Lakatamia Shipping Company Ltd v Chang Tai-Chou & Ors

This is the latest instalment in the long-running saga arising out of a breach of contract claim brought by Lakatamia Shipping Co Ltd (Lakatamia or the Claimant) against the First Defendant (Mr Su). Judgments were entered in that claim in November 2014 and January 2015. In the 9½ years since, the judgment sum is largely unsatisfied. Indeed, with interest and costs which have accrued in the meantime, I am told that, after some recoveries, more than US$ 60 million is now owed.

The hearing before me was the largely undefended trial of a claim against Mr Su, the Second Defendant (Mr Chang), and the Third Defendant (Maître Zabaldano) arising out of Mr Su’s breach of a freezing order (the Freezing Order) which was intended to prevent the dissipation of his assets prior to judgment. Mr Su cannot dispute such breach: Sir Michael Burton GBE previously committed Mr Su to 21 months’ custody for numerous breaches of the freezing order: see Lakatamia Shipping Co Ltd v Su [2019] EWHC 898 (Comm). Those breaches included failing to disclose Mr Su’s interests in two Monaco properties – Villa Rignon and Villa Royan (the Villas) – and the dissipation of the proceeds of sale of the Villas, which were held for the company which owned them, Cresta Overseas Ltd (Cresta Overseas). The proceeds (the Cresta Overseas Monies) were, as the evidence in the present case demonstrates, paid away to a company named UP Shipping Corporation (UP Shipping). In the present trial, the central issue is whether Mr Chang and Maître Zabaldano have any liability arising out of the events in question.

In previous proceedings, after a trial to which none of the current Defendants were party, Bryan J decided that a number of individuals and companies had unlawfully conspired with each other to breach the Freezing Order by concealing the Cresta Overseas Monies from Lakatamia. The Claimant describes this conspiracy as the ‘Principal Conspiracy’. In the present proceedings, the Claimant alleges it has been the victim of a further unlawful conspiracy, essentially parasitic on the Principal Conspiracy, between Mr Su, Mr Chang and Maître Zabaldano, to dissipate the Cresta Overseas Monies and thereby injure Lakatamia (the Subsidiary Conspiracy). The Claimant brings claims against all three Defendants for unlawful means conspiracy; and against Mr Chang and Maître Zabaldano for the so-called Marex tort (named after the decision of Knowles J in Marex Financial Ltd v Sevilleja [2017] EWHC 918 (Comm), [2017] 4 WLR 105).

The proceedings were served on the various defendants in July 2022. None of the defendants ever served an Acknowledgment of Service indicating an intention to defend the case on the merits, but nonetheless Lakatimia did not seek default judgment. Rather, as was its right, Lakatimia decided to pursue the claims to trial.

Although Mr Su never formally acknowledged service, he did appear remotely, representing himself, at various pre-trial hearings, including the Case Management Conference before Bright J in January 2024. On 26 April 2024, Cockerill J ordered that unless Mr Su were to file a CPR-compliant defence by 13 May 2024, Mr Su would be debarred from defending the proceedings. A document was filed, but on 23 May 2024 Foxton J decided that this did not comply with the requirements of the CPR, and struck it out. Nonetheless, Foxton J decided that it would be open to Mr Su at trial to advance a case that Maître Zabaldano believed that the Villas were not affected by the Freezing Order, and that Mr Chang believed the Villas were family owned, save that Mr Su would not be permitted to adduce witness oral evidence in respect of such a case, without the prior permission of the court. For the purpose of seeking such permission Mr Su was to comply with the order for disclosure made at the CMC, and provide the court with a copy of any witness statement he sought permission to adduce. Any application for such permission was to be made on paper by 4pm on 4 June 2024.

On 4 June 2024, an application was made by Mr Su, accompanied by his third witness statement, but Foxton J decided that Mr Su had not complied with the order for disclosure, and so Foxton J would not give permission for Mr Su to adduce witness evidence. Nonetheless, Foxton J decided it would be a matter for the trial judge to decide the extent of Mr Su’s participation in the trial.

In the event, I decided at the outset of the trial that I would permit Mr Su to argue that the evidence adduced by Lakatamia did not meet the burden of proving that Maître Zabaldano and Mr Chang had the necessary states of mind to be liable for the torts alleged. In making this decision, I bore in mind the observations of Fancourt J in Byers v Samba Financial Group [2020] EWHC 853 (Ch) at [121]-[124] that there is no ‘standard’ or ‘usual’ response of the court where a defence has been struck out, but the court “must have regard to the circumstances of the individual case and do what is necessary and proportionate to mark the seriousness of the breach of its order in a way that is consistent with the interests of justice and the overriding objective”. I decided that allowing Mr Su to make arguments on this narrow issue, but not to adduce evidence of his own, was most consistent with the interests of justice and the overriding objective.

At the outset of the trial, Mr Su also sought to adjourn the trial. For reasons I gave orally, I refused that application.

Mr Chang never acknowledged service of the proceedings, nor played any part in them. Nonetheless, I have received a certificate of service showing that Mr Chang was served at his last known residence in Taiwan. He may not have received further materials relating to the case, but, according to evidence from the Claimant’s solicitor, Mr Conor O’Brien (Mr O’Brien), that appears to be because Mr Chang has refused delivery of materials sent to his address, and not made arrangements with the courier to accept such materials elsewhere.

Maître Zabaldano acknowledged service on 27 September 2022, declaring an intention to contest jurisdiction. That jurisdiction challenge was rejected by Bryan J on 21 July 2023: Lakatamia Shipping Co Ltd v Su [2023] EWHC 1874 (Comm) (the Jurisdiction Judgment). Thereafter, Maître Zabaldano decided he did not wish to take any further part in the proceedings, setting out reasons for this in a letter from his solicitors, Mishcon de Reya LLP, on 25 October 2023. Nonetheless, I was told by Mr O’Brien that materials for the case continued to be sent to Maître Zabaldano, although couriers were apparently turned away when they attempted to make deliveries, and Maître Zabaldano’s email server was apparently configured to refuse emails from the Claimant’s solicitors concerning these proceedings.

The Claimant submitted that the court should proceed with trial in the absence of Mr Chang and Maître Zabaldano pursuant to CPR 39.3(1). In circumstances where I was satisfied that the Claimant has made proper efforts to correspond with these Defendants and to inform them of the trial date, I was satisfied that this was the right course for me to take.

As the Claimant accepts, even where proceedings are undefended, the court “still ha[s] to be satisfied on the balance of probabilities that the claim is made out”: CMOC Sales & Marketing Ltd [2018] EWHC 2230 (Comm) (CMOC) at [12] (HHJ Waksman QC). Here, the allegations are serious. As such, although the standard of proof remains the balance of probabilities, cogent evidence is required in order to meet that standard. (The Claimant submitted the evidence had to be “compelling”, which may go further than is warranted.)

The Claimant told me it relied on “the documentary evidence in the trial bundles, on the witness statements that have been made on its behalf, and on the averments made in its statements of case (duly certified by statements of truth)”. As to this:

In addition to the underlying documentary material, numerous judgments from other proceedings involving Lakatamia and Mr Su were included in the trial bundle.

