Lloyd's Maritime and Commercial Law Quarterly


Gerard McMeel


71. Atkinson and Mummery (as joint liquidators of Grosvenor Property Developers Ltd) v Varma [2021] EWHC 2027 (Ch) (Ch D: Michael Green J)
Misdirected funds—change of position—reversibility of expenditure
Those arriving at Bristol Temple Meads railway station have for decades been confronted by two derelict and decaying buildings, one of which is the former Grosvenor Hotel. A company was incorporated by Sanjiv Varma purportedly to redevelop the site. According to Rose LJ in an earlier appeal against a finding of contempt against that individual: “Grosvenor was incorporated on 16 December 2016 for the purpose of acquiring the Grosvenor Hotel in Bristol. The hotel was derelict at the time and investors were sought to fund the redevelopment of the premises into studio flats to be used for student accommodation. The only step that appears to have been taken to further that purpose was collecting in about £7.6 million from investors. The hotel was never purchased and nothing was done towards redevelopment—it appears that the whole enterprise was a fraud. The respondents [the liquidators] estimate that at most about £540,000 was spent on what might be regarded as legitimate company expenditure, the rest was misappropriated”: [2020] EWCA Civ 1602; [2021] Ch 180, [3]. This claim for £2 million was brought against Siddhant Varma, Sanjiv’s son, in knowing receipt and unjust enrichment. He was told the £2 million represented the proceeds of diamonds, which were family heirlooms from his grandmother, and represented the inheritance he had been expecting.
ICC Judge Prentis accepted that story, and dismissed the claim in knowing receipt on that basis, and also briskly dismissed the alternative claim in unjust enrichment. He also held that, in the alternative, Siddhant had changed his position by losing the entire sum in another disastrous property investment. The liquidators of the company appealed.
Decision: Appeal dismissed. Whilst Siddhant was prima facie unjustly enriched in the sum of £2 million, he was entitled to rely on a change of position defence in the same sum.
Held: (1) The appeal is allowed on the ground that Siddhant was prima facie unjustly enriched in the sum of £2 million. The judge’s findings entailed that the sum represented the proceeds of a fraud on the company. Assuming that the judge had held that it did not in fact represent Siddhant’s inheritance, there was no answer to the claim in unjust enrichment, and he could not have given something in return. Conversely, if the judge had found that the sums represented a real inheritance, no reasonable judge could have come to that conclusion on the evidence. (2) The judge had found as a matter of fact that Siddhant was the innocent recipient of £2 million which he believed was his inheritance, and but for that receipt would not have invested in the second deal, which investment was


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