Neutral Citation Number: [2013] EWHC 208 (Ch)
Case No: HC11C00276
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 11/02/2013

Before :

THE HONOURABLE MR JUSTICE SALES
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Between :

	(1) Jeremy D. Stone Consultants Limited
(2) Mr Jeremy Stone	Claimants	
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	(1) National Westminster Bank plc
(2) Paul Aplin	Defendants	

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Stephen Auld QC & Richard Mott (instructed by Grosvenor Law LLP) for the Claimants
John Wardell QC & Nicholas Medcroft (instructed by Berwin Leighton Paisner LLP) for the Defendants

Hearing dates: 9/10/12 – 31/10/12
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Judgment

Mr Justice Sales : 

Introduction
1.	In these proceedings the Claimants claim the return of monies paid into accounts held with the First Defendant (“NatWest”) and damages or equitable compensation from the Defendants in relation to losses suffered by them as a result of being persuaded by an old friend of the Stone family, Mr Jolan Saunders (“Mr Saunders”), to invest in a business which, the Claimants later learned, was a fraudulent Ponzi scheme operated by Mr Saunders. The Claimants’ investments were made between June 2009 and April 2010.
2.	The Second Claimant (whom, for simplicity, I will call Jeremy) had amassed considerable personal wealth by early 2009 from his employment in and part ownership of a hedge fund investment company, which had been sold in early 2008 at a large profit. The First Claimant (“JDSCL”) is a company established to manage investments by Jeremy and others. JDSCL is managed by Martin Stone (“Martin”) and Emily Stone (“Emily”), who took on responsibility for managing Jeremy’s investments and personal wealth. Martin is Jeremy’s father. He is an experienced accountant who runs his own corporate finance advisory business called Jemstone Financial Ltd (“Jemstone”). Emily is Jeremy’s younger sister. 
3.	NatWest is a bank which operated certain accounts for the company which Mr Saunders used as the vehicle for the scheme, Saunders Electrical Wholesale Limited (“SEWL”). The Second Defendant (“Mr Aplin”) was employed by NatWest from late 2008 as the relationship manager for a number of customers, including SEWL. 
4.	The Ponzi scheme operated by Mr Saunders was based on what appeared to be a profitable investment opportunity held out by Mr Saunders to the Claimants and other investors, involving the supply of large quantities of electrical goods and related services to large, reputable hotel groups such as Hilton Hotels, Holiday Inn, Park Plaza and Radisson (“the hotel business”). The hotel business was in fact wholly fictitious. The scheme depended on Mr Saunders and an associate, Michael Strubel (“Mr Strubel”), being able to circulate large sums of money so as to repay investors using later investment money, thereby creating the illusion that good investment returns derived from the hotel business were indeed being made and paid out. In this way they attracted yet further investments into the scheme.
5.	At the same time, Mr Saunders and Mr Strubel extracted large sums for their own benefit from the money which circulated from and back to the investors. Very large sums of cash were periodically withdrawn by Mr Saunders from SEWL’s bank accounts with NatWest and by Mr Strubel from the accounts of two other companies controlled by him (Zac Fashions Limited – “ZFL” – and Camlet Capital Limited – “CCL”), also held with NatWest. It seems that the Ponzi scheme was implemented by Mr Saunders and Mr Strubel from about 2006, when SEWL opened an account with NatWest.
6.	The ability of Mr Saunders to control the flow of money through accounts of SEWL at NatWest was vital to the operation of the scheme. In particular, Mr Saunders controlled the flow of investors’ money into the scheme and payments out to them by use of SEWL’s Number 2 account with NatWest (“the No. 2 account”). He held that account out to the Claimants as the account into which were paid the receipts from hotel chains in payment for supplies made by SEWL in the course of the hotel business; but in various ways he prevented them from having access to information about transactions on that account. Had the Claimants seen what transactions in fact had been and were passing across that account they would have realised that they had been duped by Mr Saunders. They only gained access to the bank statements for the No. 2 account by chance on 28 April 2010, when using NatWest’s online banking service (“Bankline”) for another SEWL account, at which point they began to understand that they had been subject to a very substantial fraud. They have lost many millions.
7.	Mr Aplin was the relationship manager employed by NatWest with responsibility from December 2008 for liaising with and maintaining the bank’s relationship with SEWL (acting by Mr Saunders), ZFL (acting by Mr Strubel) and – from its formation in June 2009 – CCL (acting by Mr Strubel). The Claimants allege that Mr Aplin knew about or deliberately turned a blind eye to the use by Mr Saunders and Mr Strubel of SEWL, ZFL and CCL accounts with NatWest to carry on the Ponzi scheme and that he knew that Mr Saunders had misled the Claimants and other investors about the operation of the hotel business. The Claimants say that in certain telephone conversations and meetings with Mr Aplin, he misled them about what was happening on the No. 2 account and about the operation of the hotel business. Alternatively, the Claimants maintain that Mr Aplin owed them a duty of care and that Mr Aplin was negligent in making statements to them about the hotel business and the operation of SEWL’s accounts.  
8.	In this action the Claimants assert the following claims: (i) dishonest assistance by Mr Aplin in breach of fiduciary duty by Mr Saunders and SEWL (with NatWest bearing vicarious liability for Mr Aplin as its employee); (ii) deceit by Mr Aplin (with NatWest bearing vicarious liability); (iii) conspiracy by Mr Aplin with Mr Saunders and Mr Strubel to injure the Claimants by unlawful means (with NatWest bearing vicarious liability for Mr Aplin as its employee); (iv) unjust enrichment of NatWest by its receipt of monies paid by the Claimants into SEWL’s accounts with NatWest on the basis of mistake; and (v) negligence on the part of Mr Aplin (with NatWest bearing vicarious liability). The amount claimed varies depending on the cause of action and the time at which it is said to have arisen. 
9.	Damages for (ii) and (v) (deceit and negligence) are claimed in the sum of £19,012,624.43, dating from 20 November 2009, when misrepresentations are alleged to have been made by Mr Aplin. The damages reflect sums invested personally by Jeremy and by JDSCL. The damages claimed also reflect the liability which JDSCL incurred to pay interest to third party investors under loan agreements pursuant to which those investors lent JDSCL money which it then provided to SEWL as additional funding for the hotel business. Jeremy and Martin had persuaded friends and acquaintances to invest in the hotel business via JDSCL at good rates of return and Jeremy gave personal guarantees in relation to many of these loan agreements.  When the fraud was discovered, JDSCL was left unable to repay many of the loans and the amount of interest due in relation to the principal sums has increased over time.
10.	Damages or equitable compensation for (i) and (iii) (dishonest assistance in a breach of fiduciary duty and conspiracy) are claimed in the sum of £26,149,426.24, dating from the time of the first investment by the Claimants in the hotel business by means of lending to SEWL. Again, this amount reflects both the sums directly lent by the Claimants to SEWL and the interest liabilities of JDSCL to third party investors.
11.	In relation to (iv) (the unjust enrichment claim), the sum claimed is £15,489,707.53, being the total of the sums invested by the Claimants in the hotel business by transfer of funds to SEWL’s bank accounts with NatWest (after giving credit for sums received back).  
12.	The Defendants maintain that Mr Aplin was not aware of the Ponzi scheme or Mr Saunders’ fraud upon the Claimants. He was not dishonest. He, like the Claimants, thought that the hotel business was genuine. He knew that receipts from the hotels were not paid into the No. 2 account, but did not regard that as an indication that a fraud was being perpetrated because Mr Saunders told him that the hotel receipts were paid into another account of SEWL, maintained with Barclays Bank (“Barclays”), to which Mr Aplin had no access. 
13.	Mr Aplin recognised that the withdrawal of large sums in cash by Mr Saunders was potentially suspicious, but he had been briefed on taking over the account by his predecessor as relationship manager that this was an established pattern of business by SEWL and that NatWest’s Anti-Money-Laundering (“AML”) department and fraud department had been alerted to this and had not found reason to intervene or terminate the relationship with SEWL. Mr Saunders gave Mr Aplin an explanation for SEWL’s need to use cash in its business which Mr Aplin thought was credible, just as the relationship manager before him had. Mr Aplin himself had dealings with NatWest’s fraud and credit departments which, though raising some issues with him, did not raise any alarm about fraud or suggest that the bank’s relationship with SEWL should be terminated. 
14.	The Defendants deny that Mr Aplin ever assumed any relevant obligations to the Claimants. The Defendants emphasised that Mr Aplin was bound by a duty of confidentiality to SEWL, as the bank’s customer: see Tournier v National Provincial and Union Bank of England [1924] 1 KB 461, esp. at 485 per Atkin LJ (a banker’s obligation of confidentiality owed to his customer “must extend at least to all the transactions that go through the account …”). Mr Aplin was not at liberty to tell the Claimants about transactions on the No. 2 account or about the absence of hotel receipts into it. Mr Saunders, for SEWL, gave Mr Aplin express instructions that he was not to reveal any information about the No. 2 account to the Claimants and gave an explanation for that stance (that the account included transactions involving business with Mr Strubel which had nothing to do with the hotel business in which the Claimants were interested) which Mr Aplin – like the Claimants – found plausible and accepted. Mr Aplin denied that he had lied to the Claimants or said anything to them which was untrue. 
15.	Mr Aplin admitted that there came a point when he came to appreciate that the Claimants thought that the hotel receipts were going into the No. 2 account, whereas he knew they were not and understood that they were going into another SEWL account with Barclays Bank. He admitted that he did not inform the Claimants about this, saying that he felt bound by his banker’s obligation of confidentiality to his customer not to do so. This put him in an uncomfortable position in relation to the Claimants, and he raised the issue with his line manager, Laurence Backler (“Mr Backler”). Mr Backler confirmed to Mr Aplin that, for reasons of banking confidentially, he should not correct their misapprehension.  
16.	The Defendants accept that the Claimants paid large sums into SEWL’s accounts with NatWest on the basis of their mistaken belief that the hotel business was genuine. However, NatWest denies the claim against it based on unjust enrichment by reference to a series of defences. NatWest maintains that it is not liable because (i) it was not enriched by the payments, since in collecting money for SEWL it acted for SEWL and not for its own benefit; (ii) the Claimants had themselves assumed the risk of being in error about the existence of the hotel business, since (so the Defendants say) they had doubts about the business but did not pursue opportunities to check information given them by Mr Saunders as they should have done; (iii) it has a defence based on ministerial receipt, as it received money into the SEWL accounts and paid it out at the direction of its customer in good faith; alternatively, (iv) it has a defence of good faith change of position, since it paid away the monies it received in accordance with its customer’s instructions and in good faith. 
17.	The Defendants denied that Mr Aplin assumed any responsibility to the Claimants giving rise to a duty of care and also denied that he had been careless or negligent. The Defendants also say that the Claimants should be found to have contributed to any loss by their own negligence.
18.	In relation to the sums claimed as damages or equitable compensation for dishonest assistance, conspiracy, deceit and negligence, the Defendants accept that the Claimants could recover damages for sums invested directly by them in the hotel business and lost. However, the Defendants say that there should be no increase to reflect the contractual interest liabilities of JDSCL to third party investors, on the grounds that the agreements under which those liabilities are said to have arisen have been frustrated. 
The witnesses
19.	This is a case in which the court’s assessment of the witnesses and of the evidence they gave is of critical importance. The alleged misrepresentations by Mr Aplin relied on by the Claimants are said to have been made orally at various times to Martin and Emily. 
20.	Mr Aplin: Since starting work in 1978 at the age of 18, working on the counters at a branch of Williams & Glyn’s bank, Mr Aplin has had a long career in retail banking with various high street banks. His career has included working for long periods as an account manager and business manager with responsibility for liaising and building relationships with bank clients. He commenced employment with NatWest on 3 November 2008 as a “Relationship Director”, a form of relationship manager. In December 2008 he was allocated responsibility for a portfolio of about 100 accounts, owned by about 60 to 70 high value customers of the bank.   These customers included  SEWL, with its No. 1 and No. 2 accounts, and Mr Strubel and the companies associated with him, and their accounts. Mr Aplin inherited these customers and accounts from his predecessor as relationship director, Paul Meaton (“Mr Meaton”).
21.	I watched Mr Aplin giving evidence for a number of days in the witness box. I say at once I have come to the conclusion that he is an honest man. He did not knowingly set out to deceive the Claimants in anything he said or did. He was honest in giving his evidence.  
22.	At the outset of the case Mr Wardell QC, for the Defendants, made a number of telling points in favour of a conclusion that Mr Aplin was honest, to which I refer below. I do not consider that the Claimants came up with a good answer to them at the trial. 
23.	Mr Aplin took SEWL over as a client some two-and-a-half years after the Ponzi scheme using its bank accounts with NatWest was commenced. There was no suggestion that the previous relationship managers in NatWest with responsibility for SEWL had dishonestly connived in the use of SEWL’s bank accounts for the implementation of the scheme. It appears from the history before Mr Aplin came on the scene that Mr Saunders and Mr Strubel were well capable of operating their fraudulent scheme without any inside help from within NatWest. There is no good reason to think that they introduced Mr Aplin to their scheme, which seemed to be running perfectly well without him knowing of it. In fact, they would have run a huge risk of being discovered if they had told him of it, since so far as they knew there was every chance that he was honest and would report them.
24.	Features of the accounts operated by SEWL and by Mr Strubel for companies in his control which were suspicious, in particular the withdrawal of very large (indeed, huge) sums of cash by Mr Saunders and Mr Strubel, were already well established patterns when Mr Aplin came on the scene. He was briefed on them by his predecessor, Mr Meaton. For SEWL, Mr Saunders had an explanation for this, namely that it was necessary for SEWL to buy goods from trade suppliers in cash in order to give it a competitive advantage against other companies when supplying electrical goods to hotels and hotel chains. That explanation had been examined and accepted by previous relationship managers at the bank. The suspicious pattern of cash withdrawals had been investigated by NatWest’s AML department and the bank had concluded it was safe to proceed with SEWL as a customer. Mr Aplin was briefed on this background when he took over SEWL’s accounts. There was growth in the activity on SEWL’s accounts while Mr Aplin had responsibility for them, but that was fully consistent with what he was told by Mr Saunders and Martin Stone about the success of SEWL in exploiting its supposed niche in the market and the growth in its business. In the latter period of his involvement, Mr Aplin was also entitled to take comfort from his understanding that, as was emphasised to him by Martin, he and Emily maintained a close review of all SEWL’s transactions being funded by the Claimants. Mr Aplin visited SEWL’s business premises at Hainault in Essex, and everything there appeared to be consistent with the business which was described to him by Mr Saunders and others (Emily and other employees of the Claimants also visited SEWL’s premises at Hainault from time to time and were similarly convinced that a genuine business was being carried on there by SEWL). I do not consider that any inference of dishonesty on Mr Aplin’s part can properly be drawn from the circumstances in which the SEWL accounts were operated.
25.	At a number of points, Mr Aplin referred SEWL’s affairs to other personnel in the bank for review and for decisions by them. In particular, in March 2010 he gave a copy of a business proposal document compiled by Martin in relation to SEWL’s business with the Claimants to Mr Backler and NatWest’s Corporate and Institutional Banking Office for consideration by them. That would have been an extraordinary risk for Mr Aplin to have taken if he was aware of or involved in dishonesty by SEWL, since it was probable, if NatWest were going to provide invoice financing, that that Office would examine SEWL’s business independently of Mr Aplin with great care. 
26.	I also take into account in assessing Mr Aplin’s honesty the absence of any major financial motive for him to assist SEWL and Mr Saunders to perpetrate their fraud on the Claimants and others. It is true that Mr Aplin’s pay arrangements meant that some element of additional remuneration accrued to him from having the SEWL accounts in his portfolio, and from the level of business transacted via those accounts, but the amounts involved were comparatively modest. In my view, it is not credible to suppose that these benefits would be such as to lead Mr Aplin to jeopardise his reputation and his banking career by acting dishonestly to assist in the perpetration of a fraud by SEWL and Mr Saunders.
27.	Further, Mr Aplin admits that there came a time when he became aware that Martin and the Claimants did not have accurate understanding of the way in which Mr Saunders was operating the No. 2 account. Mr Aplin came to appreciate that Martin thought that receipts from hotels were being paid into the No. 2 account, whereas Mr Aplin knew that no such receipts were being paid into that account but thought (because he had been told by Mr Saunders) that they were being paid into another SEWL account with Barclays. That caused Mr Aplin concern which I find he promptly raised with his line manager, Mr Backler. Mr Aplin’s view was that, because of the duty of banking confidentiality which NatWest owed its customer, SEWL, he was unable to tell Martin that his understanding about receipts into the No. 2 account was incorrect. But Mr Aplin wished to check that Mr Backler agreed, so he raised the issue with him (as Mr Backler confirmed in his evidence) to get his advice. Mr Backler agreed with Mr Aplin’s view, that Mr Aplin was bound by banking confidentiality and could not reveal to Martin Stone what transactions were taking place on the No. 2 account. Again, the conduct of Mr Aplin in raising this issue with Mr Backler is in my view contrary to the Claimants’ case that Mr Aplin was acting dishonestly in relation to the Claimants.
28.	There is an issue about when exactly Mr Aplin came to appreciate that Martin  did not share his understanding about how the No. 2 account was being used by SEWL. Mr Aplin thought it was after a meeting with Martin Stone he attended on 2 March 2010. I consider that it is most likely that it was on 22 February 2010: see paras. [150]-[155] below. However, in my assessment this relatively minor difference on the timing on this point is due to a genuine lack of detailed recollection on the part of Mr Aplin about the timing and precise content of conversations with the Claimants. 
29.	Similarly, when it emerged early in the trial that it was likely that Mr Aplin had wrongly dated an important (undated) manuscript note he had made of a conversation with Martin (“the Aplin note”), I thought Mr Aplin’s readiness to accept his error was also indicative of an honest witness who was trying his best to be accurate in giving his evidence. Mr Aplin had originally thought that the note was of a conversation with Martin on 20 November 2009. In fact, I have concluded that it is likely to be the note of a conversation on 22 February 2010: see paras. [150]-[155] below. 