A related issue, which arose as a result of the way in which the Claimant put its case in writing, was the reliance to be placed on the Jurisdiction Judgment. As part of his challenge to the jurisdiction, Maître Zabaldano disputed that there was a serious issue to be tried against him. Bryan J rejected that argument, occasionally in trenchant terms. The Claimant submitted that the “findings” made by Bryan J were “perhaps not strictly binding on Maître Zabaldano” but “nevertheless of considerable significance". As I indicated to Mr Phillips KC when he opened the case orally, I do not accept this characterisation. This is for the following reasons:

That leads on to the question of adverse inferences. As regards Mr Garrett and Mr Owles, although the court was told they would be called, and their absence is unexplained, I draw no adverse inference from their absence in circumstances where the Defendants never actively defended the proceedings. (I would be inclined to suggest that the Claimant had thereby adopted a sensible and proportionate approach to the litigation, had it not been for the size of the trial bundle, which I have already mentioned, and the amount of costs incurred in pursuing this undefended claim, leading to a 1-day trial, which the summary schedule puts at £1.19 million.) More significant, however, is the question of whether I should draw adverse inferences against the Defendants from their failure to give disclosure. As to this:

As part of my pre-reading, I was invited by the Claimant to read various witness statements served by or on behalf of Maître Zabaldano in the course of the jurisdiction challenge. Many of the factual matters set out in those statements are relied upon by the Claimant as being correct and supportive of the Claimant’s case. It was not suggested that I should not admit these documents as evidence, to be weighed in the balance, and I have considered them as part of the evidential material. Indeed, I have had regard to them in considering what defences Maître Zabaldano would have raised, had he participated in the proceedings. I understand it to be accepted by the Claimant that this was the appropriate course to take, since the Claimant itself addressed Maître Zabaldano’s putative defences in its arguments.

Consistently with this, the Claimant accepted as applicable the statement of HHJ Waksman QC in CMOC at [13] that “Where the trial is not attended by one of the parties, there is still an obligation of fair presentation which is less extensive than the duty of full and frank disclosure on a without notice application. Mr Justice Cresswell in Braspetro Oil Services v FPSO Construction Inc [2007] EWHC 1359 (Comm) said as follows, that he required the claimant to draw to the attention of the court: ‘points, factual or legal, that might be to the benefit of [the defendant]’.” However, I regret that, in some regards, I found that the Claimant fell short of such obligation. In particular:

In the course of preparing this judgment, a number of legal issues occurred to me which had not been dealt with by Counsel for Lakatamia, or Mr Su, in the course of the trial. (I make no criticism of the parties for this.) As a result, I invited both sides to provide further assistance on these points. I received detailed further written submissions from both Mr Su and the Claimant, to which I have had regard in preparing this judgment.

I treat the applicable law of the claims advanced by the Claimant as being English law. In this regard, I follow the decision of Foxton J in Tseng at [16]:

“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.”

Again, I gratefully adopt the analysis of Foxton J in Tseng at [18] (itself deriving from the earlier Madam Su judgment and the Jurisdiction Judgment of Bryan J):

One issue which occurred to me at trial, not directly covered in the foregoing, is the extent to which defendants to a claim of unlawful means conspiracy must, in order to be found liable, know of the unlawfulness of the means used. In this regard, Mr Phillips KC helpfully took me to Racing Partnership Ltd v Done Bros (Cash Betting) Ltd [2020] EWCA Civ 1300, [2021] Ch 233 (Racing Partnership), which decides that in order to establish liability the claimant must prove that the defendants (and each of them) knew the facts which rendered the means unlawful, but need not show that the defendants knew that the means are – as a matter of law – unlawful. In short, ignorance of the law is no defence: see at [139]-[147] (Arnold LJ) and [171] (Phillips LJ). I note that Lewison LJ dissented on this point (at [213]-[265]) but I am bound by the decision of the majority.

Once again, I gratefully adopt Foxton J’s summary from Tseng:

There is an issue as to what it means for a party to ‘intend to violate the claimant’s rights under the judgment’ and – specifically – whether such intention is established if the defendant believes they are entitled to violate such rights: I deal with that issue at paragraph 104 below. There is also an issue as to whether Bryan J was correct to express the view that there is no defence of justification to the Marex tort: I deal with that issue at paragraph 106 below.

I make the following findings of fact, on the basis of the documents in the trial bundle to which I have been taken. To be clear, the universe of documents I have considered is limited to (i) documents referred to in the Claimant’s skeleton argument; (ii) documents on my pre-reading list; (iii) documents to which I was taken by Mr Phillips KC in the course of the trial; and (iv) documents referred to on the face of documents in categories (i)-(iii) above. Where I say there is ‘no evidence’ of any factual allegation, this is on the basis that there was no evidence within these categories of material. I do not regard any other documents, outside these categories, has having been adduced as evidence in the trial.

On 19 August 2011, Blair J made the Freezing Order against Mr Su, as well as various companies legally or beneficially owned by him and/or other family members (the Su Companies). The Freezing Order was made in proceedings commenced by Lakatamia against Mr Su and the Su Companies. The Freezing Order was continued, with inconsequential variations, and has been in full force and effect at all material times since.

In two judgments of November 2014 and January 2015 respectively, Cooke J entered judgments against Mr Su and the Su Companies in sums totalling in excess of US$ 47.6 million (the Cooke Judgments and the Judgment Debt respectively). Mr Su and the Su Companies sought permission to appeal from the Court of Appeal. Permission to appeal was granted, on condition that security was provided in respect of the Judgment Debt. Security was not provided, and the appeal lapsed on 12 June 2015.

Neither Mr Su nor the Su Companies has voluntarily discharged any part of the Judgment Debt. As at the date of Mr Gardner’s first witness statement, served in support of the Claimant’s application for permission to serve proceedings out of the jurisdiction, in excess of US$ 60 million remained due, including interest and sums due under numerous costs orders.

In February 2019, Mr Su was cross-examined as to his assets, an exercise which was repeated in September 2021, when it was adjourned and continued in March 2022. Separately, a search order was executed on 18 June 2020 at the London flat at which Mr Su was living at the time, resulting in many thousands of documents being passed to Lakatamia, which Lakatamia was given permission to use in these proceedings.

In December 2010, Maître Giaccardi of GZ Avocats, a law firm he had co-founded with Maître Zabaldano, was instructed by Mr Su and Cresta Overseas in connection with the Villas. Maître Giaccardi has been in practice at the bar of Monaco since 1999. Between 2003 and 2008 he was a member of the Monegasque Parliament, and was elected Chairman of the Monaco Bar in 2021-2023. Maître Zabaldano has been in practice since 2001, and in 2017 became the Trustee-rapporteur of the Ordre des Avocats, in charge of investigations and mediations arising from complaints filed against Monaco lawyers. Maître Zabaldano's evidence, which I have no reason to doubt, was that he had never been the subject of any disciplinary or regulatory proceedings.

On 22 December 2010, Barclays Bank plc (Barclays) agreed to lend up to €25 million to Cresta Overseas, across three loans. The stated purpose of the loans was “Equity property belonging to the Borrower, known as ‘Villa Rignon’ located in Monaco (Principality), 14 rue Bel Respiro, for the purpose of purchasing an adjoining property known as ‘Villa Royan’ located 12 rue Bel Respiro”. The loan agreement was signed by Mr Su on behalf of Cresta Overseas, and guaranteed by Mr Su personally. The Claimant submits, and I accept, that this supports the allegation that Mr Su was the beneficial owner of the Villas.

The evidence of Maître Giaccardi and of Maître Zabaldano (in witness statements served in the course of Maître Zabaldano’s jurisdiction challenge) is that Maître Zabaldano did not work on the Cresta Overseas file at that time. This evidence is challenged by the Claimant. The Claimant points to a Word file (the Word File) which, in 2012, set out a 2012 draft resolution of Cresta Overseas. The metadata of the Word File show it was first created on 22 December 2010 by Maître Zabaldano. The Word File has a total editing time of 30 minutes. The Claimant submits that I can infer from this (i) that the Word File was always a board resolution for Cresta Overseas (such that it required only minimal work in 2012 to generate a board resolution for Cresta Overseas), and therefore (ii) that Maître Zabaldano had worked for Cresta Overseas (and Mr Su) in 2010. I accept, on the balance of probabilities, that such inferences are to be drawn. In particular I reject the evidence of Maître Zabaldano that this must be “an old document I had created in 2010 as a general template or for another client”, evidence which is confirmed by Maître Giaccardi: the coincidence of timings – the document being created on 22 December 2010 – renders such an explanation implausible. I do not, however, ascribe much significance to this. It may be that Maître Zabaldano provided no more than a few minutes of assistance to a colleague, more than a decade earlier, which would readily be forgotten. I do not therefore find here any basis for a greater rejection of his evidence.

