Simms v Carr

This is an appeal by the eighth Defendant, Mr Simms, against part of an order made by Master Bragge on 16 July 2007. The relevant part of that order revoked an earlier order also made by Master Bragge, being an order for security for costs made on 16 June 2006. The order for security for costs was to the effect that Mr Carr, the Claimant, should provide Mr Simms with security for Mr Simms’s costs of defending these proceedings, the required security being in the sum of £120,000. Mr Simms now appeals the order of 16 July 2007, principally on the ground that the Master had no power under the Civil Procedure Rules to revoke his own earlier order. If the appeal is allowed the result will be that, the earlier order of 16 June 2006 will stand un-revoked.

The dispute between these parties has a very long history. It will be necessary to set out the relevant parts of that history. This appeal does raise an important point as to the circumstances in which an earlier interlocutory order can be revoked without there being an appeal to an appellate court against that order.

I will begin by referring to previous proceedings between Mr Carr that is, the Claimant, and Mr Simms as one of several Defendants. Those earlier proceedings went to trial before Blackburne J and he gave his judgment on 19^th December 2001. I ought to read one or two short extracts from the judgment of Blackburne J. The Learned Judge stated that the Claimant, Malcolm Carr sued to recover, with interest, $4m from the Defendant firm of solicitors, Messrs Bower Cotton. That was the amount of the fund which was lost in May 1998 by reason of the fraud of certain third parties. The claim was brought on alternative grounds. Blackburne J summarised the matter before him in these terms:

“The gist of the claim is that, in breach of an agreement (which I shall call “the investment agreement”) entered into on 13 May 1998 between Mr Carr and a Bahamian company called Kelci Management Consultants Limited, under which Bower Cotton was to protect the $4 million fund belonging to Mr Carr and others, Bower Cotton, acting by a Mr Paul Simms, wrongly allowed the fund to be transferred out of client account to an account of an entity known as Kelly Pahl & Associates Limited at UniBank in Copenhagen whereby it was lost. There is a separate claim that Bower Cotton are in breach of the investment agreement by failing, in breach of clause 9, to return the $4 million following service on the firm of a notice under that clause. There is a yet further claim for damages for breach of an implied representation said to have been made by Bower Cotton that the investment scheme for the $4 million and those operating it were bona fide and honest.

At the time of the events which gave rise to these proceedings Mr Simms was the senior partner of Bower Cotton. The firm was dissolved in April 2000 since when Mr Simms has been a partner in a successor firm called The Bower Cotton Partnership.”

The Learned Judge then commented upon the witnesses. He had heard oral evidence from Mr Carr, the Claimant in the action before me, and Mr Simms, who is the eighth Defendant in the action before me, and the Appellant on this appeal. I need not read out in extenso the Learned Judge’s comments on those two witnesses. Suffice to say that in relation to Mr Carr the Judge expressed considerable reserve about the evidence Mr Carr had given and he said in particular, that he was unable to place reliance on Mr Carr’s testimony, except where corroborated by the documentary evidence, or otherwise not contradicted.

The Judge then commented on Mr Simms. He was critical of Mr Simms. He made a number of critical remarks about Mr Simms’ practices and the laxity of his approach. He said this in particular:

“The impression I formed of Mr Simms was that he had approached the instructions he received -- both the information communicated to him and the actions which his clients asked him to take -- somewhat too credulously. It did not occur to him until some time after the money was lost that the strange transaction in which he was asked to involve his firm in was a dishonest device to part Mr Carr from $4 million. Indeed, he was as much duped by the fraudsters’ activities as was Mr Carr. The question which I have to determine is whether Mr Carr is able to shift onto Bower Cotton any of the blame for the $4 million loss.”

The Learned Judge, in a careful judgement, at length went into the matters in issue in those proceedings and he concluded that Mr Carr’s claim against the Defendants, including Mr Simms, failed.

Mr Carr appealed the Judge’s dismissal of the action to the Court of Appeal. The Court of Appeal which heard the appeal consisted of Lords Justice Ward and Chadwick and Lady Justice Arden. All three members of the Court of Appeal gave a judgment. The principal judgment was that of Lady Justice Arden. I ought to refer to some of the comments made in the judgment in the Court of Appeal. Lady Justice Arden began her judgment by describing the history of the matter as it was understood at that time as being:

“This is an extraordinary tale of one man, the Appellant, Mr Carr, who, driven by the hope of fabulous profits, was duped into parting with a very large sum of money, and of another, Mr Simms, a solicitor in the respondent firm, who was prepared to allow himself and the facilities of his firm to be used in what turned out to be a huge financial swindle. The fraud appears to have been carried out by a company called Kelci Management Consultants Ltd (”Kelci”) and its associates. Mr Simms was not, of course, aware of their fraudulent intentions.”

The Lady Justice then referred again to Mr Simms in these terms:

“No one has suggested that Mr Simms was a knowing party to the dishonesty.”

And then she made comments about the role of Mr Simms in the transaction and whilst that role fell short of dishonesty, Lady Justice Arden expressed grave concern at the part Mr Simms had played. She also, at paragraph 5, said this, which is material to some remarks I will make at the end of this judgment:

“Members of the public start from the basis that solicitors will not be involved in a transaction unless they have satisfied themselves that the transaction is appropriately documented and structured. Even if the respondents are successful on this appeal I do not think that they can claim that they are covered in glory. For that reason I regard the respondents’ characterisation of the appellant’s case as “opportunistic” as somewhat one-sided. I hope, in the interests of the good name of the legal profession, that solicitors, especially those from well established firms with a high reputation, will resist becoming involved in the same manner in future.”

With those opening remarks Lady Justice Arden then turned to the issues in the appeal and considered them in detail and reached the conclusion in accordance with principle and on the findings of fact, that the appeal ought to be dismissed. Chadwick LJ concurred. He said at paragraph 51 of the judgment, that he shared Lady Justice Arden’s concern as to the circumstances in which Mr Simms and the Respondent firm became involved in the holding of “client monies” under the terms of the investment agreement. And then he made other remarks which tended to mitigate the point he made about Mr Simms. The third member of the court, Ward LJ agreed.

