Dadourian Group International Inc. (a company incorporated under the Laws of the State of New York) and Others v Azuri Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren,MR JUSTICE EVANS-LOMBE,MR JUSTICE WARREN |
| Judgment Date | 14 November 2007 |
| Neutral Citation | [2006] EWHC 699 (Ch),[2007] EWHC 2634 (Ch),[2006] EWHC 3492 (Ch),[2007] EWHC 1673 (Ch),[2006] EWHC 2973 (Ch),[2007] EWHC 454 (Ch) |
| Docket Number | HC04C00366,Case No: HC 04C00366,Case No: HC04000366,Case No: HC040003666 |
| Court | Chancery Division |
| Date | 14 November 2007 |
[2006] EWHC 2973 (Ch)
MR JUSTICE WARREN
Case No: HC04000366
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
CLIVE FREEDMAN QC and CHARLES SAMEK (instructed by Wallace LLP) for the Claimants
MICHAEL ASHE QC and STUART CAKEBREAD (instructed by David Wyld & Co) for the 3rd and 4th Defendants
PAUL SIMMS (litigant in person)
Hearing dates: 3 rd,7 th,8 th,9 th,13 th,14 th,15 th,16 th,17 th,20 th,21 st,22 nd,23 rd,24 th,27 th,28 th,29 th,30 th & 31 st March 2006, 3 rd,4 th,5 th,6 th,7 th,11 th & 12 th April 2006, and 8 th,10 th,11 th May 2006
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.
Introduction
In this case, the Claimants seek, principally, damages for fraudulent misrepresentation and conspiracy against the first to fourth Defendants and damages for breach of contract against the third and fourth Defendants. I shall refer to the first Claimant as DGI. Since a number of parties to this action are members of the Dadourian family and share that surname, I shall refer to them all simply by their first names; the second and third Claimants are Alex and Haig. The claims of DGI, Alex and Haig relate to an underlying dispute between DGI, a company incorporated under the law of the State of New York, and an English company, Charlton Corporation plc which I shall refer to as Charlton. That essentially contractual dispute, concerning an option in respect of certain hospital bed manufacturing equipment, was the subject of an arbitration which commenced in 1999. DGI was successful in that arbitration both in (i) defending Charlton's contractual claims and claims based on alleged fraudulent misrepresentation by DGI through Alex and Haig and (ii) in its counterclaim asserting breach of contract by Charlton and fraudulent misrepresentations by it through one or more of the first to fourth Defendants. I shall refer to the first Defendant as Mr Simms, to the second Defendant as Mr Rahman and to the third and fourth Defendants as Jack and Helga.
DGI, Alex and Haig seek to recover against Jack and Helga the contractual damages awarded against Charlton in the arbitration, on the basis that Charlton and various other entities are in reality a sham, a façade for Jack and Helga. They also seek against all four Defendants the substantial costs of the arbitration which they have been unable to recover from Charlton due to its lack of assets. They also seek damages which they allege to have been suffered as a result of the inability of DGI to sell the equipment during the currency of the option to which I have just referred. They submit that I am bound, in this claim by the Claimants against Jack, Helga and Mr Simms at least, by the findings of the arbitrator on the basis that those Defendants are privies of Charlton in relation to whom a res judicata arises. Those findings included findings of fraudulent misrepresentation by those Defendants.
Mr Simms was, at material times, senior partner in the firm of solicitors, Bower Cotton. He was also chairman of Charlton. The fifth to eleventh Defendants were his partners at the material times. It was sought to make them liable, in that capacity, for the alleged defaults of Mr Simms himself. Shortly before the commencement of the trial, the Claimants reached a settlement with those Defendants (the terms of which are unknown to me, save that those Defendants agreed to assist the Claimants with the provision of information of relevance to the claims against the first to fourth Defendants, particularly Mr Simms). The thirteenth to sixteenth Defendants are corporate bodies concerned in the family financial arrangements of Jack and Helga. They have taken no part in the trial following a direction of Sir Donald Rattee (sitting as a judge of this Division) who was of the view that their involvement would only be necessary, should the Claimants succeed in their claims, at a later stage when it comes to enforcement of any award of damages. Mr Rahman was, at material times, a director of Charlton.
Mr Clive Freedman QC and Mr Charles Samek appear for the Claimants. Mr Simms appears in person. Mr Michael Ashe QC and Mr Stuart Cakebread appear for Jack and Helga. Mr Rahman did not appear as a party, although he did give evidence on behalf of Mr Simms and Jack and Helga. Judgment had already been entered against him in default of defence. I understand that he could not afford legal representation and that, for one reason or another, could not represent himself.
As Mr Freedman says, this is an unusual case and the facts are exceptional. On his case, it involves the use of corporate and trust structures in way calculated to deceive third parties including creditors, contracting parties and members of the same family. Without going into any detail at this stage, I should say more about the background than the very briefest of sketches which I have given above and of how Mr Freedman, in his opening, put the Claimants' claims.
The background
As I have said, the claim arises out of an option agreement ("the Option Agreement") entered into in September 1997 by DGI and Charlton. Under the Option Agreement, DGI provided Charlton with an option to purchase tooling and other equipment intended to be used for the manufacture of hospital beds and related equipment. Charlton exercised the option. The Option Agreement required Charlton, at an appropriate time, to open a letter of credit to purchase the tooling and equipment. The Claimants alleged before the arbitrator and before me that the failure of Charlton to do so, which failure is admitted, was a breach of the terms of the Option Agreement. The first to fourth Defendants say that the obligation to open a letter of credit did not arise. It only arose, according to them, once DGI had acquired the totality of the equipment which it had contracted, following the exercise of the option, to sell, something which it never did. Accordingly, when DGI terminated the contract on 18 September 1998, purportedly on the basis of a repudiatory breach by Charlton, they say that it was itself in repudiatory breach.
