Global Marine Drillships Limited v William La Bella and Others [2014] EWHC 2242 (Ch) is the saga of the attempted purchase of a deep sea drillship, which ultimately led to a solicitor being held to be in breach of her undertaking and in breach of trust.

Background

The Claimant wanted to acquire a deep sea drillship using finance from J P Morgan.  This finance was subject to the provision of certain standby letters of credit (SBLCs) by the Claimant.  Coolmead Investments Limited (Coolmead) (which was run by the First Defendant, Mr La Bella) told the Claimant that they could obtain these SBLCs in return for a fee.  Coolmead would also obtain a policy to insure against the risk of J P Morgan making any claim against an SBLC.

Mr La Bella's position was that the Claimant should make a payment on account of Coolmead's fees, as he wanted to ensure that he would be in funds as soon as the SBLCs were issued.  However, the Claimant was concerned that any payment it made should be adequately safeguarded.  They therefore agreed that the Claimant would transfer the funds to Coolmead's solicitors subject to the solicitors providing an undertaking that would protect the Claimant.  Coolmead's solicitors were Landmark (the second Defendant), which had been formed by Miss Yildiz (the third Defendant).

Miss Yildiz undertook that she would hold the money to the Claimant's solicitors' order pending confirmation that an agreement between the Claimant, Coolmead and others had been completed, following which the money would be used for the sole purpose of purchasing the insurance policy.  Miss Yildiz also undertook that if the insurance policy was not issued, then the funds would be returned to the Claimant's solicitors.  Miss Yildiz gave the undertaking both personally and on behalf of Landmark.  On receiving this undertaking, the Claimant's solicitors transferred £7million into Landmark's client account.

Miss Yildiz then came under some considerable pressure from Mr La Bella to transfer the money that she was holding in Landmark's client account to various bank accounts.  In particular, Mr La Bella sent her threatening emails and also visited her office, where he threatened to report her to the Law Society.  Mr La Bella then asked Miss Yildiz to transfer the money to a different bank account ("Charles Barber & Sons Limited t/as Brooklands") as he said that 50% of the shareholding of Brooklands had been transferred to Coolmead and the Brooklands' bank account would be operated by the directors and company secretary of Coolmead.

On Miss Yildiz's request, Mr La Bella undertook to her that the funds would be used for the purchase of the insurance policy.  She then transferred £5million in total from Landmark's client account to the Charles Barber account.  It turned out that Charles Barber actually operated a car dealership in Northwich.

No SBLC had been obtained so far by Coolmead and so the Claimant decided to terminate its contract with them.  Consequently, the Claimant's solicitors asked Miss Yildiz to return the £7million to their client account in accordance with her undertaking.  However, only £2million remained in Landmark's client account, which Miss Yildiz transferred to the Claimant's solicitors' client account.  The vast majority of the funds transferred to Charles Barber were never recovered and so the Claimant lost just under £3.5million of the original £7million.

The judgment

The trial before Mr Justice Newey only related to the claim against Landmark and Miss Yildiz.  The Claimant's case against them had two strands:

  1. Given that no insurance policy or SBLC has been issued, Miss Yildiz and Landmark were obliged by their undertaking to return all of the £7million that had been paid into Landmark's client account but they failed to do so; and
  2. Miss Yildiz and Landmark acted in breach of trust.  The Claimant argued that the £7million was held on trust for the Claimant until Miss Yildiz and Landmark received written confirmation from the Claimant's solicitors that the Claimant's agreement with Coolmead had been completed and executed.  The £7million was to be paid in satisfaction of the premium charged for the insurance policy.  In the event that an insurance policy was not issued for any reason, the £7million would be returned to the Claimant's solicitors.

Miss Yildiz and Landmark did not dispute that they gave the undertaking or that the £7million was the subject of a trust.  However, they argued that:  (1) the payments made to Charles Barber were authorised by the Claimant; and (2) the Claimant had agreed that if the £2million remaining in Landmark's client account was returned, it would not pursue Landmark or Miss Yildiz for the balance of the £7million and so Miss Yildiz and Landmark were released from any liability they would otherwise have had to the Claimant.

With regard to the first limb of Miss Yildiz and Landmark's defence, Mr Justice Newey found that, on the evidence, the Claimant did not authorise the payments to Charles Barber.  Furthermore, in respect of the second limb, Mr Justice Newey said that he had "no hesitation" in accepting the Claimant's evidence and consequently he did not believe that the Claimant had agreed to release Miss Yildiz or Landmark from further liability.  He therefore gave judgment for the Claimant.

Comment

This is clearly a unique case which has been decided on its own facts, however it does provide some lessons to be learnt by solicitors when dealing with their own clients.  Firstly, a solicitor should have a healthy dose of realism when dealing with their client's version of events.  Unfortunately, in this case, Miss Yildiz completely trusted Mr La Bella and even during the trial she saw no reason not to trust him, despite the way he had treated her and the claim that had been brought against her by the Claimant.  In fact, she even appeared to believe that the Claimant was guilty of fraudulent conduct in the events that had led to the claim, which Mr Justice Newey thought probably reflected what she had been told by Mr La Bella.  Secondly, this case is a warning that a solicitor should never be pressurised into breaching their undertaking by an aggressive client or a client offering false promises.  As Mr Justice Newey noted, the fact that Miss Yildiz was subjected to intense pressure did not provide her with a defence against the Claimant's claim.