Craig Wright v Peter McCormack (WFO Judgment)

The Defamation Claim concerned (a) 14 tweets published by Mr McCormack (who is a podcaster on matters relating to Bitcoin and other cryptocurrencies) between 29.03.19 and 29.08.19 and (b) a YouTube video, on which Mr McCormack appeared, posted on 18.10.19 (these are referred to compendiously below as “the Publications”). By the date of trial, it was agreed that the meaning of 13 of the 14 tweets was that Dr Wright “had fraudulently claimed to be Satoshi Nakamoto, that is to say the person, or one of the group of people, who developed bitcoin”; and that the meaning of the further tweet was that Dr Wright “had fraudulently claimed to have written the Bitcoin White Paper”. In his judgment at trial (the ‘August 2022 Judgment’), Chamberlain J held that the meaning of the words complained of in the YouTube video was that “there were reasonable grounds for questioning or inquiring as to whether the Claimant had fraudulently claimed to be Satoshi”.

Dr Wright issued proceedings on 17.04.19 (the claim was subsequently amended to complain of the publications which post-dated 17.04.19). Mr McCormack originally pleaded defences of truth (under s 2 of the Defamation Act 2013 (“DA 2013”)), publication in the public interest (under s 4 DA 2013) and abuse of process. However, in November 2020 Mr McCormack abandoned those defences as he could not afford the costs of legal representation for a trial of those issues. Accordingly, the sole general defence to the Defamation Claim which Mr McCormack maintained at trial was his denial that any of the Publications had caused serious harm to Dr Wright’s reputation, such that liability did not accrue under s 1 DA 2013.

In the August 2022 Judgment, Chamberlain J rejected this defence (having made clear at §6 that “the identity of Satoshi is not among the issues I have to determine”) and therefore concluded that Dr Wright had established a cause of action in defamation in respect of each of the Publications: §§132-140.

However, Chamberlain J awarded Dr Wright only nominal damages, in the sum of £1. That was on the basis that Dr Wright had advanced a deliberately false case, and put forward deliberately false evidence, on the question of serious harm to reputation, until days before the start of trial. That case and evidence concerned an allegation that Dr Wright had been invited to various academic conferences and then dis-invited as a result of the matters stated in the Publications. Having maintained that allegation over the course of several years in the proceedings, Dr Wright abandoned it just a few days before the start of trial, shortly after Mr McCormack’s legal team had found witnesses who demonstrated its falsity: see §§44-111, §140 and §§141-147 of the August 2022 Judgment. Chamberlain J’s findings on Dr Wright’s fraudulent case and evidence did not, however, prevent him from reaching the inferential conclusion that each of the Publications had caused serious harm to Dr Wright’s reputation on other grounds – namely, the gravity of the allegations and the extent of publication.

On 21.12.22, Chamberlain J handed down his judgment on issues consequential on the August 2022 Judgment (“the December 2022 Judgment”). On costs, Chamberlain J ordered that Dr Wright should pay Mr McCormack’s costs of the action to be assessed on the indemnity basis, save for the costs which had been the subject of the Order of Master Dagnall dated 30.07.20 (“the Dagnall Order”) and paragraphs 12 and 13 of the Order of Julian Knowles J dated 19.11.21 (“the Knowles Order”) or of a deemed no order as to costs under CPR r.44.10 (“the CPR 44.10 Orders”): see §4 of the Chamberlain Order. The Dagnall Order and the Knowles Order are of particular relevance to the present application, and it is therefore necessary to summarise elements of the background to those Orders.

The Dagnall Order related to a successful application by Dr Wright for an extension of time for the giving of disclosure. Mr McCormack was ordered to pay Dr Wright’s costs of that application.

The Knowles Order related to various applications and issues addressed at the PTR. At §§12-13 of that Order, Julian Knowles J ordered that Mr McCormack should pay Dr Wright’s costs of (a) amendment and strike-out applications made by Dr Wright, (b) re-amending the Reply and (c) responding to the abandoned and/or struck-out elements of the Defence, including the costs of pleading the Reply and disclosure on Mr McCormack’s substantive defences of abuse of process, truth and public interest.