In July 2011, Maître Zabaldano left GZ Avocats, and Cresta Overseas remained a client of Maître Giaccardi, at the successor firm, Giaccardi Avocats.

On 13 May 2013, Mr Su, who had been the director of Cresta Overseas, resigned from that role, appointing his 18-year-old daughter, Ms Airi Morimoto (Ms Morimoto) to replace him.

In October 2014, a lawyer at Giaccardi Avocats emailed Mr Su and others, explaining advice previously given. This included:

“You ask yourself why we did not change the structure of the ownership before the entry in force of the new law relating to the registration fees, in order to replace CRESTA by a Monegasque civil company.

Please be informed that we were instructed by Nobu in December 2010 with the existing ownership structure, his purpose being at that time to keep the whole property for himself.”

By 2015, Cresta Overseas had defaulted on the loan from Barclays, and Barclays sought to enforce its security. Maître Giaccardi could not act for Cresta Overseas because his firm, Giaccardi Avocats, was Barclays’ lawyer in Monaco; accordingly, Maître Zabaldano was retained by Cresta Overseas.

On 19 February 2015, Maître Zabaldano issued a Letter of Engagement to Cresta Overseas, care of Mr Garrett. The stated purpose was “assisting you in the auction procedure filed by Barclays Bank plc Monaco”.

On 16 March 2015, Barclays issued proceedings in the Monaco court against Cresta Overseas, seeking the auction of the Villas to enable Barclays to recoup its loans.

On 24 March 2015, Mr Su, in his capacity as director of Portview Holdings Ltd (Portview Holdings), the sole shareholder of Cresta Overseas since June 2007, signed a power of attorney in favour of Mr Garrett, “to sign the Letter of Engagement to authorize the Zabaldano Avocat Défenseur in assisting Cresta in the auction procedure filed by Barclays Bank plc Monaco”. In their written submissions, the Claimant’s Counsel wrote: “Maître Zabaldano was, unsurprisingly, well aware of the Power of Attorney as he cited it in written submissions that he filed with the Monaco court [7/5/80]”. However, while there is indeed reference in the reasons of the Monaco court to a fax from Maître Zabaldano, “accompanied by a special power of attorney granted to Jame Garrett, legal representative of Cresta Overseas Ltd”, there is no indication that this is the same power of attorney. On the contrary, the 24 March 2015 power of attorney was for the limited purpose of signing the Letter of Engagement; by contrast, the power referred to in the March 2016 ruling of the Monaco court was described as being issued on 17 March 2016 for the purpose of withdrawing the appeal. I conclude that this was not the same power of attorney.

Mr Garrett did not sign the Letter of Engagement. Rather, on 9 April 2015 Mr Chang replaced Ms Morimoto as sole director of Cresta Overseas, and the Letter of Engagement was accepted, on behalf of Cresta Overseas, by Mr Chang on 21 April 2015.

According to the Particulars of Claim, on 14 April 2015, Lakatamia’s solicitors wrote to Mr Su’s then solicitors, drawing attention to the fact that Lakatamia had become aware of the Villas, which Mr Su had failed to disclose in breach of the Freezing Order. Lakatamia also wrote to Barclays, stating that Mr Su was subject to the Freezing Order, owed the Judgment Debt, and had an interest in Cresta Overseas.

On 5 May 2015, Terraceview Holdings Ltd (Terraceview) paid US$ 11,200 to Maître Zabaldano. The underlying evidence gives no indication as to the purpose of this, but the Claimant submits that this was payment of Maître Zabaldano’s fees. According to information published by the ICIJ Offshore Leaks Database, Mr Su is (or was) director and shareholder of Terraceview, and Mr Chang is (or was) director. Mr Su’s ownership is apparently confirmed by an email from a representative of Mr Su, one Ms Sara Chao (Ms Chao), from 2014. The Claimant has drawn to my attention that, in the Madam Su judgment, Bryan J found that Terraceview belonged to Madam Su rather than Mr Su. I do not consider it necessary to resolve this issue.

On 18 June 2015, Mr Garrett consented to act as director of Cresta Overseas “with immediate effect”, although I note that the register of directors in the trial bundle does not show this.

On 30 September 2015, Maître Geraldine Gazo, acting for Lakatamia, wrote to Maître Joëlle Pastor-Bensa, lawyer for Barclays. She informed Maître Pastor-Bensa that Lakatamia had obtained a High Court judgment against Mr Su and various companies; that the judgment “is currently being appealed, but the said appeal does not affect the World-Wide Freezing Injunction obtained by my Clients on 6 October 2011”; that it appeared that Mr Su had an interests in Cresta Overseas; and, “For all relevant purposes my Clients wish to draw your Client’s attention to the penal notice that appears on the first page of the said Order of 6 October 2011: ‘Any other person who knows of this Order and does anything which helps or permits any of the Defendants to breach the terms of this Order may also be held in contempt of Court and may be sent to prison, fined or have their assets seized”. I note, however, that the Freezing Order also contained at paragraph 17 the usual provision (the Babanaft proviso: see Babanaft Co SA v Bassatne [1990] 1 Ch 13 (CA) (Babanaft)) concerning ‘Persons outside England and Wales’:

On 30 September 2015, Maître Gazo sent Maître Zabaldano a copy of the letter sent to Maître Pastor-Bensa, “In my Clients’ interests”. Maître Zabaldano’s evidence is that he took note of the letter and its attachments, but found no relevance of it “to what we were doing for Cresta in Monaco as against Barclays, which was to prevent the Villas from being sold”. He thought the Freezing Order was of no consequence because the letter was merely copied to his firm and because Lakatamia’s lawyers never set out how he should act as a result of the English decisions, “or how we could legitimately act in defiance of our instructions from Cresta”.

Up until 21 October 2015, unsuccessful efforts were made by Cresta Overseas to refinance the Barclays loans. Cresta Overseas wished to discharge its loans using payments from a third party, but Barclays refused to accept money from anyone other than Cresta Overseas itself. As part of justifying this, on 20 October 2015, Maître Pastor-Bensa, on behalf of Barclays, noted in a letter to Maître Zabaldano: “In the most recent submissions of the Lakatamia Shipping Company and the information that they provide on the situation of its debtor, there could be no question of my client taking part in the realisation of an act which could constitute a fraud against the rights of a creditor”. Maître Zabaldano responded noting, in particular, that “the decision which [your client] invokes has no force for execution in Monaco and… in no way concerns the company [Cresta Overseas]”. Maître Pastor-Bensa responded, “My client must draw the consequences of the voluntary intervention of the Lakatamia Shipping Company, which now intends to assert its rights before the courts of Monaco and which can now demonstrate a definitive decision in Great Britain”.