30.	This issue is related to another criticism of Mr Aplin made by Mr Auld QC, who appeared for the Claimants.  Mr Auld submitted that Mr Aplin hid behind a claimed absence of recollection in order to avoid answering difficult questions. I do not accept this. In my view, it is unsurprising that Mr Aplin did not have much recollection of the timing and content of conversations about, and other issues bearing on, the SEWL accounts. They were a small part of the portfolio of accounts for which he had responsibility, and the extent of his contacts with the Claimants was limited. The conversations in issue took place some years ago. I did not think Mr Aplin’s lack of recollection was suspicious. In my view, it cannot lead to the inference that he was dishonest in giving his evidence. Indeed, I thought his unwillingness to pretend to recollection which he did not have, to try to put a good gloss on events from his perspective, was indicative of honesty on his part. 
31.	In his submissions in relation to Mr Aplin’s honesty and credibility as a witness, Mr Auld placed particular emphasis on two parts in the cross-examination of Mr Aplin in which he appeared (i) to admit that at one point in the course of events before the Claimants discovered the fraud he came to believe that Mr Saunders was using investors’ funds in ways they would not accept and so appeared to have misled them (contrary to the main thrust of his evidence, that he believed throughout that Mr Saunders was a legitimate businessman who had not sought to mislead him or investors in any material way) and (ii) to admit that he appreciated at the relevant time that he was aware that he had been lied to by Mr Saunders about a cheque for £421,000 said to have come from the Radisson hotel group in June 2009 which Mr Saunders said was paid into the No. 2 account, which had in fact been part of a series of cheques from Mr Saunders’ father (“Eddie Saunders”) paid into SEWL’s bank accounts at that time which had bounced (see paras. [114]-[117] below) - an event which, the Claimants maintained, should have caused him to have become suspicious about Mr Saunders and the operation of the No. 2 account. 
32.	It is natural that Mr Auld should have emphasised these points in Mr Aplin’s evidence, and I have given careful attention to them. However, I accept the submissions of Mr Wardell in relation to both of them that they were simply instances of Mr Aplin becoming slightly confused in answering questions which moved in time between events occurring in 2009 and what Mr Aplin knew at the time he gave his evidence. That was my immediate impression when I heard Mr Aplin give the relevant answers in the witness box and it was confirmed by careful reading of the transcript. Generally, these answers did not fit in with the contemporaneous documents in any way, nor with other established patterns of conduct on the part of Mr Aplin to which I have referred above. In my view, Mr Aplin did not at any stage before May 2010 think that Mr Saunders had misled investors in any significant way or lied to him.
33.	Martin, Jeremy and Emily Stone. The Stone family have suffered a traumatic loss as the result of the fraud of someone they trusted as a family friend. Jeremy has lost very large sums of money personally. Friends and acquaintances were induced by the Stones to invest in the scheme, and lost their money.  Martin and Emily had the primary responsibility for handling dealings with Mr Saunders and their failure to spot his fraud despite having opportunities to do so must have imposed severe strains on relationships in the family and terrible regret. In my judgment, the evidence of each of them was heavily coloured by a very strong wish that they had not been duped as they were and a strong impulse to think that someone else (Mr Aplin) must be to blame for what happened. I think this has led them to reconstruct events in their own heads in a way much more favourable to themselves in terms of their dealings with Mr Aplin than was in fact the case. They have worked from contemporaneous email and telephone records to reconstruct a version of the events which could not be sustained on a neutral and objective approach to the evidence. I think they have gone over and over events in their minds, and have come to convince themselves that Mr Aplin actively misled them, whereas in fact he did not. 
34.	One particularly telling example relates to the conflicting evidence of Martin and Mr Aplin about what happened at an important meeting on 2 March 2010 (see paras. [212]-[219] below). In the documents originally disclosed by the Claimants in the proceedings there was what appeared to be a contemporaneous minute of that meeting drawn up by Martin, which seemed to support Martin’s account and to record a discussion with Mr Aplin about a reduction of cheque clearance times from five days to four days which (if true) would have indicated that Mr Aplin knowingly misled Martin. But in fact that minute was only drawn up by Martin on about 16 September 2010, long after the fraud was discovered. It post-dated another document prepared by Martin on about 12 July 2010 and provided by him to the Serious Fraud Office (“SFO”), which only came to light when sent by the SFO by chance to NatWest in September 2012. That document contained another account by Martin of the meeting on 2 March 2010, which corroborated Mr Aplin’s account of the meeting given in his witness statement dated 31 August 2012 and contained no reference to a discussion of cheque clearing times.  The account of 12 July 2010 is, in my assessment, much more likely to be accurate than that in the document prepared by Martin in September 2010.
35.	The discrepancy between these documents did cause me to wonder whether Martin had sought deliberately to mislead the Court by drawing up his note of the meeting in September 2010. However, I did not think that any such suggestion was clearly made out. Martin must have been in considerable mental turmoil for a long period after the fraud was discovered, and I think it more probable that he did not have the terms of his account to the SFO in July 2010 in mind when he drew up his note of the meeting in September 2010, by which time he had considerably embroidered his recollection by a process of construction as described above. What the discrepancy between the documents does highlight, however, in my view, is that Martin’s recollection was indeed affected by such a process. 
36.	The earlier document also indicated that when Mr Aplin set out an account of events based on his recollection, he did so accurately and reliably. I found him to be a better and more reliable witness than Martin, Emily and Jeremy.   
37.	Mr Saunders. Mr Saunders is facing criminal charges. At the outset of the trial, the Claimants intended to call Mr Saunders as a witness to give evidence to support their case. The bundle of witness statements prepared for the hearing contained an affidavit and a witness statement from him. It seems that although Mr Saunders had defrauded the Stones, he was willing to support them in their case against the Defendants. Mr Saunders did appear at the trial and went into the witness box to confirm the evidence in his affidavit and statement. But in response to the first (unsurprising) question from Mr Wardell in cross-examination, putting to him that he is a compulsive liar, Mr Saunders refused to answer, on the grounds that he had been advised not to say anything which might be relevant to the criminal proceedings he faced. It did not appear that he had been warned before going into the witness box to give evidence in chief about the dangerous possibility of waiving his privilege against self-incrimination. After debate with counsel about how to proceed, it was agreed that Mr Saunders’ evidence in chief (affirming his affidavit and statement) should be treated as not having been given. This was a sensible way forward, as a matter of fairness to Mr Saunders (lest his position in the criminal proceedings should have been unwittingly jeopardised by his having given evidence in these proceedings) and as a matter of fairness to the Defendants (since Mr Saunders would not allow his evidence against them to be tested by cross-examination on their behalf). The result, therefore, was that Mr Saunders was treated as not having given evidence at trial. 
38.	Other witnesses for the Claimants. The Claimants adduced evidence from a number of other witnesses to support aspects of their case. These witnesses did not give evidence about the critical conversations with Mr Aplin relied on by the Claimants as the basis for their claims against the Defendants, save that a witness statement of Louise Machin (“Ms Machin”), who had attended the meeting on 2 March 2010, was admitted without challenge. I refer to it below. Other evidence given by these witnesses confirmed that Mr Saunders was a convincing and plausible fraudster. In particular, Andrew Curtis (“Mr Curtis”), an experienced businessman who had formerly been a partner with Accenture plc, gave evidence about how he had been duped by Mr Saunders into making investments in SEWL’s supposed hotel business, much like the Claimants were. 
39.	The Claimants also adduced evidence from a banking expert, Colin Cumberland ACIB (“Mr Cumberland”), about the standards of behaviour he would have expected to see from a relationship manager in a bank. I address this evidence below. I did not find that it provided a reliable guide as to how Mr Aplin should have acted in the particular working environment at NatWest.
40.	Other witnesses for the Defendants. The Defendants adduced evidence from a range of other witnesses employed by NatWest or within the Royal Bank of Scotland (“RBS”) group of which NatWest is part. They all gave honest and straightforward evidence. 
41.	Mr Backler was Mr Aplin’s line manager at the relevant time. He corroborated significant aspects of Mr Aplin’s evidence. 
42.	Thomas Lee (“Mr Lee”) is head of RBS’s AML Department. He gave evidence about the RBS group’s AML practices and procedures and explained the records maintained by the AML Department. He explained how the group’s automated alerts system operated to pick up unusual activity on accounts, which could then trigger further investigation by his department. He responded to comments made by Mr Cumberland about what he would expect a relationship manager to do, by explaining how in NatWest relationship managers are not expected to conduct active monitoring of customer accounts, which is the function of RBS’s and NatWest’s sophisticated automated monitoring procedures. He thus corroborated Mr Aplin’s evidence about his understanding of his role as a relationship manager working in the NatWest business environment. 
43.	Colin Berkeley (“Mr Berkeley”) is a Director in Commercial Banking at NatWest. He also gave evidence in response to comments by Mr Cumberland, again to confirm the understanding in NatWest of the role which Senior Relationship Managers have. His evidence was to similar effect as that of Mr Lee and Mr Aplin. In the relevant period, a relationship manager in NatWest was not required to monitor customers’ accounts by proactively reviewing transactions on those accounts. 
44.	Finally, I should mention Elouise Creffield (“Ms Creffield”) and Karim Smail (“Mr Smail”), who worked in NatWest’s Customer Management Team (“CMT”) at Beckenham. The CMT’s function was to provide support for relationship managers dealing with customers. Mr Aplin was one of the relationship managers with whom Mr Smail worked. If a customer had a query about an account, they could telephone the CMT to raise it. The CMT would deal with routine requests. If the matter required the relationship manager to revert to the customer, the CMT would send an email message through to the relationship manager requesting them to do that. The CMT would not transfer the customer’s telephone call directly through to the relationship manager. This evidence is significant  to explain the likely participants in telephone calls which appear from the relevant telephone records to have been made between Martin and Emily and NatWest, many of which were to the CMT rather than to the mobile telephone which Mr Aplin used personally. 
The Facts
45.	Mr Saunders and his father, Eddie Saunders, have a background in the electrical wholesale business, operating via SEWL and J.D. Electrical Supplies Limited (“J.D. Electrical”) as their corporate vehicles.  SEWL came to rent premises owned by ZFL, a company controlled by Mr Strubel.  Mr Strubel became involved in the affairs of SEWL, eventually becoming a director of the company.
46.	It appears Mr Saunders and Mr Strubel operated their Ponzi scheme from about 2006.  From that time Mr Saunders arranged for regular and large withdrawals of cash from the accounts of SEWL and Mr Strubel did likewise in relation to companies under his control.  This pattern of behaviour led to suspicion on the part of NatWest, where the accounts operated by SEWL and companies controlled by Mr Strubel were held.  An investigation was therefore conducted in early 2007 by RBS group’s security and fraud department into SEWL, Mr Strubel and companies connected with Mr Strubel.  The question whether the bank should exit its relationship with these entities was examined, but the ultimate decision taken was that sufficient explanations had been obtained for the conduct of their businesses and that the bank remained content to have them as its customers. 
47.	In late November 2008 Mr Saunders and Eddie Saunders gave directors disqualification undertakings pursuant to the Directors Disqualification Act 1986 in relation to allowing J.D. Electrical to trade for approximately 32 months while insolvent and at the risk of and to the detriment of creditors.  The undertakings were not to act as a director of a company or take part in the management of a company other than with the leave of the court, for a period of seven years commencing on 19 December 2008.  
48.	These directors disqualification undertakings were picked up by NatWest’s routine scrutiny systems.  Mr Saunders also drew the fact that he was disqualified from being a director to the attention of Mr Aplin after he took over as relationship manager for SEWL, and also drew it to the attention of the Claimants.  Mr Saunders’ explanation was that J.D. Electrical’s shop had been located just inside the congestion charge zone in London and had been hit hard by the introduction of the congestion charge, which meant that the company had lost a lot of business.  Martin Stone went so far as to visit the site to check this story.  
49.	Despite the directors disqualification undertaking given by Mr Saunders, both NatWest, acting in particular by Mr Aplin, and the Claimants, acting in particular by Martin, were relaxed about Mr Saunders’ continued active involvement in the management of SEWL throughout 2009 and into 2010, of which all of them were aware.  This was surprising in each case.  Mr Aplin said he had not previously had to deal with a situation in which a person involved in the management of a company was subject to a directors disqualification order or undertaking.  He also assumed that NatWest’s information systems had picked up the fact of Mr Saunders’ disqualification and that the bank’s fraud department was content for its relationship with SEWL to continue notwithstanding his disqualification.  Martin said that he checked on Mr Saunders’ explanation of how his company had become insolvent and checked records of the extent of its insolvency.  In the light of the information he gathered, he felt that Mr Saunders did not appear to have behaved particularly badly and was content to deal with him.  I accept that both men genuinely held the view that Mr Saunders’ disqualification did not prevent him from continuing to be closely involved in the management of SEWL, while not having the formal role of director.
50.	Mr Aplin joined NatWest on 3 November 2008 in the role of “Relationship Director”, a type of relationship manager assigned to oversee a portfolio containing a comparatively small number of higher value accounts and relationships.  According to Mr Aplin’s understanding of his role, it was principally a client-facing sales role acting as the main point of contact for the customers in his portfolio.   It was not a role in which he was expected to manage the clients’ accounts, nor actively supervise them, although he might become involved if a particular issue arose on any particular account.  This limited duty of supervision of accounts, on Mr Aplin’s account, was an important point of contention at trial.  
51.	The Claimants maintained that in fact Mr Aplin’s role required him actively to review the accounts of the customers in his portfolio; that if he had done that in relation to SEWL’s accounts, he would have come to appreciate that they had suspicious features which he could not have ignored; and that his failure to draw to the attention of others in the bank such matters as payment in of a series of cheques from Eddie Saunders which bounced in February 2009 should be taken as an indication that Mr Aplin was dishonestly prepared to cover for Mr Saunders and Mr Strubel in their management of the accounts with NatWest under their control. The Claimants sought to rely on the evidence of Mr Cumberland in support of their case that Mr Aplin’s role extended to active supervision and review of accounts in his portfolio.  
52.	There was also debate about the terms of job descriptions for relationship managers at NatWest (although Mr Aplin was not given copies of these when he took up his job with NatWest). The Defendants relied on the evidence of Mr Lee and Mr Berkeley to corroborate Mr Aplin’s evidence about his understanding of his role as relationship director or manager in the NatWest banking environment. On the evidence of these witnesses, a relationship  manager in NatWest is not expected to assume the task of active review of transactions on accounts within their portfolio. That would be excessively burdensome and inefficient, and is something which is left to the bank’s automated monitoring systems.
53.	On this area of dispute, I accept the evidence of Mr Aplin as to his understanding of his role and function. He did not believe he had any responsibility actively to review transactions on the accounts in his portfolio and he did not in fact do so. As a result, he did not pick up any of the alleged indicators of suspicious activity on SEWL’s accounts or the accounts of companies controlled by Mr Strubel on which the Claimants sought to rely (other than the very obvious fact of frequent large cash withdrawals, which he did consider).  I did not find Mr Cumberland’s evidence helpful on this aspect of the case, because it emerged from his answers under cross-examination that his experience as a relationship manager was in a bank with a much smaller customer base than NatWest which was, as a result, far less dependent on automated review functions in relation to transactions on accounts.
54.	By contrast, the evidence of Mr Lee and Mr Berkeley was clear as to the importance for NatWest of its automated review functions, which in turn meant that at the relevant time its relationship managers were not expected to conduct active reviews themselves of transactions on the accounts under their responsibility.  
55.	On a fair reading of the relevant materials, there is nothing inconsistent with this explanation of the division of responsibility between relationship managers and the bank’s automated systems in the job description documents referred to by the Claimants (which in any event Mr Aplin did not receive), nor in the bank’s retail banking AML policy (which stated, inter alia, “the RBS Group uses automated customer profiling to identify unusual transactions on customer accounts for further investigation…”), nor in the RBS group security and fraud anti-money laundering policy (which, under the heading “Monitoring”, referred to automated profiling: “the RBS Group deploys automated customer profiling to identify unusual transactions on customer accounts for further investigation”; and, separately, to manual monitoring: “staff should, where applicable, recognise the potential for management information reports designed for other business purposes to serve also as a means of alerting to unusual or suspicious activity.  Exceptionally, cases will also arise where account activity requires close monitoring on e.g. a daily, weekly or monthly basis, but this would normally be at the specific direction of [Group financial crime] operations”).  Mr Aplin did not receive any such direction to engage in this form of active monitoring of the SEWL or Strubel company accounts.  
56.	NatWest’s reliance on its automated systems and AML team for active review of transactions on accounts as a protection against fraud, rather than manual review, appears to have been in line with general practice in the retail banking sector: see, in particular, chapter 3 of the report by the Financial Services Authority (“FSA”) entitled, “Banks’ Defences Against Investment Fraud: Detecting Perpetrators and Protecting Victims” (June 2012).  
57.	This is also a convenient point at which to explain that NatWest’s reliance on its automated systems for active review of transactions on accounts is also in line with published Treasury approved guidance of the Joint Money Laundering Steering Group (“the JMLSG Guidance”).  That guidance emphasised (at paras. 5.7.15 to 5.7.16) that an automated monitoring system may add value to manual systems and controls and that “the greater the volume of transactions, the less easy it will be for a firm to monitor them without the aid of some automation”.  The guidance also stated (para. 5.7.20), “the needs of each firm will … be different and each system will vary in its capabilities according to the scale, nature and complexity of the business”, thus recognising that banks have a discretion how to set up their monitoring and review systems.  This is relevant to consideration of the Claimants’ complaint that NatWest acted in breach of its obligations under the Money Laundering Regulations 2007: see paras. [250]-[254] below.
58.	In the light of all the evidence, I found it natural that a large retail bank like NatWest should place reliance for active review of accounts on its automated systems rather than on manual scrutiny of transactions by individual relationship managers such as Mr Aplin, with responsibility for large numbers of accounts. I found it entirely credible that Mr Aplin had the understanding of how the bank’s systems operated which he claimed to have.  
