Group Seven Ltd (a company incorporated under the laws of Malta) v Allied Investment Corporation Ltd (a company incorporated under the laws of Malta) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hildyard |
| Judgment Date | 06 June 2013 |
| Neutral Citation | [2013] EWHC 1509 (Ch) |
| Docket Number | Case No: HC12C00507 |
| Court | Chancery Division |
| Date | 06 June 2013 |
[2013] EWHC 1509 (Ch)
The Hon. Mr Justice Hildyard
Case No: HC12C00507
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Jeffrey Chapman QC and Simon Atrill (instructed by Mishcon de Reya) for the Claimant
Romie Tager QC and Philip Kremen (instructed by Hughmans) for the Third Defendant
Hearing dates: 22, 23, 24 & 26 April 2013 and 9 May 2013
Nature of application and the position of relevant parties
The Claimant, a body incorporated under the laws of Malta now called Group Seven Limited ("the Claimant"), seeks to commit the Third Defendant, namely Mr Paul Sultana ("Mr Sultana"), for contempt of court for his alleged breach of a freezing order made by Floyd J (as he then was) dated 24 February 2012 ("the Freezing Order").
The Claimant contends that Mr Sultana was in breach of the Freezing Order in that he
"disposed of (or procured the disposal of) one of his most valuable assets for US$200,000 by settling one of his company's (namely, Wealthstorm Limited's) claims in relation to a debt owed to it [in the sum of US$500,000] by Digital Archives Inc and/or Ali Nasir and/or Scheherazade Nasir."
In their Skeleton Argument, Counsel for the Claimant (Mr Jeffrey Chapman QC and Mr Simon Atrill) make the point that the settlement of those claims for a sum substantially less than the face value of the debt (being one of Wealthstorm Limited's most substantial assets) diminished the value of the Claimant's shares in Wealthstorm Limited (which are without doubt assets of the Claimant). However, the Claimant's Application Notice focuses not on the Claimant's shares but on the settlement of the debt proceedings; and Counsel for the Claimant made clear that for the purposes of its application the asset in question which is alleged to have been disposed of is thus a debt owed to Wealthstorm Limited.
Thus, the premise of the Claimant's application is that the chose in action which the benefit of the debt ("the Debt") comprises is, for the purposes of the Freezing Order, to be treated as an asset of Mr Sultana; and that this is, indeed, how Mr Sultana always regarded it, including in his adumbration of his assets in response to the disclosure provisions of the Freezing Order.
Mr Sultana rejects that premise. Counsel on his behalf (Mr Romie Tager QC and Mr Philip Kremen) contend that the application is misconceived and they invite the Court to strike it out, pursuant to CPR 81PD.17, on the grounds that it discloses no reasonable ground for alleging that he is in contempt of court, and on the basis further that the sealed Freezing Order was not formally served on him. It is also contended on Mr Sultana's behalf that the Claimant's Application Notice is insufficiently particularised; and that this too warrants its dismissal.
The last two are important but essentially procedural issues. The substantive question upon which Mr Sultana's application to strike out the committal proceedings rests is whether the debt claim of US$500,000, which was settled for US$200,000, was, or for the purposes of the Freezing Order is to be treated as, one of Mr Sultana's assets.
Terms of Freezing Order of which breach is alleged: issues arising
Paragraphs 8 and 9 of the Freezing Order are in the following standard terms:
"8. Until trial or further order of the court, each of the First, Second and Fourth Respondents Marek Rejniak, Paul Sultana and Luis Nobre must not–
(1) remove from England and Wales any of their assets which are in England and Wales up to the value of €12m; or
(2) in any way dispose of, deal with or diminish the value of any of their assets whether they are in or outside England and Wales up to the same value.
9. Paragraph 8 applies to all the Respondent's assets whether or not they are in his own name and whether they are solely or jointly owned. For the purpose of this order the Respondent's assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions."
Reflecting those two paragraphs, there are two facets to the substantive issue. One facet is whether Mr Sultana's references in his affidavit evidence (and by implication in his Defence) to the Debt being one of his assets means that it is to be treated as such in any event. The other facet is as to the true construction of the last two sentences in paragraph 9 of the Freezing Order, which undoubtedly extend the meaning of the phrase "his assets".
