Dadourian Group International & Anor v Simms & Ors

On 24 November 2006 ([2006] EWHC2973 (Ch)) Warren J delivered an extensive judgment in this action.

That judgment is under Appeal and the Court of Appeal have indicated a hear by date in respect of that Appeal by 30^th April 2008.

On 23^rd July 2007 Warren J delivered a judgment in respect of damages, interim payment, interest and costs arising out of his judgment.

Following the trial on 14^th March 2007 the Claimants (“DGI”) issued an application for summary judgment against D12, 14-16. These defendants known as the Corporate Defendants (“CD”) had been joined in the proceedings pursuant to orders of the Court granting freezing order relief against them on the grounds that there was good reason to suppose that the assets held in their name belonged in truth to D3 and D4 (“Jack” and “Helga”) respectively. However, on the 22^nd December 2005 as a result of a case management order by Sir Donald Rattee the CD’s took no part in the trial, the judge having been persuaded by the CD’s that the issues concerning them were really issues of enforcement in the event that DGI succeeded at trial.

It had been Jack and Helga’s case at trial that the assets held by the CD’s did not belong to them and were owned or ultimately owned by D13 the Liechtenstein Anstalt in which Jack and Helga claimed that Jack had no interest and Helga only had a discretionary beneficial interest. They also claimed that D13 owned through the CD’s their London and Paris homes paid the rent to their winter Florida home and paid the general expense and travel costs and paid D3 $100,000 for maintenance and paid a large part towards their legal costs in the proceedings. Following an order that I made on the 14 October 2005 D13 gave evidence that it only had a very modest U.S. dollar credit balance.

On 11^th May 2007 Warren J began to hear DGI’s part 24 application. Over an adjournment DGI’s then solicitor Mr Serota served a witness statement on 19 July 2007 exhibiting a number of documents which had been previously supplied to him by a Ms Julie Eagle at a meeting on the 25^th April 2007. Ms Eagle was a former employee of Citilegal Consultants Ltd (“Citilegal”). It was and is a company owned and controlled by D1 (“Mr Simms”) a struck off solicitor through which he provides “consultancy” services. As a result of the revelation of those documents Citilegal instituted proceedings in the Queens Bench Division and on 7^th June 2007 McKinnon J ordered delivery up of the documents against Ms Eagle in favour of Citilegal but also ordered Citilegal to preserve the documents until final determination of the claim or further order.

It was suggested that the use of the Eagle documents by DGI was a contempt of court. It is also submitted that the documents are subject to legal professional privilege.

DGI wishes to rely on those documents at the resumed summary judgment hearing because it believes that they demonstrate that the assets held by the CD’s belong beneficially to Jack and Helga. The CD’s applied on 24^th September 2007 for an injunction restraining DGI from using them on the grounds that to do so was a breach of the order of McKinnon J and on the grounds that they were privileged. That application came before Warren J on the 24^th October, together with Jack and Helga’s own application to the same effect of the CD’s. At that hearing Warren J was invited by Jack and Helga and the CD’s to deal only with the issue whether the order of McKinnon J, prevented DGI’s use of the documents. They requested that Warren J did not look at the Eagle documentation. He did not do so, heard the argument and reserved judgment. His judgment was given on the 14^th November 2007. He rejected the submissions of Jack and Helga and the CD’s as advanced that McKinnon J’s order per se prevented DGI from using the documents but held that the order would prevent DGI from using them, if it by doing so would be a contempt of court. He went onto rule that such an issue can not be resolved without the court looking at the documents but that he had been expressly asked not to do so by Jack, Helga and the CD’s. He accordingly directed the proper course to follow if DGI wished to use the documents was that they should issue an application to vary the McKinnon J order and serve it on the CD’s, Jack and Helga, Ms Eagle and Citilegal and the last application as well as the applications of the CD’s and Jack and Helga to restrain the use should be determined by another judge in the Chancery Division who would look at those documents.

That application was issued by DGI on the 14^th December 2007.

It is that application and various consequential applications that are now before me. Those applications are:-

These various applications came before me on 21^st January 2008.

On that day I set a timetable for the hearing of the issue as to the Eagle documents. That is listed before me on 21^st, 22^nd and 25^th February 2008.

That application was duly issued supported by the second witness statement of Nicole Marie Hirst dated 22^nd January 2008.

