There are now a number of matters which I need to deal with following the handing-down of my second judgment on 8 March 2007. I had prepared a draft judgment dealing with some of these matters and had sent it to the parties. However, before I had finalised and handed down the draft, further evidence was produced on behalf of DGI which could not have been produced previously. This evidence has a material impact on the application for a stay of my orders for payment pending appeal. I do not think that it can be doubted that it is within my jurisdiction to alter the draft judgment. The question is whether I should exercise my discretion to do so. Even a draft judgment should only be altered in what, in the usual shorthand, are described as “exceptional circumstances” or where there are “strong reasons”. Ultimately, I must apply the overriding objective to deal with the case justly. I consider that the correct approach is for me to reconsider my decision in the light of the new material. This is particularly so as the draft judgment envisaged that Mr Simms would place formally in evidence that which he had told me in submissions. It would only be fair and just to allow DGI to produce responsive evidence (which it has done) to what Mr Simms had said about his finances and on the basis of which the draft judgment proceeded. There have also been developments in the evidence concerning the funding available to Jack and Helga from a Mr Kalaidjian which I take account of too.

Further, I have, in the meanwhile, received submissions on the applications by Mr Simms, Jack and Helga to discharge the freezing orders made against them. It is accordingly now possible for me to take into account the impact of my decision on those applications in considering the applications for stay.

Mr Simms, Jack and Helga apply to discharge the freezing orders made against them by Lindsay J on 3 February 2004, renewed by Lewison J on 13 February 2004, and they apply for orders for enquiries on the cross-undertakings. They do so on two bases (although Mr Cakebread places far greater reliance, on behalf of Jack and Helga, on the second basis):

First, it is said that the only claim by DGI which succeeded was the claim based on the intermediary representation. This was not introduced into the proceedings until the amendment of the Particulars of Claim in April 2005. The freezing orders were granted on the basis of claims which have all failed in front of me. They should never have been made.

Secondly, it is said that there was material non-disclosure when the without-notice injunctions were obtained from Lindsay J on the basis of which the freezing orders should be discharged. The principal alleged non-disclosure is said to be the failure by the Claimants fairly to present Jack and Helga’s case that they had nothing to do with the arbitration itself, the control (and finance) of it coming from Eastcastle, a company in which they were not involved in any way.

In my judgment dated 8 March 2007, I explained, to some extent at least, the state of the pleadings. The position was this.

The original Particulars of Claim of February 2004 did not contain any claim in deceit based on an allegation of a fraudulent misrepresentation that Jack was only an intermediary. That first appeared in the Amended Particulars of Claim dated 27 April 2005.

The first way in which DGI, Alex and Haig put their claim was on the basis of issue estoppels arising out of the arbitration awards. They relied, at paragraph 7e on the matters pleaded against Jack and Helga at paragraphs 18 [probably an error for 17], 20 and 29. I shall say more about paragraph 29 in a moment.

The misrepresentations relied on (defined as “the Representations”) were found in paragraph 8, and were ones alleged to have been made by Charlton, Mr Simms and Mr Rahman. They were the major shareholder representation and the financial representations (sound trading, creditworthy, able to perform obligations under the Option Agreement).

Those Representations are ones which the arbitrator held had been made but in respect of which I have rejected DGI’s claim in these proceedings.

Paragraph 10 contained Particulars of Falsity, but those are not in any way relevant to the intermediary misrepresentation. However, paragraph 11 was different: in that paragraph it was alleged Charlton, Mr Simms and Mr Rahman made the Representations fraudulently. Particulars of fraud were given. Under paragraph a., it was said that Mr Simms and Mr Rahman as directors of Charlton and as makers of the Representations must have known they were untrue; but there was nothing which was relevant to the intermediary representation. In paragraph b. reliance was placed on the fact that Ancon was declared as Charlton’s shareholder in financial statements. It was also said that Ancon was an entity controlled by Helga’s family trusts (in which the Claimants then believed Jack to be beneficially interests entitled) and/or by Jack. Then it was pleaded as follows:

So one sees there a number of allegations: (i) Jack and Helga’s involvement was not revealed (ii) DGI, Alex and Haig believed Jack’s involvement to have been only as a go-between and (iii) that Mr Simms and Mr Rahman acted under Jack and/or Helga’s control or direction in the conduct of Charlton’s affairs. It is important to note that these alleged facts are relied on as particulars of the allegations that Charlton, Mr Simms and Mr Rahman made the representations fraudulently. There is nothing in this part of the pleading which says that Jack and Helga were in any way concerned with the Representations other than what one might indirectly derive from item (iii). It will be remembered that I have rejected the claims based on the Representations. And, in relation to item (iii), it is to be remembered that I have concluded, as part of my reasoning for refusing to lift the corporate veil, that Mr Simms and Mr Rahman did not act under the control and direction of Jack and Helga in relation to Charlton albeit that, ultimately, they may have “called the shots”.

Paragraph 12 alleged that the Representations caused DGI to enter into the Option Agreement when they would not otherwise have done so. This is very different from an allegation that there was a misrepresentation to the effect that Jack was only an intermediary and that that representation was relied on in entering into the Option Agreement.

Paragraph 22 alleged Conspiracy I, reliance being placed on the acts and means set out in paragraphs 8 to 11. A liability as joint tortfeasors is said to flow. No new factual allegations were made here, however.

In the context of the claim against Jack and Helga in relation to piercing the corporate veil, it was pleaded at paragraph 29 that Charlton was used as a device and a vehicle for fraud, concealing the liability of Jack and Helga. The pleading asserted that Charlton was used by Jack and Helga (a) as a device etc to conceal their involvement in the Option Agreement transaction (b) as a vehicle for fraud as pleaded in paragraphs 21 to 26 (Conspiracies I and II and malicious abuse of process – all claims which I have rejected). It also included the following:

It is necessary to understand what was meant by “so involved”. In the context of the pleading as a whole, it is clear to my mind that the involvement which was being referred to was one which would justify lifting the corporate veil involving at least the idea that Mr Simms and Mr Rahman acted under their control and direction, aspects of the case which I have rejected. It is not possible, I think, fairly to read the pleading as referring to whatever, if any, involvement Jack and Helga did have. For example, let it be supposed that Mr Simms and Mr Rahman really had been majority shareholders, but that Jack and Helga had also been shareholders; and let it be supposed that Mr Simms and Mr Rahman consulted Jack and Helga, as shareholders, but did not regard themselves as in any way bound by Jack and Helga’s preferences. Jack and Helga would then have been involved (using that word in its ordinary sense) but the pleading could not be read as an allegation that that limited involvement, had it been known to DGI, would have resulted in its refusal to enter into the Option Agreement.

I do not, therefore, consider that Mr Freedman is correct when he says that paragraph 29 is a positive assertion of a representation that Jack and Helga were not involved in the transaction at all.

Paragraph 29 remained unamended throughout. Mr Simms’ original defence did not take the line that this pleading was only made against Jack and Helga and therefore did not concern him. Instead he pleaded limited facts about Charlton activities and denied that there was any basis for piercing the corporate veil. Jack and Helga of course denied paragraph 29.

In summary, although the intermediary representation was not initially pleaded, it was part of the original pleading that there was a failure to disclose that Jack was not simply an intermediary (although it was not pleaded that there was any duty to do so). The relevance of that to the original claim was that, had the Representations in fact been made, then the knowledge that Jack was not merely an intermediary would make the major shareholder misrepresentation all the more dishonest. It was also part of DGI’s case that had DGI known what it alleged to be the true position (ie that Jack’s involvement with Charlton was such as to justify lifting the corporate veil), it would not have entered into the Option Agreement.

The Particulars of Claim were amended in April 2005. The amended pleading contained an additional alleged misrepresentation (at paragraph 8c.) – the experienced manufacturer allegation. Clauses 8A, B and C contain the intermediary representation claims against Mr Simms and Mr Rahman and against Jack and Helga. The definition of the Representations was removed and was replaced instead, with definitions of the D1/D2 Representations and the D3/D4 Representations. The deceit claim based on the intermediary representation was a new claim. It required a positive assertion to the effect that the intermediary representation had been made in addition to the existing allegations that there had been no disclosure of Jack’s involvement, there being no allegation that there was a duty to disclose it. It was also necessary to plead reliance.

I have gone over ground which I have covered before in order to describe, more fully, what the state of the pleadings was. Mr Freedman has described the failure to plead the intermediary representation as a mere pleading lacuna – all the material was already there in the pleading, or if not there, in certain evidence, which I will come to in a moment, put before Lindsay J on the application for the freezing orders. So far as the pleading is concerned, I disagree. In order to plead deceit based on the intermediary representation, new factual allegations needed to be made.

The evidence which I have referred to is the affidavit of Mr Clarke dated 2 February 2004 sworn in support of the application for freezing orders. In paragraph 8, Mr Clarke stated that Jack represented that he was acting on behalf of DGI, Alex and Haig in the negotiations with Charlton “as, in effect, their intermediary”. And in paragraph 47, Mr Clarke expressed the view that it is clear, from the documentary evidence in the arbitration (which he had produced at paragraph 8) that at all material times Jack was “disguising from [DGI, Alex and Haig] the fact that, far from being an intermediary, he was a principal”. In agreement with Mr Freedman, I consider that that evidence does show that an allegation was made against Jack that he had led DGI to believe that he was only an intermediary. But it is not a suggestion that found its way into the original pleading.