In his submissions on costs following the August 2022 Judgment, Mr McCormack had argued that the costs orders in Dr Wright’s favour in the Dagnall and Knowles Orders – which had been made before Dr Wright’s dishonesty on the serious harm issue had come to light – should be set aside under CPR 3.1(7) or the inherent jurisdiction, or reversed under CPR 44.11. This was rejected by Chamberlain J in the December 2022 Judgment, for reasons given at §§58-70.

At the centre of the Judge’s reasons for refusing to set aside the Dagnall and Knowles Orders under CPR 3.1(7) and/or the inherent jurisdiction was that Dr Wright’s dishonest conduct related solely to the issue of serious harm. At §§65-67, Chamberlain J therefore declined to set aside those orders on the bases that (a) “[t]he Dagnall and Knowles Orders did not depend to any significant degree on the nature of Dr Wright’s case on serious harm”, (b) “it is therefore not possible to say that the dishonesty I identified in my judgment was causative of the decisions in either case” and (c) “Dr Wright succeeded in establishing serious harm despite abandoning his case about the invitations and disinvitations to academic conferences – i.e. this is not a case where the fraud undermined the claimant’s ability to establish the cause of action at all”.

Separately, Chamberlain J rejected Mr McCormack’s application that the costs orders in the Dagnall and Knowles Orders should be reversed under CPR 44.11 on the basis that that rule applies only “when a trial judge is conducting a summary assessment of costs or when a costs judge is conducting a detailed assessment”: December 2022 Judgment, §69. As set out below, if Mr McCormack were now to rely on CPR 44.11 in order to seek the reversal of the Dagnall and Knowles Orders, he would do so in the context of the detailed assessment proceedings in the Defamation Claim, such that that objection would not be applicable.

Dr Wright was granted permission to appeal (“PTA”) in respect of the August 2022 Judgment, and that appeal was dismissed by a judgment of the Court of Appeal of 26.07.23 ([2023] EWCA Civ 892). Dr Wright’s application for PTA to the Supreme Court was refused by Order dated 21.12.23.

Meanwhile, on 28.04.23, Dr Wright commenced detailed assessment proceedings in respect of the Dagnall and Knowles Orders. The bill of costs which Dr Wright served for those proceedings totalled £3,379,651.56. Those detailed assessment proceedings were subsequently subject to an agreed stay pending the determination of Dr Wright’s application for PTA to the Supreme Court. No further formal steps have been taken in those proceedings following the refusal of PTA by the Supreme Court.

Over the past year I have been involved in some detailed case management of some 5 actions brought in the Chancery Division involving Dr Wright and his claim to be Satoshi Nakamoto. That included my conduct of the Joint Trial in the COPA v Wright (IL-2021-000019) and Wright v BTC Core (IL-2022-000069) claims. The Joint Trial was a substantial trial of about 6 weeks and at the conclusion of submissions, having come to a very clear view, I announced the result: I made declarations that Dr Craig Wright is not Satoshi Nakamoto, was not the creator of Bitcoin nor the author of the Bitcoin White Paper or the original version of the Bitcoin software. Subsequently I explained my reasons in my written judgment [2024] EWHC 1198, handed down on 20^th May 2024 (which has been referred to on this Application as ‘the May 2024 Judgment’).

Following my announcement of the result (and before I had handed down my written judgment), I granted a WFO in favour of COPA in the sum of £6m, for the reasons explained in my judgment at [2024] EWHC 743 (Ch) (the ‘COPA WFO Judgment’). This triggered a series of applications from the other groups of defendants to actions brought against them by Dr Wright such that, before Mr McCormack’s application, I had granted several WFOs against Dr Wright. Each of the applications built on the evidence served in previous applications, although the situations I had to consider kept changing, due to the following.

Subject to certain wrinkles concerning the dates when payments to the Court Funds Office (‘CFO’) were cleared, Dr Wright’s response to each WFO was to pay the sum the subject of the WFO into the CFO and in time to avoid triggering the asset disclosure obligations in each Order. This pattern of behaviour was obviously relevant to whether there existed a real risk of dissipation and I must assess this afresh in the context of this application.

