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Home > Judgments > 2009 archive

Karsten v Markham [2009] EWHC 3658 (Ch)

Judgment arising in proceedings to enforce payment of debts between former cohabitants where the defendant claimed that a TR1 form and deed had been signed as a result of undue influence.

The proceedings arose from a relationship that began when the defendant saw the claimant, a litigation solicitor, in her role as a voluntary adviser at the CAB concerning impending bankruptcy proceedings against him. The claimant was persuaded to lend the defendant money to avert that threat and on the understanding that he was involved in a potentially lucrative film project: he had been successful in the industry at an early age but claimed that since he had been ill, he had been unable to work which led to his financial problems. The claimant continued to lend money, as their relationship developed into cohabitation, until 2005 when the claimant argued with the defendant when she realised that he was spending the money not on the film project, but on art. The couple separated and the claimant sought repayment of the monies. An acknowledgement of the debt and a TR1 was drawn up transferring a property owned by the defendant to the claimant as part of the repayment. A subsequent trust deed concerning the debts and their repayment was also prepared and the two documents signed by the defendant. The defendant was later made bankrupt on the claimant's petition but this was overturned on appeal.

In these proceedings the defendant argued variously that i) he had no recollection of signing the TR1 and the trust deed; ii) he signed as a result of undue influence; and iii) the monies had not been loans but were payments for consultancy services he had provided. HHJ Raynor reviews the evidence before him, including expert evidence on the signatures. He also considers the principles concerning undue influence particularly, in the circumstances of this case, as to whether the relationship was that of solicitor and client or of domestic partners. He proceeds on the basis that, as the claimant had acted as the defendant's solicitor, the relationship was “of trust and confidence and presumed influence” of the claimant over the defendant. However, he finds that the claimant was not taking unfair advantage and that there was no necessity for the claimant to ensure that the defendant had obtained legal advice before signing the deed. He also finds that the defendant's evidence was untrue and, supported by the expert evidence on the signature of the documents, he orders repayment of the monies.

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Case Number : HC07C02255

Neutral Citation Number: [2009] EWHC 3658 (Ch)
IN THE HIGH COURT OF JUSTICE

Royal Courts of Justice
Strand
London
WC2A 2LL

Date : 17th December 2009

BEFORE:

HIS HONOUR JUDGE RAYNOR QC sitting as a judge of the High Court

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BETWEEN:
Moira Karsten (Claimant)

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Paul Markham (Defendant)

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A P P R O V E D  J U D G M E N T

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Mr Stephen Davies QC
Ms Daisy Brown
appeared on behalf of the Claimant

Defendant in person

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Transcribed from the official tape recording by
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HIS HONOUR JUDGE RAYNOR QC:
1. In these two consolidated actions the Claimant, Mrs Moira Karsten, who is also known by her maiden name of O’Hara, claims

a.  against Paul Charles Markham (“the Defendant”)

(i) the net sum of £850,000, which she claims is due by way of repayment of loans made to him during the period from September 1999 to September 2005; and

(ii)  declarations

1.  that since October 2000 the Defendant has held the property 2 Codrington Mews, London W11  (“the Property”) on trust for her subject to the interests of the mortgagee and the Defendant’s trustee in bankruptcy; and

2. that his signature in October 2005 on Land Registry form TR1 was valid and effective; and

b.  against the Defendant and Julian Kingsbury, the defendants to her Pt 20 claim,  a declaration that documents purportedly executed on the 18th April 1997 (“the Kingsbury Trust Deed”) and on the 7th and 21st January 2004 were invalid and of no effect. 
In short she alleges that these documents are recent fabrications or alternatively, if created on their purported dates, are sham trusts or transactions intended to defraud the Defendant’s creditors. 

2. This is on any view a truly extraordinary case.  The Claimant, who is now aged 48 and a practising litigation solicitor, met the Defendant in February 1999 when she was working as a volunteer at a Citizens Advice Bureau.  From October 1999 until August  2005 they had an intimate relationship and cohabited from March 2003 to August  2005.  Those facts are not extraordinary but what is is the fact that I am satisfied that over the six year period from September 1999 she made payments amounting to approximately £1.16 million to him or to others at his request which she says were clearly understood and agreed to be loans.   Indeed those payments were substantially made over a period of about 28 months.  By the end of 2001 approximately £950,000 had been paid by her.
 
3. In support of her claim she relies, among other things, upon a declaration of trust over the Property and acknowledgment of indebtedness which she says the Defendant signed on the 17th August 2005.  She also relies on a Trust Deed and acknowledgment of debt (“the Moira Trust deed”) and the Land Registry form TR1 which he admittedly signed on or about the 6th October 2005.

4. In her section of her trial witness statement headed “Overview” (B1/115ff) she gives what I find to be a clear, consistent and coherent account of the circumstances of her financial dealings with the Defendant. 

5. The Defendant, who conducted the trial as a litigant in person, admits that he received over £600,000 from the Claimant over the period I have mentioned.  Essentially he neither admits nor denies the balance.  His case as it is now put is that these payments were not gifts but they were made in return for services which he rendered to the Claimant.  He says that no loans were ever made to him by the Claimant and that no money is owed to her.  He denies signing the document dated the 17th August 2005 but if it is found that he did sign it, he alleges it was procured by undue influence.  He claims to have been drunk and to have no recollection of signing the October 2005 documents.  But relying upon the evidence of Matthew Watson, who witnessed his signature but whom he did not call to give evidence, he says that the Moira Trust Deed was signed in blank and was procured by a misrepresentation as to its purpose and effect.  He says that in any event the Property and his Paris flat have since the 18th April 1997 belonged to Mr Kingsbury, who holds them in trust for his, that is the Defendant’s, sons under the terms of the Kingsbury Trust Deed.

6. In bankruptcy proceedings brought by the Claimant against the Defendant both Mr Registrar Jaques at first instance and Mr Justice Briggs on appeal categorised the Defendant’s evidence as to the circumstances in which he signed the Moira Trust Deed as “incredible”.  Mr Justice Briggs described his evidence (contained in the witness statements that were then before him) as to the nature of the payments he received as “just short of being inherently incredible”.

7. As will appear, for my part, on the totality of the evidence before me, I am quite satisfied that the Defendant’s evidence as to the nature of the payments and the execution of the documents relied on by the Claimant is not only incredible but is simply untrue.   Such is the unreliability of the Defendant as a witness that I would not be prepared to accept his evidence on any matter in dispute without incontrovertible corroborative evidence, and where his evidence conflicts with the Claimant’s, as will appear, I have generally accepted hers,  not because as Mr Markham has suggested, she is a solicitor but because I am satisfied that she is a truthful and generally reliable witness whereas he regrettably is not.

The History
The Defendant’s circumstances prior to meeting the Claimant
8. The Defendant was born in April 1943.  I have no independent evidence as to the Defendant’s income or other financial circumstances prior to 1993.  In his trial witness statement he claims to have had substantial financial success in the film and television industry from a very early age,  enabling him to purchase substantial properties.  I have no reason to doubt this account. He was also involved in various other projects prior to 1993.

9. At or about the beginning of 1993 he met a young lady then 27 years old named Eugenie Wilhelmine Campagne, and during the three years of his association with her he purchased six properties in England and France with the aid of substantial mortgage loans.  Those properties included numbers 3 and 2 Codrington Mews purchased in 1993 or 1994 and 1995 respectively, and flats at 6 Rue St Louis en L’Ile in Paris and 4 Rue Houstin in Bordeaux. 

10. He had a business and personal relationship with Miss Campagne and he alleges that she paid him approximately £300,000 per annum  net of tax for design and other services that he rendered, all in all about £600,000 over the years of their association.  He stated that he never accounted for tax on his earnings, that being a matter (so he said) for Miss Campagne.  For her part, she alleged in Court proceedings that she commenced against him that she had made him substantial loans and was the beneficial owner of all his properties.

11. I am in no position to form any judgment on her allegations, which were not closely investigated before me, and in reaching my conclusions in this case I have taken no account of any of her allegations against the Defendant.   However in evidence before me the Defendant stated that from 1992 until September 2005 the only income he had in the United Kingdom were the sums he received first from Miss Campagne and then from the Claimant. He claimed to have earned sums in the United States but produced no documentary evidence of the receipt of any such monies.  

12. What is clear is that by the end of his relationship with Miss Campagne, that is towards the end of 1996, the Defendant was in acute financial difficulty.  In October 1996 his then solicitor, Mr Gordon Bon of Laytons, advised him and Miss Campagne that they were both insolvent.   In December of that year Laytons and Mees Pierson, who are Dutch bankers, commenced proceedings against him, as did Miss Campagne.

13. In January 1997 the Nationwide Building Society commenced an action for possession of numbers 2 and 3 Codrington Mews on the grounds of mortgage arrears, and in March  Mees Pierson obtained summary judgment for £75,000 plus interest and in April Laytons obtained a similar judgment for around £42,500 plus interest in respect of their unpaid fees.  In 1997 the Defendant was also in arrears with mortgage payments in respect of his French properties. 

14. It is against that background that the Kingsbury Trust Deed was allegedly executed on the 18th April 1997.  It is in the following terms:

“I Paul Charles Markham transfer to Julian Henry Orlando Kingsbury… my ownership of 2/3 Codrington Mews, London, W11 2EH, 6 Rue Saint Louis  en I’ll Paris 75004, complete with contents/ furniture/ furnishings/ paintings and the contents / furniture/furniture/ paintings stored in my name at West London Storage, 167-185 Freston Road, London…

I will continue to have sole occupancy and be responsible for all mortgages, bills and maintenance.  The properties are to be held in trust by Julian Henry Orlando Kingsbury, for my sons Samuel Paul Jamison Markham and Matthew James Frederick Markham until I die at which time I appoint Julian Henry Orlando Kingsbury to be the sole executor and trustee of my estate to the benefit of my sons”. 

It is signed Paul Charles Markham and is purportedly witnessed by Mr John Michel.  The inventory of contents is also stated to have been checked by Mr Michel. 

Mr Michel however has not given evidence before me nor is there any form of sworn statement in evidence before me from him. 

15. It is pertinent to note at this stage, and I shall return to this matter in greater detail later, that with one exception, that of  M. Hubert de Lagabbe,  none of the persons whose statements were included in the trial bundle, including Julian Kingsbury  and Marla Kerner (referred to below), were called to give evidence before me.  However, as will appear, I did not accede to the Defendant’s suggestion that Mr Kingsbury should be permitted to give evidence from China by Skype into the Defendant’s laptop computer.

16. The explanation given by Mr Kingsbury and Miss Kerner for the execution of the Kingsbury Trust Deed was the mental ill health of the Defendant at that time.  However there is no documentary evidence before me of such ill health prior to the end of 1997, save for a letter from his GP (CB1/350)  stating that the Defendant was fully recovered “from his stress reaction” and well enough to get back to work.

17. In May 1997 the Defendant was apparently able to give coherent instructions to his then solicitor, Mr David Charity, in relation to the Campagne action in the course of a four hour consultation (noted in C1(2)/253) and indeed to make coherent proposals for the settlement of that action.  He accepted in evidence that he had not sought medical treatment for any mental illness during the years 1995 to 1997, and  I am not satisfied on the evidence before me that he did indeed suffer from any significant mental illness in April 1997 at the time of the purported execution of the Kingsbury Trust Deed. 

18. Furthermore, as will appear, it is apparent that the Defendant continued to regard the properties purportedly the subject of the Kingsbury Trust as his own to deal with and dispose of as he chose without reference to Mr Kingsbury.  Save he alleges for the Claimant, he accepts that he did not tell any of his solicitors prior to Freedman Green, who acted for him in 2006, of the existence of the Trust, notwithstanding that its existence would have been material to them, and, as will appear, I have found that his claim to have told Freedman Green of it but been advised that it was not relevant is simply untrue.  

19. He did not raise the Trust as an answer to an application for a Charging Order made by Laytons in respect of the Property in 1997, and indeed a Charging Order absolute was made in May of that year.   Nor, as I find despite his claims to the contrary, did he tell the Claimant of the existence of that Trust.

