London Capital & Finance Plc & Ors v Thomson & Ors

This judgment should be read with my ex tempore judgment of 7 September.

I said at the conclusion of the hearing on 7 September that I would deal with one outstanding point on paper, and I have now received submissions on it from Counsel for the Claimants (including submissions in reply) and for the Fourth Respondent.

The point is as follows.

The Fourth Respondent (and the Third Respondent said it took the same position) resisted the continuation of the WFOs on the basis (essentially) that the existence of the CROs in themselves meant that there was no risk of dissipation. I will call this the “narrow CRO point”.

The other Respondents all agreed with the Claimants that any argument about the continuance or setting aside of the WFOs, whether on the basis raised by the Fourth Respondent, or on the more factually intensive questions about arguable case or evidence to support the inference that the Respondents were of such character that they would dissipate assets if not restrained (I will call this “factual risk of dissipation”), could be raised by those Respondents at the further hearing I ordered, without any change of circumstances.

But no such agreement was made with the Fourth (or Third)

The factual position is this:

The Third and Fourth Respondents did not contest arguable case or factual risk of dissipation. They did not say they would not argue them in future and the Claimants did not ask them to agree not to do so.

Had the narrow CRO point been a good one but the Third and Fourth Respondents been deterred from running it by fear of later being disabled from contesting arguable case or factual risk of dissipation, a significant injustice would have been worked, in that they would have been wrongly subject to the WFOs for the period of some months until the further hearing.

The Claimants cite authority in support of their position. This is what they say at paragraphs 5 to 7 of their skeleton on this point:

“‘5. The general principle is set out in Gee on Commercial Injunctions, 6th ed., [21-057]:

“Where there is an interim order made after a hearing on the merits inter partes, the court will not entertain an application to set aside that order or part of it or which is inconsistent with that order, unless there has been a material change of circumstances, or the judge on the original application had been misled in a material respect, or if there has been a manifest mistake. This prevents re-litigation of the same application, and applies when it was open to the applicant to take the same points on the original hearing even though he did not do so. The principle has the consequence that if a point was open to the applicant on an earlier interlocutory application and was not pursued, then it is not open to the applicant to take the point in a later application when there has been no material change of circumstances and no new facts”.

6.

The leading case is Chanel Ltd v F.W. Woolworth & Co Ltd [1981] 1 WLR 485 in which Buckley LJ explained at 492: “When the motion for an injunction came before the judge inter partes, the defendants did not seek any adjournment to permit them to put in evidence in answer to the plaintiffs’ evidence”. Instead the defendants sought to challenge the injunction, but without success. Buckley LJ held that they could not subsequently seek to have a ‘second bite of the cherry’ (at 492493):

“The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter”.

7.

As this quote makes clear, the principle applies not only where the defendant could have filed the evidence before the interlocutory hearing but also where the defendant could have sought an adjournment to obtain further time to adduce evidence.’

8.

This principle has been applied on numerous occasions. In Orb a.r.l. v Ruhan [2016] EWHC 850 (Comm), for example, Popplewell J had to deal with a number of applications arising out of a freezing order made by Cooke J which had been obtained by the defendant (Mr Ruhan) against the claimants (the Orb Parties) (at [1]-[2]). The order required Mr Ruhan to fortify his cross undertaking in damages by charging certain shares (at [48]). Mr Ruhan had done so but the Orb Parties sought further fortification on the ground that the shares were inadequate security. Popplewell J dismissed the application for a number of reasons, the first of which was that it was open to the Orb Parties to take the point before Cooke J but they had failed to do so. None of the material relied on had come to their attention subsequently; Cooke J had given them an opportunity to raise any objections to the shares as fortification, but they had not raised the points now sought to be raised, although they were well known to them; there had been no significant or material change of circumstances [81]. Popplewell J continued [82]:

“That is fatal to this ground for discharge: see Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485. Mr Drake emphasised that that case involved a consent order. But the principle is well established, and often applied, in relation to contested interlocutory hearings. It is that if a point is open to a party on an interlocutory application and is not pursued, then the applicant cannot take the point at a subsequent interlocutory hearing in relation to the same or similar relief, absent a significant and material change of circumstances or his becoming aware of facts which he did not know and could not reasonably have discovered at the time of the first hearing. It is based on the principle that a party must bring forward in argument all points reasonably available to him at the first opportunity; and that to allow him to take them serially in subsequent applications would permit abuse and obstruct the efficacy of the judicial process by undermining the necessary finality of unappealed interlocutory decisions” (emphasis added).”

