Mex Group Worldwide Limited v Stewart Owen Ford & Ors

This is an unusual case. It arises out of a worldwide freezing order (“WFO”) in this jurisdiction made in support of proceedings in Scotland. The WFO was discharged as regards certain defendants for failure to make full and frank disclosure and on a jurisdiction point. That discharge was upheld by the Court of Appeal. The Third and Eighth Defendants, whilst being respondents to the WFO, did not join in the discharge application and did not obey the WFO by providing disclosure as required.

Committal proceedings were brought against the Third and Eighth Defendants. Belatedly, they applied to discharge the WFO whilst continuing not to provide the disclosure required under the WFO. The Court refused to postpone the committal proceedings. The Third and Eighth Defendants were found guilty of contempt, and continued to refuse to provide the disclosure. In the meantime, the Court made directions for the discharge application of the Third and Eighth Defendants to be heard at the same time as the decision on penalty for contempt.

In the meantime, MGWL discontinued proceedings in Scotland with the effect that the English proceedings would fall away. The result was that the WFO was set aside. What remained to be decided was the following, namely:

The background history is complex. It is not necessary for the purpose of the issues before the Court to descend to particularity. It suffices to set out a very broad summary.

Mex Group Worldwide Limited (“MGWL”) is a provider of financial derivatives worldwide. MGWL is the holding company of the MultiBank Group. It is the claimant in the Scottish proceedings and in these proceedings. Mr. Smith is a resident of Luxembourg. He is the founder of CSM.

On 18 October 2023, proceedings were brought in Scotland by MGWL against a number of parties including Mr. Smith and CSM. MGWL sought orders for interim relief (i) pursuant to a ‘summons’ under Scottish procedure, orders for the preservation of assets, broadly akin to a freezing order; and (ii) pursuant to a ‘petition’, orders for the preservation and recovery of evidence, broadly akin to a search order.

On the same day, Lord Sandison granted the orders, having heard extensive submissions from Leading Counsel for MGWL. Central to the Scottish Proceedings is the allegation that the defenders to those proceedings conspired to attempt to cause Mex Securities, which is a Luxembourg based securitisation vehicle, to renege upon a settlement agreement it reached in negotiations in Dubai in December 2020 with MGWL (the “Dubai Agreement”). The Dubai Agreement was subsequently annexed as the schedule to a Tomlin order (the “BVI Consent Order”) by which proceedings in the BVI (which has been described as the “MCL Claim”) were compromised.

It is convenient to set out the next stage of the matter by reference to the way in which MGWL put its case for the purpose of the Contempt Application. In its skeleton argument dated 22 July 2024 as updated on 14 November at paras. 20-28, it said the following:

“B.3. Disputes in Other Jurisdictions

20.

The MCL Claim (Taher 31, paras 20-31, [8/145]). The dispute in the MCL Claim related to financial and other support provided by MGWL to or for the benefit of Mex Securities, at the request of its investment manager VDH AG, another defendant to these proceedings, in sums totalling tens of millions of Euros as part of a joint venture between VDH AG and the MultiBank Group relating to Luxembourg issued notes (the “Notes”). Contrary to assurances and undertakings given by VDH AG, it sought to terminate that relationship early, denying MGWL the opportunity to earn substantial commissions on trading on the Notes.

21.

So far as MGWL was concerned the Dubai Agreement was a genuine settlement of an emerging dispute which was subject to considerable complexity and uncertainty, which settlement was the product of lengthy and intense negotiation. The MCL Claim was settled by the BVI Consent Order.

22.

Proceedings in Luxembourg and the BVI (Taher 3, paras 34-36 and 47 [8/147, 8/150]). Very soon after the Dubai Agreement was entered into, however, Mex Securities (acting through Mr Smith and Mr Volotovskiy, so MGWL alleges) began to take steps to impugn the Dubai Agreement and Consent Order. Those attempts have taken a number of forms and have included proceedings in Luxembourg (in which allegations made, it appears, by Mr Smith were later described as ‘scurrilous’ by Bryan J in proceedings in the Commercial Court; see Hastings 2, paragraph 11 at [4/21]) and further proceedings in the BVI, brought by VDHI (another defendant to these proceedings and a company related to VDH AG by majority common ownership).

23.

The Scottish Proceedings. In the Scottish Proceedings, it is alleged that these attempts to impugn the Dubai Agreement and Consent Order are the result of an unlawful means conspiracy. The summons in the Scottish Proceedings is contained in the bundle at [7/114] for completeness. Mr Smith has appeared in person on three occasions in the Scottish Proceedings, most recently on 17 July 2024. Mr Smith sought permission to act for CSM, which was rejected by the Scottish Court. At the hearing of 17 July 2024, CSM was represented by Scottish counsel.

24.

The English Proceedings (Hastings 2, para 15 [4/22]). On 20 October 2023, MGWL issued Part 8 proceedings in England seeking worldwide freezing injunctions ancillary to the Scottish Proceedings under s.25 of the CJJA against all the defendants to the Scottish Proceedings (apart from D11, Mex Securities, because it is in liquidation).

25.

An ex parte hearing took place on 20 October 2023 before Mr Justice Lavender, and the WFO was granted as against all the respondents to it including the Contempt Defendants. The WFO [5/33] contained the following material provisions:

(1)

It contained the usual orders for the provision of information relating to the respondents’ assets (para 11), and for the confirmation of that information by affidavit (para 12);

(2)

It granted permission to MGWL to serve the WFO out of the jurisdiction on all the respondents2 (para 26); and

(3)

It granted permission pursuant to CPR 6.15/6.27 to serve “the Claim Form, [the WFO], the application materials, evidence, skeleton argument, transcript of hearing and any other documents requiring service” on the respondents by an alternative method, specifically by email to addresses set out in the WFO (para 27).

26.

The WFO was served on the Contempt Defendants as set out in Hastings 2, paras 17-18[4/22] and the ‘Schedule of Service’ [5/55 – the relevant pages being 59-60, 66-67 and 74-75], and ‘read receipts’ (or the equivalent) which demonstrate that the documents so served were ‘delivered’ electronically (as opposed to ‘bouncing back’ or being recorded as undeliverable) (Hastings 2, para 19 [4/23]). The emails effecting service of the Order are at [5/76-84].

27.

The WFO was continued on 2 November 2023 at an inter partes first return date hearing by Mr Justice Jay [5/85] with a substantive return date in relation to certain of the defendants being anticipated in December 2023 (Hastings 2, para 21 [4/23]). That Order pushed back the time for compliance with para 12 of the WFO to 6 November 2023. The order of 2 November 2023 was served on the Contempt Defendants by email [5/89-91].

28.

On 16 November 2023, three of the respondents to the WFO, Mr Gollits, VDH AG and VDH Invest SA applied to discharge it. That challenge was heard in December 2023 before Mr Simon Tinkler sitting as a Deputy High Court Judge. After a 3-day hearing the Judge gave an oral judgment discharging the freezing injunctions as against those three respondents on 15 December 2023. MGWL has sought and obtained permission to appeal the decision of Mr Tinkler, and permission was granted by order of Andrews LJ on 14 March 2024. The hearing is listed for 22-24 July 2024. Other respondents have subsequently applied to set aside the WFO, but those applications have been stayed pending resolution of the Scottish Proceedings at a final hearing and those respondents have agreed to pay MGWL’s costs of responding to those (effectively abandoned) applications.”

On 22 March 2024, the Contempt Application was issued.

Within the application notice for the Contempt Application, MGWL sought the following relief, that:

MGWL further sought orders for service out of the jurisdiction and by an alternative method. On 23 April 2024, that application came before Mr Charles Morrison, sitting as a Deputy Judge of the High Court, who made an order granting MGWL permission to serve the Contempt Application on the Contempt Defendants (1) out of the jurisdiction and (2) by an alternative method, specifically email, with a number of email addresses specified in paragraph 2 of the order (being the same email addresses which were identified in the original WFO).

The third witness statement of Mr Hastings sets out the subsequent steps to effect service of the Contempt Application, and otherwise to draw this hearing to the attention of the Contempt Defendants, including:

As noted in the second and third witness statements of Mr Hastings, however, and quite apart from the fact of service of the documentation, it is clear that at least Mr Smith and through him CSM, (the company which he owns and operates) have been aware of the WFO and the Contempt Application for some time:

As set out above, more recently each of Mr Smith, CSM and Mr Volotovskiy has responded to the proceedings.

Having previously ignored the WFO and the Contempt Application, Mr Smith emailed the Court on 11 June 2024, the day before the date of the final hearing. Mr Smith stated:

“Because I wish to appear in person, I need a lot of time to prepare for the case, I have seen that there are many lawyers acting for the applicant and there are thousands of documents to study. Please advise how I can request the court to grant me sufficient time to prepare to defend the application for contempt of court.”

MGWL is the parent company of the MultiBank Group, an international group of companies and a major provider of brokerage services for foreign exchange and contracts for difference transactions. MGWL asserts that between March 2017 and December 2020, the MultiBank Group was in joint vent with a company called Von der Heydt & Co AG (‘VDH AG’) whereby MultiBank agreed to support certain notes issued in Luxembourg companies. In December 2019, the relevant funds were transferred into Mex notes by Mex Securities Sarl (‘Mex Securities’), described by MGWL's solicitor as "a Luxembourg securitisation vehicle".

MGWL says that trading losses had been incurred due to the trading strategy of VDH AG and its chief executive officer, Mr Michael Gollits. In return for MultiBank's support, MGWL says that through Mr Gollits, VDH AG agreed not to redeem the Mex notes for a period of time. Mex Securities needed this time to earn fees on commissions through the trading of the notes.

MGWL says that unbeknown to Mr Taher and MultiBank, Mr Michael Gollits established CSM, with two others, Mr Colm Smith and Mr Stewart Ford; and the initials "CSM" being the first letters of their first names, Colm, Stewart and Michael. CSM is said to have been a competitor of Mex Securities. MGWL says CSM planned to transfer funds from the joint venture to CSM and to injure the MultiBank Group's business.

MGWL's case is that VDH AG and other companies in its group came under regulatory scrutiny in Luxembourg; and that on 2 December 2020, Mr Gollits falsely represented to Mr Taher of MGWL that it had become necessary for VDH AG to withdraw funds from the Mex notes because of a supposed new regulation making illegal (in Luxembourg) the investment of the Mex notes in precious metals or precious metals derivatives. MGWL says Mr Gollits requested immediate redemption of the sums VDH AG had invested in the Mex notes.

