Lloyds Investment (Scandinavia) Ltd v Ager-Hanssen

This is an application by the Defendant, Mr Ager-Hanssen, for an order that he be permitted to defend this action and that further execution of the judgment obtained against him be stayed in the meantime. In substance the application seeks a variation of an order made by Mr Simon Berry QC (sitting as a Deputy Judge of the High Court) on 7th November 2001 by which he set aside an earlier judgment of 5th October obtained in default of defence, on terms that the Defendant should pay into Court the sum of £1.175m within 28 days. Time for compliance with this condition was later extended by Lloyd J on 5th December until 10th December 2001. That condition was not complied with and since then the Claimant has taken steps in England to execute the judgment by obtaining a charging order and subsequently an order for sale in respect of the Defendant’s flat in London. There has also been a sale of various chattels, including the contents of the flat and various motor cars. These sales have realised something over £650,000 in satisfaction of the judgment debt.

This application was issued on 23rd December 2002 and served the following day. It was therefore brought almost a year after the order of the Deputy Judge and has taken a very considerable time to be progressed to a hearing. On 20th January 2003 the Claimant itself issued its own application, inviting the Court to strike out the Defendant’s application as an abuse of process. Lightman J made an order on 27th January 2003 for both applications to be heard as applications by order on a date to be fixed and gave directions for evidence. The timetable he laid down provided for the service of evidence by early March 2003 and this was complied with. The application and the witness statements of the Defendant were professionally prepared by solicitors (Messrs S J Berwin), but they have now ceased to act for the Defendant because they are no longer in funds. Mr Ager-Hanssen says that the funding of the litigation has been a major problem for him, because he now has limited resources and most (if not all) of his assets are subject to freezing orders here and in Sweden and Norway. These were obtained early in 2001, when the proceedings commenced, and are still in force. The orders obtained in Sweden and Norway are ancillary to, and in support of, the English proceedings. This lack of funds and the absence of legal representation for the Defendant is said to be the explanation for the delay in bringing this application and in progressing it to a hearing. Mr Ager-Hanssen has appeared before me in person to present his case and has produced a skeleton argument containing a list of the main points he wishes to make. In broad terms they are as follows:

It is convenient to begin by saying something about the issues in the action. In the Amended Claim Form dated 12th July 2001 the Claimant alleges (and the Defendant accepts) that on 30th March 2000 the parties entered into a written agreement under which the Defendant agreed to sell to the Claimant 105,460 B shares in a Swedish company called Cognition AB (“Cognition”). For purposes of the agreement, Cognition was valued at £500m, subject to a provision for adjustment if the value of the company declined prior to the share purchase. Cognition was a venture capital company with a significant portfolio of stocks in IT companies. It had an issued share capital of 13,182,480 shares, with a nominal value of 0.20 SEK each. In his witness statement made in support of this application the Defendant says that he needed to raise between £200m and £250m for the company and therefore decided to float it on the London Stock Exchange. This was due to take place in spring 2000. In February 2000 the Defendant says he was approached by a Mr Haakon Korsgaard, who seems to be the leading figure behind both the Claimant and Olympia, and who wanted to invest some £25m in Cognition. This led to the agreement of 30th March 2000, under which the investment was to be made in two stages. Two separate agreements were entered into. Under the first there was to be an initial purchase of £4m worth of shares, the consideration to be paid by 19th April 2000. Under a second agreement of the same date the Claimant agreed to buy a further £553,664 B shares (valued at some £21m) with completion to take place on 5th April 2000, but with the price to be paid, at the latest, by 31st December of that year. The first agreement differs from the second in that it contains in clause 5 a put option enabling the Claimant to transfer the shares back to the Defendant. Mr Ager-Hanssen says that the inclusion of this clause was a mistake and that it formed no part of the agreement with Mr Korsgaard. On 3rd April 2000 the two men signed a further document headed “Points of Clarification”. The Defendant says that he signed it without really studying its terms and regarded it as no more than a discussion document. However, it states that the two agreements of 30th March assume a flotation of Cognition and records in terms that it was agreed that, if no flotation took place, then the Defendant would repurchase the shares on the same terms, provided that the Claimant gave notice to exercise this option by 31st December 2000.

