Lakatamia Shipping Company Limited v Tseng Yu Hsia & Anor

In the 2019 Proceedings, Madam Su argued that the law applicable to the alleged torts was not English law, in the case of the Aeroplane Sale Proceeds because “it is impossible for the Court to identify where the asset(s) have been wrongfully dealt with, so as to identify the relevant applicable law”, while conceding that she “may have no choice but to address the alleged conspiracy under English law” (2021 Judgment, [824]), and in the case of the Monaco Sale Proceeds, on the basis that Monégasque law applies (2021 Judgment, [75]). Counsel for Lakatamia fairly pointed out that Ms Tseng may, if she was present at this trial, make the same submission.

This argument was dealt with by Bryan J in the 2021 Judgment at [75], [824]-[829], and [840]-[861]. The matter is simpler here. As Lord Leggatt stated in FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45; [2021] 3 WLR 1011 at [113], the default rule is that “if a party does not rely on a particular rule of law even though it would be entitled to do so, it is not generally for the court to apply the rule of its own motion.” Where foreign law is not pleaded, English law applies. No party has pleaded that foreign law applies nor adduced any evidence to that effect. English law therefore applies to the issues in these proceedings. I can see no reason why a party who chooses not to participate in proceedings should be in a better position than a party who participates, but chooses not to dispute the application of English law, in this respect.

In any event, essentially for the reasons given in the 2021 Judgment, [840]-[861], I am satisfied that both claims are governed by English law.

The relevant principles were again accurately and comprehensively set out at [76]-[115] of the 2021 Judgment. I gratefully adopt that analysis. In short, Lakatamia must show the elements of unlawful means conspiracy as stated by Cockerill J in FM Capital Partners Ltd v Marino [2019] EWHC 768 (Comm) at [94]:

Further, as Bryan J noted in Lakatamia Shipping Co Ltd v Su [2023] EWHC 1874 (Comm) at [106]:

The Marex tort is a relatively new cause of action, but its existence and requisite elements are sufficiently established at first instance, in particular by the 2021 Judgment which I am satisfied I should follow. I gratefully adopt Bryan J’s summary of the relevant principles at [116]-[131] of the 2021 Judgment, and at [126] in particular:

“Further principles” are set out at [127]:

The court must be “satisfied on the balance of probabilities that the claim is made out, and as the underlying allegation is one of fraud, as always, cogent evidence is required in order to satisfy that burden of proof” (CMOC, [12]).

Given the seriousness of the claims made by Lakatamia, I have also had regard to the statement of Lord Nicholls in In re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563, 586 that “the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability.” It follows that “an inference of fraud or dishonesty should only be drawn where it’s the only reasonable inference to be drawn” (CMOC at [13]). The standard of proof remains the balance of probabilities, but Lakatamia must provide compelling evidence to satisfy the Court.

Lakatamia has invited the Court to draw adverse inferences against Ms Tseng in respect of her failure to disclose relevant documents and/or give evidence in these proceedings.

It is far from obvious to me that a claimant who, in the absence of the defendant, is required to do no more than prove its case by evidence untested by cross-examination should also benefit from an adverse inference from the non-participating defendant’s failure to provide disclosure or the failure of the non-participating defendant to give evidence.

I can see a stronger basis for drawing an adverse inference from Ms Tseng’s failure to provide the disclosure required by the Butcher Order, as this was a coercive order rather than one made under the court’s adjudicative jurisdiction. The Butcher Freezing Order required disclosure of Ms Tseng’s bank statements from 5 November 2014 to date, which I accept would have been highly relevant material to the allegations. I have assumed, in Ms Tseng’s favour, that no such inference should be drawn. Had I been willing to draw the inference, this would have considerably strengthened Lakatamia’s case against Ms Tseng.

Lakatamia seeks a judgment on the merits against Ms Tseng because, on its evidence, the Taiwanese courts will not recognise a foreign default judgment unless the claim form was served personally on Ms Tseng. I understand that the claim form was not served personally on Ms Tseng for reasons it is not necessary to expand on here.

