Haederle v Thomas

This is my ruling on a preliminary issue which has arisen at the pre-trial review on 14 July 2016 of committal proceedings brought by Thomas Haederle (“Mr Haederle”) against Dierk Thomas (“Mr Thomas”), alleging numerous breaches by Mr Thomas of a world-wide freezing order (“the Freezing Order”) made by Blackburne J as long ago as 21 June 2007 in support of a judgment obtained by Mr Haederle against Mr Thomas in the Companies Court on an “unfair prejudice” petition relating to the conduct of the affairs of a company called Vantage Point Europe Limited (“the Company”).

The nature of the issue, in general terms, is whether an uncorrected error in the wording of one sub-paragraph of the Freezing Order (consisting of the omission of a figure specifying the total unencumbered value of Mr Thomas’s assets whether in or outside England and Wales) is such as to invalidate, or preclude reliance by Mr Haederle upon, those grounds of committal which relate to Mr Thomas’s assets outside England and Wales (his “non-English assets”).

It is common ground that, in principle, the Freezing Order remains fully valid and effective, for the purposes of the committal proceedings, to the extent that the grounds allege breaches by Mr Thomas of its terms in relation to his assets in England and Wales (his “English assets”). The majority of the grounds, however, relate, in whole or large part, to his non-English assets. If, therefore, the preliminary issue is decided in Mr Thomas’s favour, a very substantial part of the committal application will necessarily fail, and other grounds (if they survive at all) will need substantial modification so as to confine their application to his English assets.

For the purposes of this ruling, I do not need to say much more about the long and complex background to this matter. The following brief summary is merely intended to place the issue in context.

Mr Haederle and Mr Thomas are both German nationals. Mr Haederle has for many years lived and worked in London. Mr Thomas has had business interests in many countries, and the extent, nature and duration of his links with England are in many respects unclear. In pending English bankruptcy proceedings, brought on his own petition, Mr Thomas claims that England has been his Centre of Main Interest (or “COMI”) since at least 2007, and that since July 2014 he has been a UK-resident, living at an address in Norfolk. These allegations are hotly disputed by Mr Haederle, who says that the bankruptcy proceedings are the latest in a long line of manoeuvres undertaken by Mr Thomas in several jurisdictions with the object of placing his assets beyond the reach of his creditors.

The Company was incorporated in England and Wales, to carry on a management consultancy business based in London. Mr Haederle and Mr Thomas were the directors and shareholders. In 2005, disagreements between them arose which led to the filing of a petition by Mr Haederle under section 459 of the Companies Act 1985. The respondents to the petition were Mr Thomas, the Company itself (which was by then in administration) and a German company (Vantage Point Consulting Group GmbH) to which, according to Mr Haederle, Mr Thomas had improperly diverted most of the Company’s business and assets.

The trial of the petition took place before Evans-Lombe J in 2007, in the absence of Mr Thomas. By his order dated 13 June 2007, the judge:

Meanwhile, on 14 June 2007, Mr Haederle (acting in person, as he had at the trial) applied to the High Court for a without notice freezing injunction against Mr Thomas and his German company. The application was heard, as it happens by myself, in the Chancery Applications Court, and I granted an interim injunction until 21 June 2007 restraining the respondents from removing from the jurisdiction any of their English assets up to the value of £560,000, or in any way disposing of, dealing with or diminishing the value of any of their assets (wherever situated) up to the same value.

On the return date, 21 June 2007, the injunction was continued by Blackburne J “until further order of the court”. Mr Haederle again appeared in person, and neither respondent was present or represented. The injunction thus granted is the Freezing Order, which remains in force to this day, no application to discharge or modify it having ever been made by any of the respondents.

The Freezing Order contained disclosure obligations of a usual nature, with which the respondents failed to comply. Mr Haederle accordingly made a committal application, which was heard by Blackburne J, again in the absence of the respondents, on 22 October 2007. The judge declared that they were in contempt of court, and ordered each of them to pay a fine of £10,000. Mr Thomas paid the fine imposed upon him personally, but never took steps to procure payment of the fine imposed on the German company which was subsequently struck off the register as insolvent.

Since then, Mr Haederle has waged a tenacious, but hitherto unsuccessful, campaign to recover from Mr Thomas the money which he is owed in respect of his shareholding in the Company, and the numerous orders for costs which have been made in his favour. The total amount which he is now owed, including interest, is of the order of £1.6 million.