The consequence of the termination was that in November 1998 Charlton instituted court proceedings in New York alleging that DGI had unlawfully terminated the Option Agreement, and further that DGI together with its directors Alex and Haig had fraudulently induced Charlton to enter into the Option Agreement by representing that at the time of the agreement DGI owned and possessed everything which was to be sold under it. It is common ground that DGI in fact owned the specialist tooling necessary for the manufacture of the hospital beds but did not own the general equipment (said by DGI to be readily available) necessary to produce, together with the tooling, a complete production line; it is also common ground that DGI was to provide a complete production line and not just the tooling.
The New York action was stayed for arbitration pursuant to an arbitration clause in the Option Agreement but on terms that Alex and Haig submitted to arbitration in respect of the claims of fraudulent misrepresentation. In April 1999, the arbitration commenced. In the arbitration, Charlton repeated its claims and DGI counterclaimed damages for breach of contract and for fraudulent misrepresentation.
The arbitrator heard the case over a long period of time. He heard from many witnesses and received a considerable volume of evidence, both documentary and live. On 4 July 2002, the arbitrator dismissed Charlton's claims because of its failure to comply with peremptory orders including the payment of security and costs. He also went on to conclude the determination of the counterclaim. On 13 June 2003, the arbitrator issued a Final Award part 1 in which he found that:
a. Charlton had been and was unable to open a letter of credit, and that it was in consequence in breach of contract;
b. DGI was entitled to treat the contract as repudiated, and was entitled to damages for breach of contract;
c. DGI had been induced to enter into the Option Agreement by reason of fraudulent misrepresentations by Charlton and its directors Mr Simms and Mr Rahman to the effect that:
i. each of Mr Simms and Mr Rahman owned major shareholdings in Charlton; and
ii. Charlton was (a) a sound trading company (b) which was creditworthy and (c) capable of performing its financial obligations under the Option Agreement; and
iii. Charlton was a company experienced in manufacturing various products in Third World countries which could not be manufactured profitably in the West.
d. The Claimants had not misrepresented what DGI had in its ownership and possession, and that Charlton knew at the time of the Option Agreement, and in any event before exercising the option, that equipment which became known as the General Equipment was to be acquired at a later date.
In concluding that Charlton had that foregoing knowledge, the arbitrator found that Jack had such knowledge and that such knowledge was to be imputed to Charlton. He reached such conclusion because of what he regarded as clear and compelling evidence that Jack (with Helga) was at all material times the party in control of and directing Charlton, to whom Mr Simms and Mr Rahman turned for instructions.
In finding that Charlton was unable to open a letter of credit, the arbitrator found that (a) Mr Simms and Mr Rahman had deliberately made false statements to potential funders, (b) there was a deliberate failure to provide basic...
To continue reading
Request your trial
-
Dadourian Group International Inc. and Others v Simms and Others (No 2)
... ... Dadourian Group International Inc (A Company Incorporated Under The Laws of The State of New ... ...
-
Antonio Gramsci Shipping Corporation v Stepanovs
...Maritime GmbH v Handelsveem BVECAS (Case C-387/98) [2000] ECR I-9337; [2001] CLC 550. Dadourian Group International Inc v SimmsUNK [2006] EWHC 2973 (Ch). Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc [2008]2 CLC 520. Dresser UK Ltd v Falcongate Freight Management Ltd......
-
John Corbitt Barnsley and Others v Philip Noble
...to a claim in misrepresentation that the representee would have gone ahead if nothing had been said at all: see Dadourian v Simms [2006] EWHC 2973 (Ch) at [548] (Warren J), Raiffeisen at [191] (Christopher Clarke J). But on the facts of this case, I find that what Philip said to Mr Barnsley......
-
Dadourian Group International Ltd Inc. and Others v Simms and Others (No. 1)
...as handed down may be treated as authentic. MR JUSTICE PETER SMITH The Honorable Mr Justice Peter Smith 1 On 24 November 2006 ( [2006] EWHC2973 (Ch)) Warren J delivered an extensive judgment in this 2 That judgment is under Appeal and the Court of Appeal have indicated a hear by date in re......
-
Hedge Fund Fraud: An English Law Perspective On The Potential Exposure Of Prime Brokers
...Act 2006 dealing with shareholder derivative claims are due to be brought into force in October 2007. 24 [2005] EWCA Civ 1612. 25 [2006] EWHC 2973 (Ch). 26 Either because there are assets belonging to MIF in England over which an English insolvency practitioner should be appointed, or becau......
-
The Recognition, and Res Judicata Effect, of a United States Class Actions Judgment in England: A Rebuttal of V
ivendi
...a foreign court havejurisdictional competence over the parties, has been typically met by proving one128 Dadourian Group Intl vSimms [2006] EWHC 2973 (Ch) at [715] citing Carl Zeiss n above 79,909–910 and Gleeson vWhippell [1977] 1 WLR 510 (Ch) 515.129 Barnett, n 78 above,70–71, and Gleeson......
-
PIERCING THE CORPORATE VEIL AS A LAST RESORT
...at [167]–[184]. 28 As set out in Ben Hashem v Al Shayif[2008] EWHC 2380 (Fam) at [159]–[164]. 29 [1933] Ch 935. 30 [1962] 1 WLR 832. 31 [2006] EWHC 2973. 32 As the Court of Appeal noted in VTB Capital plc v Nutritek International Corp[2012] EWCA Civ 808 at [79]; [2012] 2 Lloyd's Rep 313 at ......