CIBC Mellon Trust Company and Others v Stolzenberg and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Chadwick,Lord Justice Jonathan Parker,Lord Justice Kennedy |
| Judgment Date | 24 May 2005 |
| Neutral Citation | [2004] EWCA Civ 827,[2005] EWCA Civ 628 |
| Docket Number | Case No: A3/2004/0830,Case No: A3/2003/1715 CHANF |
| Court | Court of Appeal (Civil Division) |
| Date | 24 May 2005 |
[2004] EWCA Civ 827
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF
JUSTICE, CHANCERY DIVISION
(The Hon Mr Justice Etherton)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Ward
Lady Justice Arden and
Sir William Aldous
Case No: A3/2003/1715 CHANF
Mr John Wardell QC and Mr Jonathan Evans (instructed by Withers LLP) for the Appellants
Mr Christopher Carr QC, Mr Philip Marshall QCand Ms Hannah Brown (instructed by Howrey Simon Arnold & White) for the Respondents
The appellants Mora Hotel Corporation NV ("Mora") and Chascona NV ("Chascona") are the tenth and thirty-eighth defendants in this action. They seek to appeal against the order of Etherton J dated 3 February 2003. By his order the judge dismissed applications to set aside judgments entered against the appellants on 4 February 1999, 21 October 1999 and 7 December 1999. The applications also sought in consequence to set aside certain freezing orders and debarring orders dated 26 February 1997, 13 October 1998, 3 March 1999, 23 July 1999, 4 October 1999 and 8 May 2000. The orders dated 13 October 1998, 23 July 1999 and 4 October 1999 were "unless" orders, that is conditional orders providing that the appellants should be debarred from defending the claims made against them unless they complied with the order. If a party does not comply with such an order, the other party can obtain judgment with costs. The unless orders made in this case, and the judgments entered pursuant to them, are all described in the passage from the judge's judgment in paragraph 3 below. I will refer to them collectively as "the unless orders", and to them separately as "the July 1998 unless order", "the October 1998 unless order" and "the October 1999 unless order" respectively. The present litigation arises out of the collapse of the Castor group. I refer below to "Castor" as meaning Castor Holdings Limited or any member of its group.
There were essentially two issues before this court:
i) should the court grant permission to the appellants to appeal against the judge's holding that the respondents had a real prospect of success on their claim against the appellants in conspiracy ("the conspiracy issue") ?
ii) did the judge err in the exercise of his discretion to refuse to set aside the judgments against the appellants ("the discretion issue") ?
Mr John Wardell QC made submissions on both issues for the appellants. On behalf of the respondents, Mr Christopher Carr QC and Mr Philip Marshall QC made the submissions on the conspiracy issue and the discretion issue respectively. By an order of this court (Mummery and Mance LJJ) dated 11 November 2003, the appellants' application for permission to appeal on the conspiracy issue was adjourned to this court, but permission to appeal was granted on the discretion issue. The court refused permission on the conspiracy issue and this judgment sets out my reasons for doing so.
The procedural background
I start with an explanation of how the unless orders came to be made. The judge set out the procedural background in these terms:-
"4. These proceedings ("the Proceedings") are brought by the Claimants as trustees of certain pension and other benefit funds established by Daimler Chrysler Canada Inc. for its employees. Between 1984 and 1992 the Claimants made substantial loans to, and investments in, an international group of finance and investment companies known as the Castor Group ("Castor"). The loans and investments made by the Claimants totalled approximately CAN240 million. Castor collapsed in early 1992 with debts of CAN1.8 billion. The Claimants' loans have proved to be irrecoverable, and their investments virtually worthless.
5. The Claimants allege that their loans and investments were made in reliance upon fraudulent misrepresentations by the First Defendant, Wolfgang Stolzenberg, of which the Second Defendant, Marco Gambazzi, and others of the Defendants, including Mora and Chascona, were aware and to which they were party.
6. Mr Gambazzi is an attorney in the firm Gambazzi & Berra based in Lugano, Switzerland. He specialises in acting as a fiduciary, using off-shore companies and entities. Mr Gambazzi was a shareholder in and director of the leading Castor company, Castor Holdings Ltd, ("Castor Holdings") until its insolvency in February 1992. He was also a director of a number of other Castor companies, some of which were key operating subsidiaries of Castor Holdings, including C. H. International Finance NV, C. H. International (Netherlands) BV, Castor Finance A. G., CH (Ireland) Limited and Castor Investment AG.