In the Butcher Service Out Order, Lakatamia was granted permission to serve the Butcher Freezing Order and claim form on Ms Tseng at the Nangang and Zhongshan Addresses. When I continued the Butcher Freezing Order on 11 February 2022, I was satisfied that appropriate service had taken place by serving the order at the Nangang and Zhongshan addresses, and that remains my assessment. Both addresses feature on remittance advices generated by Citibank Taiwan Ltd that recorded payments by Ms Tseng to Baker McKenzie’s Taipei office. A bank making payment on an individual’s instructions can be presumed to know the instructing party’s address. I have also seen Ms Tseng’s business card, which states her workplace as the Zhongshan Address. I am therefore satisfied that these are appropriate addresses at which service on Ms Tseng could be effected, and that documents served at these addresses will have come to Ms Tseng’s attention, absent steps by Ms Tseng to prevent this happening.

I note that some packages sent by Lakatamia to the Nangang and Zhongshan Addresses have been returned. The package containing the Butcher Freezing Order and associated documents that had been sent to the Nangang Address was subsequently returned to Lakatamia’s solicitors having been stamped “Return to Sender”. The stamp sets out several check boxes listing various possible reasons why the package was being returned. A tick had been placed in the check box marked “Unknown”. The package containing my order sent to the Zhongshan Address was also returned to Lakatamia’s solicitors. It had been stamped “Return to Sender” and the check box on the stamp marked “Unknown” had been ticked. A customs declaration which was also received had been stamped “No such person at the delivery address”. The documents served by courier on both addresses pursuant to the order of HHJ Pelling KC of 28 June 2022 (“the Pelling Order”) were also both returned undelivered.

However, the other packages sent by Lakatamia (i.e. the Butcher Freezing Order sent to the Zhongshan Address and my order sent to the Nangang Address) have not been returned. Lakatamia states that it has no reason to believe that Ms Tseng has not received them, though there is no positive evidence to that effect.

Given the matters at [28] and [30], I am satisfied it is more likely than not that any packages which were returned were returned because Ms Tseng chose not to accept them.

Furthermore, Lakatamia obtained the Pelling Order permitting Lakatamia to serve Ms Tseng via email. The relevant email address is stated on Ms Tseng’s business card. The claim form and Particulars of Claim were deemed to have been served on 1 July 2022. Lakatamia states that her email address is active, as evidenced by receipt notifications generated by the email server, though no response was received from Ms Tseng.

Against this background, I am satisfied that Lakatamia has taken all reasonable steps to notify Ms Tseng of the proceedings and serve documents concerning the proceedings on her. I am also satisfied that Ms Tseng does have notice of these proceedings and has had an adequate time to respond if she so chose. The inference I draw from the lack of any response is that Ms Tseng has decided to avoid engaging with the court process.

I am therefore persuaded that the trial should proceed to a determination on the merits in the absence of Ms Tseng in accordance with CPR 39.3(1). It is of course open to Ms Tseng to apply for this judgment to be set aside under CPR 39.3(3), subject to the requirements of CPR 39.3(4) and (5).

A premise of the claims relating to the Sale Proceeds is that the assets in question fell within the scope of the Blair Freezing Order and were assets which could be rendered amenable to enforcement of the Cooke Judgment Debt (PJSC Vseukrainskyi Aksionernyi Bank v Maksimov [2013] EWHC 422 (Comm), [7]). I will use the shorthand “Mr Su’s Assets” to embrace both of these elements.

In addition to that issue, the same key questions which arose in relation to Madam Su in the 2019 Proceedings (as summarised by Bryan J at [2] of the 2021 Judgment) arise in relation to Ms Tseng here:

In the 2019 Proceedings, Mr Su’s ultimate ownership of the Aeroplane and the Villas does not appear to have been in dispute and indeed it was Madam Su’s case that she had told Mr Su he should sell the Aeroplane to reduce his debts (2021 Judgment, [188]), that she hoped Mr Su would use part of the Monaco Sale Proceeds to repay loans he owed (2021 Judgment, [194]) and that Mr Su had purchased the Villas and the sale proceeds were remitted to companies controlled by Mr Su (2021 Judgment, [206]).