MGWL's case is that on 7 December 2020, Mr Colm Smith, representing Mex Securities, attended in Dubai for negotiations with Mr Taher. The negotiations produced a settlement agreement whereby Mex Securities agreed to (and did) pay about €36 million to MGWL or a wholly owned subsidiary Mex Clearing Limited. In return, MGWL assigned to Mex Securities MGWL's claims against VDH AG.

On 10 December 2020, Mex Clearing issued a claim in the Eastern Caribbean Supreme Court (Virgin Islands) (the BVI proceedings) against Mex Securities, seeking the return of alleged loans. Control of Mex Securities is disputed by the defendants. The basis of the BVI claim was that : "the funds advanced by the pursuer [Mex Clearing] over the whole course of dealing were to be treated as loan finance to the eleventh defender [Mex Securities], which was by that time the party holding the proprietorial interest in the assets in which the note investment had been invested.

According to the condescendence in the Scottish proceedings:

"On 10 December 2020, Mex Clearing raised a claim against the eleventh defender [Mex Securities] and MBFX [Multibank FX International Corporation, a BVI subsidiary of Mex] in the British Virgin Islands seeking repayment of the sum of €36,385,509.52 ('Mex Clearing BVI Claim'). …. Whilst the dispute in the BVI proceedings was in substance between Mex Clearing and the eleventh defender, MBFX was joined as a second defendant as it held the funds in respect of which Mex Clearing sought payment."

What happened in December 2020 is further described in the recent decision on expenses of Lord Sandison in the Scottish proceedings at [11]-[12]:

"[11] … An agreement was reached that Mex Securities would enter into a settlement agreement and thereafter a consent order in the BVI court process acceding to the claim to the extent of most of the relevant sums, that Mex would assign its claims against VDH AG to Mex Securities and would thereafter assist it in funding the pursuit of those claims against VDH AG; and that, in the event of successful pursuit of the assigned claim against VDH AG, the ultimate proceeds after reimbursement of legal costs would be used first to restore the note holders to the position they should have been in but for VDH AG's actions, and thereafter would be divided equally between Mex and Mex Securities. The settlement was presented to the court and formalised in a consent order and schedule thereto granted by Wallbank J sitting in the BVI High Court on 14 December 2020. On 18 December 2020 the consent order was partially implemented. Mex Clearing received funds of €36,385,509.52 from MBFX in implement of an instruction from Mex Securities, in accordance with the consent order.

[12] At this point the plot thickens. Almost immediately after settlement terms were agreed and the consent order was finalised, Mex Securities purported to renege upon it. Mr Smith left Dubai to return to Luxembourg on 18 December 2020. On 22 December 2020, agents purporting to act on behalf of Mex Securities wrote to Mex's solicitors in the BVI claim and separately to MBFX, suggesting that only Mr Volotovskiy was a director of Mex Securities, which had no knowledge of the consent order and was seeking to challenge any implement of it. Mex claims that Mex Securities had been incorporated in Luxembourg in 2018 as a securitisation vehicle for the purpose of a proposed venture which had been discussed between Mex and VDH AG but which did not proceed. Mex allowed it to use the "Mex" style, but it was not integrated into its group and was not controlled by Mex. It was used as the vehicle for a note swap transaction which led to the operation of the indices in question at the suggestion of Mr Gollits, who appointed Mr Smith and Mr Volotovskiy to manage it."

In reneging on Wallbank J's consent order (‘the BVI Consent Order’), Mex Securities alleged that the settlement was a "sham". Mex Securities brought a claim in Luxembourg on or about 2 March 2021 (ibid., at [31]) alleging that Mr Taher had pressured Mr Smith into agreeing to the settlement embodied in the Tomlin order (holding Mr Smith in a "golden prison" in Dubai) and that Mr Smith was not authorised by Mex Securities to agree to the settlement.

In April 2021, in the BVI proceedings that had led to the BVI Consent Order, Mex Clearing obtained an anti-suit injunction against Mex Securities continuing the Luxembourg claim, which did not then progress further. Mex Clearing also applied for an anti-suit injunction in England, which Bryan J granted in the High Court in London on 16 April 2021. Bryan J also granted other relief to protect MGWL against what he called scurrilous and demonstrably false allegations made in the Luxembourg proceedings.

Then on 23 April 2021, a company associated with VDH AG called Von de Heydt Invest SA (tenth defender in the Scottish proceedings) (‘VDHI’), applied ex parte as an additional claimant in the BVI proceedings against Mex Clearing and MBFX for a worldwide freezing order (‘the BVI WFO’) and an order staying the BVI Consent Order (and for certain disclosure). Jack J granted the BVI WFO that day and it was upheld on appeal. Its basis was that Mr Smith and MGWL had perpetrated a fraud against VDH AG, VDHI and their clients. The allegation was that the BVI claim and settlement were a fraudulent ruse benefiting Mr Taher at the expense of investors in the Mex notes.

According to the condescendence in the Scottish proceedings, from April to October 2021, Mex Clearing and MBFX applied unsuccessfully in the BVI proceedings to have the BVI WFO set aside. On 4 October 2021, Jack J gave a judgment refusing to discharge it. In the further course of the BVI proceedings, Jack J was recused from the case in an appellate decision made on 29 April 2022. The procedural history of the BVI proceedings has been complex and there has been no trial or definitive conclusion to them.

On 18 October 2023, MGWL commenced the Scottish proceedings by summons in the Court of Session. The relief sought in the "Conclusions" was:

"For declarator that the defenders have engaged in an unlawful means conspiracy directed inter alia at harming and injuring the interests of the pursuer by: (a) by causing the eleventh defender [Mex Securities] to seek to renege on the agreement recorded in the schedule to the Consent Order granted by the High Court of Justice of the British Virgin Islands dated 14 December 2020 (as defined in the Condescendence hereto) which agreement was a lawful, valid and binding compromise entered into by the parties to it, and for that purpose (b) causing a bribe or inducement to be paid to the third defender [Mr Smith] by the transfer of investment funds from the ninth and tenth defenders [VDH AG and VDHI] in the sum of at least $7m to be paid to the eighth defender [CSM] (and thus indirectly to the benefit of the third defender [Mr Smith]) to induce him to cause the eleventh defender [Mex Securities] to seek to renege; (c) attempting to insulate the ninth and tenth defenders [VDH AG and VDHI] from exposure to their own customers and regulatory difficulty arising as a consequence of their own actions, by seeking to create the false impression that those difficulties were caused by the pursuer; (d) seeking to advance a dishonest account that the third defender [Mr Smith] lacked legal authority to bind the eleventh defender [Mex Securities] to the terms of the settlement; (e) seeking to advance a dishonest account that the third defender's [Mr Smith's] giving of consent to that settlement on behalf of the eleventh defender [Mex Securities] was vitiated by improper pressure applied to him; (f) harming the pursuer's interests and reputation by making, and seeking to publicise, false claims against the pursuer and related companies; (g) furthering the carrying on of substantial volumes of investment business between the defenders; and (h) concealing the first defender's [Mr Ford's] interest in and involvement with that business in light of the prohibition order made against him by the Financial Conduct Authority."

The Claimants then added a claim for payment by the Defendants to the pursuer, MGWL, jointly and severally or severally, of £85 million plus interest at 8 per cent per annum, and a claim for the expenses of the action.

Lord Sandison explained in a recent judgment on expenses at [20] that there was a "section 1 petition process" followed by "the grant of commission and diligence on 18 October 2023". As he explains, "dawn raids" then took place at the residences of Mr Ford (first defender) and Mr Cormack (second defender) and the offices of Melville (fifth defender) and Regal Consultancy International Limited (seventh defender) (Regal). A large amount of documents, hard copy and electronic, were recovered, though many of them had nothing to do with the dispute. Lord Sandison allowed them to be used in related litigation elsewhere.

Also in October 2023, MGWL began proceedings in the High Court in London (the English proceedings) under section 25 of the Civil Jurisdiction and Judgments Act 1982 ancillary to and in support of the Scottish proceedings. On 20 October 2023, Lavender J granted a worldwide freezing order against the defenders in the Scottish proceedings who were also the defendants in the English proceedings (“the WFO”).

Subsequently in the English proceedings, on 1 December 2023 Mr Taher swore a lengthy affidavit giving an account on oath of what he said had happened. He defined as "the Conspirators" (at paragraph 7.1) Mr Ford, Mr Cormack, Mr Smith, Mr Gollits and Mr Duthie. The first four were defenders in the Scottish proceedings. Mr Duthie, alone among "the Conspirators", was not. Mr Taher developed his allegations about "the Conspirators" at paragraph 108:

"108.

… the central allegations in the Scottish and English Proceedings, are that:

108.1

the Dubai Agreement [i.e. the settlement in December 2020] was entered into by myself and the MultiBank Group lawfully, but subsequent to the return of Colm Smith to Luxembourg, there became an unlawful means conspiracy which occurred (involving Stewart Ford, Michael Gollits, Colm Smith, Adam Duthie, VDH-AG, VDH-I and the other Conspirators) to pay and entice Colm Smith to renege on the Dubai Agreement and further, to issue the Luxembourg Summons.; and

108.2.

There is an unlawful means conspiracy in Scotland, which should be tried in that jurisdiction, which involves, amongst other things, the following:

108.2.1.

First, on the one hand for VDH-I to commence litigation in the BVI and allege fraud against me and against Colm Smith, pretending, albeit falsely, it is a separate entity from VDH-AG and is not part of the VDH Group and has no knowledge of the involvement of VDH AG with Colm Smith, CSM and the other Conspirators; and

108.2.2.

Second, on the other hand, for VDH-AG (sister company to VDH-I, working hand in hand with VDH-I) to enter into the unlawful means conspiracy, pay and work with Colm Smith and his company, CSM, so as to entice and/or induce and/or bribe him to renege on the Dubai Agreement, disappear and not defend the fraud allegations against him by VDH-I; and

108.2.3.

Third, through utilising VDH-I as the sole protagonist alleging fraud against me in the BVI, shield Michael Gollits, VDH-AG and the VDH Group, from allegations of illegal trading in gold, breach of fiduciary duty in relation to the value of the Notes, deceiving the Noteholders as to the real value of the Notes and other wrongdoings by Michael Gollits and VDH-AG; and

108.2.4.