The appeal was dismissed on 18 December 2002, and one might have thought that that would be the end of the affair. It was not to be. As appears from a lengthy recital of facts contained in a judgment given on 9 March 2006, in the case of Conlon and Anr v. Simms, the neutral citation of which is [2006] EWCA 401 Chy, Mr Simms found himself investigated by The Solicitors’ Disciplinary Tribunal. Quoting from Lawrence Collins J judgment:

“I find that The Solicitors’ Disciplinary Tribunal made the following findings and the following comments about Mr Simms’ conduct of his profession as a solicitor.”

These findings were made in relation to certain allegations, the precise character of the allegations do not appear from the passages I am about to read, but their general nature does so appear. The Tribunal said this:

“The Tribunal finds that the schemes themselves involved promises of returns which no reasonable or competent solicitor could have regarded as obtainable without one or other party being involved in transactions which were likely to be fraudulent, illegal or otherwise improper. The involvement of Mr Simms, and often as someone who might benefit from such transactions, and the association that he had with Intermediaries and others who were promoting such transactions, made it impossible for him to give independent advice to all his clients. The Tribunal is satisfied that no such independent advice was given.”

The Tribunal then referred to the serious conflicts of interest and duty which Mr Simms had placed himself in. The Tribunal then made findings that Mr Simms was the legal advisor and often the promoter or organiser in respect of various schemes, from which he expected substantial personal benefit and which promised benefits to certain of his clients. He was then criticised for lamentably failing to protect the interests of his client. The Tribunal added this:

“The Tribunal has no doubt that a transaction which on the face of it promises fantastic and incredible returns for no risk, does not have the quality of a likely lawful and honest transaction. Mr Simms did not establish the veracity of the transactions he encouraged nor the bona fides or honesty of those with whom he was dealing. He made no proper enquiry and he took on trust the extravagant and unlikely claims. This was not the conduct of an honest solicitor and he put his and the Profession’ reputation for prudence, integrity, honesty trustworthiness at serious risk. This is all the more so where (as the Tribunal has found) he acted in circumstances of acute conflicts of interest, ignored warnings from responsible third parties, eg banks or professional colleagues, and where he had an actual or potential or financial interest beyond any proper legal fees.”

Mr Simms challenged the findings of the Tribunal by referring the matter to the Divisional Court. The Divisional Court consisted of Latham LJ, Curtis J and Newman J. They gave a decision under the name Simms v. Law Society, the neutral citation of which is [2005] EWHC 408 (Admin). The Divisional Court in expressing their conclusions said this:

“The most serious finding of the Tribunal was, of course, that Mr Simms was dishonest. We agree with the Tribunal that the pattern of behaviour by Mr Simms establishes that he was not merely foolish and credulous. He was prepared on occasion dishonestly to mislead in relation to the purpose of various transactions.... Accordingly we agree that his activities were, unfortunately, properly described as dishonest. That being the case, the order for Mr Simms be struck of the Roll is inevitable.”

I comment that that those findings by the Tribunal and by the Divisional Court are wholly damning in terms of the character, the integrity and the honesty of Mr Simms.

In the judgment of Lawrence Collins J, the Learned Judge examined many other matters of fact or alleged fact in the litigation before him. That litigation was between two or three partners in a new firm, Bower Cotton Partnership. On the Claimant’s side were Mr Conlon and Mr Harris, and the Defendant was Mr Simms and that dispute which had arisen between those partners in that partnership gave rise to an investigation at considerable length by Lawrence Collins J into Mr Simms’ behaviour I am not going to read extensively from what is a very lengthy judgment, but I do note that Mr Carr’s dealings with Mr Simms did come into the Conlon v. Simms litigation and in paragraph 75, Lawrence Collins J referred to Mr Carr being involved with Mr Simms. The matter is further described in paragraph 76. Paragraph 76 refers to certain dealings with National Westminster Bank in Jersey and perhaps significantly for what happened later, paragraph 76 also refers to a Mareva injunction having been obtained by Kelci against a Mr Powell, and the sum which was said to be within the protection of that Mareva injunction was some £39m(sic). The Judge recorded that Mr Vincent (who was I understand a partner in Bower Cotton, the old firm) confirmed that Mr Carr’s investment of some £4m(sic) was included in that sum. Lawrence Collins J gave his judgment on 9 March 2006. I was told that certain matters of law, which were determined by Lawrence Collins J in that judgment, were considered by the Court of Appeal and his rulings on those matters were reversed. But that does not appear to be material to anything which arises in the present appeal and I have not been invited to read the judgment of the Court of Appeal.

With that background I can go to the present action and I can begin with the claim form, which was issued on 28 January 2005. Mr Carr is the Claimant and the Defendants are described as Bower Cotton, but as the action has developed the Defendants have been identified as eight individuals. I will refer to the first to seventh Defendants separately when the time comes. The eighth Defendant is Mr Simms.

The claim form in the present action claims:

“An order that the order made by Blackburne J, which is set out in the schedule, be set aside on the grounds it was procured by fraud, namely by the perjured evidence of Paul Francis Simms (Mr Simms)” and particulars are given, “and an order that all costs incurred in the earlier action and in the appeal and other costs be paid to Mr Carr.

Mr Carr also claims damages, damages for negligence, breach of trust breach of fiduciary duty and an order that the Defendant do reconstitute the Claimant’s, Mr Carr’s fund of US$4m Sterling equivalent being £2,514,142.05. There is other relief sought.” (Quote unchecked)

Mr Carr served particulars of claim which were settled by leading counsel. Mr Carr set out in those particulars of claim something of the dealings with the firm of Bower Cotton and, Mr Simms in particular. In paragraph 16 of the particulars of claim, it is pleaded that Bower Cotton were warned in May 1998, that certain matters were of concern and that there was risk involved in certain dealings that Bower Cotton were about to embark upon, including dealings with Mr Carr’s money. At paragraph 17 Mr Carr pleads that Bower Cotton were on notice of certain matters, which should have alerted them and in particular, prevented them paying away Mr Carr’s money of some $4m. Without spelling out the detail of that, those paragraphs define and describe the alleged significance of what is called the Natwest warning.