The position taken by Madam Su is itself revealing, both because she is likely to have been knowledgeable about the ownership of the assets, and because it would have suited her interests to assert that the assets did not belong to Mr Su.

Further:

At the very least, therefore, both assets were amenable to execution against Mr Su, and fell within the scope of the Blair Freezing Order (which defined assets as including “any assets which they have the power, directly or indirectly, to dispose of or deal with as if it was their own” and where “a third party holds or controls the asset in accordance with their direct or indirect instructions”).

It is clear that Mr Su knew of the Blair Freezing Order and the Cooke Judgment Debt prior to the payment of the Aeroplane Sale Proceeds and Monaco Sale Proceeds to UP Shipping on 4 May 2015 and 1 March 2017 respectively.

What of Madam Su? Bryan J held that she also had that knowledge on the basis of the following facts:

Having regard solely to (i) the evidence which Bryan J records as having been given; and (ii) the contemporary documents as set out in the 2021 Judgment, I have drawn the same conclusion as Bryan J.

I therefore turn to consider the knowledge of Ms Tseng against a background in which both Mr Su and Madam Su knew of the Blair Freezing Order and the Cooke Judgment Debt before the Aeroplane Sale Proceeds were paid to UP Shipping.

First, there is evidence showing significant funds being provided through Ms Tseng to UP Shipping from at least 2010 to 2017 (as is apparent from those bank statements produced in the 2019 Proceedings). Those funds were paid to various companies in the TMT group (2021 Judgment, [201]). Between 10 November 2015 and 8 February 2017, Ms Tseng made 35 separate payments totalling US$1,868,197 to UP Shipping and this was the principal funding of UP Shipping (2021 Judgment, [715]). This is significant for the following reasons:

Second, affidavit evidence filed in proceedings commenced by Cathay United Bank, in the United States District Court for the Southern District of Texas (Houston Division) in February 2013, from Ms Melanie Ho, a Taiwanese lawyer. Ms Ho states that on 7 December 2012 a real estate company linked with the Su family, New Flagship Investment Co, transferred land worth US$2.7m to a trust administered by Ms Tseng:

Third, on 4 May 2015, the Aeroplane Sale Proceeds were paid into a bank account of UP Shipping (as confirmed by a bank statement produced in the 2019 Proceedings) and the following day, US$251,050 was paid to an account in Ms Tseng’s name. Beyond a suggestion that Ms Tseng had made a significant advance to Mr Su of which this was part payment (which seems unlikely for the reasons set out at [45] above), the only other explanation for the payment is that the funds were received by Ms Tseng to hold for the Su family. Another significant amount (US$440,045) was paid by UP Shipping to a BVI company called Sparkle Wood Limited (“Sparkle Wood”), also on 5 May 2015, and on the same date US$95,050 was paid to Terraceview.

Further:

Fourth, the 2021 Judgment suggests that Ms Tseng was a director of Sparkle Wood (2021 Judgment, [307], [312] and [325]). Even if that is not the case, Madam Su’s evidence was that Sparkle Wood was Ms Tseng’s company:

Fifth, when difficulties were experienced in transferring funds from Madam Su to Mr Su’s lawyers in 2019, W Legal expressing concerns about the source of the funds, Mr Su replied “please return money and remit again by my mother friend”, which I am satisfied is likely to have been a reference to Ms Tseng and reflects the role Ms Tseng performed generally of dealing with assets controlled by Madam Su where Madam Su wished to distance herself from those assets.

Sixth, there was evidence that Ms Tseng was a source through whom funds were transferred to meet Madam Su’s legal expenses in the 2019 Proceedings from March 2020 (as confirmed in a letter from Baker McKenzie of 15 January 2021), including three remittances on a single day and a total of US$1m by 15 January 2021. Once again, it seems likely that these funds belonged to Madam Su, but were routed through Ms Tseng against a background of the freezing order made against Madam Su. It is also noteworthy that Madam Su’s lawyers identified Da Dao Land at the CMC as a company which assisted Madam Su in “succession planning”.

