herself did not receive any interest, which was paid to her mother.

The first time that the Bank was mentioned in connection with a claim by Mrs Jacobs seems to have been in a letter dated 3 February 1994 written to the Bank by a firm of solicitors named Maislish & Co who stated that they acted on behalf of Mrs Joseph, Mrs Jacobs and Mrs Goodman. The burden of that letter was a complaint that the Bank had not made proper enquiries about Sylcon and that Mrs Jacobs and her mother and sister had deposited funds with Sylcon:

"in reliance on the fact that the company conducted its transactions through your bank, and therefore must be a bona fide bank and a secure place to deposit their funds."

Likewise in a letter to the Bank of England dated 21 June 1994 Mrs Jacobs said:

"I feel that not only did Barclays Bank owe the investors a 'Duty of Care' but were 'Negligent' and would like to know why the appropriate department of the Bank of England has not instituted a full investigation as to why Barclays Bank assisted Harry Reuben of Sylcon Ltd to defraud investors of their money and even gave certain individuals 'Guarantees'."

The suggestion that the Bank received money obtained by Sylcon from Mrs Jacobs in a manner which made it identifiable by the Bank as her money rather than Sylcon's money or which gave Mrs Jacobs a proprietary claim against the Bank seems only to have been advanced at a much later stage. One cannot, of course, criticise Mrs Jacobs for being personally unaware of the precise legal analysis of her claim, but it is somewhat surprising that when the facts were being investigated much nearer to the time of Sylcon's collapse, Mrs Jacobs never thought it appropriate to mention matters such as statements by Mr Reuben that her money was to be invested with Barclays on the money market.

I have no difficulty in accepting the general framework of Mrs Jacobs' evidence I accept what she said about the amounts and dates of her deposits with Sylcon and the general tenor of her account of meetings with Mr Reuben. I think it probable that investment on the money market was mentioned by Mr Reuben as an explanation of his ability to offer higher rates of interest than was ordinarily available. I think it likely also that Mr Reuben mentioned that Sylcon dealt with Barclays on a large scale. But I am not satisfied that he said anything to Mrs Jacobs which was capable of being understood by her as meaning that her money would reach Barclays as her money rather than Sylcon's money or, as she put it:

"that Sylcon Finance was to invest the money that I was depositing with Mr Reuben on my behalf with Barclays."

Mrs Box

Mrs Sarah Box is the plaintiff in action 1997 B No. 1152. She is the aunt of Mr Harry Reuben. She is now of advanced years and in poor health and although she was present in court on the first day of the trial it was accepted that it would be impracticable to expect her to give oral evidence. Her witness statement was treated as her oral evidence but she was not cross-examined.

Mrs Box said that she knew, from her conversations with Mr Reuben, that he 'kept other people's money' Early in 1992 she was considering the sale of her flat and she spoke to Mr Reuben about placing the proceeds of sale with Sylcon. She told Mr Reuben about the sale and put him in contact with the solicitor who was acting for her in the sale, a Mr Banks. On 17 February 1992 Mr Reuben wrote to her saying that he had been in contact with Mr Banks.

In her witness statement Mrs Box said that it had crossed her mind that if she ever had any money she would put it with Mr Reuben as he seemed to be doing very well.

She thought about it for a while and then:

"decided I would put my money with Sylcon Finance."

Later on she said:

"I knew that Harry banked with Barclays Bank because he did so when he ran the business near myself in Mortimer Street. I banked with Barclays also and have done so for 45 years and am still a customer with them. He also in fact told me himself that my money would go into Barclays Bank. I knew that he was an accountant and that he was careful with money. He seemed to be doing very well himself, and I had no reason to think that he would not be careful with my money. He told me that he would take care of me and that I had nothing to worry about. He gave me these reassurances before I put my money with him, because I wanted to know that it would be safe. He didn't tell me exactly what he invested the money in but I had heard through the family that he bought property."

Mrs Box instructed Mr Banks to pay £40,000 out of the proceeds of sale of her flat to Mr Reuben. On 2 March 1992 Mr Banks sent Mr Reuben a cheque for £40,000 drawn in favour of Mr Reuben. The latter caused this cheque to be credited to Sylcon's account, which was clearly Mrs Box's own intention. On 3 March he signed on behalf of Sylcon a letter from Sylcon to Mrs Box in which he referred to receipt of the cheque and said:

"We confirm that the cheque in question has been lodged with our Bankers and has accordingly been credited to your account with us."

Mrs Box said that Mr Reuben never told her what the interest rate was and she paid no attention to this. She seems to have thought that her money might be safer if she did not receive interest, but she never told Mr Reuben that she did not want to receive interest. She did not ask Mr Reuben for any sort of guarantee as she did not believe one was necessary. She said that Mr Reuben:

"always reassured me that my money was completely safe and I do not think anything could go wrong because I knew my money was with Barclays Bank."

With the exception of that last statement ('I knew my money was with Barclays Bank') I have no difficulty in accepting all that is said by Mrs Box in her witness statement. As to the excepted statement, I am not prepared to accept that a person who has as muddled appreciation of financial matters as Mrs Box displayed in what she said about interest is able to express any reliable understanding of this kind. It is not, it would seem, based upon any specific statement of Mr Reuben to Mrs Box. The nearest she came to deposing to such a statement was when she said he 'told me himself that my money would go into Barclays Bank.' But that is, in my view, at best an equivocal statement and not one which justifies a belief that 'my money was with Barclays Bank.'

Relationship between the Plaintiffs and Sylcon

The analysis of the relationship which existed as a result of the plaintiffs placing their money with Sylcon lies at the centre of this case. In particular were the plaintiffs and Sylcon in a debtor and creditor relationship or was Sylcon a trustee for the plaintiffs in respect of the deposited money?

So far as the legal principles are concerned the starting point is Foley v. Hill (1848) 11 HLC 27. The issue in that case was whether the relationship between banker and customer was fiduciary, so as to give rise to a right to take an account in equity, or governed entirely by the common law. The Lord Chancellor, Lord Cottenham, said (at page 36):

"Money, when paid into a bank, ceases altogether to be the money of the principal (see Parker v. Marchant, 1 Phillips 360); it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the banker's, is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker's money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of banker, in other places. The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal, but he is of course answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands."

The same point was put succinctly by Channell J in Henry v. Hammond [1913] 2 KB 515 at page 521 when he said:

"It is clear that if the terms upon which the person receives the money are that he is bound to keep it separate, either in a bank or elsewhere, and to hand that money so kept as a separate fund to the person entitled to it, then he is a trustee of that money and must hand it over to the person who is his cestui que trust. If on the other hand he is not bound to keep the money separate, but is entitled to mix it with his own money and deal with it as he pleases, and when called upon to hand over an equivalent sum of money, then, in my opinion, he is not a trustee of the money, but merely a debtor."

The question of segregation of funds was further addressed by the Court of Appeal, Criminal Division, in R v. Clowes and another (No 2) [1994] 2 All ER 316 when Watkins LJ, giving the judgment of the court said, at page 325:

"As to segregation of funds, the effect of the authorities seems to be that a requirement to keep moneys separate is normally an indicator that they are impressed with a trust, and that the absence of such a requirement, if there are no other indicators of a trust, normally negatives it. The fact that a transaction contemplates the mingling of funds is, therefore, not necessarily fatal to a trust."

He went on to say (at page 326) that:

"the essential question is to determine, in all the circumstances of the transaction in question, not just the arrangements as to how the money is to be held, but whether it is held on trust."