59.	Shortly after joining NatWest in December 2008, Mr Aplin inherited a portfolio of about 100 accounts, owned by about 60 to 70 high value customers.  Most of these, including the SEWL and ZFL accounts, had previously been handled by another relationship manager, Mr Meaton.  Mr Meaton briefed Mr Aplin about each of the customers upon handover and they reviewed the files on each one together.  Mr Meaton also continued to work in the same office as Mr Aplin and so was on hand to deal with any queries he might have.
60.	SEWL had two accounts at this stage, the No. 1 account and the No. 2 account.  The mandate for the No. 1 account had been put in place in January 2006, initially with four authorised signatories on the account (Mr Saunders and his wife, Danielle Saunders, and Eddie Saunders and his wife, Rochelle Saunders). Mr Strubel had been added as a signatory in May 2008.  The No. 2 account had been opened in June 2008 with the same authorised signatories.  Mr Saunders was the main point of contact on both accounts both for Mr Meaton and then for Mr Aplin.  
61.	Mr Aplin’s evidence, which I accept, is that he understood from the briefing by Mr Meaton and his review of the file that SEWL operated an entirely legitimate electrical wholesale supply business, involving the supply of electrical products and electrical services.  That impression was reinforced by his dealings with Mr Saunders through to May 2010 and by the close involvement of the Claimants in SEWL’s business from June 2009 and their evident belief that SEWL was carrying on a legitimate business for which they were lending large sums.  
62.	Mr Aplin’s understanding was that SEWL’s No. 1 account was used primarily for SEWL’s smaller regular electrical wholesale business and that the No. 2 account was used primarily to hold loan monies advanced by Mr Strubel and other wealthy individuals as funding for SEWL’s business supplying electrical goods and services to hotels, to pay SEWL’s suppliers.  Mr Meaton told Mr Aplin that SEWL regularly withdrew large amounts of cash from the No. 1 and No. 2 accounts. The reason given for this unusual and potentially suspicious pattern of behaviour was that SEWL preferred paying suppliers in cash, as it enabled it to pay suppliers quickly and purchase electrical stock at favourable prices for onward supply to hotels.  
63.	It was thus clear to Mr Aplin that this aspect of SEWL’s business had been looked at by his predecessor and found to be acceptable and based on what appeared to be valid business reasons.  This was also the explanation given to Mr Aplin in due course by Mr Saunders himself.  As all witnesses who dealt with him agreed, Mr Saunders was a plausible and convincing liar, and Mr Aplin believed him.
64.	Mr Meaton also told Mr Aplin that working capital for SEWL was being provided by Mr Strubel/ZFL and other high net worth individuals introduced by Mr Strubel, in the form of short-term loans which were repaid with interest.  Mr Meaton explained that the main purpose of ZFL’s business was to provide warehouse storage for the clothing industry and that Mr Strubel owned the business premises at Hainault in Essex at which both SEWL and ZFL had offices.
65.	Mr Meaton told Mr Aplin that activities in relation to the SEWL and ZFL accounts had been reported to NatWest’s AML team, in particular regarding the level and frequency of cash withdrawals in relation to the SEWL accounts and large transfers between SEWL and ZFL accounts.  It is the practice in NatWest that the outcomes of an investigation by the AML team are not ordinarily reported back in detail to relationship managers or frontline staff. The understanding within the bank is that if nothing is heard back after a reference to the AML team, it is to be assumed that they have carried out appropriate enquiries and have satisfied themselves that there is nothing untoward in relation to the business using the accounts under review.  On this basis, therefore, Mr Aplin assumed (as he was entitled to do in accordance with the custom and practice of the bank) that the AML team had investigated the SEWL and ZFL accounts and had concluded that activities in relation to the accounts were legitimate.  
66.	It seems that Mr Aplin was not told at this stage that the bank’s AML and fraud department had in 2007 considered whether to exit the relationship with SEWL, concluding that SEWL’s business was legitimate and that the relationship should be continued.  Mr Aplin thinks it likely that he first became aware of this in the course of conversations between him and NatWest’s AML team in March 2009, prompted by the continuing frequency and increasing level of cash withdrawals from SEWL’s No. 1 and No. 2 accounts.  The fact that Mr Aplin was aware in December 2008 and in more detail in March 2009 that SEWL’s accounts had been the subject of investigation by the AML team (with no subsequent suggestion that the bank should exit from the relationship) reinforced the confidence which Mr Aplin had and was entitled to have that SEWL’s business was legitimate. 
67.	I accept Mr Aplin’s evidence that he never suspected that Mr Saunders and SEWL were not operating a legitimate business.  He was at no stage before   May 2010 aware that Mr Saunders and SEWL were perpetrating a fraud on the Claimants.  
68.	Mr Aplin met Mr Strubel on perhaps a couple of occasions and had more frequent telephone contact with him.  Mr Strubel appeared to him to be a respectable and straightforward man who operated a successful clothing business.  Mr Aplin’s first meeting with Mr Strubel was on 21 January 2009 at Hainault.  It was also attended by Mr Saunders.  Mr Saunders also appeared to be a very confident and plausible businessman.  He confirmed the account of SEWL’s business which Mr Aplin had already been given by Mr Meaton.  It is likely that at this meeting Mr Saunders explained that SEWL maintained another account at Barclays, into which SEWL’s receipts from hotels were paid.  At some point (it is unclear when), Mr Aplin asked Mr Saunders why the hotel receipts were paid into an account with Barclays. Mr Saunders said that this was because Barclays was willing to clear cheques more quickly than NatWest.  This appeared to Mr Aplin to be a plausible and legitimate explanation.  
69.	At some stage Mr Saunders told Mr Aplin that he would be prepared to move his account for hotel receipts from Barclays to NatWest, if NatWest was able to reduce the clearing time for cheques (meaning the time within which the bank was prepared to make the funds represented by a cheque from a hotel available to SEWL after the cheque had been given to the bank) from its standard four days to two days. Mr Aplin told Mr Saunders that he could not do this, because NatWest’s policy was to clear cheques in four days and it would not be possible for it to reduce it to two days.  (Mr Aplin understood that Barclays had made a special arrangement with SEWL to allow for a faster clearing time that might potentially expose Barclays to some risk if the hotel cheques presented were not honoured in due course; NatWest was not prepared to match that arrangement).  
70.	Mr Aplin was able to inspect SEWL’s premises in the course of the meeting on 21 January 2009.  They contained a limited amount of stock.  The level of activity there appeared to be consistent with what Mr Aplin had been told about SEWL’s business and its niche in the market supplying large hotel chains, where deliveries would be made to the hotels direct from suppliers.  
71.	Mr Aplin visited SEWL’s premises at Hainault on two or three other occasions later on, by way of keeping in touch with the bank’s customer.  On these occasions, when Mr Aplin was shown round the premises it appeared that SEWL had considerably expanded its occupation, including taking over occupation of the warehouse there from ZFL.  All this was consistent with what Mr Aplin was told by Mr Saunders about the growth in SEWL’s business.  So far as Mr Aplin could see, the warehouse contained electrical stock consistent with its carrying on a wholesale electrical supply business as had been described to him.  By this stage SEWL’s office had been moved to another, more spacious part of the building.  It had been fully refurbished and had a formal reception area, which reinforced the impression that SEWL was carrying on a thriving business.  
72.	This impression, gained by Mr Aplin, of a legitimate business being carried on from SEWL’s business premises was in line with that gained in due course by Emily Stone and Jan Walker (“Ms Walker”, an employee of the Claimants) who visited the premises when the Claimants were conducting business with SEWL.
73.	In March 2009 Mr Aplin was also in contact by e-mail and telephone with Ian Kerr, a NatWest relationship manager in Loughton, who had originally been involved when Mr Saunders and SEWL became customers of NatWest.  The introduction was made by Mr Strubel, whom Mr Kerr had known for some years and whom he described as “a straight up sort of guy” (albeit it would be difficult to prove the source of his earnings) who was “meticulous in keeping his paperwork tidy and available”.  Mr Kerr informed Mr Aplin that the only issue in relation to SEWL was the withdrawal of a large cash sum each month from NatWest’s Barkingside branch, because Mr Saunders was “not happy with staff attitudes there” and wanted “some privacy”.  Mr Kerr also mentioned SEWL’s account with Barclays: “as you may know, he already has an account with Barclays and if things don’t work out, that is where he will go”.  
74.	Mr Aplin’s contact with Mr Kerr reinforced the impression of the legitimacy of Mr Saunders, SEWL and SEWL’s business which Mr Aplin had already formed from a number of sources.  The way SEWL’s No. 1 and No. 2 accounts were operated in practice was also consistent with what Mr Aplin had been told about the nature of its business and its need to pay for its supplies in cash.  
75.	Mr Aplin had to authorise the withdrawals of cash personally on NatWest’s computer system, after checking that SEWL had sufficient cleared funds in its relevant accounts to meet the withdrawals.  Mr Saunders would then go to the NatWest Barkingside branch to collect the cash.  When Mr Aplin was unavailable for any reason, the requisite authorisation would be issued by a colleague (typically Mr Meaton, but also on occasion Mr Backler).  The amounts of the cash withdrawals could be very large (many tens of thousands of pounds) and tended to grow larger over time. But that all appeared to be consistent with what Mr Aplin and the others within NatWest understood to be the way in which SEWL had found a niche in the market to exploit and its great success in doing so and in expanding its business.  None of them considered that the pattern of large cash withdrawals, which had been checked by the AML department, indicated that SEWL’s business was illegitimate.  
76.	Mr Strubel also had a practice of withdrawing cash at times from the accounts of ZFL and later CCL, although generally in lower amounts than the cash withdrawals by SEWL.  Neither Mr Aplin nor anyone else at NatWest regarded this as untoward, nor did they have any particular reason to do so; this also had been subject to review by the AML department.  
77.	Mr Saunders also had access, on SEWL’s behalf, to NatWest’s online Bankline service throughout the relevant period and could make payments electronically via that service without reference to Mr Aplin.  
78.	There was an increasing level of turnover on SEWL’s accounts in 2009, which was consistent with what Mr Aplin was told by Mr Saunders (and from November 2009 by Martin Stone) about the strong growth in SEWL’s niche hotel business and with the fact that Mr Aplin understood that substantial amounts of short-term loan finance were being introduced into the business via Mr Strubel/ZFL and, later, via the Claimants.
79.	In February 2009, a series of cheques issued by Eddie Saunders in favour of SEWL were presented but not honoured.  They were re-presented twice before being referred to drawer as unpaid.  This might possibly, if picked up at the time by NatWest, have given grounds for questions to be asked of Mr Saunders to seek an explanation (although it is not obvious that the incident was indicative of any significant wrongdoing, and having regard to Mr Saunders’ plausibility as a liar I think the probability is that he would have come up with an explanation acceptable to the bank for what had occurred, as he did in relation to another cheque-bouncing incident later on).  However, I find, that Mr Aplin was unaware of the February 2009 cheques at the time and they were not highlighted for Mr Aplin by NatWest’s automated systems.  It was not Mr Aplin’s role to conduct active reviews of the activity on SEWL’s accounts (see paras. [50]-[58] above) and he did not see the entries in SEWL’s bank statements indicating that this had occurred.
80.	In about March 2009, Mr Aplin was contacted by NatWest’s AML team regarding the frequent and increasing level of cash withdrawals from SEWL’s No. 1 and No. 2 accounts.  Piecing events together from Mr Aplin’s evidence and from the contemporaneous documents created by the AML team, it appears that Mr Aplin gave the AML team the explanation of SEWL’s need to use cash to exploit its business niche which he had been given by Mr Meaton.  Mr Aplin also then contacted Mr Saunders directly, who gave the same explanation.  Mr Aplin then called the AML team to pass on that information.  It is likely that it was in the course of these exchanges between Mr Aplin and the AML team that Mr Aplin was informed that the relationships with SEWL and Mr Strubel had been considered for exit in March 2007, but that the AML team had concluded it was not necessary to proceed down that route.
81.	The notes compiled in March 2009 by the AML team (but which were not disclosed to Mr Aplin or discussed with him) indicate that the AML team had investigated matters and had established that the AML team had previously been satisfied about the relationships with SEWL and Mr Strubel in March 2007 because the relationship manager (presumably Mr Meaton) “had been able to justify account behaviour”; activity between the related businesses and the directors had continued; large cash withdrawals continued (“over £300,000 withdrawn in cash over 2 days”); and recent experience of unpaid cheques from Eddie Saunders had been observed on SEWL’s accounts. The notes show that disclosure to the Serious Organised Crime Agency (in compliance with AML legislation) had been made and the AML team’s investigations had been completed.  The AML team’s enquiries included a review of a previous lengthy discussion with business manager Rob Kennedy, who had introduced the customers two years previously from Lloyds TSB. He explained that Mr Strubel was a successful businessman and that he (Mr Kennedy) regularly visited the warehouse in Hainault where he observed normal business activity (presumably at that stage for ZFL).  
82.	The AML team were satisfied on the basis of their enquiries that NatWest’s relationship with SEWL should continue, but asked Mr Aplin to make contact with Mr Saunders to carry out a review of the connection.  It is likely that in the course of these exchanges the AML team required Mr Aplin to obtain copies of sample invoices from suppliers to SEWL dealing with its purchase of stock (probably, amongst other things, as a check that SEWL was not seeking to evade payment of VAT by means of transacting business in cash).  Mr Aplin did duly ask Mr Saunders for copies of sample invoices, and on 31 March 2009 Mr Saunders faxed Mr Aplin the sample invoices requested.  These purported to be from a company called KDS Appliances Limited (“KDS”) and appeared to be in order.  They showed prices of £143,995.22 and £72,321.76 respectively, in each case inclusive of VAT (with the VAT amounts shown as charged).  This material reinforced the appearance that SEWL was carrying on a legitimate business.  It did not appear to be carrying on some sort of VAT fraud.
83.	In May 2009, ZFL’s accountant sent a copy of ZFL’s unaudited management accounts for the year ending 31 March 2009 to Lombard Finance (a finance company in the same RBS group as NatWest) in connection with a loan for purchase of a car by Mr Strubel, under cover of an e-mail which stated that a decision had been made to close ZFL (though setting out no specific timetable for that).  The e-mail and draft accounts were forwarded to Mr Aplin.  Contrary to the Claimants’ submission that the draft accounts should have caused Mr Aplin to appreciate that something was amiss in the way Mr Strubel was carrying on ZFL’s business, I do not consider the draft accounts either did or should have had that effect.  The pattern of ZFL’s use of its account with NatWest remained much the same after Mr Aplin became the relationship manager as it had been before, and there was no change to put him on suspicion.
84.	In June 2009, there were a couple of incidents which indicate that Mr Aplin was conducting the relationship with SEWL as a customer relationship in a perfectly ordinary way, without any special favours or consideration being given to Mr Saunders.  Through a mix-up at NatWest, SEWL was allowed to make a transfer of £250,000 from SEWL’s No. 2 account to ZFL at a time when SEWL was not in funds to make that payment.  Mr Aplin then chased Mr Saunders and Mr Strubel to repay the money immediately, which led to an argument with Mr Saunders.  Mr Aplin discussed with Mr Backler whether it was worth persisting in the relationship with SEWL, if it was going to be difficult, but Mr Backler did not think the incident justified termination of the relationship. On about 12 June 2009, Mr Saunders arranged for a substantial payment to the No. 2 account which more than covered the deficit.  
85.	A little later, Mr Saunders drew up a SEWL cheque for £600,000 to be paid to Foxstone Estates. But there were insufficient funds in SEWL’s accounts to meet the cheque, and so Mr Aplin gave instructions to refuse payment in an entirely conventional way.  
86.	Meanwhile, in about May 2009, Mr Saunders approached Jeremy Stone, an old school friend, to see if he would be willing to provide funding for the niche business opportunity of supplying electrical goods and services to hotel chains which Mr Saunders fraudulently represented SEWL was exploiting.  Mr Saunders at this stage asked only for a loan of £250,000 to help to fund one big contract for SEWL to supply air conditioning units to the Marriott hotel group at a good rate of return.  Mr Saunders provided Jeremy with financial information, including draft accounts for SEWL for the year ended 31 January 2009 and a copy of SEWL’s debtor insurance policy.  He also gave a very persuasive account of the business opportunity.  
87.	Jeremy found the approach and explanation of the business plausible and persuasive.  Mr Saunders was an old friend from school days and the Stone and Saunders families knew each other and were part of the same Jewish community.  The Stones had a high degree of trust in Mr Saunders.  He was a convincing liar who successfully hoodwinked not just Jeremy, but a number of experienced business people such as Martin, Mr Aplin, other NatWest relationship managers and Mr Curtis.  Moreover, Jeremy found it credible that a business such as SEWL should be seeking investment finance from non-bank sources at this time.  There was an ongoing credit crunch since the collapse of Lehman brothers in late 2008, and banks were far less willing to lend than had previously been the case.  Jeremy asked Mr Saunders to speak to Martin about the investment opportunity, as he handled his investments and financial affairs.  