Before I outline some of the detail, there is one big point which should not be lost sight of. As Ms Evans KC submitted, the dishonesty on which Mr McCormack now relies is of a wholly different nature and significance to that which was relied on at the time of the December 2022 Judgment. By contrast to the position as of the December 2022 Judgment, it is now clear (as a result of the May 2024 Judgment) that Dr Wright has engaged in a thoroughgoing fraud by identifying himself as Satoshi, including by the use of at least 32 documents which were relied on in the Defamation Claim and which were found to have been forged by Dr Wright in the May 2024 Judgment. Ms Evans KC contends, correctly, that that fraud was the entire premise for the Defamation Claim because the proposition that Dr Wright had acted fraudulently in identifying himself as Satoshi was the very allegation complained of in the Defamation Claim. Accordingly, all of the costs incurred in the Defamation Claim stemmed from Dr Wright’s lie that he was Satoshi. Further that lie went to the heart of Dr Wright’s cause of action in defamation since, had Dr Wright’s fraudulent conduct (including his extensive use of forgery) been known from the outset, Mr McCormack would have had a complete defence to the Defamation Claim.

Moving to the detail, on 04.06.24, Dr Wright (by his solicitors, Harcus Parker), sent a letter to Mr McCormack (by his solicitors, RPC) in which Dr Wright offered to “release any and all entitlements to his costs of the [Defamation Claim]”. Mr Cowper-Coles says it was that letter which triggered this application. The offer was said to be subject to the condition that the three WFOs which were then “technically extant” would be formally discharged (as Harcus Parker anticipated would occur by 07.06.24). Those WFOs have now been discharged.

It follows from the position set out in Harcus Parker’s letter that Mr McCormack now has a present entitlement to payment by Dr Wright of the costs specified in §4 of the Chamberlain Order (i.e. Mr McCormack’s costs of the action, assessed on the indemnity basis, less the costs covered by the Dagnall and Knowles Orders and the deemed no order as to costs orders). Mr Cowper-Coles estimates that those costs total about £840,000 inc. VAT. Prior to Harcus Parker’s letter the position was significantly different in that, on assessment, the costs to which Mr McCormack was entitled would have had to be set off against the (far larger) costs which Dr Wright claimed under the Dagnall and Knowles Orders (subject to Mr McCormack’s right to argue that those costs orders should be set aside, reversed or reduced).

By a letter to Harcus Parker of the following day (05.06.24), RPC contended that Mr McCormack had had to incur substantial legal costs and had suffered financial losses and emotional harm as a result of Dr Wright’s fraudulent and abusive claim. The letter sought compensation from Dr Wright for those costs, losses and harm, failing which Mr McCormack would give consideration to various other remedies (including applying for a WFO and bringing fraud proceedings against Dr Wright).

The present application was issued on 07.06.24 and was subsequently informally notified to me. Having reviewed the application, on 14.06.24 I directed that it should be heard on notice and the application was served on Harcus Parker on 15.06.24. I directed the application should be heard on 20.06.24 but that date was not convenient to Dr Wright’s Counsel. Upon suitable undertakings from Dr Wright, the parties agreed to defer the application until 02.07.24.

Initially the application was supported by the First Affidavit of Mr Cowper-Coles (‘Cowper-Coles 1’) which included all the material I had previously reviewed on the preceding WFO applications. Following the correspondence between the solicitors, Mr Cowper-Coles made a sixth witness statement on 28.06.24 (‘Cowper-Coles 6’) responding to some of the points made in correspondence and the text of that witness statement was subsequently reproduced in his second Affidavit. No evidence was served on behalf of Dr Wright.

Before I outline the claims to costs which make up the sum of £1.548m, it is necessary to mention the costs budgets filed and approved in the Defamation Claim.

At the CCMC on 12.03.20 (when Mr McCormack’s defence of truth was in issue), Dr Wright presented a costs budget to trial of some £3.466m (of which about £1.2m in costs had already been incurred by Dr Wright). Master Davison described this as not only “hugely in excess of any budget that I have seen in a defamation case” but also “the biggest budget that I have ever seen personally in any category of work”. In the event, Dr Wright’s costs budget was approved in the total sum of approximately £2.619m. Mr McCormack’s costs budget was agreed and approved in the sum of £1.3m (plus VAT).

Although I understand that Mr McCormack received some support for his legal costs, it was by no means anywhere near complete. Indeed, for a period between late 2020 and early 2021, Mr McCormack was representing himself.

