Mirchandani v Gheewala

As regards Mr Mirchandani’s application to set aside the freezing orders against him, it is to be noted that his application in the Augusta proceedings to set aside the order of 20 March 2020 follows an inter partes hearing before Morris J on that date. The application to set aside the orders, of 29 July, 31 July and 19 August 2019, obtained on

The proper approach to such applications was considered by the Court of Appeal in Chanel Limited v FW Woolworth & Co Ltd [1981] 1 WLR 485. There the court held:

“The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party's position.’ (492-493)”

As Mr Fisher puts it, that was “elaborated” by Popplewell J (as he then was) in Orb a.r.l v Ruhan [2016] EWHC 850 (Comm):

“82… the principle is well established, and often applied, in relation to contested interlocutory hearings. It is that if a point is open to a party on an interlocutory application and is not pursued, then the applicant cannot take the point at a subsequent interlocutory hearing in relation to the same or similar relief, absent a significant and material change of circumstances or his becoming aware of facts which he did not know and could not reasonably have discovered at the time of the first hearing. It is based on the principle that a party must bring forward in argument all points reasonably available to him at the first opportunity; and that to allow him to take them serially in subsequent applications would permit abuse and obstruct the efficacy of the judicial process by undermining the necessary finality of unappealed interlocutory decisions.’ (at [82]).”

In advancing his case on behalf of Mr Mirchandani, Mr Geraint Jones QC points to the fact that the orders of Lambert J and Phillips J contained wording to the effect that Mr Mirchandani could apply to have the relevant order varied or discharged “at any time”. He says that on such an application, the Court should consider the case afresh. He says that “save for the hearing on 20 March 2020 (this) is the first time (Mr Mirchandani) has been represented and advanced arguments to the Court in respect of any of these orders. Plus, although the Court was under a duty to be satisfied that the orders should properly be made, nonetheless the earlier ones were made without any argument or position being put forward or taken into account by the Court. This arose as a result of the Applicant’s impecuniosity and inability to find representation”.

In response, Mr Nigel Hood, for Ms Gheewala, and Mr Fisher for Augusta, point to the principles identified by the Court of Appeal in Chanel and repeated in Tibbles v SIG plc [2012] 1 WLR 2591. They argue that the jurisdiction of the Court under CPR Rule 3.1(7), to vary or revoke its own orders, will only be exercised where there has been a material change of circumstances since the order has been made, where the facts on which the original decision had been made have been misstated, innocently or otherwise, or where there had been a manifest mistake on the part of the Judge in the formulation of his order.

Mr Jones responds that these were not interlocutory hearings. He says that the orders in question were granted after the final orders in the relevant litigation. In any event, he says there has now been material changes of circumstance. He identifies three such changes. First, he says, there is now available to the Court, hard evidence of Mr Mirchandani’s assets in the form of his affidavit sworn for this application. Second, he says, Mr Mirchandani has now offered an undertaking that 50% of the net sale proceeds of the PP flat due to him from the Receiver will be retained by his solicitors in their client account pending any further order of the court. Third, he says, the fact that the orders have followed final judgment in the relevant proceedings is a material change of circumstance.

Mr Mirchandani suggests that he now has no unencumbered assets. He says his property in Dubai is heavily mortgaged and the Compensation Order is subject to claims by both Augusta and Ms Gheewala. As such, he says, there is no real risk of dissipation of his assets; he has no assets. He says that accordingly, the grounds for a freezing order are no longer made out. He asserts a willingness to give an undertaking that any funds obtained by the virtue of the Compensation Order, in other words, the sale proceeds of the PP flat, will remain in the UK and could be deposited in his solicitor’s client account pending the outcome of these proceedings.

In my judgment, Mr Jones argument that none of the relevant orders were interlocutory and that the freezing orders cease to bite the moment judgment is obtained, so as to entitle his client to have them discharged, is misconceived.

The injunctions granted by Phillips J on 29 July and 31 July 2019, and the worldwide freezing order granted by Lambert J on 19 August 2019 were plainly interlocutory in nature. They were granted to prevent Mr Mirchandani disposing of assets so as to defeat Ms Gheewala’s attempts to enforce the court orders made in her favour. Those orders were never appealed, they remain in force, and the amount due remains outstanding.