88.	On 4 June 2009, Martin and Emily Stone met Mr Saunders at Martin’s offices in Finchley to discuss the investment and go through the paperwork.  Mr Saunders explained that SEWL had been supplying hotels on a modest scale, but his contact at Marriott hotels (“Jim Fraser”, according to Mr Saunders) was pleased with his work and had offered him this larger transaction, for which SEWL needed financing.  Mr Saunders said he would place an order with KDS, an electrical supplier which, as a member of a larger buying group, was able to secure particularly competitive prices for electrical goods. (It should be noted that this was a different explanation for SEWL’s ability to arrange supplies to hotels at competitive prices than that given to NatWest, which was by reference to the competitive advantage secured by SEWL paying suppliers by cash – Mr Saunders did not tell the Claimants about the large cash withdrawals regularly made from SEWL’s accounts).  Mr Saunders said SEWL also had a competitive advantage because it could guarantee delivery of large orders in the same place at the same time, which other suppliers found it hard to do.  With funding from Jeremy, he could pay KDS the full invoice price up front by a CHAPS transfer, helping KDS with its cash flow and leading it to prioritise meeting SEWL’s order.  The buying group of which KDS was part would deliver the goods direct to the hotels much faster than a competitor could.  Mr Saunders said he and Mr Strubel had a good relationship with his relationship manager at NatWest (albeit NatWest would not lend to SEWL, due to the credit crunch), which  Martin found reassuring.  Mr Saunders also told Martin that, as from December 2008, he was a disqualified director as a result of a bad debt of another trading company run by him, now in liquidation, which had arisen because of trading problems resulting from its shop being located within the congestion charging zone and that his wife, Danielle, and Mr Strubel were formally the directors of SEWL. (After the meeting, Martin visited Mr Saunders’ former business premises to check on this explanation and also checked that the liabilities of the company in liquidation, J.D. Saunders, had been relatively small). Mr Saunders provided Martin with a range of further documentation, including what purported to be a confirmation from Jim Fraser at the London Kensington Marriott of the order and what purported to be copies of NatWest bank statements for SEWL showing receipts from Marriott hotels.  
89.	Martin was satisfied that this appeared to be a good investment opportunity and he advised Jeremy to proceed with it.  
90.	At a further meeting, on 5 June 2009, Mr Saunders signed various documents on behalf of SEWL and himself, including a simple loan agreement, an assignment of money due under SEWL’s invoice to the Marriott and a personal guarantee.  The same day, £256,400 was paid from Jeremy’s personal account to SEWL.  The due repayment date was 6 July 2009.
91.	After the funding was provided, Martin and Emily carried out some further checks.  Martin established as a result of a Google search that Jim Fraser was the chief engineer who was responsible for the purchase of electrical products at the hotel and Emily then telephoned and asked to speak to him by name.  The operator confirmed that there was such a person and put Emily through, whereupon she put the telephone down.  
92.	This was part of a pattern of behaviour by the Claimants of which Mr Wardell, for the Defendants, was critical, whereby Martin and Emily did not get directly in touch with the contacts which Mr Saunders claimed to have at the hotels with which he dealt, nor with those supposedly dealing with Mr Saunders at KDS.  The reason for this was that the Stones considered that Mr Saunders had brought them a business opportunity based on his particular contacts in the electrical and hotel trades and it would be unfair to him and potentially damaging to the business opportunity itself, or Mr Saunders’ willingness to let the Claimants participate in it, if they intruded upon Mr Saunders’ position as the businessman with the relevant contacts.  Rather, they thought of the Claimants’ role as providers of funds for a business opportunity which was based on Mr Saunders’ know-how and contacts (and was therefore in a sense his property).  
93.	Having conducted the limited checks they did and having regard to Mr Saunders’ connection as an old family friend and part of their community, the Stones thought his story was true and they could trust him.  The fact that the first transaction appeared to proceed profitably without a hitch, as did many others after that, seemed to confirm all this.  Mr Saunders had successfully hooked them.
94.	In my judgment, there is force in Mr Wardell’s criticism of the Claimants, but only up to a point.  I consider that the Claimants ought, having regard to the large amounts invested by them and to their own interests - and even more importantly, as their involvement in SEWL’s business deepened and they attracted greater financing from friends and acquaintances to be invested in the hotel business via JDSCL - to have conducted more careful checks direct with the hotels supposedly being supplied by SEWL, so as to confirm the truth of what they were being told by Mr Saunders, on the faith of which they put such large sums at risk.  
95.	There was also a certain laxity on the part of Emily, in particular, on occasion in following up on documentary evidence required by her as evidence and an audit trail for transactions being financed by the Claimants. For example, more than once when, for cash flow reasons, she was chasing Mr Saunders to ensure hotel cheques were paid promptly into the No. 2 account by him, she asked him to send her evidence of payment of the cheques into the bank in the form of the paying-in slip, and was content to accept as evidence scanned copies of paying-in slips filled in by Mr Saunders but bearing no bank stamp as evidence of actual payment in.  
96.	Further, in the latter period of the fraud (particularly from February 2010), the Claimants were satisfied with very summary information supplied to them by Mr Saunders about what he described as emergency call-outs by hotels, in respect of which the hotels appeared to be paying very large sums of money. Mr Saunders would provide no satisfactory break-down of what exactly the hotels were paying such sums for. In my view, these wilder efforts by Mr Saunders to justify ever increasing demands for money from the Claimants for the hotel business should have strained the credulity of the Claimants, had they been exercising proper care in their scrutiny of the business, to a serious degree and led to much more careful checking of Mr Saunders’ story.
97.	Had it been relevant on the applicable legal analysis (as in the event it is not), these features of the case would have led to a finding that there was a significant element of contributory negligence on the part of the Claimants for the losses they suffered.  
98.	However, from making these points Mr Wardell sought to push the argument still further.  He suggested that the Claimants’ conduct showed that there was no causative link between Mr Saunders’ frauds and their losses, or that by failing to carry out better checks the Claimants had somehow assumed the risk of suffering the losses they did, or even that there came a point when they knew about Mr Saunders’ frauds and tried to withdraw Jeremy’s money from the scheme while leaving other investors exposed.  I do not accept any of these wider suggestions by Mr Wardell, which I found to be wholly implausible. In particular, I should record that on proper examination the last of these suggestions was found to be contradicted by the facts in relation to Jeremy’s personal exposure to the fraud, once personal guarantees given by him to third party investors were brought into account, and in the end Mr Wardell was driven to withdraw the allegation in his closing submissions. 
99.	I find that Martin, Jeremy and Emily Stone clearly did trust Mr Saunders and were completely deceived by him, resulting in the losses suffered by the Claimants.  In no meaningful sense could the Claimants be said to have assumed the risk of suffering the losses they did. They did not think there was any real risk that they were being defrauded, and then choose to ignore that risk.  It was obvious on the evidence that if they had once suspected that the hotel business was not genuine, they would not have gone on funding SEWL.  
100.	Once SEWL received the original and other loans from the Claimants, the money was used to keep Mr Saunders’ and Mr Strubel’s fraudulent Ponzi scheme in operation, with large sums being skimmed off by them.  No electrical goods or services were purchased and no supplies were made to the hotels. 
101.	On 8 June 2009, Mr Saunders sent Emily a copy of what purported to be SEWL’s invoice to Marriott hotels.  Emily asked for confirmation that the order had been processed and of receipt of the goods at the Marriott.
102.	On 16 June 2009, Mr Saunders sent Emily what purported to be a copy of an e-mail from Jim Fraser with a scanned goods receipt docket (though not in signed form).  Emily Stone asked for a signed copy, which Mr Saunders promised to provide (in fact, it does not appear that one was provided, but Emily did not pursue the point).  Also on 16 June, Mr Saunders forwarded to Emily what purported to be an e-mail from Warren Freedman at KDS, confirming receipt of payment of the £256,400 and delivery of all the units. 
103.	These documents were all forged by Mr Saunders.  
104.	Emily called KDS the next day and asked to speak to Warren Freedman.  The receptionist confirmed that he did work there and Emily, content from this that Mr Saunders was telling the truth, put the telephone down without waiting to speak to him.  
105.	Within a few days of the first deal, Mr Saunders contacted the Claimants again to say that the Marriott had been impressed by the speedy delivery of the air conditioning units and, as a result of a heat wave at the time, wanted to place further large orders for air conditioning units for other hotels.  Martin and Emily agreed to fund this supply as well.  
106.	Again, Mr Saunders supplied forged e-mail confirmations from the Marriott and from Warren Freedman.  Again, in due course, it seemed that repayment was received without any hitch with substantial payments being made back to the Claimants in July 2009, apparently in line with what Mr Saunders had said were the Marriott’s ordinary 30-day payment terms.  The profits for the Claimants appeared substantial.  
107.	Mr Saunders then brought other supposed orders from the Marriott for supply of TV sets. The Claimants funded further individual deals between June and August 2009, following much the same pattern.
108.	Mr Aplin had no awareness of these arrangements, although in early July 2009 Mr Saunders let him know that there would be a transfer of about £288,000 from Jeremy Stone to the No. 2 account. This had no significance for Mr Aplin, other than that Jeremy Stone appeared to be an individual investor in relation to SEWL’s hotel business.  
109.	It appeared by this stage that SEWL had identified a growing business opportunity with larger and larger orders from hotels, requiring ever more cash flow funding.  The Claimants therefore sought to formalise their arrangements with SEWL to handle this larger flow of hotel business by drawing up a joint venture agreement between JDSCL and SEWL dated 19 August 2009 (“the JVA”).  SEWL’s role, acting by Mr Saunders, was to identify prospective deals and arrange the logistics to complete them.  JDSCL’s role was to provide funding for the deals.  Profits were to be shared equally.  The “joint venture” was described as a division of SEWL. 
110.	The JVA stated that “the joint venture” would open a bank account into which the hotel receipts would be paid (designated “the book debts account”, to be set up with a mandate under which JDSCL’s prior written consent would be required before any withdrawals could be made) and provided for SEWL to grant a debenture over that account.  However, no such book debts account under the mandate or control of the Claimants was set up at this stage.  According to the Claimants’ understanding, SEWL continued to use the No. 2 account, under the sole control of SEWL (acting by Mr Saunders), to receive loan funds from JDSCL and for the hotel receipts. No debenture was put in place over that account at this stage.  
111.	Although Martin and Emily in their evidence sought to refer to NatWest as the joint venture’s bank and to Mr Aplin as the joint venture’s relationship manager, in fact the legal position was clear: NatWest was the bank for SEWL, which alone was its client.  The pattern of e-mails from the Claimants confirmed they understood this.  In particular, when Emily required information from NatWest or Mr Aplin, she would typically get in touch with Mr Saunders for him to obtain the information from the bank. Not until much later, in relation to a different SEWL account, did she attempt to approach Mr Aplin or the bank directly herself.  
112.	Martin and Emily thought of the No. 2 account as their account, but only in the sense that they believed that in substance all transactions on the account were being effected by Mr Saunders in accordance with their instructions.  From an early stage, the Claimants (acting in particular by Martin) understood that SEWL had the No. 1 and No. 2 accounts with NatWest and also an account with Barclays, which the Claimants understood was dormant (in contrast to Mr Aplin’s understanding, that it was an active account into which the hotel receipts were paid).  They understood that SEWL’s No. 1 account was used for its day-to-day business, largely distinct from the hotel business (although the first loan by Jeremy was in fact paid into the No. 1 account).
113.	From June 2009, Mr Saunders asked for loans from the Claimants to be paid into the No. 2 account, so as to keep the business funded by the Claimants separate from SEWL’s other business transacted through the No. 1 account.  Mr Saunders also told Martin that some of Mr Strubel’s business with SEWL had been transacted through the No. 2 account in the past, although he led him to believe that that aspect of SEWL’s business was now essentially dormant.  However, reference to transactions with Mr Strubel on the No. 2 account was important, because it gave Mr Saunders a basis for refusing to give access to the Claimants to SEWL’s bank statements on the No. 2 account in circumstances where, if the true bank statements for the No. 2 Account were revealed, the Claimants would have realised immediately that no hotel receipts were being paid into that account.  Martin believed from what he was told by Mr Saunders that SEWL’s business with the Claimants accounted for the vast majority of activity on the No. 2 account and that all receipts from the hotel business were paid into that account.
114.	On about 26 June 2009, Mr Aplin noticed that a series of cheques from Eddie Saunders to the value of a total of about £3.6 million paid into SEWL’s No. 2 account had been returned unpaid. Mr Aplin sought to get hold of Mr Saunders for an explanation. That day he also received an e-mail from RBS’s fraud department about this incident.  The e-mail instructed Mr Aplin to inform SEWL that such behaviour was unacceptable.  The concerns were that this might be evidence of cross-firing of cheques to create artificially inflated balances on the account and that there might be attempts to withdraw monies before the cheques cleared.  The fraud department did not consider that there was sufficient evidence of illegitimate activity to justify termination of the relationship, but did decide that the position on uncleared cheques should be monitored.
115.	Mr Aplin therefore ensured that NatWest’s back office staff actively monitored SEWL’s accounts for the purpose of ensuring that uncleared cheques were kept to a minimum and, as before, that withdrawals from its accounts were only authorised by him to be made against cleared funds.  This was readily done by him accessing a particular display screen on NatWest’s computer systems which provided this limited information (not a complete overview of all transactions on the accounts).  
116.	Mr Aplin followed up the issue of the returned cheques with Mr Saunders, who gave the explanation that they had been drawn by Eddie Saunders in the expectation he could use monies from funds held in bonds with Barclays which, in the event, could not be unwound in time to meet the cheque payments.  This was a plausible and acceptable reason so far as Mr Aplin was concerned. In due course he relayed this to the fraud department in a telephone conversation on 22 July 2009.  On that occasion he mentioned that some of the previous concerns about activity in relation to the SEWL accounts still existed regarding inter-company transactions and the amount of cash withdrawals, but that explanations had been given for these.  He reported that in the light of the explanations given he was reasonably content with things, although he would not be upset if NatWest decided to exit from the relationship.  
117.	Again, the openness with which Mr Aplin discussed these concerns with others within RBS/NatWest indicates that he did not feel he had anything to hide.  
118.	The fraud department’s note of the conversation records that Mr Aplin said he would “continue to engage with the directors” and would revert to the department if he had any further cause for concern.  It is fair to say that the reference to “directors”, which included Mr Saunders (who was not in fact a director, since he was disqualified), appears to have been loose use of language by Mr Aplin, but it was readily understandable in context. He meant that he would continue to engage with those controlling SEWL’s activities and related transactions, i.e. Mr Saunders and Mr Strubel (who in fact was a director). It is not evidence of any attempt to conceal material information from the fraud department, which had equal access to information about Mr Saunders’ disqualification from RBS’s and NatWest’s data systems.  I accept Mr Aplin’s evidence that he assumed RBS/NatWest was aware of the fact that Mr Saunders was a disqualified director, and that it nonetheless remained willing to deal with SEWL, particularly since they were not extending credit to SEWL.  There is a later record from about 25 August 2009 of Mr Aplin mentioning to NatWest’s credit department that Mr Saunders and Eddie Saunders were disqualified directors.
119.	With the JVA in place, Mr Saunders ramped up the volume of transactions of business allegedly carried on by SEWL so as to attract yet more payments from the Claimants into the Ponzi scheme.  Despite his considerable wealth, Jeremy did not have sufficient liquid cash himself to service all SEWL’s increased needs, so he offered participation in what appeared to be an attractive investment opportunity to friends and acquaintances of himself and Martin who could provide the additional funding required.  
120.	At the time the fraud was discovered, there remained 18 third party lenders who had invested in this way in the hotel business.  They provided money by way of loans to JDSCL under loan agreements which provided for JDSCL to pay them attractive rates of interest, and JDSCL used that money to lend to SEWL (by payment into the No. 2 account with NatWest) in return for the agreed share of the profits under the JVA.  
121.	Eventually, when the Ponzi scheme collapsed, it was found that JDSCL had been defrauded of all these monies, which were lost.  In these proceedings JDSCL, as First Claimant, claims to recover all the monies it paid into SEWL’s accounts with NatWest as well as (under its various damages claims) for the ongoing liabilities it incurred to pay interest to the third party lenders.
122.	Jeremy also lent his own monies to SEWL to help fund what appeared to be the growing hotel business.  In addition, in most cases, he personally guaranteed the obligations of JDSCL to the third party lenders.  
123.	The Stones regarded Mr Saunders as a deal maker who was rather laid back about keeping paperwork up to date and in full order and in relation to keeping a firm grip on cash flow. Therefore Emily, in particular, assumed responsibility for keeping a careful check on what was (she believed) going on by way of transactions effected by SEWL involving payment of suppliers, receipts from hotels and payments into and out of the No. 2 account as funds were lent into and repaid from the hotel business.  She drew up schedules each week to present all this information to Martin.  She chased Mr Saunders to keep the paperwork records up to date to support the schedule entries and to ensure that he brought in hotel receipts on time and that repayments of lending were made when expected.  She also chased Mr Saunders to ensure that SEWL’s insurance cover in relation to payments of debts due to SEWL was kept at an appropriate level to cover the funds lent by the Claimants.
124.	Subject to a few hiccups, glitches and delays from time to time, Mr Saunders appeared to provide the paperwork and explanations she requested. In my view, the hiccups and glitches which did occur, and occasional problems in reconciling payments and receipts of the hotel business, appeared to be compatible with the existence of an ongoing, very busy, legitimate business experiencing the stresses and strains of growing very fast and under the direction of a slightly disorganised Mr Saunders (as he presented himself to the Claimants). 
125.	There were occasional delays in the Claimants receiving payments they expected, but the lapses were made good by Mr Saunders within a short period in each case and did not give rise to serious concern. Emily and Martin would sometimes have to placate angry and disappointed third party lenders who did not receive repayment from JDSCL of their loans precisely on time, but even in such cases the money always seemed to materialise from SEWL after a short delay and (until the end of the fraud) the third party lenders were repaid.  
126.	One missed repayment from SEWL in September 2009 caused some embarrassment for Jeremy with Barclays, to whom he had agreed to pay the money by way of repayment of a short-term bridging loan for another investment.  The delay in repayment meant that Jeremy was in breach of his agreed excess with Barclays in relation to that loan.  Emily, in dealing with Barclays over this, referred to explanations given by Mr Saunders that he had given instructions to NatWest to make the payment in good time and that (as Mr Saunders told her), as far as NatWest was concerned, it had transferred the funds to the correct bank account details for Jeremy with Barclays.  Barclays asked to see evidence of this and was not satisfied with the explanations supplied by Mr Saunders to Emily, as relayed on by her.  Mr Saunders then sought to put the blame on NatWest, with the result that Emily e-mailed him on 16 September 2009 to say that “the manager from your bank must call and e-mail [Barclays] to explain what has happened and that it is totally their fault that the money was not received …”. Martin repeated the request to Mr Saunders (and demanded that he confirm that NatWest would accept liability to pay compensation for the error) in an e-mail dated 21 September 2009.  