At paragraph 26 of the particulars of claim, Mr Carr pleads that the order made by Blackburne J and the order of the Court of Appeal, to which I have already referred, were procured by the perjury of Mr Simms at the trial before Blackburne J. There are ten paragraphs of particulars of that allegation. I need not read them, save that I will comment that there are points there which plainly merit attention in detail at any trial in this action.

This action having been brought, the various Defendants applied for security for their costs. On 24 November 2005, the first to seventh Defendants applied for an order for security. On 16 December 2005, the eighth Defendant, Mr Simms, applied for an order for security to be provided by Mr Carr in relation to Mr Simms’ costs. By this time the Defendants were being separately advised and separately represented. Mr Simms, it will be remembered, had been condemned in various findings, of dishonesty, to which I have alluded, whereas the other Defendants sought to distance themselves from Mr Simms’ conduct and if possible to avoid responsibility for it.

The applications for security for costs came before Master Bragge on 12 June 2006. The matter was argued in the course of an afternoon and the Master gave what appears to be an extempore judgment dealing with both applications for costs. The eighth Defendants were represented by a single counsel, namely Mr Monty Q.C. who indeed appeared for Mr Simms at the appeal hearing before me. Mr Carr was in person.

Master Bragge went through the history of the matter in detail. He referred to his jurisdiction to make orders for security. He found that he had jurisdiction on essentially two grounds. One was that Mr Carr was resident out of the jurisdiction, and he was not resident in any relevant way in a Brussels contracting State, a Lugano protracting State, or a Regulation State, as defined in The Civil Jurisdiction and Judgments Act 1982. He also independently found that Mr Carr was a nominal Claimant, at least to a large extent, if not totally, and that gave him jurisdiction to make an order for security if that was a just course to take.

I ought to read two paragraphs from the Master’s judgment given on 12 June 2006. They are paragraphs 15 and 16 in which the Master said this:

“I should mention however, that, of course, the whole preamble to CPR Rule 25 is on the basis that the court may make an order only if it is satisfied that it is just to do so in all the circumstances of the case and one or more of the conditions in Rule 25(2) apply. I should say that I have had some hesitation in that respect, namely whether it is just to make an order, because of the findings that have been made in relation to Mr Simms, and which are, of course, recited very clearly by Etherton J...” (Quote unchecked)

I interpose there that Etherton J was dealing with other interlocutory applications in this action and it is not necessary for me to relate those, but picking up the judgment:

“...namely, that Mr Simms engaged in numerous dishonest transactions over a lengthy period of time while acting as a partner in Bower Cotton. I accept as explained to me by Mr Monty, that the findings there and the findings made by Lawrence Collins J, were in relation to transactions other than the transaction at issue in the present claim. But as I say, I have been exercised whether, in fact, it would be just to make such an order in those circumstances. I do not believe that it would be logical to make an order for costs in favour of Defendants one to seven, who will have to deal with the claim made and defend it and not Defendant eight, who will also have to deal with the claim made and have to defend it.

If I had not thought that it would have been illogical I might well have declined to have made an order for security in respect of Mr Simms in the light of the observations made about him, notwithstanding, as I say, there was no finding in those cases about the instant transaction, even though some of those transactions were more or less contemporaneous in date with the transaction involved here.

So the result is that, I am persuaded that it is right to make an order for security under sub-paragraph (a) sub-paragraph (f) of Rule 25.13.2. I should explain to Mr Carr that this order will not in any way inhibit him in his application that is due to come on, I understand, within the next few days for summary judgment in the claim. Any order that I make in relation to security is on the basis, namely this order will not need to be satisfied until after judgment is given on that application. The result, therefore, is that if that application is successful the present order will fall away and no security will need to be given.” (Quote unchecked)

The hearing had extended into the late afternoon of 12 June, and the parties came again before the Master on 16 June 2006. I think, incidentally, there had been a hearing on 15 June, before Judge Mackie, when an application for summary judgment made by Mr Carr was heard, but summary judgment was not given. On 16 June, the same Master, Master Bragge settled the quantum of the security for costs and made his order. I will not read out in extenso the order, but it provided that Mr Carr should give security in the sum of £192,000 in relation to the first seven Defendants and a separate sum of £120,000 in relation to the eighth Defendant and the Master made consequential orders to cover the case where the security was not provided. The orders are of the conventional kind and indeed, the security has not been provided and if that order of 16 June 2006 were to stand, the effect would be that the claim would be struck out against Mr Simms without further notice.

Mr Carr did not appeal the order of 16 June 2006. He did not appeal it within the time for appeal nor at any time since. That is a matter to which I will refer again at the end of this judgment. What Mr Carr did instead was to issue an application; it looks as if it was issued on 28 June 2006 for an order that Master Bragge should set aside his own order for security for costs and the grounds stated in the application notice was that the Defendants had prevented the Claimant from making a case under the relevant rule. It was said that security for costs was, in the circumstances, unjust, because the Defendants had not disclosed a crucial document in the Claimant’s case against the Defendants heard in 2001, and had only provided it two minutes before the hearing before Master Bragge on 12 June 2006.

That application was, in due course, supported by witness statements and resisted by the Defendants and came on for hearing, not before Master Bragge, probably because it was the month of August, but instead before Deputy Master Hoffman. Deputy Master Hoffman went into the application to revoke the security for costs order. He directed himself entirely correctly, that the power to revoke was conferred by Rule 3.1 sub-rule 7 of The Civil Procedure Rules. He also indicated that that power was strictly circumscribed and he indicated a good reason why it should be strictly circumscribed.