As Ms Evans KC submitted, Mr McCormack faced two major deterrents. The first was the threat of and then the institution of the Defamation Claim – which would have been a sufficient deterrent for most individuals. Once the Defamation Claim had commenced, there were still two major deterrents for Mr McCormack. The first was the presumption that the allegedly defamatory statements were false, so that Mr McCormack bore the burden of proving the truth of his publications. The second was Dr Wright’s disproportionate expenditure on costs.

With the benefit of hindsight, it can be seen that the Defamation Claim was part of the mendacious overall campaign by Dr Wright and his backers to establish Dr Wright as Satoshi Nakamoto and, ultimately, (cf the Tulip Trading claim) to obtain access to all or part of the large quantity of Bitcoin attributed to Satoshi, worth many billions. In this regard, Dr Wright was using the law of defamation both here and in Norway (so far as Mr Granath was concerned) to silence anyone who dared to contend that Dr Wright was not Satoshi or to question his claim. The power of the cause of action in defamation is exponentially increased in the hands of someone like Dr Wright who has the backing of a billionaire, Mr Calvin Ayre, and who signals his intent to spend disproportionate sums in costs in litigation in this jurisdiction.

GOOD ARGUABLE CASE

Mr McCormack’s total claim for costs of the proceedings (including repayment of costs) amounts to £1.674m odd, the sum being based on a breakdown of costs exhibited to Cowper-Coles 6. This total is made up of the following three categories of costs:

The sum sought in the WFO application was £1.548m odd. This sum was calculated based on the quantification exercise adopted by COPA in their WFO Application (see my March Judgment at [18]) and was calculated as follows:

For Mr McCormack, Ms Evans KC submitted that the only possible issue was as to the quantum of costs to which Mr McCormack will be entitled on assessment. In that regard, Ms Evans KC invited me to have regard to the following factors regarding the likely recovery:

The essence of Dr Wright’s opposition to the application came in the first response to the application in a letter dated 27.06.24 from Harcus Parker in which they indicated that this application would be opposed on the basis that:

These points were addressed in Cowper-Coles 6, where he contended that:

By an email sent on 29.06.24, Harcus Parker indicated that Dr Wright would also resist the application on the following further basis:

The premise for this contention is not accepted by Mr McCormack. Ms Evans KC submitted there was no basis for saying that Mr McCormack will not take steps to recover from Dr Wright the sums to which he is entitled “any time soon”, as alleged by Harcus Parker. On the contrary, Cowper-Coles 6 is clear that Mr McCormack intends to commence his pursuit of those sums by way of a payment on account of costs and detailed assessment proceedings (to be followed by a civil claim) and there is every reason for him to do so as soon as possible, given the considerable sums involved. Without prejudice to that position, Mr McCormack would be willing to undertake to seek a payment on account of costs and/or commence detailed assessment proceedings within a reasonable period after obtaining the WFO (should it be made). It is likely to take a few weeks for a bill of costs to be completed, at which point detailed assessment proceedings can then be started.

Further and in any event, Ms Evans KC made clear that Mr McCormack relies on the Court’s broad discretion to grant relief under s 37 of the Senior Courts Act 1981 (“SCA 1981”). Therefore, if, contrary to Mr McCormack’s primary position, the Court were to hold that it did not have jurisdiction to grant a freezing order in respect of the Further Costs under the WFO principles discussed above, Mr McCormack would contend that such an order can properly be made under s 37 of the SCA 1981: see §25 of the COPA WFO Judgment.

Mr McCormack accepts that he does not have a present entitlement to the Further Costs but submits he has a very strong case (exceeding a good arguable case) that he will establish an entitlement to those costs, by obtaining one of the following orders, which I will discuss in turn:

Most of the argument revolved around these three routes.

As to the CPR 44.11 route, it was acknowledged that this power would have to be exercised in detailed assessment proceedings. However, the pursuit of a detailed assessment pursuant to the terms of the Chamberlain Order might (as I discuss below) give rise to obstacles to recovery of (a) the other costs and (b) damages.

On the second route, involving CPR 3.1(7) (which provides that a power of the court under the CPR to make an order includes a power to vary or revoke the order), Ms Evans KC submitted as follows:

On behalf of Dr Wright, Mr Baradon KC addressed the first two routes together, submitting that both concern appealing or setting aside the Knowles Order. Whilst complaining about the allegedly inadequate way in which they were presented, Mr Baradon KC submitted as follows:

The third route is a claim in fraud or an appeal out of time in respect of the Dagnall, Knowles and CPR 44.10 Orders.