127.	Martin was still pressing Mr Saunders on 30 September to arrange for Mr Aplin to speak to Barclays to explain and apologise.  That did not happen.  Barclays remained unsatisfied.  Mr Saunders failed to provide documentary evidence for his account of events, as requested by Martin and Emily.  
128.	In my view, this was an incident which should have caused the Claimants to examine with far greater care than they did what was going on in relation to the hotel business. But I accept the evidence of Emily and Martin that since the outstanding repayment from SEWL came in shortly afterwards, they did not attach much significance to this incident, regarding it as just another hiccup explicable by the strains of SEWL’s sudden expansion of its business.  
129.	However, irritated that Mr Aplin had not spoken to Barclays, Martin called a contact of his in the RBS group (Stephen Mountain) on about 10 November 2009 to complain that Mr Aplin was withholding information, even though he had been authorised to provide it.  Mr Mountain relayed the complaint to Mr Aplin’s managers, but nothing further was heard or came of it.  
130.	In the course of carrying on the joint venture, Mr Saunders appeared (even if sometimes after some delay) to provide the great bulk of the documentation that Emily required of him.  Everything he provided, however, was an elaborate forgery.  Mr Saunders also appeared to arrange for repayments to JDSCL and Jeremy in (more or less) proper time and in line with the Claimants’ expectations and understanding of the supposed underlying hotel business, but the repayments were made out of the monies circulating as part of the Ponzi scheme.  
131.	The demands of SEWL’s supposed hotel business for ever more funding, and the increased profits which the Claimants believed they could achieve if they secured such funding, led them later in 2009 and in early 2010 to seek bank financing for the business.  
132.	Another feature of the case on which the Claimants placed emphasis was the pattern of operation by Mr Strubel of the ZFL account and, from September 2009, the CCL account with NatWest.  There was again a pattern of cash withdrawals, but more intermittently and generally for lower amounts than on the SEWL accounts.  Mr Aplin was aware from the handover discussions with Mr Meaton in December 2008 that Mr Strubel and those accounts had also been the subject of investigation by NatWest’s AML team without adverse conclusion being drawn, and so for the most part did not consider there was any need to clarify why funds were withdrawn on any particular occasion.  He simply assumed that they were withdrawn for normal business purposes – there was no clear indication to suggest otherwise.  I accept Mr Aplin’s evidence about this.
133.	There was one exceptionally large cash withdrawal by Mr Strubel from ZFL’s account in late August 2009, in the sum of £200,000.  Mr Aplin queried this with Mr Strubel, who explained by text that, because Mr Saunders was away at the time, he had agreed to pay SEWL’s suppliers direct (rather than ZFL lending the money to SEWL for SEWL to pay the suppliers), against the expectation of later reimbursement by SEWL.  Mr Aplin checked with Mr Backler, who confirmed that he could authorise this withdrawal.  Again, it is significant that Mr Aplin did not simply wave through a large cash withdrawal outside the established pattern of withdrawals simply because Mr Strubel asked him to and that he checked with Mr Backler.  These were not the actions of a dishonest man or one operating in league with Mr Strubel and Mr Saunders to defraud others.
134.	In about August 2009, Mr Strubel asked Mr Aplin to open new accounts for CCL (which was to take on the part of ZFL’s business which involved channelling money from investors into SEWL’s hotel business) and Cross Bay Limited (which was to take on ZFL’s ordinary clothing storage business). Mr Strubel said that he was aiming eventually to close the ZFL account.  New accounts were opened in mid-September.
135.	Between August and November 2009, Mr Saunders led the Claimants to believe the hotel business was doing so well that other large hotel chains (Park Plaza, Holiday Inn and Hilton Hotels) were now placing large orders with SEWL.  In September or October 2009, Mr Saunders took Emily to see the Westminster Park Plaza hotel, then under construction, to introduce her to “Dave”, who he said was his contact at Park Plaza.  Mr Saunders managed to conduct a conversation with Dave that gave the impression that Dave was responsible for ordering electrical equipment for Park Plaza hotels and that Mr Saunders provided quotes to him for the supply of electrical equipment.  This reinforced  Emily’s belief that SEWL’s hotel business did indeed exist.
136.	In early September 2009, Martin began to apply pressure on Mr Saunders to set up a new dedicated bank account under the Claimants’ control as contemplated by the JVA.  Mr Saunders first suggested, in response, that the current system in relation to the No. 2 account was working perfectly well and no new account was required.  He then reluctantly said he would speak to Mr Strubel to see whether he would agree to the Claimants having full visibility of the No. 2 account and let Emily become a signatory on it.  Nothing came of this.  Martin continued to press for a new No. 3 account to be set up.  Mr Saunders made encouraging noises but nothing happened.  
137.	Also in September 2009, Martin asked an accountant associate of his, David Wordley (“Mr Wordley”), to carry out an audit of the hotel business. Martin pressed Mr Saunders to provide bank statements for the No. 2 account for the audit (blacking out private entries not to be shown to the Claimants), or at least a  schedule of receipts and payments, a copy of SEWL’s insurance documentation and so forth.  Mr Wordley met Mr Saunders on 14 October 2009, but he did not have all the documentation required, including bank statements.
138.	Martin and Emily began to push Mr Saunders harder for access to SEWL’s bank statements for the No. 2 account.  Mr Saunders fobbed them off.  For various reasons, including what had occurred in September with Barclays (paras. [126]-[127] above ) and that he had been told in late October 2009 that Park Plaza had stopped a cheque for about £1.9 million banked in the No. 2 account and he wanted to reassure SEWL’s relationship manager at NatWest that SEWL was reducing its exposure to Park Plaza, Martin also pressed Mr Saunders to arrange a meeting for him with Mr Aplin.
139.	In November 2009, the Claimants and Mr Saunders agreed that a new corporate vehicle should be formed to conduct the hotel business and that Emily (but not Mr Saunders) would be a director of the company and a signatory on its bank account.  J.D.S Saunders Wholesalers Limited (“J.D.S. Saunders”) was incorporated on 20 November 2009.  In the event, however, the hotel business was not transferred to J.D.S. Saunders but continued to be carried on through SEWL.
140.	Mr Saunders arranged a meeting to be attended by Martin, Emily, Mr Aplin and himself at SEWL’s offices at Hainault on 20 November 2009.  Mr Saunders and Martin agreed that they should raise with Mr Aplin the procedure for Emily to become a signatory on the No. 2 account as an interim measure until the hotel business was transferred to J.D.S. Saunders, which would have a new bank account with NatWest.  
141.	By e-mail dated 16 November 2009 from Emily to Mr Saunders, she asked him to bring the paperwork for NatWest signed by Danielle Saunders or Rochelle Saunders and to chase Mr Aplin for the bank statements on the No. 2 account (it seems that Mr Saunders had been using alleged delays by NatWest as one excuse not to provide these).  It is likely the paperwork referred to was to add Emily as a signatory on the mandate for the No. 2 account as well as paperwork preparatory to setting up a new account (J.D.S. Saunders had not been established at this point).  It is likely that Mr Saunders had provisionally agreed that Emily might be added to the mandate of the No. 2 account while he played for time.  Emily chased Mr Saunders on this by e-mails in the following days; for example, in an e-mail from Emily dated 23 November 2009 she pressed him for signed forms so that she could have access to the No. 2 account from 24 November.  
142.	Mr Saunders asked Mr Aplin to send him forms for the opening of a new account and to add someone to the mandate of an account. Mr Aplin sent the account opening and mandate forms to Mr Saunders under cover of an e-mail message saying, “once completed and returned I will be able to confirm what ID will be required.” 
143.	It is very unlikely that Mr Saunders ever intended that Emily should really be added to the mandate for the No. 2 account and given authority to have access to that account.  Nonetheless, to string Emily along, Mr Saunders did provide her with a form to add her to the mandate on the No. 2 account, signed by Rochelle Saunders, which Emily also signed in readiness for her meeting with Mr Aplin.  Mr Saunders filled in this form using the account number of the No. 2 account, apparently making Emily sole signatory on it but leaving it unclear what should happen in relation to other existing signatories.  This was probably done deliberately by him with a view to precipitating a reference by Mr Aplin back to him to clarify his instructions, at which point he could spring his trap on Emily, refuse access to her on the No. 2 account, but instead offer her access to a new No. 3 account.  It is likely that Emily couriered the mandate form for the No. 2 account to Mr Aplin at about 4.00 pm on 23 November in readiness for her meeting with him the next day.
144.	On the morning of 23 November, Emily was still chasing Mr Saunders for forms signed by Danielle Saunders, and it seems that on 24 November Mr Saunders supplied Emily with an account opening form for a new SEWL account, signed by Rochelle Saunders and Danielle Saunders and dated that day, together with a form signed by Danielle Saunders and also dated 24 November authorising Emily to be added to the mandate for that account, to be known as the No. 3 account. Rochelle Saunders and Danielle Saunders were, with Emily, named in the account opening form for the No. 3 account as other parties associated with the business (i.e. SEWL) seeking to open the account.  
145.	Shortly before the meeting on 20 November was due to take place, Mr Saunders called Martin to say he could not make the meeting due to travel difficulties.  When Mr Aplin learned that Mr Saunders would not be attending, Mr Aplin cancelled the meeting on the grounds that he would not be able to tell Martin anything without Mr Saunders being present to represent NatWest’s customer, SEWL.  However, with Mr Saunders’ agreement, Mr Aplin did agree to speak to Martin on the telephone. It is very likely that (as Mr Aplin recalled) Mr Saunders gave Mr Aplin express instructions that he was not to discuss confidential banking matters with Martin, in particular the operation of SEWL’s No. 1 and No. 2 accounts, explaining that SEWL was using the accounts to conduct business unrelated to the Claimants’ investments.  Mr Aplin regarded this explanation as perfectly plausible and was not suspicious.  In any event, he understood that the usual banker’s duty of confidentiality owed to its customer applied in relation to information about transactions on these accounts.
146.	It is in this initial call between Martin, Emily and Mr Aplin that the Claimants submit Mr Aplin first made misrepresentations or gave a false impression to them. The evidence in chief about what was said in the call was somewhat distorted, because Mr Aplin originally erroneously thought that the undated manuscript note by him which I have called the Aplin note related to this call, whereas it emerged at trial that at least parts of it must have been made later.  Mr Aplin, Martin and Emily all engaged in degrees of reconstruction of the conversation, in part by reference to the Aplin note.  
147.	In my judgment, it is likely that in this initial conversation Martin introduced himself and briefly explained the Claimants’ interest as lenders to SEWL for the purposes of the hotel business (he did not need to elaborate much on this since he understood that Mr Saunders had already explained the background to Mr Aplin); in compliance with his duty of banking confidentiality and Mr Saunders’ instructions, Mr Aplin did not disclose any details of transactions on the SEWL account and probably explained to Martin why he could not; and Martin probably said that the Claimants wished Emily to become a signatory on the No. 2 account as an interim measure and would be looking to set up a new account in future. It is quite possible that in the course of this discussion it was agreed that Emily should bring the relevant paperwork to Mr Aplin’s office in Rochester.
148.	Contrary to the evidence of Martin and Emily, I find that Mr Aplin made no representations to them and did not say anything at all about the transactions passing through SEWL’s accounts in the course of this initial conversation.  It is very unlikely he would have done so, particularly in light of the express instruction from his customer not to do so.  I am also fortified in that conclusion by the absence of any assertion in the Claimants’ letter before claim, dated 8 July 2010, that Mr Aplin made any misrepresentation to them in the conversation on 20 November.
149.	Nor do I accept the evidence of Martin and Emily that there was such a full and detailed discussion about the nature of the hotel business or the Claimants’ participation in it as described by them in their evidence.  In my view, this is an instance of subsequent reconstruction by them, informed both by reference to the (misdated) Aplin note and by the wishful thinking after the event which characterised much of their evidence.
150.	At this point it is convenient to explain my conclusion about the timing of the Aplin note and its significance. In my assessment, it is probable that the note is Mr Aplin’s note of a conversation between him and Martin on 22 February 2010. It referred to events in January 2010, and included a note of SEWL’s turnover between 18 January and 22 February 2010. It also included a note, “RBSIF”, meaning RBS’s Invoice Financing department, with whom Mr Aplin had been in touch in late January 2010 to see if he could assist Martin in obtaining bank financing for the hotel business. The telephone records for Martin’s and Mr Aplin’s mobile telephones show that they had a telephone conversation on 22 February 2010, which is the most likely occasion on which a note containing these items would have been prepared.
151.	Contrary to suggestions by the Claimants that parts of the Aplin note were written by Mr Aplin at different times, it is in my view a note written on a single occasion as the record of a single telephone conversation. The note has all the appearance of having been compiled at one time (there is no natural division of subject matter nor any feature of the layout of the note to suggest otherwise), and I accept Mr Aplin’s evidence that his practice was to make a note of each conversation in relation to an account on a notepad and then to file the note on the relevant account file (as opposed to maintaining a running notebook of a series of conversations). 
152.	Also, soon after discovery of the fraud, Martin compiled a chronology in note form on about 24 May 2010 (the earliest chronology compiled by him after recovering from the initial shock of the discovery), in which he included this entry for 22 February 2010: “Martin Stone … telephoned Paul Aplin to discuss future funding arrangements and for him to bring his Director or whoever could make decisions. Hotel business growing rapidly and fixed arrangements on finance required for future”. This is consistent with the substance of the information recorded in the Aplin note.
153.	This does leave a bit of a mystery about the form of the information contained in the note, which reads like a record of a general introduction by Martin of himself, a description of the Stones’ contact with Mr Saunders, the background to SEWL and a general description of the joint venture business: all matters known to Mr Aplin by late February 2010. However, as the Claimants noted in their closing submissions, Martin tended to rehearse the whole background to the joint venture business whenever he got the opportunity for an extended conversation with Mr Aplin. Further, it made particular sense for him to do so on 22 February 2010, since Martin was at that stage seeking to persuade NatWest to provide invoice financing for the hotel business for the future and probably wished to ensure that Mr Aplin got a clear understanding of the background and Martin’s pitch so that he could pass that on to those within NatWest who might have the ability to take a decision in favour of the Claimants.  
154.	The particular significance of the Aplin note is what it reveals about Mr Aplin’s state of mind. It includes reference to “Lss 2 A/c” (meaning loans are paid into the No. 2 account) and hotel receipts, “Marriott 28 days … Holiday Inn 7/800k”, against all of which Mr Aplin has written “Barclays”. In my view, this is most likely to be a note made by Mr Aplin reflecting his understanding, contrary to what he was told by Martin in their conversation, that the hotel receipts were going into SEWL’s Barclays account. This indicates that, contrary to his recollection, Mr Aplin was aware by the time of the meeting on 2 March 2010 referred to below of a mismatch between what Mr Saunders had told him and what he had told Martin.  
155.	Mr Backler also, in his evidence, thought that it might well have been before this meeting on 2 March 2010 that Mr Aplin had discussed his concern about this mismatch with him, which was one reason he originally planned to go to the meeting himself. This tends to support the dating of the Aplin note at 22 February 2010 and what it indicates about Mr Aplin’s state of mind at that time. I return to this point in the context of the meeting of 2 March 2010, below.
156.	In his evidence, Martin said that from the conversation on 20 November 2009 onwards he regarded Mr Aplin as the bank manager for the joint venture and as a person whom Emily and he could call freely in respect of the joint venture’s business.  I do not accept that the position was as clear cut as this.  After the conversation, Emily and Martin continued to approach Mr Saunders (not Mr Aplin direct) when they wished to have information about the No. 2 account.
157.	It was clear from the circumstances in which the meeting set for 20 November was cancelled and from what Mr Aplin said in the telephone conversation that day that Martin and Emily would not be given free access by Mr Aplin to information about SEWL’s accounts unless and until SEWL gave consent for that. It was clear from this and Mr Aplin’s behaviour generally that Mr Aplin did not regard himself as, or do anything to assume any responsibility to act as, the bank manager for the joint venture (as distinct from SEWL, which he correctly regarded as the bank’s customer).  There were, in fact, comparatively few telephone conversations or meetings between Martin, Emily and Mr Aplin thereafter, and they were mainly directed to the mechanics of changing the No. 2 account mandate or opening a new No. 3 account or to unsuccessful efforts by Martin to persuade NatWest to agree to provide invoice financing for the hotel business.
158.	When Martin and Emily were interviewed by the SFO in December 2010, after the fraud had been discovered, Martin emphasised that Mr Saunders had told him and Emily that he could not have access to information about the No. 2 account. Emily gave a similar account. These explanations were not consistent with an understanding that Mr Aplin was now their bank manager in relation to that account. Emily described Mr Aplin to the SFO as SEWL’s bank manager.  
159.	At some point between Friday, 20 November 2009, and Monday, 23 November, Emily says she took identification documents to NatWest’s Finchley Central branch for verification, copying and onward transmission to Mr Aplin.
160.	On 23 November 2009, the telephone records for Mr Aplin’s mobile telephone indicate that he spoke to someone from Martin Stone’s office for about 4½ minutes.  Martin and Emily said that this was a joint call to Mr Aplin by them.  In my view, it is likely that the purpose of the call was to confirm arrangements for Emily to visit Mr Aplin’s office to sort out account mandates the next day.  
161.	In their evidence, Martin and Emily said that Martin also raised with Mr Aplin the issue of substantial payments received from the Marriott hotel group the previous Friday, and that Mr Aplin said that he had seen such monies had come into SEWL’s account (which would have been untrue).  I do not accept this evidence.  It is very unlikely that Mr Aplin would have discussed transactions on SEWL’s account in this way, particularly in light of the recent instructions from Mr Saunders not to do so and the position adopted by Mr Aplin on 20 November. For reasons set out earlier in this judgment, it is also very unlikely that Mr Aplin would have lied to the Claimants about this.