He then referred to the facts as they were put before him. Taking the matter very shortly, what Mr Carr wanted to rely upon was a document he had seen as he described it, two minutes before going in before Master Bragge on 12 June, which gave rather more substance to the allegation that Natwest Bank in Jersey had warned Mr Simms and/or Bower Cotton in relation to possible dishonest or fraudulent dealings of the kind with which Mr Carr became enmeshed. The Deputy Master reviewed the material. He noted that the warning from Natwest in Jersey had been debated in some detail before Judge Mackie on 15 June 2006, and Judge Mackie, hearing Mr Carr’s application for summary judgment said that, the Natwest warning evidence was not a “knock out blow” for the purpose of summary judgment.

In the upshot the Deputy Master dismissed the application to revoke, so the order for security for costs stood un-revoked. The Deputy Master recorded in paragraph 8 of his judgment a statement that Mr Carr had made to him that Mr Carr and his colleagues had run out of money to carry on with the litigation. But the Master indicated that was not something he could deal with and indeed that was plainly right, because the Master was being asked to revoke an earlier order on grounds that there had been either a change of circumstances or a fact that had not been appreciated at the earlier hearing.

Mr Carr did not stop there. He appealed or sought to appeal Deputy Master Hoffman’s order to a judge of the High Court. The appeal came before Sir Donald Rattee sitting as an additional Judge of the Chancery Division. Mr Carr again appeared in person and in the upshot his appeal was dismissed. The learned Judge recited the history. He referred to Rule 3.1 sub-rule 7. He referred to a decision of Patten J, in the case of Lloyds Investment (Scandinavia) Limited v. Ager Hannsen [2003] EWHC 174 (Ch), which was approved by the Court of Appeal in Collier v. Williams [2006] 1 WLR 1945, [2006] EWCA Civ 20, paragraphs 39 to 40. The Learned Judge said that the Deputy Master had correctly directed himself in point of law.

The Learned Judge then dealt with the suggestion that there had been a material change of circumstances or a change in the facts considered by the court, as between the hearing on 12 June and the subsequent hearing in August before the Deputy Master. The Learned Judge recorded the facts and the Deputy Master’s reasoning. He then pointed out that the appeal to him was by way of review and not re-hearing and he said at paragraph 17:

“Therefore, the question I have to answer is not whether I would have reached the same decision to the Deputy Master but whether the Deputy Master erred in principle. The Claimant ... puts his case very clearly and forcefully, but he failed to persuade me that the learned Deputy Master made any error that would justify my interfering with his conclusion. He was right, in my judgment, to reject the Claimant’s submission that Master Bragge was misled as to the role of the bank. He was not. Mr Monty was right to say that none of the findings of dishonesty referred to and made in the judgments of Etherton J and Lawrence Collins J (as he then was) related to transactions in the Claimant’s funds. Certainly, those funds were referred to in the relevant judgment but neither judgment made any finding of dishonest in relation to such transactions.”

In paragraph 18, in short, the Learned Judge said that there was not a material change of circumstances. The information which came from Natwest would be useful material for cross-examination by Mr Carr of Mr Simms at the trial, but essentially the Deputy Master was right to conclude that he had no power to revoke an order made by another Master.

That was the end of the first application to revoke the order for security for costs. I will refer briefly, in due course, to certain material that was put before Sir Donald Rattee and his reaction to it, but I will recite that hereafter and not at this stage. Having failed before Sir Donald Rattee on 24 January 2007, Mr Carr made a second application to revoke the order for security for costs. The application notice is stamped 20 February 2007, so it was not very long after failure on the first appeal, that Mr Carr put forward this second challenge.

The application, which is ultimately the application which has led to this appeal, sought an order revoking Master Bragge’s order for security for costs. The grounds of the application were that there was a material change of circumstances from those made known by the Defendants to the Claimant at the time Master Bragge heard the application. The circumstances which were said to be known at the date of this February 2007 application were that the Claimant’s investment fund had not been lost as the Defendants had previously asserted and one, some or all of the Defendants were complicit in furtively applying for and obtaining the discharge of a freezing order. That application was supported by witness statements and was opposed, the opposition being supported by witness statements. This application came before Master Bragge. I understand that the hearing before him was in April 2007, and he gave a reserved decision on 16 July 2007. It is apparent that the Master considered the matter thoroughly. He plainly wanted to think through what was the right thing to do in the circumstances. I should add that Mr Carr appeared in person before Master Bragge in April and Mr Simms was represented by counsel, as were the other Defendants who were also involved in April 2007.

Master Bragge gave a reserved judgment, as I have said. He referred to Patten’s J decision and he quoted the principally relevant paragraph at length. He then referred to Mr Carr’s case about the material change of circumstances. I will not read out or even attempt to summarise all of the fact-finding done by Master Bragge in relation to this suggested material change of circumstances, because I will independently go to the material and record what it amounts to, but I will refer to one or two conclusions reached by Master Bragge. The Master did refer to a great deal of material which had been put on the two sides in relation to the suggested material change of circumstances. The material change of circumstances, it will be remembered from the application notice, was to do with the obtaining of and the discharge of a freezing order which had been referred to. Those matters were discussed in detail.

At paragraph 11 of his judgment, the Master pointed out that this question of the freezing order had not really been debated on 16 June 2006. So that at least meant that the point being focused upon in April and in this judgment was a point that had not been focused upon in June 2006. At paragraph 18 of his judgment, Master Bragge concluded that the material he was being asked to consider was not, at any rate in its totality, available to Mr Carr at the time that the order for security was made. The Master directed himself that that was not of itself sufficient to support an application to vary or discharge an earlier order. He asked himself this question: would the court have come to a different conclusion on the security for costs application had it been aware of it? He recorded counsel’s submission that the material was irrelevant and the reasons put forward in support of that submission .

At paragraph 20, the Master referred to an affidavit which Mr Carr had sworn in the freezing order proceedings, dated 22 April 1999. I will myself go to that in a moment. The Master then, in paragraph 21 which is a long paragraph, set out his reasoning, starting with the question: what then is the correct order to make? He reminded himself that security for costs orders should be made where jurisdiction exists and where it is just to do so. He said that the purposes of security for costs is to prevent injustice to the applicant, but there is also a need to avoid injustice to a respondent who may have a meritorious claim. The cases indicated that it was important to try and avoid the situation in which the merits of a claim have to be considered and the best that can be clearly demonstrated one way or the other, that there is a high degree of probability of success or failure.