On this route, Ms Evans KC submitted that the essential principles governing claims to set aside judgments for fraud were set out by Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners LP [2013] 1 CLC 596 at §106 (approved by the Supreme Court in Takhar v Gracefield Developments Limited [2020] AC 450), as follows:

A similar approach is open to the court when considering an appeal against an order which was procured by fraud (although in certain circumstances the court will require the issue to be determined by way of fresh proceedings rather than by remittal / on appeal): Dale v Banga [2021] EWCA Civ 240; Ras Al Khaimah v Azima [2021] 1 CLC 715.

On the present facts, each of the elements for setting aside an order on the ground of fraud (by fresh proceedings or an appeal) is satisfied. There has been “conscious and deliberate dishonesty” by Dr Wright in relation to the entirety of his case and evidence in the Defamation Claim (namely, his assertion that he is Satoshi, which was the whole foundation for the claim, and his deployment of fraudulent and forged evidence in support of that assertion). Further, that dishonesty was “material” in that the subsequent evidence of Dr Wright’s dishonesty (i.e. that referred to in the May 2024 Judgment in the COPA and BTC Core Claims) would have “entirely changed the way” in which the Court approached and came to its decisions on costs in relation to the Dagnall, Knowles and CPR 44.10 Orders.

On that basis, Mr McCormack has a very strong case for obtaining orders, in fresh proceedings or by way of an appeal, by which the Dagnall, Knowles and CPR 44.10 Orders are set aside on the ground of fraud and damages are awarded to Mr McCormack to compensate for the loss and damages consequential on that fraud (including the Further Costs incurred by Mr McCormack in defending the proceedings).

Counsel for Dr Wright submitted that the third route suggested by Mr Cowper-Coles is an undefined “civil fraud” claim against Dr Wright. Though, they said, it appears that this is intended to address the shortcomings of the first two routes (in particular that neither leads to an order of all of Mr McCormack’s costs of the proceedings), they suggested it is not clear what actually is meant by it. They suggested that it may be that Mr McCormack has been vague about his proposed case because of the problems he faces in any claim in “civil fraud”, citing the following:

Counsel for Dr Wright also contended that Mr McCormack’s refusal to commit to a route to recovery has the further consequence that the Court risks granting relief on a false premise, relying on the following submissions (and I emphasise that the following sub-paragraphs are just submissions made by Counsel for Dr Wright):

When assessing whether any of Mr Baradon KC’s arguments have any merit, it helps, in my judgment, to keep the big picture in mind: Dr Wright’s Defamation Claim was founded on a lie – his fraudulent claim to be Satoshi Nakamoto – supported by a series of forged documents. Mr McCormack’s principal defence of truth was correct, albeit he was forced to abandon it due to costs pressure. In short, the Defamation Claim should never have been threatened, commenced or pursued. In these circumstances, our law would be in a sorry and sad state if a litigant in the position of Mr McCormack is not able to recover his costs of having to fight that type of litigation (subject only to deduction of costs attributable to any unreasonable conduct of the litigation on his part) on the fraud being exposed.

With this in mind, it can be seen that Mr Baradon KC’s carefully constructed submissions descend into the minutiae which enables the big picture to be entirely ignored. It is true that his submissions assisted me to identify what I characterise below as the ‘safest’ way forward and whilst a number of his submissions might have merit in different factual circumstances, his submissions failed to address or take account of the big picture. In his oral submissions, we had a leisurely tour through the authorities, but, to my mind, almost no principles were identified which are applicable to this particular situation.

I acknowledge entirely the force of the finality principle, but in these circumstances I am unable to detect any public interest in the finality of the Chamberlain Judgment and Order being upheld in the face of the wholescale fraud perpetrated by Dr Wright and his backers in his claim to be Satoshi Nakamoto which was the foundation for the Defamation Claim. This, in my judgment, is a very plain case for the setting aside of the Chamberlain Judgment and Order due to fraud and one in which Mr McCormack should recover his costs of the Defamation Claim.

I should explain one further aspect of the costs pressure on Mr McCormack. At the time of the CCMC, it was apparent that Dr Wright intended to spend disproportionately on costs in order to defeat Mr McCormack’s defence of truth. It is, however, relevant to understand the immense effort and resources which were required to expose Dr Wright’s fraud in the Joint Trial in the COPA and BTC Core claims. It was a joint effort on the part of COPA and the individual defendants to the BTC Core claim, known as the Developers. Their combined costs were in the region of £10m.

