(1) Zia Shlaimoun (2) Infina Fund Ltd v Mining Technologies International Inc.
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Coulson |
| Judgment Date | 13 December 2011 |
| Neutral Citation | [2011] EWHC 3278 (QB) |
| Docket Number | Case No: IHQ11/07954 |
| Court | Queen's Bench Division |
| Date | 13 December 2011 |
[2011] EWHC 3278 (QB)
Mr Justice Coulson
Case No: IHQ11/07954
IHQ11/0795
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr James Hanham (instructed by Huggins and Lewis Foskett) for the Applicants
Mr Charles Douthwaite (instructed by CJ Jones Solicitors LLP) for the Respondent
Hearing date: 29 November 2011
INTRODUCTION
On 9 February 2011, Deputy Master Bard made a Bankers Trust/Norwich Pharmacal order in favour of the respondent, Mining Technologies International Inc., and against National Westminster Bank PLC. The documents which were provided led to a further order in similar terms, made by Master Kay QC on 4 April 2011, this time against Barclays Bank PLC. The documents which were provided by the two banks formed an important part of the respondent's claim, subsequently brought by way of court proceedings in Ontario, Canada, for fraudulent misrepresentation, breach of fiduciary duty, conversion and the like against a whole series of defendants, including the two applicants.
By an application made on 31 October 2011, the applicants seek to set aside the orders made in February and April by the two masters, and seek an injunction against the respondent restraining it from relying upon, referring to, disclosing, disseminating or otherwise utilising in the Ontario proceedings (and in related proceedings in California), the documents that were disclosed in accordance with those orders. In essence, it is said on behalf of the applicants that the original Bankers Trust/Norwich Pharmacal proceedings were an abuse of the process because the documents obtained thereby were then used for the purposes of foreign proceedings. In addition, it is said that the respondent's use of the documents in this way constituted a breach of the collateral undertaking set out in CPR 31.2The applicants maintain that if either the abuse argument, or the breach of undertaking argument, is successful, the court does not have the power to (and in any event should not) make a retrospective order permitting the respondent to utilise the documentation in the Ontario proceedings.
I set out the chronology in Section 2 below. I then deal with the abuse arguments in Section 3; the arguments in relation to CPR 31.22 in Section 4; and the arguments in relation to the making of a retrospective order in Section 5. There is a short summary of my conclusions at Section 6. I should express my gratitude to counsel for their clear submissions and the considered way in which they explained the differences between them. I am very grateful to both of them.
CHRONOLOGY
The respondent manufactures and supplies large-diameter subsurface drilling tools and other equipment to the mining and construction industries. As part of their perennial search for third party financing, Mr Lipic, the respondent's CEO, was introduced to a Mr Korakianitis. He explained to Mr Lipic his ability to access large amounts of funds from trades and investments. Mr Lipic alleges that Mr Korakianitis explained how a deposit of $100 million could be traded in the money markets with a return of five times the original investment within a 10–30 day time frame. In 2009 and 2010, there was a tortuous series of meetings and negotiations between the respondent and Mr Korakianitis. Eventually it was agreed that the respondent would provide Infina Fund Limited (the second applicant) with US $2 million for investment purposes. The money was transferred into the second applicant's bank account with NatWest on 27 May 2010. The money was promptly transferred out of that account and its whereabouts are unknown. It has not been returned to the respondent.
The first applicant is the director and owner of the second applicant company. In the Ontario proceedings the first applicant's affidavit suggests that he was not aware of the transactions agreed by Mr Korakianitis and that the money was paid out of the second applicant's bank account on the instructions of Mr Korakianitis. It would be fair to say that the first applicant's affidavit raises as many questions as it answers.