The Master then addressed the relevance of the freezing order and the discharge of that order. Again, I will not read the entirety, but I will read excerpts from the reasoning, the first is this:

“In the present case the Mareva injunction potentially secured assets relevant to Mr Carr’s claim to his funds. Mr Carr’s case is that because of the unilateral act of the Defendants, Mr Carr’s fund is not now so secured. I think that this is material to the exercise of the court’s discretion. One now finds Mr Simms and Mr Conlon were involved in making an application in the name of Bower Cotton without Kelci’s or Mr Carr’s knowledge or authority.” (Quote unchecked)

The Master then pointed out that the Defendants had not been forthcoming with explanations as to how that state of affairs came about. The Master then referred to a witness statement of Mr Da Costa, to which I will later refer:

“Having made this finding, I accept that no assets were, in fact, successfully secured. Bearing all those matters in mind as best I can and notwithstanding that there have been other applications by Mr Carr, I come to the conclusion that had I known earlier all the material that is now before me, I would have hesitated to a very considerable degree indeed, as to whether it was just in all the circumstances to make an order for security. And, more particularly, in a situation where I already had some hesitation in this worrying case, whether it was right to make an order in favour of Mr Simms, because of the serious findings that have been made in relation to Mr Simms and as recited by Etherton J, namely that he engaged in numerous dishonest transactions while a partner in Bower Cotton.

As it now appears, Mr Simms with Mr Conlon unilaterally took an act, namely applying to discharge the freezing order, which potentially touched Mr Carr’s position without reference to him. In the event I intend to discharge my earlier order in relation to Mr Simms.” (Quote unchecked)

He added:

“I have hesitated whether or not it would be right to discharge the order for security in relation to the other Defendants, but I conclude that the justice of the situation is against that course, particularly, but because of those Defendants. Only Mr Conlon was involved in the application to discharge the injunction and all those Defendants are jointly represented by a single firm of solicitors.”(Quote unchecked)

The order made by Master Bragge thus differentiated between the first seven Defendants and the eighth Defendant, Mr Simms. The order made on 16 July 2007, meant that the security for costs order stood in relation to the first seven Defendants and that meant in turn, the action against the first to seventh Defendants was dismissed as at an earlier date. However, the security for costs order in favour of the eighth Defendant was set aside and the Master gave provisional directions as to the future of the action. He also gave Mr Simms permission to appeal.

The matter, of course, did not end there. There were, in fact, two appeals against the order of 16 July. Mr Carr appealed the order that the first seven Defendants continued to have the benefit of an order for security for costs and Mr Simms appealed the revocation of the earlier security order made in June 2006. Before I consider what should be done in relation to Mr Simms’ appeal, I ought to refer to some other material relating to the freezing order and the discharge of that freezing order. It will be remembered that Mr Carr became involved with Kelci and that Kelci had parted with a large sum of money to third parties, one of whom was a Mr Pahl.

Towards the end of 1998, Kelci instructed Bower Cotton to act for Kelci in attempting to recover some of the monies that had been paid away. Bower Cotton, on behalf of Kelci, started proceedings. The claim was for a sum of the order of $39m. It subsequently emerged, and it certainly came to the attention of Mr Carr, that the figure of $39m included his $4m.

Right at the tail-end of 1998, Kelci applied for a freezing order against six named Defendants, included Mr Pahl. They obtained that order from Penry-Davey J and the order was continued inter partes on, I think, 15 January 1999.

Now, what happened between 1999 and 2005 is best described in a witness statement of Mr Da Costa, which Mr Carr has put before me. This witness statement was prepared in the previous action by Mr Carr against Bower Cotton and thus, he had a copy of it for some time. I will not recite the lengthy detail given by Mr Da Costa. For those who need to consult it, Mr Da Costa goes through in some detail what happened in the freezing order which he calls the recovery action. Mr Da Costa gives some relevant evidence about Mr Carr’s involvement in those proceedings. He refers to Mr Carr at one time supporting Kelci and at another time taking the side of Mr Pahl. Mr Da Costa gives what appear prima facie to be good reasons why Kelci and Bower Cotton were keeping Mr Carr at an arm’s length in relation to the recovery action. The conclusion which Mr Da Costa expresses in paragraph 59 of his witness statement is in these terms:

“The recovery action is now dormant. Mr Pahl and two other parties did serve defences, but none of the parties attempted to comply with the remainder of the directions. The guarantee supporting the injunctions and the security for costs made in favour of two of the Defendants are still in place.” (Quote unchecked)

Mr Da Costa, as I have said, referred to Mr Carr’s involvement in the recovery action and one glimpse of that involvement appears from an affidavit, which Mr Carr himself swore in the recovery action on 22 April 1999. He stated in paragraph 2, that prior to that date he had given support to the application for the injunction on certain bases and he explains what he had been told and the information he had had. He then describes in detail how his view changed, so much so, that at paragraph 10 of the affidavit he says:

“Since this conversation I have had no wish to assist or be associated with the Plaintiff (that is Kelci) who I believe has seriously misled the court and persists in misleading the court, despite its knowledge to the contrary of what is proposed to in a certain affidavit.”

He adds:

“I am most concerned about the wilful use of misinformation by the Plaintiff to harm Mr Pahl.”

It will be remembered Mr Pahl was one of the Defendants whose assets were frozen by the freezing order. At paragraph 23 Mr Carr says:

“I believe that, in so far as my investment of $4m is concerned, the injunction serves no useful purpose as my funds were mishandled by Messrs Bower Cotton, who transferred my funds to Kelly Power & Associates Limited without my authority,” and so on. (Quote unchecked)

So that is some information which the court has as to the long-running recovery action in which the freezing order had been made.