Mr Browne-Wilkinson, on behalf of the plaintiffs, sought to argue, as the basis for some of the ways in which the plaintiffs put their claim against the Bank, that Sylcon was a trustee for the plaintiffs in respect of the money placed with it by the plaintiffs. He claimed that the trust relationship arose in one or other of three ways, namely (i) express trust; (ii) constructive trust arising by reason of Sylcon's illegal deposit taking; or (iii) constructive trust arising from Sylcon's fraud.

(i) Express trust

Mr Browne-Wilkinson's argument that Sylcon received the plaintiffs' money as trustee under an express trust was based upon the evidence as to what Mr Reuben, on behalf of Sylcon, said that Sylcon would do with their money. In essence the contention was that Sylcon took the plaintiffs' money on the basis that it would invest it on their behalf with the Bank on the money market.

Mr Browne-Wilkinson relied on the way in which a similar matter was approached by Peter Gibson J in Carreras Rothman Ltd v. Freeman Matthews Treasure Ltd [1985] 1 All ER 155. Having referred to Barclays Bank Ltd v. Quistclose Investments Ltd [1970] AC 567, and other cases, Peter Gibson J said (at page 165):

"In my judgment the principle in all these cases is that equity fastens on the conscience of the person who receives from another property transferred for a specific purpose only and not therefore for the recipient's own purposes, so that such person will not be permitted to treat the property as his own or to use it for other than the stated purpose. Most of the cases in this line are cases where there has been an agreement for consideration, so that in one sense each party has contributed to providing the property. But, if the common intention is that property is transferred for a specific purpose and not so as to become the property of the transferee, the transferee cannot keep the property if for any reason that purpose cannot be fulfilled."

The present case is not one where the suggested specific purpose (namely investment in the Bank on the money market) cannot be fulfilled, but I am quite content to ask myself whether the evidence shows that each of the plaintiffs deposited her money with Sylcon for a specific purpose.

So far as Mrs Brown is concerned, most of the evidence about what Mr Reuben said consists of assurances about how safe her money would be. The general tenor of such evidence is, in my view, that Mrs Brown would be investing in Sylcon at an advantageous rate of interest. The nearest that it comes to suggesting a common intention that Mrs Brown's money would be dealt with in a particular way is in Mr Brown's statement that he asked Mr Reuben where the money would be if he and Mrs Brown did decide to invest it with him and received the reply that it would be with Barclays Bank on the money market. But Mr Brown also said that at a later meeting Mr Reuben said that the money would 'initially' be deposited with Barclays Bank but that he would look for profitable deals and property.

As Mrs Brown's own understanding of the arrangement with Sylcon was derived entirely from what her husband told her, this evidence of Mr Brown must colour Mrs Brown's own rather bald statements of belief that her money was 'in Barclays' (Day 7, page 54 line 20, page 55 line 10). Moreover she knew perfectly well that her money was to be mixed with other money in the hands of Sylcon. She was attracted by the high rate of interest. She regarded herself as the customer of Sylcon, not the Bank. She received, without protest or question, regular statements of her account with Sylcon. Mr Brown thought that Mr Reuben, and thus presumably Sylcon, was engaged in 'investment banking' And in response to the questionnaire submitted by the Auerbach Hope Mrs Brown described the terms of her investment as 'Loan to the company repayable on demand.'

Looking at the evidence as a whole I find it impossible to conclude that there was a common intention on the part of Sylcon and Mrs Brown that Sylcon would hold the money deposited by Mrs Brown on trust for her. The view which I have formed is that Mrs Brown's statement of her belief that her money would be with the Bank on the money market, which would be at best only a weak indication in support of a trust, owes a great deal to rationalisation carried out in Mrs Brown's mind since Sylcon's collapse. It is in conflict with the other evidence I have mentioned I think that Mrs Brown's understanding when she placed her money with Sylcon is more faithfully represented by the answer which she gave to the Auerbach Hope questionnaire. Her action in proving as an unsecured creditor of Sylcon and the absence of any early suggestion that the Bank was liable to her are consistent with this and, in my judgment, support the view that she never supposed that she retained a proprietary interest in the money she had placed with Sylcon.

I turn to the case of Mrs Jacobs. In her evidence there were several references, which I have already set out, to statements which she claims to have been made to her to the effect that her money would be invested by Sylcon with Barclays. While these references are consistent with Sylcon being merely an agent for the investment of her money, they are in my view equally consistent with Mr Reuben making representations to her as to the manner in which Sylcon would invest what would have become its own money in order to explain to her how Sylcon could pay such advantageous rates of interest.

Moreover I have reached the conclusion that Mrs Jacobs is a witness whose evidence I must treat with a considerable measure of caution. She is evidently an intelligent woman with some knowledge of business matters. Yet if she is correct it is strange that she never raised any question about Sylcon's reference, in its letter to her of 13 April 1989, to her £10,000 being 'placed to the credit of your new account.' She also did not question the personal guarantee given by Mr Reuben, which would hardly have been appropriate if the £10,000 was to be invested in assets which would belong to her. It may, of course, be said that these are considerations which would only arise in the mind of lawyer and I give some credit for that. But her incorrect answer to the Bank of England to the effect that her account with Sylcon was not interest bearing cannot be excused on similar grounds. Nor can her failure, on repeated occasions in the earlier stages of the investigation of Sylcon, to mention the involvement of the Bank in the intended deployment of her money be reconciled with the emphatic attention she now seeks to give to this aspect.

I have formed the view that, in the case of Mrs Jacobs as in the case of Mrs Brown, the assertion that her money was to be invested with the Bank on the money market represents a later rationalisation, rather than a reliable account of what was understood and agreed with Mr Reuben. Even if this view of the matter were too harsh, the fact remains that what is claimed to have been said is at best equivocal. I reject the claim that Sylcon accepted an express trusteeship in relation to Mrs Jacobs.

Turning to the case of Mrs Box, her evidence is, to my mind, wholly insufficient to substantiate the existence of an express trust. The only part of such evidence which is directly material is that which I have already quoted. Her statement that Mr Reuben told her that her money would go into Barclays Bank is at best equivocal. The later statement that Mr Reuben did not tell her exactly what he invested the money in but that she had heard that he bought property is, in my view, an indication contrary to the creation of a trust rather than in favour of it. The same goes for her earlier statement that she decided that she would put her money with Sylcon Finance.

I therefore find that no express trust came into existence between any of the plaintiffs and Sylcon. I would add that this conclusion is consistent with the provisions of the Banking Act 1987 on which the plaintiffs rely for other aspects of their case. The starting point of each plaintiff's case is that Sylcon carried on an unlawful deposit-taking business and received as deposits taken in the course of that business the money which each of the plaintiffs seeks to recover in these proceedings. But in the absence of special arrangements of a most specific kind I find it difficult to understand how money which is held in trust can be said to be received by way of deposit in the course of a deposit-taking business.

(ii) Constructive trust arising from illegal deposit-taking

The consideration of this argument must start from an examination of the relevant statutory provisions.

Deposit taking is now regulated by Pt I of the Banking Act 1987, which replaced an earlier regime of control under the Banking Act 1979. (Sylcon was in business before the relevant provisions of the 1987 Act came into force, but it was not suggested that anything in the earlier regime is directly relevant to this case.)

The relevant provisions of the 1987 Act are ss 3 to 6. Section 3 provides as follows:

"3... Restriction on acceptance of deposits

(1) Subject to section 4 below, no person shall in the United Kingdom accept a deposit in the course of carrying on (whether there or elsewhere) a business which for the purpose of this Act is a deposit-taking business unless that person is an institution for the time being authorised by the Bank under the following provisions of this Part of this Act.