There was nothing in Mr Clarke’s evidence to suggest that DGI relied on the representation that Jack was only an intermediary in entering into the Option Agreement. Nor did he assert that Mr Simms and Mr Rahman knew of that representation. Indeed, Mr Clarke himself has drawn the distinction between Jack being simply an intermediary and being a principal. It is that distinction which, I think, is what the pleading focuses on in attributing Jack’s fraud not so much to his not being an intermediary, but as to his being the controlling and directing mind of Charlton through his alleged control and direction of Mr Simms and Mr Rahman; and that is why the pleading places reliance only on the pleaded misrepresentations, that is to say the alleged financial representations. I do not, therefore, think Mr Freedman is quite right when he says that there was before the court on the without-notice hearing (as a result of the pleading and Mr Clarke’s evidence together) the entirety of the intermediary representation pleaded against the first to fourth defendants as joint tortfeasors. The fact of the intermediary representation by Jack was, I agree, in Mr Clarke’s affidavit, but the entire cause of action was not apparent.

On the without-notice hearing, Lindsay J was presented with the claim as formulated in the original Particulars of Claim and he had the evidence of Mr Clarke which I have mentioned. The application was presented to him by Mr Michel Kallipetis QC. Before coming to the material non-disclosure which is alleged, there is one further point I should make in relation to the original pleading and the case as presented to the Judge. The financial representations were alleged to have been made to DGI through its agents Alex and Haig. I think it is clear that this meant that the representations were made to both of them; and that was made clear later on in further information. But Haig’s evidence was that these representations were never made to him; he knew of them only because Alex had told him. That was something which was known at the time of the without-notice application because it was the evidence which Haig had given in the arbitration. It is an allegation which should not have been made.

It is to be remembered that many of the claims asserted by DGI rested on a premise that Charlton and Mr Simms and Mr Rahman were acting under the control and at the direction of Jack and Helga, for instance those claims relating to matters arising after the Option Agreement such as Conspiracy II, malicious abuse of process; and joint tortfeasorship. The estoppel claim relied (non-exclusively) on the matters pleaded in paragraph 29 where, as I have mentioned, it was again alleged that Charlton was used as a device and a vehicle for fraud, concealing the liability of Jack and Helga: reliance was therefore, once again, placed on the proposition that Charlton was simply a façade for Jack and Helga.

However, Mr Cakebread submits that the evidence before the arbitrator was that it was Eastcastle and not Jack and Helga which funded Charlton from about August 1998 and thus throughout the arbitration itself and to which Mr Simms looked for shareholder input. One thing which is clear in this case is that the Claimants’ legal team have left no stone unturned in their search for assets of Jack and Helga and their attempts to show that Jack and Helga control Charlton. They have produced no evidence, whatever their strongly held suspicions, to show that Eastcastle was a creature of Jack and Helga or that the assets which it used in relation to Charlton were in fact Jack and Helga’s assets. Wherever the truth lies, it is certainly the case that the Claimants have known since July 2004 that the case of all of Mr Simms, Jack and Helga is that Jack and Helga had had nothing to do with Charlton’s participation in the arbitration having withdrawn from participation in favour of Eastcastle some time previously.

The absence of any involvement of Jack and Helga in the arbitration would, in my judgment, be a material factor in relation to Conspiracy II, malicious abuse of process and aspects of the joint tortfeasorship claim. Equally, therefore, it would be a material factor in relation to paragraph 7e. I would have thought that paragraph 7e. was a very important factor in the case in favour of Mr Simms, Jack and Helga being privies to the arbitration.

Mr Cakebread submits that it was incumbent on the Claimants expressly to bring to the attention of Lindsay J that one aspect of certain of the claims, including in particular factor 7e., was a matter seriously challenged by Mr Simms, Jack and Helga. I agree with that submission.

I turn then to what was actually said to the Judge. I have a copy of the skeleton argument produced by Mr Kallipetis and Mr Samek, together with a note of the hearing prepared by solicitors attending. It is paragraph 32 of the skeleton argument which deals with that. The possible defence identified seems to have been that the defendants might argue that the action was an attempt to re-litigate the matters litigated in the arbitration with the claimants being estopped from bringing the claim. That argument is addressed and rejected; the rejection is a perfectly fair and balanced approach to the hypothetical argument. But there is nothing in the skeleton argument which draws the court’s attention to the point concerning Eastcastle.

This note records the following:

Court asked: as to the third and fourth Defendants, you have to show that they procured Charlton to act as it did?

Leading Counsel replied yes, my Lord

Leading Counsel explained “this was a scam in which all four were joint tortfeasors and, by reference to paragraph 30 of the Affidavit, Leading Counsel said that Charlton was the alter ego of the Third and Fourth Defendants and used as a façade for fraud.

It is to be noted that this interchange occurred in the course of submissions concerning the arbitration. Paragraph 30 of the affidavit (of Mr Clarke) referred to the privy argument and set out effectively what was found in paragraph 7 of the original Particulars of Claim. Accordingly, the Judge would have appreciated that Conspiracy II and malicious abuse of process were factors in support of the conclusion that there was a privy relationship.

Mr Cakebread submits that in none of this is there any attempt to bring to the Court’s attention “the key point that the position as presented to the arbitrator was that it was Eastcastle and not D3 and D4 who then controlled Charlton and that Cs had carried out exhaustive inquiries into Eastcastle and could establish no connection”. The case seems to have been presented as if, in considering the strength of the privy argument, the facts set out in paragraph 7 are taken as givens. The result, he says, is that the Court was unable to evaluate whether there were sufficient grounds for the grant of a freezing order on the basis of the true position of Jack and Helga as was manifest from the information and evidence before the arbitrator and from the knowledge acquired by the claimants.

For good measure, Mr Cakebread also refers to other failures to make proper disclosure First he points to paragraph 1 of the Particulars of Claim which stated that DGI was and is a company incorporated in New York and owned a company called InterRoyal, a manufacturer until about 1990 of hospital and nursing home beds etc. In fact, DGI did not own InterRoyal, and InterRoyal had ceased manufacturing years before 1990. Secondly, it is stated in paragraph 1(f) that Jack was an undischarged bankrupt. As to that, Mr Cakebread says this: “This was a gratuitous but serious allegation intended to lower D3’s reputation in the eyes of the court and was untrue. As the evidence at trial established D3 had never been bankrupted in the USA and had been discharged in England many years before”. I believe that that is what the evidence did establish.

When the case came before Lewison J on the return date, Mr Simms was present, representing himself. Jack and Helga were not present and had, according to Mr Freedman, been evading service. Mr Simms argued that the arbitration award should not have been put before Lindsay J and should not be before Lewison J himself. Lewison J rejected that submission. But, having done so, he recognised that that was not an end of the matter in favour of the applicants since it did not follow that the third party (Mr Simms) was bound by it. He said this:

The judge then identified the question for him, in deciding whether to continue the freezing order, to be whether there was a good arguable case that the first four defendants were bound by the award. He noted that there were six factors set out in the skeleton argument on the basis of which he concluded that there was a good arguable case. One of those factors is virtually the same as set out in paragraph 7e. of the Particulars of Claim. In his affidavit in opposition, Mr Simms identified a number of alleged non-disclosures. Lewison J must have had all of those in mind when (a) he rejected Mr Simms’ allegations (in the light of Mr Clarke’s second affidavit of 13 February 2004) and (b) he said that he would have re-imposed the injunction under Brink’s Mat principles even if Mr Simms had established the non-disclosure which he alleged.

One of the alleged non-disclosures, set out in paragraph 60 of Mr Simms’ affidavit, was that the Claimants failed to disclose that Jack and Helga played no part in bringing the New York proceedings or the arbitration. He referred to Eastcastle’s involvement, saying that it was well-known to the Claimants by June 1998 that Jack and Helga had no dealings with Charlton. There, raised fairly and squarely by Mr Simms, is the very non-disclosure that Mr Cakebread relies on in relation to Jack and Helga. Mr Simms himself seeks to rely on this as well, and also seeks to open up other alleged non-disclosures which had been dealt with on other occasions.

The skeleton argument prepared by Mr Kallipetis and Mr Samek for the hearing before Lewison J contains a reference, at paragraph 13, to the fact that Mr Simms and Mr Rahman did nothing to dispel the suggestion that Jack was acting only as a go-between when in truth he controlled Charlton and gave instruction to Mr Simms and Mr Rahman, reference being made to paragraph 17 of the Particulars of Claim.

Mr Simms appealed. Dyson LJ gave a judgment on that appeal on 13 May 2004. Dyson LJ included in his judgment the passage from the judgment of Lewison J which I have just quoted. He referred to paragraph 7 of the Particulars of Claim and decided that there was a good arguable case that Mr Simms was privy to the arbitration.