This is an aspect of the case which Mr Baradon KC’s submissions completely ignored. He spoke of Mr McCormack’s ‘election’ to abandon his defences as if it was a completely free choice. It is, in my judgment, essential to understand the costs pressure which forced Mr McCormack to take that course. It is that costs pressure which means that any action which Mr McCormack is now able to take to recover his costs of the Defamation Claim and any damages he sustained cannot possibly be characterised as an abuse of process (cf the submission recorded at 52.v) above).

I should also deal with one argument directed by Mr Baradon KC at the Dagnall and Knowles Orders in particular. Mr Baradon KC was keen to characterise the Knowles and Dagnall Orders as merely procedural in nature (and therefore not suitable for reversal in favour of Mr McCormack).

In the Dagnall Order, Master Dagnall ordered Mr McCormack to pay Dr Wright’s costs of his application to extend time for the giving of disclosure. This Order takes on a different complexion in the light of what occurred in the COPA action, where Dr Wright made late and very late disclosure of documents by which he sought to prove that he was Satoshi on numerous occasions. It turned out that the reason why these late tranches of disclosure were not produced at the date originally set for disclosure was because they did not then exist – Dr Wright was busy forging documents down to and, indeed, during the Trial.

Ms Evans KC submitted that, of the documents which I found to be forged by Dr Wright in my COPA Judgment, 32 were produced on disclosure in the Defamation Claim. For present purposes, the point is that an extension of time for Dr Wright to give disclosure was intimately bound up with his production of forged documents.

As for the Knowles Order, its effect is very much bound up with the substantive merits of this situation. In addition to what I have set out above, it is relevant to note the following features of the case:

That leads me to the mechanics of how Mr McCormack’s costs can be recovered. As I mentioned in the course of submissions, I got the distinct flavour that Mr McCormack’s legal team favour pursuing the first two routes (or at least parts of them) before launching a new action for fraud so that they can recover substantial sums in costs in order to fund the pursuit of that new action. Indeed that was the plan as explained in Cowper-Coles 6. As I also mentioned in the course of submissions, I foresee there may be dangers in pursuing that plan. Pursuit of either or both of the first two routes (even in part) might be said to constitute affirmation of the outcome of the Defamation Claim. I envisage that Dr Wright would then argue that affirmation constituted an obstacle to the bringing of a claim to set aside the Judgment and Order resulting from the Defamation Claim on the basis that the result was procured by fraud. I make no ruling on the point, not least because these possible situations have only been briefly sketched out and because I have not heard argument on the point, but one can foresee the point being taken on behalf of Dr Wright.

However, it seems to me that all these potential problems could be avoided. Although Mr Baradon KC sought to cast doubt even on the recoverability of the Chamberlain Costs, I cannot envisage any circumstances in which Mr McCormack would not be able to recover those costs (whichever route is taken), nor was there any concrete suggestion to that effect. In other words, his claim to those costs (subject only to a detailed assessment) seems unanswerable. That being the case, this situation is ripe for an order for an interim payment on account of those costs. On hand down of this judgment, I am prepared to entertain short submissions (which could be in writing) on the timing and amount of any interim payment which may be sought by Mr McCormack. If Dr Wright takes the course of paying £1.548m into Court in order to ensure the WFO ceases to have effect, the interim payment could be paid out from the funds in Court.

An interim payment should allow Mr McCormack’s legal team to formulate his full claim (a) to set aside the Defamation Judgment on the ground of fraud and (b) for damages. This, it seems to me, is the safest route to recovery of costs in the sum of £1.548m (or thereabouts).

The final point to make is that I agree that Mr McCormack is likely to make a high recovery of his costs on the indemnity basis, particularly in view of the costs incurred by Dr Wright, so it is appropriate to adopt the 85% recovery figure.

In conclusion, and notwithstanding all the objections posed by Mr Baradon KC, I was entirely satisfied that Mr McCormack has a good arguable case (indeed a very strong case) for recovery of costs in the sum of £1.548m.

IS THERE A REAL RISK OF DISSIPATION?

