Caroline Jill Crowther v Paul Anthony Crowther
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Moylan,Lord Justice Phillips |
| Judgment Date | 16 June 2020 |
| Neutral Citation | [2020] EWCA Civ 762 |
| Date | 16 June 2020 |
| Docket Number | Case No: B6/2020/0520 |
| Court | Court of Appeal (Civil Division) |
[2020] EWCA Civ 762
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
FAMILY DIVISION
Mr Justice Holman
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moylan
Lord Justice Males
and
Lord Justice Phillips
Case No: B6/2020/0520
Charles Howard QC & Alex Tatton-Bennett (instructed by Hughes Fowler Carruthers) for the Appellant
The First Respondent in person
Charles Hale QC, James Copley & James Watthey (instructed by Preston Turnbull LLP) for the Second to Sixth Respondents
Remote Hearing date: 9 th June 2020
Approved Judgment
Introduction
Paul and Caroline Crowther used to run a shipping business together, but are now in the throes of a bitter divorce. In the course of the financial remedy proceedings Mrs Crowther obtained a freezing order from Lieven J to restrain the second to sixth respondents (Mr Steven Knight and companies controlled by him) from disposing of or charging four vessels operated within that shipping business. While it is common ground that legal title to the vessels is held by companies controlled by Mr Knight, Mrs Crowther's case is that she and her husband are entitled to the beneficial interests in those vessels, or strictly speaking the beneficial interests in the shares in the companies which own the vessels, and that there is a fraudulent conspiracy between Mr Crowther and Mr Knight to claim that neither of the Crowthers have any interest in the vessels and thus to reduce the value of the assets available for distribution in the financial remedy proceedings.
Mr Knight, supported by Mr Crowther, denies these allegations. He says that his companies are not only legal but also beneficial owners of the vessels and that there is an urgent need to sell (or perhaps to charge) one of them in order to generate funds for the upkeep and running costs of the remaining vessels in the fleet.
At a hearing on 10 th March 2020 Holman J discharged the freezing order against the second to sixth respondents, leaving them free to dispose of the vessels, although there was no challenge to a freezing order also made against Mr Crowther preventing him from doing so, which remains in place. However, the freezing order against the second to sixth respondents was reinstated by Floyd LJ on 13 th March 2020 pending this appeal. Mrs Crowther now appeals, seeking to continue the injunction granted by Lieven J until the issue as to beneficial ownership of the vessels can be determined.
On this appeal Mrs Crowther and the second to sixth respondents have each been represented by leading and junior counsel. Mr Crowther, who supports the position of the second to sixth respondents, has represented himself.
At the conclusion of the hearing we informed the parties that the appeal would be allowed so as to continue the prohibition on disposal of the vessels by the second to sixth respondents, but on terms which would enable one of the vessels to be sold (or vessels to be charged as security for a loan up to the value of the most valuable vessel) and the proceeds to be used to pay running costs and to carry out any necessary repairs or maintenance work. The terms of our order are set out in the schedule to this judgment. I now give my reasons for joining in that decision.
The background facts
The Crowthers were married on 28 th September 1996. They owned a shipping business, which operated vessels providing services in the construction of offshore wind farms and oil and gas subsea operations. Mr Crowther's expertise was in shipping, so he was responsible for chartering out the vessels and for their management and operation. Mrs Crowther dealt primarily with the financial side of the business and also with property management, managing a serviced office centre called Maritime House until it was sold in 2018. Until 2012 the vessels were owned by offshore companies ultimately owned by the Crowthers, but that changed in 2012 after they were introduced to Mr Knight. Thus until November 2012 the vessels were owned by subsidiaries of a company called Med Marine Charters Limited, while a limited partnership, Atlantic Marine & Aviation LLP (“AMA”), dealt with the operation and management of the vessels.
It appears that the business was sufficiently successful to enable the Crowthers to enjoy an affluent lifestyle. They lived in a house in Sussex valued in excess of £4.5 million (but subject to a mortgage for £1 million), educated their three children privately, owned horses (for which purpose they employed a groom), a collection of expensive cars, and (until recently) an interest in a private aeroplane.