It is clear, in my judgment, that Lindsay J and Lewison J relied only on the arbitration award, and the factors set out in paragraph 7 of the Particulars of Claim, to show that the first to fourth Defendants were privies to the arbitration, in granting and upholding the freezing order. Mr Freedman submits that that does not mean that the freezing order would not properly have been granted even if reliance could not have been placed on the arbitration award: where a judge has a clear route to the grant of such an order, he does not need to consider other, and possibly more difficult, routes. As a matter of theory, Mr Freedman is obviously correct. But in the present case, I have no doubt that the freezing order was wholly dependent on the arbitration award and the matters set out in paragraph 7 of the Particulars of Claim. It is, I consider, fanciful to think that Lewison J would, on the evidence before him, have continued the freezing order if he had been persuaded that the arbitration award could not be relied on.

In the event, I decided that Mr Simms was not a privy to the arbitration. Mr Freedman says that the failure of DGI on this issue was only a narrow one. I do not think anything turns on that, any more than I think anything turns on the fact that DGI only narrowly succeeded on its claim based on the intermediary representation against Mr Simms and Helga, whose liability flowed from the application of presumptions rather than on the making of a clear representation which was positively relied on by DGI. I left open the question whether Jack and Helga were privies.

I consider that the failure to draw the attention of Lindsay J to Jack and Helga’s position in relation to the arbitration and their position concerning Eastcastle, was a material non-disclosure. With the benefit of hindsight it is, of course, easy to see that Jack and Helga’s participation or non-participation in the arbitration (as funders and persons calling the shots behind the scenes) would be a very important point in deciding whether they were privies to the arbitration. I do not, however, consider that it is only, or even mainly, the benefit of hindsight which shows the importance of Jack and Helga’s participation to that issue. Paragraph 7 relied on paragraph 29 which in turn relied on paragraphs 21 to 26, and thus on Conspiracy II. It was always part of DGI’s case that Jack and Helga were involved behind the scenes in the arbitration and indeed in his witness statement dated 27 August 2004, Mr Clarke there expressed his scepticism about their non-involvement given the paucity of evidence about Eastcastle.

However, in his second affidavit (which was before Lewison J), Mr Clarke took issue with Mr Simms about what he, Mr Simms, had said in paragraph 60 of his affidavit. Mr Clarke points out that in his first affidavit he did indeed refer to Jack and Helga and the invitation to them to participate in the arbitration. This point is picked up in counsel’s skeleton argument, where it is pointed out that Mr Clarke had informed the court in his first affidavit that none of the Defendants was party to the arbitration. Then it is said that whether the Claimants knew that Jack and Helga had no dealing with Eastcastle and Charlton by June 1998 – after Jack’s introduction of Charlton to the Claimants – was “neither here nor there”. It is correct that it was neither here nor there in relation to the underlying contractual claims. But surely, I would say, it was relevant to Conspiracy II and malicious abuse of process, matters relied on to show that there was a privy relationship between Charlton on the one hand, and Mr Simms, Mr Rahman, Jack and Helga on the other. Accordingly, it was material for the court to be told that Jack and Helga claimed to have no involvement with Charlton after June 1998. But that is precisely what Mr Simms did tell the court in his affidavit which was before the court on 13 February 2004.

At this point, I need to say something about the law in relation to the discharge of freezing orders and the enforcement of undertakings where there has been material non-disclosure (whether innocent or not). The principal authorities are Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 (CA) (which contained citation of many important earlier authorities); Lloyds Bowmaker Ltd v Britannia Arrow Holdings [1988] 1 WLR 1337 (CA); Behbehani v Salem reported as a note at [1989] 1 WLR 723. These cases were addressed in an exhaustive review of the authorities by Mr Alan Boyle QC, sitting as a judge of this Division in The Arena Corporation Ltd v Peter Schroeder (15 May 2003). For present purposes, I need only set out the following points which I consider can be derived from those cases (and I here express my gratitude to Mr Boyle for his careful analysis of the cases):

The normal approach of the court faced with material non-disclosure will be to discharge the freezing order. For the reasons given in many of the cases, the court requires strict compliance with the duty of full and frank disclosure if relief is to be obtained without notice. This is true of any such application but particularly true in relation to freezing orders. Breach of that duty invokes the disciplinary sanction of the court which then discharges the order.

Nonetheless, the rule of practice should not be allowed to become an instrument of injustice. There is a tension between the disciplinary sanction of discharging the order and justice between the parties. Indeed, Staughton LJ has described the exercise as being “to reconcile the irreconcilable”. The court retains power to continue the order or to make a new order (whether or not on terms). The jurisdiction is invoked to punish the non-disclosure: there must be proportionality between the punishment and the offence.

It is relevant to the exercise of the discretion whether the non-disclosure was innocent, by which is meant that a fact was not known to the applicant or that its relevance was not perceived. Another way of putting what is an innocent non-disclosure is to say it is one where there was no intention to omit or withhold information which was thought to be material. It is also relevant that an injunction could have been granted even if full disclosure had been given at the time of the without notice application.

The court must assess the importance and significance to the outcome of the application for an injunction of the matters which not disclosed. But the court does not need to reach the conclusion that the judge would have declined to grant the injunction if the relevant facts had been disclosed. The court can properly reach the conclusion that the non-disclosure was important and significant even where the judge might still have granted the injunction.

There is a great public interest in the court ensuring full disclosure. That policy should not be undermined, generally speaking, by pointing to the harm which will be suffered by a claimant if the injunction were discharged or were not renewed. The court is not to apply a simple balancing exercise in the way in which that was done in Behbehani – that is to put into the scales the strength of the claimant’s claim on the one side and the matters not disclosed on the other, an incorrect approach. The court can take into account the merits of the claimant’s claim but should not conduct a simple balancing exercise.

So far as the cross-undertaking in damages is concerned, it does not follow that, just because a defendant succeeds in obtaining the discharge of a freezing order that he is automatically entitled to an enquiry on the cross-undertaking. The normal rule is no doubt that, once it is established that the injunction was wrongly granted, an enquiry as to damages will follow. It has indeed been said that the court ought to enforce the undertaking unless there are special circumstances why it should not: Graham v Campbell (1887) 7 Ch D 490 at p 494).

More recently, Nelson J has considered the enforcement of a cross-undertaking in Eliades v Lewis [2005] EWHC 2966. He refers, with apparent approval, to paragraph 11.021 of Gee, Commercial Injunctions (5^th ed), which identified two important factors in the exercise of the discretion whether to discharge namely whether the claimant has succeeded on the merits of his claim and whether there was a real risk of dissipation of assets. It is said, in reliance on an unreported decision of the Court of Appeal in Armhouse Lee Ltd v Anthony Chappell (1994), that where the discretion is being exercised after judgment, and if the claimant has succeeded in his claim and there was a real risk of dissipation, then ordinarily the court will not enforce the undertaking.

At paragraph 42 of his judgment, Nelson J says this:

I turn now to the exercise of my discretion. I will take, separately, the two grounds for discharge set out in paragraph 3 above.

The first ground is that the claims by reference to which the freezing orders were obtained have failed. The claim which succeeded was not pleaded until April 2005 and had not been formulated, quite apart from the formal pleading, when the freezing order were obtained. It is submitted that the freezing orders ought therefore not to have been granted so that they should now be discharged and orders made on the cross-undertakings.

Mr Simms relies, in this context, on the decision in Financiera Avenida SA v. Shiblaq CA 7 November 1990). In that case, the plaintiff claimed sums of money amounting to over $3.5 million, alleging that they had been retained by the defendant in breach of trust. A writ was issued on 2 June 1983. Mareva relief was granted. The affidavit in support identified four sums making up the total. The trial which lasted several days commenced in November 1985. Of the four items mentioned, the plaintiffs failed on two and two were not pursued. However, the plaintiffs succeeded on three further claims which they had added by way of amendment in May 1985, judgment being entered in August 1986 for $366,847, a small proportion of the amount originally claimed. In dealing with costs, the judge decided that, since the plaintiffs’ application for Mareva relief had been mounted on the basis of claims which were either abandoned or decided against them, the defendant should have his costs of that application. An enquiry on the plaintiffs’ cross-undertaking was ordered.

So far as relevant to the case before me, all that that decision shows is that on the facts of that case it was appropriate to exercise the discretion in favour of discharging the injunction and ordering an enquiry. The facts are miles away from the present case. In that case the new claims related to completely different sums of money and the sums were only a modest percentage of those previously claimed. It is certainly not an authority which compels me to adopt the approach which Mr Simms urges on me in the present case.

In dealing with Mr Simms’ submissions, let me take an example. C has two closely related claims against D both leading to a similar measure of damage. He seeks a freezing order on the basis of both claims; the judge grants an order expressly stating that he regards claim 1 as strong but claim 2 as weak and not sufficient by itself to found a freezing order. At trial, C loses on claim 1 but wins on claim 2. It would, I think, be contrary to principle if the injunction were discharged and an enquiry made on the cross-undertaking. It could not seriously be said that the injunction was wrongly granted.

Now, suppose that claim 2 is added after the freezing order has been obtained and has never been mentioned before, albeit that many of the facts relevant to that claim were already pleaded or in evidence on the application. Should the result be any different?

