Michael v Michael (No 2)

I am today dealing with an application which is made by Ms Stalo Michael, to whom I shall refer as the wife, against Mr Mario Michael, to whom I shall refer as the husband. This is another application, an enforcement application, in the middle of a very longstanding dispute with which I have been dealing since 2022. I have been dealing with it as a Deputy High Court Judge with the approval of Peel J and I have dealt with it through the procedural stage and through to a substantive hearing over 12 days in July and August 2024. As a result of that, I have made a number of orders, two of which come to the fore for today’s hearing in relation to enforcement.

The representation before me today is as follows. The wife has two counsel, Mr Steadman, he is from a chancery background and Mr Haggie, who comes from a family law background and they appear as a team today. The husband is represented today, at least to some extent, by Mr Collins of counsel who has not appeared before but has been instructed fairly late in the day and his instructions are to apply for an adjournment of today’s application and, as it has happened, that has not been successful. He has not been instructed to make substantive representations on the application itself. He has courteously remained to hear this judgment, and no doubt will report back to the husband, but he has not made any submissions on any substantive items.

The application which is before me today is that Hannah Davie and Ami Sweeney of Grant Thornton UK LLP should be appointed as receivers in relation to certain judgment debts which arise as a result of previous orders that I have made.

This application is made pursuant to the Civil Procedure Rules, Part 69, for the appointment of a receiver under Senior Courts Act 1981, section 37.

The particular application is that the receivership should be appointed in relation to three items. First, the husband’s 550 shares in a company called Michael Bros Limited, which I shall refer to in this judgment as MBL. His ownership in MBL represents a 34.375% share in that company MBL. The other shares are owned by two of his brothers and there was an argument before me in July or August to the effect that he held his 550 shares on behalf of his two sisters but I dismissed that application and my finding was that those 550 shares are owned by the husband legally and beneficially. The second element is the husband’s one share in Hartsfield Investments UK Limited to which I shall refer in this judgment as Hartsfield. I found that the husband was the owner of that share and 100% of the shareholding in Hartsfield. The third item is the assets of a company called Property Empire Limited which I shall refer to as PEL in this judgment and PEL is a wholly owned subsidiary of Hartsfield and, as I have said, the husband owns 100% of Hartsfield and Hartsfield owns 100% of PEL.

The application today relates to those three items and the scheme which is put forward on behalf of the wife is that those receivers should do what they can to extract assets for the enforcement of various orders that I have made. In particular, it is the enforcement of the orders that I made on 6 December 2023 and 25 October 2024. The order that I made on 6 December 2023 was for some maintenance pending suit and legal services payments orders for the husband to pay to the wife to enable her to be represented at the hearings after that, particularly the long trial in July and August of 2024. I should say in passing that an application was made for permission to appeal that order but that application was turned down by Moylan LJ on 28 March 2024. There is no further appeal that can be brought against that judgment debt. The second order of 25 October 2024 was for the husband to pay, on account of his costs liability, the sum of £850,000, he having in my judgment lost the trial in July and August 2024. He was to pay that by 22 November 2024. I should say that the husband was perfectly well aware of both of those orders at the time they were made. He was present at court at both of those orders but insofar as there is any doubt about that, he was also represented by a team of experienced lawyers including junior and leading counsel but in case there is any doubt over that, he was personally served with those orders respectively on 9 February 2024 and 7 January 2025.

It would be uncontroversial for me to say, and the husband has not challenged this, that the husband has not paid one penny towards those debts and they of course are enforceable judgment debts against the husband personally. As a result of that, he owes £1,315,150 to the wife just as a result of those two orders and interest has run on that to the extent that as of today, interest is owed on that judgment debt to the figure of £32,251.72.

I should say also that despite my finding that the indicative values of the assets were something more than £40 million, though I should say in parenthesis that that was an indicative value, which may yet change with more evidence, the husband has, as far as I can see, made no attempt whatsoever to pay any part of those debts at any time since those orders were made. If he had made any attempt, then there is no evidence of it and Mr Collins has not been able to tell me about any particular scheme which the husband has in mind for complying with my orders.

The reality is that he is determined not to comply with my orders and every document that I have seen from him makes that very clear, that he has every intention not to comply with my orders and a particularly clear illustration of that fact is that within a few hours of the very same day that I made the order on 6 December 2023, the husband transferred from one of his companies to himself a figure of £535,000 and did not pay one penny of that towards complying with my order. I saw him cross-examined about that and it was apparent that he had no wish to comply with my order in any sense and had no regard for the importance of his obligation to comply with that order.