What Mr Carr has found out more recently is certain material leading to the discharge of the freezing order in July 2005, and he has drawn my attention to that material and I will refer to some of it. The material shows that Mr Conlon, of the firm which is called the Bower Cotton Partnership was in communication with Mr Simms, who was continuing in practice under the name City Legal Consultants Limited. Mr Simms wrote to Mr Conlon a letter of 21 July 2005, and without reading it out, it is apparent those two gentlemen put their heads together to see if the result could be obtained whereby the freezing order was discharged, that certain guarantees had been given could then be released, and certain payments could be made and the benefit of those payments would be shared between Bower Cotton Partnership and City Legal Consultants Limited. The letter shows that Mr Simms was himself, or through City Legal Consultants, to bear the expense involved in instructing counsel to obtain a discharge of the order.

On 26 July 2005, Mr Conlon sent an email to Mr Simms discussing a draft witness statement to be used to support the application to discharge the order. Mr Conlon appears to have shown proper reserve as to what he was able to sign by way of a witness statement. He asked Mr Simms in particular, whether Mr Simms knew whether Kelci was still on the register in the Bahamas. Mr Conlon indicated that if Kelci have not been struck off and they can give instructions to Mr Conlon, then he will sign the witness statement. He also discusses the alternative that if they have been struck off the application could be based on a lien, which the firm had for its fees and he expressed his concern about his firm acting for a company that did not exist.

In the event, on 27 July 2005, there was an application to discharge the freezing order. The application was in terms made on behalf of the Claimant, Kelci. The grounds stated were that the freezing order was no longer serving any useful purpose. It was stated that the Claimant (rather than Bower Cotton Partnership) sought a release of the undertakings and cancellation of bank guarantees and this was said to be justified by a witness statement of Mr Conlon. I have been provided with the witness statement of Mr Conlon. Mr Conlon went into the background to the fraud, the proceedings, the earlier procedural steps in the action. He said at paragraph 17:

“The Action has now been dormant for nearly 5 years. The events in question took place 7 years ago.”

He said that it is clear that there had been a fraud, but none of the Claimant’s money had been recovered. It would be a waste of the Claimant’s funds in all the circumstances to bring this matter to trial. In paragraph 18 he requested :

“...on behalf of my firm and the Claimant that the freezing order granted be set aside and the undertakings and guarantees etc would all be (inaudible)...”

That witness statement and the application, were put before Elias J on 29 July 2005 and he did indeed discharge the freezing order and grant the other relief which had been sought.

On the face of it, matters appear relatively straightforward, but the matter is shown in a possibly different light by a witness statement prepared by a Mr Robert Anderson. That witness statement was signed on 22 January 2007, and Mr Anderson stated that he was the only director and the only authorised person to give instructions for Kelci since October 1998. He says he instructed Bower Cotton to bring the recovery action in the first place. He refers to having health difficulties for a period, and he seems to have involved himself in these matters again by the end of 2006 or early 2007. He happened to know, it seems, about the Mareva injunction being discharged. He made enquiries on 19 January 2007, which caused him to understand that the order had been discharged. He refers to the application of 27 July 2005 and the order of 29 July 2005. He states that Mr Conlon had put the application forward on the basis that Kelci consented to the application and he says this:

“This statement was not true, as Kelci was not aware that Mr Conlon had made the application. Mr Conlon had no instructions from Kelci to make such an application. Kelci was not advised prior to the application or after the order, of Mr Conlon’s action. The Bower Cotton Partnership had never accounted to Kelci for the cash obtained for supporting the cross-undertakings and I requested it from them in late 2006.”

The other matter which I have been asked to consider, is that Mr Anderson has plainly taken this matter up with the Legal Complaints Service and that Service wrote to him on 5 March 2007, and they sent to him certain documents. Mr Carr told me that it was only on 5 March 2007 that he, Mr Carr, became aware that Mr Simms as well as Mr Conlon had been involved with the events of July 2005. The Legal Complaints Service letter indicates that on the material before them, there was no evidence that Kelci or anyone acting for Kelci gave instructions to Bower Cotton Partnership in July 2005, to act in the way in which they have acted. Mr Monty, who appeared for Mr Simms on the appeal before me urged me to regard that letter as simply a provisional finding based on incomplete material. However, no other material which would contradict that finding has been put before the court. As Master Bragge said in July 2007, the Defendants have been studiously silent and not forthcoming in explaining the circumstances in July 2005.

I have set all that matter out in detail, because it is a disturbing state of affairs which is revealed and it is the background to, but it is not necessarily determinative of, this appeal. As I indicated at the outset, the issue for me on the appeal is a relatively narrow procedural one and that is, in what circumstances is it open to the Master to revoke an earlier order which he has made? The power to do so exists, but as I think Deputy Master Hoffman said, it is circumscribed. The power is stated in rule 3.1 sub-rule 7 of the Civil Procedure Rules in these terms:

“The power of the court under these rules to make an order includes the power to vary or revoke the order.”

That is not circumscribed as expressed, but the matter has been considered and I am bound to give effect to the way in which it was considered by the Court of Appeal in Collier v. Williams [2006] 1WLR 1945. In paragraph 39 and 40 of the judgment of the Court of Appeal the court approved a statement of principle by Patten J, in the Lloyds Investment case to which I have referred. In paragraph 40, the Court of Appeal endorsed that approach. Indeed, they also indicated that the circumstances outlined by Patten J are the only ones in which the power to revoke or vary an order already made should be exercised. What Mr Justice Patten said was this and whilst it is a lengthy passage it is important that the full force of it is understood:

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

There was some discussion at the hearing before me, as to the difference between a material change of circumstances and a judge being misled as to the facts. It may assist to say one or two words by way of clarification, although as I read the judgment it is really very clear. The way I read Patten’s J judgment is he was referring to two different cases or sets of circumstances. The first case he describes is a material change of circumstances. I interpret that to be a reference to a case where the circumstances at the date of the first order are correctly understood by the court, but those circumstances changed after the date of the first order and a party brings the matter back before the court and asks the court to review the first order in the light of the new changed circumstances.

The second case referred to by Patten J is where the court does not a have correct understanding of the facts when it makes the first order. The party then wishes the court to review its first order in the light of a correct understanding of the facts, which are then for that purpose communicated to the court. As Patten J makes clear, the court will not consider an application to revoke or vary the first order where the facts could have been, but were not, correctly stated first time round.

