Bilta (uk) Ltd ((in Liquidation)) v Muhammad Nazir and Others

JurisdictionEngland & Wales
JudgeMR JUSTICE LEWISON
Judgment Date24 November 2010
Neutral Citation[2010] EWHC 3227 (Ch)
Docket NumberNo: HC09C03502
CourtChancery Division
Date24 November 2010

[2010] EWHC 3227 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Lewison

No: HC09C03502

Between:
Bilta (uk) Limited (in Liquidation)
Claimant
and
(1) Muhammad Nazir
(2) Chetan Chopra
(3) Pan 1 Limited
(4) Aman Ullah Khan
(5) Sheikh Zulfiqar Mahmood
(6) Jetivia Sa
(7) Urs Brunschweiler
(8) Trading House Group Limited (bvi)
(9) Muhammad Fayyaz Shafiq
Defendants

Christopher Parker Qc And Rebecca Page (Instructed By Messrs Hbj Gateley Wareing Llp) Appeared On Behalf Of The Claimant

Graham Charkham (Instructed By Messrs Macfarlanes Llp) Appeared On Behalf Of The Sixth Defendant

Wednesday, 24 November 2010

MR JUSTICE LEWISON
1

Bilta (UK) Limited was ordered to be wound up on the petition of Her Majesty's Revenue and Customs ("HMRC"). HMRC claims that Bilta owes it very large sums of money for VAT. The VAT was payable on sales of carbon credits. HMRC's case was that the transactions under which the carbon credits were bought and sold, were part of a fraudulent scheme for evading VAT. Bilta, acting through its liquidator, now sues the alleged participants in the fraud.

2

Its claim against Jetivia, a Swiss company, is that Jetivia knowingly received property belonging to Bilta which had been diverted away from Bilta by its former directors. It also alleges that Jetivia dishonestly assisted those directors in breaches of their fiduciary duties to Bilta.

3

The transactions in question took place for the most part in June 2009. Jetivia says that these claims are not justiciable in the High Court because there is an arbitration agreement in place between it and Bilta which covers the claims made against it. Jetivia has applied under section 9 of the Arbitration Act 1996 for a stay of the claims against it.

4

The application came before Sales J on 5 April 2010. He delivered a reserved judgment on 17 May. Jetivia's application for a stay was opposed on a number of grounds. One of the grounds was that Bilta had never entered into the arbitration agreement and that Jetivia's allegation to the contrary had no real prospect of success.

5

Sales J dealt with this ground of objection in paragraphs 12 to 16 of his judgment. He referred to the evidence of Mr Vito Cardinale, employed by Jetivia in its Emissions Trading and Advice Department. He says of that evidence:

"According to him, Jetivia sent Bilta a copy of the Framework Agreement by e-mail in March 2009, since it contained Jetivia's standard terms and conditions for carbon trading (i.e. trading in EUAs) and was sent to all its customers. The copy available bears the date of 4 March 2009 next to the spaces for signature by Mr Brunschweiler and Mr Chopra. However, confusingly, on the same page the Framework Agreement also gives 11 May 2009 as the date of execution of the agreement. To explain this, Mr Cardinale gives evidence in his witness statement that his assistant subsequently sent another copy of the Framework Agreement (this time signed by Mr Brunschweiler in the appropriate space for his signature) to Bilta by e-mail on 11 May 2009.

According to Mr Cardinale, Jetivia did not receive a response from Bilta to either of these e-mails. However, Bilta did commence trading with Jetivia from 5 May 2009, so Mr Cardinale says that he understood that Bilta had accepted the terms of the Framework Agreement."

6

The judge then referred to a number of criticism which the liquidator had made of the evidence of Mr Cardinale and recorded the submission of counsel then appearing on Bilta's behalf, that the evidence was so weak that the court could be satisfied to the standard required for summary judgment that no such agreement was ever made. Sales J said:

"I do not accept that submission. In my view, on the evidence of Mr Cardinale, Jetivia has raised a triable issue on the question whether the Framework Agreement did or did not become a binding contract between Bilta and Jetivia. If the Framework Agreement was sent to Bilta, as Mr Cardinale says it was, and Bilta traded with Jetivia with notice that the Framework Agreement contained Jetivia's standard terms and conditions, it is arguable that the Framework Agreement (including clause 8.7) became part of the contractual terms binding on Bilta."