Citilegal and Mr Simms did not participate in this issue. Mr Simms on behalf of Citilegal wrote a letter to my clerk dated 23^rd January 2008. He did not seriously oppose the present application stating that he believed it was for the CD’s and Jack and Helga to articulate the reasons why the court should not give consent. He was unable to attend the adjourned hearing because he was scheduled to attend an annual general meeting of a company of which he was the chairman. His lack of serious objection to the proposed use of his cross examination is in my view significant.

On 21^st October 2005 I made an order for various of the Defendants who had sworn affidavits in response to a freezing injunction application made by DGI to attend for cross examination. Sir Donald Rattee made an identical order against Mr Simms on 22^nd November 2005. The cross examination was ordered on DGI giving the following undertakings:-

That order was never appealed. All of the requisite Defendants attended and were cross examined.

Warren J made and order on 20^th March 2006, releasing DGI from the undertakings to enable them to cross examine Jack and Helga at the trial, in relation to the answers that they had provided upon their cross examination pursuant to my order. DGI made no such application as regards to Mr Simms although, I have been shown a transcript of the trial where Warren J heard (without objection from any of the defendants) Mr Simms being cross examined on the answers he gave pursuant to the order of Sir Donald Rattee.

Jack and Helga appealed that decision of Warren J to permit the use of the material obtained on cross examination. In addition Warren J granted permission to DGI, to use the information in contempt proceedings.

Jack and Helga appealed that decision. Shortly before the hearing in the Court of Appeal they abandoned any objection to the use of material at trial and limited their appeal to its use in subsequent committal proceedings. The Court of Appeal dismissed that appeal ([2006]EWCA (Civ) 1745[2007]1WLR2967).

DGI wish to use the material in support of their application to use the Eagle documents.

DGI contend that no permission is required because the use of the material is intended for the purposes of the part 24 applications, and that does not fall within the ambit of the restrictions, identified in undertakings (i) and (ii).

I reject Jack and Helga and CD’s submission that the implied undertaking given on disclosure is applicable. In my view the undertakings that govern the use of this material are the express undertakings set out in the order and no more.

DGI submits that the use of the cross examination material in the part 24 application positively and defensively to obtain a variation of McKinnon J order does not fall within the express undertakings.

I do not accept that. There is reference to a trial in undertaking (i) at first blush that must have meant the primary trial, but it must be remembered that at the time that the undertakings were given the CD’s were parties and were contemplated to be Defendants. I appreciate that Sir Donald Rattee made an order on the same day, the effect of which was that the CD’s did not participate in the main trial, nevertheless it was accepted that there would be a trial against the CD’s on liability if DGI won.

The present application is to avoid a full trial. However, the summary procedure is plainly, in my view “a trial” for the purpose of the undertakings. It will result in judgment for the DGI’s unless the CD’s raise a Defence, which has a real prospect of success. If they fail to do that there will be no further hearings on the merits.

I therefore determine that the Part 24 application falls within undertaking (i).

This makes sense. One has to remember what the purpose of the undertaking was. Its form followed that of the earlier order I had made in October 2005. It was against the background of the DGI’s seeking to cross examine these deponents on their affidavits as to assets. The purpose of such cross examination was stressed by Mr Clive Freedman QC who appeared with Mr Samek for DGI. That stated purpose was, to enable DGI to identify assets that were the subject matter of the freezing order, with a view to preserving those assets pending the trial. After much argument the order for cross examination was made. Thus the opponents were compelled to attend for cross examination, although their right to assert a privilege against self incrimination was expressly preserved (but never asserted. Nevertheless, they were compelled to attend and therefore (subject to that privilege) compelled to answer questions. The counterpart for that was to provide a check on DGI limiting the use of the evidence. As the stated purpose was for use solely in identifying and preserving assets there would be no justification in use for the material for any other purpose. However, of course it would be quite wrong to bar out any absolute use for any future purpose, (I doubt whether a court can ever make such an order in reality in relation for example to contempt proceedings). Therefore, the undertakings were put in place, but with a proviso that the undertakings could be lifted by appropriate applications made to a judge in the light of submissions given by all parties as to whether that undertaking should be lifted. I understand this is what happened before Warren J. As I have said the Court of Appeal upheld his decision to lift the cross examination as regards committal in respect of Jack and Helga and they abandoned the challenge to his decision to permit their cross examination to be put to them at trial and I have already observed that he lifted it as regards Mr Simms when he was cross examined in some aspects.