The Claim Form then pleads that on 8th May 2000 the Claimant arranged for the transfer of the sum of £2.35m to Barclays Bank in Jersey for the benefit of the Defendant. It is alleged that, prior to then, the Defendant had asked for the remaining £l.65m of the £4m due on 19th April to be used to acquire 25% of the shares in a company called Strand Property Holding Limited, which was an SPV used by a number of investors (including Olympia) to purchase an interest in a commercial building at 336 Strand in London for the sum of £6.6m. This transaction was completed on 28th April, and Olympia is said to have paid for its own share and also to have contributed £1.65m on account of the Defendant’s proposed acquisition of shares in the SPV. Subsequently the Defendant is alleged to have decided not to take up this interest and on 11th May to have asked Mr Korsgaard for a loan from Olympia of £1.65m to enable him to discharge a liability to Barclays Bank. It is pleaded that Olympia agreed to make the loan and remitted the £1.65m to Barclays in Jersey. The Claimant says that the loan was not repaid and that on 9th June 2000 there was an agreement between the Claimant and the Defendant that the Defendant would retain a greater share in Cognition by reducing the consideration under the first agreement to £2m. As a result of this, the Defendant was to repay the £350,000 excess (of the £2.35m paid on 8th May) by 31st December 2000.

No flotation of Cognition took place, and on 29th December 2000 the Claimant is alleged to have exercised the put option in respect of the shares it had already purchased. On this basis the claim is for repayment of the £2.35m paid in May. The Defendant denies the existence or enforceability of the option, or its valid exercise, and alleges that he has a counterclaim for the £21m due in respect of the second tranche of shares under the second agreement of 30th March. This is on the basis that the £1.65m advanced to him in May to pay off his liability to Barclays Bank falls to be treated as having been disbursed by Olympia (like the initial payment of £2.35m) in part-payment of the sum of £4m due under the first agreement and not by way of loan.

It is neither necessary nor appropriate for me to express any views about the strength or weaknesses of these rival claims. The Deputy Judge in his judgment, when addressing the question whether there were real prospects of success on the intended defence, said that the prospects lay at the bottom end of the permissible scale, and I am content to accept this analysis, which was the basis on which the Defendant addressed me and has made this application. Mr Berry therefore began his consideration of whether the judgment should be set aside on terms with a base figure of £350,000, which represented the alleged overpayment. He then decided that a proper figure was 50% of the claim, without giving further reasons for doing so beyond saying that there were serious issues about the Defendant’s credibility. Mr Ager-Hanssen contends that in the light of his inability to raise this sum, and having regard to the matters summarised earlier in this judgment, I should lift this condition, insofar as it has not been satisfied by realisations to date, and allow the action to proceed to trial.

The Deputy Judge exercised a discretion under CPR Part 13.3. It is not open to me as a Judge exercising a parallel jurisdiction in the same division of the High Court to entertain what would in effect be an appeal from that order. If the Defendant wished to challenge whether the order made by Mr Berry was disproportionate and wrong in principle, then he should have applied for permission to appeal to the Court of Appeal. I have been given no real reasons why this was not done. That course remains open to him even today, although he will have to persuade the Court of Appeal of the reasons why he should have what, on any view, is a very considerable extension of time. It seems to me that the only power available to me on this application is that contained in CPR Part 3.1(7), which enables the Court to vary or revoke an order. This is not confined to purely procedural orders and there is no real guidance in the White Book as to the possible limits of the jurisdiction. Although this is not intended to be an exhaustive definition of the circumstances in which the power under CPR Part 3.1(7) is exercisable, it seems to me that, for the High Court to revisit one of its earlier orders, the Applicant must either show some material change of circumstances or that the judge who made the earlier order was misled in some way, whether innocently or otherwise, as to the correct factual position before him. The latter type of case would include, for example, a case of material non-disclosure on an application for an injunction. If all that is sought is a reconsideration of the order on the basis of the same material, then that can only be done, in my judgment, in the context of an appeal. Similarly it is not, I think, open to a party to the earlier application to seek in effect to re-argue that application by relying on submissions and evidence which were available to him at the time of the earlier hearing, but which, for whatever reason, he or his legal representatives chose not to employ. It is therefore clear that I am not entitled to entertain this application on the basis of the Defendant’s first main submission, that Mr Berry’s order was in any event disproportionate and wrong in principle, although I am bound to say that I have some reservations as to whether he was right to impose a condition of this kind without in terms enquiring whether the Defendant had any realistic prospects of being able to comply with the condition.