Fourth, the price that VDH Group (including VDH-AG and VDH-I) will have to pay Colm Smith, his master Stewart Ford, Brian Cormack and other Conspirators is not only to pay € 8.6 million from 1 January 2021 to July 2023, but to also, for VDH-AG to become the investment manager to CSM, and issue Junk Bonds amounting to US$ 5.6 billion, in order to both give credibility to these Junk Bonds and also shield and conceal the involvement of Stewart Ford in the Bonds and the profits arising therefrom (in breach of the FCA life ban on Stewart Ford who suffered the heaviest fine in the history of the FCA amounting to circa GBP 76 million for issuing similar Junk Bonds as those now being issued by CSM under the synopsis of VDH-AG); and

108.3.

Needless to say, the result of the concealment of the involvement of VDH-AG with Colm Smith and CSM and the unlawful means conspiracy tantamount to abusive behaviour by VDH-I to conceal facts, deceive and mislead the BVI Honourable Courts so as to cause unjustifiable and substantial harm to the MultiBank Group and I both economically and reputationally."

On 15 December 2023, Mr Tinkler sitting as a Deputy Judge of the High Court acceded to the application to discharge the WFO as against Mr Gollits, VDH AG and VDHI. He refused MGWL's application to continue the English WFO. The approved transcript of his judgment was issued on 25 January 2024: see [2023] EWHC 3394 (KB). While there was a good arguable case against the three defendants, after a 3-day hearing Mr Tinkler, gave an oral judgment discharging the freezing injunctions as against those three respondents. He found that there was material non-disclosure in a number of respects, and that such was the non-disclosure that it was inappropriate having discharged the injunction to grant a fresh one.

MGWL had been "highly reckless in its attitude to compliance with its obligations", he noted at [8]. He gave details of the failures of disclosure at [75]-[120]. I will not repeat them here. Among the points were that Lavender J had wrongly been told MultiBank had a "blameless reputation in the industry", when in fact it was on a watch list issued by the Financial Conduct Authority (the FCA) warning against dealing with it and to "beware of potential scams".

Mr Taher's past censure by Stanley Burnton J and other criticisms in past English court proceedings had been omitted; so had Mr Taher's past contempt of court and an arrest warrant issued against him for failing to attend hearings. The BVI proceedings had been presented in a selective way that was "misleading in itself and by omission" ([81]). Statements about control of the VDH companies were misleading. Lavender J had not been told the full facts about the regulatory history of the VDH companies and Mr Gollits; he was given a version that was "significantly different from the truth" ([118(5)]).

Mr Tinkler also found that there was no risk of dissipation. (The Court of Appeal did not agree with that part of the judgment as appears below, although the Court of Appeal affirmed the end result.) Mr Tinkler also found that there was no connection which these respondents had with the jurisdiction and therefore found that relief should be refused on the ground that the fact that the court had no jurisdiction apart from s.25 of the Civil Judgments and Jurisdiction Act 1982 to make an order made it inexpedient for the court to grant it.

On 14 March 2024, permission was granted for an appeal to the Court of Appeal. The hearing was listed for 22-24 July 2024. Whereas other respondents applied to have the WFO discharged, Mr Smith and CSM did not make an application for discharge until September 2024. They did not engage with the WFO and did not provide the information required. On 22 March 2024, the Contempt Application referred to above was issued.

Orders were made for alternative service. Having previously not responded to the WFO and the Contempt Application, Mr Smith emailed the Court on 11 June 2024, the day before the date of the final hearing. Mr Smith stated:

“Because I wish to appear in person, I need a lot of time to prepare for the case, I have seen that there are many lawyers acting for the applicant and there are thousands of documents to study. Please advise how I can request the court to grant me sufficient time to prepare to defend the application for contempt of court.”

There were hearings on 12 June 2024 and 30 July 2024 before Ellenbogen J and Morris J respectively who adjourned the Contempt Application, but made costs orders reflecting the Court’s displeasure regarding the approach of Mr Smith and CSM to the Contempt Application.

On 12 June 2024 he appeared by video link before Ellenbogen J. She granted an adjournment to 30 July 2024 she ordered that the parties should come prepared to address all matters arising including sanction should that issue arise. She ordered that all parties attend in person. Any evidence would have to be filed by 5 July 2024 by the Defendants. She ordered that the Third Defendant and the Eighth Defendant were to be jointly liable for the costs thrown away by the adjournment with a payment on account assessed at £15,000 to be made by 3 July 2024. The payment was made albeit late.

There was a further application for an adjournment which came before Morris J on 30 July 2024. The application by the Third Defendant and the Eighth Defendant was on the basis that the Third Defendant was unable to travel to the UK to attend the hearing since he had suffered injuries due to a horse-riding accident. Morris J acceded to the application for a second adjournment, but he ordered that Mr Smith and CSM were to be jointly liable for the costs thrown away by the adjournment with a payment on account of £35,000 to be paid by 13 August 2024.

The English WFO, meanwhile, remained in force as against all the English defendants (also being the Scottish defenders) except as against Mr Gollits, VDH AG and VDHI who had, it will be recalled, persuaded Mr Tinkler to discharge it as against them. MGWL had obtained permission to appeal against that decision and the appeal was argued from 22 to 24 July 2024. The appeal was dismissed for the reasons given in the reserved judgments of the Court of Appeal (Males and Coulson LJJ and Sir Julian Flaux C) handed down on 8 August 2024: see [2024] EWCA Civ 959.

The Court of Appeal judges agreed with Mr Tinkler save only that they found that there was evidence of a risk of dissipation, and whilst agreeing substantially with the findings about non-disclosure, in certain respects, they made different findings which did not affect the overall result.

The Court of Appeal treated three aspects of non-disclosure as the most serious, namely:

In my judgment on the Contempt Application, I summarised the relevant chronology as follows:

“[19] On 25 September 2024, the Third Defendant filed an affidavit in opposition to the Claimant's application. On 27 September 2024, the Third Defendant, the Eighth Defendant and the Twelfth Defendant applied to discharge the WFO and to stay the application to commit and to vacate the hearing listed for 18 November 2024 pending the outcome of their discharge application. On 21 October 2024, Soole J made an order on paper dismissing the application to stay the application to commit and to vacate the hearing listed for 18 November 2024. Soole J held that "the fact of the application to discharge the worldwide freezing Order provides no good reason to stay the contempt application nor therefore to vacate the hearing listed for 18 November 2024". He ordered in respect of the discharge application that it be listed for directions only on 18 November 2024 by the Judge hearing the contempt application, who would determine at what stage in the hearing to consider the directions. Since this order was made without a hearing, Soole J granted any person affected by the order 7 days within which to apply to the court to set aside or vary its terms. No application was made within the seven-day period, and no attempt was made on 18 November 2024 to apply out of time.”

The Contempt Application was heard and a number of points were advanced to explain the failure to provide the information. In my judgment, I found that Mr Smith and CSM knew that their failure to provide the information was a breach of the court order. I found that the order for alternative service was properly made and should not be set aside. It was not illegal in Luxembourg to have service by email. I found the contempts proved.

In my judgment, I stated that I would deal with penalty only at the same time as dealing with the application to set aside the WFO. That was capable of affecting the appropriate penalty.

On 22 January 2025, I ordered that the determination of penalty and the application to set aside the WFO be heard at a rolled-up hearing on 10-11 March 2025. Shortly before the hearing, there was a written application for cross-examination of Mr Taher which I dismissed in an order made on 6 March 2025.

At a hearing in the Court of Session on 5 March 2025, MGWL appeared by fresh agents and counsel and indicated that it proposed to abandon the Scottish proceedings. On 6 March 2025 MGWL's Chief Operations Officer, Mr Salem Kattoura, filed a witness statement in that matter.

In the statement, Mr Kattoura said he wanted to explain to the court why MGWL "felt it had little choice but to discontinue the claim against the defendants in Scotland". Insisting that the claim was well founded on its merits and that the defenders had indeed taken part in the unlawful conspiracy as alleged, he said the costs of continuing the Scottish proceedings would be many millions of pounds and the evidence of the ability or otherwise to collect from the respondents if successful was not promising. In particular, it was revealed in February 2025 that VDH AG was going into a process of liquidation. Further, the Fifth Defendant went into bankruptcy in early 2024. There was also concern that CSM was engaged in illegal activities and that was another reason to believe that it would not be good for the money. In a hearing on 10 March 2025, I expressed the view that I was dissatisfied with the evidence of Mr Kattoura and that it was “problematic”.

MGWL filed its notice to discontinue the Scottish proceedings on 7 March 2025. At the hearing in London on 10 March 2025, I discharged the English WFO as against Mr Smith and CSM. I declined to deal with issues of costs and arising from MGWL's cross-undertaking in damages. I ordered MGWL to file further witness evidence addressing its reasons for discontinuing the Scottish proceedings, if so advised, by 31 March 2025. A further hearing would be listed as necessary to deal with outstanding issues.

The Claimant stated that it would not press for any particular penalty in respect of the contempts. With the discharge of the WFO, there fell away the order for the provision of information. It did not affect the fact that the contempts had been proved and penalty remained outstanding. However, there was no longer a need for coercive punishment to bring about observance of the disclosure provisions in the WFO.

On 20 March 2025 Lord Sandison, in his own words (see his recent judgment on expenses, at [23]):

"found Mex liable to the defenders in the expenses of the causes on an agent and client, client paying basis; found the defenders' agents entitled to charge an additional fee … with 15% specified as the level of increase in the charges to be allowed at taxation in respect of each such paragraph, found Mex liable to the Scottish defenders for payment of interim expenses in the sum of £150,000 in each process and authorised the sum lodged as caution to be uplifted and paid to their agents."

Lord Sandison in the Scottish proceedings, the same judge who had granted the ex parte orders in Scotland was troubled by how the Claimant had brought conspiracy to defraud proceedings in Scotland claiming £85,000,000 which had suddenly discontinued. He expressed himself about the reasons set forth for this in the following terms in a judgment given about costs reported at [2025] CSOH:

“27.