As the Fourth Respondent points out, these cases are partly about situations where a party tries to reargue a point that they have lost at an earlier stage in proceedings (as in Chanel). That is not the case here.

However, Gee and Popplewell J in the passages cited above refer to situations where a party declines or fails to take a point which is open to it. I agree that a party may be precluded from taking that point later, but it is clearly not an absolute rule.

Further, in my view the underlying principles of the cases cited by the Claimants are (a) the prevention of an abuse in the context of interlocutory proceedings (rather than following concluded proceedings as is addressed by the Henderson v. Henderson form of abuse of process) and (b) the efficacy of the judicial process, as Popplewell J explained in the passage cited above.

I should mention that the Fourth Respondent relied on Holyoake [2018] Ch 297 at [40] and Butt v Butt [1987] 1 WLR 1351 at 1355. In my view those cases are consistent with my view of the underlying principles, but I accept the Claimants’ submissions that they relate to different circumstances than the present.

It is often observed in the context of Henderson v. Henderson abuse that the question is not merely whether the party alleged to be prevented from taking a point previously available could have taken it, but also whether he or she should have.

Although the points about arguable case and factual risk of dissipation were open to the Third and Fourth Respondents in a theoretical sense, they were not open to them in any practical way, for the reasons explained above. They never elected not to run those points, but rather simply could not. They did not encourage the Claimants to think that the points were abandoned.

On the basis of the facts set out above, the Third and Fourth Respondents’ behaviour was and is not abusive, and nor, as matters now stand before me, would it be abusive for them to take points on arguable case or factual risk of dissipation at the further hearing. On the contrary, although the narrow CRO point failed, it was just and not inefficient for them to be permitted to take it at the hearing on 7 September, and in a self-contained way, even if they were permitted to take other points in due course.

I am fortified in this view by the fact that the other Respondents are all free to challenge all points including arguable case and factual risk of dissipation at the further hearing, but I would have made the same conclusion without this consideration.

In retrospect, given the agreed position between the Claimants and the First, Second and Fifth Respondents, it might have been preferable for the Third and Fourth Respondents to state prior to arguing the narrow CRO point that they reserved their rights on all other points. It might also be said that the Claimants ought to have said that they would oppose that course. But if either of those things had happened, the result would merely have been that I would have made the decision represented by these reasons in advance of the narrow CRO point being argued, instead of afterwards. I am confident the result would have been the same.

I conclude that the Third and Fourth Respondents may argue good arguable case and factual risk of dissipation at the further hearing, without having to show a change of circumstances.

In the light of this judgment and in order to bring the timing for all the Respondents into line, I direct that the Third and Fourth Respondents do comply with the directions in paragraph 4 of the CMC Order dated 7 September in respect of any future discharge application.

This is the return date for a series of worldwide freezing orders and many matters have had to be considered. The one to which this judgment relates is whether the freezing order should be continued against the third and fourth respondents.

On 24 August 2020 Mr Edwin Johnson QC, sitting as a deputy judge of the High Court, ex parte, without notice, made a series of freezing orders in these proceedings against five respondents.

The proceedings are described in general terms which are adequate for the purposes of this judgment in the opening paragraphs of his judgment.

At the hearing before me today, a number of the respondents accepted, pragmatically speaking, that the worldwide freezing orders should continue. In doing so, they made it clear that they were not accepting any of the allegations against them and that they reserved the right, in due course, to dispute everything, to dispute whether the claimants have an arguable case on the merits and to dispute whether, on the facts, there is any risk of dissipation.

But the third and fourth respondents were not content to take that course.

The feature of these proceedings that distinguish them and lead to the points I have to decide is that there are already Criminal Restraint Orders under the Proceeds of Crime Act 2002 made by HHJ Taylor sitting at Southwark Crown Court in March 2019 against the respondents (“the CROs”), the respondents to this application today.

Accordingly, the third and fourth respondents submit that there is no risk of dissipation because the existence of the CROs mean that they are unable to dissipate the assets anyway.