Also on 20 October 2015, according an affidavit I have been shown of Mr Jean-Philippe Flament, a businessman based in Monaco, there was a full-day meeting in Monaco involving Mr Flament, Mr Rolf Wikborg and Mr Arne Fredly (who were contemplating providing funds to Cresta Overseas to repay Barclays), Mr Garrett, and – at times – Mr Su. Mr Garrett would often leave the room to consult with Mr Su, but Mr Su was present during the part of the meeting when the Lakatamia litigation was discussed. Mr Flament expressed his surprise to Mr Su at learning only then that the Cooke Judgments were in fact final and no longer under appeal, and that there was a freezing order. Mr Su showed Mr Flament a document recording a purported transfer of beneficial ownership in Cresta Overseas to his daughter, Ms Morimoto, a day or two beforehand. After some discussion, Mr Flament, Mr Wikborg and Mr Fredly decided that, in view of the finality of the Cooke Judgments and the Freezing Order, they could not proceed with the transaction. Mr Flament also recorded that Mr Garrett said that he had not been aware of the Freezing Order before the meeting of 20 October 2015, and that Mr Garrett was at all times following the instructions of Mr Su, who “had ultimate power to control Cresta”. According to the Claimant’s solicitor, Mr Gardner, Mr Garrett told him that Mr Garrett was in telephone contact with Maître Zabaldano “during the course of the day”. The Claimant submits that it is “inconceivable” that Mr Garrett did not tell Maître Zabaldano why the negotiations failed, but I do not accept that: first, it is unclear when Mr Garrett spoke to Maître Zabaldano; second, there is no evidence that the relationship between Mr Garrett (or Mr Su) and Maître Zabaldano was such that Maître Zabaldano would be told why negotiations had failed, rather than just that they had done so. Maître Zabaldano’s evidence was that he and his firm were not directly involved in any of the discussions concerning the refinancing transaction, but (in his witness statement for the jurisdiction challenge), notes only that he does not accept everything Mr Gardner says, “and will respond in detail if it becomes necessary for me to do so”.

Also on 20 October 2015, Lakatamia applied to intervene in the proceedings between Barclays and Cresta Overseas in Monaco. In its application, Lakatamia recited the Cooke Judgments, the failure of Mr Su’s appeal, and the Freezing Order (and its attached penal notice), and submitted that “according to the fragmented information available” to it, Cresta Overseas appeared to be controlled by Mr Su, and Lakatamia could be prejudiced if the auction went ahead with money paid to Cresta Overseas, “funds which could ultimately benefit Mr Nobu Su, and this in defiance of the World-wide Freezing Injunction delivered on 6 October 2011”. This application was rejected the next day, on the basis that the materials relied on by Lakatamia had not been translated into French, and were therefore excluded from the proceedings, leaving Lakatamia with no document to support its claims or arguments.

The Villas were sold on 21 October 2015. The purchase price was €65.1 million. The full sale price was transferred by the successful buyer in November 2015 to the account of the Caisse de Dépôts et Consignations (CDC). Maître Zabaldano explains that this was usual procedure for a court-ordered sale, to ensure that all creditors received their share of sale proceeds. Barclays began the process of seeking distribution of the sale proceeds.

The large majority of the sale proceeds were ultimately distributed in February 2017. There was not an agreement between the parties as to how much Barclays was entitled to by way of interest for late payment since 6 November 2015, so around €3 millon was retained in the CDC pending resolution of that dispute. However, it was ordered, most significantly, that €34.6 million odd be paid to Barclays; and that €27,127,855.01 be paid to Maître Zabaldano as lawyer for Cresta Overseas, into an account held by him at the counters of CFM Indosuez Wealth Management (his client account).

On 21 February 2017, according to Maître Zabaldano, Mr Chang instructed Maître Zabaldano to transfer all the remaining cash proceeds from the sales of the Villas from his client account to UP Shipping, save for a retainer of approximately €200,000 which Maître Zabaldano was instructed to keep as a retainer to continue acting on behalf of Cresta Overseas in its dispute with Barclays. There is indeed, in the bundle, an email of 21 February 2017 from ‘TC’ to Maître Zabaldano, cc’ing Mr Garrett, ‘Sara’ and ‘Business1’, reading: “dear sir: a decision was made today for the fund of cresta to be transferred from your account to up shipping corporation. please refer to the attached document signed by me, tai chou chand, and accordingly process the fund to be transferred to up shipping corporation”. Maître Zabaldano replied the same day, cc’ing others in his office, to Mr Garrett: “Dear James, Could you please sign it as well and return it to us?”.

According to Maître Zabaldano, he was told that Mr Garrett was no longer a director, and so Maître Zabaldano accepted the instruction signed by Mr Chang alone, in his capacity as director of Cresta Overseas. I accept the submission of the Claimant that Mr Chang did so at the direction of Mr Su: that is consistent with the evidence showing Mr Su to be (via Portview Holdings) the ultimate beneficial of Cresta Overseas; with Mr Flament’s evidence concerning Mr Su’s control of Cresta Overseas (see paragraph 47 above); and with Mishcon de Reya’s letter on behalf of Maître Zabaldano describing Mr Chang as “only ever a functionary” who “appears to have been little more than someone to whom Mr Su gave instructions”. (The Particulars of Claim assert that “Mr Chang was a businessman in his own right as well as an employee of the Su family”, but I was shown no evidence to support that proposition. On the contrary, Counsel for the Claimant quite properly drew to my attention that Jacobs J previously refused a freezing order against Mr Chang, because Jacobs J was not satisfied that Mr Chang had any assets.)

Ms Chao sent an email to Mr Garrett on 21 February 2017, the contents of which are not in evidence. Mr Garrett replied: “I understand that my resignation is necessary and Tai Chou Chang will be the one director of Cresta. I will process this asap and Fortus can provide an advisory role to Cresta/TC for Monaco/property matters”. Ms Chao responded: “We understood your intention further. Please can we process the unanimous agreement to transfer funds from lawyer between you and Mr Chang of directors of Cresta Overseas Limited today, then we will process the resignation procedure as per your instruction. If you are not any comments, we will send the instruction to Zabaldano”. Mr Garrett replied: “I am no longer a Director of Cresta Overseas Ltd so this is not within my authority”. The Claimant asserts that Mr Garrett was unprepared to approve the transfer in view of the Freezing Order, and this is why he resigned his directorship of Cresta Overseas. I do not consider I need resolve this question, since Mr Garrett’s state of mind is not directly relevant to any point I need to decide. Maître Zabaldano’s evidence was that he did not know why Mr Garrett had resigned, and there is nothing to gainsay that.

On 23 February 2017, Maître Zabaldano gave effect to Mr Chang’s instruction. He directed his bank to transfer the money held in his client account for Cresta Overseas to UP Shipping. This was a sum which, converted into US dollars, was in the amount of US$ 26,712,911.68. The SWIFT confirmation shows the details of payment as “Cash proceeds of the sale of Villa Rignon”, paid to Citibank.

The Claimant’s skeleton argument reads: “Mr Su was kept updated regarding the transfer. Thus on 24 February 2017, he sent a text message to a colleague of his in which he said ‘We have money. Clean money’ [7/16/122]”. This document reference was to a table of WhatsApp messages, running to some 50 pages, involving different people communicating with Mr Su, and the cited line follows two previous messages: “Incoming: Where is the money coming from – what country. It’s a court sale. Outgoing: Via New York. US dollar. Incoming: U make my life impossible. Outgoing: We have money. Clean money”. An earlier exchange with the same interlocutor read: “Incoming: When u receive euros 10 mill from Monaco lawyers. Outgoing: Monday. But I am not sure it will go as smooth as 27. Our offer must they go court after receive 7mill cash. I cannot guaranty date”. This reference to receiving “27” (million euros) from Monaco lawyers is, I accept, evidence of Mr Su being kept apprised of the receipt of funds from Maître Zabaldano’s account.