The reasons advanced for the abandonment did not stand up to scrutiny, as could be seen from a close examination of a witness statement provided by the COO of the MultiBank Group, Salem Kattoura, in one of the related English proceedings. VDHI's insolvency event had occurred many months previously. It had not been represented in the proceedings here for a considerable time, and nothing about their circumstances justified an abandonment only in March 2025. The Scottish defenders were unaware of any particular change in VDH AG's ability to satisfy any decree despite the surrender of its banking licence as part of a restructuring exercise in January 2025. Mr Kattoura's allegation that Mr Taher considered CSM to be a Ponzi scheme was an example of just the sort of self-referential exercise that had characterised Mex's conduct throughout the proceedings here and elsewhere. No notice had been given of any change in circumstances on the part of the Scottish defenders which could justify a change of approach in relation to them. Although Mex claimed that the "Engenera" entity in which Melville Consulting Partners Limited was heavily invested, Engenera Green Bond plc, had become insolvent, in fact it was another related entity with a similar name which had done so, as was quite clear from publicly available information. Melville Consulting Partners Limited continued to have substantial net assets, amounting to over £7 million according to its latest (unaudited) accounts to 31 March 2024. The timing of the abandonment in the context of the conduct of the action to date amply justified the inference that the conduct of the action had been unreasonable throughout.

….

44.

The factors that a court would generally take into account in deciding whether to make an award of expenses on an agent and client scale were set out in McKie . In this case, Mex's conduct of the litigation had been either, or both, incompetent and unreasonable. There was no cogent reason for a properly prepared action to be abandoned at this stage. The explanation tendered by Mex was not credible. The event of insolvency affecting VDHI had happened many months ago, that affecting VDH AG more recently, but on no logical basis could they be causally linked to the recent abandonment. In any event, CSM's liquidity position had not changed at any relevant point. If Mex was concerned about the liquidity of any of the remaining defenders, it could quite reasonably have abandoned the action against only those defenders which it deemed to be a recovery risk.

45.

The proceedings had been brought in October 2023. That was around three years after the events said to have given rise to the action. There was no cogent explanation for the delay. However, there were ongoing proceedings in the BVI concerned with the validity of the consent order which was central to the present action. The existence of the present proceedings was successfully used by persons and entities connected to Mex to persuade the court in the BVI to postpone a trial on that matter in February 2024. That was their purpose, and it was an improper one. Had the present action proceeded to proof, the defenders might well have been in a position to invite the court to find in fact that it had been an abuse of process. It was regrettable that that opportunity had been denied to them. However, the court was entitled to draw inferences from the background to the raising of these proceedings. Since all that these proceedings seemed to have achieved was a stay in the BVI case, and standing their abandonment for no cogent reason, the court was invited to find that the raising of this action was motivated solely by a desire to achieve that. That was unreasonable conduct. CSM cast no aspersions on counsel and agents who had acted for Mex. It was taken at face value that they would have been acting on instructions and were entitled to assume that Mex was genuine in its desire to ventilate the issues at proof. However, it might be noted in this regard that the turnover of representation for Mex had been vigorous.

46.

The action alleged an unlawful means conspiracy and a range of steps taken by the defenders said to amount to fraud. Those allegations had not been vindicated. CSM's position was that there never had been any proper basis to make those averments at the outset. However, it had been preparing for proof, in keeping with all timetables set by the court, to refute the allegations. Not only were the reputations of the averred conspirators impugned, but they were faced with an £85 million claim. Any defender acting reasonably would vigorously oppose such claims where they were not admitted. CSM, having gone to entirely reasonable and predictable expense to resist Mex's claim, should not be left out of pocket by the award of expenses on the usual scale. Mex should bear the cost of its own unfounded and unreasonable, failing which incompetent, litigation.”

As regards costs, Lord Sandison ordered that:

MGWL now relies also on the third and fourth witness statements of Louise Wright dated 31 March 2025 and 28 April 2025. That evidence sought to fill the gap by stating that the impecuniosity of the Defendants was only recently discovered and at the time and costs saved by discontinuing the Scottish proceedings was a very substantial advantage. There was a further application to cross examine Mr Kattoura and Ms Wright which was refused. Mr Grant KC for the Claimant said that it was very unusual for such an application to be made and that the court would very frequently form a view about such evidence without the need for cross-examination. This is indeed such a case.

In my judgment, the evidence of Ms Wright does not advance matters substantially for the following reasons. First, although it provides some further details, it does not substantially advance the position from that stated by Mr Kattoura. It seeks to provide more information about VDH AG, but the attempt to say that the proceedings in Scotland all hinged on the solvency of VDH AG, who were not even parties to the proceedings in the BVI, is unconvincing. Lord Sandison found, as set out above that the insolvency of VDHI and the more recent insolvency of VDH AG could “on no logical basis….be causally linked to the recent abandonment.” More generally, it does not provide a refutation to the conclusions of Lord Sandison.

As regards the proceedings in Scotland, Lord Sandison suggested that its motivation had been to achieve a stay of the proceedings in the BVI so as to frustrate the fraud claim in the BVI. That had been achieved. Further, the effect of the discontinuance was that there was no ability of the defenders in Scotland to prove the true motivation for the discontinuance and particularly Mr Smith and CSM to show that the proceedings in Scotland were tactical, without merit and, according to them, fraudulent. Ms Wright is simply a legal adviser acting on such instructions as she has been given without knowledge of the true intentions and motivation of the Claimant. She was not in a position to refute the conclusions of Lord Sandison.

Third, the Claimant has not waived legal professional privilege and therefore the many communications and advices which must have been passed between general counsel and the Claimant are not before the court. For example, there has not been revealed the Claimant’s strategy in relation to the following matters, namely:

The Court has now had a hearing on 20 June 2025 and continued on 29 July 2025 to hear submissions about penalty, costs and the cross undertaking as to damages.

A refusal to provide information in the context of a WFO is ordinarily treated as extremely serious and prima facie warranting a sentence of imprisonment. It has two elements at least. First, there is the defiance of the court order. Second, in order to police a WFO, it is essential that a claimant knows the nature and whereabouts of the defendant’s assets. Without this, a defendant is able to dissipate assets in breach of a court order without MGWL or the court knowing about it.

Thus, typically a penalty serves two purposes. The first is retrospective as a punishment for breach of the court order. The second is a form of coercion to encourage the defendant to observe the court order.

In the instant case, when the proceedings were discontinued in Scotland and the WFO in this jurisdiction fell away, the element of coercion was no longer required. Without a continuing WFO, the disclosure no longer served the purpose. It therefore follows that by the time of the penalty, the only purpose was to punish for the failure to provide disclosure of assets from the time of service until the WFO fell away.

MGWL made clear once the WFO had fallen away that it was no longer seeking a particular penalty and in particular it was not encouraging the court to impose a sentence of imprisonment. This was not surprising in the circumstances.

An order must be observed until such time as it is set aside, and it is no excuse to a defendant that the order should not have been granted. A defendant's remedy in those circumstances is to do what the other defendants did, namely to apply to discharge and, if appropriate, for a stay of the order until the discharge application.

That said, if the order should never have been imposed or would have been set aside if an application had been made, that may be a major matter in mitigation. That is because MGWL should not have had the benefit of the order, and therefore suffers no prejudice as a result of the non-disclosure.

In the instant case, MGWL should not have had the order in two senses. First, a possible inference from the discontinuance of the Scottish proceedings is that there was never a substantive basis for the original claim and therefore for the WFO. Whilst it would be argued that Mr Smith is in a slightly different position because he was for a few weeks a director of two companies registered in England and Wales, if he had any connection with England and Wales, it was very limited. There is no reason to believe that the Court would be likely to have reached a different conclusion on this issue from Mr Tinkler and the Court of Appeal’s view in respect of the defendants who successfully took the s.25 CJJA point.

Second, even if there had been a substantive basis, there is no basis for inferring that an application to set aside the WFO made by Mr Smith and CSM would not have had the same result as in respect of those defendants who did make the application, namely that it would have been set aside for failure to make full and frank disclosure. Nothing has been identified to show as regards the failure to make full and frank disclosure that the position would have been any different in respect of Mr Smith and CSM if they had made the application.

Whilst it is the case that it was found that there was a good arguable case on the evidence before Mr Tinkler and the Court of Appeal, that was before the decision to discontinue the proceedings in Scotland. For the reasons set out in the judgment of Lord Sandison, that cast a different light on the merits of the proceedings and at lowest raised serious questions about the true intentions of the proceedings. In any event, the effect of discontinuance is that Mr Smith and CSM have been deprived of their ability to show that the proceedings were, as they contend, without foundation and even fraudulent or for a collateral purpose.

In view of all of these matters, the Court has serious concerns about the motivation and intention of the Claimants in pursuing the Contempt Application once the injunction had been discharged by Mr Tinkler in respect of Mr Gollits, VDH AG and VDHI on their applications. Those concerns are exacerbated by MGWL continuing the WFO and continuing to pursue the Contempt Application once the Court of Appeal had dismissed the appeal on 8 August 2025. If there was a justification for this, it is not apparent to the court what it was, and since the set aside application was never contested following the capitulation of the Claimant, it will never become apparent.

Despite the above, as indicated above, a belief that an injunction should not have been ordered or that it was not properly served is not a defence to a contempt. The correct course is to seek the discharge and a stay in the meantime. Without this, the Court order must be obeyed. Further, it is not a defence that there was a concern that the information obtained would be misused. That might be a matter for a discharge or a variation of the WFO, but it is not an answer to a case of contempt. It is regrettable in this case that Mr Smith and CSM did seek to render ineffective the hearings before Ellenbogen J and Morris J and procured the adjournments. They are responsible for having done so. At that stage, there was still no application to set aside the WFO.

Against the background of those applications for adjournments, it might have been difficult if the Defendants had sought in a court hearing to seek a third adjournment to deal with the set aside application before the contempt. Soole J ruled on paper that they could not, and no attempt was made until after liability to have the set aside application heard before the outcome of the contempt hearing. I shall find below that some part of the costs of the contempt proceedings has been brought upon the Defendants by themselves.

In these extraordinary circumstances, a sentence of imprisonment, whether immediate or suspended would not be appropriate. Nor is it necessary to order a financial penalty in addition to such order as to costs as will be made. There are cases where the court takes the view that it is a sufficient penalty that a defendant has had to pay the costs of the committal proceedings or a part of them. This is reflected in Arlidge, Eady and Smith on Contempt 5^th Ed. at para. 14-154. This itself will be a punishment to Mr Smith and CSM and a substantial disincentive to other persons who ignore a court order instead of applying promptly for its discharge. It does not condone the failure or refusal to provide the information ordered by the court, but it does reflect upon serious concerns that the court has about the application for the WFO and its continuation.