(2) Any person who contravenes this section shall be guilty of an offence and liable:

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both;

(b) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both. (3) The fact that a deposit has been taken in contravention of this section shall not affect any civil liability arising in respect of the deposit or the money deposited.

Section 4 contains exemptions for certain persons and transactions, none of which is applicable here. The term 'deposit' is defined in Section 5, subsection (1) of which is in the following terms:

"(1) Subject to the provisions of this section, in this Act 'deposit' means a sum of money paid on terms

(a) under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it; and

(b) which are not referable to the provision of property or services or the giving of security; and references in this Act to money deposited and to the making of a deposit shall be construed accordingly."

The other subsections elaborate on this definition in ways which are not material for present purposes save to note that subsection (2) sets out conditions which must be satisfied if money is to be said to be paid on terms which are referable to the provision of property or services or the giving of security. Section 6 defines what is meant by a deposit-taking business. It is unnecessary for me to set out any part of it beyond s 6(1) which provides:

"(1) Subject to the provisions of this section, a business is a deposit-taking business for the purposes of this Act if:

(a) in the course of the business money received by way of deposit is lent to others, or (b) any other activity of the business is financed, wholly or to any material extent, out of the capital of or the interest on money received by way of deposit."

It is accepted on both sides in this action that Sylcon was at all material times carrying on a deposit-taking business and that the moneys placed with Sylcon by the plaintiffs were received by Sylcon in the course of that business. In accepting that this was so the Bank made it clear that it made no admission as to whether or when it knew or ought to have known of these facts.

Mr Browne-Wilkinson argued that in these circumstances the contracts of deposit were affected by illegality, and that, on authority, equity would impose a constructive trust so as to enable the plaintiffs to recover their money. He said that there is a principle under which, where money passes under an illegal transaction in relation to which the recipient of the money is at fault to a greater degree than the payer, equity will give the payer a right to recover his money. This right, being equitable, will bind successors in title to the original recipient unless they take in good faith and for value and without notice of it.

In support of this argument Mr Browne-Wilkinson referred me to four decisions of Lord Mansfield in the eighteenth century. These were Moses v. Macferlan (1760) 2 Burr 1005; Clarke v. Shee (1774) 2 Cowp. 197; Browning v. Morris (1778) 2 Cowp. 790; and Smith v. Bromley, reported as part of the decision in another case at 2 Dougl. 696. I do not think that I need to do more in relation to these authorities than to cite from the judgment of Lord Mansfield in Moses v. Macferlan, when he said (at page 1012):

"This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies only for money which, ex aequo et bono, the defendant ought to refund: it does not lie for money paid by the plaintiff, which is claimed of him as payable in point of honour and honesty, although it could not have been recovered from him by any course of law; as in payment of a debt barred by the Statute of Limitations, or contracted during his infancy, or to the extent of principal and legal interest upon an usurious contract, or for money fairly lost at play; because in all these cases, the defendant may retain it with a safe conscience, though by positive law he was barred from recovering. But it lies for money paid by mistake; or upon a consideration which happens to fail: or for money got through imposition, (express or implied;) or exhortation; or oppression: or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money."

That principle was applied by Parker J in Lodge v. National Union [1907] 1 Ch 300, where a borrower who had given security to an unregistered money lender was held to be entitled to recover that security, but only on terms that he repaid the money which he had borrowed.

It is notable, however, that in all of the eighteenth century cases the plaintiff either had no right to recover without resort to the principle declared by Lord Mansfield or was in a position where any contract on which he might have sued was tainted by illegality and, unless the principle be applied, unenforceable.

In the cases with which I am concerned, however, it is clear that the illegal taking of deposits by Sylcon does not vitiate the contracts between depositor and Sylcon. This is the result of s 3(3) of the Banking Act, under which this fact is 'not to affect any civil liability arising in respect of the deposit or the money deposited.' Mr Browne-Wilkinson argued that the effect of s 3(3) is neutral so far as his trust claim is concerned. He admitted that the Section neutralises a possible defence of illegality in respect of a claim in contract, but it leaves untouched the alternative claim in equity.

I cannot accept this argument. In my view illegality consisting of the taking of deposits by a person who conducts an unlicensed deposit-taking business constitutes a special form of illegality which does not bring in its train the ordinary consequences of illegality at common law. This is achieved by means of s 3(3). That subsection leaves the ordinary contractual remedies of the depositor intact. It is unnecessary in these circumstances to seek an alternative remedy in equity. Indeed to do so would go against the very terms of s 3(3). It is not suggested that there would be a remedy in equity were it not for the illegality consisting of the contravention of s 3(1). But if that contravention gives rise to an equitable remedy where none would otherwise exist this would 'affect' the civil liability arising in respect of the deposit by giving the new remedy. Section 3(3) expressly negatives this.

This view accords with the decision of the Court of Appeal in SCF Finance Ltd v. Masri [1987] 1 QB 1002. While that was a decision on the provisions of the Banking Act 1979, which in some respects are very different from those of the Banking Act 1987 with which I am concerned, those provisions included (in s 1(1)) a prohibition similar in substance to that imposed by s 3(1) of the 1987 Act and (in s 1(8)) a provision which is indistinguishable from s 3(3) of the 1987 Act. The Court of Appeal had no difficulty in construing s 1(8) literally.

I therefore reject the argument that Sylcon held the money placed with it by the plaintiffs on a trust arising from the fact, which I accept, that Sylcon accepted that money in the course of carrying on an illegal deposit-taking business.

(iii) Constructive trust arising from Sylcon's fraud

The claim that such a trust arose involves two principal questions, namely whether Sylcon did obtain the plaintiffs, money by fraud, and, if so, whether this fact made Sylcon a trustee. If these questions were to be answered in favour of the plaintiffs a third question would arise, namely whether the Bank was bound by any such trust.

The basis on which the plaintiffs assert that Sylcon obtained their money by fraud is set out in voluntary further and better particulars which were served a short while before the trial began. Three heads of fraud are alleged. These are:

(a) an implied representation by Mr Reuben to each of the plaintiffs that Sylcon was entitled and authorised to take deposits, when Mr Reuben knew that Sylcon was not so entitled or authorised or was reckless whether it was or was not so entitled or authorised;

(b) fraudulent representations alleged to have been made by Mr Reuben to each of the plaintiffs individually;

(c) a claim that in accepting the plaintiffs deposits Sylcon and Mr Reuben were trading fraudulently in that Sylcon had insufficient assets to enable the plaintiffs to be repaid.

As to the first head, the material relied upon as justifying the implication of the alleged representation was, in my view, extremely slender. It consists of little more than Mr Reuben's reference to opening a 'current account' or a 'deposit account' and, in the case of Mrs Brown, the provision of a paying-in book. Moreover although each of the plaintiffs was content to subscribe to a supplemental witness statement asserting (in identical words in each case) that when she deposited money with Sylcon she believed that Sylcon and Mr Reuben 'were acting in accordance with the law and held any licences and authorisations that were required' this evidence, unsupported by any circumstantial detail, seems to me to be inherently improbable and I decline to accept it literally. I think the truth is that none of the plaintiffs addressed her mind to whether any licence was required or held and that none of them made any assumption about the matter.