Their position was argued by Mr Béar QC (leading Ms Laura John) appearing for the fourth respondent, Mr Golding; and his position was adopted by Mr Owen QC, for the third respondent.

I am grateful to all counsel for their submissions, which have had to be compressed somewhat because, although this hearing was originally estimated for a day, in the event only half a day was available, although this hearing has now stretched on until half past 5.

The nature of Mr Béar's submissions were these: first of all, he submitted that although it might be pragmatic, it would be wrong, in principle, for this court to continue the worldwide freezing order against his client without further scrutiny simply on the basis that it had been made by the Deputy Judge; that it was for the claimant to justify the continuation of the order effectively; and that it was not necessary for him to apply on behalf of his client to set the order aside.

I accepted these submissions, which I think are plainly right, and therefore although the time for the hearing was somewhat compressed, I felt it was important to give Mr Béar the opportunity to make all the submissions that he wanted about whether the worldwide freezing order should continue.

It was submitted by Mr Robins for the claimants that it was not the claimants’ position that the worldwide freezing order should simply continue without scrutiny, but rather that he had already made the submissions that he wanted to make on behalf of the claimants in writing in his detailed skeleton argument and indeed supplemental skeleton argument.

I did not feel there was anything complacent about the claimants' position. They came to court fully prepared to justify the continuance of the worldwide freezing orders. However, because they had put in such full written submissions, I did not call on Mr Robins to open the application to continue orally, but rather I gave Mr Béar the opportunity first to express his opposition to the claimants' application for continuation.

Pragmatically, and I am sure rightly, Mr Béar did not submit for today’s purposes that there was not a reasonably arguable case, although he does not admit that there is. And nor did he make any submission in answer to what I would call the factual question of whether the nature of the alleged dishonest acts by the third and fourth respondents gave rise to a reasonably sufficient inference that they might try to dissipate their assets if not restrained by the court.

He focused his submissions, I think very sensibly, on the interaction between the civil worldwide freezing order and the CROs that have already been made in the criminal proceedings which are described in detail in the parties' skeletons.

The interaction between worldwide freezing orders and CROs have been considered on a number of occasions by the civil courts. Reference was made by Mr Robins in his written statement to the judgment of King J in Cancer Research UK Limited v Morris [2018] EWHC 2678; to the judgment of Mann J in Faya v Butt [2010] EWHC 3461 Ch; and to the judgment of HHJ Pelling in HMRC v Ben Nevis Holdings [2012] EWHC 1807 Ch.

In each of these judgments there are statements, in broad terms, by the judges who considered the matter that there is “a fundamental difference”, to use the words of King J in Cancer Research, between criminal proceedings of this type and worldwide freezing orders. I refer to his judgment; to the judgment of Mann J at [22] to [25]; and the judgment of HHJ Pelling at paragraphs [73] to [74].

On their face, these contain broad statements of principle that the existence of a CRO does not stand in the way of the grant of a worldwide freezing order or, in itself, remove the risk of dissipation of assets by a defendant who is the subject of it.

Mr Béar's submissions were as follows: first of all, he submits that all of those judgments came before the entry into force of sections 58 and 69 of the Proceeds of Crime Act 2002 (April 2014 and June 2015 respectively) and therefore did not proceed on the basis of an interaction between the criminal regime and the civil regime.

Although it is true that, obviously, those sections were not considered in terms by the judges who heard those cases, I nonetheless am sure that they had very strongly in mind that there was such a relationship; but, in any event, I do not accept any argument, if it was made -- in fact, I am not sure it was -- that either section 58 or section 69 provides that the existence of a CRO has an impact on the appropriateness or otherwise of a worldwide freezing order to be made on application to the High Court.

But that was not the end or even the central thrust, I think, of Mr Béar's submissions. He made the further submission that these cases must turn on their facts; and that it may well be, in a particular case, that a CRO has been granted which does, in fact, mean that there is no risk of dissipation and, as a result, no worldwide freezing order should be made in the High Court.

He pointed out that in Cancer Research v Morris at the time of King J's judgment there was, in fact, no CRO in existence; to the fact that in Faya v Butt, when Mann J considered the case, there was a very significant disconnect between the CRO, which related to quite different matters, and the fraud alleged as the basis for the worldwide freezing order; and he pointed to the time line in the HMRC v Ben Nevis case considered by HHJ Pelling.