20. In October 1998 a bankruptcy order was made against the Defendant on the Petition of the Royal Bank of Scotland in respect of net indebtedness of about £35,000.  Previously, in a draft affidavit prepared for him,  2 and 3 Codrington Mews and his Paris flat were claimed as his assets and he stated that he would already have sold the Codrington Mews properties to settle his debts but for cautions obtained by Miss Campagne --  and that is in spite of the fact that he would have it that those properties were beneficially owned by his sons at that time.

21. At the end of November 1998 the Defendant was referred by his General Practitioner to hospital as a result of having expressed suicidal ideations.  However, hospital notes are not in evidence before me and a sick note and a doctor’s letter produced at the time in the context of the Defendant’s failure to meet the Official Receiver spoke of migraine and severe headaches, necessitating hospital admission and investigation.  I find that it is necessary to treat all the Defendant’s claims about ill health with caution.

The Defendant’s initial dealings with the Claimant
22. In December 1998 the Nationwide Building Society obtained possession of 3 Codrington Mews and Mr Michael Sanders was appointed as the Defendant’s trustee in bankruptcy. 

23. In February 1999 the Defendant came to the Citizens Advice Bureau and saw the Claimant, seeking advice for what he perceived as the threatened sale by the Nationwide of 3 Codrington Mews at an undervalue.

24. At that time the Claimant was married, living with her husband, a circuit judge, and her three children who were then aged 13, 10 and 6. 

25.  She advised him to consult solicitors and gave him a list, including that of her own firm, Carritt & Co.  He alleges that he there and then told her of the Kingsbury Trust and indeed at one stage alleged that he actually then gave her a copy of the Trust Deed, although he later withdrew that suggestion.  But he said that he told her he did not want to rely on the Trust Deed in the context of the proposed action against the Nationwide Building Society.  As stated, I am satisfied that his claim to have told her of the Kingsbury Trust is manifestly untrue, as confirmed by her later actions as set out in this judgment.

26. Shortly afterwards the Defendant invited the Claimant to take his case against the Nationwide on a contingency fee basis, a prerequisite being a favourable Counsel’s opinion.  Her instructions, which were approved by the Defendant, were premised on the Defendant being the beneficial owner of 3 Codrington Mews.  She did not know of his bankruptcy at that time nor, as I have said, of the Kingsbury Trust.

27. In about March 1999 the Defendant also told her that he wanted to sell number 2 Codrington Mews to avoid the repossession of his Bordeaux property.  The Defendant at that time was being pursued by the Bank Nationale de Paris (BNP), who were the mortgagees of the Paris flat and the Bordeaux property.  

28. In April 1999 the Claimant was told of an offer that had been made for 2 Codrington Mews by Mr Michel, the alleged witness to the Kingsbury Trust Deed.  That offer was an offer to buy 2 Codrington Mews (the Property) from the Defendant for the sum of £550,000, notwithstanding that if the Kingsbury Trust Deed was a genuine document, Mr Michel would have been well aware that the Property was not the Defendant’s to sell.  The Claimant  deployed this offer and the concluding of a contract between Mr Michel and the Defendant for the sale of the Property on the 23rd June 1999 in a vain effort to avoid the sale of the Bordeaux property. Her correspondence is of significance in connection with the primary dispute between these parties.

29. Her account of the conversations leading to her agreeing to make the first and subsequent loans is set out in paragraphs 29 to 32 of the trial witness statement.  After remarking that she was having difficulties with her marriage and that the Defendant was kind and she enjoyed his company,  she goes on to say in paragraph 30 – 32:

“Paul explained to me that the reason for his financial situation was that he had been ill in the past and had not been working but had been very well off previously.  He did not at that stage explain what the illness was but he said that he was now better and was involved in the French film deal  [That is a term that she defines earlier in paragraph 6 of  her witness statement as being a film project in France that the Defendant was engaged on]  in which he would be producing a film in Paris which would be funded by some wealthy Canadians and which he expected was eventually going to result in  £8 million profit.  He told me that it was a biopic about a French figure of historical importance, who he always referred to as “the Old Man”  who was about ten years older than him.  He told me that he could not reveal more details as this could lead to a rival film being made…   He said that the French film company Canal Plus had shown some interest in the film and that the French Department of Culture were taking an interest and he often told me over the years that he had meetings with officials from the Ministry of Culture..  I had absolutely no reason  to doubt his statements about the French film deal and accepted what he told me without reservation.  He said that he had previously been earning £20,000 to £30,000 a month working in the film industry but he now wished to focus on this particular project.  He explained he owned a flat in Paris which he was extremely anxious that he retained as he needed a presence in Paris.  He also said the industry was such that it was crucial for his prospects of success to be seen to be living a certain sort of lifestyle…”.

30. The Defendant’s case is that there was never any French film deal and that her evidence in that regard is an entire fabrication .  This is stated in  terms  in paragraph 114 of his trial witness statement and similar assertions are made elsewhere.  In the course of his evidence before me he said “I was never involved in a French film deal, there were simply conversations about films.  There was not going to be a biopic of French figure of importance, the Old Man.  I did not say Canal Plus had shown interest in this film.  I never I said I had meetings over the years or that I was keen to retain a presence in Paris in connection with the project”.   He alleged that the Claimant concocted all of the statements regarding the French film deal and its funding, and indeed it is now clear that no French film deal ever existed.

31. However in a letter to the Defendant’s French lawyer dated the 16th June 1999 the Claimant stated  in paragraph 4 “ Mr Markham is now fully well and is involved in a large film project in France.  The finance for the film is in place and Mr Markham will be receiving income from it by the end of the year.  He anticipates being able to repay a significant proportion of debt on the Paris property by the end of the year and have that debt completely repaid within one year”.  I am satisfied that those assertions were based on what the Claimant had been told by the Defendant, as  recorded in the Claimant’s file note (CB1/62).  It is however right to say that when the Defendant was shown a draft letter to BNP relating to the Paris flat he instructed the Claimant  to delete reference to his having a large film project which had secure funding.  I accept the Claimant’s explanation that he told her he did not wish to rely on the deal at that stage in relation to BNP.  Nonetheless I am perfectly satisfied that he spoke constantly in his relationship with the Claimant of the French film deal and the very substantial returns he expected to make from it.  

The first and subsequent alleged loans
32. The Claimant’s evidence regarding the first alleged loan is perfectly clear and contained in her witness statement at paragraphs 33, 35 and 36:

“In September 1999 Paul first asked me to lend him money to pay off debts relating to the Paris flat.  At that time the mortgagee of the Paris flat BNP had commenced possession proceedings.  He said that his financial problems were very temporary and that as soon as he was back on his feet he would be able to pay me back.  He estimated that it would take three months and then he would be able to pay me back in full and he offered to pay me interest of £5,000….  By now I liked and trusted Paul and believed that he just needed to fix his short term cash flow problem.  I was willing to lend the money to him.   We discussed the option of me taking a charge over the Property [that is number 2 Codrington Mews] to secure the loan.   He seemed perfectly agreeable to this.  I spoke to my husband and he had no objection…  My biggest concern was that Paul was a client…  I telephoned the Law Society who said there was no prohibition on loans to clients but suggested I advise Paul to obtain independent legal advice before borrowing money.  I asked him to do this and shortly afterwards he told me he had been to see a sole practitioner in Kensington for legal advice…  Although we discussed a charge over the property when he asked for the advance to be made he said it was too urgent to arrange for the charge.  He seemed offended that I did not trust him to repay and he assured me that the “Canadians” were going to make him very rich again and repayment would not be a problem”.  

It is common ground that the first payment (in the sum of £39,576.88) was made to BNP’s lawyers on 27 September 1999, at which time the parties were not yet in a relationship.  The payment also predated the agreement which the Defendant alleges was made for the provision of services, which he says was made in early 2000 (paragraph 92 of his trial witness statement).  It will be seen that according to the Claimant the payment was simply a loan.

33. For his part, the Defendant  is adamant that there were never any loans at all from the Claimant to him and in evidence he asserted that this initial payment (of nearly £40,000) “must have been connected with some work that I was doing for her”.  However, he could not remember what that work was.  Then he asserted for the first time that the Claimant had given him written instructions for tasks that she wanted doing and indeed that there were written documents evidencing the terms of their agreement.  But he suggested that these had all been suppressed by the Claimant.  I find all of this evidence to be simply untrue.

34. Their affair began in or around October 1999 and there followed in October and December 1999 further substantial direct payments to the Defendant’s creditors totalling about £166,500, together with by the end of the year payments  of £67,850 for the refurbishment of his Paris flat and (as I find he stated) his requirements in connection with the French film deal and his general business needs.   The Claimant asserts (as I find to be true) in paragraph 41 of her witness statement in relation to these further payments that “shortly after commencing the relationship Paul began to ask me to loan him further sums to help him get out of his financial difficulties.  Again he said that the sums would easily be repaid in the reasonably short term when he was paid for the French Film Deal.  As I had money available and because I trusted that he would be able to pay the money back I did agree to loan him the money”.  Then she lists the payments which I have summarised.  All these very substantial payments were made prior to the time when the Defendant says he concluded his agreement with the Claimant for the provision of what he describes as “financial support to the level he required” in return for services. 

35. In December 1999 the Claimant’s company MK Property and Development Limited was incorporated, and as will be seen monies were paid to the Defendant from her director’s loan account with that company.  Also in that month the Claimant learnt for the first time from the Defendant of his bankruptcy and that he was being threatened by his trustee with an application for possession and sale of the Property (2 Codrington Mews).   The Claimant advised him that the only way to prevent this was to apply to annul the bankruptcy, which would necessitate paying off the bankruptcy debts.  That she says provoked a further request for a loan and repeated assurances that he would be able to pay back all of the loans as soon as he received the proceeds of the French film deal. 

36. As stated, I find as she asserts that that was his constant mantra throughout and that when the French film deal failed to bear fruit within the timescale he had originally stated, he was constantly reassuring, saying that all was going to plan and that the deal would ultimately produce the anticipated returns, pointing out that such deals can take years to come to fruition – an example cited by him being the musical based on  Queen (the group), which he told her took 7 years to get off the ground.  It is pertinent to note that throughout the period from 2000 to 2002 and beyond the Defendant was travelling extensively abroad, principally to Paris, as appears from the schedule of movements based on his diaries from 2000 and 2002, diaries thereafter not being available.  He was ostensibly travelling frequently on business. 

37. In May 2000 an agreement was reached with the Defendant’s trustee for the annulment of the bankruptcy on payment of the sum of £200,000 which was financed by the Claimant making a withdrawal from her company’s current account. Notwithstanding that payment, the Property (2 Codrington Mews) has remained vested in the Defendant’s trustee because of the Defendant’s failure to agree and discharge his fees.   The Defendant’s evidence  before me is that this payment of £200,000 was “primarily” his remuneration in connection with the proposed renovation and conversion of the Claimant’s then family home, 120 Sutherland Avenue, into flats, work that was never actually done.  Later in this judgment I set out my reasons for rejecting this evidence as wholly incredible and untrue.

38. By October 2000 the payments that had been made by the Claimant to and for the benefit of the Defendant amounted to approximately £650,000 and it is then that she says that the Defendant agreed that his interest in the Property 2 Codrington Mews would be held for her.  That is denied by the Defendant.   She also says, and he denies, that they discussed and agreed that a formal trust deed should be drawn up and signed by him.   However, although according to her documents were drawn up in October 2002 and October 2004, and indeed copies have been produced, none was signed by him until the disputed one in August 2005,  although she says, and again the Defendant denies, that notes confirming the debt were signed by him towards the end of 2001 in connection with her divorce proceedings in the sum of £1 million and again in March or April 2002.  She has, however, been unable to find the copies she says she retained. 

39. The Defendant denies all of these assertions and says that it is all pure fabrication.  However, her evidence is consistent with the later documents which I find that he signed, and I accept it.