The present committal proceedings, which themselves have a convoluted history, were begun by Mr Haederle on 28 June 2015. The respondents were Mr Thomas, his wife Michaela Thomas, and another German company associated with Mr Thomas. There were no fewer than forty alleged grounds of contempt, drafted by Mr Haederle without the benefit of legal assistance. Following a hearing in January 2016, re-amended grounds of committal against Mr Thomas alone were filed and served by Mr Haederle in February. These re-amended grounds had been reduced to fifteen in number, of which three have since been abandoned or are no longer pursued. The remaining twelve grounds, however, are still live, although I made it clear at the beginning of the PTR, and counsel now appearing for Mr Haederle appeared to accept, that a further substantial reduction in the counts being pursued would be necessary if the effective hearing of the application (currently fixed for three days in October 2016) is to be kept within manageable and proportionate bounds. The steps that will need to be taken for that purpose, however, are heavily dependent on the outcome of the preliminary issue, so it soon became clear that the first priority was for the court to rule upon it.

I should add that, for the first time, both sides now have the benefit of legal representation. Although informed of his entitlement to criminal legal aid by Asplin J, at a hearing which he attended in person, on 10 July 2015, Mr Thomas took no effective steps to engage with the proceedings against him, and it was only in March 2016, after I had made an order on 21 January 2016 actually granting him legal aid, that he finally took steps to obtain representation. The solicitors acting for him are Duncan Lewis, and he is currently represented by Mr Adam Tear, a solicitor advocate of that firm. For his part, Mr Haederle has recently instructed counsel on a direct access basis, Mr Alaric Watson.

The issue mainly turns on the following two paragraphs of the Freezing Order:

“4.

Until further order of the court, the Respondent must not –

(1)

remove from England and Wales any of his assets which are in England and Wales up to the value of £560,000.00; or

(2)

in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales up to the same value.

…

7.

(1) If the total value free of charges or other securities (“unencumbered value”) of the Respondent’s assets in England and Wales exceeds £560,000.00, the Respondent may remove any of those assets from England and Wales or may dispose of or deal with them so long as the total unencumbered value of the Respondent’s assets still in England and Wales remains above £560,000.00.

(2)

If the total unencumbered value of the Respondent’s assets in England and Wales does not exceed £560,000.00, the Respondent must not remove any of those assets from England and Wales and must not dispose of or deal with any of them. If the Respondent has other assets outside England and Wales, he may dispose of or deal with those assets outside England and Wales so long as the total unencumbered value of all his assets whether in or outside England and Wales remains above £ ”

The problem lies in the omission of any figure after the “£” at the end of paragraph 7(2). The error was originally made in the sealed version of the original Freezing Order which I made on 14 June 2007, and was unfortunately not noticed when the same paragraph was reproduced in the order made on the return date one week later.

To anyone familiar with the law and practice relating to freezing orders made in the English High Court, it will be apparent that the missing figure at the end of paragraph 7(2) should have been £560,000. The figure was clearly intended to be the same as that specified, or referred to by the words “the same value”, in paragraphs 4(1) and (2) and 7(1). If, however, the second sentence of paragraph 7(2) is read in isolation, by a person unfamiliar with that law and practice, it might arguably be thought to permit the Respondent to dispose of or deal with his non-English assets so long as the total unencumbered value of all his assets, wherever situated, remains above £ nil. Alternatively, such a reader might have realised that a figure had mistakenly been omitted, and that it could not sensibly have been intended to be zero, but been left uncertain what the correct figure was supposed to be. Either way, if the Respondent fell within the scope of paragraph 7(2), because the total unencumbered value of his English assets did not exceed £560,000, he might arguably have been left in real doubt about his ability to dispose of or deal with his non-English assets.

As I have already said, the majority of the re-amended grounds of committal relate in whole or in part to non-English assets alleged to have been owned by, or under the control of, Mr Thomas. Thus, to take a simple example, ground B6 relates to the acquisition and disposal by Mr Thomas of a 50% share in a luxury motor boat in Italy. It is alleged that Mr Thomas purchased the share on 19 April 2008 for €135,000, and then placed it in his wife’s name; they then sold the share to one Michael Kamm, said to be Mr Thomas’s best friend, on 21 October 2012 for €170,000, receiving the money in instalments by October 2013. These actions are said to have constituted a breach of the terms of paragraph 4 of the Freezing Order, “as qualified by paragraphs 5, 6, 7 and 13” thereof.