Mr Knight is a UK qualified chartered accountant who has specialised in international tax planning and asset management. In 1989 he was appointed to manage the Gibraltar office of Price Waterhouse but when that office was closed in 1992 he decided to stay in Gibraltar and to set up his own business, the Castle Trust Group, to take over Price Waterhouse's private client and trust portfolio of clients. Castle has been operating in Gibraltar for over 27 years. According to Mr Knight, it manages a portfolio of assets worth in excess of several hundred million US dollars and is heavily regulated. Mr Knight emphasises that the Crowthers were just two out of hundreds of clients.
Mr Knight and Mr Crowther were introduced in early 2012 and first met each other on 8 th May 2012. According to Mr Knight, Mr Crowther explained that he and his wife owned three vessels through offshore companies and were currently acquiring a fourth, but the business was highly leveraged and they were struggling to finance their debts. Mr Knight says that he had some familiarity with the Crowthers' business as Castle acted for some of those who had loaned them money. One of those creditors was Richard Morgan, a family friend to whom the Crowthers had agreed to pay interest at the remarkably high rate of 25% per annum. Mr Knight says that he considered that the business of operating offshore vessels was attractive and he saw an opportunity to invest in it. Various possibilities for collaboration were discussed.
The upshot was that two letters were sent to Mr Crowther, summarising two distinct structures. One of these letters was deliberately mis-dated 11 th May 2011 in order (according to Mr Knight) to distinguish it from the other which was correctly dated 11 th May 2012. This seems an odd way to distinguish the two letters, but it is clear that the 2011 letter was indeed written in May 2012 as it is common ground that the parties had not met before then. The 2011 letter proposed a transfer of the shares of the owning companies to a company within the Castle group in return for which Castle would take over the companies' debts, together with a bareboat charter of the vessels to AMA, which would therefore continue to operate and manage them. The 2012 letter proposed a different structure, described as an “international pension trust” to be formed by Castle, who would place sufficient funds into the trust to finance ongoing obligations of the business, with the vessels being transferred to a new company to be owned by the trust, with personal loans available to the Crowthers, and with their option to terminate these arrangements and take back control of the vessels at any time on repayment of the funds advanced.
At that stage neither of these proposals was taken further. However, discussions continued through the summer of 2012, while at the same time, according to Mr Knight, loan note holders were making clear that they wanted to get their money back. According to Mr Knight, by 1 st October 2012 AMA was in default of at least one outstanding loan and, on 12 th November 2012, Castle wrote on behalf of loan note holders to AMA giving notice that it was exercising the right to take over ownership of the vessels. In response, by an email dated 19 th November 2012, Mr Crowther apologised for his failure to respond earlier and for the fact “that the company is having difficulty in making the contractual payments at this time”, which he attributed to “cashflow issues”, and promised to make a proposal by the following afternoon at the latest.
After some further exchanges a meeting took place in Gibraltar on 21 st November 2012. Mr Knight and Mr Crowther both say (and Mrs Crowther does not deny) that Mrs Crowther attended this meeting together with her husband. It was agreed that there would be two agreements, one being an agreement whereby a newly formed Castle entity, Castle Ship Management Ltd (“CSM”), would take over the indebtedness under the loan notes together with ownership of five vessels (the Atlantic Guardian, Atlantic Surveyor, Atlantic Cougar, Atlantic Wind and Atlantic Carrier), which would then be bareboat chartered back to AMA. The second agreement was a Family Settlement which it was contemplated would protect Mrs Crowther and the children in the event of Mr Crowther's early death. It was envisaged that part of the income which would come to AMA from sub-chartering the vessels would be paid into the Settlement in order to build up a fund. In the event, however, Mr Knight says that no money was ever transferred into the settlement.
As a result a formal agreement dated 22 nd November 2012 was concluded, governed by Gibraltar law and signed by Mr Crowther on...
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