Finally, during the trial documents were produced by Madam Su which were said to have been provided by Ms Tseng, after Baker McKenzie Taipei phoned Ms Tseng during the trial. They included a money transfer to Terraceview of US$286,000 on 21 November 2014, US$542,000 on 29 December 2014 and US$800,000 on 28 May 2015. Ms Tseng’s willingness to provide these documents at Madam Su’s request provides some (limited) further support for Lakatamia’s case that Ms Tseng had a general and continuing role in relation to the management and disposition of assets controlled by the Su family.

Standing back, I am satisfied of the following matters:

Were matters to stop here, the issue would arise as to whether that was sufficient knowledge for the purposes of the claims brought by Lakatamia. In particular, would participation in a general scheme operated for the purposes of disguising the ownership of assets with a view to impeding creditor enforcement generally be sufficient to allow one creditor damaged by the scheme to bring claims of the kind advanced here? In the context of dishonest assistance, it is well-established that the dishonest assister need not know all of the details of the trust or the identity of the beneficiary, provided that they know that the asset is not at the free disposal of the principal, and that it might be sufficient for them to know that they are assisting in a dishonest scheme (Twinsectra v Yardley [2002] 2 AC 164, [135]-[137]). I was referred by Lakatamia to CMOC [125]-[126]:

The law on this issue has recently been comprehensively reviewed by Calver J in ED&F Man Capital Markets Limited v Come Harvest Holdings Limited [2022] EWHC 229 (Comm), [490]-[528]. He rejected the argument that “a specific intention to target” the claimant was required ([500]), and expressed his agreement with the decision in CMOC ([515]-[516]). Calver J also referred to an obiter passage in Group Seven Limited v Nasir [2017] EWHC 2466 (Ch), [523], in which Morgan J observed that one defendant would probably have been liable for unlawful means conspiracy even if he had not known the identity of the true owner of the money, noting “Mr Louanjli knew that there was a strong case that Mr Nobre was laundering money which he had obtained dishonestly. It is obvious that such conduct was intended to harm the true owner of the money. Although, in such a case, it was probably not necessary for Mr Louanjli to know who the true owner was, in fact he did know that the money had come from Group Seven to AIC and from it to Larn.”

I can see ample scope for the argument that knowing participation in a scheme unlawfully to obstruct enforcement by creditors generally should be sufficient knowledge for liability for the tort of unlawful means conspiracy at the suit of a creditor who suffers loss as a result of that scheme, or a judgment creditor who brings claims in relation to the Marex tort. The position in relation to claims based on knowing breach of the Blair Freezing Order is more challenging – this involves conduct which might well be thought to be of a different character to obstructing creditor enforcement generally, not least because of the criminal consequences of assisting the breach of an injunction.

Fortunately, I do not need to reach a final decision on the issues referred to in the preceding paragraph without the benefit of contrary argument, because of the following facts:

It follows that I am persuaded that this part of Lakatamia’s case is made out on the evidence: at all material times Ms Tseng was aware of the Blair Freezing Order and the Cooke Judgment Debt.

It follows from my findings at [47]-[55] above that Ms Tseng combined with Madam Su, Mr Su, UP Shipping and possibly others to conceal the Aeroplane Sale Proceeds in order to prevent Lakatamia executing its judgment against them, and did so in breach of the Blair Freezing Order:

My attention was drawn to the fact that Ms Tseng might have said, were she represented at this trial, that Lakatamia’s claims against her in connection with the Aeroplane Sale Proceeds are time-barred given that the Aeroplane Sale Proceeds were transferred to UP Shipping and hence to Madam Su’s control on 4 May 2015. That date is more than six years prior to the date on which the claim form was issued against Ms Tseng (8 February 2022). However, I accept that this provides no answer to Lakatamia’s claim:

On this basis, I am satisfied that Ms Tseng caused loss to Lakatamia in the amount of the Aeroplane Sale Proceeds, which but for the combination to which she was a party, would have been available for execution by Lakatamia (who were “on to” the existence of the Aeroplane), and that Ms Tseng is liable for such loss both in the tort of unlawful means conspiracy and in the Marex tort.