That therefore leaves the issues about the existence of the freezing orders and the effect which they have had on the Defendant’s ability to comply with the condition. Before I do that, however, I need to mention one other issue raised by Mr AgerHanssen in argument, although not contained in his written submissions. In the course of that argument he alleged that his former flat at Petersham House in Kensington had been sold at an undervalue of as much as £1m. This allegation was made in his sixth witness statement sworn in support of the application. He says that he bought the flat for £4m in about April 2000 and that by December 2001, when it was sold, it was worth at least £4.5m. The sale of the flat was complicated by the fact that earlier the Defendant had sold the flat to a company called Seektask Limited for £2.5m, subject to an option to repurchase it, which was exercisable by a date in September 2001. The Defendant had in fact exercised this option prior to the hearing on 7th November, but this contract needed to be completed by 14th December of that year. On 5th December Lloyd J extended the time for compliance with the condition until 10th December. When payment was not made by that date, an urgent application was made to Lightman J on 11th December on notice to, but in the absence of, the Defendant for a charging order nisi obtained earlier over the Defendant’s interest in the flat to be made absolute. Lightman J made this order and authorised Mr Ashton on behalf of the Claimant to complete the purchase of the flat. On 13th December (again in the absence of the Defendant) Lightman J authorised Mr Ashton, as the Claimant’s agent, to sell the flat in execution of the judgment at a minimum price to be fixed by the Master. The purchase was completed at a cost to the Claimant of £2,750,197.74 (including arrears of service charges) and on 7th January 2002 Deputy Master Lloyd ordered the flat to be sold by private treaty at a minimum price of £3.25m, having received evidence about value from two firms of professional agents and valuers. The Defendant was represented at that hearing by his solicitor. Master Bowles gave further directions on 22nd January 2002 and the property was eventually sold for a price in excess of £3.25m. The Defendant was given an opportunity to produce valuation evidence before the Master, but did not do so. Nor is any professional valuation evidence tendered in support of this application. In these circumstances there is nothing to support the claim of an undervalue except the Defendant’s own assertion about these matters. This is inconsistent with the professional advice on which the Claimant acted and is not, in my judgment, a sufficient basis on which to impugn the adequacy of the sale price.

The more troubling aspect of this matter is the freezing order. Mr Ager-Hanssen addressed me at length about the tactics employed by Mr Korsgaard and the lengths to which he has been prepared to go to prevent the Defendant being able to comply with the condition imposed by the order of the Deputy Judge. It is obvious that this has, from the start, been hard-fought litigation. The Claim Form was served in its original form in January 2001. On 18th January the Claimant obtained a freezing order against the Defendant in Sweden. The Defendant, through his then solicitors, Messrs McDermott Will & Emery (“MWE”), asked for an extension of time for the service of a defence. There was a hearing on 10th July 2001 before Master Prebble at which the Claimant obtained leave to amend, but on 10th August MWE ceased to act and gave notice that the Defendant intended to act in person. The Claimant’s solicitors wrote on 13th August reminding the Defendant that a defence was due. On 20th August the Defendant asked for correspondence to be sent to Cognition’s offices in Gothenberg and not to his London flat. On 7th September, the deadline for the defence passed. An application was issued for an “unless” order and this was made by the Master on 17th September 2001. The Defendant had until 4th October to serve his defence. He failed to do so and on 5th October judgment was entered against him in default. This was followed by an application for a charging order nisi made to Pumfrey J on 9th October. On 18th October the Defendant applied to set the judgment aside. His case before the Deputy Judge was that he did not realise he had to serve a defence by a fixed time or that an “unless” order had been made. With some reluctance Mr Berry accepted this explanation and held that he had produced a sufficient explanation for his failure to comply with the “unless” order. After that a draft defence was served. Although the judgment was set aside by Mr Berry, the freezing orders remained in place and this, says the Defendant, greatly hampered his ability to raise money.