A Citibank statement, bearing the same account number as that shown on the SWIFT notification, shows US$ 26,712,851.68 being received from Maître Zabaldano on 1 March 2017, and then rapidly being paid out to a range of recipients including, I note, Maître Zabaldano himself (in the sum of US$ 200,055), and Mr Chang. The payment to Maître Zabaldano of around US$ 200,000 appears inconsistent with his evidence that he retained such sum from the amount transferred to UP Shipping: see paragraph 51 above. Others who received payments from UP Shipping included Wikborg Sons Ltd and Arne Fredly (compare paragraph 47 above), and various lawyers in a range of jurisdictions.

On 6 July 2017 – notably, this was some months after the events said to give rise to the claims in these proceedings – the Monaco courts recognised the Cooke Judgments.

On 11 October 2017, an email was sent from ‘Business1’ to Berkin Ataun (an accountant at Maître Zabaldano’s firm), cc’ing Ms Chao, regarding Cresta Overseas: “Please remit 35000 euro back to us. Sara will send you bank account. Nobu”. Ms Chao replied: “As instructed, please find the below account detail for your reference” – giving the details of UP Shipping’s account with Citibank. The next day, Maître Zabaldano’s firm provided a copy of the SWIFT transfer confirming such payment had been made. A bank statement from UP Shipping shows US$ 41,057.50 received from Maître Zabaldano on 13 October 2017. The evidence of Maître Zabaldano is that he was not informed of these dealings at the time; the evidence of another lawyer in Maître Zabaldano’s firm, Valerie Zoccola (Ms Zoccola) is that she believes she would have called Mr Chang, as the director of Cresta Overseas, to confirm the transfer before authorising it.

On 5 December 2017, Mr Chang sent Mr Su an email, with the subject ‘take over my job’, beginning: “at your request and by your order on november 30 2017, I shall resign my job in the end of december 2017. Accordingly please assign right person to be the successor director/supervisor for each company…”. UP Shipping is mentioned in the list of current directorships. Cresta Overseas is not listed (although there is an “etc.” indicating the list is not exhaustive). The email ends: “finally I thank you for the job offered to me during the past years”.

On 15 March 2018, Mr Su met with Maître Zabaldano. This is evidenced by a WhatsApp exchange between them. Maître Zabaldano’s evidence is that “I did not meet with Mr Su in my capacity as his lawyer but as that of Cresta regarding new instructions I received from Cresta…”. Maître Zabaldano declined to say more in his evidence, citing obligations of professional secrecy.

On 16 April 2018, Mr Su emailed a representative of Barclays in Monaco, copying Ms Zoccola, requesting (among other things) all bank statements for Cresta Overseas. He wrote: “Regarding Cresta Overseas I assume that you will need the same but signed by M. Cheng or James Garret or from my lawyer which were sent you long time ago but no reply”. Maître Zabaldano replied: “I guess that even though I am in Cc of your e-mail below, you are not referring to me when you talk about ‘your lawyer’ as I am Cresta’s which I understand you no longer are the UBO of nor the legal representative”. Mr Su forwarded this to an associate, Ms Hedvig Baqué, a former employee of Barclays who was assisting Mr Su (Ms Baqué): “We need to be careful on this”. The Claimant submits that this exchange shows that “Maître Zabaldano… well knew that Mr Su had been Cresta Oversea’s beneficial owner (and, for that matter, still was, though it evidently suited Maître Zabaldano to pretend otherwise…)”. I agree that this shows that Maître Zabaldano knew that Mr Su had been UBO of Cresta Overseas. It is of no direct relevance what Maître Zabaldano’s state of mind was in April 2018, and so I make no finding either way on the remainder of the Claimant’s submission.

On 30 November 2018, Mr Su again met with Maître Zabaldano. This is evidenced by an email from Mr Su that day to certain associates, including Ms Baqué, which also requests urgently a “Cresta corporate board resolution tonic Lin is sole director after TC Chang”. Ms Baqué replies saying “We also need to confirm if Tonic Lin is also the Beneficial Owner of Cresta or ‘only’ the Director”. Mr Su forwards to an associate: “See Passport. Tonic Uob. Ultimate owner More”. That leads to a response including: “Cresta (BVI) -> PortView -> TopCo Moco. We don’t have ‘TopCo Moco’ info on hand, so we don’t know who is the shareholder. But TC is the company director”. Again, in his evidence for the jurisdiction challenge, Maître Zabaldano cited professional secrecy in refusing to say more about this meeting than that he was instructed by Cresta Overseas. Maître Zabaldano emphasised that he continued to act for Cresta in its dispute with Barclays, which resulted in judgments of the Monaco Court of Appeal and Supreme Court in 2019 and May 2020 respectively, the latter being “shortly before I ceased to act for Cresta”.

On 27-28 February 2019, Mr Su was cross-examined as to his assets before Sir Michael Burton GBE. He was asked about the €27 million paid to Maître Zabaldano in February 2017. His evidence was: “I already resigned of Cresta. TC Chang handle the case”. He believed the money went back to his family, on his mother’s instruction.

On 6 March 2019, Lakatamia issued proceedings against Mr Su, Madam Su, Portview Holdings and Cresta Overseas. In the course of these proceedings, Madam Su never disputed that Mr Su was the 100% owner of the Villas.

The Claimants submit that the following matters are established on the evidence:

I accept these submissions. Each of these matters is, in my judgment, amply justified by the evidence I have described in paragraphs 26 to 64 above. In particular, I accept that – whether the registered shareholder of the company ultimately owning Cresta Overseas was Mr Chang or Ms Morimoto or someone else – such person was merely a nominee for Mr Su, who was the ultimate beneficial owner of Cresta Overseas and of the Cresta Overseas Monies.

In an introductory paragraph to the Jurisdiction Judgment, Bryan J observed: “… [N]o one is suggesting that the case against Mr Su and Mr Chang is anything other than a strong one. The undisputable evidence is that both those individuals knew full well of the Blair Freezing Injunction and Cooke Judgments…”. I do not know what evidence Bryan J had in mind, but I do not interpret this to mean that any such evidence could not be disputed at trial. In any event, I am not bound by any such observation.

As it is, I am not satisfied that it is more likely than not that Mr Chang knew, at the time he ordered the transfer of the Cresta Overseas Monies to UP Shipping, that Mr Su was bound by the Freezing Order. The evidence suggests that Mr Chang did what he was told by Mr Su: compare paragraphs 52 and 59 above. But there is no evidence as to the extent to which Mr Su kept Mr Chang informed of what he was doing, or why he was doing it. The Claimants point out that Mr Chang swore an affidavit of assets on behalf of one of Mr Su’s companies that was bound by the Freezing Order on 13 October 2011, but (i) that was more than 5 years earlier; (ii) that affidavit makes no reference to the Freezing Order; and (iii) that affidavit makes no reference to Mr Su (other than, in the heading, as a co-defendant of the company on behalf of whom Mr Chang swears the affidavit).

Similarly, I am not satisfied that it is more likely than not that Mr Chang knew that Mr Su owed the Judgment Debt at the relevant time. The Claimant submits that on 19 May 2015 Mr Chang signed a letter addressed to the Court of Appeal in connection with Mr Su’s efforts to appeal against the Cooke Judgments, but (i) that letter is in fact unsigned (with Mr Chang’s name simply printed at the bottom); (ii) the letter itself discloses no real understanding of the relevant court process, referring only to the ability of Great Vision Management Ltd to pay a certain sum; and (iii) in any case this was 18 months or so before the relevant time. Again, in the absence of any evidence showing that Mr Su kept Mr Chang informed about the litigation in which he was involved, I have no basis for concluding that Mr Chang had the requisite knowledge.