162.	Martin and Emily in their evidence also said there was a discussion about why Mr Saunders had not yet received the PIN code to the Bankline facility in respect of the No. 2 account (Mr Saunders had told the Claimants that he did not yet have access to Bankline whereas, as Mr Aplin was well aware, he did).  I do not accept this evidence either.  It is very unlikely Mr Aplin would have participated in such a discussion given his state of knowledge about Mr Saunders’ access to Bankline and his general unwillingness to discuss any details about SEWL’s banking arrangements.
163.	Shortly before 2.00 pm on 23 November 2009, Emily called a number for NatWest which took her through to NatWest’s CMT at Beckenham.  It is likely she spoke to Mr Smail.  Emily requested the bank statements for the No. 2 account, but was told she could not have access to them until she was an approved signatory on the account.  
164.	Emily later called Mr Aplin’s mobile telephone at 5.25 pm in a call lasting less than a minute.  According to Emily, she told Mr Aplin about her conversation with Mr Smail and Mr Aplin said “he would deal with it”.  I think that is unlikely to have occurred.  Emily had not yet been accepted by the bank as a signatory on the No. 2 account (indeed, had probably only given the relevant forms to a courier to take them from Finchley to Mr Aplin’s office at Rochester shortly before this, at about 4.00 pm) and both she and Mr Aplin were aware that there could be no question of her having access to SEWL’s bank statements until that happened.  I think it is more likely that this short call was by Emily to check if the couriered documents had arrived yet in preparation for her meeting with Mr Aplin the next day, and may well simply have involved leaving an answer-phone message for him.  
165.	According to Emily, on 24 November she called Mr Aplin to ask if he had received the identification documents that she had taken to NatWest’s Finchley Central branch and, when he said he had not, she decided to take the documents and drive to his office in Rochester so as not to waste any more time.  However, there is no telephone record of any such conversation with Mr Aplin on 24 November and I think it is more likely that a meeting had already previously been fixed for that day for Emily to go through the various account forms and documentation required.
166.	It is common ground that such a meeting did take place between Emily and Mr Aplin on 24 November 2009.  Mr Aplin had limited recollection of this meeting, other than that he copied personal identity documents she had brought with her and that she was set up as sole signatory on a new SEWL No. 3 account pursuant to the mandate dated 24 November 2009 signed by Danielle Saunders (in fact, it seems the account could not be opened that day because, although Emily had brought identity documents in relation to herself, the bank also needed to see identity documents for the other parties named in the account opening form, Rochelle Saunders and Danielle Saunders).  Consistently with Mr Aplin’s position up to then, it is unlikely he discussed anything touching on transactions on SEWL’s existing accounts.
167.	Emily gave a much fuller account of what happened at the meeting in her evidence.  I do not think it likely she could really recall all the detail she gave.  It is probable that her account developed out of an effort at reconstruction.  One thing in her account that I do consider is likely to have occurred, and is corroborated to some degree by the contemporaneous documents, is that Mr Aplin spoke to Mr Saunders to clarify his instructions (since to keep his fraud going, Mr Saunders had been so insistent up to then that the Claimants could not have access to the No. 2 account and because the mandate form for Emily on the No. 2 account left open important questions, see para. [143] above) and that Mr Saunders at this point insisted that Emily could not be a signatory on or have access to information about the No. 2 account (relying on the same excuse as before: the privacy of transactions with Mr Strubel on that account). Instead, Mr Saunders instructed Mr Aplin that Emily could only become a signatory on a new No. 3 account. Emily accepted this at the meeting and so was only made a signatory on a new No. 3 account for SEWL which Mr Aplin then took steps to open.
168.	Contrary to Emily’s recollection, it is unlikely that Mr Aplin discussed SEWL’s Bankline service at the meeting.  I think it is probable that there was a brief discussion about bank statements on the No. 2 account in which Mr Aplin confirmed that they could be printed out for Emily if Mr Saunders agreed but, having spoken to Mr Saunders by telephone, who refused his consent, Mr Aplin told Emily he had no authority to do so (this seems to be what lies behind a report Emily sent by e-mail to Martin dated 4 December 2009).
169.	At the end of November 2009, Martin and Emily recruited Ms Walker to work for the joint venture business.  She divided her time between SEWL’s offices in Hainault and Martin’s offices in Finchley.  Emily retained responsibility for managing (as she thought) SEWL’s cash flow by giving instructions to Mr Saunders.  
170.	According to Martin’s evidence, on 26 November 2009 he telephoned Mr Aplin and left a message for him on his answer-phone informing him of a cash flow issue if a particular cheque from the Hilton Hotel group, due to be deposited into the No. 2 account on 2 December 2009, were not cleared on an accelerated basis and to ask for NatWest’s assistance.  The Claimants had been told by Mr Saunders that NatWest took five days to clear cheques deposited with the bank (this was untrue: the real period was four days, but five days was probably a period chosen by Mr Saunders in an effort to provide himself with a bit more flexibility in operating the Ponzi scheme while remaining a credible story for the Claimants).  
171.	Martin went on to say that on 27 November 2009, not having received a reply, he telephoned Mr Aplin again and had a conversation with him in which Mr Aplin deliberately gave the false impression that hotel receipts were indeed being paid into the No. 2 account.  Martin said he referred to the expected Hilton Hotel cheque that would be received and asked Mr Aplin if NatWest would advance funds against the monies that would shortly be received into the No. 2 account before the cheque had cleared at the end of the five day period; Mr Aplin said he understood the problem, but could not provide finance for the joint venture against that Hilton cheque, nor could special clearing be arranged.  Mr Aplin had no recollection of any such message or conversation.
172.	I do not accept Martin’s evidence on this.  Detailed examination of the available telephone records indicated that he reconstructed his account based on a mistaken understanding that the telephone call made by him on 27 November was to Mr Aplin, whereas in fact it was to the CMT.  Further, I think it unlikely that he could have left the detailed message for Mr Aplin he set out in the telephone call to Mr Aplin’s mobile telephone on 26 November, which lasted only 1 minute 1 second.  In addition, this account did not fit well with an e-mail to Martin from Emily on 4 December, in which she provided Martin with Mr Aplin’s mobile telephone and office telephone numbers, giving the appearance that Martin wished to contact Mr Aplin then for the first time.  There is also the sheer improbability, in my view, that Mr Aplin would have engaged with Martin in the alleged discussion of hotel receipts and cheque clearing times, when Mr Aplin knew all that to be incorrect.  I think it more likely that the telephone calls on 26 and 27 November to Mr Aplin’s mobile telephone and to the CMT, as recorded in the available telephone records, were made by Emily. 
173.	According to Emily’s evidence, she telephoned Mr Aplin at 3.30 pm on 1 December 2009 to chase him in relation to the opening of the No. 3 account; stressed to him the importance of her becoming a signatory on whatever account the joint venture would be trading through; and discussed with him the provision of PIN codes to Mr Saunders for the Bankline service on the No. 2 account.  In my view, like Martin’s evidence about the alleged telephone conversation with Mr Aplin on 27 November, this was all reconstruction by Emily by reference to telephone records which she mistakenly thought showed she had called Mr Aplin at this time, whereas the number she called was for the CMT.  Calls to the CMT were not transferred to relationship managers, and it is likely that she did not speak to Mr Aplin at this time.  In fact, the telephone records show that she tried calling Mr Aplin’s mobile telephone immediately before this call, for a period of 8 seconds.  It is probable she found his telephone was switched to answer-phone or switched off, so she called the CMT instead.  
174.	Also, there is an e-mail exchange between Mr Smail and Mr Aplin that day which refers to discussions between Mr Smail and Emily the same day, which strongly supports this view of events.  It appears from this e-mail trail that Emily Stone made an inquiry of Mr Smail on 27 November whether she was on the account mandate yet, which Mr Smail relayed to Mr Aplin, who responded that paperwork had not been sent off “as I need to have ID for the other signatories” (presumably a reference to Rochelle Saunders and Danielle Saunders, who had been named in the account opening form for the number three account) and referred to the fact that she was only going to be on the new No. 3 account.  It seems likely that Mr Smail relayed this fact to Emily. Mr Smail sent a further e-mail to Mr Aplin on 1 December timed at 15.39 to report that Emily had just been on the telephone to him to say that the signatories had gone to a NatWest branch to hand in their identity documents.  Mr Aplin replied to Mr Smail to say that they had not yet been received.  
175.	In my assessment, Emily did not have the discussion with Mr Aplin on 1 December which she set out in her evidence, either on that day or at all.
176.	On 2 December 2009, in response to pressure from the Claimants to provide bank statements for the No. 2 account, Mr Saunders faxed the Claimants two pages of what appeared to be a NatWest bank statement for the No. 2 account for the period 3 November to 27 November showing, inter alia, a flow of receipts for various hotel groups.  This document was an elaborate forgery by Mr Saunders.  Emily and Martin Stone, unsurprisingly in my view, did not spot this on the cursory examination they gave it; but they wanted much more extensive bank statements for the No. 2 account so Mr Wordley could complete his audit.
177.	On 3 December 2009, it appears that Emily spoke again to Mr Smail at 9.46 am to ask him to send her bank statements for the No. 2 account and followed that immediately with an e-mail to Mr Saunders to ask him to call Mr Smail to tell him to send the statements direct to Emily: “he said that he can do that just needs to speak to you, says there is no record on the system of any statements being ordered”.  It was made clear in this way, as with the similar position adopted by Mr Aplin at his meeting with Emily on 24 November, that NatWest did not regard the Claimants as their customer in relation to SEWL’s No. 2 account.  
178.	Martin himself then contacted the CMT, where he spoke to Ms Lockwood on 4 December 2009 to request bank statements for the No. 2 account.  It is likely that this is what the call from Martin’s mobile telephone timed at 11.49 that day and lasting 5 minutes 43 seconds related to.  The CMT did not send these bank statements to him because he was not on the account mandate.  The CMT informed Mr Aplin of Martin’s request and that the statements had not been ordered, nor supplied to him.  Mr Aplin spoke to Mr Saunders about Martin’s request and Mr Saunders instructed Mr Aplin that he was not willing to authorise release of the No. 2 account bank statements to Martin and that he would speak to Martin about this.  
179.	The fact that the call at 11.49 on 4 December was to the CMT is significant, because it supports the conclusion that the account given by Martin in his evidence of a detailed conversation with Mr Aplin on 4 December about the business of the joint venture and the difficulties caused by NatWest not being able to reduce its cheque clearing times below five days is reconstruction by Martin based, again, on the mistaken assumption that a call to the CMT was in fact to Mr Aplin personally.  The detailed telephone records show that Martin did place a call to Mr Aplin’s mobile telephone at 11.47 that day, lasting 1 minute 30 seconds.  I do not think that would have been long enough for the extended conversation Martin described in his evidence, and the timing and sequence of the call suggests that Martin may have called Mr Aplin and got only his answer-phone, leading him then immediately to call the CMT (as a second best option) to try to get hold of the bank statements for the No. 2 account. In my view it is very unlikely that Mr Aplin engaged with Martin in such a conversation as Martin described.
180.	It is probable that Mr Saunders spoke to Martin and promised to supply him with copies of further NatWest bank statements for the No. 2 account, to be provided by Mr Saunders himself rather than the bank (probably, again, relying on the excuse that he wished to be able to check that the statements did not include information about private transactions with Mr Strubel). On 7 December 2009 Mr Saunders faxed the Claimants another seven pages of what purported to be copies of NatWest bank statements for the period June 2009 to December 2009, with a few further pages faxed on 8 and 10 December 2009.  These were all, again, elaborate forgeries by Mr Saunders.  Martin gave them only a cursory look before passing them on to Mr Wordley to complete his audit in due course.  Martin noted what seemed to be a reconciliation problem between the running balance entry for 30 September 2009, shown at the end of one sheet (which was faxed on 7 December and purported to be a print-out from the 4 December), and the opening balance shown for 9 October 2009 at the start of another sheet (which was faxed on 8 December and purported to be a print-out from 7 December), but this did not set alarm bells ringing and he assumed that it would be the sort of detail which would be checked and ironed out by Mr Wordley in due course.
181.	Emily did not check the (fake) bank statements very carefully, because they contained historic information not directly relevant to her current cash flow concerns, although on her brief look at them she noticed there were a few dates missing for some of the months in the statements sent on 7 and 8 December and in an e-mail dated 8 December asked Mr Saunders to chase up the statements in relation to the gaps.  
182.	If anyone acting for the Claimants had checked the bank statements carefully, they would have come to appreciate that many of the entries could not be reconciled with the detail of what Mr Saunders had been telling them about payments in and out of the No. 2 account. In my view, if this were relevant to the legal analysis, the failure by the Claimants to carry out within a reasonable time or at all the audit checks by reference to these statements for which they had been obtained was another significant element of contributory negligence on the part of the Claimants.
183.	Also in early December 2009, J.D.S. Saunders opened a new account with Barclays in readiness to take over as the vehicle for conducting the hotel business.  Ms Walker drafted letters for signature by Mr Saunders to go to suppliers and customers with the new bank details and company name.  Mr Saunders approved the drafts but did not provide signed copies which could be sent out. Instead, he said he would hand-deliver them to customers, but of course he did not do so.  
184.	On 10 December 2009, Martin and Emily had a meeting with the commercial finance arm of Barclays to discuss the possibility of Barclays providing invoice financing for the hotel business, once it was taken over by J.D.S. Saunders.  Barclays set out information it would require to take such a proposal forward, including copies of all supplier invoices and signed third party proof of deliveries from suppliers or confirmation of deliveries from the hotel customers. Unbeknownst to Martin and Emily, there was no prospect of Mr Saunders providing them with such material.
185.	According to Martin’s evidence, on 11 December 2009 he had yet another conversation with Mr Aplin about cheques from Hilton hotels which had been paid into the No. 2 account and had been cleared properly, in order to press once again for Mr Aplin to reduce NatWest’s cheque clearing time; Mr Aplin said he was aware that a large cheque had been received but could not reduce the clearing time for reasons already discussed.  
186.	I do not accept Martin’s evidence about this.  It builds on his previous evidence about earlier discussions of these topics with Mr Aplin which I have already found to be erroneous reconstructions by him; the call to Mr Aplin’s mobile telephone lasted only 1 minute 9 seconds which is so short that I do not think it likely that it could have accommodated the sort of conversation described by Martin; and again I consider it very improbable that Mr Aplin would have engaged in a discussion along these lines, which would have been in violation of his obligation of confidentiality to his banking client and of express instructions given to him by Mr Saunders. It is particularly improbable that Mr Aplin would have given the false impression that he was aware that a large cheque had been received into the No. 2 account.
187.	The Stone family, including Martin, Jeremy and Emily, spent time in Florida in the lead up to Christmas in 2009.  Mr Saunders had a holiday home close by and was there at the same time.  He met up socially with Martin, Jeremy and Emily on 22 December at a restaurant.  Jeremy and Mr Saunders, who had not met for some time, chatted together to catch up with each other.  There was also discussion about the hotel business.  According to the evidence of Martin, Jeremy and Emily, there was a telephone conversation in the course of this discussion between Martin and Mr Aplin in which they say Mr Aplin again gave them a deliberately false impression about SEWL’s business and the operation of its accounts with NatWest.  
188.	Mr Aplin denied that any such conversation took place.  He was, in fact, on compassionate leave at the time, as his father had just died and he was not taking work telephone calls.  The telephone records for his mobile telephone, which was the telephone he used for work, showed that he neither made nor received any such telephone call on that day.
189.	The accounts given by the Stones diverge slightly.  They agree that there was a specific issue concerning a cheque from Hilton hotels and the time in which it would clear.  Martin wanted to ask Mr Aplin to reduce the clearing time for hotel cheques.  According to Jeremy, Mr Saunders called Mr Aplin and, once he was on the telephone, passed the telephone to Martin who then had a conversation in which it was agreed between them that the clearing time would be reduced from five days to four days.  According to Martin’s account, Mr Saunders called Mr Aplin and left a voice-mail for him, leading to Mr Aplin returning his call some 30 minutes later, at which point Mr Saunders had a chat with Mr Aplin and then passed the telephone to Martin; Martin then had a conversation with Mr Aplin in which he asked whether, since a number of Hilton cheques had already cleared without incident, it would be possible for NatWest to shorten the clearance period for the Hilton cheques to three days in line with what Barclays could offer; Mr Aplin refused to do this but said he would be willing to recommend a four-day clearance period which would probably be accepted.  Emily’s account was in line with Martin’s so far as concerns the order of telephone calls, but she recalled that Martin asked Mr Aplin to match a clearing time of four days offered by Barclays and that Mr Aplin agreed to do that.
190.	I do not accept the evidence of Martin, Jeremy and Emily that Martin had a conversation with Mr Aplin on 22 December.  There is no available telephone record, including the telephone records of Mr Saunders’ mobile telephone and Mr Aplin’s mobile telephone, which supports this suggestion.  Mr Saunders was in the habit of calling or texting Mr Aplin on Mr Aplin’s mobile telephone and there is indeed no evidence that he had any other telephone number for him. Since Mr Aplin was on compassionate leave at the time, it is unlikely he would have been taking or making business calls that day.  Martin’s account, which was the most detailed and specific, builds on and refers back to earlier evidence of his about previous telephone conversations with Mr Aplin about Hilton cheques and cheque clearing times which I have rejected as erroneous reconstruction. His evidence about this telephone call is of a similar character, in my view.  Again, I consider that it is very improbable that Mr Aplin would have engaged in such a discussion as the Stones describe.  I have reached the conclusion that, however passionately the Stones may now have convinced themselves that such a conversation took place with Mr Aplin, it did not.