There is also Mr Reuben's state of mind to be considered. He, of course, is now dead and the allegations of fraud could not be put to him. One has to rely on such other material as is available to show what Mr Reuben knew. I am certainly not satisfied that this supports the view that Mr Reuben was aware that Sylcon was carrying on an unlawful deposit-taking business at any time before the last of the deposits with which I am concerned (that of Mrs Box made on 2 March 1992). Indeed the way in which Mr Reuben, in a letter of 24 August 1992 the substance of which was confirmed by Sylcon's solicitor, resisted the suggestion that Sylcon was an unlicensed deposit-taker indicates that Mr Reuben did not, even at that date, believe it to be the case. His belief was no doubt mistaken, but I am not satisfied that it was not genuine.

The material relied upon under the second head has to be considered separately in relation to each of the plaintiffs.

As to Mrs Brown, no representations were made to her directly. In my view she can, at best, rely only on the representations made by Mr Reuben to her husband. These were:

(i) That money invested with Sylcon would be with Barclays Bank on the money market. The statement that the money would be with Barclays Bank was a statement as to future intentions and was true up to a point. As I have indicated, I am not prepared to accept that Mr Reuben said anything to suggest that the money would be with the Bank in a form which preserved it as Mrs Brown's money rather than Sylcon's. Without such a suggestion a statement that it would be on the money market did not to my mind, add anything of significance.

(ii) That the money was as safe as the Bank of England; that it was 1000% secure; and that Mr Reuben had millions of pounds invested with Barclays himself. These statements, if made as alleged, cannot in my view have been regarded by Mrs Brown as anything more than 'puff.' She cannot have supposed that her money was really as sage as if it had been with the Bank of England. The assertion that it was '1000%' safe was no more than an emphatic statement of opinion. The reference to Mr Reuben having millions of his own money invested in Barclays is, in my view, nothing more than an imprecise boast of no real relevance. It probably meant no more than that Mr Reuben (or Sylcon) had large sums to the credit of one or more accounts at Barclays. If this is so, it was not a representation which was relevant to the degree of security which Mrs Brown would enjoy, since the solvency of the Bank is unquestionable.

(iii) That Mrs Brown's money would be safe and that, whenever she needed it, it would returned. This appears to me to be a milder version of the assurances as to security considered under (ii).

In the case of Mrs Jacobs the representations said to have been made were

(i) On 13 April the assertion by Mr Reuben that Sylcon would invest her money on her behalf with Barclays.

(ii) On 22 May 1991 the assertion by Mr Reuben that the money she was investing would go into the Barclays Bank Oxford Circus Branch and that he could arrange a meeting with Mr Adamson, the manager.

(iii) Shortly before 22 May 1991 the statement by Mr Reuben that he had millions of pounds invested with Barclays and that Mrs Jacobs could not use a safer institution.

(iv) On 22 May 1991 the statement by Mr Reuben that Mrs Jacob's deposit would be put with other moneys on the money market, which was how he was able to offer a higher rate of interest.

(v) In October 1992 a statement by Mr Reuben to Mrs Jacobs that her capital was '2000% guaranteed.'

Items (iii) and (v) are, in my view, of the same character as item (ii) in the representations said to have been made to Mrs Brown. As I have indicated, I find that no representation was made about investing Mrs Jacob's money 'on her behalf' with Barclays. Without that element, a representation that her money would go into Barclays was substantially true, as was item (ii) in the summarised representations. As to item (iv), the statement that Mrs Jacobs' money would be 'put with other moneys' is true. The nub of the representations, if it has one, must lie in the statement that it would be put on the money market. This is a somewhat vague concept and, unless it carries with it some implication that the money would continue to belong to Mrs Jacobs (which is difficult to reconcile with the concept of mixing with other people's money and other features of the transactions already considered) says nothing about the security that Mrs Jacobs would enjoy.

I also agree with Mr Malek that, in relation to her first deposit Mrs Jacobs did not rely on whatever representations were made to her by Mr Reuben on 13 April 1991. The decision to invest her money with Sylcon had already been made before Mrs Jacobs saw Mr Reuben on that date. She had drawn money out of her building society account and took it with her with the intention of paying it to Sylcon, which she duly did.

The representations relied upon by Mrs Box were first that Mr Reuben told her that her money would go into Barclays Bank and secondly that he told her that he would take care of her and that she had nothing to worry about. The first of these was a statement of intention which was carried out, albeit not in the way that Mrs Box now claims that she had envisaged. The second constituted, in my view, mere words of comfort or reassurance, not capable of being regarded as false representations giving rise to a claim in fraud even if, which was not established, Mr Reuben did not genuinely believe what he said.

Turning to the third head, based upon the claim that Sylcon was trading fraudulently and had insufficient assets to enable the plaintiffs to be repaid, this was not, in my view, made out on the evidence. Such fraudulent trading would only be relevant if it could be said to be carried on at the date of each deposit. The evidence as to Sylcon's financial position which was before me showed only (a) that Sylcon was gravely insolvent when it went into liquidation in 1992; (b) the major contributing factors in that insolvency were large amounts in unpaid tax and exceptionally high costs incurred in the liquidation and in the previous proceedings taken by the Bank of England; (c) that at all times between the date of the sale of the Mortimer Street property and the intervention of the Bank of England Sylcon had a strong position at the Bank in that the amounts standing to the credit of its accounts which were in credit were substantially greater than the debit balance on the overdrawn No.1 account. On this evidence I cannot find that Sylcon was trading fraudulently in the sense alleged.

The result of this examination of the three heads of fraud relied upon by the plaintiffs is that I am far from being convinced that Sylcon was guilty of fraud. An allegation of fraud is, of course, a most serious one requiring proof by convincing evidence. I do not find it to be made good here.

That conclusion strictly makes it unnecessary for me to consider whether, if I had found that Sylcon obtained the plaintiffs' money by fraud, the result would have been to constitute Sylcon a trustee in respect of that money. But I heard a good deal of argument on the point and I think I should express my views on it.

Mr Browne-Wilkinson's argument was that where money or other property is obtained by fraud the fraudsman is to be treated as constructive trustee of that money or property for the person defrauded. He contended that this is either an invariable rule applicable to all such cases or a rule which is applicable in all cases in which the recipient of the money or property cannot in good conscience retain it. If the rule is of the latter nature then he submitted that the facts of these cases are such that Sylcon was not entitled in good conscience to retain the plaintiffs' money.

In support of this argument Mr Browne-Wilkinson relied on three authorities. These were Westdeutsche Landesbank v. Islington LBC [1996] AC 669; Nesté Oy v. Lloyds Bank plc (The "Tiiskeri", "Nestegas" And "Enskeri") [1983] 2 Lloyd's Rep 658; and a statement of Lord Westbury in McCormick v. Grogan (1869) LR 4 HL 82.

In the Westdeutsche case a principal issue was whether money paid under a contract which was void by reason of being beyond the powers of the recipient of money paid under the contract was held by the recipient in trust for the payer. It was not, therefore, a case where the contract was induced by fraud and so voidable rather than void. Nevertheless Lord Browne-Wilkinson, in the course of explaining why he reached the conclusion that the recipient was not a trustee considered the position of a thief who steals a bag of coins which are then dealt with in such a way as to cease to be traceable at common law. In the passage relied upon Lord Browne-Wilkinson said (at page 716):

"I agree that the stolen moneys are traceable in equity. But the proprietary interest which equity is enforcing in such circumstances arises under a constructive, not a resulting, trust. Although it is difficult to find clear authority for the proposition, when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity."

