Bostani and Others v Pieper and another

Hearing dates: Friday 1 st March 2019.

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

A: The application and the factual background

In these proceedings, the Claimants apply to lift a stay of proceedings agreed in March 2011 by way of a consent order in the form of a Tomlin Order, which scheduled terms of settlement between Mr. Alfred E. Mann (“Mr. Mann”) and the Defendants. Mr. Mann died in 2016. The present Claimants are the Trustees of Mr. Mann's trust, and have been substituted as claimants in place of Mr. Mann in these proceedings. They apply to enter judgment against the Defendants pursuant to the terms of that Tomlin Order.

The underlying claim in the proceedings arises out of a debt owed by the First Defendant (“Mr Pieper”) under a guarantee. Mr. Mann was, during his lifetime, the sole trustee of The Alfred E. Mann Living Trust (“the Trust”), a trust organised under the laws of California. In November 2008 the Trust entered into a funding agreement with a Luxembourg company called ETIRC Aviation S.a.r.l (“ETIRC”). In effect the Trust agreed to lend $10,000,000 to Eclipse Aviation Corporation (“Eclipse”), and to also lend a further $10,000,000 to ETIRC, which it would in turn lend to Eclipse. ETIRC agreed to repay the Trust the second $10,000,000 by way of issuing an unconditional $10,000,000 promissory note (“the Promissory Note”).

Mr Pieper was chairman of ETIRC, and as part of the funding agreement he agreed to give a personal guarantee in favour of the Trust for ETIRC's obligations under the Promissory Note (“the Guarantee”). ETIRC defaulted on the Promissory Note on 28 ^th February 2009 and Mr Pieper defaulted under the Guarantee. Once Mr Pieper had defaulted under the Guarantee, on 19 ^th May 2009, the Trust issued proceedings before the Supreme Court of New York, claiming the $10,000,000 plus interest, totalling $10,206,027.39.

Mr Pieper defended the claim on jurisdiction grounds, but the Trust successfully obtained judgment on 29 ^th June 2009 in the full sum claimed plus interest (“the New York Judgment”). Mr Pieper tried to appeal the New York Judgment, but his appeal failed and it is now final and Mr Pieper cannot have further recourse to appellate courts.

With the New York Judgment having been granted the Trust sought to enforce it against Mr Pieper. On 4 ^th November 2010, the Trust issued the current action before the English court seeking to enforce the New York Judgment. At that time the claim was for $10,206,027.39 plus interest at a per diem rate of $2,796.17. The pleaded claim was for the judgment debt due on the New York Judgment.

Mr Pieper filed his defence on 7 January 2011 and sought to defend the English claim on various bases. The Trust's position is, and was, that there was no defence to the claim. In the meantime, on 4 ^th November 2010 the Trust sought, and on 8 ^th November 2010 obtained, an ex parte worldwide freezing order from Christopher Clarke J (“the 2010 WFO”). The 2010 WFO was continued, subject to certain minor amendments, at the return date before Beatson J on 22 ^nd November 2010.

The Tomlin Order

Mr Pieper applied to discharge the 2010 WFO. The Claimant applied for summary judgment. The two cross-applications were listed to come before the Court on 11 ^th February 2011, but the parties entered into settlement negotiations, the result of which was a compromise agreement. That compromise agreement was then embodied in the Tomlin Order which David Steel J approved and made on 23 ^rd March 2011.

The body of the Tomlin Order contains various recitals, including that the Claimant and the Defendants had agreed terms of settlement. It then provides that:

BY CONSENT

IT IS ORDERED that all further proceedings in this matter be stayed upon the terms set out in this Order and Schedules 1 and 2 hereto, except for the purposes of enforcing those terms.

AND IS FURTHER ORDERED that any party may be permitted to apply to the court to enforce the terms upon which this matter has been stayed without the need to bring a new claim.

AND IT IS RECORDED that the parties have agreed that any claim for breach of contract arising from an alleged breach of the terms set out in the Schedules to this Order may, unless the Court orders otherwise, be dealt with by way of an application to the Court without the need to start a new claim.