I am, however, satisfied that the Claimant has established that it is more likely than not that Mr Chang knew at the relevant time that Mr Su was the ultimate beneficial owner of Cresta Overseas: Mr Chang was the director of Cresta Overseas and of Portview Holdings, and took his instructions from Mr Su.

In circumstances where, in my judgment, it is not established that Mr Chang knew of the Freezing Order, the Cooke Judgments or the Judgment Debt at the relevant time (i.e., in or about February 2017), I do not consider that the elements of either the unlawful means conspiracy claim, or the Marex tort claim, are made out. Accordingly, these claims fail as against Mr Chang.

I am satisfied that it is more likely than not that, at the time Maître Zabaldano ordered the transfer of the Cresta Overseas Monies to UP Shipping, he knew that Mr Su was bound by the Freezing Order, and that the Judgment Debt had not been discharged. I reach this conclusion for the following reasons:

I am also satisfied that it is more likely that Maître Zabaldano’s knew of Mr Su’s ultimate beneficial ownership of Cresta Overseas at the relevant time.

In consequence of these findings, I am satisfied that Maître Zabaldano knew that the transfer of the Cresta Overseas Monies would place Mr Su in breach of the Freezing Order, and would hinder Lakatamia’s ability to enforce the Cooke Judgments.

However, there is one further element of Maître Zabaldano’s state of mind on which I consider it necessary to make a finding. I am satisfied, on the materials I have seen, that Maître Zabaldano honestly believed himself entitled – indeed, obliged – to transfer the Cresta Overseas Monies to UP Shipping. I reach this conclusion for the following reasons:

On my findings, Maître Zabaldano agreed to make the transfer of the Cresta Overseas Monies, following an instruction of Mr Chang which Maître Zabaldano knew came from Mr Su. Maître Zabaldano knew of the Freezing Order and the existence of the Judgment Debt. He knew that Mr Su had an interest in the Cresta Overseas Monies, and that the transfer would be in breach of Mr Su’s obligations under the Freezing Order.

I am bound by authority – see paragraph 22 above – to hold that Maître Zabaldano can be liable for unlawful means conspiracy even though (as I find) he honestly believed that he was entitled to do what he did. While Lewison LJ disagreed in Racing Partnership (at [213]-[265]), the majority decision binds me.

Nonetheless, a separate question, which was not mentioned by the Claimant’s Counsel, but on which I sought further assistance, was whether the Babanaft proviso in the Freezing Order precluded Maître Zabaldano having any liability in tort for his actions. To repeat, this proviso states that (save for certain exceptions):

“the terms of this Order do not affect or concern anyone outside the jurisdiction of this Court.”

In post-hearing written submissions, Lakatamia accepts that there is no evidence to suggest that Maître Zabaldano (nor, indeed, Mr Chang) were within the jurisdiction of the court at the time when any relevant act occurred. I observe that this distinguishes the case from JSC BTA Bank v Ablyazov (No.14) [2018] UKSC 19, [2020] AC 727 (Ablyazov (No.14)) where it was assumed that the relevant combination or understanding was entered into in England: at [4].

Counsel for the Claimant nonetheless argued that an element of the Subsidiary Conspiracy did take place in England – because damage is an element of the tort, and this was suffered (in the form of a reduction in the value of the Judgment Debt) in England. I accept that damage was, indeed, suffered here, and that – for the purposes of bringing these proceedings in 2022 – Bryan J held that this loss was sufficient to meet the requirements of the relevant jurisdictional gateway. However, that does not, in my judgment affect whether Maître Zabaldano was, or was not “outside the jurisdiction of this Court”, within the meaning of the Babanaft proviso at the time of his actions in 2017. On my findings, therefore, Maître Zabaldano was entitled to take the benefit of the proviso.

Counsel for Lakatamia then argued that I am bound by Supreme Court authority to conclude that the Babanaft proviso has no effect on a claim in unlawful means conspiracy in the present circumstance. Counsel submitted:

“The Supreme Court has already addressed this issue, directly and in the clearest terms, in [Ablyazov (No.14)]. At [23]–[24], Lord Sumption and Lord Lloyd-Jones (with whom the rest of the Supreme Court agreed) said (emphasis supplied):

‘At first sight, there is more to be said for the argument that a right of action for conspiring to breach a freezing order injunction would expose foreigners to liability notwithstanding the standard proviso in such orders that their terms “do not affect or concern anyone outside the jurisdiction of this court”. But the proviso is irrelevant to the position of a party in contempt, such as Mr Ablyazov, who is by definition subject to the jurisdiction of the court. A claim in conspiracy will normally allege conspiracy with the respondent to a court order to breach his obligations under the order, as it does in this case.

We conclude that the Bank’s pleaded allegations disclose a good cause of action for conspiracy to injure it by unlawful means’”.

There are multiple difficulties with this submission. First, the passage cited from Ablyazov No.14 was considering something entirely different – namely, whether there was a preclusionary rule preventing persons in contempt of court being exposed to anything other than criminal penalties at the discretion of the court: see at [18]. For this reason, the passage did not consider the position of the alleged assister (Mr Khrapunov, akin to Maître Zabaldano in the present proceedings), but the position of the alleged contemnor (Mr Ablyazov, akin to Mr Su in the present proceedings). As a result, this reasoning was not considering the impact of the Babanaft proviso on someone outside the jurisdiction, but rather its impact on someone within the jurisdiction of the court. In any event, as I have noted, in Ablyazov (No.14) the Supreme Court specifically noted that it was assumed that the alleged combination or understanding had taken place within the jurisdiction: see paragraph 79 above.

Counsel for Lakatamia next pointed out that in the Madam Su judgment, Bryan J held:

For the reasons set out in paragraph 82 above, I respectfully disagree with Bryan J’s conclusion that he was bound to decide this question in accordance with the decision of the Supreme Court in Ablyazov (No.14). I also disagree, if this is what Bryan J intended, that the Court of Appeal in Ablyazov (No.14) [2017] EWCA Civ 40, [2017] QB 853 previously resolved this question in a manner binding on lower courts. Rather, at [56], Sales LJ (with whom Gloster and Beatson LJJ agreed) held:

“Turning to the position of a co-conspirator who is not himself subject to the court's order, again I do not think that there is any floodgates objection to imposition of liability. The co-conspirator will only become liable if, with knowledge of the obligations imposed by the order on the addressee of the order, he deliberately counsels, procures or assists in the violation of those obligations by the addressee. This means that, unlike in the situation addressed by the House of Lords in Barclays Bank, civil liability is imposed on a narrow basis and only in circumstances broadly equivalent to those in which the co-conspirator would himself be liable for contumacious breach of the court order under the principle of accessory liability in Seaward v Paterson [1897] 1 Ch 545 (subject to the Babanaft proviso, if it applies): see, in that regard, the contrast emphasised in Barclays Bank [2007] 1 AC 181 between the negligence claim in that case and the circumstances in which a third party bank would be liable in contempt for breach of the freezing order at paras 29–30 (Lord Hoffmann) and paras 63–64 (Lord Rodger). As I have observed, if the Babanaft proviso applies, that may well be a good reason why the co-conspirator should be exempt from personal penal sanction for contempt of court, but it does not follow that he should be immune from civil action for compensation for his participation in what has been done, which is so obviously unlawful vis-à-vis the claimant. In the case of a freezing order, if a co-conspirator has indeed deliberately helped the addressee of the order to hide his assets covered by that order or in some way render them immune from execution, thereby inflicting loss on the claimant, I consider that it is strongly arguable that justice is in favour of the imposition of civil liability on the co-conspirator to be liable to pay compensation to the claimant.”