That second facet of the substantive question is, I think, of some general application and importance. Paragraph 9 of the Freezing Order is in the same form as paragraph 6 of the CPR standard form of freezing order, which since 2002 has been and remains in use in the High Court (although there is an alternative form also used in the Commercial Court). Accordingly, the point primarily raised is not only of significance to the parties: it could well affect orders made and to be made in other cases too.
Immediate procedural background
The immediate procedural background can be summarised as follows.
On 10 March 2013, Mr Sultana's solicitors (Hughmans) informed the Claimant's Solicitors (Mishcon de Reya) that Mr Sultana had "managed to settle" Wealthstorm Limited's claim against Digital Archives Inc, Mr Ali Nasir and Ms Scheherazade Nasir for the sum of US$200,000. Hughmans stated that the net proceeds after payment of the US attorney's fees would be paid into its client account, to be held subject to the Freezing Order (although Mr Sultana would be wanting in the future to make payments out of that money in due course).
No intimation of the pendency of that claim had previously been given to the Claimant, still less any intention to compromise the Debt to which it related. The funding of the claim was and remains uncertain. Mishcon de Reya sought an explanation why no mention had been made of the claim; why the Debt had been settled at so heavily discounted an amount; and who had paid the fees of the US attorneys acting for Wealthstorm.
Hughmans replied on 19 March 2013, stating that the settlement had been advised on by an US attorney, and a discount accepted as an "opportunity to come away with at least some money". No explanation was offered why Mishcon de Reya had not been told before about the proceedings or the settlement; or as to the precise rationalisation of the settlement; nor as to how the litigation was funded. Further correspondence did not elucidate the issues.
The Claimant's committal application was issued on 5 April 2013. The breach of the Freezing Order is described as follows:
"In breach of paragraph 8(2) of the Freezing Order Mr Sultana disposed of (or he procured the disposal of) one of his most valuable assets for $200,000 by settling one of his company's (namely, Wealthstorm Limited's) claims in relation to a debt owed to it by Digital Archives Inc and/or Ali Nasir and/or Scheherazade Nasir. This is a clear breach of paragraph 8(2) of the Freezing Order and Mr Sultana and his advisers did disclose this proposed disposal to the Claimant nor seek to vary the Order. Mr Sultana has failed to provide an explanation as to why we were not made aware of these proceedings and their settlement."
The Application Notice was stated to be supported by the affidavit of Jarret Bevan Brown sworn on 5 April 2013 ("Mr Brown's Affidavit") and served at the same time. That affidavit, which is largely devoted to the background of the proceedings, includes the following statements by Mr Brown:
"55. …To be clear, although the loan and claim was in the name of Wealthstorm Limited, I do not consider that this matters for two reasons.
56, First, in reality this loan and claim was made by Mr Sultana. The fact that the loan was recorded by Mr Sultana as one of his assets suggests that this is how he treated it. He obviously realised that it was to be treated as one of his assets for the purposes of the Freezing Order. Wealthstorm itself is an offshore (Maltese) company with very limited assets and there is little sign of any trading activity. It is 100% owned by Mr Sultana.
57. Secondly, even if the loan and claim are to be treated as formally as being the property of Wealthstorm, it is obvious that Mr Sultana has procured the breach of the Freezing Order, to the same effect. He (and therefore Wealthstorm) were obviously aware of the fact that the loan was an asset under the Freezing Order.
58. As I have explained above, it does not appear to be in dispute that this amounts to a breach of the freezing Order…"
The application was listed for hearing on 22 April 2013, together with two other applications in the same proceedings. At the commencement of the hearing, Counsel for the Claimant indicated that he wanted an adjournment pending further disclosure of documents and to enable a date to be fixed for cross-examination of Mr Sultana on the affidavits he had served in his defence.
Counsel for Mr Sultana objected to this course and pressed for summary dismissal. When this objection was raised, Counsel for the Claimant did not object to the procedural issues and the substantive twin-faceted issue as to the interpretation of the Freezing Order being dealt with there and then.
Thus, the questions raised as to the sufficiency of the Application Notice, the failure formally to serve a sealed version of the Freezing Order,...
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