40. As stated I am satisfied that by the end of  2001 the Claimant had made payments totalling approximately £950,000 to or for the benefit of the Defendant.  Further sums were paid subsequently, bringing the total to that previously mentioned.  One such payment which I mention specifically was the sum of £53,025 borrowed in February 2002 from her parents, which the Claimant states and I accept was said by the Defendant to be required to enable a debt owed to persons involved in the French film deal, which she was assured was still proceeding, to be discharged.  In the event it emerged that the Defendant used the money to buy antiques.  I also accept her evidence that her suggestion at that time that the money should be used to discharge the trustee in bankruptcy’s fees was declined by the Defendant, which is why the fees were not paid  at that stage.  They have risen substantially since then.

41. In February 2002 a consent order was made concluding the Claimant’s ancillary relief claim in her divorce proceedings and she obtained a lump sum of approximately £1.1 million after giving credit for the loans she admitted had been made to the Defendant.

42. In December 2006 the Defendant produced as attachments to his witness statement in the  bankruptcy proceedings brought against him by the Claimant copies of documents that he said had passed between them in April 2002.  The first is a note purportedly from the Claimant dated the 2nd April 2002.   The second is a letter dated the 4th April 2002 which he says he sent in reply, but which she denies receiving.  The note purportedly from the Claimant reads (CB1/117)

“This is to confirm that I Moira Elizabeth Ann O’Hara will not enforce any debt I have against Paul Charles Markham until he dies” and it is signed “Moira Elizabeth Ann O’Hara”. 

The Defendant, when he gave evidence, said that he could not recall the reason for her note. The Claimant in evidence accepted the writing looked like hers.  She does not however believe that the document is genuine and cannot explain it.  In any event it is important to note that even if the document is genuine, which it appears to be, the Defendant  in his Defence did not rely upon it as a defence to the Claimant’s proceedings, and indeed is adamant and has been throughout the proceedings that there never was any debt at all.  He now though says that he did place reliance on the note.

43. His letter dated 4th April 2002 is in these terms:

“Dearest Moira,  I know you pride yourself on your litigation skills and your ability to get what you want.  You know how much I care about your and your children’s wellbeing and the understanding between us that you would by way of gifts of money show your appreciation and also remember that this was your idea and you told me not to be arrogant and to take your offer.  But Moira come on maybe the lines between business and personal is blurred in your mind.   There’s no debt between us so please just give me a short note confirming that the monies that you paid for things were gifts not [illegible].  I trust  you completely otherwise I would not have entrusted my affairs to you.  So I am making an allowance that you wrote this when you were in work mode.  Lots of love and give my love to the kids. You were right they are a handful, Paul x”. 

I pause to note that the terms of that letter are extraordinary, given that the parties were in an untroubled intimate relationship in April 2002. 

44. As will be appreciated, the letter from the Defendant is not consistent with the case that he is now running (which is that the payments were not gifts) but it is consistent with the case that he was advancing in his witness statement of 18 December 2006 (B2/69).  In paragraph 9  of that statement, when he produced a copy of this letter stating that he had managed to locate it as a result of clearing an office, he said that the payments

“made by the Petitioner were not loans, but were in fact gifts of money for looking after the Petitioner’s children.  The Petitioner’s children were extremely disturbed and damaged by her previous relationship.  She required me to look after their emotional and moral wellbeing”.

The Defendant does not claim to have received a reply to his letter and that letter is I find a fabrication written to bolster up the case that he was running in December  1996.

45. In April 2002 the Claimant purchased a new home at 62 Tavistock Road,  London, W11 using the proceeds of her divorce settlement and a mortgage advance.  In November the Defendant was discharged from bankruptcy although as I have indicated 2 Codrington Mews remains vested in his trustee.  In March 2003 the parties started cohabiting at 62 Tavistock Road and at the beginning of that month 2 Codrington Mews was let out and it was agreed that the Claimant should receive the rent,   she says by way of acknowledgment that the property was hers, as had been agreed as long ago as 2000.  According to the Defendant, however,  he allowed her to receive the rent because he had no bank account and the rent was to be set against credit card expenditure incurred on his behalf and/ or to be his contribution to domestic expenses.  What is clear is that in September 2003 the Claimant told her accountant that rental income was being received by her on a property held in trust for her, and I accept her account of the agreement.  I also note that the Defendant’s trustee in bankruptcy has made no complaint or claim regarding her receipt of rental income.  

46. Further sums were paid by the Claimant in 2004, including £25,025 paid to the Defendant’s French bank account on the 19th October of that year.  The Claimant explains the circumstances in paragraph 108 of her witness statement. 

“Paul told me he had contrary to what we had agreed borrowed money from the Old Man and the French film deal was in jeopardy if he did not repay it.  I increased the mortgage on Tavistock Road to do this on the assurance that the money would be repaid.  I asked him to sign a trust deed that I had drafted.   He did not agree to that as it provided for security over the French flat and therefore another deed was drawn up which he  agree to sign. I gave him money to see a solicitor in connection with that trust deed.   He told me he had made an appointment with a solicitor near his mother’s home but had to cancel the appointment as he needed to go back to France urgently.  He urged me not to delay sending the money to his French bank account and that he would go to see a solicitor to sign the Deed when he got back from France.  He never did.  At all times he would ask to borrow the money and urge that he would be able to repay me in full in the near future when the French film deals produced a return”. 

The Defendant says that this is all lies but what is plain is that from 2003 the Claimant significantly increased the mortgage on Tavistock Road in order I find to continue to make what she asserts were loans to the Defendant. 

47. The Claimant says that during 2005 she was told of a second film deal in relation to a film which she says the Defendant told her he “was going to produce on the subject of globalisation.  He said that the economist Professor Stiglitz had agreed to be involved and he needed to work in America to progress this deal.”  (paragraph 113 of her witness statement).  In paragraph 17 of his Defence the Defendant denied any knowledge of the alleged film deals.

The end of the relationship
48. What brought matters to a head according to the Claimant was her discovering in July 2005 that art works had been purchased by the Defendant in 2001 and 2002 from a firm named Bizarre with sums that she had lent ostensibly for the purposes of the French film deal.  The Defendant she says at first lied about the matter, saying at one stage that the items had been purchased by the Old Man.   He then though admitted spending the money himself.  The Defendant says again that all of this evidence  is fabrication and that the Claimant knew throughout he was buying items from Bizarre and that she has used this as a pretext because by  July she had established a relationship with another man, which indeed she had, and wanted to be rid of him. I accept the Claimant’s account of these events.

49. The Claimant says that at this stage in July 2005 she demanded repayment of the sums lent.  In his defence the Defendant admitted (in paragraph 33(1)) that she did then demand repayment of the sums paid, although he denied that the payments were by way of loan.  But in evidence he has said that the first demand that was made was in the telephone conversation on the 2nd May 2006 which I shall deal with shortly.  

50. It was in those circumstances that the Claimant says that the Acknowledgement dated the 17th August 2005 was signed.  In her witness statement she says at paragraph 118

“I realised at this point I was extremely exposed and that I could not trust Paul.  I drafted the Acknowledgement which recorded the indebtedness and the trust over the property.  The Acknowledgement was signed in my presence after a long argument at my house about the fact that he had lied to me about the purchase of the art works and furniture from Bizarre.  I drafted different variations of the Acknowledgement before Paul signed.  He would object to certain wording and I recall that in the first draft I again included the Paris flat as security which he was not prepared to give.  Although he was angry during this discussion about the fact that I found out that he had lied to me, he perfectly understood the terms of the Acknowledgement.  He was alert and intelligent and he knew that he had been caught out and I was very upset and concerned to have him repay me”.

51. The Acknowledgement (CB1/6) is in these terms

“I Paul Charles Markham of 2 Codrington Mews state as follows:
1. I hold 2 Codrington Mews, London, W11 on trust for Moira O’Hara of 62 Tavistock Road London W11 1AW. 
2. I confirm that I have borrowed £1,150,000 from Moira O’Hara.
3. I also confirm that I will repay this monies as soon as I am able”

It bears a signature which the Claimant says is the Defendant’s and is dated the 17th August 2005. 

The Defendant says that that document is a complete fabrication by the Claimant, that there were no such conversations as she asserts and that the signature is not his and bears no resemblance to his.  

52. Very shortly thereafter the relationship between the parties ended, although the Defendant was allowed to continue to live in Tavistock Road until the 27th April 2006 saying, I accept, that he would need a little more time to sort out the second film deal and still maintaining that the French film deal was proceeding.

53. The Acknowledgment of debt did not say that the net value of 2 Codrington Mews would be set off against the debt but the Claimant’s case is that that was always understood and that the parties agreed that she would obtain a ball park valuation of the property, which she did from Foxtons on the 14th September 2005, and that valuation recommended an asking price of £650,000.  The claimant’s evidence, which again I accept, is that a value of the property in the sum of £600,000 was then agreed between the parties, this being the figure asserted in the Land Registry form TR1.  Meanwhile she also reviewed her records of the amount of the loans she had made and came to the view that the sum that had been stated in the Acknowledgement of £1,150,000 was slightly overstated and that £1,125,000 was a more accurate figure.  It was because a solicitor advised her that a Deed should be witnessed that she drew up the Moira Trust Deed dated the 7th October 2005 and asked the Defendant to sign it and have it witnessed.  Her evidence is at paragraphs 122 to 123 of her witness statement. She says she discussed the documents with him and then put them (ie the Deed and the Land Registry form TR1) in an envelope for him to sign but was not present when he signed them.  She asserts that no pressure was placed on him to sign.  On the 6th October 2005 he left an envelope on her pillow with the signed documents inside. She signed the Deed on the following day.

54. The Claimant maintains and in this (as will be seen) she is supported by expert evidence that the Trust Deed and form TR1 were not blank when given to the Defendant.

55.  The Moira Trust Deed is stated to be made on the 7th October 2005 between the Defendant and the Claimant and it provides (CB1/12)

“A.  This Agreement replaces and extinguishes any previous agreements between the parties in relation to the same matters. 
B. It is hereby acknowledged that £1,125,000… has been lent to the said Paul Markham by the said Moira O’Hara.
C. It is hereby declared that with effect from 1st October 2000 the property known as 2 Codrington Mews, London, W11 1AW is held in trust by the said Paul Markham for the said Moira O’Hara to extinguish in part the debt referred to in paragraph B, after deducting the value of any mortgage or other charges until the same is redeemed”. 

It is signed as a Deed by the Defendant and it is witnessed by Matthew Watson and then signed by the Claimant (and witnessed).  The form TR1 (CB1/13) is again signed by the Defendant, witnessed by Matthew Watson and as consideration records that the transferor (the Defendant) has received from the transferee for the Property the sum of £600,000.

56. I trace the history of the Defendant’s response to the Moira Trust Deed below.

57. On the 17th September 2005 the Claimant signed a further tenancy agreement in respect of the Property expressly on behalf of the Defendant as landlord.  He says that she had no right to do so and I agree that she was not entitled to execute the document on his behalf.

Events in March to May 2006
58. In CB1 at tab 25 are six letters which the Claimant says she gave to the Defendant personally, recording conversations between them.  He says that all those letters are fabrications, as are the conversations that they record because he now says, among other things, that no demand for repayment had been made before the 2nd May 2006.  In the light of his contentions the letters bear close analysis. 

59. The first is a letter dated the 9th March 2006 from the Claimant stating

“Dear Paul, I need you please to give straight answers to the following: 1) will I get £600,000 as promised by the end of April 2006  2) Will you redeem the mortgage (about £190,000) on the Mews at the same time  3) Will you put sufficient monies in my firm’s client account to satisfy your Trustee’s fees (about £140,000)   I understand you want me to try and agree them at £100,000 I will do my best but cannot promise anything.  It is no use you telling me you are doing your best and the fact that you have not paid me back is not your fault.  You should not have borrowed the monies if you were unable to pay them back.  It is unreasonable for you to expect me to wait beyond the end of April.  When you asked me for the money I gave it to you at the time you needed it despite the great difficulty it has put me in (and continues to put me in).  I did not give you vague promises. I did what you asked at the time you asked for it.  I now expect you to keep your word to me”.

That letter I find is genuine; the conversation that it records to my mind strikes me as having the ring of truth. 