191.	There is a reference in an e-mail dated 24 December 2009 from Emily to Ms Walker which may be the foundation for the account they have given by way of reconstruction. Among other matters, Emily wrote, “NatWest have said that on all future cheques it will be 4-day clearance which will help us a bit”.  That indicates that something had been said at about this time on the question of cheque clearance times, but in my view it is most probable that this was said by Mr Saunders purporting to relay on something he had been told by NatWest.  I think it likely that Mr Saunders was in this way simply using the flexibility he had created for himself by his original lie to the Claimants that NatWest cheque clearance time was five days to say there was a reduction to four days, which he knew to be the true time, in order to take off some of the pressure being applied with him by the Claimants on this issue.   
192.	On 31 December 2009, SEWL granted a new debenture in favour of JDSCL to secure all monies due or to become due from SEWL to JDSCL “on any account whatsoever”, as the certificate lodged by the Claimants at Companies House stated (“the debenture”).  
193.	By e-mail dated 12 January 2010 from Emily to Mr Saunders, she asked him if she had been put on as a signatory for the new No. 3 account.  The fact that she directed this query to Mr Saunders rather than to Mr Aplin direct indicates that she appreciated that SEWL (represented by Mr Saunders) was NatWest’s client and she could not regard Mr Aplin as a relationship manager answerable to her.  Other e-mails to Mr Saunders followed the same pattern (see, e.g., Martin’s e-mail of 24 January 2010).
194.	On 19 January 2010, Martin telephoned Mr Aplin to discuss the aims of the joint venture.  Martin emphasised that he was looking to find bank financing for the joint venture’s hotel business going forward, but Mr Aplin was non-committal.  Martin said that if NatWest would not help he might have to move the business to Barclays. (In the event, however, Barclays was not willing to provide invoice financing for the business because it was not provided with satisfactory audit evidence for the transactions). Shortly after the call, Mr Aplin took steps to set up a meeting with Mr Backler to discuss this, but in the event it did not take place.
195.	On 22 January 2010, Emily spoke to Mr Aplin on the telephone.  As a result of their conversation Emily sent him a letter on JDSCL-headed notepaper addressed to NatWest and signed by her, headed with a reference to SEWL and to the number of the No. 2 account which stated:
“We refer to the debenture granted to us by Saunders Electrical Wholesalers Limited on 31st December 2009, whereby the Book Debts (as defined in that debenture) are charged to us.
We refer to clause 9 of the debenture which sets out the manner in which the Book Debts Account is to be operated.  We confirm that you as the bank concerned may credit the account with receivables and make payments out of the account in accordance with the mandate in accordance with provisions of clause 9.2 of the debenture.
We confirm that an execution of a mandate by Emily Stone shall constitute the necessary consent under clause 9.2.”
  
196.	Emily did not send Mr Aplin the debenture itself.  The letter constituted consent from JDSCL that NatWest could go on operating the No. 2 account for SEWL notwithstanding the existence of the debenture in favour of JDSCL referred to.
197.	Emily continued to chase Mr Aplin in relation to opening the No. 3 account (it was eventually opened on 23 February 2010).  On 29 January, Martin called Mr Aplin to do the same.  He referred to the debenture which, he said, caught all SEWL’s hotel receipts.  He pressed Mr Aplin to proceed to finalise opening the No. 3 account so that it could operate as an account for the hotel business in the interim while the business was transferred into the name of J.D.S. Saunders, since Mr Saunders was not willing to give the Claimants access to the No. 2 account as (he had told Martin) it would give them sight of historic transactions which were none of their business.  
198.	On 27 January 2010, Martin had a telephone call to Mr Aplin’s mobile telephone which lasted 1 minute.  Mr Aplin did not recollect the call.  Martin purported to have a detailed recollection of a discussion in which he emphasised the fast growth of the hotel business and the need for financing to fund that growth.  He wanted a meeting with Mr Aplin to discuss whether NatWest would provide long-term financing for the business and said that Mr Aplin agreed to meet to discuss this.  In my view, however, it is more likely that Mr Aplin had in mind to try to set up a meeting with people in RBS’s or NatWest’s commercial financing department who would handle any such request.  
199.	The telephone records show that on 29 January 2010 Martin called Mr Aplin from his mobile telephone for 1 minute 4 seconds and then, a little over an hour later, for 33 seconds.  Since the second call was immediately followed by a call to the CMT, it is likely that Martin only got Mr Aplin’s voice-mail message on that occasion.  Martin said that he spoke to Mr Aplin to ask whether NatWest would lend funds against a large cheque just received from the Hilton group and that Mr Aplin said he knew a cheque had come in but could not authorise an advance of funds against it.  Mr Aplin recalled no such conversation.  
200.	I do not accept Martin Stone’s evidence about this. It is very unlikely Mr Aplin would have discussed a transaction on the No. 2 account and very unlikely he would have told Martin, untruthfully, that he had seen the cheque come into SEWL’s account.  It is more likely that any discussion proceeded in general terms, with Martin simply emphasising, as before, the joint venture’s need for trade financing and pressing Mr Aplin for a meeting.
201.	Martin chased Mr Aplin on this issue in further telephone calls, leaving messages for him and so forth.  The issue became more urgent when, in early February 2010, Barclays indicated its unwillingness to provide an invoice financing facility for the joint venture because of deficiencies in the audit trail relating to the hotel business.  
202.	The telephone records show that Martin made a call from his mobile telephone to Mr Aplin’s mobile telephone on 22 February 2010, lasting 7 minutes 7 seconds.  It is likely that it was during this telephone conversation that Mr Aplin made the Aplin note which was the focus of much debate at the trial (see paras [150]-[155] above).  In the conversation, Martin rehearsed the background to the joint venture and the Claimants’ involvement with it.  He set out the Claimants’ case why the bank’s financing arm should be willing to fund the expanding hotel business, drawing attention to the difficult issue of Mr Saunders’ disqualification as a director in order to defuse it by emphasising that the bank-lending against invoices would be to a new company, J.D.S. Saunders.  
203.	By this stage, as a result of enquiries Mr Aplin had made with RBSIF in late January, it was looking unlikely that RBSIF would be comfortable with taking on the business, having examined the hotel business some months previously. It is likely that Mr Aplin’s reference to “RBSIF” in the Aplin note was a reminder to himself about that background.  
204.	It was in the Aplin note that Mr Aplin included his reference to “Barclays” against points recording discussion of loans from the Claimants going into the No. 2 account and reference to hotel receipts.  Although it is possible that this reflected some statement by Martin that if NatWest did not provide invoice financing on acceptable terms, SEWL and J.D.S. Saunders would take their business to Barclays, I consider from the position of the note and in light of other evidence (such as Martin’s recollection that at about this time he told Mr Aplin he had encountered difficulty in obtaining bank financing) it is more likely that this note reflects Mr Aplin’s first private awareness that Martin  thought that hotel receipts were going into the No. 2 account, whereas Mr Aplin thought they were going into SEWL’s account with Barclays.  
205.	Mr Aplin felt constrained by his banker’s duty of confidence and the instructions given by Mr Saunders not to disclose to Martin what transactions were, or were not, taking place on the No. 2 account.  After the conversation, Mr Aplin checked what he should do with Mr Backler, who confirmed that he could not correct Martin’s understanding and tell him what was happening (so far as NatWest understood) on the No. 2 account. 
206.	In the light of this conversation on 22 February, although it is likely that Mr Aplin remained non-committal on the question of invoice financing, a meeting was set up for 2 March 2010 to discuss provision of such financing by the bank.  Mr Backler originally planned to go to the meeting along with Mr Aplin, probably reflecting concern about the awkwardness that Martin seemed to have a different understanding of the destination of the hotel receipts than the bank did and to support Mr Aplin.
207.	Meanwhile, although J.D.S. Saunders had been established and had its own bank account (with Barclays) and although the No. 3 account was opened on 23 February, Mr Saunders successfully persuaded the Claimants that the hotel business should continue to be transacted through the No. 2 account for the time being.  This was on the grounds that an attempt to switch companies or bank accounts would unsettle the accounts departments of the hotel chains and so slow down their payments unhelpfully, at a time when the joint venture’s cash flow was strained.
208.	Mr Aplin was cross-examined in relation to the account opening forms for the No. 3 account, the suggestion being that he deliberately suppressed relevant information in relation to SEWL to encourage NatWest’s accounts department to assist SEWL by opening the account.  In my view, this suggestion has not been substantiated.  It is true that in answer to a question, “Is the business multi-banked?”, Mr Aplin answered “no” rather than referring to its account with Barclays; but I accept his evidence that this is likely to have been a simple slip in filling in the form.  The omission was not sinister – the No. 3 account was not the vehicle of any fraud, since the Claimants were to have full visibility of transactions through it.  The other information supplied by Mr Aplin on the forms identified Mr Saunders as someone involved with the account.  Mr Aplin did not attempt to suppress information about the account.
209.	The Claimants had by this stage engaged a firm of accountants, RSM Tenon, with a view to auditing SEWL and the hotel business so as to strengthen their hand in commercial negotiations with banks for invoice financing.  The meeting Martin set up with Mr Aplin to discuss the invoice financing proposal was scheduled for 2 March 2010 at the offices of RSM Tenon.  Mr Aplin agreed to attend with Mr Backler.  Martin wanted someone with more authority than Mr Aplin, who could take a decision about this.
210.	On 1 March 2010, however, Mr Aplin e-mailed to say that Mr Backler could not make the meeting.  Nonetheless, Martin pressed for the meeting to proceed with Mr Aplin alone.  He did not wish to lose the opportunity to make a presentation in relation to invoice financing which could be referred back by Mr Aplin to the relevant people in NatWest.  Although Mr Aplin was aware that RBSIF was unlikely to find the proposal attractive, he felt he should attend the meeting as SEWL’s relationship manager, to see if there might be some way to help.  
211.	Although on Mr Aplin’s best recollection he went to the meeting at the offices of RSM Tenon without being aware that Martin thought the hotel receipts were going into the No. 2 account, I consider it more likely that he had learnt this shortly before the meeting during the telephone conversation on 22 February.  This awareness probably reinforced his general approach at the meeting, which was to be non-committal.
212.	There was a difference of recollection regarding what happened at the start of the meeting on 2 March 2010.  According to Mr Aplin, at the start of the meeting it was just he and Martin together in the room; they were joined slightly later by Louise Machin (“Ms Machin”) of RSM Tenon and a colleague.  Mr Aplin said that at the start of the meeting, prior to being joined by Ms Machin, Martin acknowledged that the purpose of the meeting was not to discuss the running of the SEWL accounts (and indicated that he understood from conversations with Mr Saunders that the details of the running of those accounts were confidential), but rather to discuss whether NatWest was willing to fund the joint venture.  Martin, on the other hand, said that there was no such discussion and that Ms Machin was present throughout the meeting.  Ms Machin’s witness statement was admitted as evidence without challenge from the Defendants.  It did not cast light on this particular issue.  
213.	I prefer the evidence of Mr Aplin on this point.  It accords with the general approach he had been adopting with Martin for some time to decline to discuss the operation of SEWL’s accounts.  It is also likely that he would have been concerned to establish this point at the outset, given the awkwardness about Martin’s understanding regarding hotel receipts and the No. 2 account and that Mr Backler was now not attending the meeting.  
214.	Mr Aplin’s account of the beginning of the meeting is corroborated by a description of the meeting which Martin drew up to provide to the SFO on about 12 July 2010, relatively shortly after his discovery of the fraud and after he had had an opportunity to pull himself together after the trauma of finding out what had happened.  In that account, which came to the Defendants by chance in September 2012 via the SFO, Martin said that Mr Aplin “attended the meeting on the specific understanding that we were discussing only the hotel project. Indeed [Mr Saunders] made the point to me that Mr Aplin had been told not to discuss the [SEWL] number two account and related operations of [SEWL] as previously requested by Michael Strubel”.  According to this note, Martin said that he greeted Mr Aplin in reception and took him into the designated meeting room.  It continued, “I tried to put [Mr Aplin] at ease by saying something to the effect that we were not here to discuss the entire [SEWL] business but were focusing on the prospect for the joint venture between [JDSCL] and [SEWL] as reflected in the current banking arrangements”.  This document emerged after Mr Aplin signed his witness statement in the proceedings, giving his account of the meeting.  In my view, it provides corroboration for his account of the early part of the meeting on 2 March.  
215.	When Ms Machin joined the meeting, Martin tabled a detailed presentation document entitled “Electrical Wholesaling Business, Joint Venture 2009-2010” (“the March presentation”).  This document set out details of the increase in turnover of the hotel business.  It included a statement that, “all receipts are paid into a dedicated bank account in accordance with a fixed charge that is held by [JDSCL]”. So far as Mr Aplin was aware, this would have been SEWL’s Barclays account. The presentation also included a flow chart headed, “Joint Venture Order Process”, which referred to funds being transferred to the KDS buying group by CHAPS rather than by cash.  
216.	Mr Aplin’s evidence was that he did not study the March presentation at the meeting, but rather listened to Martin’s oral explanation and after the meeting simply sent it on to others in the bank’s commercial financing department without reading it himself.  Accordingly, he did not notice these statements in the document.  I accept Mr Aplin’s evidence on this. The detail in the March presentation was of little interest for him, since he would not be taking any decision on the proposal but would have to refer it to others in the bank.
217.	Mr Aplin made a note at the meeting of Martin’s oral explanation.  He noted in relation to purchases of goods by the buying group for supply to hotels that the terms were “cash on delivery”. Ms Machin’s manuscript note from the meeting recorded “pay supplier up front… pay COD” (probably an abbreviation for “cash on delivery”).  It is likely that this reflected what Martin said.  It seemed to confirm that Martin appreciated that SEWL paid its suppliers in cash, as Mr Aplin believed (although Martin probably just used the phrase as shorthand to mean immediate payment by CHAPS).  
218.	Mr Aplin’s manuscript note did not record anything about hotel receipts going into the No. 2 account, but Ms Machin’s manuscript note of the meeting recorded, “paid into number two a/c – controlled by JV [joint venture]. Debenture in place”.  In my view, it is likely that Martin did say something at the meeting about the hotel receipts being paid into the No. 2 account, despite Mr Aplin’s recollection that he was unaware of Martin’s belief about this at the time of the meeting.  Mr Aplin probably did not think it necessary to note it himself because this was a point of which he was already conscious.  I do not, however, think that Martin gave this point as much emphasis as he suggested in his evidence nor, in my view, did he go through the March presentation in the detail he set out in his witness statement.  
219.	In my judgment, Mr Aplin was careful at this meeting to say nothing about the operation of SEWL’s bank accounts with NatWest. Particularly in light of the exchange with Martin at the start of the meeting, Mr Aplin was entitled to assume that Martin appreciated he could not take Mr Aplin to be giving any information about the operation of those accounts.  I find that Mr Aplin did not say or do anything at this meeting deliberately to mislead Martin.  Mr Aplin was in listening mode and said nothing of substance, other than that he would take the March presentation away to pass on to others in the bank.  In my view, in the context of this meeting and judged on an objective basis, Martin could not reasonably have understood Mr Aplin to be making any representation himself about the conduct of the hotel business or the operation of the No. 2 account.
220.	After the meeting, Mr Aplin promptly sent on the March presentation to NatWest’s commercial funding department. The bank remained unwilling to provide invoice financing for the joint venture, so the proposal went nowhere.
221.	In her evidence, Emily said that between 10 and 12 March 2010 she had two telephone conversations and exchanged e-mails with Mr Aplin regarding putting a sweep arrangement in place, so that any monies paid into the No. 2 account would automatically be transferred to the No. 3 account.  I do not accept Emily’s account of the detail of conversations she said she had with Mr Aplin in this period, which does not accord with Mr Aplin’s evidence and does not sit well with the contemporaneous documents.  I think it likely that in this part of her evidence she was reconstructing an account from an e-mail exchange which was probably, in reality, the extent of her exchange with Mr Aplin on this issue.
222.	On 12 March 2010, in response to a query from Mr Aplin about use of Bankline and whether the No. 3 account would be used going forward, Emily responded to say she was “just working out with [Mr Saunders] re the accounts, will let you know”, then added a new question: “If we had a mandate in place to sweep number two account receipts straight into the number three account, would it happen as they hit or would it be a case of at the end of the day the total is pulled across (which may be too late for us as you know we need to make the orders that day from receipts)?”  Mr Aplin responded a few minutes later to say, “Emily, any sweeps in place will only take effect at the end of the day”.  
223.	That was a straightforward and accurate answer to Emily’s question.  In my view, Mr Aplin’s answer did not make any implied representation about transactions occurring on the No. 2 account.  Certainly, in giving that answer, Mr Aplin did not deliberately seek to mislead Emily about transactions through the No. 2 account.  I find that there was no oral discussion between Emily and Mr Aplin about that answer or the issue of the sweep.
224.	On 28 April 2010, Emily stumbled across evidence of the fraud perpetrated by Mr Saunders on the Claimants.  She logged into Bankline for the No. 3 account and noticed an option on the screen to access other accounts.  She entered the account number for the No. 2 account and the system gave her access to the true bank statements for that account for more than a year.  She saw large transactions on that account with payments going out to individuals and companies she did not recognise and no receipts in the name of hotels.  She was in shock.  She printed out as many pages of the bank statements as she could.  
225.	Emily and Martin then compared those statements with the forged statements provided by Mr Saunders.  They still hoped that there might be some proper explanation from Mr Saunders.  However, they now made contact with hotel groups and it quickly became apparent that they had been defrauded.  
226.	Martin, Jeremy and Emily decided that their best move was to pretend to Mr Saunders that they did not know about the fraud, in order to try to recover some money from him.  They identified the sum of about £4 million representing two impending receipts that Mr Saunders had told them were due to come into the No. 2 account.  Martin pressured Mr Saunders to arrange for speedy payment of this sum on the grounds that, as Martin Stone told Mr Saunders, they were being pressed by an angry third party investor for repayment.  Mr Saunders contacted Mr Aplin to ask him to confirm that SEWL had sufficient cleared funds to meet a late payment of £1.891 million in favour of Jeremy.  This Mr Aplin did by e-mail to Martin timed at 4.47 pm on 4 May, which also stated that it was too late to send the money that day so that the payment would go through on 5 May.  Mr Aplin’s e-mail was accurate.  He had no intention to deceive Martin by sending it.