Mr McCormack relied on the principles governing the requirement to show real risk of dissipation referred to at §§28-29 of my COPA WFO Judgment (citing in particular the judgment of Popplewell J in Fundo Soberano de Angola v Jose Filomeno dos Santos [2018] EWHC 2199 (Comm) at §86).

The evidence as to Dr Wright’s assets and the real risk that they will be dissipated is contained at §17-19 of Cowper-Coles 1. This evidence drew in large part on that set out in the affidavit of Mr Sherrell adduced by COPA in their application for a WFO against Dr Wright. Based on that evidence, I held in my COPA WFO Judgment that there was a real risk of dissipation (see §§30-43), concluding that it was “rare to see such a powerful case on the risk of dissipation” (§43).

Ms Evans KC submitted that, if anything, the evidence of that risk has increased since the COPA WFO Judgment. Ms Evans KC drew attention to the submissions made by Leading Counsel for COPA at the Form of Order hearing on 07.06.24, that “the correspondence [with Dr Wright’s solicitors] indicates that Dr Wright may either be deliberately evading service or at least is peripatetic and is very difficult to locate”. The apparent difficulties in effecting personal service on Dr Wright (which prompted COPA’s application to dispense with the requirement for personal service) amplify the concerns that Dr Wright would seek to take steps to frustrate enforcement of orders against him by dissipating his assets.

By contrast, Dr Wright denies that he is a dissipation risk, and submits that Mr McCormack has not done enough to convince the Court that he is. Indeed, Counsel for Dr Wright went so far as to submit that Mr McCormack does not himself believe Dr Wright to constitute a dissipation risk. This is suggested by (again these sub-paragraphs are submissions made by Counsel for Dr Wright):

Counsel for Dr Wright also submitted:

I can deal with the allegation of delay here. It seems to me there are two aspects to it. The first concerns when the application was issued. Mr Cowper-Coles gave sworn evidence that the trigger for this application was Harcus Parker’s letter of 04.06.24 (see §24 above). I agree that Mr McCormack’s legal team worked swiftly to prepare this application, which was issued 3 days after Harcus Parker’s letter.

The second and related point concerns the complaints that Mr McCormack’s team had not properly articulated how the costs would be recovered. I have some sympathy for Mr McCormack’s team on this aspect and it is clear that their plan, as outlined by Mr Cowper-Coles was, once again, influenced by costs pressures.

Insofar as delay is relied on as a reason against the making of the WFO, there is nothing in the point.

In my COPA WFO Judgment at [28]-[43], I analysed the substantial evidence filed on the COPA WFO application in support of the contention that there existed a real risk of dissipation. All of that evidence is reproduced in Mr Cowper-Coles’ First Affidavit and the same analysis applies. The eight factors cited by COPA constituted cogent evidence of a risk of dissipation. However, I must reassess the overall risk in the light of some subsequent developments and the principal additional factors are as follows.

First, as already mentioned, in response to each WFO granted against him (or his company Tulip Trading), Dr Wright has paid the requisite sum into Court in order (a) to ensure the WFO in question ceases to have effect so that (b) he does not have to give the disclosure ordered of his assets.

As I have previously observed, it may be said that that militates against a risk of dissipation. However, there are indications in the evidence that the sums paid into Court from Dr Wright’s account in connection with the first two WFOs of £6m and £1.089m were paid into his account by a third party. As I observed in my short ruling on the second application, in one sense the risk of dissipation is supported precisely because Dr Wright and/or his backers have so arranged affairs that whether a payment is made lies in their gift. In other words, they decide whether a payment should be made and that means that if Dr Wright or his backers decide a payment should not be made, there is a very real risk of a judgment or order going unsatisfied.

Second, it is apparent that Dr Wright wishes to avoid giving disclosure of his assets and he has avoided giving any disclosure by paying the requisite sums into Court. One consequence is that the evidence of assets available to meet various costs orders remains extremely shadowy.

Third, in large part, Dr Wright kept his distance from the various applications for WFOs, albeit for this one he mounted a spirited opposition. Nonetheless, once again he did not file any evidence, so he has not attempted to allay any of the concerns prompted by his previous outspoken public pronouncements (summarised in my COPA WFO Judgment in March).