Therefore, the purpose of the undertakings was to protect the person being cross examined. They could answer questions frankly, (relying on their privilege of self incrimination) but with the protection highlighted.

The suggestion therefore that the restrictions did not apply to a Part 24 application or any other application not expressly spelled out is untenable. That would remove a significant level of protection intended to be afforded to the witness to be cross examined. This is demonstrated by the fact that Mr Samek, who appears for DGI before me, frankly acknowledged that the material could not be used at trial without an application to the judge. Nevertheless, that can be circumvented by making a Part 24 application. Thus the material could be deployed in a Part 24 application without permission. That application might fail or be dismissed but the material has then been deployed. One wonders then what would have then happened to a subsequent application at a later trial to use the material then. It was contemplated that the restriction applied to all subsequent hearings unless the court granted permission.

For those reasons, in my view, DGI need permission.

I have already observed that Mr Simms does not maintain any objection to the use of his answers. I have also observed that the corresponding material has been put to Jack and Helga at the trial, and partly to Mr Simms at the trial. I have already observed that, Warren J (upheld by the Court of Appeal) permitted the material to be used for contempt proceedings. The Court of Appeal also rejected an argument that the transcripts could only be used if special circumstances were required in accordance with Crest Homes PLC v Marks [1987] AC829,860 (C per Arden LJ paragraph 12 and Sir Andrew Morritt C paragraphs 49-50). Jack and Helga abandoned an appeal in respect of the use of the material at trial.

The primary purpose for which DGI wish to use this cross examination is to justify the use of the Eagle documents. The Eagle documents, DGI contend, demonstrate the falsity of Jack and Helga evidence at trial, their evidence at the cross examination and in effect the whole way in which they presented their case. As I said I required DGI to issue an application for such relief supported by evidence (without prejudice to their right to argue that an application was not necessary). The application subsequently issued sought use for 8 purposes. During the hearing of the application I declined to consider item (f) and indicated (g) ought to be the subject matter of an application to the Court of Appeal. The other items all fall within the ambit of the various applications, some of which are before me.

In essence DGI contend that they are entitled to use the Eagle documents because it demonstrates that there has been a pattern of deception by Mr Simms, Jack and Helga in relation to the true ownership of the assets claimed by Jack and Helga to belong to Brinton; said to be a properly regulated discressionary trust/anstalt and the CD’s. Thus the DGI’s contend that that material is relevant to the part 24 application. It is important to appreciate that I am only concerned at this stage with the admissibility of Mr Simms cross examination for the purposes of considering whether or not the Eagle documents can be relied upon by DGI. I have not considered whether or not the Simms cross examination will carry any weight in that decision but I do believe that it is appropriate that DGI should be allowed to use material on the basis that they genuinely believe that that material shows a pattern of deception by Mr Simms and Jack and Helga. That itself will in my view be relevant to my determination on the Eagle document. In so observing I stress that I have not evaluated either the Simms cross examination or the Eagle documents. Further the weight and relevance of the Simms cross examination is a matter for further consideration. However, it seems to me to be wrong that the court should remove from itself material which DGI contends has the effect set out in Ms Hirst witness statement. This is more so when considering the purpose of the material is to demonstrate further falsity on the part of Mr Simms and on the part of Jack and Helga in relation to assets owned or controlled by the CD’s.

I should also observe that in my view Jack, Helga and the CD’s have no locus to challenge the release of the undertaking given to the court in response to its decision to order Mr Simms to be cross examined. I say that for the following reasons. First they were not a party to that hearing and application. Second the purpose of the undertakings was to protect Mr Simms when he was cross examined and not to give any protection to Jack, Helga and the CD’s. Indeed it would be quite wrong to give them any protection because they were the potential targets of the information gathering exercise. It is strongly analogous to a situation, where on a search order for example, Defendants are often required to identify whether the relevant material has been disseminated to any other persons. The purpose of that is to provide information to a Claimant to enable it to bring proceedings against other people who might be involved in the actions that are brought. The check of course is that the Court requires its permission before such proceedings are instituted. However, that procedure almost invariably involves proceedings against a fresh party. It is extremely rare indeed for the proposed new Defendant to further proceedings is involved in that decision making exercise. As Mr Simms does not object to the use there is no legitimate opposition to DGI’s application and the reasons they give in my view are compelling.