I do not read the last sentence – “I consider that it is strongly arguable…” – as deciding the point in question. Rather, the Court of Appeal was considering only whether there was a good arguable case that the breaches of the freezing order alleged qualified as relevant unlawful means. In my judgment, notwithstanding the obvious persuasive effect of the Court of Appeal’s reasoning, it remains open to a first instance judge, hearing the trial of a case in unlawful means conspiracy, to conclude that such breaches did not so qualify.

I have not found the question an easy one to resolve, but in my judgment the presence of the Babanaft proviso does preclude liability of Maître Zabaldano for unlawful means conspiracy in this case.

As a starting point, it seems to me to be a strong thing to hold a person liable for involvement in breach of a freezing order in circumstances where the court has previously, in the freezing order itself, stated the terms of the order “do not affect or concern” such person. The Babanaft proviso is expansive in its language – it does not, on its face, limit itself to excluding liability for contempt of court. That language would be apt to mislead if a person could, nonetheless, be held liable for combining with the respondent to the order with a view to helping or permitting the respondent to dissipate assets in breach of the order. It is in my judgment inconsistent with such a proviso to hold a person, who has the benefit of the proviso, liable for such conduct.

I can see that the position would be different if the defendant in question were to have engaged in independently wrongful conduct – such as the production of false documents to deceive the English court as in Surzur Overseas Ltd v Koros [1999] 2 Lloyd’s Rep 611. As Waller LJ held in that case at p620 (cited by Sales LJ in Ablyazov (No.14) at [50]): the production of false documents “would seem to me to be unlawful means without any reliance on a contempt having been committed”. But that is not the present case: there is no suggestion that the conduct of Maître Zabaldano would have constituted unlawful means, but for the contempt of Mr Su which it assisted.

I have well in mind the observation of Sales LJ in Ablyazov (No.14) at [56] that “if the Babanaft proviso applies, that may well be a good reason why the co-conspirator should be exempt from personal penal sanction for contempt of court, but it does not follow that he should be immune from civil action for compensation for his participation in what has been done, which is so obviously unlawful vis-à-vis the claimant”. I can see that it would be possible to conclude that liability for contempt is excluded by the Babanaft proviso, but not tortious liability. As against that, however, I consider there are two significant considerations.

First, the language of the Babanaft proviso is not so limited. It provides: “the terms of this Order do not affect or concern anyone outside the jurisdiction of this Court”. The proviso does not, on its face, distinguish between tortious liability and liability for contempt.

Second, I have regard to the purpose and policy of the Babanaft proviso. In Babanaft itself, Neill LJ held (at 40G):

“I am satisfied that it is wrong in principle to make an order which, though intended merely to restrain and control the actions of a person who is subject to the jurisdiction of the court, may be understood to have some coercive effect over persons who are resident abroad and who are in no sense subject to the court's jurisdiction.”

In the same case, Nicholls LJ held (at 43D and following):

“Third parties

But there is a troublesome point here concerning third parties. An injunction, as an order of the court, can affect the conduct of persons other than the defendant in the proceedings against whom the order is made. This was a matter considered in the recent Spycatcher litigation: Attorney-General v. Newspaper Publishing Plc. [1988] Ch. 333. For the purposes of the present appeal it is sufficient to note that it is well established that a person who knowingly assists in the breach of a court order is himself in contempt of court: see, for example, Seaward v. Paterson [1897] 1 Ch. 545 and, in the context of a Mareva injunction, Z Ltd. v. A-Z and AA-LL [1982] Q.B. 558. This principle is one of the strengths of a Mareva order, but it is the application of this principle to an injunction in respect of overseas assets such as I have described above that causes difficulty.

Take the present case. After the judge made the order under appeal on 19 April 1988, the plaintiffs' solicitors gave notice of the order to numerous overseas banks and other organisations. In some of their telexes the plaintiffs' solicitors strongly advised the recipients that, before allowing the defendants to deal with any of the defendants' assets held by them, they should check with the plaintiffs' solicitors directly to see that the defendants had given the requisite notice. There is no question of the solicitors having acted improperly in taking these steps. These matters were ventilated before the judge, and on 20 April 1988 he declined to place any restraint on dissemination of notice of the injunction by the plaintiffs' solicitors. In so doing the judge recognised that, inevitably, he was having to feel his way in a new situation, no similar worldwide injunction having been ordered previously even after judgment. But a consequence of the plaintiffs taking these steps was that, so far as the English court was concerned, if a French or Swiss bank, or other person to whom notice was given, thereafter parted with money or some other asset of either defendant without proper advance warning having been given to the plaintiffs' solicitors, the bank or other person would or might be in contempt of the English court. Indeed, it was precisely for this purpose that the notice of the injunction was being given to third parties. By thus affording the plaintiffs a possible sanction against third parties the plaintiffs' position was intended to be fortified.

This is not an acceptable situation. It would be wrong for an English court, by making an order in respect of overseas assets against a defendant amenable to its jurisdiction, to impose or attempt to impose obligations on persons not before the court in respect of acts to be done by them abroad regarding property outside the jurisdiction. That, self-evidently, would be for the English court to claim an altogether exorbitant, extraterritorial jurisdiction.

In Crown Central Petroleum Corporation v. Ibrahim (unreported), 27 April 1988, Hobhouse J. sought to avoid this difficulty by accepting from the plaintiff an undertaking not to serve notice of a post judgment restraint order in respect of assets outside the jurisdiction on any person other than the defendant (and, in that case, another person who was a party to the action) and his legal representatives. This, in practice, would go a long way towards resolving the difficulty, but in my view it does not go far enough. This form of order is still unsatisfactory in respect of a third party who may learn of the existence of the order without being formally notified by the plaintiff's solicitors.

To meet this difficulty I can see no alternative but to grasp the nettle firmly, and write into the order, which applies only to property outside the jurisdiction, an express provision to the effect that nothing in the relevant part of the order is to affect any person other than the defendants personally. This will remove any extraterritorial vice which otherwise the order might have, or be thought to have. The order will be binding only on the conscience of the defendants.”

In Derby v Weldon (Nos 3 and 4) [1990] Ch 65 (CA), Lord Donaldson MR considered the interplay of three aspects of international law on the Mareva (freezing order) jurisdiction. He held (at 82C and following):

“(2)

The effect on third parties

Here there is a real problem. Court orders only bind those to whom they are addressed. However, it is a serious contempt of court, punishable as such, for anyone to interfere with or impede the administration of justice. This occurs if someone, knowing of the terms of the court order, assists in the breach of that order by the person to whom it is addressed. All this is common sense and works well so long as the ‘aider and abettor’ is wholly within the jurisdiction of the court or wholly outside it. If he is wholly within the jurisdiction of the court there is no problem whatsoever. If he is wholly outside the jurisdiction of the court, he is either not to be regarded as being in contempt or it would involve an excess of jurisdiction to seek to punish him for that contempt. Unfortunately, juridical persons, notably banks, operate across frontiers. A foreign bank may have a branch within the jurisdiction and so be subject to the English courts. An English bank may have branches abroad and be asked by a defendant to take action at such a branch which will constitute a breach by the defendant of the court's order. Is action by the foreign bank to be regarded as contempt, although it would not be so regarded but for the probably irrelevant fact that it happens to have an English branch? Is action by the foreign branch of an English bank to be regarded as contempt, when other banks in the area are free to comply with the defendant's instructions?