Nesté Oy was also not a case involving fraud. It concerned a number of payments made by shipowners to their commercial agents for the purpose of paying port dues and other liabilities incurred on behalf of the shipowners. The agents became insolvent without discharging these liabilities and the question was whether they held the payments which had been made to them on trust for the shipowners. Bingham J held that in respect of the first five payments there was no trust, but that in all the circumstances the sixth payment was held in trust. The precise facts which led to this conclusion do not matter for present purposes. The principle on which Bingham J relied for his conclusion that those facts gave rise to a trust appears from pages 665-666 of the report. In particular he adopted a passage from Story's Equity which had been accepted by Goulding J in Chase Manhattan Bank NA v. Israel British Bank (London) Ltd [1981] Ch 105, as correctly stating the law of England. The most important part of that passage was as follows:

"1255. One of the most common cases in which a Court of Equity acts upon the ground of implied trust in invitum, is where a party has received money which he cannot conscientiously withhold from another party. It has been well remarked, that the receiving of money which consistently with conscience cannot be retained is, in Equity, sufficient to raise a trust in favour of the party for whom or on whose account it was received. This is the governing principle in all such cases. And therefore, whenever any controversy arises, the true question is, not whether money has been received by a party of which he could not have compelled the payment, but whether he can now, with a safe conscience, ex aequo et bono, retain it."

Mr Browne-Wilkinson urged upon me the view that a person who has obtained money by fraud clearly cannot in good conscience retain it, with the consequence that, in accordance with the principle stated by Story, he holds it on trust. However in the Westdeutsche case Lord Browne-Wilkinson at pages 714-715 disapproved of the reasoning in Chase Manhattan on various grounds, including the acceptance of the principles of New York law as representing also English law, which he held it does not. The argument which was presented to me was, in substance, an argument for the adoption in English law of a remedial, as distinct from institutional, resulting trust. At page 716 Lord Browne-Wilkinson made it clear that a remedial constructive trust is not at present part of English law. If it were to be adopted careful consideration would need to be given to the protection of innocent third parties. Having regard to this criticism I think it would now be dangerous to rely upon a principle of the kind applied by Bingham J in the Nesté Oy case.

The statement of Lord Westbury from which Mr Browne-Wilkinson sought to obtain assistance comes from McCormick v. Grogan (1869) LR 4 HL 82 at page 97. That case, being one where it was alleged that the property bequeathed by a testator was held by the legatee on a secret trust, was of a very different nature from the present. What Lord Westbury said was:

"the jurisdiction which is invoked here by the appellant is founded altogether on personal fraud. It is a jurisdiction by which a court of equity, proceeding on the ground of fraud, converts the party who has committed it into a trustee for the party who is injured by that fraud."

However a suggestion that that statement is applicable to the facts of the present case is, in my judgment, met by the answer given by the Court of Appeal to a similar suggestion in Halifax Building Society v. Thomas [1996] Ch 217. There Peter Gibson LJ, with whose judgment the other members of the Court agreed, quoted Lord Westbury's statement and continued:

"But that statement must be read in the context in which it was made, namely the jurisdiction where a secret trust is alleged. It cannot be elevated into a universal principle that wherever there is personal fraud the fraudster will become a trustee for the party injured by the fraud."

In his answer to Mr Browne-Wilkinson's contentions Mr Malek, on behalf of the Bank, pointed out that, even assuming in favour of the plaintiffs that they were induced to make their deposits by the fraud of Sylcon, the contracts of deposit were not void from the beginning, as was the contract in the Westdeutsche case, but merely voidable. Mr Malek relied upon the fact that the plaintiffs had never sought to avoid these contracts. On the contrary they had, if anything, affirmed them by proving as unsecured creditors of Sylcon, not as beneficiaries under a trust of which Sylcon was trustee. I do not find it necessary to express a firm conclusion about affirmation, but I regard it as clear that the contracts of deposit have not been rescinded by any of the plaintiffs.

Building upon the factual position Mr Malek contended that the argument that a constructive trust arose from Sylcon's fraud is contrary to authority. He referred me first to the decision of Millett J in Lonrho plc v. Fayed (No.2) [1992] 1 WLR 1, where it was said (at pages 11-12):

"A contract obtained by fraudulent misrepresentation is voidable, not void, even in equity. The representee may elect to avoid it, but until he does so the representor is not a constructive trustee of the property transferred pursuant to the contract, and no fiduciary relationship exists between him and the representee: see Daly v. Sydney Stock Exchange Ltd (1986) 160 CLR 371, 387-390, per Brennan J."

Mr Browne-Wilkinson referred me to Daly's case and submitted that it does not really support the statement of Millett J, but I consider that it does (see particularly 160 CLR at 389).

The same reasoning underlies the remarks of Millett LJ in El Ajou v. Dollar Land Holdings plc [1993] 3 All ER 717, at page 734, concerning the rights of persons other than the actual plaintiff in that case. It is also inherent in the reasoning of the Court of Appeal in Halifax Building Society v. Thomas [1996] Ch 217, at pages 227-228, where attention was drawn on more than one occasion to the fact that the building society had not attempted to set aside the mortgage Likewise it is consistent with the analysis made by the Privy Council, in Re Goldcorp Exchange Ltd [1995] 1 AC 74 at pages 101-103, of the position which results where money is paid under a contract induced by misrepresentation.

To revert briefly to the authorities relied upon by the plaintiffs, the passages in the Nesté Oy and McCormick v. Grogan are, in my judgment, unreliable for the reasons which I have endeavoured to state. The observation of Lord Browne-Wilkinson in the Westdeutsche case only assists the plaintiffs if it is to be treated as a general statement of the law applicable to all cases of fraud. In my view it would be wrong so to treat it. It was a general statement of certain underlying principles instanced by examples two of which concerned transactions which are void, not voidable, and the third of which comes from the field of secret trusts where 'fraud' is referred to in a special sense. I do not think that Lord Browne-Wilkinson can be taken to have been laying down a principle applicable to all cases of fraud when he did not deal with the reasoning in the other cases which I have mentioned.

Accordingly, even if I had found that the plaintiffs were induced by fraud to deposit their money with Sylcon I would not be prepared to conclude that Sylcon thereby became a trustee of such money for the plaintiffs.

Having thus considered, perhaps at undue length, the various grounds on which it was contended for the plaintiffs that the relationship between them and Sylcon was that of trustee and beneficiary, I reject all these grounds and conclude that the relationship between the plaintiffs and Sylcon was contractual only. It does not appear to me that this conclusion involves any injustice to the plaintiffs. Under their contracts with Sylcon the plaintiffs were fully entitled to recover from Sylcon the amounts they had deposited and any interest which Sylcon had agreed to pay them. Their arguments in favour of a trust, if correct, would not give them any rights against Sylcon itself which, in practical terms, are larger than those which they enjoy under their contracts. The argument that Sylcon was a trustee is in reality, directed towards achieving a position under which the plaintiffs are compensated for their misfortune at the expense of third parties (for example unsecured creditors of Sylcon or, as in the actions before me, the Bank) which had dealings with Sylcon.

Having dealt with these matters at some length I can, I think, address rather more shortly the specific grounds on which the plaintiffs seek to recover their losses from the Bank.