Paragraph 5 of the Freezing Order, which is in standard form, explains what is meant by “the Respondent’s assets”. They include all of his assets, whether or not in his own name, and whether solely or jointly owned. They also include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. He is to be regarded as having such power if a third party “holds or controls the asset in accordance with his direct or indirect instructions”.

Paragraph 6 of the Freezing Order then set out various specific assets to which it was to apply, including a house in Munich, a villa on Lake Garda in Italy, interests in companies in Germany, the USA and Canada, and money in German bank accounts.

Paragraph 13 of the Freezing Order is an interpretation provision, again in standard form, which states that a respondent who is an individual who is ordered not to do something must not do it himself or in any other way, nor may he do it through others acting on his behalf or on his instructions or with his encouragement.

It can be seen, therefore, that the allegation of breach relies on the prohibition in paragraph 4 of the Freezing Order, as qualified by (inter alia) paragraph 7.

The issue, accordingly, is whether Mr Thomas can properly be placed at risk of committal to prison, or payment of a fine, in respect of dealings with his non-English assets, in circumstances where a literal reading of paragraph 7(2) of the Freezing Order might be thought to leave him at liberty to deal with such assets without any financial limit, or at least without any identifiable financial limit.

The question needs to be considered in the light of the salutary and well-established principle that any injunction, and in particular any injunction which it is sought to enforce by way of committal, must be clear and precise in its terms, so that the respondent knows exactly what it is that he must, or must not, do. So, for example, in Iberian Trust Ltd v Founders Trust and Investment Co [1932] 2 KB 87, Luxmoore J said at 95:

“If the Court is to punish anyone for not carrying out its order the order must in unambiguous terms direct what is to be done.”

Similarly, in P. A. Thomas & Co v Mould [1968] 2 QB 913, O’Connor J refused to enforce by committal an injunction restraining the defendants from making use of certain confidential information acquired by them during their employment, when the nature of the alleged confidential information had not been specified in the evidence or disclosed to the court. As the judge said, at 923D:

“But where parties seek to invoke the power of the court to commit people to prison and deprive them of their liberty, there has got to be quite clear certainty about it.”

See further Arlidge, Eady & Smith on Contempt, 4^th edition, para 12-51, and Steven Gee QC, Commercial Injunctions, 6^th edition, at para 20-019.

One more citation will serve to reinforce the point. In Hussain v Hussain [1986] Fam 134 (CA), Neill LJ said at 142C:

“It is always important that an injunction should be in clear terms so that the person enjoined knows what he is ordered to do or prevented from doing and so that on any committal proceedings the scope of the order is not in doubt.”

Against this background, Mr Watson submits on behalf of Mr Haederle that the Freezing Order, properly construed, is in clear terms, and can have left Mr Thomas in no doubt that his non-English assets fell within the scope of the express prohibition in paragraph 4 up to the value of £560,000.

Mr Watson’s starting point is that the terms of paragraph 4 are clear and unambiguous. The first limb orders Mr Thomas not to remove from England and Wales any of his assets which are in England and Wales up to the specified value of £560,000, while the second limb orders him not to dispose of, deal with or diminish the value of (“deal with”, for short) any of his assets anywhere in the world up to the same value. The language of paragraph 4(2) expressly applies to his non-English assets, and prevents him from dealing with them “up to the same value”, which can only be £560,000. It is implicit in the wording of the paragraph, submits Mr Watson, that Mr Thomas is at liberty to deal with both his English and his non-English assets above that value, because if he did so he would not be caught by either limb of the injunction.

The next step in the argument is that this implicit entitlement is then spelt out, in positive terms, in paragraph 7 of the Freezing Order. Paragraph 7(1) applies to Mr Thomas’s assets in England and Wales, making it clear that he may remove them from the jurisdiction or otherwise deal with them so long as the total unencumbered value of his assets still in England and Wales exceeds £560,000. The first sentence of paragraph 7(2) then deals with the situation where the total unencumbered value of his assets within the jurisdiction does not exceed that value, and reinforces the prohibition on removal or dealing with such assets already contained in paragraph 4. The second sentence must then be meant to say, in positive terms, that if Mr Thomas has non-English assets, he may deal with them outside the jurisdiction so long as the total unencumbered value of all his assets, wherever situated, remains above the same level.