Taking that simple example, I do not think that the answer should be any different. If the freezing order is to be discharged in these circumstances – perhaps a considerable time later, after trial – it would mean that, in order to protect its position, C ought to make a renewed application to the court for a further freezing order as soon as he adds his new cause of action. Assuming that he would inevitably get his order – because it would remain justified by claim 1 – then D would at most be entitled to his costs of the first application and damages on the cross-undertaking up to the time of the second application. I say at most, because it must be very doubtful that he would obtain either a discharge or an order on the cross-undertaking. It cannot, I think, be right that C needs to make a fresh application in such circumstances. To be contrasted with that sort of example is a case such as Financiera Avenida SA where the added claim would have been insufficient to support the first freezing order if only because of the size of the second claim which one supposes (the Court of Appeal transcript does not disclose the facts in sufficient detail) would have been inadequate to support the amount of the first freezing order.

Putting aside for the moment issues of non-disclosure, the position in the present case seems to me to be this. The freezing orders were properly granted by Lindsay J and Lewison J on the material placed before them and in the light of the decision of Dyson LJ in relation to Mr Simms’ appeal. Had the intermediary representation been relied on from the beginning, then the freezing orders would nonetheless have been made whether or not Lindsay J and Lewison J would have regarded the claim based on the intermediary representation as weak and insufficient, by itself, to justify a freezing order. In those circumstances, DGI having won its claim based on the intermediary representation, it is not easy to see how a claim to discharge the freezing order could succeed.

Suppose then, that having amended the Particulars of Claim to plead the intermediary representation and to allege fraudulent misrepresentation in relation to it, DGI had then sought to renew the freezing order on the basis of the new claim. The court might have been very surprised to see such an application being brought given that the existing freezing order already protected it. However, on being shown Financiera Avenida SA, the court might have seen the need for some additional protection whilst thinking that DGI was perhaps being over-cautious. In that hypothetical situation, and assuming DGI had made such an application, I would take no persuading that an application to discharge the freezing order, made after a judgment had been given in the terms in which I actually gave it, should be rejected. I would not categorise the original injunction as having been wrongly made notwithstanding that the causes of action originally pleaded had failed. But even if that is wrong, this would be the sort of case where the court could clearly perfectly properly exercise its discretion by refusing to discharge the injunction.

In my judgment, it should make no difference to the result if such an application is not in fact made. In the present case, it is true that, by not renewing its application for a freezing order following amendment, DGI might have been taking a risk that the court would subsequently, in the exercise of its discretion, accede to an application to discharge the freezing order. But in the absence of special factors, I see no reason to exercise my discretion, in the events which have happened, in a way different from that in which I would have exercised it if a further application had been made following amendment. I do not propose to attempt to give examples of such special circumstances except to point to Financiera Avenida SA as a case where the different facts and, importantly, far smaller amounts involved in the added claims, led to an exercise of discretion against the plaintiffs.

I should also note that it might be argued that the amount of the freezing order based on the intermediary representation would have been significantly less than the amount actually provided for and that success on the intermediary representation does not justify an order based on the larger amount. On that basis, Mr Simms, Jack and Helga ought to have some route to compensation for having had an excessive restriction imposed on them. Such an argument would not be without significant difficulty even if the facts supported it. It is not an argument which is relied on and I do not consider it any further.

Accordingly, I reject the first ground on which it is sought to discharge the freezing orders.

Turning to the second ground, I have said that I regard the failure at the hearing before Lindsay J expressly to inform the court about Jack and Helga’s position in relation to their non-involvement with Charlton since June 1998, and in particular their lack of involvement in the arbitration (and not simply the fact that they were not parties to it), as a material non-disclosure of both the (alleged) fact of that non-involvement and of the defence that would flow from it in relation to the privy issue.

However, Lewison J was properly informed of the relevant facts: he was told by Mr Simms in his witness statement and submissions were addressed to him about material non-disclosure. Accordingly, when he made the order which he did, he did so on the basis that any non-disclosure had been corrected. He expressly mentioned the allegations made by Mr Simms of non-disclosure and rejected them in the light of Mr Clarke’s second affidavit. It is true that neither Mr Clarke’s second affidavit nor counsel’s skeleton focus on the relevance of the alleged lack of involvement by Jack and Helga with Charlton after June 1998 as being an answer to the privy argument. It may be that Mr Simms did so in his submissions, but I do not know whether that is so or not. If, in fact, he did so, then Lewison J was fully in the picture when he made the order which he did. If, in fact, he did not do so, then it seems to me that the worst that can be said against the Claimants and their advisers at that stage (whatever might have been said about what they told Lindsay J) is that they failed to appreciate that the fact of the alleged non-involvement (a matter which clearly was before Lewison J) might have led to an argument which could be deployed by Jack and Helga in their defence to the privy argument.

It may or may not be that Lindsay J, Lewison J and Dyson LJ would have reached different conclusions on the privy argument if they had appreciated the possible impact of this point. For my part, I do not think that the appreciation of the point would have turned an arguable case into one which was not arguable. Indeed, so far as Jack and Helga are concerned, I have expressly not decided the issue in their favour for the obvious reason that it is a difficult issue which always was, and still is, well arguable. But, as the cases show, in assessing the importance and significance to the outcome of the application for the freezing order, the fact that the judge might have made the order anyway is of little importance.

This issue is not one which is capable of further elaboration as a result of my findings at trial. The point, if it is a good one, was one which it was open to take before Lewison J. Lewison J expressly held that there was no non-disclosure and that, even if there had been, it would have been appropriate nonetheless to continue the injunction. In my judgment, it is not open to Mr Simms now to seek to discharge the injunction on the grounds of material non-disclosure of a fact which he himself in fact disclosed to Lewison J and who nonetheless made the order which he did.

Nor, in my view, is it now open to Jack and Helga to do so. It is to be noted that the hearing before Lewison J was the return date following the without-notice application: it was intended to be a hearing with the parties present. I have little doubt that Jack and Helga knew about the hearing date and, if they chose to take action which meant that they did not attend, they can have little complaint about what happened. However, let it be assumed for the sake of argument that, so far as concerns Jack and Helga, the Claimants were under the same duty of full and frank disclosure as they were at the without-notice hearing. What non-disclosure can then be relied on? The fact is that the point on which Mr Cakebread now seeks to rely is non-disclosure of a fact which was put before the court by Mr Simms himself in his affidavit. It may have been, and may be, open to Jack and Helga to point to other facts and matters which were not disclosed, but that does not get round the point that this particular fact was disclosed.

In these circumstances, I do not consider that it is open to Jack and Helga to seek to discharge the order of Lewison J on the basis of non-disclosure to him. It would, in my judgment, also be quite wrong to discharge the order of Lindsay J on the basis of any non-disclosure in the light of the way in which Lewison J himself dealt with non-disclosure. I certainly do not accept that any non-disclosure (if indeed there was any) before Lindsay J infects Lewison J’s order, especially given Lewison J’s observations on how he would have exercised his discretion in the light of Brink’s Mat. I leave open the extent to which the non-disclosure before Lindsay J should be reflected in a costs order.

In case I have adopted a wrong approach in relation to Jack and Helga, I consider briefly the position on the assumption that there was material non-disclosure before Lewison J. Mr Cakebread submits that the non-disclosure is clearly material and clearly serious so that the freezing order should be discharged and an order should be made on the cross-undertaking.

I should jump ahead a little at this point. Even if I were to discharge the freezing orders, Mr Freedman submits that I should make a post-judgment freezing order now that the liability of Mr Simms, Mr Rahman, Jack and Helga is established. As to that, and assuming that DGI would otherwise be entitled to such relief, I do not consider that the non-disclosure which I have identified should disentitle it from post-trial relief. To hold that DGI has forfeited such relief by virtue of that non-disclosure would, in my judgment, be a wholly disproportionate response, or punishment, for the offence and would itself be to allow the rule to be used as an instrument of injustice.

I have no doubt whatsoever that there is a real risk of dissipation so far as Jack and Helga are concerned: at least, if they have assets, there is a real risk. Their case, of course, is that they have no assets. But on the evidence before me at trial, there is a real issue about whether various property-holding companies were, or were not, placed in the Brinton structure and, if they were, what the position is now that Brinton is in winding-up. It is at least possible, I put it no higher at present, that those companies are, directly or indirectly owned, by Jack and Helga. If, as they say, they have no assets, the freezing order will in practice give DGI no protection but, on the other hand, it will not damage Jack and Helga. I have no doubt that in the exercise of my discretion I should continue or re-impose the injunction in support of the judgment, although the amount is a matter on which I will hear further submissions.

In those circumstances, it appears to me that it would be unjust to expose the Claimants to liability on their cross-undertakings, so far as concerns Jack and Helga when (a) the Claimants have established that Jack and Helga have a large liability to them (albeit based on a different cause of action from that which justified the freezing order) and (b) there is a real risk of dissipation. It would be disproportionate to punish the Claimants in such a draconian way. In the light of my actual decision in relation to non-disclosure, the exercise of my discretion does not arise; but without deciding the point I would be inclined to consider imposing the appropriate sanction by discharging the freezing order and ordering the Claimants (with a joint and several liability) to pay Jack and Helga’s costs, on the standard basis, of the application for the freezing order and the costs of any applications relating to the freezing order and disclosure of assets ancillary to it (save insofar as those costs have been dealt with already in such a way that leaves me with no discretion over them).