It is now necessary to consider the cross undertaking as to damages. This might have been considered after the issue of costs, but it is more logical to decide this issue before considering costs since it is potentially relevant to the costs order.

Consequent upon the discharge of the WFO, Mr Smith and CSM seek an inquiry as to damages. They say that this is the enforcement of the cross-undertaking. They say that (i) there is no reason to depart from the usual starting point that the cross-undertaking should be enforced, and (ii) there is prima facie evidence that some loss was suffered as a result of the WFO. MGWL says that the conduct of Mr Smith and CSM in being in contempt of court is so bad that the discretion of enforcement of the cross-undertaking should be exercised against them. In any event, MGWL submits that there is no prima facie evidence of loss, and that if there is any loss, the evidence adduced is loss due to the proceedings in conspiracy and not the WFO.

The evidence relied upon in support of an application to enforce the cross undertaking as to damages comprises the following:

This evidence is to the following effect. Notwithstanding that the proceedings were commenced in Scotland in October 2023 and that the WFO was in October 2023 and amended in November 2023, it was not until August 2024 that MGWL notified custodians to CSM, listing agents for CSM and a relevant Stock Exchange where the bonds issued by CSM had been listed. The notification was by emails from Quillon Law LLP (“QL”). MGWL has refused to provide copies of the emails. This judgment shall return to whether any inferences are to be drawn as to the content of the emails.

The relevant custodians were the European Depositary Bank SA and Kaiser Partner Privatbank AG. The relevant listing agents were Steubing AG and ICF Bank AG. The stock exchange was the FSE, the Frankfurt Stock Exchange (“FSE”) which is operated by the Deutsche Borse.

The evidence of Mr. Smith is that based on the e-mail of QL, the board of directors of the FSE took a decision to put into effect the delisting of all bonds issued by CSM from the FSE and blocked any new bonds for listing on the FSE. Mr. Smith stated that investors required bonds to be listed on the FSE and that the effect of the delisting has had the effect of putting CSM out of business as far as new bonds go. Mr. Smith estimates the value of his shares in CSM as €24 million, and that the effect of the delisting could be to reduce that value to zero.

In his fifth witness statement, Mr Smith said that CSM derives income from setup charges for each bond, from annual administration services for each bond issued and from the redemption of each bond at maturity. These charges are debited to the fiduciary estates and are thus borne by the investors for whom the fiduciary estates hold the bond assets in trust. He explained why a Stock Exchange listing was important to the investors. He said that when QL sent the WFO to the FSE, this effectively destroyed CSM's business. He pointed to the timing of the notification, being nine months after the WFO was obtained and shortly before the hand down of the judgment of the Court of Appeal in England and Wales. He inferred that by that time, MGWL would have known about the judgment from reading the draft and which was to the effect that at least as regards those respondents to that appeal, there was no basis under section 25 of the CJJA 1982 for proceedings in England and Wales, and in any event the WFO had been procured by such material non-disclosure as required its discharge without re-grant.

Mr Smith referred to losses as follows. He said that the bond promoters required the CSM fiduciary estate bonds to be listed on a Stock Exchange.

On or around 7 August 2024, the present solicitors for MGWL, namely QL, wrote to the FSE and to the Vienna Stock Exchange (the “VSE”) to inform them of the WFO against CSM. MGWL has refused to provide to CSM or its solicitors, William Sturges LLP, copies of their correspondence with the FSE and the VSE. This was sent on the day before the Court of Appeal handed down a judgment against MGWL on 8 August 2024 of which QL would have had prior notice.

On 15 August 2024, the FSE duly published the Management Board’s decision to discontinue trading in bonds and certificates issued by CSM on the basis that orderly trading on the FSE could no longer be ensured. CSM was informed by the FSE that trading of three bonds and 11 certificates at the FSE issued directly or indirectly by CSM would be terminated as from the end of September 2024. Termination of trading was published by the FSE.

In the meantime, the VSE informed CSM that it had become aware of the FSE decision to suspend trading of CSM bonds; and subsequently, on 29 August 2024, the VSE decided not to list CSM bonds for EUR 450 million as detailed in Mr Smith’s fourth witness statement dated 24 February 2025 at paragraphs 19.13, 19.14 and 19.15. Paragraph 19 of Smith 4 detailed the impact of the delisting of CSM bonds by the FSE.

Mr Smith said that the decisions of the FSE to delist CSM bonds and not to allow any new listings on the FSE, and of the VSE not to list CSM bonds on the VSE were a direct result of the actions of MGWL (through QL) in “abusing/weaponizing” the WFO. CSM, as the bond issuer, for each of the relevant bonds, had been contractually engaged to issue and list the affected bonds. As per the terms of those engagements, CSM was entitled to revenue from each bond over its duration. The delisting and refusal to list those bonds by the FSE and the VSE has rendered CSM unable to issue any of the affected bonds and has thus prevented the generation of revenue from those bond issues. Had MGWL not taken the actions it did, CSM could have listed and issued those affected bonds.

According to the fifth witness statement of Mr. Smith, the bond promoters required the CSM fiduciary estate bonds to be listed on an agreed Stock Exchange so that the bonds may be acquired by their investors. CSM earned its income based upon the Stock Exchange listing of the bonds being completed and maintained. The actions in causing the delisting of the bonds as well as the refusal to list bonds resulted in the bonds not receiving investor subscriptions, which in turn is said to have resulted in lost revenue for CSM.

They lost revenue comprising the income for setup charges for each bond, from annual administration services for each issued and from the redemption of each bond on maturity. These charges are debited to the fiduciary estates and are thus borne by the investors for when the fiduciary estates hold the bond assets on trust.

Mr Smith exhibited a spreadsheet detailing losses as a result of the delisting of CSM bonds comprising sums of EUR 22,813,000. The spreadsheet was prepared on an assumption that but for the notification of the WFO to the Stock Exchange, there would have been a full subscription. As a result of the notification of the Stock Exchange and the subsequent delisting, there was a nil subscription: see Mr Smith’s fourth statement at paras. 18-21 and his fifth statement at paras. 46-55.

Mr Smith served a further sixth witness statement on 13 June 2025. There should have been a formal direction for its admission, and MGWL objects. There is no evidential prejudice identified resulting from the same, and no request was made to serve evidence in response. It has limited ambit, and the Court will admit it.

Mr. Smith and CSM sought permission to call a suitable expert accountant in order to verify and calculate the losses suffered.

In evidence in response, Ms Wright has stated that:

The starting point is relevant principles in respect of an application for enforcement of a cross-undertaking as to damages. A principle is as follows:

“In a case where it is determined that the injunction should not have been granted the undertaking is likely to be enforced, though the court retains a discretion not to do so.” See Cheltenham & Gloucester BS v Ricketts [1993] 1 WLR 1545 per Neill LJ, his fourth numbered point.

As regards the timing of when a determination should be made as to whether there should be an inquiry as to damages, there are a number of possibilities, namely:

“ (a) The court can determine forthwith that the undertaking as to damages should be enforced and can proceed at once to make an assessment of the damages…. (b) The court may determine that the undertaking should be enforced but then direct an inquiry as to damages in which issues of causation and quantum will have to be considered…. the court should not order an inquiry as to damages and at the same time leave open for the tribunal at the inquiry to determine whether or not the undertaking should be enforced. A decision that the undertaking should be enforced is a precondition for the making of an order of an inquiry as to damages. (c) The court can adjourn the application for the enforcement of the undertaking to the trial or further order. (d) The court can determine forthwith that the undertaking is not to be enforced. …”: see Cheltenham & Gloucester BS v Ricketts above, being the seventh numbered point of Neill LJ (emphasis added).

In Harley Street Capital Limited v Tchigirinski [2005] EWHC 2471 (Ch.), Mr Michael Briggs QC (as he then was) stated at [19]:

“The third principle is that loss will not qualify for compensation under the cross-undertaking unless it has been caused by the grant of the injunction. Though normally that is an issue decided on an enquiry as to damages at the end of the day, the causation issue must also be examined in forming an intelligent estimate of likely loss at the fortification stage.” (emphasis added)

In Gee on Commercial Injunctions 6^th Ed. at para. 11-041, it was stated:

“On an application for an inquiry the applicant should adduce some evidence (Yukong Line Ltd v Rendsburg Investments Corp [2001] 2 Lloyd’s Rep. 113 at [35]—“some credible evidence that he has suffered loss as the result of the making of the order”) to show an arguable case that he has sustained loss falling within the undertaking. The court will not order an inquiry if it would be pointless to do so because the intended claim is obviously bad or because any recoverable loss is trivial. On the other hand, at the discretion stage the court should not hear protracted argument on whether the suggested loss will be recoverable: see Malhotra v Malhotra [2015] 1 B.C.L.C. 428; see generally Williams and Humbert Ltd v WDH Trademarks [1986] A.C. 368 at 441.”

This is derived directly or indirectly from the case of Yukong Line Ltd v Rendsburg Investments Corp [2001] 2 Lloyd’s Rep. 113 (“Yukong Line”) in which Potter LJ said:

“33.

Upon discharge of a Mareva injunction, the court has a discretion whether or not to enforce the undertaking in damages….if it is established that the injunction was wrongly granted, albeit without fault on the plaintiff's part, the court will ordinarily order an inquiry as to damages in any case where it appears that loss may have been caused as a result.

34.

… The order for an inquiry as to damages is discretionary, such discretion being exercised in accordance with equitable principles, taking into account all the circumstances of the case, but bearing in mind that, since the injunction should not have been obtained, prima facie the plaintiff ought to bear the loss: see Financiera Avenida -v- Shiblaq [1991] The Times 14th January (CA Civil Division) . As observed by James LJ in Graham -v- Campbell (1877) 7 Ch. D. 490 at 494, the undertaking ought to be given effect except under ‘special circumstances’. Those special circumstances include the conduct of the injunctee at the time the injunction was obtained or later, see per Lord Diplock in F. Hoffmann -v- La Roche & Co AG -v- Secretary of State [1975] AC 295 at 361. However, whilst the principles referred to above have been enunciated as generally applicable to the exercise of the court's discretion whether or not to order an inquiry as to damages, if the reason for the discharge of the injunction is that the court lacked jurisdiction to make it in the first place, it is difficult to envisage any circumstances in which the court would refuse to order an inquiry as to damages upon some evidence of loss…”

35.