The attempts to recover the money having failed, the respondent made its first Bankers Trust/Norwich Pharmacal application on 9 February 2011. That application was supported by a lengthy affidavit sworn by Mr Lipic. Paragraph 1 records that the affidavit was sworn in support of the respondent's application "for disclosure before proceedings start in respect of a transaction on 27 May 2010 whereby MTI sent US $2 million to an account held by a company known as Infina Fund Limited at the National Westminster Bank PLC." The affidavit then sets out in considerable detail the history of the lengthy dealings with Mr Korakianitis. Those explanations run from paragraph 3 all the way through to paragraph 3It is necessary to set out the last part of the affidavit in full:
"37. Since 29 July 2010 I have had contact with Mr Korakianitis and Mr Shlaimoun but it is clear that MTI has been the victim of a fraud and my contact with them has been part of the ongoing investigation into this matter.
38. I do not believe that it will be possible to recover any funds from the fraudsters. Mr Korakianitis lives in Canada and there is an unsatisfied judgment against him from 25 November 2009 in the sum of Canadian dollars 47,583 in favour of the Canadian bank, CIBC. Mr Shlaimoun is a joint owner with his wife of 21 Glebelands Avenue, South Woodford, London, E18 2AB, a property which they purchased for £250,000 in October 2004. There are two charges and also two unsatisfied judgments from the Bow County Court registered against this property. At pages 21–27 in the exhibit are the most up to date accounts for Infinafund Limited filed with Companies House. They show that at 30 September 2009 the company had total assets of only £5,991.
39. MTI now wishes to see if it can trace the money that was sent to the NatWest account. We wish to consider what steps the NatWest took to ensure that they were not involved in money laundering. We also want to know if Mr Dawes has been dismissed by NatWest and if so, what were the reasons for his dismissal and whether the NatWest has investigated or is aware of his dealings with the fraudsters."
Deputy Master Bard made an order on 9 February against NatWest requiring them to disclose the balances in the accounts of the applicants; all correspondence passing between NatWest and the applicants from 27 May 2010 to date concerning the transfer; and statements and internal memoranda relating to any account held by the applicants concerning the transfer. No order was made in relation to the separate application in respect of the involvement of Mr Dawes.
The documents supplied by NatWest demonstrated that between June and September 2010, Mr Korakianitis and the first applicant transferred large sums from the NatWest account to an account at Barclays Bank. Accordingly, on 4 April 2011, Master Kay QC made an order in the same terms against Barclays Bank. Subsequently, Master Rose made no further order in relation to the involvement of Mr Dawes.
On 27 May 2011, the respondent commenced proceedings in Ontario against a total of eighteen defendants in connection with the missing US $2 million. The first named defendant was Mr Korakianitis. Other defendants included both of the applicants in the present case. The addresses for those 18 defendants ranged from the UK to the US, Canada, Barbados, Switzerland and Cyprus. It appears that Ontario was chosen as the venue for the action, not only because it is where the respondent is based, but also because Mr Korakianitis owns a valuable property in that State.
The essence of the claim is the return of the US $2 million, although it is put in a variety of ways, including breach of contract, breach of fiduciary duty, fraudulent misrepresentation, conversion, knowing receipt and unjust enrichment. The first applicant swore an affidavit on 25 August 2011, to which I have already made reference. It appears that the applicants contest the jurisdiction of the Ontario court but are due to provide a defence to the claim without prejudice to their jurisdictional objection.
The application to set aside the orders of the two masters, and the claim for the injunctions restraining the respondent from using the documents, were issued on 31 October 20They are supported by a witness statement from Michael Legister, the solicitor acting for the applicants. His witness statement is addressed in the second statement of Mr Jones, dated 8 November 2011.
THE ABUSE ARGUMENT
Setting Aside
Before coming on to deal with the substantive issues raised by the abuse of process argument, it is necessary to make clear at the outset that, whatever findings I reach, it would not be appropriate to set aside the Bankers Trust/Norwich Pharmacal orders. Those orders have been made and they have been complied with in full. The proceedings which gave rise to them have come to an end. It would be entirely redundant now to make any order that modified or set aside those orders.
In WEA Records Limited v Visions Channel 4 Limited [1983] 1 WLR 721, Sir John Donaldson MR refused to consider an appeal from a judge who had made an ex parte order but who had not been given an opportunity of reviewing that order in the light of argument from the defendant. He said, at page 727G:
"In the instant case the Anton Piller order is spent in the sense that it has been...
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