So far as Mr Simms is concerned, he says that there is no risk of dissipation (and never has been) so that the injunction should now be discharged and not be continued or re-imposed. Mr Simms says that he has no assets, or none of any significant value, and that there is not, in any case, any, or any sufficient, evidence to support the suggestion that he would dissipate his assets. He points out that he lives in England and has done so for many, many years. He travels only for holidays and when business requires. There is no real possibility that he will leave the jurisdiction. The problems which he has had with the Law Society do not justify any sort of inference that he would put his assets (if he has any) outside the reach of his creditors.

Mr Freedman submits that this is totally unreliable evidence. He says that Mr Simms has recently been less than frank and honest about his resources. Mr Freedman says that the evidence shows that Mr Simms has misled the court in relation to the costs agreement reached with the Law Society (as to which see below) and has failed to be honest about dealings in relation to his personal pension plan, in relation to which his activities have amounted to a breach of the freezing order. He relies in particular on evidence obtained from Julie Eagle. I view what she has told Mr Serota with a great deal of circumspection save where it introduces incontrovertible documents. There is clearly a serious dispute between her and Mr Simms in which he is making allegations of fraud against her. It is only in the context of that dispute that she has seen fit, at a very late stage, to blow the whistle on Mr Simms. Nonetheless, there are issues which arise out of her evidence as follows. Mr Freedman relied on the following:

First in relation to Mr Simms’ self invested pension plan it is clear that there have been dealings concerning the investment and reinvestment of funds. It appears that Mr Simms’ may have effected a limited drawdown from his SIPP in order to fund Citilegal over a difficult period.

Contrary to the impression which he had given, Mr Simms in fact has bank accounts other than his (disclosed) account with Halifax. In reality he has accounts with the Cooperative Bank plc, on which there have been significant movements between December 2004 and August 2006. The outward transfers to Citilegal companies were breaches of the freezing order.

From February 2006, Mr Simms appears to have had an account with the Cyprus Popular Bank Ltd. There may be an innocent explanation for its non-disclosure, but Mr Simms had not previously revealed it.

There is reason to think that Mr Simms might have an account with Union Bancaire Privee.

There is some evidence to suggest that Cline is controlled by Mr Simms and not just by T&T Trustees, the trustees of the Taurus Trust which Mr Simms says no longer has any funds on which he can call. It is clear that in August 2006 Cline transferred from its account at Union Bancaire Privee, £25,000 to Mr Simms’ personal Co-op account.

Mr Simms told me in evidence that he had not been involved in Helga’s financial affairs since about 1995. However, draft correspondence from 2004 (revealed by Ms Eagle) suggests that Mr Simms was, contrary to that evidence, involved in her affairs in 2004.

I deal with Mr Simms’ response to this evidence later in relation to the application for a stay. Taking all of this evidence into account, and keeping in sight my view of his evidence and his conduct of these proceedings as dealt with in the Judgment, I consider that Mr Simms has not been full and frank with the court either about what he knows about Helga’s assets, or about the details of his own assets. In relation to his own assets, he may have told most of the truth, and it may be that that which remains untold would not reveal any further assets. But by telling only half the story as he has so often done – most recently in relation to the costs agreement with the Law Society and in relation to his SIPP – I feel constrained to say first, that I am not convinced that there are no other assets on which Mr Simms can call and secondly, that I perceive a real risk that such assets as he does control, will in effect be put outside the reach of his creditors. In those circumstances, it is appropriate to continue the freezing order against him. However, I say the same in relation to Mr Simms as I have said in relation to Jack and Helga in the last sentence of paragraph 54 above.

In conclusion, I dismiss the applications to discharge the freezing orders and consider that they should continue post-judgment in support of the financial awards which I have made and will make in this action. It follows from my dismissal of these applications that the £50,000 security deposited pursuant to the undertakings given to Lindsay J should be released

The next matter concerns costs. I have already decided (see paragraph 90 of my second judgment) that I should award 75% of the costs of the action (this includes the costs of Mr Simms’ counterclaim but not the costs of various interim applications) against each of Mr Simms, Jack and Helga on the indemnity basis. Mr Simms and Mr Cakebread say that costs should not be awarded on the indemnity basis. Mr Simms also says that the order should not be joint and several on the basis that his part in the proceedings was secondary and that the considerable amount of work carried out and time spent at trial on the trust issues was not something with which he was concerned. However, as can be seen from my two judgments, Mr Simms took issue with DGI’s assertions that Jack was more than an intermediary and was himself involved in the attempts to distance Jack and Helga from Ancon by relying on the trust structure. I maintain the conclusion expressed in my second judgment that costs should be assessed on an indemnity basis. I also decide that the costs, as so assessed or agreed, should be a joint and several liability of Mr Simms, Jack and Helga.

I have already dealt with interest on costs in paragraph 91 of my second judgment. DGI is to receive interest from the date of handing down of my first judgment on 24 November 2006, at 1% pa above base rate.

DGI seeks an interim payment of costs under CPR44.3(8) which provides for payment on account before the costs are assessed. Although the material which would go before the costs judge is not, of course, before me, it is obvious, if I may say so, that very substantial costs have been incurred by DGI in fighting this case (even ignoring the many interim applications directed principally at Jack and Helga in relation to establishing the amount and whereabouts of their assets). Mr Freedman handed me a sheet which, if it is correct, shows the costs on his side of counsel (brief fees and refreshers) and solicitors (costs for January to May 2006) of £637,000 odd. These costs are not surprising. The evidence suggests that Jack and Helga have themselves spent getting on for £1.5 million on this litigation (including, I should point out, all the interim applications). In my second judgment I indicated that I would make an order for payment on account of one half of the 75% which I am awarding. Mr Cakebread has no observations to make on quantum. Mr Simms, however, complains that the evidence (or rather lack of it) about the amount claimed is scant. DGI has had plenty of time to prepare a schedule of costs (albeit not with the detail that would be appropriate on an actual assessment). He suggests that any payment should be a matter for the Costs Court. However, that is, I think, to confuse payment on an interim certificate in the course of an assessment with a payment on account under CPR44.3(8). I still consider that the correct approach, in spite of Mr Freedman’s request for more, is to order a payment on account of one half of 75%.

I was not satisfied with the brief schedule which had been prepared for earlier hearings and required DGI to produce a more formal schedule, appropriately certificated, if I was to make an order. I have now been supplied with a schedule which, in spite of Mr Simms’ continued objections, satisfies my requirements. In reaching this conclusion, I have taken into account the decisions which I have been referred to, in particular Mars UK v Ltd v Teknowledge Ltd (Costs) [1999] 2 Costs LR 44 and Dyson Ltd v Hoover Ltd [2003] EWHC 624(Ch). In the light of those decisions, I have adopted a cautious approach to the percentage of the costs which I think it appropriate for DGI to recover on account. But having myself been the trial judge and having a very good idea of the sort of level of costs likely to have been properly incurred, and given that I have ordered costs to be paid on an indemnity basis, I consider that the order I propose to make is one which will best give effect to the overriding objective. Rounding the figure, I will make an interim costs order in the sum £885,000.

In relation to financing charges incurred by DGI, it appears from the evidence that DGI did borrow money from Alex and Haig to finance its own obligations in relation to certain costs of the arbitration and that DGI incurred interest charges on that borrowing: it is these interest charges which are sought to be recovered. I was concerned that the amount of the interest rate might be excessive. If this interest is recoverable as part of the costs of the arbitration (assessed on the standard basis) DGI is entitled to recover on that basis; if such interest does not, strictly, form part of the costs of the arbitration, it should nonetheless, I now consider, be recoverable as special damages. In the latter case, DGI would be restricted, in my view, to recovering a reasonable rate. It is difficult to see that there would, in practice, be much difference between the interest allowable on a standard rate assessment and the interest which it would be reasonable to recover as special damages. The Judge or Master carrying out the assessment of the arbitration costs will decide whether the finance charges are to be recovered as costs and if so assess them accordingly. If he decides that they are not in principle recoverable as costs, he should determine the appropriate rate of interest which DGI can recover as damages. As I have already indicated in my second judgment, interest on this sum is not recoverable since that would be to award compound interest.

In my second judgment at paragraph 6 I said that I proposed to allow £650,000 as a payment on account of damages and interest. Mr Freedman had applied for an interim payment at the hearing following my first judgment and which led to my second judgment. Mr Simms submits that the figure is too high and says that it should be set at £500,000. I see no reason to depart from what I said in my second judgment on this aspect.