The next stage of the case, the final calculation of the value of some of these assets, assisted by a report which should have been produced already, but has been delayed and hopefully will be produced in the next few weeks, but that remains to be seen. Then the distribution of those assets is due to be considered at further court hearings which I have directed which involve a pre-trial review on 20 March 2025 and a five day further final hearing starting on 13 May 2025.

I should say in passing that the husband has issued an application for permission to appeal my judgment of August 2024 and that is currently lodged with the Court of Appeal and there has been no decision yet on that application either way by the Court of Appeal. Plainly, the Court of Appeal could in due course order a stay of my original orders, then that might very well put a halt to anything which any receiver I might appoint today was doing or had done but there is no such decision yet from a single justice of the Court of Appeal. I think, therefore, that it is appropriate for me to proceed today, whilst recognising that it is of course open to the Court of Appeal to reverse any decision that I make in this regard.

The first decision I have to make is whether or not I should accede to the application for adjournment of today’s hearing. This application is lodged directly or raised directly by Mr Collins who is present on behalf of the husband and is employed as a direct access barrister. It is also less clearly raised by Hartsfield, who apply for an adjournment although are not here to argue in support of that. They went to the extent of sending me an email and submitting a D11 to the court seeking an adjournment of today’s hearing but have not turned up today to back that up.

Should there be an adjournment? Mr Collins has made some arguments as to why there should be. Of course it is a matter of concern that the consequence of an adjournment would be yet more legal costs in a case which has had very substantial legal costs already and much of it has not been paid and the costs of the wife’s team today is some £69,000 but if the wife was at fault, that might not be a reason for not adjourning today’s hearing but it certainly provides a reason for the court exercising caution and declining to hear the application, hearing it on another day. But Mr Collins advances his application on a number of grounds, one of which is, he says, that there has not been sufficient notice and he suggest that rather than looking at Part 69, I should look at the Family Procedure Rules, Part 18, and that this application requires either seven or 14 days depending on whether it is an interim order or not. It seems to me that this is actually an application for enforcement, not an interim order and if the Family Procedure Rules apply it would be seven days rather than 14 days but of course the husband has not had seven days’ notice, he has only had less than that. But I am not persuaded that the Family Procedure Rules apply at all. It seems to me this is a case where the Civil Procedure Rules apply and under Civil Procedure Rules, Rule 23.7, an on notice application of this nature only requires three business days and the husband was served indeed, Hartsfield was also served, on 7 January and so they have had three clear business days, 8, 9 and 10 January, Wednesday, Thursday and Friday of last week. In any event as Mr Steadman points out, this application could be made without notice, although there are slightly different provisions that would apply in terms of return dates, and so, on that basis I am not precluded from dealing with the matter. It seems to me that if I include a provision that any party who feels that they have not had adequate opportunity could make an application to discharge or vary this order and I would deal with that at the pre-trial review on 25 March 2025, then any injustice is largely dealt with. I appreciate in saying that the receiver may have incurred some costs before that date but where those fell might have to be subject of some further consideration further down the line.

I am not persuaded on the technical reason for adjourning the case but Mr Collins has also suggested some other substantive points as he sees them. One is which that he feels that we should wait until the Court of Appeal has dealt with the permission to appeal application, though of course we do not have a timetable for that. That is no criticism of the Court of Appeal but that has not yet been resolved because there have been some arguments which may only have been resolved very recently about the form of bundle for the purposes of the Court of Appeal. As I have said, if the Court of Appeal decides to overturn what I have done, that is within their power to do that, but I do not think it would be appropriate for me not proceed with any enforcement application simply because there was an outstanding application for permission to appeal. I did not give permission to appeal myself on the grounds that I did not consider that the appeal had any merit. The Court of Appeal may take a different view. That is a matter for them but it would not be appropriate it seems to me for me simply to wait for that to be dealt with before this enforcement application was made.

The second point is that Mr Collins has only had the bundle today, but the reason for that is that the husband was offered the bundle last week and did not take that offer up so it was only after counsel for the wife became aware that Mr Collins was involved that they were in a possible position to serve him with a copy of the bundle, insofar as that is a problem that is something which has been created by the husband’s acts or failures and in any event Mr Collins has not taken the opportunity and is not instructed to make any submissions on the merits of the case, just on the adjournment. I do not consider that to be a good reason for adjourning this application.