7

Having considered a number of other matters which arose on that application, Sales J directed that two issues be tried as preliminary issues, the first of which was whether there was an arbitration agreement as Jetivia alleged. Trial of these issues is due to take place in a trial window of 7 to 9 December 2010, with a time estimate of one day.

8

In anticipation of the trial, each party has given disclosure by list. Jetivia's list was served on 11 June 2010. In addition to the evidence of Mr Cardinale that was before Sales J, Jetivia has served two further witness statements from him and a witness statement from his assistant, Mr Elbro. On 1 November 2010, Bilta issued an application for an order striking out Jetivia's application for a stay or, in the alternative, summary judgment in its favour on that application. The ground for the strike out was that Jetivia had either destroyed or failed to preserve relevant documents with the result that it was no longer possible to have a fair trial of the preliminary issues. The ground for the application for summary judgment was that Jetivia's application had no real prospect of success. As a fall-back, Bilta also ask for an order that Jetivia give further disclosure in relation to its computer and email records and their destruction.

9

As Sales J recorded, Mr Cardinale's evidence before him was that he sent the Framework Agreement to Bilta, both by email and by post some time in March 200In his second witness statement made on 12 July 2010, he repeated this, although this time he sent the documents to Bilta on or around 4 March 200In his third witness statement, made on 15 October 2010, he says that he cannot be sure that he sent a copy of the agreement by post in March 2009 but that his assistant, Mr Elbro, sent a copy by post on 11 May 200Mr Elbro confirms in his witness statement that that is what he did. The transactions in issue all took place after May 2009.

10

Jetivia's disclosure statement disclosed no emails passing between Mr Cardinale and Bilta. It said that Jetivia had had in its possession, but no longer had, documents that it had destroyed in the ordinary course of business or emails that had been deleted. It also said that Jetivia had not searched databases, back-up tapes, mobile phones, notebooks, servers, laptops or offsite storage. No specific complaint about disclosure was made by Bilta until October 2010.

11

A letter from Millnet, who are IT consultants, exhibited to Miss Constantis' witness statement dated 26 October 2010, says that Jetivia had instructed them that Jetivia has no policy about retention of emails and that each employee manages his own files. They were also told that Jetivia upgraded its computers in April or May 2010, that the upgrade did not involve the copying of files from previous computers to new ones, and that the previous computers had been destroyed. Thus there were no, or almost no, digitally stored documents to disclose. Millnet said that there were no potential sources of electronic documents that were likely to yield documents of relevance.

12

The letter also said that Mr Sartor, the in-house IT employee at Jetivia, had discussed with them his approach to searching for potentially relevant electronic documents. Mr Sartor had told them that he inspected emails within Outlook and used the search functionality integrated into Outlook and Windows Explorer for searching the computers and file server for potentially relevant emails.

13

In a subsequent witness statement, Mr Mackie, the partner in MacFarlanes in charge of the conduct of Jetivia's case, has amplified the position. Again, this is based on instructions that he has been given by Jetivia. The salient points that he makes are as follows.

(1) The Claim Form was served on Jetivia on 29 October 2009. His firm was instructed towards the end of November and, as soon as they were instructed, Mr Mackie's assistant explained to Jetivia their disclosure obligations and told Jetivia that it was vital that potentially relevant documents be kept safe. Further discussions to the same effect took place in December between MacFarlanes, Jetivia and Jetivia's Swiss lawyer.

(2) Jetivia caused searches for documents to be made in February 2010. The searches included searches for emails, both within Jetivia and at their Internet Service Provider. The latter had been carried out by 24 February 2010.

(3) The application for the stay was launched in March after the searches had been carried out.

(4) Jetivia's computers were upgraded after these searched had been carried out and after the documents revealed by those searches had been turned into hard copies. As part of the upgrade, hard disks were wiped clean. The computers, as I understand it, had not themselves been destroyed and had been reallocated to other personnel within Jetivia.

(5) Emails that might have been relevant and which would have assisted Jetivia to establish its claim, would have been destroyed long before the proceedings were begun.

14

Mr Parker QC, appearing on behalf of Bilta, relies on the principle laid down in a number of cases that a failure to comply with an order for disclosure may result in the entry of judgment against the party who fails to comply with the order, if the result of non-compliance has rendered a fair trial impossible. He accepts that a...

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