Alex and Haig each paid £15,000 into court as security. This very limited security was designed to cover the additional cost which Mr Simms, Alex and Haig would face in having to enforce any money judgment (eg for costs) against the Claimants if they were to lose their claim. Given my decision on damages and costs, and in particular interim payment, I can see no justification at all for that money being retained in court subject, however, to what should happen pending appeal. In my second judgment, at paragraphs 93 and 94, I indicated a preliminary view that the money should stay in court until the appeal was determined. However, there is a significant point which I did not deal with at that time. The point is that Mr Simms, Jack and Helga are all subject to outstanding liabilities pursuant to costs orders which have already been made in the litigation and which are not subject to any appeal: they would remain even if appeals from my first judgment were successful. These orders in favour of DGI were made by Laddie J on 18 February 2005 (£60,000), by the Court of Appeal on 11 April 2006 (£30,000) and by the Court of Appeal again on 22 December 2006 (£32,750 against Jack and Helga but not Mr Simms). It would not be right, in my judgment, for the security to remain in court whilst the unappealed costs orders remain unsatisfied. Accordingly, even if a stay of other parts of my order is to be granted (a matter which I come to in a moment) I would think it right to order release of the security unless all of the outstanding costs orders made against Mr Simms, Jack and Helga (that is to say, the order of Laddie J and the first order of the Court of Appeal) are paid within 28 days from today. I return to this matter at paragraph 110 below, where I express my conclusion on payment out of this security.

Mr Simms, Jack and Helga all seek a stay of my orders (including orders for payment on account of costs and interim payment in respect of damages) pending their appeals. Mr Freedman opposes the granting of any stay.

The starting point is that an appeal does not automatically operate as a stay: CPR 52.7. The position is helpfully summarised by Clarke LJ giving the judgment of the court in Hammond Suddards Solicitors v Agrichem International Holdings Ltd [2001] EWCA 2065 at paragraph 22:

On the particular facts of that case, the appellant/applicant was a BVI company. Clarke LJ said this

On the basis of that, Mr Freedman says that, in order to fulfil the onus of establishing that the court should depart from the normal position ie that no stay will be granted and that a successful litigant is normally entitled to recover the fruits of his litigation, Mr Simms, Jack and Helga need to adduce evidence about their financial position in order to show that the effect of refusing a stay will be to stifle the appeal. I mention only stifling the appeal because no other special circumstances are relied on by Mr Simms, Jack and Helga. In this respect, I need to consider the position of Mr Simms separately from those of Jack and Helga. Jack and Helga I take together because I have no material which would permit me rationally to make any distinction between their positions.

I will start with what Mr Simms says about his position. This has developed in the course of the hearings before me. Initially, he did not put in any further evidence about his means. He does point out that he gave full evidence of his means in the course of interim proceedings in 2004. He told me in submissions, but not on the basis of evidence, that he now has no assets. Both his own assets and the assets in the family trust (which he says was set up by his mother) have been used in paying off costs orders in favour of the Law Society. He points out that the Claimants have been trying to make him bankrupt on the basis of the subsisting unpaid costs liabilities and, given his imperative of avoiding bankruptcy for reasons which I will come to, it is unlikely that he would not have met these costs if he had resources available to do so. He told me that Citilegal is not a company of substance as can be seen from the accounts which were available at the trial before me; and he says that he has not drawn any salary for the last few months and that staff have been made redundant because the company is unable to afford them. He himself is, he says, living frugally; he and his wife are living off her salary.

He has explained the position in relation to his litigation against Mr Conlon. The judgment for £150,000 which Mr Simms obtained was appealed and there is to be a retrial. Even if he is successful on the retrial, any recovery is likely to be a long way in the future.

Mr Freedman said that that is unsatisfactory. He was clearly suspicious that Mr Simms was hiding assets.

Matters moved on after those submissions. Mr Simms prepared further witness statements dated 22 and 24 March and 9 May 2007.

In his witness statement dated 22 March 2007 he exhibits a copy of the last filed accounts of Citilegal Consultants Ltd and a set of draft accounts to end April 2006. They show an ever increasing loss. He explains that he has drawn nothing by way of salary during 2007 and missed 3 months in 2006. He explains that the sale of his interest in his matrimonial home to his wife for £50,000 in April 2006 was the disposal of the last of his assets; and he states that he could not meet the costs orders (ie payable to the Law Society). He has made every effort to meet those costs, including prevailing on the trustees of the Taurus Trust (the trust which he says was set up by his late mother) to meet them. He ends by saying that the funds of the trust and his own funds are now exhausted.

In his witness statement dated 24 March 2007, Mr Simms demonstrates what he says is his parlous financial position by reference to his bank and credit card statements. He explains that the accounts of Citilegal Consultants Ltd show a serious financial situation. He states that funds from Cline Ltd (which is said to own Citilegal and is itself within the Taurus Trust) no longer supports Citilegal. The most important part of the witness statement for present purposes is one which relates to a costs agreement reached with the Law Society. Mr Simms had written to the Law Society (in respect of an outstanding costs liability of £18,000) saying that he believed he could borrow the money to pay the Law Society if the litigation with DGI created no further burden on him – which of course was not the case when my judgment eventually emerged

Following that judgment, Mr Simms says that it was impossible for him to inform the prospective lender that he would have no further liability other than to the Law Society and so, he says, he has been unable to borrow the additional £18,000.

Meanwhile, a further costs assessment was under way in relation to his liability to the Law Society. An assessment hearing date was looming on 13 March 2007. Mr Simms says that he re-approached a client of his who had indicated a potential willingness to lend “provided it cleared matters up entirely, and was able to offer a sum of £150,000 to the Law Society”. He says that he made clear in a letter to the Law Society that this proposal was subject to a stay being granted in the present proceedings in the absence of which he would be unable to borrow.

The assessment was to come on for hearing on 13 March 2007, the claim being for about £700,000 plus interest over 3 years. He says that he made clear that he would be able to borrow nothing and pay nothing unless a stay was granted in these proceedings. On that basis, he says that he was able to negotiate the figure down to £400,000 inclusive of interest and costs. This was recorded in a consent order. He says “I have not been able to tell the Law Society I could pay the costs order but it was clearly in my interests to reduce my potential liability”. There was a further consent order relating to other costs, agreed at a figure of some £32,859.

Finally, so far as material, he says that he has no personal or trust resources from which to pay the two consent orders; he “did have a prospective lender for £150,000 but whether he will be prepared to lend, when I have to inform him that it will cost me another £160,000 to settle finally with the Law Society, I do not know”.

Mr Serota also produced a witness statement dated 22 March 2007. He reports on a phone call he had had on 12 March with Ms Asher of Russell-Cooke, the Law Society’s solicitors in relation to the costs claim against Mr Simms. She was phoning to enquire what sums if any Mr Simms had been ordered to pay to Mr Serota’s clients and what enforcement action had been taken. She told Mr Serota that in the course of negotiations with Mr Simms, he had said that if he could not agree an acceptable figure, he would present a petition for his own bankruptcy (something inconsistent with his present application for a stay). On 19 March 2007, Mr Serota phoned Ms Asher to ascertain what had happened at the assessment hearing. He says that she told him that agreement had been reached for Mr Simms to make payments totalling £310,000 in instalments – by 6 April 2007, £150,000; by 31 May 2007, £50,000; and by 2 July 2007, £110,000. Ms Asher told Mr Serota that Mr Simms had indicated to her that he would be borrowing monies from a former client in order to meet those instalments. The actual consent order contained different figures reflecting payments which had already been made.

Mr Serota then produced another witness statement dated 4 May 2007. This reveals information derived from Ms Eagle, who has not herself provided a witness statement, which I have mentioned already. Mr Serota notes that Mr Simms did not disclose the existence of his SIPP when swearing his second affidavit on 16 February 2004; nor did he do so in his witness statement of 22 March 2007. He draws attention to documents which suggest that Cline has access to substantial sums (or at least that this was so in 2006). Criticisms are made of Mr Simms’ disclosure of the assets of the Taurus Trust; and inferences are drawn to the effect that Mr Simms knows far more about Helga’s assets than he has been prepared to admit.

In turn, Mr Simms responded with a witness statement dated 9 May 2007. He describes in more detail his discussions with the Law Society from which it appears that the Law Society understood that, as a result of references by Mr Simms to a third party, he would be borrowing funds to meet the Law Society’s costs. The Law Society assumed, given that agreement was subsequently reached, that Mr Simms had in fact liaised with the third party during periods of the negotiation when the parties were in separate rooms. He acknowledges that he had written a credit account cheque on his MBNA credit card to pay Citilegal salaries and asserts that nothing had been received from Cline Ltd for a considerable time because it had no funds as he had made clear in earlier evidence.

Mr Simms explains the existence of the Cooperative Bank account as well as various credit card accounts with MBNA Bank, Capital One Bank, Morgan Stanley and “Smile”. He acknowledges the drawdown from his SIPP (which was done, he says, in order to assist Citilegal in its various financial problems). He also discusses the Cyprus Popular Bank account, his SIPP, the Union Bancaire Privee account, Kingfisher Drive/Delana Inc, and the Taurus Trust. Finally, he explains why, according to him, the material which Mr Serota suggests shows knowledge of Helga’s assets as late as 2004 does not in fact do so.

I cannot possibly, on these applications, resolve any issues which may arise out of Mr Serota’s expressed suspicions and accusations and Mr Simms’ explanations of them. I have already decided that, taking all the evidence together, it is appropriate to continue the freezing order against him. However, that is not to say that he has sufficient assets to meet the interim orders for payment of costs and damages, let alone to meet the whole when the figures are finally ascertained. I consider that it is unlikely in the extreme both (i) that Mr Simms in fact has assets of his own with which to meet my orders (or outstanding amounts owing to the Law Society or other creditors) and (ii) that there are other sources – whether the Taurus Trust or persons willing to lend - from which he could meet these amounts.