So far as evidence of loss is concerned, upon an application for an inquiry, the applicant must adduce some credible evidence that he has suffered loss as the result of the making of the order. The court will not order an inquiry if it appears to be pointless to do so because the intended claim for damage is plainly unsustainable. That may be because it is clear that the order is no more than the factual context for loss which would have been suffered regardless of the granting of the order, or it may equally be clear that the damage is too remote. However, at the stage of exercising its discretion whether to order an inquiry, the court does not ordinarily hear protracted argument on whether the suggested loss will be recoverable. If the defendant shows that he has suffered loss which was prima facie or arguably caused by the order, then the evidential burden of any contention that the relevant loss would have been suffered regardless of the making of the order in practice passes to the defendant and an inquiry will be ordered: see for instance Financiera Avenida SA -v- Shiblaq (above); Tharros Shipping Co Limited -v- Bias Shipping [1994] 1 Lloyd's Rep 577 .” (emphasis added)

In Phoenix Group Foundation v Cochrane [2018] EWHC 2179 (Comm) at [14] ("Phoenix Group")), Popplewell J (as he then was) said:

“14.

The relevant law was not substantially in dispute before me, and is summarised in Energy Venture Partners Ltd. v Malibu Oil and Gas Ltd. [2014] EWCA Civ 1295, [2015] 1 WLR 2309 , and the authorities there referred to. In particular, an applicant for fortification must satisfy three requirements. First, that the court can make an intelligent estimate which is informed and realistic, although not necessarily entirely scientific, of the likely amount of any loss which might be suffered by the applicant by reason of making the freezing order. Secondly, that the applicant has shown a sufficient level of risk of loss to require fortification, that is has shown a good arguable case to that effect. Thirdly, that the making of the interim order is or was a cause without which the relevant loss would not be, or would not have been, suffered. In relation to that third requirement, whilst it is open to the respondent to the application to demonstrate that there is no causal link between the granting of the injunction and the loss in question, if disproving that asserted causal link, as to which a good arguable case is shown, requires the deployment of extensive contentious evidence and argument, then that is not an exercise to be attempted at the interlocutory stage.

15.

The court in that case, and indeed the Court of Appeal in the later case of JSC v Mezhdunarodniy Bank and Anr. v Pugachev [2015] EWCA Civ 139, [2016] 1 WLR 160 , approved a passage in the judgment of Floyd J (as he then was) in Bloomsbury International Ltd. v Holyoake [2010] EWHC 1150 (Ch) at paras. 24 and 25. Floyd J said:

"In many cases the fact that there is a risk of loss will be obvious merely from the general situation, and while it may not be possible to put anything like a precise figure on the loss, the court will, if necessary, do what it can on the evidence before it to reach an appropriate figure. The courts are well accustomed to assessing the appropriate value to be given to things whose valuation is difficult. In some cases it will be possible to make a more precise or confident assessment than in others. The mere absence of particularised evidence does not [of itself necessarily] mean that there is no evidence of a risk of loss."

In PJSC National Bank Trust v Mints [2021] EWHC 1089 (Comm), Calver J considered in the context of fortification the question of whether the loss was caused by the grant of the injunction. He said the following at [27]:

“(c)

It is only loss which is caused or would have been caused by the preventative or, as the case may be, coercive effect of the injunction that is recoverable under the cross-undertaking: Harley Street Capital at [22]. It follows that if the loss would have been suffered in any event because of an injunction properly obtained in the proceedings against other defendants, that will not be recoverable: Tharros Shipping v Bias [1994] 1 Lloyd's Rep 577 at p. 583 ("Tharros Shipping").

(d)

If the loss would have been suffered regardless of the granting of the injunction, for example because of the bringing of the proceedings, then that is not covered by the undertaking. As was stated by Saville J in Financiera Avenida v Shiblaq (unreported, but cited in Tharros Shipping at 581-2 by Waller J):

"The object of the undertaking is to protect a party, normally the defendant, in respect of such damage as he may sustain by reason of the grant of the interim relief. It is no part of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise, as for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when no interim injunction is sought or granted. Consequently, it is for the party seeking to enforce the undertaking to show that the damage he has sustained would not have been sustained but for the injunction." See also Harley Street Capital at [35]; and Bloomsbury International v Holyoake [2010] EWHC 1150 (Ch) at [18] per Floyd J.

(e)

Similarly, a misconceived notion by potential investors in a listed company (or fund), that the grant of a freezing order against (private individual) defendants who are considered to be in control of that company (or fund) lent the Court's credence to the serious allegations made against those defendants is unlikely to be seen as part of a chain of causation between the freezing order and any loss in share value in the company (or fund). "It is a factor wholly unrelated to any restraint placed by the freezing order on the…defendants or anyone else. It therefore lies outside the quasi-contractual analysis of causation…": Harley Street Capital at [22] and [33].

(f)

So far as reputational consequences of being subject to a freezing order are concerned, in Harley Street Capital at [34] the deputy judge stated as follows:

"Neither I nor counsel were aware of any case in which the purely reputational consequences of being the subject of a freezing order have formed a part of an award of damages under the cross-undertaking, wholly divorced from the consequences of the restraint which the freezing order imposed on the applicant for damages or upon anyone else. In this case, the reputational loss is not even that of the defendants against whom the freezing order was made, but of the fourth defendant. That makes the supposed causative link even more tenuous." (emphasis added)

(g)

However, in Al Rawas v Pegasus Energy Limited [2008] EWHC 617 ("Al Rawas"), Jack J stated:

"35.

I consider that there is a close analogy between the stopping of a cheque by a bank and the obtaining of a freezing order. In each case there is an interference with the party's ability to use its money as it wishes. It goes to the heart of the party's ability to use the banking system, which is at the heart of trade. To be on the wrong end of a freezing order is undoubtedly a stigma – see the Booker McConnell case referred to above: it suggests that the defendant has failed to pay its debts and has been found likely to try to dissipate its assets….

39.

I conclude that it is in accordance with principle and the above authorities that general damages may be awarded where a search and seizure order has been wrongly obtained, and likewise with a freezing order. Such damages are to compensate the defendant for the consequences of the order which cannot be claimed as special damage. They are not, however, awarded for nothing. It may be obvious that the particular circumstances of the case justify an award, or it may well not be but rather the contrary. In most cases it will be necessary to have some evidence to support the award."

(h)

In Bloomsbury International Ltd v Holyoake [2010] EWHC 1150 (Ch), Floyd J, having considered Harley Street Capital and Al Rawas stated at [23]:

"Plainly, the strength of the causative link between the grant of a freezing order and damage to the commercial standing of the defendant will vary from case to case. Harley Street v Tchigirinski was a case where Mr Briggs QC felt able to discount it as an element in the defendants' loss at the interim stage, whereas Al-Rawas was a case where it was ultimately considered to justify an award of damages, once all the evidence was available."

(i)

Thus, whilst a claim for general damages might in theory be available for reputational damage caused by the granting of a freezing order, it is likely to be a rare case as it will frequently be difficult for the defendant to show that the damage has been suffered as a consequence of the restraint and not as a result of other factors, such as the bringing/existence of the underlying litigation.”

There are particular features which are important:

In the instant case, the evidence is that the business of CSM was to list bonds on a recognised stock exchange for investors which they held in a fiduciary capacity. CSM derived income of setup charges for each bond, from annual administration services for each bond issued and from the redemption of each bond at maturity. Without a Stock Exchange Listing, the investors were not prepared to invest.

The proceedings were commenced in October 2023, but the business of CSM continued. On 7 August 2024, QL notified the FSE and the VSE of the WFO. This notification had almost immediate results. On 15 August 2024, the FSE duly published the Management Board’s decision to discontinue trading in bonds and certificates issued by CSM. It notified CSM that trading of three bonds and 11 certificates at the FSE issued directly or indirectly by CSM would be terminated as from the end of September 2024. Termination of trading was published by the FSE. The VSE followed in its decision to suspend trading of CSM bonds; and subsequently, on 29 August 2024, the VSE decided not to list CSM bonds.

This was the lifeblood of the business of CSM, and despite attempts to prevent it, CSM was unable to prevent the Stock Exchanges from acting in this way. The consequence has been the loss of income of the kind described above. Using various assumptions, CSM say that the losses are in excess of €22 million.

In my judgment, for the purpose of ordering an inquiry, the above is “some credible evidence that [CSM] has suffered loss as the result of the making of the order”. It has shown loss suffered which was prima facie or arguably caused by the order such that the matter should properly be investigated in an inquiry.

In respect of the criticisms of Ms Wright, the answers at this stage are as follows. It fails to look at the big picture which is an apparently good business until notification of the WFO, and then the source of income being closed down immediately consequent upon such notification. It is not necessary at this stage to have detailed evidence of the nature of the business. The spreadsheet can be criticised in that its assumptions have not been stress tested, but that is not appropriate at the stage of ordering an inquiry. That is suitable for the inquiry.

It is understandable to say that expert evidence is required in order to present and expand the nature of the evidence about the losses. That evidence can explain “in detail” the expected take up and revenue and the loss of revenue from the delisting of the bonds. If the commercial record of CSM is to be scrutinised, that can be within the inquiry.

Seeking expert evidence is necessary in order to subject the assertions to the forensic analysis required in a hearing: it is not a recognition of deficiencies at this stage. It is not appropriate in this judgment to make an order for expert evidence. There ought to be a directions hearing for the purpose of the inquiry, and that ought to include more detailed evidence about the expert to be required and some outline topics to be covered.

A criticism which is made is that the loss may have arisen from the proceedings themselves and the claim of conspiracy to defraud rather than from the WFO. There is sufficient evidence at this stage to raise a prima facie case that loss has been suffered as a result of the WFO. The points of importance here include the following. First, it is the timing, namely that within a very short time of notification of the WFO, the FSE made its decision to delist and not to accept further business. Second, the refusal to provide the letters sent by QL to the FSE and the VSE mean that a potentially important part of the causation analysis is missing. There is at this stage a potential inference to the effect that this would support the case that it is the WFO which has caused the losses. For the purpose of raising an arguable or a prima facie case, this should be taken into account. Third, there is reason to believe that there might be expert evidence and further factual evidence for the inquiry capable of proving the causal connection between the notification and the delisting.