Mr Ager-Hanssen says that his principal means of seeking to raise the finance was from two potential deals in Sweden. The first was the settlement of a contractual claim for damages for £15m against the Swedish National Pension Fund (“SNPF”); the second was an agreement between Cognition and two companies called FundXchange Limited and FundXchange UK Limited. The second agreement did produce about £500,000 on 1st December 2001, but the Defendant says that this was too late. He did not, however, use those monies to obtain an extension of time from the Court on the basis of a partial payment, nor has he applied those monies in satisfaction of the judgment debt. The first deal produced a proposed settlement of the claim for £1.5m, which the Defendant says was reached on 30th November 2001. Mr Ager-Hanssen says that the Claimant got wind of this and tried to intervene and have the freezing order extended over these monies. Through its Swedish attorneys it made direct contact with the Court Bailiff, who has responsibility for supervising and enforcing freezing orders, and the Bailiff then got in touch with SNPF. As a result, SNPF pulled out of the compromise.

In addition Mr Ager-Hanssen alleges that Olympia has started its own proceedings against him in Sweden, based on the non-payment of the alleged £1.65m loan, and has also obtained a freezing order. He says that Mr Korsgaard sought to cause him considerable personal damage in Sweden by publicising in the newspapers an account of the problem he had with Barclays Bank which led to the liability I referred to earlier in this judgment. In April 2000 Barclays Bank in Jersey apparently by error credited the Defendant with over £15m. He then instructed the bank to remit £4m of those monies to Cognition, and this was expended almost at once on investment projects. Mr Ager-Hanssen says that he believed the £15m was part-payment of the share sale price by the Claimant, but when Barclays discovered the error, it reversed the transaction, leaving the Defendant with a liability of £4m. It also commenced proceedings to recover the money and obtained a freezing order against him. He sought to repay the debt, using the £4m due to Cognition from the Claimant on 19th April. He says that Mr Korsgaard became aware of his difficulties with Barclays and this was the reason why only £2.35m was paid initially. Olympia has a freezing order over his houses in Norway and Sweden, some cars and a Swedish bank deposit. The Claimant has a freezing order in Sweden over shares in Cognition valued by the Swedish Court at SEK 47.775m, together with other property in that jurisdiction, including a house, a bank deposit and some cars.

Although the existence of the freezing orders is not challenged by the Claimant, Mr Ashton in his evidence in answer does challenge the Defendant’s account about the loss of the compromise agreement with SNPF. He refers to the Defendant’s fourth witness statement sworn in support of the application for an extension of time, which refers to his intention to make the payments and to raise the necessary funds from the SNPF compromise. The £1.5m was, he said, due to be paid on 3rd December 2001. Mr Ashton says that on receipt of this witness statement the Claimant’s Swedish lawyers contacted the Court Bailiff and asked him to investigate whether the claim against SNPF (alleged to be worth £15m) existed. The Bailiff contacted SNPF, which denied the existence of any such claim, and Lloyd J was shown a copy of a letter from SNPF confirming this. In response, the Defendant denies fabricating his account of negotiations with SNPF and says that Olympia simply frightened SNPF off. I cannot and need not resolve this particular dispute on this application, beyond saying that I am not satisfied that the Claimant has acted improperly in pursuing whatever remedies have been open to it in Sweden and elsewhere. The only real issue to be decided on this point is not whether the Claimant or Mr Korsgaard have exerted unfair pressure on the Defendant, but whether the existence of the freezing orders over its assets, at the suit of the Claimant, provides grounds for a variation of Mr Berry’s order.