The evidence of direct involvement by Ms Tseng in the concealment of the Monaco Sale Proceeds is less strong than for the Aeroplane Sale Proceeds. I have had to consider carefully whether it is sufficient to establish Lakatamia’s case on the balance of probability, and the issue is not straightforward.

I have ultimately concluded that the evidence does establish on the balance of probabilities that Ms Tseng combined with Madam Su, Mr Su, UP Shipping and possibly others to conceal the Monaco Sale Proceeds from Lakatamia in breach of the Blair Freezing Order:

I am, therefore, satisfied that Ms Tseng caused loss to Lakatamia in the amount of the Monaco Sale Proceeds, which but for the combination to which she was a party, would otherwise have been available for execution by Lakatamia (who were actively seeking to enforce against the Monaco Sale Proceeds), and that Ms Tseng is liable for such loss both in the tort of unlawful means conspiracy and in the Marex tort.

Lakatamia seeks compensatory damages in the amount of the sum taken out of Monaco (€27,127,855.01), the same figure for which it obtained judgment in the 2021 Judgment: [948]. Madam Su did not seek to challenge the latter figure on the basis that Mr Su was not the sole owner of the Villas, a fact which is itself highly significant because Madam Su would have been well-placed to know if persons other than Mr Su were interested in the Villas.

Nonetheless, Lakatamia have raised and addressed that possibility, because Mr Su had previously given evidence that the Villas were acquired with “family money”, or statements to similar effect suggesting that they were acquired with Madam Su’s money, and that he only had an 8.33% share.

I am unable to place weight on uncorroborated statements by Mr Su to the extent that they seek to reduce the extent of his interest in the Villas. He has every incentive to downplay the size of that interest, and he has repeatedly been found (to the criminal standard) to have lied when giving accounts of his assets. As I have stated, it is highly significant that Madam Su made no such suggestion, in a case in which every conceivable point open to her to reduce her liability appears to have been taken. Further:

It follows that I am persuaded that Lakatamia is entitled to judgment against Ms Tseng for damages:

I am also satisfied that Lakatamia is entitled to interest on those amounts. I have been provided with interest calculations at LIBOR one month US dollar plus 2.5%. I am satisfied that this does not exceed the appropriate rate to use. Interest is sought from the day after the Aeroplane Sale Proceeds were paid into UP Shipping’s account and from the date on which the Monaco Sale Proceeds were ordered to be paid to UP Shipping. Once again I am satisfied that these are appropriate dates to use.

Accordingly I hold Ms Tseng is liable to pay interest to Lakatamia in the amount of US$8,296,393.94 to 16 November 2023.

Lakatamia states that Ms Morimoto was served with the proceedings on 13 October 2022 in Japan via the Foreign Process Section in accordance with the Hague Service Convention. The postal delivery report appended to the certificate of service states that an employee of the Shibuya Post Office in Japan “handed over the documents to the recipient”. However, Ms Morimoto has failed to give an address in England at which she could be served pursuant to CPR 6.23(3).

Furthermore, according to evidence from Mr Jack Redrup of Lakatamia’s solicitors, Lakatamia has sent all other relevant documents to Ms Morimoto at her address in Japan as specified in the Butcher Service Out Order. Mr Redrup explains that nearly all deliveries have been returned, with some notifications supplied upon return stating that Ms Morimoto or another person acting on her instructions has refused to accept the deliveries.

Nonetheless, I am satisfied that Lakatamia has properly served Ms Morimoto, and has also taken all reasonable steps to notify Ms Morimoto of the proceedings. I am satisfied that Ms Morimoto does in fact have notice of the current proceedings and has had an adequate time to respond if she so chose.

Following CPR 10.2, if Ms Morimoto failed to file an acknowledgement of service, defence, or admission within the relevant period after service of the particulars of claim, Lakatamia may obtain default judgment in accordance with CPR Part 12. To date, Ms Morimoto has not engaged with the proceedings and has not filed an acknowledgement of service or any other document.