As a matter of theory, I can accept that it might be possible, in the right circumstances, and with careful liaison and preparation, that a CRO might be so watertight and so cogent that it removes the need for a worldwide freezing order. But the statements of principle by the judges in the cases that I have identified make clear that, for pragmatic and systemic reasons, this will be very unlikely at best.

For example, as HHJ Pelling said:

Similarly, Mann J said:

“If [the CRO] were to go and there were to be nothing else in place then the claimant would not have any protection. The CRO is in no way geared or intended to protect the interests of the claimant liquidator in the present proceedings and his own rights and his own interest in getting his own order which he controls. The liquidator is, in my view, entitled, subject to his otherwise being entitled to the order, to his own order which he controls and to bring about a situation which is not vulnerable to change of mind by a party to other proceedings or indeed by the court if the court were to come to the conclusion that the criminal restraint order ought to be there."

So although, as I say, I accept at least, for the purposes of this judgment, that in theory there might be a CRO so arranged that there is no risk of dissipation justifying a worldwide freezing order, I think it would be a very unusual case.

It is perhaps a tenable view of the above authorities that as a matter of principle a CRO can never stand in the way of the grant or continuance of a worldwide freezing order, but I do not find it necessary to decide that, because on the facts of this case, which I will now turn to consider, the CROs are not an adequate or complete substitute.

In this case, there is no provision which would ensure that if the CROs were to be discharged or varied the claimants would find out or find out in enough time to apply for a worldwide freezing order. It may be that right now, today, that is relatively unlikely, since the SFO proceedings are at a stage where they have quite a long way to run, but the issue is that neither I nor the claimants have visibility of what might happen to the SFO proceedings. This is no criticism of the SFO, but there is no reason to suppose that in the time for which the worldwide freezing order might be in force there would not be a variation of the CRO or the prosecution or investigation might cease for some reason. And there are specific reasons to consider that this could happen.

Two matters illustrate this. First of all, it is not in dispute, in circumstances set out in paragraph 23 of the annex to the claimants’ supplemental skeleton, that Mr Golding applied to discharge the restraint orders. Neither Mr Golding, nor the SFO, it is common ground, told the claimants about the application -- I am not suggesting that they had to -- or the appeal against the dismissal of the application. In fact the claimants found out by chance, as is related by Mr Hardman in paragraph 642 of his affidavit in support of the worldwide freezing order.

It is conceivable that these problems could be patched up by some sort of undertaking to keep the claimants informed of the criminal proceedings and the SFO's investigation, but that would be a piecemeal approach which I think would be vulnerable to failure. Certainly, as matters stand before me today, there is nothing remotely to suggest a rigorous regime would ensure that that would happen. The inherent difficulty in doing this, if it is ever to be possible, is one of the reasons underlying the judgments to which I have referred above.

The second incident which illustrates the position is that there was an issue raised at the hearing of the application for the worldwide freezing order before the deputy judge about the sale of a helicopter engineered, it is alleged, by Mr Golding.

I need not go into the detail of this. As it turns out, and as the claimants now accept, the SFO, in fact, consented to the sale of the helicopter. Mr Robins suggested that they had insufficient information about the sale and, in particular, about the fact that it may have been sold, it has been suggested -- and I make no finding -- at an undervalue.

This illustrates, to my mind, that decisions taken by the SFO, no doubt in good faith, to permit dealings by the respondents in disputed assets could affect and undermine the position of the claimants, without the claimants being aware of them, in circumstances where a worldwide freezing order would have prevented those dealings.

Given that the authorities I have cited identify that the SFO, for quite understandable reasons, have different interests from the civil claimants that, to my mind, is important.

I ask myself what level of risk is represented by the current circumstances. I consider that it is very difficult to put a number on it. I cannot put a percentage on it, but, in my view, the risk is real and non-trivial; and although it may be relatively slight right now, that could change at any time without the claimants being in a position to address it, as matters stand.

In my view, I have to consider the position as it is right now, but also during the likely lifetime of the worldwide freezing order. In my view, looking at the facts as a whole, there is an appreciable risk, such that I think there is an adequate risk of dissipation of assets if there is no worldwide freezing order that something like that could happen.

For those reasons, I decided to continue the worldwide freezing order against the third and fourth respondents.

That concludes my reasons. I will continue the orders against the third and fourth respondents.