Although the present case is said to involve a material change of circumstances, in my judgment a better analysis of what has been argued is that Master Bragge, it is said, did not have all the facts before him when he made his order of 16 June 2006. The facts which are now said to be material ante-dated 16 June 2006, as it is said, they took place in July 2005. In that sense there has plainly been no change in the circumstances subsequent to the order of 16 June 2006. What Mr Carr relies on is that the Master did not know of the events of July 2005, when he made his decision in June 2006, but the Master was told of these events when the matter was reviewed in April 2007. Mr Carr submitted to Master Bragge in April 2007 that the earlier facts were significant; they would have affected the Master’s assessment of the case if he had known them first time round. Mr Carr also submitted that the events of July 2005 could not have been deployed by him in argument in June 2005, because Mr Carr was not then aware of them. He said that when he did become aware of those events he made his second application to revoke the security for costs order. That was heard by Master Bragge in April 2007 and Master Bragge was persuaded to revoke his order on 16 July 2007.

Before I deal finally with the arguments and the disposal of the appeal, I ought to refer at this stage to the other appeal that was made against Master Bragge’s order of 16 July 2007. It will be remembered that Master Bragge continued the security for costs order in favour of the first seven Defendants and Mr Carr appealed against that part of the order. Mr Carr wanted to achieve a result where there was no security for costs in favour of any Defendant and Mr Carr says that result was not to be limited to the eighth Defendant alone. That appeal by Mr Carr came before Mr Sales Q.C. sitting as a Deputy Judge of the Chancery Division on 29 January 2008. It is to be regretted that there have been two separate hearings of these two appeals against the same order of Master Bragge, but I am assisted in a number of respects by what Mr Sales had to say when giving judgment. In short, Mr Sales dismissed Mr Carr’s appeal and gave an extempore judgment. I have a note of that judgment, it has not been approved by the Learned Deputy Judge, but it appears to be sufficiently reliable as a note for present purposes.

Mr Sales was pressed by Mr Carr with the facts surrounding the discharge of the freezing order. The Deputy Judge referred to Mr Conlon’s witness statement in July 2005. He referred to the witness statement of Mr Da Costa and he understood Mr Carr to be saying that he had not known anything about this and neither he nor Kelci had authorised it. The Deputy Judge then quoted something Master Bragge held in these terms. “I accept that no funds were successfully secured.” The Deputy Judge directed himself that he was reviewing a decision and not substituting his own decision for that of the Master. In relation to a submission made by Mr Carr that the discharge of the freezing order harmed Mr Carr, because as Mr Carr put it, it was possible there was an effective freezing of funds or there could have been a settlement and the continuation of the freezing order might have assisted. Mr Sales said this:

“In truth, Mr Carr was inviting the court to speculate as to what might have been the outcome of the Mareva proceedings in the absence of evidence that the proceedings had produced an outcome which saved the fund and in circumstances in which there was material before the Master on which he could properly base his conclusion, that no assets were secured by the Mareva injunction.”

Mr Sales then dealt with Mr Carr’s second point, that given that the $4m was part of the $39m, the Mareva injunction was of benefit to Mr Carr. The Deputy Judge said that did not add anything to the first point. The logic of that was irresistible;, if the Mareva injunction did not fasten on any assets anywhere, it did not matter what was allegedly protected by it.

Mr Sales then dealt with the separate point Mr Carr had made, that there should not be a distinction between the first seven Defendants and the eighth Defendant. The Deputy Judge thought that there could be a distinction, because Mr Simms was far more at fault and far more culpable in relation to matters which were near to, if not at the centre of, this litigation. And as I indicated, Mr Sales dismissed Mr Carr’s appeal.As I understand it, that means that the action against the first seven Defendants is struck out, and Mr Carr is not in a position to revive that action however belatedly by giving the security.

That being the background and those being the legal principles, it becomes relatively straightforward to apply them to the facts of this case. In my judgement, the primary question is whether the events of July 2005 were material to the discretion exercised on 16 June 2006 in relation to Mr Simms’ application for security for costs. The Master found that the freezing order did not secure any assets. That finding was plainly right on the material I have seen and I do not believe it has been challenged by Mr Carr. When the Master said that the Mareva injunction “potentially” secured assets, he should not have proceeded on the basis that the injunction might have secured assets when he had already correctly found that it did not. The correct finding was that, the continued existence of the freezing order was of no benefit to Mr Carr. Equally, the discharge of the freezing order did not harm Mr Carr. I can see no basis on which the solicitors were under a duty to contact Mr Carr and solicit his views as to whether it was appropriate to seek a discharge of the Mareva injunction. Mr Carr was not a party to the recovery action. He was not the solicitor’s client in relation to it. I accept what Mr Da Costa has described as to the involvement of Mr Carr in relation to the recovery action and, on that basis I see no basis on which the solicitors had to take Mr Carr’s views into account. They are, therefore, not to be criticised for not taking Mr Carr’s views into account. If Mr Carr had been approached one can only speculate as to what he might have said. There is no particular reason to think that Mr Carr would have requested the solicitors to continue the injunction in the light of his third affidavit to which I have referred. Even if Mr Carr had stated that he did wish the injunction to be kept in place, as before, Mr Carr is not in a position to direct the solicitors in that respect and I see no reasons why the solicitors should have felt constrained by those wishes. The bottom line, of course, was that there were no assets protected by or frozen by the Mareva injunction, as the Master himself heard.