227.	Also on 4 May, Mr Aplin received a telephone call from Joe Mosca, who handled client accounts at Coutts.  He called because one of his clients, Mr Curtis (another investor defrauded by Mr Saunders), was concerned to check whether things he had been told by Mr Saunders about payments in and out of the hotel business were correct.  Mr Mosca wanted to check if a payment had gone from SEWL to CCL on 29 April 2010.  Since Coutts was a sister bank in the same group as NatWest , Mr Aplin was prepared to tell Mr Mosca that no such payment had gone out of SEWL’s accounts with NatWest.  Mr Mosca then asked to confirm other payments from SEWL in late April, of which Mr Aplin was able to confirm only one.  Eventually, Mr Mosca asked if there were any chance Mr Saunders might be pulling the wool over his client’s eyes.  Mr Aplin replied that he would not have thought it of Mr Saunders, since “normally if he says money is coming in and going out, it happens”; but he emphasised that he had inherited the account.  Mr Aplin mentioned that SEWL had been reported to the bank’s AML department but said, “every time you ask him a question you get a valid answer”.  Mr Aplin also mentioned SEWL’s connection with the Claimants and that Martin thought the joint venture business was coming through the No. 2 account (Mr Aplin referred to it as the No. 3 account by a slip), but that in fact while the short-term loans came into the No. 2 account, the hotel receipts went through an account at Barclays from which money was paid away.  Mr Aplin said he felt caught between Mr Saunders, who did not tell the Claimants things, and the Claimants, who wanted to know things.  Mr Aplin told Mr Mosca he would be happy to get rid of the connection.  
228.	I find that in this conversation Mr Aplin accurately described his understanding of the operation of SEWL’s accounts.  The fact that he was so open with Mr Mosca is another telling indicator of Mr Aplin’s honesty in relation to the issues under review in this trial.
229.	Early in the morning of 5 May 2010, Mr Aplin e-mailed Mr Backler to ask for a meeting when he came to the local office to discuss SEWL.  I accept Mr Aplin’s evidence that this was to discuss with his manager concerns about SEWL’s activities arising from his conversation with Mr Mosca.  Again, Mr Aplin’s willingness to raise his concerns about SEWL internally is an indication of his honesty and that he was not seeking to assist Mr Saunders in carrying on his fraudulent scheme.
230.	On the afternoon of 5 May, Mr Saunders asked Mr Aplin to send two confirmatory e-mails to Martin.  In a first e-mail timed at 15.36, Mr Aplin, at Mr Saunders’ request, confirmed to Martin Stone “that we held £1.9 million today which has subsequently debited the account”.  That was accurate.  Mr Aplin understood the reason for sending it to be that payment had been instructed previously but had not been processed because at that time there had been insufficient funds in SEWL’s account.  In a second e-mail timed at 17.23, Mr Aplin, at Mr Saunders’ request, wrote, “[Mr Saunders] has also asked me to confirm that we received two instructions for the payment of £1.9 million”.  Mr Aplin meant by this, truthfully, that Mr Saunders had given two instructions for this payment, i.e. an instruction and a later repeat or confirmation of that instruction for payment of that £1.9 million sum.  His e-mail would have been clearer if he had inserted the definite article before “£1.9 million”, but there was no sinister intention on his part by omitting it.  It is likely that he was simply writing a short e-mail at some speed with little thought.  I reject the suggestion by the Claimants that he wrote in this way intending to trick Martin Stone into believing that not one but two separate payments of £1.9 million had been instructed by Mr Saunders.  That, however, was how Martin Stone read the e-mail (probably influenced by what Mr Saunders had been telling him about payments).  When he later discovered that only one payment had been made, he felt tricked.  
231.	At this point, having got in as much money as they thought they could from Mr Saunders, on 10 May 2010 the Claimants launched legal proceedings against Mr Saunders and Mr Strubel and their companies and obtained freezing orders from the court.  
232.	A further point of criticism by the Claimants of Mr Aplin was that he provided a witness statement for use by Mr Strubel in seeking to oppose the freezing order.  But again, I consider there is nothing in this criticism.  At that stage Mr Aplin believed Mr Strubel to be a legitimate businessman who was the bank’s customer and needed the bank’s help.  Mr Aplin’s statement was confined to accurate statements about Mr Strubel’s relationship with NatWest.  He checked with NatWest legal department for clearance before providing it for Mr Strubel.  No inference can be drawn from this of any improper connection between Mr Strubel and Mr Aplin, nor of any improper desire on Mr Aplin’s part to cover up the fraud committed by Mr Saunders and Mr Strubel.
233.	A similar observation may be made about another point of criticism of Mr Aplin by the Claimants, in relation to an e-mail he sent on 5 May 2010 to NatWest’s Bankline administration, asking them to ensure that Emily only had access to the No. 3 account and to remove her access to the No. 1 and No. 2 accounts.  Mr Aplin was probably told of Emily’s access to those accounts and instructed to remove it by Mr Saunders.  Mr Aplin simply acted to comply with his customer’s request, which was in line with previous instructions given.  There was no sinister purpose in Mr Aplin acting in this way.  
234.	I accept Mr Aplin’s evidence that he was as shocked as the Claimants were to discover the fraud that Mr Strubel and Mr Saunders had been perpetrating.         
Legal Analysis
235.	In the light of my findings of fact, I now address in turn the legal claims advanced by the Claimants.
(i)	Dishonest assistance by Mr Aplin in breach of fiduciary duty by Mr Saunders and SEWL 
236.	Dishonesty on the part of a defendant is the relevant standard for liability under this head of claim: see Twinsectra Ltd v Yardley [2002] 2 AC 164; Aerostar Maintenance International Ltd v Wilson [2010] EWHC 2032 (Ch), at [178] per Morgan J. 
237.	As I have made clear in my account of the facts, Mr Aplin was not dishonest. He was unaware that Mr Saunders and SEWL were perpetrating a fraud on the Claimants. Although, near the end, from 22 February 2010, he was aware that Martin had a different understanding than he did about the destination of the hotel receipts, he did not doubt that SEWL’s hotel business was genuine and legitimate and in all major respects in line with Martin’s understanding about that business. Mr Aplin did not think that Mr Saunders was acting in breach of any fiduciary duty owed to the Claimants. This claim therefore fails.
(ii)	Deceit by Mr Aplin
238.	In my judgment, Mr Aplin made no false statements or representations to the Claimants.  He acted honestly throughout, and did not intend to mislead them by anything he said or did. Therefore this claim also fails.
(iii)	Conspiracy by Mr Aplin with Mr Saunders and Mr Strubel to injure the Claimants by unlawful means 
239.	Mr Aplin was not a party to any conspiracy with Mr Saunders and Mr Strubel to injure the Claimants. For the same reasons as are set out above in relation to (i) and (ii), this claim fails.
(iv)	Unjust enrichment of NatWest by its receipt of monies paid by the Claimants into SEWL’s accounts with NatWest on the basis of mistake
240.	The Claimants undoubtedly did pay money into SEWL’s NatWest accounts (principally the No. 2 account) on the basis of their mistaken belief that the hotel business was genuine. The Claimants therefore have a cause of action against SEWL in unjust enrichment to reclaim the payments made, but SEWL has no money to meet such claims. The issue, therefore, is whether the Claimants also have claims in unjust enrichment against NatWest, which received the Claimants’ payments into SEWL’s accounts.
241.	In my judgment, the Claimants have no good claim in unjust enrichment against NatWest, either because NatWest was not enriched by the payments or because (even if on proper analysis it was enriched) it has a good defence.
242.	As to the issue of enrichment, it is true that when the Claimants paid sums to NatWest for the account of SEWL, NatWest received those sums and added them to its stock of assets as monies to which it was beneficially entitled. However, the increase in its assets was matched by an immediate balancing liability, in the form of the debt which NatWest owed SEWL reflected in the increase in SEWL’s bank balance as a result of the payments. This is how the relationship between bank and customer works. There was no basis - at any rate none known to NatWest at the relevant time as the receipts came in, credit entries were made on the accounts and payments were made out against those credit entries – on which NatWest had any entitlement to withhold payment of sums representing credit balances on the accounts when instructed by SEWL to pay. 
243.	Therefore, in my judgment, NatWest was not enriched by the payments made by the Claimants into SEWL’s bank accounts (in that regard see Box v Barclays Bank Plc [1998] Lloyd’s Rep. Bank. 185 and Compagnie Commercial Andre SA v Artibell Shipping Co. Ltd 2001 SC 653, Court of Session, Outer House, at [16] per Lord Macfadyn). The Claimants’ proper unjust enrichment claim is against SEWL, whose assets were increased upon the making of the payments to its bank accounts by the increases in its balances on those accounts (representing the debt owed to it by NatWest).
244.	Even if I am wrong about that, and NatWest was enriched in a relevant sense by the Claimants’ payments, I consider that it would have a good defence to the claim based on the fact that it had a contractual obligation to pay out the sums in SEWL’s account in accordance with the instructions of its customer, and did so. Mr Wardell submitted that this gave rise to a defence of good faith change of position and/or to a distinct defence of ministerial receipt (see Portman Building Society v Hamlyn Taylor Neck (A firm) [1998] 4 All ER 202, 207-208). 
245.	In my judgment, both defences are available for NatWest. I would particularly emphasise the availability of the defence of ministerial receipt, in the sense that NatWest received the payments in question and became subject to an obligation to its customer transfer them out of the accounts again according to its instructions. In my view, that defence is clearly established even in the period after 22 February 2010, when Mr Aplin first became aware that Martin was mistaken about the account into which Mr Saunders had arranged for the hotel receipts to be paid. At that stage, Mr Aplin still had no idea that Mr Saunders was committing a fraud against the Claimants, and NatWest had no good grounds to refuse to honour its contractual obligations to SEWL to pay out the money in the No. 1 and No. 2 accounts according to SEWL’s instructions. In such circumstances, it would be unjust to impose any liability on NatWest in relation to its receipt of sums which it was then obliged to pay out again on SEWL’s instructions.
246.	The defence of good faith change of position, recognised in Lipkin Gorman v Karpnale [1991] 2 AC 548, is in my judgment also available. For the purposes of this defence, relevant bad faith “is capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that falls short of outright dishonesty as well as dishonesty itself” (Niru Battery Manufacturing Co. v Milestone Trading Ltd  [2002] EWHC 1425; [2002] 2 All ER (Comm) 705 at [135] per Moore-Bick J); and see the discussion on appeal at [2003] EWCA Civ 1446; [2004] QB 985 at [143]-[165] per Clarke LJ, in particular at [162], where he endorsed Moore-Bick J’s approach and said: “the essential question is whether on the facts of a particular case it would in all the circumstances be inequitable or unconscionable, and thus unjust, to allow the recipient of the money paid under a mistake of fact to deny restitution to the payer”. 
247.	In my view, the actions of Mr Aplin and NatWest did not involve any bad faith, according to this standard. Mr Aplin believed that Mr Saunders and SEWL were conducting a legitimate business in the form of the hotel business as described to him. He had good reasons for believing that. He did not shut his eyes to the truth. He did not act incompetently or in breach of the standards to be expected of a relationship manager in NatWest (even if such incompetence were capable of amounting to bad faith according to the standard set out in Niru Battery, which I doubt: see Abouh-Rahman v Abacha [2005] EWHC 2662, at [88]). 
248.	Up until 22 February 2010, Mr Aplin had no reason to think that the Claimants were mistaken in any way. On the contrary, they emphasised to him the extent of their involvement in and control over the hotel business, so Mr Aplin thought that they were far better informed than him about the operation of the business. 
249.	From 22 February 2010, Mr Aplin was aware that the Claimants appeared to misunderstand the mechanics of which account the hotel receipts were actually paid into, but he still did not doubt that the hotel business was genuine and legitimate. The Claimants still appeared to have the benefit of the debenture in relation to the hotel receipts, whether they were paid into an account at Barclays or at NatWest. They were far better informed than Mr Aplin about the operation of the hotel business and appeared to be entirely happy with it. Indeed, it was the Claimants who by that stage were pressing NatWest to finance the business, on the basis of what they told NatWest about it. In my view, Mr Aplin and NatWest rightly took the view that in these circumstances they were bound by a duty of banking confidentiality according to Tournier which prevented them from telling the Claimants about the operation of and transactions on the No. 2 account. They acted in accordance with what they understood to be a binding legal obligation, both in omitting to correct the Claimants’ error and in continuing to pay out sums in the account according to SEWL’s instructions. In those circumstances, it is not inequitable, unconscionable or unjust to allow NatWest to avail itself of the defence of change of position.
250.	On this aspect of the case, the Claimants also sought to suggest that NatWest should not be entitled to avail itself of the defence of change of position because it was a “wrongdoer”.  Lord Goff in Lipkin Gorman said that “the defence should not be open to a wrongdoer” ([1991] 2 AC 548 at 580). The Claimants maintained that NatWest was a wrongdoer because it failed to monitor its relationships with SEWL, ZFL and CCL in accordance with regulation 8(1) of the Money Laundering Regulations 2007 and because Mr Aplin failed to report suspected money laundering to the authorities as required by section 330 of the Proceeds of Crime Act 2002. I do not accept either of these points. 
251.	So far as concerns section 330 of the 2002 Act, I accept Mr Wardell’s submissions that Mr Aplin did not breach any obligation in that Act and also that, even if he did, such breaches would constitute strict liability regulatory failures which were insufficiently grave to debar NatWest from relying on the change of position defence, according to the standards of behaviour required by the relevant test of good and bad faith in Niru Battery. In my view, Lord Goff did not have this sort of breach of regulatory standards in mind when he referred to a “wrongdoer” in Lipkin Gorman. The proper understanding of the notion of “wrongdoer” in this context is that explained in Niru Battery. The main point, however, is that Mr Aplin did not act in breach of section 330. He did not suspect money laundering; was entitled on the basis of the information he had received from various sources not to suspect it; and he believed that NatWest’s AML department had fully investigated matters and made such reports as might be necessary to the authorities. 
252.	Regulation 8(1) of the 2007 Regulations provides that “A relevant person” (here, NatWest) “must conduct ongoing monitoring of a business relationship”, meaning (see regulation 8(2)):
“(a)  scrutiny of transactions undertaken throughout the course of the relationship (including, where necessary, the source of funds) to ensure that the transactions are consistent with the relevant person’s knowledge of the customer, his business and risk profile; and
(b)	keeping the documents, data or information obtained for the purpose of applying customer due diligence measures up-to-date.” 

253.	In my judgment, the Claimants have failed to show that NatWest breached its obligation in regulation 8. NatWest did conduct appropriate monitoring of its banking relationships (including those with SEWL, ZFL and CCL) by a combination of automated transaction monitoring and relationship managers keeping in touch with clients from time to time as necessary to understand the customers, their needs and the nature of their businesses. The measures which NatWest took were in line with the relevant JMLSG guidance and industry standards (see paras. [56]-[58] above). 
254.	Further, even if there had been a breach of regulation 8 it would, in my view, have been relatively technical in nature and would not have been of a character which would justify the Court in disbarring NatWest from relying on the change of position defence, according to the standard of good faith behaviour explained in Niru Battery. 
(v)	Negligence on the part of Mr Aplin 
255.	The Claimants submit that Mr Aplin assumed responsibility for the accuracy of information he gave the Claimants in relation to the joint venture (see Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830, HL, at 837 per Lord Steyn, and James McNaughton Paper Group Ltd v Hick Anderson & Co. [1991] 2 QB 113 at 125 per Neill LJ; cf Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28; [2007] 1 AC 181) and that he failed to take reasonable care to ensure that such information was accurate. The Defendants deny both these allegations.
256.	In my judgment, Mr Aplin did not assume any responsibility to the Claimants in relation to the accuracy of information supplied by him. In fact, mindful as he was of his obligations of confidentiality owed to SEWL, he took care not to lead the Claimants to believe that they could rely on him for information about what was happening on SEWL’s accounts. Mr Aplin did not know, and had no reason to believe, that the Claimants were using their communications with him as a means of obtaining information about the No. 2 account or as to whether the hotel business was genuine. He thought that they had conducted their own investigations about that, and had far more information about the business than he did. 
257.	Despite their protestations that they regarded him as the bank manager for the joint venture, the Claimants appreciated that he was in fact the relationship manager for SEWL, not them. Mr Aplin explained to them that he was bound by duties of confidentiality to SEWL, so they could not reasonably look to him for information about SEWL’s accounts or business.
258.	Nor could it be said that it would be fair, just or reasonable in the circumstances to impose a duty of care on Mr Aplin of the form alleged by the Claimants (see Caparo Industries Plc v Dickman [1990] 2 AC 605). He gave them no assurance that they could rely on him for these purposes. The context of Mr Aplin’s contacts with the Claimants was very informal. Martin and Jeremy were experienced businesspeople who had available to them other and better means of knowledge about SEWL’s affairs, namely by asking Mr Saunders and SEWL directly. If Martin and Jeremy were unsatisfied by their responses, they could have chosen not to deal with SEWL. 
259.	Further and in any event, I do not consider that Mr Aplin made any representations to the Claimants which were false; nor any which involved carelessness on his part. Even at the meeting on 2 March 2010, when in my view Mr Aplin was aware about Martin’s mistake about whether the hotel receipts were paid into the No. 2 account, the context of the meeting was such that Mr Aplin made no implied false representation about that matter.
260.	I therefore also dismiss the Claimants’ claim in negligence. It is therefore unnecessary and inappropriate to address in any more detail than I have done in the course of the judgment the Defendants’ alternative defence of contributory negligence. Had it been necessary to do so, I would have found that there was a significant element of contributory negligence on the part of the Claimants.
Conclusion
261.	For the reasons set out above, I dismiss all the Claimants’ claims. It is unnecessary to address the further submissions made by the Defendants regarding the quantum of losses claimed by the Claimants.