(1) Tracing at common law/ Money had and received

This way of putting the plaintiffs' case was founded upon the by now well-known decision of the House of Lords in Lipkin Gorman (A Firm) v. Karpnale Ltd [1991] 2 AC 548. In that case an individual named Cass, a partner in the plaintiff firm of solicitors, was a compulsive gambler. In order to finance his gambling addiction he used his position as a partner to sign cheques drawn on the solicitors, client account and payable to cash. Having drawn out the cash in this way he paid it to the defendant, the proprietor of a gambling club The solicitors sought to recover from the club so much of the money paid to the club as had been lost by Cass in gambling. It was held that the solicitors were entitled to succeed. The starting point was that the solicitors had a legal chose in action in the form of their right to compel their bank to pay them the amount standing to the credit of their client account with the bank. To the extent of the drawings made by Cass this legal chose in action then became represented by another item of property, namely the cash paid out by the bank to Cass. This property then passed to the club when Cass paid over the cash. The solicitors were thus able to show that property to which they had a legal title had come into the hands of the club. The House of Lords rejected the club's arguments that it had given valuable consideration and, to the extent of Cass's net gambling losses, that it had changed its position in good faith in reliance upon the belief that it was entitled to retain the money.

A number of points arise from this decision. First a claim made on the basis upheld in that case is exclusively a common law claim. It is essential, therefore, that the plaintiff shall be able to show that the property which has come into the hands of the defendant is, or represents by the application of common law rules of tracing, property to which the plaintiff had a legal title. It will not suffice for the plaintiff to claim that he had an equitable title to the property, or that he can trace his property into that which has come into the hands of the defendant by the application of equitable rules of tracing. Secondly, although the right to recover depends upon the plaintiff showing the requisite proprietary interest at the outset of the transaction, that right will not be defeated by showing that the defendant no longer has the plaintiff's property (unless he has parted with it in circumstances enabling him to take advantage of the defence of change of position) or that he has mixed it with other property in such a way that it can no longer be identified. Thirdly the defendant must have received the plaintiff's property for its own benefit. Fourthly it will be a defence if the defendant can show that it was a bone fide purchaser for value.

It follows from the fact that this form of claim is a common law claim, not an equitable one, and that the plaintiffs, if they are to succeed, must show that they had a legal title, that my rejection of the plaintiffs' argument that Sylcon was a trustee for them does not, by itself, injure this way of putting the plaintiffs' case.

The question whether the plaintiffs can show that the Bank has received for its own benefit what, for present purposes I will loosely refer to as 'their money', is one of somewhat greater difficulty. There is no doubt that what Sylcon received from, or on behalf, of the plaintiffs was paid into the No.1 account at the Oxford Street branch of the Bank. But the fact that a bank receives or collects money for its customers is not by itself sufficient to establish that the bank has received the money beneficially. In Agip v. Jackson [1990] 1 Ch 265, Millett considered the position in relation to an equitable tracing claim. For that purpose he distinguished two main classes of case, the first being where a person receives for his own benefit property transferred to him in breach of trust and the second being where a person, such as an agent of the trustees receives trust property lawfully and not for his own benefit but then misappropriates it. He went on ([1990] 1 Ch at page 292):

"The essential feature of the first class is that the recipient must have received the property for his own use and benefit. This is why neither the paying nor the collecting bank can normally be brought within it. In paying or collecting money for a customer the bank acts only as his agent. It is otherwise, however, if the collecting bank uses the money to reduce or discharge the customer's overdraft. In doing so it receives the money for its own benefit."

In the present case Sylcon's No.1 account was overdrawn at all material times. But at all times after the sale of the Mortimer Street property in 1989 the Bank owed more to Sylcon on its accounts which were in credit than Sylcon owed the Bank in respect of its overdraft on the No.1 account. Hence although money paid into the No.1 account went to reduce the overdraft on that account, thus appearing to be received by the Bank for its own benefit within the principle stated by Millett J, the effect of the payment in to the No.1 account was to increase the amount which the Bank owed to Sylcon. Mr Malek argued that it would not be right to regard this as receipt of the money by the Bank for its own benefit. It was equivalent to paying the money into an account which was in credit, the only relevant act of the Bank being to process the payment in and, where it was made in the form of a cheque, to collect payment of the cheque.

This is an attractive argument but I do not think that it is correct. I consider that the overdrawn account must be looked at in isolation. If the overdraft on a bank account stands at £100,000 and £10,000 is paid in, then the bank, having previously been a creditor for £100,000 has become a creditor for only £90,000 because it has been repaid to the extent of the £10,000. I do not think that it matters that, in respect of a separate account, the bank is a debtor to the same customer for, say, £500,000 which stands to the credit of that account. The only connection between Sylcon's various accounts in this case was that the Bank had (as I assume, although the details were not explored in this case) a right to set off the amount which it was owed on an overdrawn account against what it was owed on an account which was in credit. The reduction of the debit balance on the No.1 account which resulted from the payment-in of money obtained by Sylcon from one of the plaintiffs was a true reduction, arising from the receipt by the Bank for its own benefit of the amount paid in to the No.1 account, notwithstanding that the Bank was not at risk of loss because of its right of set-off.

Where the plaintiffs' claim based on a common law right to recover money had and received breaks down is, in my judgment, that the plaintiffs cannot show that what came in to Sylcon's No.1 account was their money at the time when it reached that account. This can be illustrated by reference to the first deposit made by Mrs Jacobs. This was the cash sum of £10,000 which Mrs Jacobs withdrew from her building society account. There is no doubt that Mrs Jacobs had a legal title to this cash. But she then paid it over to Mr Reuben who received it on behalf of Sylcon on the terms of what I have held to be a contractual deposit. The cash then became Sylcon's property. Mrs Jacobs obtained in return for it contractual rights against Sylcon. No doubt these rights constituted a legal, not an equitable, chose in action vested in the Mrs Jacobs, but it was not this item of property which reached the hands of the Bank. What the Bank received was the cash. But when the Bank received it the cash was Sylcon's property, not Mrs Jacobs'. The facts of her case are thus distinguishable in a vital respect from those of Lipkin Gorman, where on the facts the House of Lords accepted that the solicitors had a legal right to the cash which Cass paid to the gambling club at the time when it was paid over.

The same general analysis is, in my view, equally applicable to the two later sums credited to Mrs Jacobs' account with Sylcon, namely the £3,000 deposited by her father and the £35,000 which represented part of the cheque for £74,375 drawn by a Swiss bank in favour of Mrs Joseph. In these instances it seems doubtful whether Mrs Jacobs herself ever had a legal title to the money, the legal title being transferred direct to Sylcon in the first case by her father and in the second case by her mother. But even if she is to be regarded as having had such a title to the money she exchanged it for contractual rights against Sylcon and the money paid in to the No.1 account was Sylcon's, not hers. I agree with Mr Malek that there is no difference in principle between payments made to Sylcon in cash and payments made to Sylcon by means of a cheque. Accordingly the payments by cheque which were made to Sylcon by Mrs Brown and Mrs Box (in the case of the latter by means of a cheque drawn by her solicitor) produced an equivalent result.

Mr Malek also made a number of submissions all of which, as it seemed to me, were supportive of a general proposition that, even if the Bank had received what was in law the plaintiffs' money, it was not thereby unjustly enriched. Thus Mr Malek again made the point that in all cases except perhaps that of Mrs Brown, who paid her money to Sylcon before the Mortimer Street property was sold and thus at a time when Sylcon may have been an overall debtor to the Bank, the receipt of money into the No.1 account increased the total sum which the Bank owed to Sylcon. The Bank was not therefore enriched. If it was then Mr Malek argued that such enrichment was not unjust because the plaintiffs had received consideration in the form of Sylcon's contractual obligations. Further the Bank had itself given consideration, albeit to Sylcon rather than to the plaintiffs, because of the reduction in the overdraft on the No.1 account which resulted from the payment of new money into that account.