Mr Simms says that the effect of allowing the orders against him to be enforced is that his appeal will be stifled. This is not on the basis that he will have no money to progress his appeal since (a) he is acting as a litigant in person and (b) his own case is that he has no money (or source of funding for an appeal) anyway. Rather, he says that the inevitable result of refusing a stay will be that he is bankrupted by DGI and the reality is likely to be that his trustee in bankruptcy will not proceed with the appeal. In that he must, I think, be right. The trustee would need to employ lawyers with no hope of recovering anything for creditors but carrying a large risk as to costs. It is, I suppose, possible that a trustee would permit Mr Simms to continue with the appeal, but this is far from certain and would take time to negotiate.

Now, it may be that Mr Simms will be bankrupted anyway by virtue of the present outstanding costs orders in favour of DGI and/or the Law Society. If that occurs, then Mr Simms’ argument that the absence of a stay will stifle an appeal falls to the ground because the appeal will be equally stifled as a result of a bankruptcy order based on those outstanding orders. But unless and until that happens, the threat of a bankruptcy order based on the interim awards is real and there is a risk that the appeal would be stifled.

Mr Freedman submits that Mr Simms has not satisfied the court that it is probable that the claim would be stifled (the test laid down in relation to a refusal to order security for costs in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 (CA)). In the context of a stay pending appeal, the test for staying an appeal is set out in Hammond Suddards (above): in the present case, the position is whether the appeal will be stifled in the absence of a stay and in that regard I think the Keary test applies. Mr Freedman throws into the balance the proposition that delay is prejudicial to DGI because trust assets may be spent which could otherwise be enforced against (although Mr Simms, of course, says that the trust assets have already been exhausted).

Notwithstanding the criticisms which are made of Mr Simms, I am satisfied that his appeal probably (indeed, I think almost certainly) would be stifled (so long as he is not subject to a bankruptcy order) if a stay is not granted. That does not mean that there should be a complete stay of execution. In my judgement, the appropriate order is that there should be a limited stay in relation to the interim orders. There should be a stay only to the extent that DGI may not base a statutory demand or otherwise invoke any bankruptcy procedure against Mr Simms, but should be free to enforce the order in any other way they can. Further, such stay should not prevent DGI from supporting a bankruptcy petition based on some other debt nor from proving for the full amount in any bankruptcy resulting from such a provision. Formally, it would be best to provide expressly that the stay shall cease if a bankruptcy order is made in relation to Mr Simms. There is a further and slightly different issue concerning stay of the assessment of costs and inquiry concerning damages which I will deal with in considering Jack and Helga’s position.

So far as concerns Jack and Helga, their own evidence is that they have no assets and such assets as are available to them (in particular, indirectly, the London and Paris properties) are within the Brinton structure. There is no further evidence which they would be able to give about their assets. The evidence now is that Mr Kalaidjian will lend no further financial support to this litigation, although there remains an absence of any explanation about why he was willing to fund the litigation in the first place but is no longer willing to do so.

Mr Cakebread identifies the real issue as the ability of Jack and Helga to sustain their appeals and at the same time meet the payment orders against them. He submits that, without a stay, the appeals will be stifled. But to succeed in that, he would need, or so it seems to me, to show that, if a stay is granted, funding will be available from some source. Their positions are different from that of Mr Simms. Mr Simms is a litigant in person and can conduct his own appeal without the need to incur the cost of solicitors and counsel. In contrast, Jack and Helga need to fund their appeals: without funding, there will be no appeal (unless pro bono representation can be obtained, but it has not been suggested that that might be available). Given that Mr Kalaidjian is no longer willing to fund the litigation, and given that no other third party has indicated a willingness to fund, what other source could there be? Jack and Helga say they have no assets, so it cannot be that their own assets might be available. That leaves as the only known potential source the London and Paris properties (unless there are, as DGI no doubt believes, substantial hidden assets on which they could call).

Jack and Helga’s case is that London and Paris properties are in fact within Brinton and not indirectly owned by Jack and Helga. If that is right, then so far as those properties are concerned, enforcement of the payment orders will make no difference. The payment orders could not, on this hypothesis, be enforced against the properties (or shares of the companies holding them) since they are not owned by Jack and Helga, even indirectly. The extent to which, (if at all) the value of those properties might be released to Jack and Helga to meet the costs of the appeal is not affected by whether the payment orders are stayed or not. It could be argued, however, that the appeal would be stifled because, absent a stay, Jack and Helga would be made bankrupt and unable to pursue the appeal.

But if that is wrong, so that the properties are in fact assets of Jack and Helga, then they are available both to meet the payment orders and to meet the costs of an appeal. If the properties were the only source of funds, a failure to stay the payment orders would quite probably stifle the appeal unless an alternative source of funding is available. But more importantly, enforcement of the interim costs and damages awards might result in the bankruptcy of Jack and Helga.

It might therefore be thought that, so far as bankruptcy is concerned, the position of Jack and Helga is the same as that of Mr Simms and that, as with him, there should be a limited stay of execution. I do not, however, consider that to be correct. Unlike in the case of Mr Simms, Jack and Helga or their family trust do own (directly or indirectly) assets of considerable value, namely the London and Paris properties. Jack and Helga’s case for a stay is critically dependent on those properties being utilised to provide the finance for an appeal (either through sale or secured borrowing). If those properties belong to Jack and Helga, then they are available as much to meet the interim payment orders as to meet the costs of any appeal. If they are owned within a trust structure, I am prepared to proceed only on the basis (in the absence of any evidence to the contrary) that trustees who would make available money for costs would also make available money to meet the interim awards – especially bearing in mind that Helga, even on her own case, is the principal beneficiary during her lifetime of Brinton. There is no evidence before me about the value of the properties. Even if one leaves the Paris home out of account, as Jack and Helga’s main home, the London property, in an expensive part of London, may well be valuable enough to meet the interim payment orders and to meet the costs of an appeal. If one brings the Paris property into account, it may be possible to raise additional loans on the security of it. On the current state of the evidence, I am not satisfied that a refusal to stay the payment orders against Jack and Helga would result in their bankruptcies or otherwise stifle the appeal.

Mr Cakebread then looks at what, if any, prejudice might be suffered by DGI if my order is stayed. He points out that DGI is a company of no substance: it has no assets and does not trade. It is not easy to see, he says, how it would be being dealt with unjustly if a stay were to be granted.

Following on from DGI’s lack of assets, it is questionable, Mr Cakebread submits, whether Mr Simms, Jack and Helga would be able to recover from DGI if the appeals succeeded and damages and costs had to be returned. DGI has no assets of its own and been funded by Alex and Haig. There are two answers to it. The first is that Alex has indicated that he is prepared to give an undertaking himself to repay any amounts due from DGI if DGI fails to do so. The second is that, in any case, if Jack and Helga have no assets (and the same goes for Mr Simms) as they say is the case, then DGI will in fact not be able to recover anything from them so there will be nothing to repay. If, on the contrary, they do have assets available to meet costs, they should tell the court about them and an assessment can then be made about the balance of justice on the basis of such assets.

Mr Cakebread then says that it would be senseless to have a long and expensive detailed assessment carried out pending the appeal when, if the appeal is successful, such an assessment would have been unnecessary and wasteful.

In relation to all of this, Mr Freedman submits that it is far from clear that Jack and Helga do not have other assets which they have hidden. He points to Cooke Investments and the failure to disclose it and the use of which is a clear breach of the freezing orders against Helga. He points out that, on my findings, the assets used to pay Addleshaws and Kingsley Napley clearly did not come from Brinton and their source has not been disclosed (other than perhaps Maitre Croisier, but no explanation is provided of how he came to have substantial assets available for Jack and Helga). The evidence that Jack and Helga have no assets is therefore, he submits, extremely unsatisfactory. He says that the fact that judgments for costs are outstanding is a factor which militates against stay. Finally, he says that every day which passes is likely to make recovery even more difficult, expressing his concerns about whether the freezing orders are in fact being observed by Jack and Helga.

I have reached a clear view in relation to Jack and Helga that my orders should not (subject to one point mentioned below) be stayed on the current state of the evidence, provided that Alex gives the undertaking just mentioned. I do not rule out the possibility of a further application for stay based on the inevitability of bankruptcy resulting in a stifling of the appeal, but it would have to be supported by clear evidence about the values of the properties and why sufficient money could not be raised to meet the interim orders (in whole or in part) and Jack and Helga’s own costs of an appeal. That observation should not, however, be taken as encouragement: Mr Freedman has made powerful submissions to the effect that there should not be a stay in the light of Jack and Helga’s conduct of the litigation generally and what he would describe as Jack’s overarching dishonesty.

All of the above is subject to this. There is considerable force in Mr Cakebread’s submission that the detailed assessments of costs and damages should not proceed during the currency of the appeal. It would be a huge waste of money to carry out an enquiry and assessment which turned out, on appeal, to have been incorrectly ordered. I propose therefore to order a stay, pending appeal, of further proceedings on those assessments both in relation to Mr Simms and in relation to Jack and Helga.