The orders made by Saini J on 5 March 2020 were also interlocutory. They were granted to prevent Mr Mirchandani disposing of assets so as to defeat Augusta’s claim based on the Facility Agreement. Griffiths J increased the sum subject to the July 2019 order to incorporate the sum frozen by the order of Saini J on 5 March 2020. Morris J continued the freezing order and increased the sum protected. At that hearing, on 20 March 2020, Mr Mirchandani was represented. None of those orders were appealed. Judgment in default in favour of Augusta was obtained, but not until 5 May 2020 by which time this application had been launched by Mr Mirchandani.

In any event, in my judgment, Mr Mirchandani’s entitlement to seek an order for setting aside the injunction is not materially improved by the fact that default judgment is entered against him but remains to be enforced. The freezing order subsists until judgment is enforced or the orders are set aside. If a claimant obtains judgment, a freezing injunction ensures that once the mechanisms of enforcement are set in motion, there is something physically available upon which they can work (see Mercedes-Benz A.G. vLeiduck[1996] 1 A.C. 284; [1995] 3 All E.R. 929 at 941, PC, per Lord Mustill).

In those circumstances, the crucial questions in this case are whether Mr Mirchandani can show that he had no opportunity to advance his case at the hearings that led to the making of the orders, or whether he can show a material change in circumstances since the orders were made.

The underlying principle, which determines the approach the Court should adopt on an application to set aside an interlocutory order, is that a party must advance all points reasonably open to him at the first opportunity. If a party has contested the grant of the interlocutory order, or had the chance to do so and did not take it, the Court will only set aside the order where there has been a material change in circumstances, where the facts on which the original decision had been made had been misstated or where there is a manifest error on the part of the Judge. That is the effect of the Court of Appeal’s judgments in Chanel and Orb. The only one of the three factors in play in the present case, on Mr Jones’s case, is the material change of circumstances.

I am not here determining a contempt application based on allegations of failure properly to give disclosure of information required by the various orders, although such allegations are made. I am deciding whether to set aside those orders. The adequacy of Mr Mirchandani’s disclosure as to his financial position, however, is relevant to the issues I have to decide and much of the submissions I have heard were addressed to that point. In particular, it is relevant to whether he was prevented by impecuniosity from ensuring he was represented at the relevant hearings and advancing arguments properly open to him.

At the forefront of Mr Mirchandani’s arguments as to his ability to attend or be represented at the hearings is his alleged impecuniosity. He said in his affidavit of 29 April 2020:

“I am or at least was, a self-made man, who did hold substantial means, until the frauds committed against me by the Defendant. I lost all my wealth in those frauds and I am living at the moment hand to mouth.”

In a footnote to his second witness statement he said that “the news report stating that I had said that I ‘was down to my last £160m’ is false.”

It is not necessary for present purposes for me to resolve all of the issues raised on the issue of Mr Mirchandani’s financial position but the following three seem to me particularly pertinent. First, the apparent disappearance of Mr Mirchandani’s wealth as it had been described in 2014. Second, Mr Mirchandani’s interest in Flacourt Finance S.A. Third, Mr Mirchandani’s interest in Aveem Group companies.

Both the assertion that Mr Mirchandani lost all his wealth as a result of the fraudulent conduct of Mr Somaia, and the assertion that the newspaper account about his wealth was untrue, are entirely inconsistent with what he told the jury in the trial of Mr Somaia. That account, which is recorded in the transcripts of the judge’s summing up, was to the effect that after the fraud he was still worth something in the region of £160 million. Nowhere in any of his evidence in this case is there any explanation for that conflict of evidence nor any explanation as to how he has lost so substantial a sum of money over the six years since the trial.

It became apparent during the course of the hearing that Mr Jones was previously unaware of what his client had said in evidence at the criminal trial. When first addressing the issue of the lost £150 million, Mr Jones, appeared to believe that the only evidence that he had told the jury he was “down to his last £160 million” was a report in the Mail Online. When it was pointed out to him that there was reference to that fact in the transcript of the criminal trial, he was able to submit, only, that there was no evidence that he remained so wealthy.