All this was considered in the Babanaft appeal [1990] Ch. Cas. No. 6 and gave rise to what is known as the ‘Babanaft proviso’…”

The position was summarised by Millett LJ in Credit Suisse Fides Trust SA v Cuoghi [1998] QB 818, 824E (CA):

“The Mareva jurisdiction was established in 1975 as an exceptional remedy to prevent a foreign defendant from defeating any ultimate judgment by removing his assets from the jurisdiction. It was progressively extended, in 1979 to English defendants, in 1982 by restraining defendants from dissipating their assets within the jurisdiction as well as removing them from the jurisdiction, and finally in 1990 by restraining defendants from dealing with their assets both inside and outside the jurisdiction. This last step was taken in Babanaft International Co. S.A. v. Bassatne [1990] Ch. 13, in which the court was concerned not to make an unwarranted assumption of extraterritorial jurisdiction. It recognised that it would be wrong to make an order which, though purporting merely to restrain the actions of a defendant already subject to the jurisdiction of the court, might be understood to impose obligations upon persons resident abroad and not subject to its jurisdiction. This danger was avoided by including provisions in the order which made it clear that it was not to affect parties not subject to the jurisdiction of the court in respect of acts outside the jurisdiction save to the extent that the order might be enforced by the local courts. The jurisdiction to make such orders is now firmly established. It is exercised with caution, and a sufficient case to justify its exercise must always be made out; but such orders are nowadays routinely made in cases of international fraud and the conditions necessary in order to preserve international comity and prevent conflicts of jurisdiction have become standardised.”

It seems to me that the policy of the Babanaft proviso would not be met if people outside the jurisdiction of the court were to be liable in tort simply for assisting (or combining) in a breach of a freezing order – i.e., without participation in some independently unlawful act. In practical terms, this would mean that such persons would be coerced, or have obligations imposed on them, by the freezing order, just as much as if they were within the jurisdiction. In the present case, for example, the effect of the Babanaft proviso would mean that although Maître Zabaldano could not be held liable for contempt of court for assisting Mr Su to breach the Freezing Order, he could still be held liable for over US$ 26 million in damages. This would plainly have a coercive effect on his conduct.

As a countervailing argument, I can see that it might be said that a freezing order would be denuded of effect if people outside the jurisdiction could assist a respondent to freezing orders to breach such orders with impunity. However, I do not consider that this concern of itself justifies disregarding the Babanaft proviso. In Babanaft itself, Nicholls LJ recognised that the freezing order might be fortified by parties outside the jurisdiction being given notice of, and considering they would or might be bound by, the order – but still he regarded this as “not an acceptable situation”, hence the proviso.

For these reasons, I conclude that the effect of the Babanaft proviso, for a person who benefits from it, is to preclude tortious liability from arising as a result of merely helping or permitting a person to breach the freezing order in question.

On my analysis, it would not matter whether the defendant in question had read or relied upon the Babanaft proviso itself: the fact and wording of the proviso, and its underlying policy, are sufficient to preclude tortious liability for those who have the benefit of it. However, to the extent it may be relevant, I accept Maître Zabaldano’s evidence that he read the Freezing Order, and having done so he believed it did not affect him: see paragraphs 72(a), 72(b) and 75(a) above. For this additional reason, I consider he cannot be held liable in unlawful means conspiracy.

For these reasons, in my judgment, the effect of the Babanaft proviso is that Maître Zabaldano is not liable for conspiracy to breach the Freezing Order.

The Marex tort raises different considerations. This claim focuses not on the Freezing Order, but on the Cooke Judgments and the Judgment Debt. The claim also engages the question whether Maître Zabaldano induced or procured a breach, rather than merely facilitating it. The argument advanced by the Claimant is that Maître Zabaldano, by the transfer of the Cresta Overseas Monies to UP Shipping, intentionally and knowingly induced a violation of Lakatamia’s rights in the Judgment Debt.

It seems to me that, in this context, it does not matter that the transfer of the Cresta Overseas Monies was in breach of the Freezing Order: in order to establish the Marex tort, there is no need for any independent unlawfulness in the act said to constitute inducement. A third party who knowingly assists a judgment debtor to dissipate their assets so as to hinder enforcement of a judgment debt has, in principle, liability in the Marex tort – whether or not there is a freezing order in place. Accordingly, the issues around the Babanaft proviso do not, in principle, arise.

Taking the elements of the Marex tort in turn, it is clear that there has been the entry of a judgment – the Cooke Judgments – in Lakatamia’s favour. There has also been a breach of the rights existing under those judgments, in that Mr Su has not paid the Judgment Debt to Lakatamia when it fell due.

As for whether there has been procurement or inducement of that breach by Maître Zabaldano, the evidence is that Maître Zabaldano did as he was instructed by Mr Su (through Mr Chang). Maître Zabaldano did not induce or procure Mr Su to take any step; rather, Maître Zabaldano was induced by Mr Su to take the steps which caused the breach. However, I accept that “any active step taken by the defendant having knowledge of the covenant by which he facilitates a breach of that covenant” may fall within the ambit of the tort (British Motor Trade Association v Salvadori [1949] Ch 556, 565 (Roxburgh J)), and Maître Zabaldano took such an active step when he instructed the bank to make the relevant transfer. Accordingly, I am satisfied that this element of the claim is sufficiently established.

Nonetheless, I consider that the necessary element of intention is missing. I reach this conclusion for the following reasons:

If I am wrong that such honest belief negatives the requirement for intention in the context of the Marex tort, I consider instead that Maître Zabaldano nonetheless has established a justification defence, as for the reasons that follow.

Starting first with the availability of the defence of justification in principle, I consider that such a defence is available, for the following reasons.

For these reasons, I conclude that the defence of justification could be available in principle on the facts of the present case.

In its post-hearing written submissions, the Claimant argued that it was fatal to this point that Maître Zabaldano did not plead a defence of justification. However, it is in the nature of this case that the Claimant chose to pursue a trial against Maître Zabaldano, knowing he had not pleaded a defence, but accepting the need nonetheless to deal fairly with defences Maître Zabaldano might have advanced: see paragraphs 17 and 18 above. It might have been unfair to the Claimant for me to consider a putative defence that the Claimant had not had the opportunity to address, but the Claimant in its (pre-trial) skeleton dealt in some detail with the justification defence, arguing that “this is absolutely no answer to Lakatamia’s claims”. I do not agree with the Claimant’s analysis in this regard:

In seeking to assess whether the defence of justification is made out in the present case, in the context of the Marex tort, I have regard to the scope of such defence in the context of the tort of procuring breach of contract.

Returning to the facts of the present case, in my judgment, if the claim in the Marex tort were otherwise made out, Maître Zabaldano would nonetheless succeed in his defence of justification. I reach this conclusion for the following reasons:

For these reasons, I conclude that both claims against Maître Zabaldano fail.

That brings me, finally, to the claims against Mr Su.

I accept – as has, in any event, previously been found by Sir Michael Burton GBE in proceedings between Lakatamia and Mr Su – that Mr Su knowingly participated in breaches of the Freezing Order by directing Mr Chang to cause Maître Zabaldano to transfer of the Cresta Overseas Monies to UP Shipping.

However, that does not make Mr Su party to an unlawful means conspiracy. It takes (at least) two to conspire, and on the findings I have made neither Mr Chang or Maître Zabaldano participated in an unlawful means conspiracy. Accordingly, there was no ‘Subsidiary Conspiracy’, and so Mr Su is not liable in unlawful means conspiracy.

In light of my findings, the question of quantum does not arise. However, in case this case go further, I would record only that, had I found either the unlawful means conspiracy or the Marex tort claims to be made out, I would have concluded that the loss to the Claimants was the sum paid away to UP Shipping, namely US$ 26,712,851.68. I am satisfied that Mr Su had the entire beneficial interest in Cresta Overseas, and that, but for the transfer to UP Shipping of the Cresta Overseas Monies, those funds would have been available to satisfy, in part, the Judgment Debt.

Accordingly, I dismiss all the claims advanced in these proceedings.