MGWL seeks to draw a conclusion to contrary effect from correspondence said to indicate that the cause was the nature of the proceedings. It was asked what was the cause of the withdrawal of facilities on the Exchanges. The Court has been asked to draw an inference from the absence of a definitive answer that at highest, Mr Smith and CSM cannot prove that the withdrawal was not due to the action. In my judgment, whilst this raises an argument to this effect, it does not prove that the loss would have been suffered regardless of the granting of the WFO. The matters just mentioned in the preceding paragraph are sufficient to establish at least a prima facie case that the WFO has caused the loss.

As noted above, it is usually necessary to decide prior to ordering an inquiry whether the court in the exercise of its discretion should do so. Where the injunction was wrongly granted, the court will ordinarily order an inquiry as to damages in any case where it appears that loss may have been caused as a result.

It is submitted on behalf of Mex that no inquiry as to damages should be ordered in this case due to the conduct of Mr. Smith and CSM. They particularly emphasise (a) the failure to provide the information required by the WFO, (b) the conduct reflected in the judgments of Ellenbogen J on 12 June 2024 and before Morris J on 30 July 2024 which were critical of their conduct, (c) the finding of contempts on 13 December 2024, and (d) still failing to provide the information required.

The Court takes into account the bad conduct in not obeying the court order. This is a relevant consideration in deciding whether or not to enforce the cross-undertaking. There are two matters which outweigh that consideration. First, the costs orders which are being made against Mr Smith and CSM, whilst not being the entirety of the costs referable to the contempt, are a significant penalty to pay for that conduct. There is a risk of double punishment if in addition to costs, Mr Smith and CSM are punished by not being able to enforce the cross-undertaking.

Second, and of greater significance still, is the fact that the WFO should not have been obtained or maintained in that there is reason to believe that:

If the Claimant did not appreciate this at the outset, it ought to have been apparent by reason of the decision of Mr Tinkler, and if not then, by the time that the appeal was lost. It is also a matter of potential significance that the draft of the judgment of the Court of Appeal may have been received by the time of the notification of the Stock Exchanges. Although that was in respect of other defendants, there is no substantial reason to distinguish between the position of the different defendants on the disclosure issues, and probably also not as regards the question of inexpediency.

Third, the discontinuance of the proceedings in Scotland have raised serious questions as to whether the claim in Scotland for the reasons given by Lord Sandison was in fact a good claim at all. In circumstances where Mr Smith and CSM are unable to defend themselves because the proceedings have been abandoned, it is appropriate for the purpose of the WFO to treat it as having had no basis.

Fourth, whilst there was no excuse for the contempt, the above points are mitigating factors. Mr Smith and CSM should not have been exposed to the detriment of the WFO.

In all the circumstances, the usual consequence of the WFO being discharged should follow, namely that there should be an inquiry as to damages. There should be a CMC for directions in respect of the inquiry.

The relevant provisions as regards costs where an action has been discontinued are set out in CPR 38.6(1) as follows:

“(1)

Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant.”

In Safeway Stores Ltd v Twigger [2011] 2 All ER 841 at para. 58-60, Pill LJ said the following:

“58.

The claimants have sued the eighth defendant but by discontinuing their claim they accepted that it is not a valid claim against the defendant. The position should be, and in my view the wording of the rule provides, that in those circumstances the claimant is on the face of it liable for the eighth defendant's costs. That would have the effect of reversing the order for costs below. The claimant should not normally have the luxury of bringing a claim now accepted as invalid and not meeting costs incurred along the way. Of course, if the eighth defendant's conduct in the course of proceedings was found to have been abusive or vexatious different considerations may apply but an appropriate application would need to be made by the claimant discontinuing.

59.

I do not accept that there is a burden on the party against whom a claim is discontinued to have to seek to set aside the notice under CPR r 38.4 and keep alive the claim against him in order to contest costs below. In my judgment that is to put the burden in the wrong place and it is for the party discontinuing a claim to take the initiative. It is for the claimant discontinuing to seek a different order or to achieve by negotiation a discontinuance on other terms.

60.

The starting position should be, in my view, that a party who unilaterally discontinues a claim against a defendant by serving a notice of discontinuance is liable for the costs of that defendant, as provided by rule 38.6 . Even had the appeal by the other defendants failed in this court the claimants should in my view have met the costs of the party against whom they had discontinued when the claim reached this court. It has not been suggested that the application to strike out was vexatious or other than arguable.”

In the same case, Longmore LJ observed at para 33 that generally “the formal position must … in my view be that orders for costs in favour of a claimant before discontinuance remain in effect. They will not be unwound merely because the claimant discontinues.” However, Longmore LJ at [34] and Lloyd LJ at [41] preferred not to express a view as to whether a notice of discontinuance affected costs already ordered.

In Dar El Arkan v Al Refai [2016] 6 Costs LO 865, Andrew Smith J said the following:

32.

Nothing either in CPR 38.6 or elsewhere in the CPR states in terms that prima facie discontinuance reverses (or otherwise affects) previous costs orders, nor is it obvious that this is their necessary implication. I have already questioned Pill LJ's apparent starting point that discontinuance typically indicates acceptance that the claim (or, presumably by parity of reasoning, a part of a claim) was not valid….

33.

The general position is that interlocutory costs orders are not affected by other costs orders in the proceedings. The table at CPR PD 44.2 provides that the effect of an interlocutory order for costs is that “The party in whose favour the order is made is entitled to that party's costs in respect of the part of the proceedings to which the order relates, whatever other costs orders are made in the proceedings.” Of course, a practice direction cannot amend the rules themselves, but on the face of it would be surprising if the rule and directions under them are not harmonious.

…

35.

The courts' approach is not to revisit interlocutory orders for costs. After all, often the costs are assessed summarily and paid accordingly, and it is not easy to identify a legal mechanism to require a recipient to disgorge costs already paid, there being good consideration for the payment at the time that it was made: the recipient might have altered his position on the basis of the payment.

...

In Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2009] EWHC 2014 (Ch) Mann J observed at para 31 (surely correctly) that:

“The modern practice is to be much more willing to make adverse orders for costs in interim matters as the case progresses rather than to leave them to be made later. The purpose of this is to fix liabilities and to allocate costs. … It is consistent with this that such orders for assessment should be dealt with on a self-contained basis. Otherwise part of the purpose of the orders is lost.”

36.

Further, Mann J's judgment (at para 38) implicitly rejects Pill LJ's characterisation of interlocutory costs as being “incurred along the way” in the course of proceedings. In a case concerning the costs of the trial of a preliminary issue, he considered it “entirely logical” that costs orders should remain unaffected by subsequent events in the litigation, and saw this as:

“consistent with a scheme of litigation in which the costs of applications are dealt with according to the fate of the application. It does not produce unfairness to the paying party, it was the defendant's choice in this case to take the collateral contract point, and it accepted that it should be dealt with as a preliminary issue.”

37.

As a matter of policy it would be surprising if the CPR provides for harsher consequences on a litigant who discontinues a claim or part of a claim than are typically visited on one who pursues an invalid claim or arid litigation to the bitter end. Surely a litigant who comes to appreciate that there is no point in pursuing a claim or part of one is to be encouraged to discontinue it promptly.

…

39.

I therefore conclude that prima facie under the rules discontinuance does not affect costs orders already made. I see no justification for a contrary order in this case. Even if I took a different view about the prima facie position, I would make orders to depart from it, and uphold orders already made….”

In the commentary in the White Book in respect of CPR 38.6, the following principles are stated:

“In Brookes v HSBC Bank Plc [2011] EWCA Civ 354; [2012] 3 Costs L.O.285, Moore-Bick LJ set out the following principles (approved in Nelson’s Yard Management Co v Eziefula and Ashany v Eco-Bat Technologies Ltd [2018] EWCA Civ 1066): (1) when a claimant discontinues the proceedings, there is a presumption by reason of CPR r.38.6 that the defendant should recover their costs; the burden is on the claimant to show a good reason for departing from that position; (2) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so; (3) however, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption; (4) the mere fact that the claimant’s decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption; (5) if the claimant is to succeed in displacing the presumption they will usually need to show a change of circumstances to which they have not themselves contributed; (6) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule. (See Teasdale v HSBC Bank Plc [2010] EWHC 612 (QB); [2010] 4 All E.R. 630, HH Judge Waksman QC, sitting as a judge of the High Court; affirmed by the Court of Appeal at [2011] EWCA Civ 354; [2012] 3 Costs L.O. 285.)”

The parties take radically different starting points in relation to the applications for costs. The approach of Mr. Smith and CSM is to start with the discontinuance of the Scottish proceedings and the discontinuance in all but name of the instant proceedings, and to say that under CPR Part 38, all of the costs should follow in their favour. This should even include a reversal of the costs ordered in favour of MGWL to reflect the fact that the proceedings should never have been brought.

The approach of MGWL is to look at the matter issue by issue and application by application. In this way, they seek to say that they succeeded on most of the issues and hearings. For example they succeeded in relation to contempt. They succeeded in resisting applications for cross examination in connection with the set aside application. They succeeded in resisting an application that the instant proceedings be stayed pending the determination of the proceedings between MGWL and Duthie. They say that any costs in connection with the underlying section 25 proceedings will be limited in part because Mr. Smith and CSM did not engage in respect of them and/or because they came to an end without any determination about them.

There are various court rules that should be set out. They are as follows:

“Court’s discretion as to costs

44.2

(1)

The court has discretion as to –

(a)

whether costs are payable by one party to another;

(b)

the amount of those costs; and

(c)

when they are to be paid.

(2)

If the court decides to make an order about costs –

(a)

the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b)

the court may make a different order.

….

(4)

In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a)

the conduct of all the parties;

(b)

whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c)

any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

(5)

The conduct of the parties includes –

(a)

conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b)

whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c)

the manner in which a party has pursued or defended its case or a particular allegation or issue;

(d)

whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim; and

(e)whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution.

...

(6)

The orders which the court may make under this rule include an order that a party must pay –

(a)

a proportion of another party’s costs;

(b)

a stated amount in respect of another party’s costs;

(c)

costs from or until a certain date only;

(d)

costs incurred before proceedings have begun;

(e)

costs relating to particular steps taken in the proceedings;

(f)

costs relating only to a distinct part of the proceedings; and

(g)

interest on costs from or until a certain date, including a date before judgment.