60. The next letter is dated on its face the 21st March 2005 but the year is mis-dated if the letter is genuine: it clearly should have been dated 2006.  The Claimant states that she handed it to the Defendant at 62 Tavistock Road on the 21st March 2006 (although again the year is mis-stated as 2005 in her note).  It states

“I thought it would be useful and avoid any unwelcome confusion if I set out the conclusions of our conversation on 13th March:

1) I would accept £600,000 in payment of the debt to me provided -- points 2 and 3 below are also met at the same time; and I receive the monies in cleared funds by the end of April.  (As you will appreciate the interest alone on the sum you borrowed would be in excess of £300,000 on a rate of 1% over base)
2) You need to redeem the mortgage [on the Property] by the end of April 2006. 
3) You need to pay off your Trustee’s and their solicitors fees by the end of April 2006. 

Unless all these points are met your debt to me will not be repaid”. 

The Claimant says all of those points were agreed, and that the Defendant also agreed to redeem the mortgage and to pay the sum of £140,000 into her firm’s clients’ account in respect of the trustee’s fees and disbursement (see paragraph 127 of her witness statement). The Defendant says that is absolute nonsense and that she knew that he had no money.  However, in paragraph 117 of her witness statement the Claimant  says she was given an assurance that the first and second film deals would produce significant profits which would enable him to repay her;  nonetheless,  I do accept that it may well be that the Claimant was setting out in the letter what she wanted and would accept, rather than what had been agreed. Notwithstanding the dating anomalies, I accept the Claimant’s evidence that the letter is a genuine contemporaneous document handed to the Defendant on the date she says.

61. On the 25th April 2006 the Claimant wrote

“Dear Paul
I thought it would be useful if I put into writing what we had agreed.  1) You will move out on the 11th May 2006.  2) You will pay me £600,000 on or about that date. 3) You will redeem the mortgage on 2 Codrington Mews on or about that date. 4) You anticipate being in a position to resolve your trustee’s fees shortly thereafter..”.

62. The next letter dated 26th April 2006 states

“Dear Paul,
Today you have confirmed to me in a telephone call at 12.18 that

1) you will leave 62 Tavistock Road on the 11th May,
2) you would call me back to re-confirm when you would meet your repayment of your debt to me.

Sadly you have not called me back. 
Your behaviour on this occasion and last night (when you admitted the debt then tried to resile from it and then admitted it and promised to pay £600,000 plus redeem the mortgage on 2 Codrington Mews and pay off the Trustee’s fees on or about the 12th May has made me very much doubt your sincerity about keeping your agreement.
 I will therefore be instructing solicitors to protect my interests….”

(There is a later letter of the 27th April which in fact adds nothing).

63. I have no doubt that all of these letters are genuine documents given to the Defendant as alleged by the Claimant.  I also find that the letter of 26 April accurately records the conversation between the parties. I am also satisfied not only on the basis of the Claimant’s evidence but also from the tape recorded conversation mentioned in the next paragraph that the Defendant was not denying his indebtedness to the Claimant at this time and there was no suggestion whatsoever that the payments had been made for services rendered. 

64. On the 2nd May 2006 the telephone conversation that I have mentioned took place which was recorded part way through to the Defendant’s knowledge.  The transcript (CB1,tb26) does not make pleasant reading but parts of it are instructive.  Right at the very beginning of the transcript there is the Claimant saying “yes but when are you going to pay me back my dear?”  Defendant “hey, hey you are such a stupid fucking cow, I have never ever on a piece of paper denied how much money I owe you,  is this on tannoy by the way?  Then later “I have not denied anything at all..” Later on he asserted that he was drunk.  I note that in the conversation there was no denial of borrowing over £1m or of past promises to repay or suggestion that the money was paid under an agreement for the provision of services, nor was there any expression of surprise at the demand for repayment, which I am sure there would have been had the demand for repayment been made then for the first time in the course of this conversation in circumstances when the Defendant had believed he would never have to repay any money.

The Claimant’s bankruptcy proceedings against the Defendant
65. In mid May 2006 there was service of the Claimant’s statutory demand.  A Bankruptcy Petition was issued on the 12th June 2006 and the claim made in the bankruptcy proceedings was entirely straightforward.  It was alleged (A224) that “the debtor is justly and truly indebted to me in the aggregate sum of £1,125,000 together with interest at 1 per cent over base… less a secured sum of £275,000 being money borrowed from me by the debtor during the period on or about 2000 to 2005”. 

66. The Defendant served five witness statements in the bankruptcy proceedings. In none was the Kingsbury Trust mentioned.  On the contrary, in his first witness statement dated 1st August 2006 he confirmed that he was the owner and the registered proprietor of 2 Codrington Mews.  

67. After asserting in paragraph 8 of that statement (B2/59) that he did not accept that any sums were owing and that indeed it might be the case that the Claimant owed him money, he went on to say in respect of the Moira Trust Deed

“In relation to the purported agreement signed by me on the 7th October 2005 and witnessed by Matthew Watson, I have no recollection that I signed the document.  The signature on the document resembles my signature and if it is found that I did sign it I will say that I was intoxicated at the time I signed it and did not know what I was signing. I frequently signed papers for her as she was acting as my solicitor and had been for a number of years.  She represented the document that she required me to sign was a Trust Deed for my two younger sons.  As I indicated above I was in a relationship with Ms Karsten at the time and implicitly trusted her in relation to my affairs…”.

68. The allegation that a Trust Deed was required for his two younger children is extraordinary because on his evidence both he and indeed the Claimant knew that there was a trust deed for them already.  That is a matter that he elaborates later.

69. In the fourth witness statement that was made on the 18th December 2006 (B2/69) the Defendant claims a greater recollection in relation to the execution of the Moira Trust Deed.   Under the heading “Undue influence” he says in paragraph 3 that

“As I have mentioned in my first witness statement.. the petitioner procured my signature to a blank document and represented to me that it would be a Trust Deed for the benefit of my children and that the relevant details would be completed by her at a later stage”.

There is no such assertion in the first witness statement about a blank document or its completion at a later stage and it is pertinent to question how the Defendant would know if, as he alleged he had no recollection of signing the document, that it was blank at the time.

He goes on to say

“I was horrified to discover… that the document was not a Trust Deed for the benefit of my children but was in fact a purported Trust Deed for the acknowledgement of a debt due to the Petitioner in the sum of approximately £1.25 million.  This is a transaction which I did not agree to nor did I enter into the Deed with full knowledge as to the contents of the same.  The Petitioner as my solicitor at the time did not advise me to take independent legal advice with regard to the blank document.  Further the Petitioner did not forward the document to me at a later stage to enable me to obtain such independent advice, contrary to the professional conduct and other ethical requirements, to which I understand solicitors are subject”. 

70. In that witness statement he states in paragraph 7 that he has now seen for the first time the Acknowledgment dated the 17th August 2005 and asserts, as he asserted before me, that the signature was not his.  He asserts also that the transfer document TR1 would “appear to be another document that the Petitioner has procured my signature to”.  I have referred already to paragraph 9 of that witness statement, where he produced the copy letters dated 2 April and 4 April 2002 and made his assertion as to the basis on which he says that he received money from the Petitioner, a very different account to that which is now given. 

71. In the fifth witness statement that was made on the 26th February 2007 the Defendant gave an expanded account of the basis on which he received payment.   What he asserted (at B2/76) was

“that the various payments were not loans but were in fact unconditional gifts for looking after the Petitioner emotionally and caring for her three children…  Furthermore [she] had the benefit of two years’ rental income from the property 2 Codrington Mews for the years 2003 and 2004 and out of the rental income would discharge the credit card bills and other expenses incurred by me and charged to the Petitioner’s credit card account.  The arrangement I had with the Petitioner was a very informal one. We were building a life together and..  it was not necessary to record anything in writing.   I would provide business advice to her including a great deal of emotional support.  On many occasions the Petitioner suggested that I receive payment of monies on her behalf because she was involved in a separation from her husband.. and these payments were received prior, during and after her divorce from her husband.  This informal arrangement was always on the basis that in return for providing emotional support for the Petitioner and looking after her three children, I would be paid in kind.  The payments received by me were used for my personal expenses and also for the children with the full authority and agreement of the Petitioner. … I have never denied that I have received sums of money from the Petitioner but this was with the full knowledge and agreement of the Petitioner in return for providing emotional support to her and her children…I acted as the Petitioner’s personal counsellor in her business affairs, have always denied that sums were loaned to me by the Petitioner...  The amounts paid were absolute gifts from her to me and they were not intended to be loans. The Petitioner  is a lawyer and if she intended that the advances to me were by way of loans I would have expected [her ]to prepare  precise loan documentation to evidence such loan payments.  In my view absence of any documentation…. supports my contention that she intended the payments of the various sums to be gifts rather than loans”.

So in that witness statement there is mention of services, although it is still being asserted that the payments were essentially gifts.  Before me, as  will appear, it is being now asserted not that the payments were gifts but that they were payments made in consideration of services rendered. 

72. A Bankruptcy Order was made by Mr Registrar Jaques in February 2007 but was set aside on appeal in June of that year by Mr Justice Briggs. 

The Claimant’s present action
73. This action was commenced in August 2007. ( I will deal separately with the action commenced by Mr Kingsbury against the Claimant).

74. The Defendant’s defence as regards the alleged loans expressly pleads not that they were gifts but that they were “payments in consideration of the services provided by the Defendant” under the agreement set out in paragraph 18 of the defence (see  paragraph 19 of the defence.)  In paragraph 18 (A19) it is asserted  that

“(1) in or around early 2000, at the suggestion of the Claimant, the Defendant and the Claimant agreed (“the Agreement”) that in consideration of a) the Defendant remaining in England rather than going to work overseas, b) looking after the children and c) providing other services for the Claimant including but not limited to day to day assistance and emotional support in order that the Claimant was able to continue her work as a solicitor,  carry out fund raising for the Labour Party and perform other activities,  the Claimant would provide the Defendant with financial support to the level he required,  such financial support to include payments to cover his own general living expenses and those of her children and/ or the discharge of the same directly or by the provision to the Defendant of her credit cards or such like.”

It is asserted in sub paragraph (2) that the Defendant chose not to pursue other work opportunities such as consultancy projects offered to him in the film industry in order that he could perform the role that the Claimant asked of him. However, I note that in the course of these proceedings the Defendant has failed to provide details of  any work opportunity whatsoever that he says he was deprived of pursuing because of the agreement that he made. The work and support relied on are elaborated in sections O and P of his trial witness statement.

75. At this point, it is worthwhile to pause to consider specifically the Defendant’s case about the huge payment (£200,000) made in May 2000 referred to in paragraph 37 of this judgment. In his statement, he states

“89. The Sutherland Avenue property was very large and situated over a number of different floors…  Ms O’Hara was keen on renovating the property.  I suggested to her that, rather than keeping it as one property she could make more money by converting it into four or five large high quality flats.  She was very enthusiastic about this and after discussing it at great length and visiting the property when Judge Karsten was not present, I drew up some plans and budgets to show her how this might best be done.  On the basis of this work Miss O’Hara asked me to be responsible for undertaking and supervising the work.

90. In addition Ms O’Hara asked me to assist in locating suitable properties to purchase and renovate in West London as well as France and Italy.  This included a property at Hillgate Place.  I spent many hours visiting estate agents and looking at properties…

91. Given the work that I was undertaking for her, Ms O’Hara offered to pay me an overall sum of £200,000, primarily for renovating 120 Sutherland Avenue.  She calculated this on the basis of £50,000 for each of the anticipated 4 flats and by reference to my previous earnings from Ms Campagne with which she was familiar as she had the relevant papers showing my earnings. Whilst I appreciate this is a significant sum particularly as Ms O’Hara did not subsequently follow through with this work as a result of her divorce, it does need to be placed into the context of the substantial profit that she stood to gain.  In addition Ms O’Hara was impressed with my work and was aware of the level of remuneration paid to me by Ms Campagne”.

76. In evidence the Defendant said that the plans referred to were not Architect’s drawings – he has no qualifications as a draftsman  or architect– and that the agreed payment included payment for managing the proposed works.  To my  mind, the idea that the Claimant  would be paid in advance the sum of £200,000 (primarily) in respect of a building project which might never take place (not least because the property remained the family home of the Claimant, her husband and their children) and which in the event did not take place, in circumstances  where he had no building qualifications, is simply incredible and I accept the Claimant’s evidence that it is pure fiction.