The Claim Form and the Particulars of Claim do not quantify the claim, with the result that it falls to me to assess the amount of loss when entering judgment in default. The claims comprise:

Under CPR 12.12(1), Lakatamia is entitled to “such judgment as the claimant is entitled to on the statement of case”. That will not ordinarily involve any review of the merits by the court when asked to enter default judgment. However, it is clear that the court is not always required to accept the asserted characterisation of the pleaded case: see for example Sloutsker v Romnova [2015] EWHC 2053 (QB), [84]-[86] and Charakida v Jackson [2919] EWHC 858 (QB). It is also clear that the court retains a general discretion as to the relief to be granted where the remedy sought is other than for money: Lux Locations Ltd v Yida Zhang [2023] UKPC 3, [56]. However, there are a number of first instance authorities which suggest that it is not part of the court’s function to consider the viability of the claim asserted as a matter of law: Football Dataco Ltd v Smoot Enterprises Ltd [2011] EWHC 973 (Ch), [16]-[19] and Otkritie International Investment Ltd v Jemal [2012] EWHC 3739 (Comm).

There is no difficulty in quantifying the amount of damages recoverable so far as they concern the Tokyo sale proceeds - ¥JPY 240 million being the amount of the sale proceeds of a Tokyo property sold by Madam Su during the brief period when no freezing order against her was in place, which Madam Su is alleged to have transferred to Ms Morimoto. I will enter default judgment in this amount. At Lakatamia’s request, the default judgment will only take effect if Ms Morimoto does not apply to set it aside within 23 days of service (a step taken in order to make the judgment enforceable in Japan).

I will also award interest on this amount from 23 August 2019 at 1.9% compounded on three-monthly rests (being 2% above the Japanese short-term policy interest rate). This produced total interest of JPY 19,982,291 to 9 November 2023, continuing at the rate of JPY 13,533.32 per day.

By contrast, I have real doubts as to whether English law recognises a tort of unlawful means conspiracy dishonestly to defend a claim through the production of forged documents in those proceedings. The extension of the tort of malicious prosecution to the initiation of civil proceedings is not without controversy (see the differing views in Willers v Joyce [2016] UKSC 43), and there is no tort of maliciously defending proceedings. Even if it is possible to overcome those difficulties through the tort of unlawful means conspiracy, further issues would arise as to whether the deployment of forged evidence at trial can provide the basis for a private law cause of action, or is a matter to be dealt with under the court’s jurisdiction (through strike-out or committal) or under the criminal law (cf. Marrinan v Vibart [1963] 1 QB 234).

In any event:

In those circumstances, I am not willing to enter a default judgment in respect of the Litigation Conspiracy.

I have been provided with Lakatamia’s schedule of costs for the claims against both Ms Tseng and Ms Morimoto. I have been invited to divide the costs on a 50%-50% basis as between the two defendants. However, I have concluded that the division should be 65% as to Ms Tseng and 35% as to Ms Morimoto, to reflect both the fact that a judgment on the merits was sought and obtained against Ms Tseng, and the broader scope of the claims against Ms Tseng.

The total of the schedule of costs is £648,742. The hourly rates claimed are well within the Guideline rates, although the case has involved a significant number of fee earners with the risk of duplication. Some small reduction is necessary to allow for the fact that the hearing was shorter than the one day anticipated. However, the level of counsel fees is high for proceedings which have been undefended throughout, and in which the prior involvement in the 2019 Proceedings would have given the legal team a considerable head start both in pleading the case and preparing for the hearing. Counsel fees comprise 68% of the total, with claims for three counsel, including a silk and a senior junior (with a silk and junior junior at trial). Even allowing for the freezing order applications, I am satisfied that a significant reduction is required for the purpose of summary assessment.

I will summarily assess the costs as follows:

Ms Tseng is therefore ordered to pay costs in the sum of £251,149 and Ms Morimoto to pay costs in the sum of £135,234.