Fourth, I bear in mind the possible oppression caused by repeated WFOs. It takes some time for each Order to cease to have effect, only for another WFO to be granted either on top of an existing Order or shortly after the previous Order has ceased to have effect. I have given careful consideration to the risk of oppression on Dr Wright. However, I observe that if he had been more forthcoming about his ability to pay the costs orders ranged against him and how he has been able to fund the payments into Court made so far, that might have been sufficient to put a stop to the repeated Orders.

Fifth, in the absence of engagement on his part, I am left to assess the risk of dissipation on the evidence put before me and in the circumstances which present themselves. Undoubtedly a curious situation has developed, but as before, I am reminded that the authorities require the risk of dissipation to be assessed on an objective basis, and objectively, his boasts of having rendered himself judgment proof remain a powerful factor in favour of a conclusion that there remains a real risk of dissipation, along with the other factors I mentioned in my COPA WFO Judgment.

Sixth is the fact that Dr Wright appears to have left his previous residence in Wimbledon some weeks ago now. The last information available (which was at the time of the COPA WFO) was that he was in the UTC +7 timezone. I have not been given any further information as to his whereabouts or whether he has left the UK for good.

Viewing all the relevant circumstances objectively, I conclude there remains a real risk of dissipation.

JUST AND CONVENIENT?

Not surprisingly, Counsel for Mr McCormack submitted it was just in all the circumstances to make the WFO sought, relying on the strength of his case for recovery of the costs and the clear evidence of the risk of dissipation.

Counsel for Dr Wright invited the opposite conclusion, on the basis of three submissions:

On that third point, that is about the weakest form of reassurance that it is possible to give and I give it no weight, against all the evidence to the contrary effect. The second point I have already dealt with under delay. Upon my enquiry, the first point was explained as follows. The contention being made on behalf of Dr Wright (albeit hesitantly) was that Mr McCormack did not seek the WFO to secure the fruits of a judgment because he had not demonstrated a sufficient intention to proceed to obtain such a judgment in any reasonable time frame. Once again, this was founded on the submission that Mr McCormack has failed to specify what path to judgment he will take. I was invited to be unpersuaded that the various paths suggested would actually work.

For the reasons already indicated, none of these points carry any weight. For the avoidance of any doubt, I completely reject the first submission.

Although Ms Evans KC submitted that it is very unlikely that Dr Wright would suffer any loss as a result of the making of the WFO sought, Mr McCormack has offered a cross-undertaking in damages. As set out at §20 of Cowper-Coles 1, this takes the form of an undertaking to release Dr Wright from payment of Mr McCormack’s costs pursuant to §4 of the Chamberlain Order, in the event that Dr Wright were to suffer loss in consequence of the WFO. Again, Dr Wright has not challenged the contentions underlying this part of the application.

In all the circumstances I am in no doubt that it is just and convenient to grant the WFO, not least because Mr McCormack should not, it seems to me, face a risk of the costs orders he secures going unsatisfied.

In the end, there was no dispute about the inclusion of provisions as to alternative service of the WFO on Dr Wright’s solicitors.

I am very grateful to the parties for their efforts in agreeing most of the provisions of the draft Order presented to me. The disputes which remained concerned certain deadlines, foreign enforcement and the terms of the undertaking as to further action by Mr McCormack.

So far as the deadlines are concerned:

So far as foreign enforcement is concerned, Counsel for Dr Wright contended that Mr McCormack had not addressed the guidelines established by the CA in Dadourian v Simms [2006] EWCA Civ 399, and drew attention to Guideline 5 in particular. This was not the subject of any real focus in submissions. However, I consider I am in a position to reach an informed decision in the circumstances of this case. First, the trigger for the COPA WFO was the transfer by Dr Wright of his shares in RCJBR Holding plc to DeMorgan PTE, a company organised under the laws of Singapore. Second, Dr Wright’s links with Australia, the Seychelles and Antigua are all discussed in my COPA Judgment and touched upon in my COPA WFO Judgment (see my reference to his use of offshore structures in [38]). Mr Cowper-Coles gives specific evidence about the existence of assets owned by Dr Wright in each of those territories. In the circumstances of this case, I consider it is essential for Mr McCormack’s team, if it should prove necessary, to be able to have the WFO recognised and enforced in the foreign jurisdictions mentioned in the Order.

So far as the terms of Mr McCormack’s undertaking as to further action, this was under further discussion between Counsel but I also indicated that it could be finalised in the light of consideration of this Judgment in draft.