Mr Mirchandani’s evidence on his finances is not corroborated at all, whether by eyewitness statements or through documentary evidence. And Mr Jones was able to offer no explanation for the changes in his fortunes since the criminal trial, beyond pointing to Mr Mirchandani’s bald assertions. I accept that the burden is on the Respondents to make out their case in support of the orders obtained but I am entitled to draw obvious inferences, and I do. Given the different accounts of his financial circumstances in 2014, affecting, as it does, a central element of this case and concerning, as it does, an enormous sum of money, I conclude that I can place very little reliance on anything Mr Mirchandani says about his finances, unless it is corroborated elsewhere.

I will consider the question of Mr Mirchandani’s interests in Flacourt Finance S.A. (“Flacourt”) and Aveem Group companies (“Aveem”) together.

Mr Jones does not accept that his client has any pecuniary interest in either company.

In my judgment, however, there is a great deal more than innuendo and assertion in support of the assertion that Mr Mirchandani has a significant beneficial interest in the two companies.

In his second witness statement, when dealing with the payment of the outstanding sum of costs due to Ms Gheewala in January 2018, Mr Mirchandani said this:

“Although, as I say, it is not clear to me whether Thakrar & Co were entitled to refuse the funds paid to them by Sadin on my behalf, it seemed to me that I must arrange an alternative payment in case they were. In desperation, I decided to raise funds by arranging for thecompany I own, Aveem Securities Limited, to liquidate some of itsequities in its investment portfolio. This was at a significant loss to Aveem Securities Limited and was effectively a last resort” (emphasis added).

Implicit in that statement is that further equities in a company he owns were not liquidated and remained available to him.

Mr Mirchandani asserts, in his affidavit, that he holds directorships in Aveem Property Development Limited and Paragon Holdings Limited. As is set out in the witness statements of Jordan Leech of Metis Law, and Jitesh Thakrar of Thakrar & Co Solicitors, Aveem Property Development Limited (in liquidation) includes Aveem

It is apparent that Mr Mirchandani’s interest in that flat is not wholly historical. He is registered on the electoral roll at that property and still uses the PRC flat as his home address. Mr Thakrar, Ms Gheewala’s solicitor, points out in his sixth affidavit that, on

In my judgment, absent any evidence from Mr Mirchandani as to what happened to the £160 million he was worth in 2014, absent any explanation as to his past interest in Flacourt and Aveem, and absent any explanation of his interest in the PRC flat, I am entitled to draw the inference that he remains a wealthy man, well able to meet his liabilities and well able to instruct solicitors to defend these proceedings. In my view, it is perfectly plain that Mr Mirchandani was in a position to contest the hearings that led to the orders now under discussion. All the hearings of significance were on notice to him and he could have attended in person or instructed solicitors or counsel to act for him. In fact, he did instruct counsel for the crucial hearing before Morris J 20 March 2020.

It follows from my findings as to his financial circumstances that he was able to make submissions as he wished at all the relevant hearings.

The question, therefore, in respect of the orders obtained both by Ms Gheewala and Augusta is whether Mr Mirchandani is able to show a change of circumstances, or fresh knowledge of relevant facts, or error of the Judge. He does not suggest the second or third apply here. In my judgment, he cannot establish the first.

The new evidence as to Mr Mirchandani’s assets is only contained in the affidavit sworn in support of this application; it did not exist until this application was launched. And it is evidence that was always available to Mr Mirchandani. In any event, for the reasons I have explained, the crucial element of the new evidence, namely his account of his impecuniosity, is simply not credible.

Second, in my judgment, the undertaking Mr Mirchandani has offered is wholly inadequate. The Court cannot rely on Mr Mirchandani’s word given his conduct to date and in particular, his failure properly to explain his financial position.

Third, the fact that the claim by Ms Gheewala is based on an order that Mr Mirchandani pay her costs or that Augusta has obtained a judgment in default, cannot possibly be said to justify any change to these orders.

In those circumstances, the first application fails.

As regards the application made by Augusta, it is to be noted that CPR 23.10 provides:

“(1)

A person who was not served with a copy of the application notice before an order was made under rule 23.9, may apply to have the order set asideor varied.