77. In evidence the Defendant detailed his services under 4 heads: 

(1)  Searching for properties over the whole period;
(2)  the redesign of Sutherland Avenue as mentioned; 
(3) Staying in the UK to help the Claimant  with her children, which he said took up an extraordinary amount of time since all three children were alleged to have significant problems.
(4)  the renting of his furniture to her at Tavistock Road at (according to him) the agreed sum of £25,000 per annum.

78. As to the allegation regarding the children,  the Defendant was not introduced to them as the Claimant’s boyfriend until February 2002, by which time most of the sums that are the subject of this claim had been paid.  He did not look after them in any way, as he admitted, until 2003 and indeed the Claimant had a full time live-in au pair until 2002. 

79. In evidence the Claimant comprehensively rebutted the Defendant’s evidence about the alleged agreement and services. The idea that she would pay the Defendant over £1m (or even £600,000) for the services he describes is again to my mind  simply incredible.  I am satisfied that his evidence as to the alleged agreement is fiction. I shall return in due course to the basis on which I find the payments were made.

The Defendant’s evidence to me about the execution of the Moira Trust Deed and form TR1
80. In his evidence before me, the Defendant  makes it clear that he is entirely reliant on the account given by Matthew Watson, the witness to his signatures on the documents, in his witness statement, as to the circumstances in which he (the Defendant) came to sign these documents.  He then details the advice which he says the Claimant gave him regarding the updating of the Kingsbury Trust.  He states (in paragraph 154) that the explanation Matthew Watson gave about the misrepresentation relating to the purpose of the blank documents (namely that they would be used to update the 1997 Trust)

“accords with the discussions I had with Ms O’Hara regarding updating the Kingsbury Trust.  I had suggested this to Ms O’Hara as, whilst the 1997 Trust had been in place for several years by that time, I was conscious that the Property [ 2 Codrington Mews] had not been transferred into the name of Julian to hold on Trust for Sam and Matthew.  Indeed I was keen for the document to be formalised because, in reality, the 1997 Trust had been prepared in a hurry by Julian at a time when I was severely unwell and I was not entirely confident as to its legal enforceability.   Ms O’Hara had offered to improve it and I was in the habit of signing documents prepared by her without reading them and she was fully aware of this and of the trust I placed in her at this time, particularly as she knew of my dyslexia”.

81. Once again I am perfectly satisfied that this account is pure fiction.  Notwithstanding the evidence of Julian Kingsbury and M Lagabbe (which I will detail in due course), as well as that set out in the next section of this judgment,  I am quite sure that the Claimant is truthful when she tells me that she knew absolutely nothing of the Kingsbury Trust until it was revealed in the circumstances I shall mention in June 2007.  Her dealings throughout with the Defendant (including her attempts to obtain security over the Property  from him for her benefit and her payment of £200,000 to obtain annulment of the bankruptcy and avoid its sale),  with his trustee in bankruptcy, with the Nationwide Building Society in connection with the sale at an undervalue claim and with Mr Michel in relation to the contract for its sale and with BNP, make that absolutely clear to me. 

The Kingsbury Trust Deed and the January 2004 documents
82. As previously mentioned Julian Kingsbury says he drafted the Deed after receiving a telephone call from Marla Kerner regarding the Defendant’s ill health.  The further transfers and updated inventories purportedly dated the 7th and 21st January are also witnessed by Mr Michel. 

83. However until June 2007 the Trust was ignored by the Defendant in his dealings with others (leaving aside the disputed conversations with the Claimant) and he, as he accepts, continued to deal with the assets the subject of the alleged Trust as his to dispose of without regard to the Trust until and after his bankruptcy and it was accepted as late as May 2007 by his then solicitors, Freedman Green, that the Property, 2 Codrington Mews, had vested in the Trustee.  The Defendant says that he told Freedman Green (but no previous Solicitor save, he says, for the Claimant ) of the Kingsbury Trust Deed but they dismissed it as irrelevant, even though he was bankrupt and even though, had the trust been genuine, the property would not have vested in his trustee.   Indeed, Freedman Green wrote to the trustee in bankruptcy’s Solicitors on 11 May 2007 stating that the Defendant was considering purchasing the trustee’s beneficial interest in the Property.

84. The reference to the Kingsbury Trust Deed first appears in an unquestionably authentic document on the 29th May 2007, when Mr Kingsbury sent copies to the Defendant's then solicitors, Bevan Britten, stating he had retained the original documents.  Copies of the January 2004 documents were not produced until November 2007.  The 1997 Deed was then deployed by the Defendant in answer to his trustee’s application for sale of 2 Codrington Mews and at that time he claimed very little knowledge of the circumstances surrounding the execution of the Deed and the reasons for it:   in the witness statement dated 12 June 2007 served in answer to the Trustee in Bankruptcy’s application (B2/180) he stated in paragraph 4 “By 1997 my illness”, which he claimed was amply documented,” had worsened to such an extent that there were fears for my life.  I could not cope with life and it was not thought I was responsible enough to deal with my affairs.  I was therefore advised to transfer the ownership of my properties to be held in Trust for the benefit of my two younger sons”.   In paragraph 7 he stated “as the Court will appreciate I was very ill at the time and cannot recollect/did not know of the circumstances which surrounded the setting up of the Trust.  In particular I cannot recollect/do not know who drafted the Trust document or on whose advice it was prepared.   Mr Kingsbury is currently travelling..”.

85. In his trial witness statement made on 5 October 2009 the Defendant now purports to have what appears to be total recall of the circumstances of the execution of the Kingsbury Trust Deed – see paragraphs 36 – 43.  As mentioned, he claims to have given the Claimant a copy and had discussions with her about its updating, claims I have dismissed as lies (see paragraph 81).

The Defendant’s failure to call witnesses (save for M Lagabbe)
86. I now deal with another remarkable feature of this action, which is the Defendant’s failure to call witnesses with the solitary exception of M. Lagabbe.  The Defendant’s then solicitors’ allocation questionnaire dated the 10th December 2007 stated that they intended to call 7 witnesses relating to the creation, existence and operation of the Kingsbury Trust including Messrs Kingsbury, Michel, Watson, Ms Kerner and the Defendant’s sons, Sam and Matthew.   In the event witness statements were served of the evidence of Mr Kingsbury, Matthew and Sam Markham, Matthew Watson, Marla Kerner and Dr Alexander Bremner, the Defendant’s former psychiatrist and present friend, who until recently has funded his litigation and that brought by Mr Kingsbury.  Marla Kerner apparently always made it clear to the Defendant that she would not come to England for the trial but no steps were taken for her evidence to be given by video link, and the only witness actually called was M Hubert Lagabbe, whose evidence I must consider in depth later.

87. John Michel,  the witness to the vital Kingsbury documents, was not called to give evidence nor was an affidavit or witness statement produced from him.  He is elderly and, according to the Defendant, “not very well” and “sick” but that cannot explain the failure at the very least to obtain sworn evidence from an obviously crucial witness who remains the Defendant’s friend.  Matthew Watson is also an obviously crucial witness, a friend of the Defendant with whom he is in regular contact.  He is an assistant manager of a health club.  Nor did the Defendant call or seek to obtain evidence from  Mr Webb, whom he alleges was with him when, before 1997, he says he purchased items which are on the Trust inventory but are alleged by the Claimant to have been purchased after its date. 

88. At the pre trial review the Defendant, who was by then in person, was advised as to the requirements if an application for video link evidence was to be made.  No such application was made but on the first day of the trial it was suggested that Mr Kingsbury, to whom had been sent none of the trial bundles, should give evidence by Skype into the Defendant’s laptop computer,  a suggestion which I regarded as unacceptable and unmanageable and which I declined. I should mention that Mr Kingsbury is a party to the litigation and that the trial window was fixed for his convenience, but he said after the commencement of the trial that he was too busy to attend.

89.  It thus follows that I have not heard from vital witnesses.  At the beginning of the trial I told the Defendant that I would ensure that flexible arrangements would be made to accommodate witnesses whom he wished to call and that I was liable to draw adverse inferences if witnesses were not called without good explanation.

90. I am not satisfied that there is any good reason for the non attendance of Messrs Watson, Michel or Webb and I can only surmise that they were not willing to support the Defendant on oath.  The Defendant’s evidence that Bevan Brittan, his former solicitors, advised that the evidence of Mr Michel was not important is simply unbelievable.

91. The evidence of those who have made witness statements was nonetheless admitted as hearsay evidence under the Civil Evidence Act.  However for different reasons I am unable to attach any weight to their evidence on matters in dispute.  In all cases their evidence is unsworn and untested.  I have already stated my view regarding the failure to call Mr Watson (whose statement was in the bundle) and I have been denied the opportunity of seeing any of these people give evidence. 

92. I deal with them briefly in turn.

(a) Julian Kingsbury
93.  Mr Kingsbury is a party to the Pt 20 claim; he is therefore in a different category to the other witnesses.  He gives evidence as to the circumstances in which he says the 1997 and 2004 documents were executed.   He also alleges that on the 1st July 1999, 14th February 2000 and the 15th October 2005 he wrote to the Claimant.  She says that none of those letters was ever received by her although she accepts that she received payment of £7000 (by bank transfer) in October 2005 to settle a dispute the Defendant had with an antiques dealer (such payment being mentioned in the last letter) 

94. The letter dated the 1st July 1999 is in these terms:

“Reference PC Markham/Nationwide Building Society. 
Dear Mrs Karsten, Mr Markham has informed me that your firm is handling on a contingency basis the claim against Nationwide for selling 3 Codrington Mews to a developer at a price below market value.  I enclose the 1997 Trust Deed you have requested which confirms my interest in the property”. 

In the letter of 14 February 2000 Mr Kingsbury stated (among other things) that

“…As you are aware I hold [the Property] in trust for [the Defendant] youngest sons. I enclose a copy of the of the 1997 Trust Deed I previously sent you last July as Charles tells me you have been unable to locate it.  Charles tells me he has complete confidence in the way you are managing his legal and financial affairs and given his mental history I am reassured by this…”

95. Whilst originally stating in paragraph 114 of his statement dated 15 November 2007, filed in connection with the proceedings brought by the Defendant’s trustee in bankruptcy, that a copy of the Deed was sent to the Claimant in 1999, which accords with the claim in his letter dated 29 May 2007 (D1/87A) to have the original and with the statement in Bevan Brittan’s letter dated 18 July 2007 (D1/114) that the original deeds were available for inspection, in a response to a request dated 21 December 2007 and in paragraph 21 of his witness statement of August 2008 he stated that the original was sent to Mrs Karsten  with the letter of the 1st July 1999.   In the event, the original  documents have never been produced for inspection. 

Furthermore, Julian Kingsbury’s assertion (in paragraph 21 of his trial witness statement) that the Claimant’s request in 1999 for a copy was to assist in the investigation of the sale and undervalue of number 3 makes no sense to me and conflicts with the Defendant’s own assertion that he told the Claimant to ignore the Kingsbury Trust in connection with that claim

96. I have considered the evidence of M Lagabbe (dealt with below), which corroborates the evidence of the Defendant and Mr Kingsbury regarding the Claimant’s knowledge of the Kingsbury Trust, and I have rejected that evidence.  As I have already made clear, I accept the Claimant’s evidence that she was ignorant of the Trust until June 2007.  I find that the 3 letters produced by Mr Kingsbury are fabrications and that I can place no weight at all on his evidence.

(b) Matthew Watson
97. I have considered the evidence of Matthew Watson as set out in his witness statement.  He says that the document which became the Moira Trust Deed was signed in blank and that the Claimant induced the Defendant’s signature by misrepresenting that the Deed was required to update the Kingsbury Trust.  I am quite satisfied that all that unsworn and untested evidence is simply untrue, and I deal with expert evidence supporting the Claimant’s case about the documents not being in blank when signed by the Defendant  later.

(c) and (d) Samuel and Matthew Markham
98. Samuel and Matthew Markham were aged respectively 12 and 16 in 1997. They both say that Julian Kingsbury in that year showed them a copy of the Trust Deed and explained that it was to protect the Defendant’s assets.  In view of their age and relationship to the Defendant and their failure to attend Court I find I can place no weight on their evidence.

