Caroline Jill Crowther v Paul Anthony Crowther
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Lieven,Mrs Justice Lieven DBE |
| Judgment Date | 22 December 2020 |
| Neutral Citation | [2020] EWHC 3555 (Fam) |
| Court | Family Division |
| Docket Number | Case No: ZZ18D88433 & BV19D24032 |
[2020] EWHC 3555 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Lieven
Case No: ZZ18D88433 & BV19D24032
Mr Philip Marshall QC and Mr Alex Tatton-Bennett (instructed by Hughes Fowler Carruthers) for the Applicant
Mr Justin Kitson and Ms Alice Hawker (instructed by Trainer Shepherd Phillips Melin Haynes & Collins Long) for the First Respondent
Mr Robert-Jan Temmink QC (instructed by Preston Turnbull) for the Second to Sixth Respondents The Seventh Respondent was unrepresented
Hearing dates: 10 December 2020
Approved Judgment
This judgment concerns Mr Crowther's application that Mrs Crowther pays his costs of the preliminary issue on an indemnity basis.
Mr and Mrs Crowther have been engaged in highly acrimonious and litigious financial remedy proceedings since late 2019. The background to the litigation is set out in the judgment of the Court of Appeal in Crowther v Crowther [2020] EWCA Civ 762. I will merely recount those matters which are particularly relevant to the costs application before me.
Mr and Mrs Crowther had run a successful shipping business comprised of a number of ships providing services in the construction of offshore windfarms and oil and gas subsea operations. On 6 September 2019 each party issued a petition for divorce. Mrs Crowther made her application for financial remedies against Mr Crowther on 18 September 2019. On 17 December she made an urgent ex parte application for a freezing injunction against Mr Crowther and the Second to Sixth Respondents, “the Castle parties”.
Mrs Crowther alleged that she and her husband were the beneficial owners of five ships worth approximately £7–10 million. She said that there was evidence that Mr Crowther, together with the Second Respondent Mr Knight, were conspiring to defraud her by reducing Mr Crowther's apparent financial position by transferring assets away from Mr Crowther and by various devices involving ending contracts with companies controlled by Mr Crowther and moving those contracts to new companies. She argued that unless a freezing order was granted, the assets of the marriage would be taken offshore and would effectively be impossible for Mrs Crowther to access in any matrimonial finance award.
Mrs Crowther contended in her application for the freezing order that although the ships were held under legal title by various iterations of the Castle parties, she and Mr Crowther were the beneficial owners of the ships. She said that the legal ownership was merely for “tax purposes”.
I granted the freezing order, after an inter partes hearing, and gave a return date of 10 March 2020. On 24 February the Castle parties issued proceedings in the Admiralty Division asserting legal and beneficial ownership of four of the vessels and related relief. They also asserted that companies controlled by Mr and Mrs Crowther owed Mr Knight approximately £5 million. It is not necessary to set out the precise figures, not least because sums have varied considerably through the litigation. The important point for these purposes is that the Castle parties were alleging that the Crowthers, whether directly or through various companies, owed them a very large sum of money.
Mr Knight served two affidavits setting out his account of how Castle Ship Management had come to acquire title to the vessels. In essence, he said that the Crowthers' business was in considerable financial difficulty in 2012 and a deal had been struck by which ownership was transferred to companies controlled by him as a way of restructuring the Crowthers' finances. He asserted this was an entirely bona fide and arms length agreement and he and Mr Crowther denied that the purpose of the agreement was to evade tax in the UK. He alleged that the Crowthers, through the companies, owed the £5 million for unpaid charter fees. Mr Crowther had immediately conceded the Castle claims in the Admiralty proceedings and entirely supported Mr Knight's version of events. Mrs Crowther set out a Defence and Counterclaim to the action and pleaded fraud and conspiracy against both Mr Knight and Mr Crowther.
On 10 March Holman J discharged the freezing order in respect of the ships. Mrs Crowther promptly appealed to the Court of Appeal and a stay was granted. The appeal was heard on 9 June, the Castle parties being represented by leading counsel but Mr Crowther representing himself. The appeal was allowed on the grounds that the hearing before Holman J had not been fair and the Court of Appeal determined to reinstate the freezing order.