7. Mora and Chascona own and operate the Gorham Hotel in New York ("the Hotel"). From 1979 Mr Gambazzi was the managing director of Chascona. He was also a director of Mora from 1995. The Claimants allege that he was actively involved in the affairs of Mora even before 1995. Until relatively recently, Mr Gambazzi held all the bearer shares in Mora and Chascona. He claims, however, that at all times prior to the collapse of Castor he held them as nominee for the true beneficial owners.
In May 1996 the Claimants issued the Proceedings against the main conspirators. The first four Defendants are individuals. The other Defendants are corporations. At that time, the only claim against Mora was a tracing claim for US380,687 and CAN357,738.
9. On 26 th February 1997 Mr Justice Rimer granted a worldwide freezing order against the individual Defendants and many of the corporate Defendants, including Mora. The order required Mora, in relation to the tracing claim, to provide information and documents regarding what had become of the money which it had allegedly obtained by fraud. In order to enable the freezing injunctions to be policed, Mora, in common with others of the Defendants, was required to produce information and documents regarding its assets. Mora was also required to provide copies of any documents which it held which were relevant to the proceedings.
10. On 10 th April 1997 Mora acknowledged service of the writ. Mora was thereafter represented by the same solicitors and counsel who appeared on behalf of Mr Gambazzi. The solicitors acting for Mora at that time were Richards Butler.
11. On 11 th April 1997 Mora, Mr Gambazzi and other Defendants applied to set aside service of the writ on the grounds of lack of jurisdiction.
12. On 23 rd May 1997 Mr Justice Rattee dismissed the applications to set aside service of the writ on grounds of lack of jurisdiction. An appeal to the Court of Appeal was dismissed on 29 th October 1997. In due course permission was granted to appeal to the House of Lords.
13. By this time Colman Coyle had replaced Richards Butler as Mora's solicitors for the Proceedings.
14. On 10 th July 1998 Mr Justice Rattee made several orders against Mora to secure compliance with the freezing order of Mr Justice Rimer, some of which were "unless" orders.
15. On 13 th October 1998, Mr Justice Rattee made an order that, unless Mora served on the Claimants' solicitors by 10 th November 1998 "all documents within its possession, custody or power relating to the security granted by [Mora] to C H International Overseas which either remained in existence, or was created, after 20 th May 1992" Mora be debarred from defending the Proceedings further, and the Claimants be at liberty to proceed with an account of what was due to the Claimants from Mora in respect of the tracing claim against Mora.
16. Mora did not supply any such documents. Nor did it serve any affidavit or witness statement explaining why it had failed to do so.
On 4th February 1999, following the taking of an account against Mora by Master Winegarten, pursuant to the order of 13th October 1998, judgment was entered against Mora, as I have said, for CAN357,738.21 and US386,687.95.
18. In the meantime, on 11 th January 1999 Chascona had been joined to the Proceedings. A claim in conspiracy was made against Chascona. Furthermore a claim in conspiracy was now made against Mora. The amended writ and statement of claim were served on Mora and also on Chascona.
19. On 25 th February 1999 Chascona entered an acknowledgement of service. On 12 th March 1999 Chascona issued an application challenging the jurisdiction of the English court. That application was adjourned pending the determination by the House of Lords of the jurisdiction issue.
On 23rd July 1999 Mr Justice Lightman made an order extending the existing freezing relief against Mora, and also granting freezing relief against Chascona, up to a value of CAN420 million in respect of the conspiracy claim. Mora was also required, by Mr Justice Lightman's order, to take certain steps to ensure that any proceeds of certain litigation it had brought in Canada against Castor's auditors ("the C & L Litigation"), and any proceeds of a proof of debt which it had submitted in Castor's bankruptcy, were preserved. Those steps included opening an account at a branch of a bank in England & Wales, for the purpose of receiving any such proceeds, and giving certain notices.
21. Mora and Chascona took no steps to comply with the order of Mr Justice Lightman.
22. On 4 th October 1999 Mr Justice Rattee ordered that, unless Mora and Chascona complied with the outstanding terms of the order of Mr Justice Lightman within fourteen days, they would be debarred from defending the Proceedings further, and the Claimants would be entitled to enter judgment for damages to be assessed in respect of their claims in conspiracy. Mora and Chascona took no steps to comply with that...
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