In case I am wrong I will consider Jack, Helga and the CD’s grounds for opposing DGI’s application.

The Court of Appeal in Dadourian (no 2) plainly rejected the exceptional circumstances test set out in the Crest case (see above). It is not clear precisely what test the Court of Appeal considered appropriate when considering lifting an undertaking. Arden LJ considered permission should be granted where it was just and convenient (paragraph 20) Longmore LJ considered that it should be released where it is convenient to be used for the purposes of enforcing or policing the freezing order or where it was convenient for the information to be used for the purposes of establishing contempt (paragraphs 38 and 39) and Sir Andrew Morritt considered that the test was whether it was just in all circumstances of the case (paragraph 52).

Although the wording of each judgment is slightly different, I do not see that there is any significant difference. What the Court of Appeal was propounding was a test that is simple enough. The judge has to consider all relevant circumstances in deciding whether or not to accede the application and make his decision in the light of what he perceives to be such relevant circumstances.

Neither Jack and Helga or the CD’s supplied any evidence in opposition to that of Ms Hirst. The reason for that was that it was stated that the witness statement contained arguments. The witness statement does contain arguments but it contains statements as to the relevance of Mr Simms cross examination and the Eagle documents which is not challenged. I therefore approach the application on the basis that it is accepted that the evidence thus led is capable of leading to the inferences suggested. I stress that I do not determine that. As I said in argument it seems to me that the weight and relevance of the Simms cross examination is a matter for consideration when I hear and determine the application for use of the Eagle documents. At this stage I am simply concerned as to whether or not DGI should have permission to use it in accordance with the guidance given by the Court of Appeal in Dadourian no 2.

For the reasons that I have set out above, I accept Ms Hirst’s evidence and accept the reasons she gives in her witness statement as to why the Simms cross examination is relevant for the purposes of the present application. And for those reasons it is appropriate in my view that the DGI should be entitled to use it.

In so determining I am of a view that in whatever way the Court of Appeal expressed the test in Dadourian (no 2) (in case it be argued that there are different tests) I am satisfied on each of those ways as expressed DGI have satisfied the requirement of those tests and that the justice of the case leads me to conclude that they ought to be allowed to adduce the material. The effect of that material however, as I have said is a matter for consideration at the substantive hearing in the light of all other materials and whatever other submissions the parties make.

I (like the Court of Appeal has rejected the exceptional circumstances test as set out in Crest.

In case both I and the Court of Appeal are wrong it seems to me that the circumstances set out in Ms Hirst’s witness statement of what this material shows are so extraordinary that the need for the use of the material is exceptional and thus within that test on the implied undertaking if any. If Jack and Helga have conducted themselves in the way which the DGI suggest the court would be very concerned to ensure that all material that was lawfully available was made available to it. It is difficult to see a more serious allegation. I should stress again however, that, of course, does not extend to my determination of the Part 24 application as that is a matter for Warren J in the light of the material which is provided to him after my decision. Nor should these reasons in relation to the Simms material be used as a basis for suggesting that the Eagle documentation can be produced. Without wishing to prejudge that issue, as I said in argument, it seems to me that the question is whether or not the Eagle material is privileged and whether the right to assert privilege has either been waived wholly or in part or whether it ought not to be asserted because it is evidence of a crime remains to be decided. In coming to that decision there is no residual discretion available to admit the material because it is relevant and significant if it is privileged.

Ms Levy who appears for the corporate defendants in her skeleton argument set out four reasons why the evidence ought not to be received. In my view those four objections go to the weight of the evidence rather than for a decision whether or not DGI should be entitled to deploy it. It is still open to the CD’s (and Jack and Helga) to make submissions at the hearing as to whether or not Mr Simms cross examination has any material impact on that decision. It must be appreciated that I have made an order that all deponents of evidence attend for cross examination. If there is any inconsistence in that evidence with earlier inconsistence. Whether at the trial or at the cross examination it is right that that evidence is put so that a proper assessment of any evidence can be considered. I do not see that I should shut out a valuable tool for the purpose of determining the veracity of evidence and whether such evidence should be removed from the Court’s consideration or for use from any party.

For all of those reasons therefore I accede to the DGI’s application in the terms set out in their proposed draft order but not (f) and (g).