As well as the permission to appeal which I have already indicated in my second judgment that I will give, Mr Simms, Jack and Helga seek permission to appeal on additional grounds, and DGI and Alex (and I imagine Haig’s personal representatives) seek permission to cross-appeal.

I take Jack and Helga first. They seek permission to appeal (i) my order that they pay costs on an indemnity basis and (ii) my costs order overall on the basis that my approach was wrong in principle in that (a) I should have made an issue-based order and (b) I failed to take proper account of the late amendments of the Claimants’ claim to introduce the deceit claim based on the intermediary representation.

I do not propose to repeat my reasoning for deciding that an issue-based order was inappropriate nor to spend any time debating whether the percentage reduction I ordered was adequate. I was, of course, aware of the late amendment which is identified by Mr Cakebread but decided, nonetheless to make an order which included the costs of the action before the date of the amendment within the recoverable costs and made the percentage reduction which I did. As I have said the intermediary representation was not a new issue when the amendment was made, although the cause of action in deceit based on it was. Mr Cakebread submits that, nonetheless, I failed to attach any, or any due, weight to this factor in reaching my conclusions.

Next it is said that I failed to give any, or any due, weight to the fact that the Claimants’ own conduct was also deficient. Mr Cakebread reminds me of what I said in paragraph 80 of my second judgment. It seemed to me, however, that the misconduct of the Claimants ought not to be reflected by a refusal to order indemnity costs against Mr Simms, Jack and Helga when otherwise I would have made such an order; rather, it should be reflected in the percentage reduction in the overall costs order which I decided to make. The 25% reduction was intended to do just that.

I clearly thought that my orders were right when I made them and still think that they are the right orders to have made. But that is not the real point; the real point is whether those orders fall outside the range of the discretion which is given to me. As to that, I do not consider that Jack and Helga have any real prospect of showing, in reliance on the factors I have identified, that I acted outside that scope of my discretion. Accordingly, I refuse Jack and Helga permission to appeal any part of my costs order.

Turning now to Mr Simms, he seeks permission to appeal my orders that he pays costs on an indemnity basis and that he should be jointly and severally liable for the whole amount which I have ordered. He has a ground additional to those relied on by Jack and Helga for challenging my order that he pay costs on an indemnity basis. He points out that my decision against him turned largely on what I saw as his failures in relation to disclosure. Such additional documents as came to light were found as a result of the search of electronic documents made available to the court by delivery of a number of CDroms provided by the Law Society. Mr Simms accepts as he must that he already had copies of those CDroms but had not searched them because he had carried out disclosure by reference to the hard-copy files. But he notes that representatives of DGI were present at the Solicitors Disciplinary Tribunal hearing and knew that the Law Society had all these files. And yet not a single specific disclosure application was made. As I said in my second judgment, I found the position in relation to Mr Simms much more difficult that in relation to Jack and Helga. For my part, I accept that a different judge might have reached a different conclusion. However, I considered that it right to make an indemnity costs order. I still consider that such an order was within the range of the discretion afforded to me. On that basis, I do not consider that Mr Simms has a real prospect of success in showing that I acted outside the range of that discretion and refuse permission accordingly.

Similarly, I do not consider that Mr Simms has a real prospect of success in showing that I acted outside the range of my discretion in deciding that the costs liability should be a joint and several liability. Contrary to Mr Simms’ submissions, I do not accept that the main case against Jack and Helga in relation to the trust issues and the so-called five layers had nothing to do with his position.

Mr Freedman seeks on behalf of DGI and Alex (and I think Haig’s personal representatives) permission to appeal the following aspects of my decision in addition to those where I have already indicated in my second judgment that permission should be given (ie the correct measure of damage being restricted to standard costs; the “privy” points) :

My conclusions on “lifting the corporate veil”.

My conclusion on Conspiracy I.

I refuse permission in relation to “lifting the corporate veil”. I do so for two reasons. First, I do not consider that there is a real prospect of overturning what is effectively a judgment on the facts. Secondly, there is no need to lift the veil in order to give a full remedy for the one element of the claim which succeeds, namely deceit and I do not consider that there is a real prospect of establishing the contrary.

As to Conspiracy I, Mr Freedman suggested that the House of Lords would, in giving its decision in Douglas v Hello! Ltd, clarify (or develop) the law in relation to the need for an intention to cause economic harm in cases of conspiracy. Judgment has now been given. I do not perceive anything in the decision which would assist Mr Freedman in showing that my decision was wrong. It is not the case that a combination which in fact uses unlawful means (in the present case, a deliberate misrepresentation) but which is not intended to harm DGI economically and which would not have been perceived as even running the risk of harming DGI economically, could give rise to a liability based on conspiracy. On my findings of fact, there was no intention to harm DGI, nor, I think, would a risk of harm have been perceived: as I said, the purpose of the misrepresentation was to procure the Tooling not to harm DGI and there was not reason to think that, by obtaining the Tooling, DGI would possibly be harmed. This is not a case where unavoidable economic harm was an inevitable side effect of the action taken. In any event, I do not see how there could be an unlawful means conspiracy in the present case unless there was a fraudulent misrepresentation. It seems to me therefore that Conspiracy 1 is likely to add nothing; or, if does add anything, it is only minor. I consider that the Claimants do not have a real prospect of success in relation to an appeal on Conspiracy 1. But even if that is wrong, it would be entirely disproportionate, in my judgment, for an appeal on Conspiracy 1 to be allowed to continue. I accordingly refuse permission here, as well, and leave it to the Claimants to persuade a Court of Appeal, if they can, that permission should be given.

In the light of all of the above, I need to return to the release of the £30,000 paid into court by Alex and Haig. In the light of the limited nature of the staywhich I am ordering, I do not consider that it would be fair and just to require this sum to remain in court and order its payment out as to £15,000 to Alex or at his direction and as to £15,000 to the personal representatives of Haig or at their direction.

For quite understandable reasons, given the ongoing applications made to me, the Defendants have not served their appellants’ notices within the time limit laid down by the rules. I have no doubt that, if I have jurisdiction to do so, I should extend the time; Mr Freedman does not oppose that course. There is, however, a question of jurisdiction which arises in the light of the wording of CPR 52.4(2) and 52.6(1) with which I need to deal. There are two authorities which deal with the tension between these two provisions.

The first is the decision of the Court of Appeal in Aujla v Sanghera [2004] EWCA Civ 121 (23 January 2004). At paragraph 14 of her judgment (with which Thorpe LJ and Park J agreed) Arden LJ said this in relation to CPR 52.4 and 52.6:

Arden LJ then goes on to elaborate the matters to which she expressly made her general comments subject. They go essentially to the manner of the exercise of the discretion to extend time by the lower court as well as including the proposition that it is the appeal court alone which has power to extend time once the appellant’s notice has been filed.

The second case is the decision of Forbes J in Yorkshire Water Services Ltd v Taylor Woodrow Construction Northern Ltd (23 July 2004). Forbes J concluded that it was only the Court of Appeal which could extend the time for filing an appellant’s notice. The relevant time limit was laid down in CPR 52.4 and could only be extended under CPR 52.6 and thus only by the appeal court. He did not have Aujla cited to him.

Mr Samek, in a spirit of helpful neutrality, draws attention to an earlier decision of the Court of Appeal in Sayers v Clarke Walker [2002] 1 WLR 3095. That case did not directly raise the issue in point, but Brooke LJ might be read, in what he says at paragraphs 16 and 17 of his judgment, as assuming the correctness of the approach taken by Forbes J. However, Sayers v Clarke Walker was referred to in the judgment of Arden LJ in Aujla. I am clearly, and happily since it is, if I may respectfully say so, an obviously sensible and correct decision, bound by the decision in Aujla.

Accordingly, there is jurisdiction, in my judgment, for me to extend the period for filing appellants’ notices by Mr Simms, Jack and Helga. I will extend the period until a date to be discussed at the handing down of this judgment.

I come now to the outstanding costs orders (listed in paragraph 5 of Mr Freedman’s and Mr Samek’s written submissions for the hearing on 8 March 2007). Those submissions stated that oral submissions would be made. In fact, I have not heard detailed submissions in relation to the various orders and have not been taken through them. Mr Freedman’s position was, I think, that DGI’s claim to receive the reserved costs turned on the outcome of the applications to discharge the freezing orders. I did not receive any submissions from Mr Simms or Mr Cakebread about these costs. Now that the result of the freezing order discharge application is known, it may be that these costs can be agreed. If not, I will deal with them when handing down this judgment.

I make the following directions, but these are stayed pending the appeal:

I direct a detailed assessment by the Costs Judge, of the costs, which I have ordered to be paid.

I also direct an assessment, as damages recoverable from Mr Simms, Jack and Helga, of the costs of the arbitration on a standard basis to be conducted by the same Costs Judge. The bills of costs put before the arbitrator (Files 49 and 50 of the trial bundle) are to stand as bills of costs for the purposes of such assessment.

Mr Simms, Jack and Helga shall file Points of Dispute in relation to those bills of costs, such disputes to be limited to such items and amounts as it is contended would not be recoverable on an assessment of costs on the standard basis as between Charlton and DGI.

I order that the personal representatives of Haig, should be substituted as claimants in place of Haig