(7)

Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.

…”

I shall first consider the approach of MGWL. It seeks the costs of all matters relating to the Contempt Application. This includes (i) service out of the Contempt Application, (ii) the applications for a stay pending the discharge application (dismissed by Soole J) and for an extension of time for service of evidence, (iii) the substantive hearing of 18 November 2024, (iv) the adjournment of the hearing of 20 December 2024, (v) the oral application of 10 January 2025 and the hearings leading to the determination of the penalty for the proved contempts. They submit that they ought to have the costs of the applications for cross-examination which have been dismissed, in respect of Mr Taher in March 2025 and in respect of Mr Kattoura and Ms Wright in June 2025. Likewise, they submit that they ought to have the costs of the unsuccessful application for a stay pending the action against Mr Duthie. They point also to the applications before Ellenbogen J and Morris J, and to the fact that costs orders have been made.

MGWL says that the general rule is that costs should follow the event. It says that it has been the successful party in relation to the Contempt Application. It is critical of the conduct of Mr. Smith and CSM and their procrastination relating to the hearings fixed for 12 June 2024 and 30 July 2024. It points to the fact that over many months from service, Mr. Smith and CSM did not observe the order of Lavender J as amended by Jay J for the provision of information. It says that there was a period of 10 months before the application to set aside. Further, the time provided for the application to set aside was limited by Jay J so that the application was out of time by at least nine months. There was no good reason for this delay. Even after the judgment on contempt was handed down on 13 December 2024, which encouraged late compliance so that this might be taken into account on a penalty hearing, there was still a failure or refusal to provide the information. In the submission of MGWL, a usual order for costs in a proved Contempt Application is that a defendant should pay costs on the indemnity basis.

The starting point of Mr. Smith and CSM is the law relating to costs on the discontinuance of an action. They say that although there has not been a formal notice of discontinuance, the approach taken on 10 March 2025 when it was conceded that the WFO should be set aside was in effect a discontinuance of the action. The only reason according to MGWL why there was not a notice of discontinuance was because it was indicated that application would be made to set aside the notice of discontinuance on the ground that Mr. Smith and CSM should be at liberty to apply to enforce the cross undertaking as to damages. They submit that on a notice of discontinuance, the interim costs orders made to date stand to be reversed. (In the submission of MGWL, there is no rule that a notice of discontinuance reverses orders already made).

It is therefore submitted that the court should reverse the orders for costs made in favour of MGWL, namely the orders of Ellenbogen J and Morris J made on 12 June 2024 and 30 July 2024 respectively. This would entail the repayment of monies ordered to be paid on account of costs comprising a total sum of £50,000.

Even if existing orders stand, then absent any other order, the party discontinuing must bear the costs of the action. Mr. Smith and CSM submit that this is an action that should not have been brought and/or should have been withdrawn after the dismissal of the WFO as regards Mr Gollits, VDH AG and VDHI by Mr Tinkler on 15 December 2023, alternatively at latest after the dismissal of the appeal by the Court of Appeal on 8 August 2024. Any steps taken in the action thereafter even for committal should not have been brought and the costs ought to follow the event not of the committal, but the event of the section 25 proceedings and the WFO falling away.

It is also submitted that in respect of costs not yet ordered, the court should say that those costs should be ordered against MGWL. The reasons for this are as follows:

The approach of MGWL is that the orders for costs should be issue by issue. They seek in this way to obtain the lion’s share of the costs by making out that they have won the lion’s share of the issues.

This ignores the underlying reality. That is that MGWL has lost the action. More than that, there is reason to believe that the action should never have been brought (the failure of the section 25 point) and/or that having brought it, they misused the court process by obtaining a WFO through breaches of the duty of full and frank disclosure which was culpable.

MGWL was able to convince Mr Tinkler and the Court of Appeal that it had a good arguable case. Such were the circumstances of the abrupt end to the case and so unsatisfactory were the reasons to explain that end that there are reasons to doubt even that. Indeed, if the Court of Appeal had been considering the question of good arguable case knowing that the case was about to be jettisoned in the way in which it was (which they could not have imagined would be the case), one cannot rule out a different conclusion even on the good arguable case issue. The discontinuance of the proceedings in Scotland raised serious questions as to whether the claim in Scotland for the reasons given by Lord Sandison was in fact a good claim at all. The effect was that Mr Smith and CSM did not have the opportunity to demonstrate that there was in fact not a case.

Whilst sometimes an issue-by-issue approach is the fairest, it is not in this case to the extent that it leads to a departure from the overall starting point which is that Mr Smith and CSM have been the overall successful parties. Along the road, various points arose which may not have been considered in the same way if it could have been guessed that there would be the capitulation which would take place. This must temper an issue-by-issue approach. It must inform as to the overall costs to be ordered. For Lord Sandison in the Scottish proceedings, there was an unusual order in favour of defendants to reflect the very unusual nature of what had occurred and what this told about the case. These are matters which inform about the overall incidence of costs.

The starting point is that the overall order should be that the MGWL should pay the costs of Mr Smith and CSM. The Court should be cautious about eroding that starting point by chiselling away issue by issue in the circumstances where there is a grave question as to whether the action should have ever been brought, whether the WFO should ever have been granted and at least from the time of the decision of the Court of Appeal on 8 August 2024 and from the application to set aside the WFO on 27 September 2024 as to whether the action should have been pursued. Applying the principles set out by Moore-Bick LJ in Brookes v HSBC Bank plc, there is a burden on the discontinuing party to show good reason to depart from the presumption. Even if it were true that the decision to abandon the action was motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case, that will not suffice to displace the presumption. Unreasonable conduct on the part of the other party may provide a good reason to depart from the rule.

This is not a case where there has been an express discontinuance in England and Wales. Nevertheless, for this purpose, it should be treated as if there has been a discontinuance in the sense that upon the dismissal of the WFO, there is nothing more to try. If there had been a discontinuance, I should have refused to set aside or to treat as set aside the orders as to costs made by Ellenbogen J and by Morris J for the following reasons, namely:

If I were wrong about this, then even assuming that there had been an order for discontinuance, I should have ordered that the orders of Ellenbogen J and by Morris J should still stand. They reflected what they considered to be unreasonable behaviour having put forward inadequate reasons for adjournments in circumstances which appeared to be tactical to postpone the committal hearing. The fact that the overall proceedings were not justified or that the Contempt Application should not have been pursued does not explain or justify specifically the applications for adjournments. In my judgment, the costs orders were the result of the unreasonable behaviour of Mr Smith and CSM. There is no reason to set aside the orders made.

The next question is about the reserved costs or the costs not ordered. In my judgment, there is reason to depart from the presumption under CPR 38.6 by reason of the finding of contempt. In that regard, the Court should have regard to the principle in relation to contempt proceedings that the question in the committal is whether the defendant has been in breach of the WFO rather than whether the WFO was properly sought or ordered. It is important in relation to the authority of the court order that a respondent must obey it until it is set aside. It is unreasonable conduct not to observe the order of the Court. In usual circumstances, as regards the contempt of court, that would entitle the applicant for a committal order to its costs.

In my judgment, the circumstances of this case are different such as to justify a modified departure from those usual circumstances. That is to reflect the fact that it now appears the WFO should either not have been obtained or that it should have been withdrawn such that the initiation and/or continuation of the committal proceedings were not justified in the following respects, namely:

There should nonetheless be a modified costs order in respect of the Contempt Application despite these features in order to mark the fact that Mr Smith and CSM were in breach of the court orders in failing and refusing to provide the information. They also raised points about service which were rejected.

Despite this, I consider that there should be a modified departure from the usual order that the costs of the Contempt Application should all follow the event. This is a discretionary exercise having regard to the fact that on the one hand Mr Smith and CSM were in breach and contested the committal on grounds which were rejected and on the other hand the serious misgivings about the conduct of MGWL in seeking or continuing the WFO until the time when it finally withdrew. In order to reflect this, the Court will make the following orders, namely:

The Court is fortified in these conclusions by the resolution of the latter stage of the costs in this way from the fact that a part of it relates to the application to enforce the cross undertaking as to damages where an inquiry has been ordered, and the submissions to contrary effect of MGWL have been rejected.

Save as above set out, the costs of the action as a whole stand to be paid by MGWL to Mr Smith and CSM. That is because the action has ultimately been conceded in circumstances where MGWL has been unable to show that there was a basis for the action. The fact that it has contended that the action had become uneconomical is unconvincing, as recognised by Lord Sandison: it cannot be tested due to the election of MGWL. In those circumstances, the costs of the action ought to follow the event, namely that in the English proceedings (save for the contempt proceedings to the extent set out above), Mr Smith and CSM were the successful parties.

The Court considered the possibility of ordering indemnity costs to reflect the basis of order of Lord Sandison in the Scottish proceedings, the order of Mr Tinkler which was on an indemnity basis and the way in which the Court frequently orders indemnity costs in fraud claims which fail or are discontinued. The Court does not make an order for indemnity costs in this case. The assessment remains discretionary in each case including in a fraud case which is dismissed or discontinued. In the instant case, although Mr Tinkler made an order on the indemnity basis, the costs of the appeal were a percentage of the costs of the successful appellants on the standard basis.

The order as to costs in this case is multi-faceted bearing in mind that this is not a simple one way decision but involves orders going in different directions and follows applications where the Defendants failed. In that application, not all of the costs are ordered in favour of MGWL and such costs as are ordered are not on the indemnity basis and where costs after 13 December 2024 are awarded against MGWL. The decision to make a standard order as to costs should not be seen in abstract, but reflects the overall justice of the case as to costs in which costs are awarded in different directions and proportions.

There should be no penalty for contempt. To the extent that parts of the costs of the Contempt Application have been awarded against Mr Smith and CSM is sufficient penalty in the peculiar circumstances of this case.

There should be an order for an inquiry as to damages and there should be a CMC for further directions.

The costs of the action should be paid by MGWL to Mr Smith and CSM, but there should be a carve out of a part of the costs of the Contempt Application as set out in more detail above. There should also be certain items where there are no order as to costs as set out in more detail above.

An order should be prepared to reflect these conclusions. The Court wishes to thank all Counsel for their written and oral submissions which have assisted the Court.