Dennis Wise v Tony Jimenez & CD Investments Ltd

The claimant, a former professional footballer, sought equitable compensation in the sum of £500,000 plus interest from the first defendant (a former friend and business associate) after the claimant had invested in the first defendant’s proposed French golf course development project.

The first defendant’s case was that: (a) the investment had been made not by the claimant but by the second defendant, a company now in liquidation, the shares of which had once been owned by the claimant; and (b) the first defendant had in any event properly invested the money received in the proposed golf course development.

At trial, although it was established that the precise mechanism for the proposed golf course investment had not been agreed in advance, it was clear that money had been advanced to the first defendant for the purpose of a specific investment. The first defendant failed to satisfy the Court that the money which was advanced to him had in fact been used for its intended purpose or that the claimant had obtained any interest in the first defendant’s project. The judge therefore held that the money had been paid away by the defendant in breach of a Quistclose trust and the first defendant was liable to pay equitable compensation in the amount of the original investment plus interest.

The Court also rejected the first defendant’s argument that the investment had been made by the second defendant. Although the second defendant was the immediate transferee of the funds to the first defendant’s accounts, it was clear on the facts that the ultimate source of the funds was the claimant and there was no evidence that the claimant had intended to make a gift, loan or investment of capital to the second defendant. The second defendant was merely a conduit for the claimant’s investment; alternatively it held any rights in the investment on a resulting trust for the claimant.

This case is a useful example of the application of Quistclose trusts to investments in business venture and demonstrates the Court’s willingness to look at the substance to determine the identity of the true investor.