(e) Marla Kerner
99.  Marla Kerner too is a friend of the Defendant.  She is a physical therapist in New York who in 1997 and 1998 provided letters which she signed as president of the Directors Showcase Inc offering employment to the Defendant in London at a salary of £200,000 per annum,  evidence that was directed at defending possession proceedings brought by the Nationwide.   There are earlier letters from her in the discovery bundles dated 1991 and 1994.  Her witness statement is silent about such matters, as it is silent about her involvement with Directors Showcase, and I have previously remarked on the lack of hard evidence before me of the Defendant’s ill health in April 1997. Again I find I can place no weight on Ms Kerner’s unsworn and untested evidence.  There is no good reason in my view why arrangements could not have been made at the very least for her to give evidence by video link.

(f) Dr Alexander Bremner
100. Dr Bremner is in a different category.  He has expressed partisan views in favour of the Defendant in his witness statement.   He has funded the litigation, he has refused to produce his notes evidencing his attendances on the Defendant since May 1999 on which much of his evidence is based.  By order made at the pre trial review on the 5th November of this year it was provided that unless his medical notes which are referred to in his witness statement were produced, evidence based on those notes should not be admitted and therefore a large part of his evidence is in any event simply inadmissible.   In any event the Defendant did not call Dr Bremner to give evidence, stating that his work commitments prevented that at any time during the trial period.  Thus again I am deprived of the opportunity to see him and to hear his evidence be tested.  I find that I can place no weight on his evidence.

The evidence of M. Hubert de Lagabbe
101. I now must deal at greater length with the evidence of M. Lagabbe, who was called to give evidence.   He is president of the co- owners syndicate for the building which includesthe Defendant’s flat in Paris.  He has been a member of that syndicate since 1983 and as such is involved in accounting matters and the payment of service charges to the building management firm, Cabinet Lescallier.  He first met the Defendant in 2000 but was aware of him in 1999 because his service charges were over three years in arrear.  He says he is not a friend of the Defendant but has been inside his flat four or five times although for some incomprehensible reason was at first extraordinarily reluctant to answer the simple question of whether he had been inside the flat  when he was called to give evidence.   Although not a friend, M Lagabbe says that the Defendant told him shortly before the 16th December 2008 that the Claimant was claiming that the Defendant’s arrears of service charges, mortgage loan to BNP and building work finance had been paid with her personal money as a loan and was denying the existence of a trust for his sons.  Monsieur Lagabbe said that he felt so strongly in the light of the conversation I shall mention that he said he had with the Claimant in September or October 1999, and he is firm about  those dates, that unsolicited he wrote a letter on the 16th December 2008 to the Defendant’s solicitors to set things right. 

102. I shall quote from that letter addressed to Mr Edward Husband of Bevan  Brittan (CB2/670).

After stating that he had noticed  that the latest apartment charges had been paid by the Defendant personally “and not through the people I knew of as his employers, Moira Karsten and MK Enterprises, as it had been the case for the past years” M Lagabbbe wrote:

“many years ago, Mr Markham charges had not been paid for three years or more, and we were about to sue him and to go to court for a judicial sale of his apartment. It happened that, just as I was visiting Cabinet Lescallier to discuss this very critical situation, a call from Mrs Karsten was passed to the room where we had our meeting, and, as I was the only English speaking person, they handed the phone to me.

Mrs Karsten knew about the situation, as, in the law firm she was working for, she was the solicitor in charge of their client Paul Markham's matters. She wanted to tell us that there would not be any problem for Mr Markham arrears to be paid. She explained that as the apartment was the property of a trust for Mr Markham's sons, and that we should stop our legal actions against Mr Markham and that the debt would be paid very soon.

I remember that I asked more details because this very affirmative assurance did not have any support. That brought her to tell me that Mr Markham, apart from being her law firm's client, had done a considerable and good work as much for her personal property as in her property firm, MK Enterprises. Mr Markham's consultant work had generated very substantial fees for him (she did not mention a precise figure but I understood that it was considerable) which had not been paid to Mr Markham. Those fees were posted as credits due to him, as much in her own accounts as in MK Enterprises. Mr Markham arrears would be paid without problem thanks to those credits due to him. She added that she was also going to use these sums due to Mr Markham to pay the arrears in Mr Markham's mortgage, and settle his mortgage loan…..

I remember Mrs Karsten also asked me during this same conversation if I could recommend an architect and a contractor which Mr Markham could use for the renovation of his apartment in Paris, and also a bank branch for opening an account for him where she could credit Mr Markham's fees from MK Enterprises and herself’s to pay for the works. I was not very motivated to respond to this demand, but, we decided with Cabinet Lescalllier that it would be a good thing for the benefit of the building that Mr Markham was using firms we knew of. So I told her the name of the building architect and some names of contractors known by us. But I added that this was linked to her assurance that their bills would be paid, otherwise I would loose the contactors and the architect’s confidence. I learnt later that they were paid directly from England by MK Enterprises or directly through Mrs Karsten account in England.

I feel that the knowledge of these facts had to be given to you in the present situation, in which I understand Mrs Karsten (now ex-Karsten as she is divorced) is claiming that Mr Markham's arrears, mortgage loan and building works have been paid with her personal money as a loan to him, in complete contradiction with her words to me as Mr Markham’s solicitor some years ago.”

103. Following that letter M. Lagabbe agreed to be a witness, hence the witness statement before me in which he repeats the contents of that letter.   In paragraph 15 of that statement it again is asserted that in the course of that conversation in September or October 1999 Mrs Karsten informed him “that Mr Markham apart from being her law firm’s client had done a considerable amount of consultancy work in relation to her personal property and for her company”.  He explained in paragraphs 19 and 20 how he was able to have more or less total recall of this very old conversation: he says that it was the only time that, as far as he can recall, that the syndicate had to consult lawyers in order to begin proceedings.  It was sufficiently unusual to leave tracks in his memory, and that is elaborated in paragraph 20.

104. In paragraph 22 he states that Mrs Karsten did not provide written proof, that he later came across Mr Markham unexpectedly, asked for and was given a copy of the Trust, which he claims to have scanned onto his computer in 2000. 

105. In cross examination M. Lagabbe said that he had no contemporaneous note of the conversation, which of course occurred nine years before his letter, and was relying entirely on his own memory; that the letter was drafted without assistance from or discussions with the Defendant and that a copy was not given to the Defendant before it was sent.  The only thing he said he asked the Defendant before writing the letter was the name of the Claimant’s company.  He said that there were no significant arrears of service charges in respect of the Defendant’s flat after payment of the 1999 arrears and although he scanned the Deed into his computer his understanding, after the conversation with Mrs Karsten, was that the Defendant’s sons were the owners of the flat and responsible for service charges.  He said that it was very important for him and Cabinet Lescallier to know who the owners were, and he claims he told them after his conversation with the Claimant in 1999 but not again, albeit that he continued to regard the sons as responsible, notwithstanding the terms of the Kingsbury Trust Deed.

106. Notwithstanding his statement about the lack of substantial arrears after 1999 he remembered, after being shown a letter from French lawyers dated the 2nd August 2006, that at that date the Defendant owed €12,755 and was being threatened with legal process which would not occur unless the arrears were of about one year or more in age.  That refreshed his memory because he then said that he had actually seen the letter and had spoken to the Defendant about it.

107. The Claimant denies M. Lagabbe’s account. She says that she has never spoken to him, that she dealt exclusively with Cabinet Lescallier in relation to the service charges both in 1999 and 2003 and that they, a large organisation, have a number of fluent English speakers.  What is clear is that the service charges of which Monsieur Lagabbe speaks were paid on the 29th October 1999 by the Claimant directly;   her company was not in fact incorporated until 20th December 1999.

108. As I have indicated, I reject the evidence of M. Lagabbe.  As I have made clear, I am perfectly satisfied notwithstanding that evidence that the Claimant had never heard of the Kingsbury Trust before June 2007 and that the Defendant had not done “a considerable amount of consultancy work” either for her or obviously her company by the time of the alleged conversation in September or October 1999 or indeed thereafter.   It is quite remarkable that he claims total recall of a conversation in 1999 yet forgot about dealings over arrears that occurred much more recently in 2006.  He claims to have obtained a copy of the Deed which he says was important for him to have, yet evidently did not read it or else he would have realised that by its terms the Defendant was not responsible for the service charge.

109. But for the references to scanning the document in 2000 I would have concluded that he is simply mistaken in his recollection and has a false memory on account of conversations he has had with the Defendant.  However that conclusion is not possible in the light of the evidence regarding the scanning of the Deed, which I reject, and so I am forced to conclude that he is lying in the interests of the Defendant, albeit that I am unable to say why he should have done that.   In any event I have no doubt that his evidence concerning the Claimant is untrue.   I also mention the fact that his computer has not been the subject of forensic examination notwithstanding the suggestion of the Claimant’s solicitors that it should be.

Expert evidence
110. I have heard on behalf of the Claimant the expert evidence of Audrey Giles, the well known handwriting and forensic document expert, and Stephen Davies, a computer forensic investigator.  The Defendant did not seek to cross examine either expert, stating quite reasonably that he did not have the requisite expertise. 

111. As regards the evidence of Audrey Giles (A/95), her conclusions are as follows:

a.    as regards the Acknowledgement of the 17th August 2005, she concluded that there “is more support for the view that Mr Markham signed the handwritten agreement than there is support for the view that this is an attempt to simulate his genuine signature.  However this support is only limited”.  That is elaborated on page 105 which I do not find necessary to quote.

b.   In paragraph 3 she says that “I found that the signatures in the name Markham on the Moira Trust and Land Registry documents were in each case written after the laser printing of the body of the documents”.   That is elaborated on pages 106 and 107, where for example it is stated that the ink line is poor where the pen intercepts with laser printing and that in each of the questioned signatures the area interception is small but all the deposited ball point ink appears bright as it crosses the smooth surface of the laser printing, which  means in each case the signature was written after the laser printing. 

c.  She finds very strong positive evidence to support the signatures on these Deeds as being genuine signatures, but that is not disputed,  and nothing in the writing or signature of Mr Watson or Mr Markham on either the Moira Trust Deed or the Land Registry form to suggest they were written under the influence of alcohol, and again that is elaborated on page 108.

112. Stephen Davies’ conclusions are as follows:

d.  an examination of the contents of the digital and signed copies of the Moira Trust Deed and the Land Registry transfer form shows both are identical in content;

e.   an examination of the embedded date/time stamp information of the file “trust deed.doc” revealed that the “last saved” and the “last printed” date/time information precedes 7th October 2005, the date he was informed the hard copies were signed.  The files “CODRINGTON MEWS.olf” and “Trust deed. Doc” were “Last Written”  (ie last saved)  approximately five minutes apart without any other files being written to in the meantime.  This suggests (he opines) that the digital copies of both those documents (ie the Moira Trust Deed and Form TR1) were saved in the same computer usage session. 

f. No evidence has been identified which suggests any alterations to the specified files.

113.  The evidence therefore of both experts strongly supports the conclusion that these documents were not blank when signed by the Defendant.

The action brought by Julian Kingsbury against the Defendant
114. On the 19th September 2007 Julian Kingsbury as Trustee of the Kingsbury Trust, without any letter before action, issued proceedings against the Defendant claiming relief arising out of the lease which I have mentioned  in paragraph 57  executed by the Claimant on behalf of the Defendant as landlord, and in respect of Trust chattels which it was said she was wrongfully detaining.   The proceedings were defended and by Pt 20 counterclaim to which the Defendant has been joined the declaratory  relief that I mentioned at the outset was sought. 

115. As stated, it was learnt in September of this year that Dr Bremner was funding this and the Defendant’s own litigation. On the 20th August 2009 Mr Kingsbury was ordered to pay £50,000 by way of security for costs. He failed to do so and on the 15th September his claim was dismissed.  However the Pt 20 counterclaim remains live. 

116. On the 26th October this year the Defendant became a litigant in person, Dr Bremner having discontinued the funding , and the Defendant has pleaded no set off or counter claim in his own action.