The following passages of the judgment are particularly relevant to the application before me:
“[Mrs Crowther] did so contending that the arrangements entered into in 2012 and described above were a sham. She acknowledged that “on paper it looks like Castle Ship Management have owned their ships since 2012”, but said that this was not the reality and was only done to “reduce our tax liabilities”, the reality being that “100% of the shareholding in Castle Ship Management Ltd is held on trust for us”. Although she did not put it anything like so bluntly, what her evidence came to is that her husband conspired with Mr Knight to conceal from HMRC that ultimately the vessels were beneficially owned by the Crowthers; that this was done in order to evade tax; and that what Mr Knight gained from this arrangement was a relatively modest annual fee. Mr Charles Howard QC for Mrs Crowther confirmed in argument before us that Mrs Crowther's case is indeed that this was unlawful tax evasion as distinct from legitimate tax avoidance, albeit that her case will be that despite being a partner in the business and responsible for financial matters, and despite having attended the November 2012 meeting, she was not a participant in unlawful activity.
…
50. Only two possibilities have been suggested as the true nature of the 2012 arrangements. The first is that the arrangement reached was, as Mr Knight and Mr Crowther say, a commercial agreement to transfer both legal and beneficial title to the vessel owning companies to CSM in exchange for CSM taking responsibility for paying off the loan notes, combined with a bareboat charter to AMA which would enable it to continue in business and to earn a profit on sub-charters of the vessels. The suggested rationale for this arrangement was that the Crowthers were in default of their loan commitments due to cashflow difficulties and faced the vessels being taken over by Castle acting on behalf of their creditors. The second possibility is that it was a criminal conspiracy between Mr Knight and Mr Crowther, but also involving Mrs Crowther who attended at least one of the relevant meetings, to evade tax properly due on the Crowthers' earnings.
51. The first of these possibilities has the support of some contemporary documents, by which I mean not only the agreements concluded themselves but also surrounding documents such as the letters and emails which say on their face that the Crowthers' business was unable to meet loan payments due to “cashflow issues” and that they were faced with a real prospect of losing control of the vessels in any event. If that was so, it would not be a commercially implausible arrangement to make, albeit that it has what I would regard as some unusual features, such as the hire provisions to which I have referred.
52. I bear fully in mind that the second possibility is a very serious allegation, meaning that Mr Knight, who is apparently a respected professional man carrying on a substantial regulated business in Gibraltar, was prepared to put his career and professional reputation at risk in order to assist the Crowthers, whom at that stage he had only just met, to evade tax illegally, and that he was prepared to do all this for a relatively insignificant annual fee. Cogent evidence would be required to make good such a serious allegation at trial.”
Males LJ set out eleven reasons which he considered gave “scope to question whether the substantial liability of the Crowthers and their business to Mr Knight has been exaggerated or even invented.” This was necessarily a hearing at an interlocutory stage of proceedings and no findings were made.
On 6 July the Admiralty claim was transferred to the Family Division on Mrs Crowther's application. The Castle parties and Mr Crowther resisted the transfer. On 17 July both matters came before me and I ordered a trial of a preliminary issue, which was set out as follows:
“IT IS ORDERED THAT:
The Preliminary Issues
1. There shall be a trial of the following preliminary issues (“the Preliminary Issues”):
i) the beneficial ownership of Atlantic Enterprise, Atlantic Tonjer, Atlantic Endeavour and Atlantic Explorer and the respective offshore companies which legally own them;
ii) the beneficial ownership of Atlantic Discovery;
iii) the beneficial ownership of funds presently held offshore by the second to sixth respondents; who is entitled to the chartering income from the disputed vessels; and an appropriate account of such chartering income if it is owed to the applicant and/or the first respondent; and
iv) whether the applicant wife and the first respondent husband and family companies owned by them are indebted to the second to sixth respondents (all of whom...
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...down in Brookes v HSBC Bank plc 2011 EWCA Civ 354, [2012] 3 Costs LO 285, adding Brookes was recently applied in Crowther v Crowther 2020 EWHC 3555 (Fam), [2021] 1 WLR 2705, where at para 28 it was stated: In Brookes v HSBC Bank plc 2011 EWCA Civ 354, Moore-Bick LJ summarised the releva......
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Office of the Premier of Montserrat v Bertrand Burke and Jennifer Burke Trading as Jenny Tours
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Caroline Jill Crowther v Paul Anthony Crowther
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