I expressed my concern to Mr Martin that Mr Berry may not have fully taken into account the level of assets subject to the freezing order in deciding what condition to impose. In response to this expression of concern, he took me to some of the material which was before the Deputy Judge and also to the subsequent application before Lloyd J. The statement by Mr Ashton which appears to have undervalued the assets subject to the Swedish freezing order is contained in paragraph 14 of his first witness statement, made on 9th October in support of the Claimant’s application for a charging order nisi over the flat. That witness statement sets out the history of the proceedings to date and refers to the value of the assets subject to the freezing order as a matter that was clearly relevant to the Court’s consideration of whether or not to grant relief by way of charging order. It was not until 26th October 2001 that Mr Ager-Hanssen made the witness statement in support of the application to set aside the default judgment. That witness statement, which, as I indicated earlier, was prepared with professional assistance, sets out the issues in the proceedings and the problems with Barclays Bank, but does not at any point deal with his asset position or refer to or rely on the existence of the freezing orders. This is because the purpose of the evidence was to support a claim that there was a valid defence to the action, and the draft defence is one of the exhibits to the witness statement. For this reason Mr Ashton in his third witness statement, made in response to the application to set aside, also confines himself to commenting on the strength of the proposed defence to the action. It looks from Mr Berry’s judgment as if the question of the imposition of a condition arose during the course of the hearing. No application seems to have been made for an adjournment to put in evidence dealing with the Defendant’s means or with his ability to raise the money within the timescale contemplated by the Deputy Judge. Clearly it was not suggested to the Judge, on instructions, that the Defendant would have difficulty in raising the money, although the Judge included in his order express liberty to apply for an extension of time, to assist him if further time was needed. In his witness statement in support of this application, Mr Ager-Hanssen says in terms that Mr Berry did not have evidence of his means so as to be able to consider that issue and was seriously misled by the Claimant into thinking that there was only a small part of his assets frozen, when he says almost everything he owns has been frozen in one jurisdiction or another. I am not satisfied on the material before me that this point was ever raised at all, and Mr Martin confirms that to be the case. Because it did not surface as an issue, Mr Berry was presented with no evidence about these matters, nor was he asked to consider the contents of Mr Ashton’s witness statement of 9th October which contained the error I have referred to, although the statement was in the Court bundles. This is, I think, confirmed by the fourth witness statement of Mr Ager-Hanssen, which was made on 3rd December 2001 to support his application for an extension of time. There is no reference in that witness statement to the possibility of payment not being made, provided that further time could be (as it was) made available.

There is also in evidence a note taken by Mr Ashton of the hearing before Lloyd J on 5th December. On that occasion the Defendant was represented by solicitors and Counsel. Miss Higgs (for the Defendant) opened the application by telling Lloyd J that her application was not only for an extension of time for payment under the liberty to apply in Mr Berry’s order, but that she also wanted to produce further evidence and to make an application to set aside this order, related, she said, to the Swedish freezing orders, which had only very recently been translated. She told the Judge that the new evidence in the form of the freezing orders showed that there were assets worth some £4m frozen in Sweden, which not only affected her client’s application but also the underlying order. She also told Mr Justice Lloyd (as was clearly correct) that this evidence was not before Mr Berry. When the Judge asked why that was the case, Miss Higgs replied that the evidence before Mr Berry was that the assets were worth approximately £700,000, whereas their true value was in fact in the region of £4m. As I have already indicated, although Mr Ashton’s first witness statement contains this reference, the point was not deployed during the hearing before the Deputy Judge. On the application for an extension of time, Miss Higgs told Lloyd J that because of the freezing order the Defendant was unable to use those assets to meet the condition and therefore needed extra time to make the funds available. Lloyd J asked when the Defendant became aware of the freezing orders, and Miss Higgs confirmed that her client was aware of the orders at the time of the hearing before Mr Berry, but did not appreciate their significance. Mr Ager-Hanssen had of course known about the orders since they were made early in 2001. Lloyd J also asked when the Defendant had tried to get hold of the assets in order to comply with Mr Berry’s order. He was told that since 7th November Mr Ager-Hanssen had been hoping to receive payments from the two transactions I have mentioned, and that he had merely required at that stage a small extension of time, so that monies could be paid into Court.