The issues in the case
117. After that long recital I can now deal with the issues in the case, namely 

1) How much did the Defendant receive from the Claimant? 
2) What was the basis of the payments?
3) Did the Defendant sign the Acknowledgment of August 2005?
4) If so is it vitiated by undue influence?
5) Were the Moira Trust Deed and form TR1 signed in blank?;  if not
6)  Are they vitiated by misrepresentation, non est factum or undue influence?
7) Are the Kingsbury Trust Deed and the January 2004 documents genuine, valid and enforceable? 

118. Before dealing with the resolution of these issues it is necessary for me to mention how I have dealt with the standard of proof.

119. Throughout I have been cognisant of the fact that this is a case of alleged fraud and dishonesty involving very serious allegations made by the Claimant (and indeed the Defendant)  of fraud,  fabrication of documents and  lies.  I remind myself of the judgment of Rix LJ in the case of Markel v  Higgins [2009] EWCA Civ 790, where at paragraph 50 he stated:

It is common ground that where a claimant seeks to prove a case of dishonesty, its inherent improbability means that, even on the civil burden of proof, the evidence needed to prove it must be all the stronger: see Hornal v. Neuberger Products Ltd  [I957] I QB 247, Re H [1996] AC 593 at 586/7, Re Doherty [2008] UKHL 33 at paras 23/29, Re B (Children) (Care Proceedings: Standard of Proof) [2008] UKHL 35, [2008] 3 WLR l. The judge did not cite these cases other than Re H, but that is sufficient. Moreover, it is clear to me reading his judgment that he proceeded on a basis, the right basis, which must have been common ground before him. He said right at the beginning (at para 4):

"The burden of proving this fraud lies upon the Claimants who must do so on the balance of probabilities. But cogent evidence, commensurate with the gravity of the allegations made against the defendants, is required to prove the allegation on the balance of probabilities: see lkarian Reefer [1995] I Lloyd's Rep 455 and Re H [1996] AC 563."

120. It is clear from the preceding contents of this judgment and from my further conclusions set out below that I have concluded that the Claimant, both in relation to her case against the Defendant and her case on the Pt 20 counterclaim, has amply discharged the burden to the requisite standard.

The resolution of the issues
I now deal with the resolution of the issues. 

(1) How much money did the Defendant receive?
 
121. I have concluded for the following reasons that the Defendant received the sum acknowledged in the Moira Trust Deed, namely £1,125,000.

(a) I find that he freely admitted receipt of that sum in that Deed and indeed was prepared to admit the receipt of the slightly larger sum in the Acknowledgment dated the 17th August. 

(b) The Claimant in her Schedule of Loans has given detailed particulars of the sums paid and their purposes, demonstrating that approximately £1.16m was paid. The items are documented and cash and credit card payments have been broken down   There are detailed schedules and supporting documents in Bundles E(1) and (2).  In evidence she stated that when she prepared the schedules she was confident of their accuracy although it was possible that errors had been made.  The sum admitted in the Moira Trust Deed permits a margin of error, albeit very small.

(c) In his witness statement the Defendant accepted among other things in paragraph 98 that the Claimant had shown she had paid sums totalling £1.025 million, but had not he said demonstrated that all those referred to him,  although it was accepted “tentatively”  that she had demonstrated that approximately £410,000 was paid to him or for his benefit, not including the £200,000 paid to procure the annulment of his Bankruptcy.   Initially during the course of the Claimant’s cross examination, the Defendant challenged some payments where there was no documentary evidence of his receipt but when he gave evidence he said that he admitted all payments where there was documentary proof of his receipt but neither admitted nor denied the others; in other words he did not plead or advance a positive case with regard to those. 

(d) In the circumstances I have concluded it is safe to accept the Claimant’s evidence about the sums paid notwithstanding the fact that she did not maintain a contemporaneous statement of account, albeit that she had documentary records.

(2) What was the basis of the payments?
122. The starting point, although it is not of any great assistance in this case, is as stated in paragraph 38 -244 of Chitty on Contracts, volume 2, under the heading “Proof of loan”:  “If money is proved or admitted to have been paid by A to B then in the absence of any circumstances suggesting presumption of advancement there is prima facia an obligation to repay the money.  Accordingly if B claims the money was intended as a gift the onus is on him to prove the fact”.  Of course in this case I have heard the sworn evidence of both parties and I do not need to decide the case on the basis of presumptions.  I decide it on the basis of my findings of fact. 

123. It is important to note that the Claimant’s particularisation of the claim in her Schedule makes it clear that the monies that she has claimed do not include payments in respect of the Defendant’s general living or household expenditure, but comprise sums paid in connection with the Paris and Bordeaux properties, the French film deal, payment of creditors and general business expenses. 

124. For the reasons I have stated I reject the Defendant’s pleaded case as to the basis of payment as untrue.  I also accept the Claimant’s evidence that she never agreed to pay any rent or other sums for the use of the Defendant’s furniture at Tavistock Road.  

125. The Defendant does not now suggest that the payments were simply gifts, perhaps because of their huge amount.  But in any event I accept the Claimant’s evidence that the payments in respect of which she claims, being made for the purposes described in paragraph 123 above, were made on the express understanding that they were loans.  In view of their amount it seems to me inconceivable that the Claimant would have made unconditional gifts amounting to approximately £1 million prior to the end of 2001, when her divorce ancillary relief claim remained outstanding and thus she was unclear as to her eventual financial position.   But having said that I recognise that her conduct on any view was extraordinary, but she was deeply in love with the Defendant, as indeed was clear to her friend Lexa Hilliard, whose evidence was unchallenged.  I find that that love and the Defendant’s charm and persuasion and lies clouded her reason and her common sense and, as appears from my account of the history , particularly in relation to the lies that I am satisfied were told in relation  to the French Film Deal and its anticipated returns, I regretfully find that it is entirely accurate, as the Claimant has alleged, to describe the Defendant in relation to his financial dealings with the Claimant as a confidence trickster, and I am satisfied that he was a convincing and effective one.

126. I am reinforced in my conclusion regarding the basis of the payments by the express terms of the Acknowledgment of the 17th August 2005 and the Moira Trust Deed, which acknowledged borrowings and lending respectively and are thus entirely consistent with the Claimant’s account of the parties’ dealings, which I accept as truthful, consistent and accurate and entirely inconsistent with the Defendant’s account.  It goes without saying that I reject as untrue the explanation for the payments given in his witness statement of the 18th December 2006, namely gifts of money for looking after and seeing to the emotional and moral welfare of the children,  a proposition that only needs to be stated to be dismissed as ludicrous. 

(3) Did the Defendant sign the Acknowledgment dated 17th August 2005?
127. I am sure that he did.  In this regard, I place little reliance on the evidence of Audrey Giles but I accept that the Claimant is truthful in her account and find the Defendant is not.   It is interesting that in order to bolster his case virtually the first thing he asserted in the witness box was “I always sign my name Paul Charles Markham”, the signature on the Acknowledgment not being in those terms.  However when shown examples of other forms of signature he admitted  that his normal signature was either Paul Charles Markham or Paul Markham.  I shall deal with undue influence in relation to the Acknowledgment (issue 4) below.

(5) Were the Moira Trust Deed and form TR1 signed in blank?
128. Again I am sure they were not.  The evidence of the Claimant is clear and it is supported by the independent expert evidence of both Ms Giles and Mr Davies and  the Defendant is not assisted by his failure to call Mr Watson. 

(4) (6) Were the Acknowledgment, Moira Trust Deed and form TR1 vitiated by undue influence; were the Trust Deed and form TR1 vitiated by misrepresentation or non est factum?
129. I deal briefly with misrepresentation and non est factum in relation to the Moira Trust Deed and form TR1.  There was simply no misrepresentation.  The evidence of the Defendant and Mr Watson as to the Claimant’s statements relating to the updating  of the Kingsbury Trust for the children and the circumstances in which the documents were signed is I am satisfied a tissue of lies.   I am satisfied beyond any doubt that the Defendant was perfectly aware of what he was signing in the case of all three documents.

Undue influence
130. The legal principles to be applied are set out succinctly in Snell on Equity paragraph 8-09

(a) Undue Influence  ‘Undue influence is one of the grounds of relief developed by the courts of equity as a court of conscience. The objective is to ensure that the influence of one person over another is not abused.’ The doctrine of undue influence enables C to obtain relief where he or she has been induced by the influence of D to enter into or participate in a transaction in circumstances where the court considers that the influence was exerted improperly or unfairly. As discussed in para.8-04 above in cases of this kind equity intervenes to prevent or reverse unconscionable conduct.  The kind of conduct which will attract the court's intervention may involve threats or other overt acts of coercion. But the court may also intervene where D has exercised no overt pressure on C because he or she has such a power of influence that this is unnecessary. Although the circumstances which are capable of giving rise to a claim for undue influence are potentially very wide cases where the doctrine operates are conventionally divided into two classes. The first class consists of cases of actual undue influence.  The second class consists of cases of presumed undue influence. The legal burden of proving undue influence remains on C throughout but if C establishes the existence of a relationship of influence and the nature of the transaction is so suspicious that it calls for an explanation, this satisfies the evidential burden of proving undue influence and the burden moves to D to provide a satisfactory explanation for the transaction. In the absence of a satisfactory explanation the inference of undue influence can be drawn and the legal burden of proof will be satisfied even if there is no direct evidence of undue influence. The court imposes the burden of providing a satisfactory explanation on D as a matter of public policy. Further, where the relationship between the parties falls into one of a number of recognised categories of parent and child, guardian and ward, trustee and beneficiary, solicitor and client or medical or spiritual adviser and patient or follower a relationship of influence is presumed. This is an irrebuttable legal presumption (as opposed to an evidential one) although in order to establish undue influence it remains necessary in all cases for C to establish that the transaction called for an explanation on the basis that it was "immoderate or irrational" or cannot "be reasonably accounted for on the grounds of friendship, relationship, charity, or other motives on which ordinary men act”

131. I also derive assistance from the speech of Lord Nicholls in  Royal Bank of Scotland v Etridge (no 2) [2002] 2 AC 773,798-9  The relevant paragraphs are paragraphs 21 to 26 stressing the need, even if there is a relationship of trust and confidence, to have something calling for an explanation.

21 As already noted, there are two prerequisites to the evidential shift in the burden of proof from the complainant to the other party. First, that the complainant reposed trust and confidence in the other party, or the other party acquired ascendancy over the complainant. Second, that the transaction is not readily explicable by the relationship of the parties.

22 Lindley LJ summarised this second prerequisite in the leading authority of Allcard v Skinner 36 Ch D 145, where the donor parted with almost all her property. Lindley LJ pointed out that where a gift of a small amount is made to a person standing in a confidential relationship to the donor, some proof of the exercise of the influence of the donee must be given. The mere existence of the influence is not enough. He continued, at p 185 "But if the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the donee to support the gift."  In Bank of Montreal v Stuart [1911] AC120, 137 Lord Macnaghten used the phrase "immoderate and irrational" to describe this concept.

23 The need for this second prerequisite has recently been questioned: see Nourse LJ in Barclays Bank plc v Coleman [2001] QB, 20, 30-32, one of the cases under appeal before your Lordships' House. Mr Sher invited your Lordships to depart from the decision of the House on this point in National Westminster Bankplc v Morgan [1985] AC 686.

24 My Lords, this is not an invitation I would accept. The second prerequisite, as expressed by Lindley LJ, is good sense. It is a necessary limitation upon the width of the first prerequisite. It would be absurd for the law to presume that every gift by a child to a parent, or every transaction between a client and his solicitor or between a patient and his doctor, was brought about by undue influence unless the contrary is affirmatively proved. Such a presumption would be too far-reaching. The law would be out of touch with everyday life if the presumption were to apply to every Christmas or birthday gift by a child to a parent, or to an agreement whereby a client or patient agrees to be responsible for the reasonable fees of his legal or medical adviser. The law would be rightly open to ridicule, for transactions such as these are unexceptionable. They do not suggest that something may be amiss. So something more is needed before the law reverses the burden of proof, something which calls for an explanation.  When that something more is present, the greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted.