Mr Watson submits that paragraph 7(2) cannot sensibly be read as relaxing in any way the prohibition already clearly imposed by paragraph 4. Its purpose is, rather, to explain and clarify the implications of paragraph 4, and to express in positive language what Mr Thomas is entitled to do with both his English and non-English assets if they exceed the minimum unencumbered value.

Mr Watson also points to the symmetrical way in which both paragraphs 4 and 7 are framed, dealing first with assets within the jurisdiction, and then with assets anywhere in the world, but always by reference to the same value of assets which the Freezing Order is concerned to protect. It would be wholly inconsistent with that evident purpose, he says, if a figure of nil, or any figure other than £560,000, were to be inserted at the end of paragraph 7(2). The only way in which consistency can be achieved is by treating the omission of that figure as an obvious error, which can and should be corrected as a matter of construction, in the same way as one would correct an obvious typographical error.

Finally, Mr Watson relies on three pieces of evidence which show, he submits, that Mr Thomas at all material times knew perfectly well what the effect of paragraph 7(2) was intended to be.

The first piece of evidence is an alleged concession made in a document submitted by Mr Thomas’s German lawyers (Heiss & Lettla) to the Regional Labour Court in Munich on 12 December 2014. This document includes a passage which, in the poor English translation exhibited to Mr Haederle’s sixth affidavit, appears to contend that in early 2008 the value of the Vantage Consulting Group was in excess of €4 million:

“… which did not lead to any issue of liability for the corporation or for the acting persons, which would have arisen, if the assets of the counter-defendant dropped below the amount of GBP 560,000.”

For a number of reasons, it seems to me impossible to place any firm reliance on this document. Without a much fuller explanation of its context and purpose, it is far from clear to me what this passage was intended to convey, or whether it represented Mr Thomas’s own understanding of the effect of the Freezing Order. Furthermore, the document only dates from December 2014, which is long after most of the alleged breaches of the Freezing Order contained in the re-amended grounds of committal.

The second piece of evidence is an extract from an affidavit dated 12 June 2014 filed by Mr Thomas’s wife, the second respondent, in the context of a related freezing injunction granted by Proudman J on 23 May 2014. In paragraphs 20 to 23 of this affidavit, Mrs Thomas quoted from paragraphs 4 and 7 of the Freezing Order, including the figure of £560,000 at the end of paragraph 7, and then said:

“23.

To my knowledge and understanding the assets of my husband have been always outside England and Wales. The total value of his assets were since 2007 always above the value mentioned in the freezing injunction of Mr Justice Blackburne. My husband Dierk Thomas was not under any restriction in regards to building up assets nor dealing with them if the conditions of the Order applied.”

This passage may provide some indication of Mrs Thomas’s understanding of the effect of the Freezing Order, at a time when she was still making common cause with her husband. However, it cannot be treated as an admission by Mr Thomas himself, and in any event it comes very late in the history, seven years after the Freezing Order was made. The weight which I can attach to it, in the present context, is therefore minimal.

The third piece of evidence is contained in a letter to the court sent by Mr Thomas on 21 January 2016, apologising for his alleged inability to be present at the directions hearing due to take place before me on that day. The letter included this passage:

“Also, I herewith formally apply to vary the order of Mr Justice Blackburne from 21 June 2007. It is only about the correction of a clerical mistake: Paragraph 7,(2) at the end. The GBP figure “560,000.00” was not printed. This is material to the contempt application made.”

It is difficult to know what to make of this passage, in a letter sent at a time when Mr Thomas was not legally represented. On the one hand, it appears to evidence a recognition on his part that the omission at the end of paragraph 7(2) was indeed a clerical error, and that the intention was to repeat the figure of £560,000. On the other hand, the alleged materiality to the committal proceedings might have been that, unless and until the error was corrected, Mr Thomas considered himself free to proceed on the footing that no figure was specified at the end of the paragraph. I certainly cannot safely conclude, from this passage alone, that Mr Thomas accepts that the Freezing Order has always applied to him as if it contained the correction.