In his judgment Lloyd J set out the background to the case and recorded the Defendant’s contention that, as a result of the two transactions in Sweden, he was confident, as at that date, of being able to comply with the terms of the order within the next few days. An extension of time was therefore granted. For present purposes the interesting part of his judgment, however, is that relating to Miss Higgs’ alternative contention, that Mr Berry’s order was obtained in effect on a false basis. Lloyd J set out the terms of the Swedish freezing order and the alleged value of the assets encompassed within it, and also referred to Mr Ashton’s witness statement containing the estimate of value in the sum of £700,000. He then records Mr Martin’s confirmation to him that that evidence, although technically before the Judge, was not alluded to in argument at all. In paragraph 10 of his judgment he said this:

“But the striking thing about the report from the Swedish Court of Enforcement and Execution is that although that was not drawn to the attention of the learned deputy judge, it is plain - and Miss Higgs confirms - that it was within the knowledge of the defendant himself, although he did not draw it to the attention of his English lawyers. In those circumstances, the alternative application which Miss Higgs has not made, but has intimated to me, that the existence of this order might be a justification for a wholesale review of Mr Berry’s order, is simply not tenable, because although, no doubt, his English lawyers were unaware of it, he was aware of it, he knew of the figure of 47 million Krone as the estimate in February of the value of the claims and relevant assets frozen. Whether that is, in fact, now the value is a quite different matter. If it had been thought to be of materiality, he could have caused it to be put before the court. He did not. The fact that he did not seems to me to bar any suggestion that the basis of Mr Berry’s order should be reviewed.”

It seems to me, therefore, that although Lloyd J had no formal application before him to set aside Mr Berry’s order, he in effect heard the very same argument which I have heard on this application today. He rejected any suggestion that there could be a successful attempt to set aside Mr Berry’s order on those grounds, because this is a case where the Deputy Judge’s failure to consider the effect of the freezing order and the Defendant’s asset position was simply the result of the Defendant’s failure to communicate those facts to his representatives and their failure to raise them as issues which they considered relevant to the exercise of the Judge’s discretion. In these circumstances this seems to me, as it did to Lloyd J, a case where the Defendant is really seeking to re-argue the application that was before Mr Berry, on grounds which were available to him then, but on which he chose not to rely. That is not a course which, in my judgment, it is open for this Court to take. The only possible course open to the Defendant is to seek to appeal Mr Berry’s order out of time and to apply to admit new evidence in the form of the material about the freezing orders. In saying this, I do not intend to indicate that those applications would necessarily have any prospect of success, but those are matters for the Court of Appeal, not for me.

I should also mention for completeness that even if it was open and right for me to reconsider the order in the light of the freezing order, it is by no means clear that it would assist the Defendant. The cars and property have been sold. The Claimant (who has to share in the proceeds with other creditors, including the Swedish Revenue) has received only about £272,000 from the sale. The shares in Cognition remain unsold and have an uncertain value. The Defendant says in correspondence that he has an offer for these of SEK 8m (about £500,000), but he told me in terms he was not advancing any valuation figure. It is safe to assume that the £4m figure of 2001 is far in excess of present value. I take the view that I am not entitled, on the grounds which are relied upon, to exercise the power under CPR Part 3.1(7), to vary or revoke the order of the Deputy Judge. The application therefore fails and will be dismissed.