The third is that Mr Collins says that I should wait to see Mr Pearson’s report before considering this enforcement application because he may, the husband fears or worries or hopes, depending on what perspective one comes from, that the valuation evidence might prove that there is no value in any of these assets in any event. Well I do not know when Mr Pearson is going to report. Even when he does report that is not the end of it because there are some tax issues which have got to be reported on subsequent to that. I do not know exactly when that will happen. Even if I did have the tax report it may be that that would be absolutely definitive, but I do know that the indicative valuations that I was using back in July and August 2024 were assets in excess of £40 million. As I have said in a different context, I think it is unlikely that there will be no assets here, which is what the husband has been trying to assert, when tax and penalties are taken into account. It seems to me that the greater danger is that the more time that passes, the less chance there will be for any enforcement to take place and the more risk that there will be that the wife will not be able to be represented at the subsequent hearing because her lawyers are owed a lot of money and there must be some limit to the extent to which they could be expected to carry on working without being remunerated.

None of those arguments have persuaded me that I should adjourn this application, as I have said. I will include in my order a provision that if anyone wants to apply to reverse that or set side, then I will give them liberty to apply and I will attempt to deal with that at the pre-trial review.

Having decided that, I will go ahead and deal with this application. I therefore turn to the merits of the application itself.

I start by noting the power that I have under Senior Courts Act 1981, section 37 because the High Court may by order whether interlocutory or final, grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so. The high level test for me to apply is whether it is just and convenient for me to appoint a receiver on the facts of this particular case and, breaking that down a little, Mr Steadman has helpfully suggested a number of questions that I might voluntarily answer.

First of all, do I have the power to appoint a receiver in the Family Court? The answer is that I do. The power to appoint a receiver is effectively copied over by Family Procedure Rules, Rule 33 incorporating Civil Procedure Rules, Part 69 and so for all practical purposes the power of the Family Court, at High Court level, to appoint a receiver is the same as it would be in the Chancery Division. I do have the power.

Mr Steadman has helpfully directed my attention to a judgment in the case of Cruz City 1 Mauritius Holdings and Unitech Limited [2014] EWHC 3131 (Com) where Males J set out some basic principles which apply here and I will read some of those out. Males J said this:

“(a)

The overriding consideration in determining the scope of the court’s jurisdiction is the demands of justice. Those demands include the promotion of the policy of English law, that judgments of the English court and English arbitration awards should be complied with and, if necessary, enforced.

(b)

Nevertheless the jurisdiction is not unfettered it must be exercised in accordance with established principles, though it is capable of being developed incrementally. Specifically in modern conditions where business is increasingly global in nature and the jurisdiction is ‘unconstrained by rigid expressions of principle and responsive to the demands of justice in the contemporary context’.

(c)

The jurisdiction will not be exercised unless there is some hindrance or difficulty in using the normal processes of execution, but there are no rigid rules as to the nature of the hindrance or difficulty required, which may be practical or legal.

(d)

As the statutory source of the court’s power to appoint a receiver speaks of what is ‘just and convenient’, it is impossible to say that convenience is not at least a relevant consideration (albeit not the only one).

(e)

A receiver will not be appointed if the court is satisfied that the appointment would be fruitless, for example because there is no property which can be reached either in law or equity. However, a receiver may be appointed if there is a reasonable prospect that the appointment will assist in the enforcement of a judgment or award. It is unnecessary, and will generally be pointless, for the court to attempt to decide hypothetical questions as to the likely effectiveness of any order. It is sufficient that there is a real prospect that the appointment of receivers will serve a useful purpose.”

I have in mind all of those paragraphs in deciding where I go with this.

Also I have in mind some of the cases in the family sphere which have illustrated how important these powers can be. For example, Mostyn J, in Maughan and Wilmot [2014] EWHC 1288, said:

“It is worth noting that when the court makes an order the owner of that order is not the wife, it is the court. When you defy the order you are not defying your former spouse, you are defying the court.”

Mr Justice Holman in H and Z [2018] EWHC 2436 said:

“It is, frankly, intolerable and an affront to justice that in the last month this man paid £95,000 to his new solicitors at the very time when he was already in arrears and getting further into arrears with his wife and her very patient and long-suffering solicitors in the amounts I have described.”

The sentiments expressed by Mostyn J and Holman J very much apply in this case.

