FM Capital Partners Ltd v Marino and Others

Hearing dates: 25 July 2018

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.

On 25 July 2018 a one day consequentials hearing was scheduled in this case following on from the main judgment on liability which I delivered on 11 July 2018. A considerable portfolio of issues arose for decision and time ran short. Some further submissions were therefore required after the close of the hearing.

With vacation looming and the production of this judgment therefore unlikely before October, I acceded to submissions for the Claimants that I deal with the relatively uncontroversial issues first by way of decision (“the July Decision”) to be encapsulated in an order, with reasons to follow. The remaining issues that were left for decision, and the reasons, appear together in this judgment.

Thus the issues to be covered in this judgment break down as follows:

i) July Decision Issues:

a) Amount of the bribery claim;

b) Allocation: approach, costs and credit;

c) Interest basis;

d) Costs: incidence, basis, interim payment;

e) Appeal issues.

ii) Remaining issues:

a) Proprietary claim;

b) Account of profits and equitable compensation: Election;

c) Account of profits: Issues regarding Mr Ohmura;

d) Equitable compensation issues;

e) Other issues as to the terms of the Order.

The July Decision Issues

The decision which I made read as follows:

“1. Amount re bribery claim (Marino pleading point): Claimant's figures.

2. Allocation:

a. Approach as per Claimant's schedules.

b. Costs:

i. Haggiagi not relevant to Mr Ohmura, but to be treated the same as the other recoveries.

ii. Generally: deduction of 30% from headline figures to allow for the effect of taxation.

c. Credit to be given for outstanding payments.

3. Interest: simple interest for this claim.

4. Costs:

a. Defendants to pay the Claimant's Costs

b. Basis: Indemnity

c. Amounts of interim payment:

i. Marino: US$1.5 million

ii. Ohmura US$ 1,000,000

5. Permission to appeal refused (both D1 and D3).

6. Time for renewing the application for permission and filing an appellant's notice at the Court of Appeal be extended to 14 [days after the handing down of this judgment].”

Amount of bribery claim

The first issue is the amount which is to be found to be due in relation to what has been called the bribery head, but covers not just bribery properly so called but also receipt of secret commissions.

It was submitted by Mr Couser for Mr Marino that the only paragraphs of the pleading where this head had been properly pleaded were the subheadings at paragraph 39CC. He argued that paragraph 39D is to be read as cross-referring to 39CC only. The significance of this is that if so it would follow that Mr Marino was not liable in relation to the GAIN Ironfly payments under this head (though they are covered by the dishonest assistance claim).

Having looked carefully at the pleading I am satisfied that this is a false point. The pleading is not immensely easy to follow, but it has a section headed “Secret Commissions”, the last paragraph of which is paragraph 39D. Its cross-reference back to “ each of the aforesaid transfers” is in context to be read as a reference to each of the transfers within the section, including the GAIN Ironfly payments. This is reinforced by the facts that:

i) Paragraph 39D estimates the payments to be worth US$8 million, which would make no sense if the GAIN payments were not included; and

ii) Those payments were originally the focus of this section.

Allocation issues

The next questions are those relating to allocation. The first question is whether the pro rata approach adopted by the Claimant, which results in a significant allocation to Phase 2 issues, is appropriate and fair.

Mr Emmett for Mr Ohmura contended it was not, and that 100%, alternatively 80%, of the other receipts should be allocated to this phase of the proceedings, and hence to Mr Ohmura's benefit. He contended that the correct approach in a case such as the present, was set out by the Court of Appeal in Townsend v Stone Toms & Partners (1984) 27 BLR 26.

He says that this case demonstrates that once there is a prima facie case that the plaintiff has received a sum of money which reduces the loss, it is for the plaintiff to show, if it be the case, that some part of the sum was for another cause of action. In this regard he refers me to the judgment of Waller LJ at page 56 and the words of Oliver LJ:

“it is to be said that the payment in relates to some claims which are not concurrent, or which could not succeed against the defendant, the only person capable of providing that guidance is the plaintiff himself, who has accepted the payment…

Where … the party who has to bring the money into account himself provides no material to show how any apportionment should be made (or, as in this case, invites the Judge to deal with it in a particular way) the Judge has to do his best with what material he has, and the only material that he had in this case was the claims themselves. What he had to ascertain was what the plaintiffs had lost, and to what extent that loss had been mitigated or satisfied by what had been received.”

His Lordship went on to say that there was really no other reliable way of doing this except by assessing the true value of the plaintiff's claims against the third party and comparing it with the amount the plaintiff had actually received from the third party.

He also directed my attention to the judgment of Purchas LJ at page 53:

“Where the previous recovery stems from the acceptance of a payment into Court made and accepted not only in respect of the claim for damages under consideration, but also in respect of other claims not relevant, the Court must decide, and it is for the plaintiff to establish, by how much that part of the payment attributable to the instant claim falls short of the total value of the claim itself. For my part I cannot see how this exercise can be done without an investigation of the other claims, unless it be for the Court to say that the plaintiff has failed to establish that there is any excess of damage suffered in respect of which he, the plaintiff, is entitled to continue his action for damages against the remaining defendant. Particularly where there is also a counterclaim, the subjective motives of payer and receiver alike cannot be relevant. The Court must restrict its attention to the effective benefits received by the plaintiffs. For these reasons the learned Judge was perfectly correct to investigate the value of the claims between the appellants and Laings, as well as the claims between the appellants and the respondents.”

Mr Emmett says that in the light of this I should be cautious about following the course which FMCP suggests and relying on the judgment of Eder J in Otkritie International Investment Management Ltd v Urumov [2014] EWHC 755 (Comm) at paragraphs [8] – [13] in particular upon the statement at paragraph [13] that “the claimants have a choice as to how the recoveries are to be appropriated so long as it is not ‘obviously unsustainable’”.

Mr Emmett submits that to the extent it is taken as a statement of general principle it is contrary to the decision of the Court of Appeal in Townsend.

He says that I must have three things in mind:

i) The Court of Appeal in Townsend did not hold that the plaintiff could simply “choose” how to apportion a recovery as between its various claims against the defendant and the third party. Moreover, if the Court of Appeal had allowed the plaintiff in the Townsend case to choose the basis for apportionment, it would have attributed the payment to each claim against D1 in the proportion which £30,000 bore to the total amount of the claims brought against D2. Rather the Court must ask what “effective benefits” were received by the plaintiff from the third party in respect of the concurrent claims.

ii) If the statement of Eder J bore the interpretation for which FMCP contends, the reference to acting “bona fide and without collusion” would make no sense. If the claimant can make the appropriation by reference to its own interests, it is unclear what would be involved in an appropriation made in bad faith. Moreover, “collusion” implies interaction with another person, and on FMCP's approach it is unclear which other person is pointed to. Collusion, he says, is referable to the situation when an apportionment is agreed by the original payer of the sum in question. It is suggested that there may be some context to the statement of Eder J which is not reflected in the judgment or that Eder J misunderstood the judgment of Oliver LJ in Stone Toms.

iii) It is obviously unfair to allow the claimant to make an apportionment retrospectively and with a view to its own interests. Moreover, if the appropriate question for the Court were merely to ask whether the proposed allocation is “obviously unsustainable”, this would encourage claimants, as is the case here, to present as little evidence to the Court as possible. Such an approach prevents defendants and judges...