25 This was the approach adopted by Lord Scarman in National Westminster Bank plc v Morgan [1985] AC 686, 703-707. He cited Lindley LJ's observations in Allcard v Skinner 36 ChD 145, 185, which I have set out above. He noted that whatever the legal character of the transaction, it must constitute a disadvantage sufficiently serious to require evidence to rebut the presumption that in the circumstances of the parties' relationship, it was procured by the exercise of undue influence. Lord Scarman concluded , at p 704:

"the Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the relationship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exercised to procure it." (Emphasis added.)

132. In this case I also found helpful the comments of Mr Justice Briggs on this aspect of the case when he heard the bankruptcy appeal.  In relation to the Moira Trust Deed, he found that the evidence then before him disclosed a clear triable issue as to the existence of the  relationship of trust and confidence as between solicitor and client.  He went on

“The more difficult question is whether the transaction constituted by the Trust Deed is, within the confines of a relationship which was both that of solicitor and client and that of domestic partners, one that called for an explanation, or rather one that is merely unexceptionable. More precisely, the question is whether there is a triable issue that the transaction calls for an explanation. In that context, I consider that everything depends upon what might be established at a trial as to the relevant background preceding the execution of the Trust Deed.

38. If for example it were proved (as Mrs Karsten asserts in evidence) that the parties had from the outset orally agreed that payments by her to him or for his benefit were to be loans rather than gifts, and that she had carefully and painstakingly calculated the amount outstanding by October 2005, then the transaction constituted by the Trust Deed (or at the very least that part of it recognising the continuing existence of a debt of £ 1.125 million) would indeed be unexceptionable. It would be no more than putting into writing what the parties had in substance already agreed by their words and conduct.

39. By contrast, if it were shown at trial that (as Mr Markham contends) the payments were gifts or the informal quid pro quo for his looking after Mrs Karsten's children, then the Deed of Trust, purporting to record the contrary, would plainly be disadvantageous to Mr Markham and something calling for an explanation.

40. There is of course a substantial undistributed middle between those two extremes, including for example the by no means unlikely scenario that Mrs Karsten transferred substantial sums of money to Mr Markham or for his benefit in circumstances where neither of them either discussed or gave significant thought to the precise legal basis upon which this was taking place. Such things routinely occur between co-habitees in relation for example to the ownership of their dwelling house; see Stack v Dowden [2007] 2 WLR 831.

42. True it is that the evidence suggests that Mrs Karsten sought to obtain Mr Markham's signature to trust deeds in 2042 and 2004 broadly reflecting that which she asked him to sign in October 2005, but it is common ground that he did not sign those earlier deeds, and in my judgment it is significant that, in 2004, Mrs. Karsten appeared to have recognised that the deed which she then wished him to sign was of sufficient significance to merit his obtaining independent legal advice before doing so, if necessarily at her expense. It is not suggested that in October 2005 Mr Markham was invited to or did obtain any such advice during the three day period which Mrs Karsten suggests he had between receiving and returning the Trust Deed duly signed.

43. It is of course tempting to conclude that since Mr Markham has chosen to tell a pack of lies about the circumstances in which he signed the Trust Deed (as the learned Registrar rightly concluded), the court should be slow to conclude that there exists an arguable case of undue influence, even if he signed an otherwise complete document while sober. But the tenderness of a court of equity to the possible victim of undue influence extends as much to the foolish liar as to those who are wise and honest, and wherever it is arguable that a transaction procured by a solicitor from her client calls for explanation, the jurisdiction exists also for the encouragement of the better conduct of solicitors, quite apart from the protection of persons who might prove to be their victims.

44. In my judgment therefore, there is a genuine triable issue as to the existence of a case of undue influence in relation to the Trust Deed, and the learned Registrar was wrong to reach a contrary conclusion. In so saying, I am far from suggesting that an affirmative outcome to that issue is probable. It may well be that it is improbable. Numerous decisions under the closely analogous CPR Part 24 show that summary judgment rejecting a defence is not appropriate merely because the defence is improbable. Probabilities are properly a matter for trial.

133. In the Defence the case of undue influence is pleaded thus in relation to the Acknowledgement in paragraph 34(4):

“To have signed the Acknowledgment would have been to the manifest disadvantage of the Defendant because he would have effectively have been asked to agree both a) that there should be an account stated in respect of the balance struck in the Claimant’s favour consequent upon items brought into account on both sides, namely any advance made by the Claimant to the Defendant of whatever kind for whatever purpose less any contribution made by the Defendant or on his behalf by the Kingsbury Trust and b) by the said account stated the sum of £1,150,000 was owing from the Defendant to the Claimant”. 

In the case of the Moira Trust Deed there is a similar assertion in paragraph 40(5).

134. Over the years, the Claimant acted on the Defendant’s behalf as his solicitor in connection with various matters (for example, the claim against Nationwide) and I proceed on the basis that their relationship was one of trust and confidence and presumed influence on her part over him.

135. I deal first with the Acknowledgment dated the 17th August 2005.  In the light of my findings of fact it is in no way exceptional in my view nor does it call for explanation.  The Declaration of Trust accords with what had been orally agreed and understood since October 2000.  The confirmation of the amount of the borrowings was freely given and substantially accords with my finding and paragraph 3 itself is wholly unobjectionable.  I reject the plea that the document operates as an account stated.  There is nothing in paragraph 2 to preclude the Defendant from asserting a set off in my view.

136. Similarly with regard to the Moira Trust Deed, it similarly represents what had been agreed by the parties without the Claimant in any way taking any unfair advantage of the Defendant.  I do not believe that its effect on its true construction would be to bar cross claims if the Defendant has any and although paragraph 3 of the Acknowledgment is omitted there is nothing objectionable in that having regard to the facts that I have found regarding the Defendant’s conduct. 

137. The Defendant relies on the fact that he did not receive independent advice with regard to the Moira Trust Deed, whereas the Claimant evidently had considered he should receive it in respect of earlier proferred Deeds which he did not sign.  But in my judgment on the basis of the facts that I have found there was simply no necessity for the Claimant to see that the Defendant obtained any kind of legal advice before signing the document. 

138. In evidence the Defendant asserted, although he had not asserted this in his Defence, that he was reliant throughout on the Claimant’s confirmation dated the 2nd April 2002 that she would not seek to enforce any debt in his lifetime, which is quite audacious in light of his purported reply to the Claimant two days later.  But in any event I find this does not assist him because by mid August 2005 he knew that the Claimant did indeed demand repayment of the loans in his lifetime.

(7) Are the Kingsbury Trust Deed and the January 2004 documents genuine, valid and enforceable? 
139. I am satisfied that all these documents are fabrications created long after their purported dates.

(a) As regards to the Kingsbury Trust Deed, as stated the Defendant’s conduct for years later is wholly inconsistent with its existence and I am satisfied that Julian Kingsbury has fabricated letters in support of its supposed existence. 

(b) Second, the original documents have never been made available for forensic examination and as previously stated Julian Kingsbury has given inconsistent accounts of the whereabouts of the original 1997 documents.   It is claimed that the original 2004 documents, copies of which were only produced in November 2007, have been lost in the post.

(c)  I have found that the Claimant was wholly unaware of the alleged Trust until June 2007, when it would have been highly material for her to have been told of it.

(d) Next it is telling that I have not heard or received sworn evidence from Mr Michel, who purportedly witnessed all of the disputed documents and purportedly checked all the inventories.  His absence is quite remarkable.

(e) Next I am further satisfied that items listed in the 1997 inventory were only acquired by the Defendant after its alleged date: 

(i) I heard evidence from Mr William Lack, the director of Attfield Limited, a leading dealer in antique Chinese furniture, who sold the Defendant four 19th Century Chinese stools in 2001.  He identified those stools in a photograph shown to him.  The Defendant claims that he purchased these stools in 1994/1995 at a flea market in Paris in company with Mr Webb whom I mentioned earlier, and he maintains that these items have been in the Paris flat ever since.   Mr Lack said that the items were not available on the European market in 1994 or 1995.  Mr Webb was not called to give evidence and the inventory annexed to the Kingsbury Trust Deed lists no items in the Paris flat at the time of its purported execution, which accords with what is stated in an email from the architect responsible for its refurbishment dated the 20th July 2007 (CB2/669), who says that the property was unfurnished and in very bad condition prior to the refurbishment works.  I accept the evidence of Mr Lack and reject the evidence to the contrary of the Defendant. 

(ii) Similarly the Defendant asserts that a Chinese chest of drawers identified by Gong of Chelsea as coming from their 2001-- 2003 collection (CB2/598), and items which match descriptions in Ogier invoices dated 2000 and 2002 were purchased with Mr Webb at the same flea market in Paris and have been in the flat ever since in Paris. I simply do not believe this evidence . 

140. However, if I had found these documents to be genuine,  I would have held that them to be sham trusts or alternatively transactions defrauding creditors within the meaning of section 423 of the Insolvency Act  1986.

141. The relevant legal principles regarding sham trusts are set out in Snell on Equity at paragraph 20-48 :

20-48 If held to be a sham there will be no trust at all. Diplock L.J. said that if sham ". . . has any meaning at all, it means acts done or documents executed by the parties to the sham which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual rights and obligations (if any) which the parties intend to create ... for acts or documents to be a 'sham', with whatever consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.  No unexpressed intentions of a 'shammer' affect the rights of a party whom he deceived…… The result of these principles is that if one person pretends to give property to another to hold on trust, but in reality intends that the ownership shall not change, this will be not a valid trust; or if he intends that the legal owner shall hold the property on trust, but does not in fact intend to part with the beneficial ownership of the property, whatever the trust documentation may say. Also if the beneficiaries have no rights enforceable against the trustees, there are no trusts.  Ultimately the issue of whether there is a sham involves a factual enquiry for the court. Thus a trust has been held to be a sham where, amongst other things, the settlor retained a power, exercisable with the trustee's consent, to appoint the entire capital to anyone including himself; and the settlor retained a power, exercisable without the trustee's consent, similarly to appoint one third of the capital in any l2-month period; the trustee's administrative powers were also subject to the settlor's prior written consent; and the settlor treated the assets comprised in the trust fund as his. On the other hand, the power to nominate a wide (even unlimited) class of beneficiaries and the fact that the assets included bearer shares, have not been regarded as an indication of anything sinister. If trustees of a trust, which is not itself alleged to be a sham, have power to transfer trust assets to another trust, and claim to exercise the power in a way which would be authorised if the transferee trust were genuine, the court will not lightly infer that a trustee in bankruptcy, upon whom lies the burden of establishing a sham transaction, has discharged the burden of showing that the transfer and transferee trust were shams.

142. If these documents were created on their purported dates (and of course I have found they were not) and if they were genuine in that sense, I am satisfied that they were sham trusts because  in reality the Defendant did not intend that the ownership of the property comprised therein should change, as evidenced by his conduct and the lack of involvement of Mr Kingsbury or his sons in those assets ever since their dates.

143. Alternatively, the transfers if genuine were gifts to Mr Kingsbury for the benefit of the Defendant’s sons.  Had I held that the trusts were genuine I would have held that their purpose was to put assets out of the reach of the Defendant’s creditors.  The Defendant’s financial position in April 1997 (and indeed in January 2004 given his indebtedness to the Claimant) was dire.  If a Trust was created in 1997 the most likely explanation on the evidence I have seen was to shield assets from the Defendant’s creditors then and in the future, rather than any ill health of the Defendant.  I would have been prepared to grant retrospective permission to the Claimant as a victim of the transaction to make an application under the Act and I would have made an Order setting aside the transfers.   However this does not arise in the light of my previous findings.

Conclusion
144. In the result it follows that the Claimant is entitled to the relief that she claims in both actions.  As to the amount of the money judgment which is sought, namely £850,000, this is calculated as follows:















I have not been given a precise mortgage redemption figure; I will need to hear further as to what to do about that and also I want argument as to the rate of interest because interest has been claimed at the judgment rate from the date of demand in August 2005 which of course is much higher than existing rates.  That concludes this judgment.

[Judge’s note:  On considering the draft, it seems that an arithmetical error has been made and that the net indebtedness should have been stated as £860,000]