I now turn to the submissions for Mr Thomas. In his skeleton argument, Mr Tear appeared to accept that the omission at the end of paragraph 7(2) was a typographical error, but he pointed out that Mr Haederle had never sought to correct it. In a rather confused sentence, he said:

“As such prima facie, it appears that the Order has not had any real effect for a period of time in respect to funds outside of the UK.”

In his brief oral submissions, Mr Tear confirmed that his client’s case was that the Freezing Order was wholly ineffective in relation to his non-English assets, at any rate for the purposes of the committal proceedings. On a literal reading of paragraph 7(2), Mr Thomas was at liberty to dispose of his non-English assets without any lower limit, because none had been explicitly specified. Mr Tear argued that the terms of the Freezing Order had to be clear to anybody potentially affected by it, including third parties such as banks. Paragraph 4 could not be read in isolation, but had to be construed together with the other provisions which qualified its effect or created exceptions to it. So construed, there could be no escape from the conclusion that the Freezing Order was in this critical respect unclear.

At first sight, there is much force in Mr Watson’s simple point that the prohibition in paragraph 4(2) of the Freezing Order is clear and unambiguous. Mr Thomas is expressly forbidden to deal with any of his assets, anywhere in the world, up to the value of £560,000. He must therefore have understood that the injunction extended to his non-English assets, and that the same limit of £560,000 applied to any dealings with his assets, wherever they might happen to be situated. This prohibition is then reinforced by paragraph 6, which specifies several non-English assets as being ones which “[t]his prohibition includes”. Furthermore, the words “in particular” make it clear that the list of assets in paragraph 6 is not intended to be exhaustive.

I also agree with Mr Watson that an important purpose of paragraph 7 is to spell out the dealings with his assets which a Respondent is permitted to make, notwithstanding the injunction in paragraph 4. Moreover, the repetitions of the figure of £560,000 in paragraph 7(1) and the first sentence of paragraph 7(2) reinforce the point that the paragraph is concerned to clarify what is anyway implicit in paragraph 4. When a person is at risk of committal for dealing with his assets, there is obvious good sense in spelling out explicitly what he is permitted to do.

Nevertheless, paragraph 7 is not just a mirror image of paragraph 4. For a start, it introduces the concept of “unencumbered value” as a means of specifying the level above which dealings with assets are permitted. This concept is then expressly applied to the Respondent’s English assets, both to clarify the extent to which the injunction applies to them, and to define the threshold above which dealings with them are permitted.

This then leaves the Respondent’s non-English assets, which are dealt with in the second sentence of paragraph 7(2). Clearly, the sentence is intended to be permissive, and to authorise dealings with non-English assets in essentially the same way as paragraph 7(1) authorises dealings with English assets. The sentence also employs the same concept of “unencumbered value”, although now applied to the total value of all the Respondent’s assets, wherever situated. The only problem is the omission of the figure after the “£”.

As I have already said, a reader acquainted with the law and practice relating to the grant of freezing injunctions in the English High Court could be under no doubt about the figure that was intended. Obviously, it was £560,000. It is not such a reader, however, to whom the Freezing Order was addressed. Mr Thomas is not a UK citizen, nor is English his first language. He was not present at either of the hearings when the injunction against him and his German company was granted. Furthermore, although the Freezing Order is framed in standard terms, the precedent upon which it appears to be based (form F1 annexed to Practice Direction 25A to CPR Part 25) does not make it clear that the same amount has to be specified throughout the relevant paragraph (i.e. paragraph 8 of the standard form, where the injunction is worldwide): the amount is merely left blank, after each of the four “£” signs.

In these circumstances, I see no escape from the conclusion that the Freezing Order was in this material respect unclear and uncertain, at any rate in its application to Mr Thomas. Paragraph 7(2) was evidently intended to grant him permission to deal with his non-English assets so long as they exceeded a specified value, but that value was not stated. However undeserving his conduct may seem, in my judgment he should not find himself at risk of imprisonment, or payment of a fine, in respect of dealings with his non-English assets, when the order served upon him was deficient in this material respect.

Had Mr Haederle made an application to the court under the so-called slip rule (CPR rule 40.12), I have little doubt that the application would have been granted. Alternatively, an application to amend the Freezing Order under CPR rule 3.1(7) would certainly have succeeded. In the present context, however, that is not the point. An order upon which committal proceedings are based must be clear and unambiguous in all material respects. This order was not.

For the above reasons, I determine the preliminary issue in Mr Thomas’s favour.