I think that these arguments have considerable substance, but it is not altogether easy to appraise them in the light of my earlier conclusion that what reached the Bank was Sylcon's money, not the plaintiffs'. It is on the basis of that conclusion that I reject the plaintiffs' claim that they are entitled to succeed against the Bank in a common law claim for money had and received.

(2) Equitable Tracing

Mr Browne-Wilkinson argued that, even if the plaintiff cannot succeed in a common law claim for money had and received, they can trace their money in equity into Sylcon's No.1 account and are entitled to recover it from the Bank unless the Bank is able to show that it had no knowledge of the plaintiffs' rights. He referred me to the succinct statement of Millett J in Agip (Africa) Ltd v. Jackson [1990] 1 Ch 265, at page 290:

"The tracing claim in equity gives rise to a proprietary remedy which depends on the continued existence of the trust property in the hands of the defendant. Unless he is a bone fide purchaser for value without notice, he must restore the trust property to its rightful owner if he still has it. But even a volunteer who has received trust property cannot be made subject to a personal liability to account for it as a constructive trustee if he has parted with it without having previously acquired some knowledge of the existence of the trust."

The Bank cannot, he contended, claim that it has parted with the plaintiffs' property because, in accordance with the rule in Re Hallett's Estate (1880) 13 Ch 696 it is to be deemed to have used its own money, not the plaintiffs', in making whatever payments have been made and debited to Sylcon's account.

This argument cannot prevail in the light of my earlier conclusion that the relationship between the plaintiffs and Sylcon was purely contractual, not that of trustee and beneficiary. Equitable tracing is only available where there is an equity to trace, which requires that there must be an initial fiduciary relationship between the person claiming to trace and the party who is said to have misapplied that person's money (see Snell's Equity, 29th edition, page 302 and Agip, supra, at page 290).

That by itself is a complete answer to the claim to trace in equity. But there is another equally complete answer, namely that it is impossible to trace in equity through an overdrawn account (see Re Goldcorp Exchange Ltd (in receivership), [1995] 1 AC 74 at pages 104-105; the Westdeutsche case [1996] AC 669 at page 105 G-H; and - most explicitly - Bishopsgate Investment Management Ltd v. Homan [1995] Ch 211, particularly at pages 220 F-H and 222 D-F). It is not necessary in these circumstances to consider whether or not the Bank had notice of the plaintiffs' rights. There were no relevant rights for the Bank to have notice of. I will, however, address the general question of the Bank's knowledge at a later stage.

(3) Knowing receipt

In the context of this case there are three main ingredients in this way of putting the plaintiffs' claim. First it has to be shown that what the Bank received was money which was held by Sylcon in trust for one of the plaintiffs. Secondly the plaintiffs must establish that the Bank knew that the money was trust property. Thirdly the Bank must either have known that the money was paid to it in breach of trust or it must itself have dealt with the money in a manner inconsistent with the trust.

As to the first of these matters, it would not generally matter how the trust came into existence. But the pleadings in the three cases before me are such that the plaintiffs have, so far as this claim is concerned, limited themselves to alleging that the Bank had notice only of a trust arising from Sylcon's illegal deposit-taking. This is because paragraph 7 of each Statement of Claim, in which the Bank's knowledge is alleged, it is said only that the Bank knew or should have known that Sylcon was carrying on the business of deposit-taking, that it was not authorised to do so and that moneys received by Sylcon from its customers were being paid into Sylcon's account at the Bank. There is no allegation that the Bank knew or ought to have known of facts giving rise to the contentions in respect of express trust or trust arising from fraud which I have previously dealt with.

After attention had been drawn to this limitation in the pleadings Mr Browne-Wilkinson applied, on the fifth day of the trial, for leave to make further amendments to the Statement of Claim. So far as material to the present point the amendments would have alleged that the Bank knew or should have known that each plaintiff's money was held on an express or resulting trust arising in each of the three ways which I have evaluated. It appeared to me that such amendments would present the Bank with a greatly enlarged claim that it could not be expected to deal with except after an adjournment of significant duration and that in all the circumstances it was not just to allow the plaintiffs' claims to be extended in this way. I therefore refused leave to make these amendments, although I granted leave to make some other amendments which were not objected to.

I mention these matters largely for the sake of completeness and so as to describe accurately the claim which I am now dealing with. In truth, however, the matter is now of historical interest only. Having regard to my decision on earlier matters the plaintiffs cannot succeed in their claim based upon knowing receipt because there was no trust and the first essential ingredient of such a claim is not present. This would have been the result even if I had allowed the amendments which were proposed.

It is not necessary, therefore, to deal with the Bank's knowledge although, as I have already mentioned, I will say something about this later.

(4) Negligence

This way of putting the case is, of course, very different from any that I have hitherto considered. It encounters a substantial difficulty at the outset, namely that of defining the relevant duty of care. In paragraph 10 of each Statement of Claim it is alleged merely that:

"the [Bank] owed to the plaintiff as a depositor with Sylcon, a duty of care in tort."

The nature of the duty appears, so far as it appears at all, only from the matters alleged in paragraph 11 of each Statement of Claim to constitute breaches of the duty. In essence these amount to complaints of the Bank's failure to inform the Bank of England that Sylcon was carrying on an unauthorised deposit-taking business and its failure to take steps to ensure that Sylcon did not continue to carry on such a business without authorisation. The duty is thus one which, if it existed, required the Bank to take positive steps, not merely to refrain from taking certain harmful steps.

Mr Browne-Wilkinson's argument was that if the Bank knew that Sylcon was carrying on an unlawful deposit-taking business and was acting as Sylcon's agent in collecting the proceeds of cheques drawn by depositors in favour of Sylcon it must have been foreseeable by the Bank that those depositors might suffer loss. The purpose of the requirement that deposit-takers shall obtain authority from the Bank of England is to exclude from that business unscrupulous or unreliable organisations, which Sylcon turned out to be. Mr Browne-Wilkinson also submitted that there was sufficient proximity between the Bank and depositors, at least in cases where the Bank collected a depositor's cheque. As to general considerations of justice and reasonableness, Mr Browne-Wilkinson submitted that there would be no injustice in holding the Bank liable On the contrary, he suggested, the law would be deficient if it left the plaintiffs without a remedy.

The plaintiffs' case in negligence does not appear to me to fall within any established category in which a duty of care has previously been held to exist. This, of course, is not by itself fatal to the claim but if, as I think they are, the plaintiffs are seeking to establish that a duty of care exists in circumstances of a novel kind they have to show that this can be done by means of the process of incremental reasoning favoured by Lord Bridge in Caparo plc v. Dickman [1990] 2 AC 605, particularly at page 618. Moreover since that case was decided the tendency has been to emphasise the importance of establishing that the defendant has in some way assumed responsibility for the plaintiff (see Henderson and others v. Merrett Syndicates Ltd and others [1995] 2 AC 145, at pages 178-181 of the former report; White v. Jones [1995] 2 AC 207; Peach Publishing Ltd v. Slater & Co, unreported, Court of Appeal, 13 February 1997).