(2)

An application under this rule must be made within 7 days after the date on which the order was served on the person making the application.”

That rule provides the Court with a very wide discretion. At paragraph 69-70 in Mackay v Ashwood Enterprises [2013] EWHC Civ 959, Lloyd LJ (with whom Jackson and Ryder LJJ agreed) said this:

“69 The same, as it seems to me, can be said of rule 23.10. In the cases to which that rule applies the order will have been made without the party affected having had any opportunity to present a case to the judge. The rule ensures that there is such an opportunity. The making of orders by way of substantive relief (as distinct from case management) without notice to one party is exceptional. If such an order is made, the party affected should have the right to a first instance hearing at which arguments can be presented that would have been relevant if the original hearing had been on notice and attended by the party affected.

70.

Mr Justice Peter Smith said at paragraph 27 that the affected party in such a situation "has an absolute unfettered right … at least once to come back to court to challenge the making of the order". I agree that there is and must be such a right. In general, it seems to me, that right is conferred by, and confined to, rule 23.10. In a case in which the party affected can fairly say that seven days from being given notice of the order is too short, it is likely to be possible to obtain an extension of the time, so long as the party has acted reasonably promptly. I am not sure that I would recognise the existence of a free-standing right to apply, outside the scope of the rule 23.10 or whatever express provision is made in the original order by way of liberty to apply. I do, however, agree with the underlying point, that a party affected by an order made without notice must have a right to apply back to the first instance court, and not merely a right to appeal. That applies to the order for costs, as it does to other aspects of the order made without notice.”

Mr Fisher, for Augusta, contends that the order of Spencer J, dated 21 April 2020, should be set aside. He points out that Morris J’s Order of 20 March 2020 included a provision that Mr Mirchandani could make an application to set aside, vary or discharge

Mr Jones responds that the application was only made four days late and the delay was indeed explained by the effect of the coronavirus pandemic on Mr Mirchandani and his solicitors. But neither in writing nor in his oral submissions does he offer a convincing explanation for the failure to give notice of the application, the effect of which was that Spencer J only heard one side of the story.

In my view, it is of significance that Morris J did not adjourn the return date for the freezing order and made it clear that the onus would be on Mr Mirchandani to make out his case to set aside the order in the event that he made such an application. Morris J’s Order set out the date by which the application had to be made and spelt out the consequence if no such application was made in time.

The question for me is whether the Court, having heard the argument now advanced, would have granted the order Spencer J in fact granted.

It is apparent from his order that, when granting Mr Mirchandani his extension, Spencer J had particular regard to Practice Direction 51ZA. That requires the Court to take account of the impact of the Coronavirus epidemic in so far as that is consistent with the proper administration of justice in considering applications for relief from sanction. However, as Mr Fisher submits, Mr Mirchandani’s solicitors had made no attempt to contact Augusta’s solicitors to agree an extension by consent, and the retrospective extension of time had a direct prejudicial impact on Augusta which otherwise would have been entitled to an interim payment on account of costs in the sum of £15,000 within 21 days of 17 April 2020.

Because Augusta were not represented before Spencer J, they were not able to make representations about any of these matters. And in my judgment, none of that is excused by the Coronavirus outbreak. Mr Mirchandani had from 21 March 2020 to 17 April to ensure an application could be made in accordance with Morris J’s Order. That was all the more important in circumstances where, for no good reason, the order had been obtained ex parte. In my view, there was no satisfactory explanation for Mr Mirchandani’s conduct of this application.

Had Spencer J had the benefit of Mr Fisher’s arguments he would have been aware of all of these points. He would have been aware of the background to this case which is canvased in this judgment. I have no doubt that, in those circumstances, he would not have made the order he did. Accordingly, in the exercise of my discretion, I set aside the Spencer J Order and Augusta becomes entitled to its payment on account in the sum of £15,000 and interest.

For those reasons, I dismiss Mr Mirchandani’s application and allow Augusta’s application.

I indicated during the course of argument, that I would consider Ms Gheewala’s application when this judgment is handed down. As anticipated, however, it has proven possible for the parties to agree the appropriate outcome for that application in the light of this judgment.