The next question is, is it appropriate to make receivership order in relation to the particular assets that I am talking about here. The shares that the husband has in MBL and Hartsfield seem to me to be absolutely crystal clear to be his assets on the findings that I have already made I can see no legal argument as to why that would impede a receivership order being made. Perhaps slightly more controversial is the third and possibly most productive or likely productive aspect of this application which is to give receivership over the assets of Property Empire Limited, in particular, recommended by the proposed receivers. It is right to say that the email with the D11 I received from Hartsfield or Hartsfield’s solicitors, suggested that to make that order would be tantamount to piercing a corporate veil and exercising a power which I did not have.

Having heard Mr Steadman going through some reported cases on this matter, in particular Masriand Consolidated Contractors International Limited [2008] EWCA Civ 303, and JSC VTB Bank and Skurikhin [2015] EWHC 2131, I have been persuaded that the representations made in the D11 and the email from Hartsfield are not correct and this is illustrated by some passages from the latter of those two cases, the Skurikhin case where DHCJ Butcher QC said this:

“Mr Penny for VTB submitted that the answer to this question is that a receiver by way of equitable execution may be appointed over whatever may be considered in equity as the assets of the judgment debtor. For this proposition he cited Masri at paragraph 151; Tasarruf at paragraph 6; and Blight and Others v Brewster ("Blight") [2012] EWHC 165 (Ch) at paragraph 66.

More specifically in the present context, Mr Penny submitted that property subject to trust or analogous foreign arrangements would be regarded in equity as assets of the judgment debtor if he has the legal right to call for those assets to be transferred to him or to his order, or if he has de facto control of the trust assets in circumstances where no genuine discretion is exercised by the trustee over those assets.”

And then a little further on in that judgment the judge says:

“In my judgment these authorities do support Mr Penny's submission as set out above, which I accept.”

And the judgment goes on to consider another case involving the Beringer Foundation which involved similar issues to those which arise here.

So would it be right to say that the PEL assets fall into this category? Well, we know that, as I have already said, the husband owns a 100% of the shareholding of Hartsfield which itself owns 100% of the shareholding of PEL. I have made a finding in my judgment in August 2024 that for all practical purposes the husband can do whatever he wanted in relation to the affairs of Hartsfield, the same also applies to the affairs of PEL. It seems to me that those assets fall squarely within the test which has been laid out in the judgments I just read out, that the assets of PEL are assets which could be transferred to him if he wanted to have them transferred to him via his powers. He also has de facto control of those assets. It seems to me therefore, that the receivers order can be properly made in relation to those assets.

The next question is whether or not there is a reason for using the receivership option rather than some other form of enforcement. As a combination of the way in which these assets are held, the structure of the companies and also the husband’s very obvious refusal to cooperate in any way with this, do in my judgment, mean that this case does involve a situation where there is some hindrance or difficulty in using the normal processes of execution, a normal charging order or other such enforcement order would be complicated in this context and the receivership order therefore is the sensible and appropriate way forward.

Is there a danger that the mere appointing of a receiver or the subsequent acts of a receiver would have a catastrophic or bad effect on the commercial prospects of PEL or Hartsfield? I would say two things in relation to that. The first is that the appointment of these particular receivers with the reputation that they have and what I have read about them in terms of their experience and expertise, could be trusted to act in a professional and responsible way to minimise a commercial downside of this route. Also insofar as there is any commercial downside of going down this route, I accept the argument from the wife’s side that it is entirely the responsibility of the husband’s attitude to this case and his refusal to make any steps to comply with my orders. The people concerned are suitable for appointment as receivers. They will cost some money and in due course it will have to be decided as to who is really responsible for the spending of that money. If the husband had made an effort to comply with the court orders, there would never have been a receiver needed and so it may be his fault. If subsequent events prove that to be wrong, then it may be that a different provision will have to be made for that under the distributive part of the case later on in this year, but that does not in my judgment prevent the conclusion that it is just as convenient for me to make the orders now.

The draft order has been prepared on behalf of the wife and it seems to me to include all the safeguards that I would be interested in seeking for the operation of this receivership and is perfectly properly made out subject to bringing in some figures at the end.

I am satisfied for all of those reasons that on the facts of this case, it is appropriate for me to make the order sought and that is what I am going to do.

I can reserve the question of costs of today and of this application to the pre-trial review on 25 March 2025. I am not going to impose a stay. I am not going to give you permission to appeal but thank you for your submission.