Mr Malek pointed to a number of factors which, he contended, pointed against any assumption by the Bank of responsibility for the plaintiffs. These included the fact that, as I accept, the Bank was probably unaware of the identity of the plaintiffs. Mr Browne-Wilkinson suggested that the Bank collected payment of their cheques in favour of Sylcon, but in most cases this does not seem to have been the case because the plaintiffs either paid cash (eg. Mrs Jacob's' first deposit) or introduced money in the form of a cheque from a third party (Mrs Jacobs' deposit derived from the Swiss bank, Mrs Box's solicitor's cheque and, so it seems, at least some of Mrs Brown's payments). Mr Malek pointed out also the fact that there was no evidence that the Bank knew of the generous obligations which Sylcon was undertaking, at least towards certain depositors, in to suggest that this is indeed what the Bank should have done. But this would be a very onerous duty to impose upon the Bank, particularly when it is recognised that, if it were imposed, the Bank would, for its own protection, need to act in circumstances where it is not fully certain that its customer is contravening the law.

I agree with Mr Malek that to impose the suggested duty of care would be quite unreasonable. It would also go against the principle that the law does not generally impose on a person a duty to protect another from suffering financial loss by reason of the acts or defaults of a third party (see Smith v Littlewoods Organisation Ltd [1987] AC 241, particularly at pages 270-272 and Davis v. Ratcliff [1990] 1 WLR 821 at page 827). The suggested duty would be a large step on the road to converting bankers into detectives or, more onerous still, insurers of third parties dealing with their customers. This is a matter on which, in another context, Millett J commented unfavourably in Macmillan Inc v. Bishopsgate Investment Trust plc (No.3) [1995] 3 All ER 747, quoting amongst other things an observation of Steyn J in Barclays Bank Plc v. Quincecare Ltd [1992] 4 All ER 363 at page 377.

I therefore find that the Bank owed to the plaintiffs no such duty of care as the plaintiffs allege. I think it is fair to say that Mr Browne-Wilkinson demonstrated little enthusiasm for his arguments under this head. In the circumstances I do not find it necessary to consider whether the Bank would have been in breach of a duty of care had one existed.

(5) Knowledge on the part of the Bank

It will be apparent from what I have said about the particular ways in which the plaintiffs' case was put that the Bank's knowledge or absence of knowledge of various matters (notably of Sylcon's illegal deposit-taking or of the plaintiffs' alleged interests under a trust) was potentially relevant in a number of respects. Thus in relation to the plaintiffs' constructive trust claim it would have been essential for the plaintiffs to prove that the Bank had notice of the trust which the plaintiffs claimed to exist and of the fact that Sylcon or the Bank itself were dealing with the plaintiffs money in a manner inconsistent with such a trust. In relation to certain other matters it would have been a defence for the Bank to show that it acquired the plaintiffs' moneys without notice of the plaintiffs' rights or that it was unaware of Sylcon's illegal acts.

In the event I have found against the plaintiffs without the need to explore these matters and I see no need to explore them in any detail merely for the sake of completeness. The Bank elected to call no evidence. The evidence of the plaintiffs themselves did not bear upon the extent of the Bank's knowledge. The only material which was relevant to knowledge which was deployed at the trial was the report of the plaintiffs' expert witness, Mr Sillett, which was admitted in written form without cross-examination, and such information as could be gleaned from the agreed documents. An appellate court would therefore be in as good a position as I was to consider this material, should it be thought to be relevant.

However there are two matters which I think I should refer to. The first is Mr Browne-Wilkinson's submission that, as the Bank had elected to call no evidence, it was impossible for it to discharge the burden of showing that it had no knowledge (or notice) of a particular matter where that burden lies upon it. I do not accept this. If it were correct it would mean that a party who (perhaps by reason of the death of the witness) is unable to call a particular individual who is the only person who can depose to that party's state of mind could never show that it had no knowledge or notice. The reality is, however, that in modern litigation oral evidence from a live witness is by no means the only form of evidence which can be relied upon. Where, as in this case, there is, by agreement of the parties or otherwise, acceptance of the admissibility of statements in documents as evidence which is probative of the truth of those statements, either party can in my view rely upon those statements as evidence from which knowledge can be established or inferred. No doubt this means that a party who 'elects to call no evidence' (ie. to call no oral evidence) may obtain the advantage, in the form of the order of speeches, conferred by Order 35, r 7(3) without incurring all the disadvantages which might have followed in the days when a stricter approach to evidence was taken. But that is a different consideration.

Had the matter been one which was potentially determinative of some issue in this case, I would have held that the Bank was entitled to rely on the agreed documents in this case as material indicators of the Bank's state of mind. In saying this I am not, of course, expressing any view whether that reliance would yield a result favourable to the Bank.

The second matter which I propose to address briefly is the extent to which the Bank can be said to have had knowledge that Sylcon was carrying on an unauthorised deposit-taking business. The provisions of Pt I of the Banking Act 1987, the material parts of which have been set out earlier in this judgment, are quite complex and it will not necessarily be an easy matter in every case to determine whether a person is or is not carrying on a deposit-taking business. In the present case I would not have regarded such matter as general references in Sylcon's accounts to 'Client's deposit accounts' or 'Client's current accounts' as sufficient to put the Bank on notice that Sylcon was a deposit-taker. If, in relation to a particular issue, it was sufficient for the Bank to have been put upon enquiry I would have accepted that this stage was reached by January 1991 when the Oxford Street branch of the Bank was sufficiently concerned about what it knew of the primary facts to seek the advice of a specialist unit within the Bank. I would, however, have found it impossible to say that this stage was reached before that time.

Unfortunately by 23 May 1991 the conclusion which the Bank had reached was that so long as Sylcon did not advertise for loans and deposits it did not have to be authorised under the Act. This was clearly an erroneous conclusion. Its effect was, in my view, to postpone for something over a year the taking of the steps which the Bank did eventually take from July 1992 onwards.

What happened at that time does, however, show that there is quite a big difference, in circumstances of the kind which existed in this case, between being put on enquiry and reaching a conclusion that Sylcon was, in all probability (but not more than probability) carrying on a deposit-taking business. The Bank referred the matter to its Law Section on 6 July 1992 because of its renewed concern that Sylcon might be a deposit-taker. The Law Section confirmed on 10 July that this concern was justified. Not surprisingly the Bank then took up the matter with Sylcon itself, albeit after a delay of more than a month. On 18 August the Bank asked Sylcon to obtain from its solicitors confirmation that Sylcon was legally eligible to carry on the business of accepting deposits. This brought forth a letter from Mr Reuben dated 21 August in which he went into some detail about Sylcon's activities and repudiated any suggestion that Sylcon was acting in contravention of the Banking Act. Not all of the factual statements in that letter seem to have … (NOTE: There is a page missing at this point in the judgment. This is how the transcript was supplied. As this is an Order 68 judgment any queries should be addressed to the Judge's clerk) … do, was to decide that it ought to refer the matter to the Bank of England. Had it not made the mistake which I have mentioned in February 1991 it might, I think, have reached that stage in about June or July of 1991.

As I have said, none of this has a direct bearing upon my main conclusions, which I have reached on other grounds. But as I heard a good deal of argument about the matter I thought it right to express my views.

(6) Concluding observations

One cannot fail to have a great deal of sympathy for the plaintiffs, who have lost substantial sums of money which they could not afford to lose. But this is not a reason for imposing liability on the Bank. The real reason why the plaintiffs have lost their money is that they fell for the blandishments of Mr Reuben and naively believed that he could secure for them benefits which would not be attainable if they invested directly with the Bank or some similar institution. It would not be just if the Bank were obliged to underwrite the extravagant promises made by Mr Reuben on behalf of Sylcon and I find that it is under no such obligation. These actions must be dismissed.