Claim against solicitor arising from advanced fee fraud
Mr E and Mr B sued their solicitors (“BC”) for substantial financial loss resulting from an “advance fee” or “banking instrument” fraud whereby victims are induced to “advance” money a to a third party in reliance on the promise of huge financial reward. In this case the Claimants were told that their $225,000 and $150,000 investments would return them £14,000,000 and £12,500,000 respectively within one year.
In 2000, Mr B’s company was experiencing financial difficulties. He attended a meeting with BC at which he explained that he needed funds to assist his company and Mr S advised that the transaction was the best way of achieving the refinancing that Mr B’s business required. Mr B signed an agreement drafted by Mr S which provided that Mr B would pay an arrangement fee of US$225,000 to a third party company which would obtain and allocate US$15m to an account at a bank in Montreal; which money would be loaned to Mr B’s company on extremely favourable terms.
Mr B paid the arrangement fee but his company has received no loan in return because the transaction was in fact an advanced fee fraud. Mr E’s story was similar and he agreed to pay an arrangement fee of US$150,000, By reason of Mr S’s actions and alleged dishonesty, for which BC was liable, Mr B and Mr E lost the majority of their money. They instructed us to attempt to claim the monies back from Mr S’s insurers.
The background to these stories began in September 1997 when the Law Society issued Professional Standards Bulletin No. 17 to the legal profession, enclosing a “Yellow Card” warning in respect of banking instrument fraud which stated that “Prime Bank Guarantees” were not issued by the legitimate banking community and the legitimacy of such investments should always be questioned. The Yellow Card noted that the use of a solicitor in Prime Bank Guarantee schemes provided legitimacy and respectability both as regards the provision of documentation and the provision of accounts for the receipt of money. The warning concluded: “REMEMBER - if it sounds too good to be true it probably is!”
We argued that Mr S was aware that “Prime Bank Guarantees” were not issued by the legitimate banking community and that the legitimacy of any transaction or scheme involving them or purporting to involve them should always be questioned.
It was our case that both Mr B and Mr E were clients of Mr S and BC. It should have been obvious to a reasonably competent and honest solicitor that the transactions were or were likely to be frauds on Mr B and Mr E, particularly in light of the Law Society’s “Yellow Card” warning of 1997. We also advanced claims on behalf of Mr B and Mr E for breach of contract, negligence, misrepresentation and breach of fiduciary duty.
We issued proceedings against BC and recovered a substantial sum for each Claimant at a Mediation, with solicitors acting for BC and its insurers.
Mr E and Mr B