On the material before me, I could not say whether it was proven one way or the other that the solicitors, in particular Mr Conlon, did or did not have the authority of Kelci. There is a strong prima facie case that they did not have the authority for Kelci. Any arguable wrongdoing by the solicitors in breach of their duty to Kelci does not seem to me to be a matter which Mr Carr can say should carry any weight in the balancing exercise when the court is considering security for costs in relation to Mr Simms’ application for security. After all, this particular matter has to be taken together with other matters. When the Master made his original security for costs order on 16 June 2006, he knew a great deal which was dishonourable about Mr Simms. He knew Mr Simms had been found guilty of serious dishonesty in relation to transactions similar to the one which involved Mr Carr. He also knew that Mr Carr’s pleaded case in the present action was that Mr Simms had been dishonest in relation to Mr Carr’s transactions specifically and, that Mr Simms had given perjured evidence at the earlier trial. Against that background I fail to see how the arguable wrongdoing in breach of the duty to Kelci in respect of the discharge of a worthless freezing order, which discharge caused no harm to Mr Carr and which Mr Carr might have had no reasonable grounds to object to at the time, has any part to play in the balancing exercise as to whether there should be an order for security for costs in favour of Mr Simms.

It follows, applying the principles approved by the Court of Appeal in Cooper v. Williams, that there has not been shown to the court on this appeal, facts which were not available in June 2006, but which would have been material to the exercise of the discretion on that occasion. Certainly, the court subsequently heard about the discharge of the Mareva injunction and Master Bragge did not know about that in June 2006. But if I can drop into the vernacular, my response to that new material is “so what” as regards the security for costs order.

The result of that conclusion is, without more, that I will allow the appeal against the Master’s order of July 2007. I will deal very briefly with the other points that have been argued. Mr Monty, on behalf of Mr Simms, argued that the events of July 2005 could have been deployed earlier. It was not, I think, contended that they could have been deployed in June 2006 before Master Bragge, nor even in August 2006 before Deputy Master Hoffman.

What was pressed on me was that, they could have been and should have been raised on the hearing of the appeal before Sir Donald Rattee on 24 January 2007. It is correct that a matter of days before that hearing Mr Carr had become aware of some of the material. Indeed, I would say in favour of Mr Simms and against Mr Carr, that Mr Carr really had all that he needed if he was to deploy this point at that stage. Mr Carr says he did not know that Mr Simms was involved in, in July 2005; he only became aware of that in March 2007. But so far as the matter being argued in court in January 2007 is concerned, Mr Carr had the involvement of Mr Conlon in obtaining the discharge of the Mareva injunction. What I think does matter is that the hearing before Sir Donald Rattee in January 2007, was not the original hearing of the application to revoke the security for costs order. It was an appeal from the Deputy Master. Mr Carr, in fairness to him, did try strenuously to rely upon the discharge of the freezing order on the hearing of the appeal before the Judge. The Judge, however, pointed out correctly, that those events were not before the Deputy Master. They were not any part of the Deputy Master’s reasoning, and the appeal to the judge was confined to a review of that reasoning. So essentially, the only criticism that could be made of Mr Carr in relation to the events of January 2007 was that, he did not apply to the Judge to amend his application notice to bring forward new material at that stage.

Mr Monty was not prepared to go so far as to say that it was an abuse of process for Mr Carr to make a second application, as he did in February 2007. I fully recognise that any court would be cautious about permitting a second application to revoke an order when the first one had failed and an appeal against the failure had been dismissed. But if all other matters had been in Mr Carr’s favour I would not have found against Mr Carr on the grounds that he should have brought forward the Mareva history before the time when he did in February 2007.

Mr Monty also relied on the fact that, the action had been struck out against the eighth Defendant because of Mr Carr's failure to comply with the original security for costs order. Mr Monty submitted to me that meant that the action was not extant and it was not open to Mr Carr to make an application in an action that had come to an end. If the action had come to an end for wholly independent reasons, then a review of an interlocutory order made in that action would not be an appropriate step to take. But here the action has come to an end because of the operation of the order of 16 June, which Mr Carr would say should not have been made and should now be revoked.

Accordingly, the ground on which I allow the appeal is the ground I have already identified, which is that the facts which were put before Master Bragge in April 2007, which he ruled on in July 2007, were not material to the discretion which he exercised in June 2006. Accordingly, he did not have any power to set aside or revoke his own order in this case. It seems to me also, as a matter of policy, that the court should be reluctant to stretch the concept of material change of circumstances to allow matters to be reviewed in the absence of an appeal.

What I have said deals with the appeal which is before me. What is not before me is any appeal against Master Bragge’s original order of 16 June 2006. That order was made ordering security for costs in the exercise of the Master’s discretion. However, the unusual procedural history of this case has produced an unusual state of affairs. It is now apparent to the court that Master Bragge has had second thoughts about how he exercised his discretion the first time round. He has made it clear in his judgment of July 2007, that if it were open to him to revoke his original order he would do so. If he were able to exercise his discretion afresh he would not make an order for security for costs. I have held that it was not open to the Master to take the course he took of revoking an order which he had made, of which Mr Simms had the benefit and which had not been appealed.

However, I think it is right to express my concerns about this state of affairs. The order for security for costs which the Master made and which I am restoring has stifled this action. The action against Mr Simms involves very serious allegations of dishonesty and wrongdoing in circumstances where Mr Simms has been held to have committed serious acts of dishonesty and wrongdoing similar to those now alleged against him. If there were to be an appeal against the order of 16 June 2006, any appellate court considering that appeal would wish to give very anxious consideration to the course which should be adopted in this case. It is entirely wrong for me to offer any advice to any litigant, even a litigant in person. It is equally wrong for me to predict what would happen if there were to be an appeal which there has not been.

I have, therefore, hesitated some time before I made the last few remarks I have made. I have, however, decided to say what I did for a number of reasons, they are these: Mr Carr is in person, although I understand he has counsel attending for this judgment today. The outcome of the appeal has shown that the apparent goal he scored in July 2007 has been declared off-side because he used the wrong procedure. There was at one time and possibly still is an alternative procedure open to him, an appeal against the original order of 16 June 2006, which he has not yet used. I also take into account the facts of this case, which I have taken the trouble to set out at some length, because they are, first, unusual and secondly, very disquieting and finally, Master Bragge, who made the order in June 2006, has now said in terms, that it seems to him it was not an appropriate order to make.

Having made those remarks, I recognise that they are not material to the outcome of this present appeal and as I have indicated, I will allow the appeal and restore the order for security for costs made in June 2006.