Paragraph 1 of the body of the order then provides that the Claimant is given permission “to amend the Claim Form and Particulars of Claim in this Action in the form annexed to this Order and initialled by the Judge”. The original Claim Form contained a claim for payment of the amount due under the New York Judgment. The amended claim added an additional claim which is not material for present purposes. Paragraph 2 joined the Second Defendant, Quantum Holding Ltd (“Quantum”) to the proceedings and waived service.

Paragraph 3 of the order provided that:

All further proceedings in this Claim shall be stayed except for the purpose of carrying into effect the terms set out in Schedule 2.

Paragraph 4 of the order provided for the WFO to remain in force, except that it would cease to be a worldwide order when the Claimant was paid $5m under the compromise. There is no dispute that this did not happen. Paragraph 6 of the order provided for the vacation of the WFO upon the Defendants having fully complied with the compromise schedule. Again, there is no dispute that this did not happen.

The terms of settlement are then found in Schedule 2 to the Tomlin Order. The important terms are as follows.

Paragraph 1 provided for the Defendants (i.e. both Mr. Pieper and Quantum) to make payments totalling $11m to the Claimant between 10 June 2011 and 7 December 2012:

i) $2 million by 4pm on 10 June 2011;

ii) $1 million by 4pm on 5 August 2011;

iii) $2 million by 4pm on 9 December 2011;

iv) $2 million by 4pm on 9 March 2012;

v) $2 million by 4pm on 8 June 2012; and

vi) $2 million by 4pm on 7 December 2012.

Paragraph 3 then provided for what happens if there is a default by the Defendants in making those payments:

If the Defendants fail to make any of these payments on the dates set out in paragraph 1 above the Claimant shall be entitled to enter judgment

(i) against the First Defendant in the full amount of the Claimant's claim against him as set out in the Amended Claim Form and Amended Particulars of Claim herein together with interest thereon at the rate of US$2796.17 from the 4 November 2010 up to the date when judgment is entered against him LESS any sums which shall have previously be [sic] paid to the Claimant pursuant to this Schedule 2; and (ii) against the Second Defendant in the same amount as set out in sub-para (i)

and both Defendants shall be deemed to have consented to the entry of that judgment.

Subsequent events and the parties' arguments

Mr Pieper made the first two payments due under the Tomlin Order, i.e. the $2m due by 10 June 2011, and the $1m due by 5 August 2011. Then he stopped. Since then he has not made any of the payments due under the Tomlin Order. The Claimants contend that the Defendants are in breach of paragraph 1 of Schedule 2 to the Tomlin Order, and that they are entitled to enter judgment against them for the full sum originally claimed, plus interest, less the $3m already paid. The total is currently US$17,423,232.57 including interest.

The First Defendant resisted this claim on three separate grounds.

First, he contend that an oral agreement was reached in the course of meetings in February and March 2012 between Mr. Mann and Mr. Pieper. The agreement was that:

a) Mr. Pieper would work to assist Mr. Mann in the development of business opportunities;

b) Mr. Pieper would at Mr. Mann's request enter into agreements to share with the Trust the proceeds of certain realisable assets that Mr. Pieper held, and that the WFO would remain in place but be varied so as to allow the sale of those assets; and

c) No further action would be taken in relation to the Tomlin Order or the payment obligations in it.

Secondly (although at the forefront of the submissions of Mr. Midwinter QC for the First Defendant) he contend that the Claimants' claim to enforce the settlement agreement scheduled to the Tomlin Order is time-barred.

Thirdly, they contend that the application should be rejected because it constitutes an abuse of process on the grounds of delay.

The Claimants contend that there is no substance in any of these arguments. First, they say that there is no satisfactory evidence upon which the court could possibly conclude that there was any agreement that no further action would be taken in relation to the Tomlin Order. The documentary record is, they say, flatly inconsistent with any such contention. They rely heavily upon written agreements reached in May 2012 and May 2013 which, they contend, preclude the argument currently advanced.

Secondly, they say that the claim is not time-barred for a number of different reasons described below.

Thirdly, they contend that there has been no material delay, and none which would qualify as an abuse....