Gwembe Valley Development Company Ltd ((in Receivership)) v Koshy
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Rimer,MR JUSTICE RIMER |
| Judgment Date | 15 October 2004 |
| Neutral Citation | [2004] EWHC 2202 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC96G07154 |
| Date | 15 October 2004 |
[2004] EWHC 2202 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Rimer
Case No: HC96G07154
Mr Andrew Thompson (instructed by CMS Cameron McKenna) appeared for the Claimant
Mr Hugo Page QC (instructed by De Cruz Solicitors) appeared for the First Defendant, Thomas Koshy
Hearing dates: 9 and 10 June 2004
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
This application, by notice dated 10 March 2004, is by the claimant, Gwembe Valley Development Company Limited (in receivership) ("GVDC"). There are eight defendants, but the application seeks relief only against the first of them, Thomas Koshy. The other defendants are companies with which he is alleged to be, or to have been, associated. The action was commenced by a writ dated 15 November 1996. Seven days earlier, on 8 November 1996, another action was also started against the same eight defendants. The claimant in that action was DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH ("DEG").
DEG is a bank owned by the German government. It invests in third world projects. GVDC is a Zambian company incorporated in 1985 for the purpose of acquiring a farm in Zambia at which it carried on cotton and wheat production. DEG and other investors provided finance for the project. The other investors included the second defendant, Lummus Agricultural Services Company Limited ("Lasco"). Mr Koshy was a director of both Lasco and GVDC.
The Zambian project was a failure and GVDC and Lasco became insolvent. DEG lost its investment and, by its action, claimed damages against Mr Koshy for deceit and conspiracy. By the GVDC action, GVDC claimed against Mr Koshy an account of the secret profits he was said to have made under the so-called "pipeline transaction" which was at the heart of GVDC's sources of finance. GVDC also claimed compensation for breaches of fiduciary duty by Mr Koshy. GVDC started its action at the instigation of receivers purportedly appointed by DEG. On 14 December 2000 the Court of Appeal (Pill, Chadwick L.JJ and Wright J) held those appointments to be invalid but it also ordered the appointment of Michael Rollings, a partner in Ernst & Young, as a court-appointed receiver of GVDC's causes of action. Mr Rollings thereafter ratified the GVDC action on behalf of GVDC and carried it on. He continued to instruct CMS Cameron McKenna ("CMS") as GVDC's solicitors.
The DEG and GVDC actions were tried together before me over six weeks between 24 April and 26 June 2001. Mr Simon Browne-Wilkinson QC and Mr Andrew Thompson, instructed by CMS, represented DEG and GVDC. Mr Hugo Page QC, instructed by Landau & Scanlan, represented Mr Koshy. I delivered my reserved judgment on 26 October 2001. I heard argument on the form of the order on 10 December 2001 and ruled on it on 12 December 2001.
The outcome was that I dismissed the DEG action and ordered DEG to pay 50% of Mr Koshy's costs. In the GVDC action, I ordered an account of profits against Mr Koshy and ordered him to pay 80% of GVDC's costs. I gave GVDC liberty to apply for a payment on account of costs under CPR Part 44.3(8). I reserved the taking of the account of profits to myself, but directed that no steps should be taken on it until after the disposal of the appeals which Mr Koshy and GVDC wanted to pursue. My judgment is reported at [2002] 1 BCLC 478. It deals with the facts and issues at some length and I will take it as read.
On 18 December 2001 I made a freezing order in the GVDC action against Mr Koshy. It was expressed to endure "until [he] shall have paid any sums found due to [GVDC] following the taking of the [account of profits ordered on 12 December 2001] or further Order of the Court in the meantime". It restrained Mr Koshy from disposing of or dealing with assets in England and Wales up to a limit of US$500,000.
On 20 December 2001 I made a freezing order against six of the corporate defendants to the GVDC action. The limit was again US$500,000. The order was expressed to endure until Mr Koshy had paid any sums found to be due to GVDC following the taking of the account ordered on 12 December 2001, or he had paid any sums due to GVDC in respect of the costs of the action, whichever was the later, or further order of the court in the meantime.
DEG, GVDC and Mr Koshy were all dissatisfied with my decision and the litigation went to the Court of Appeal. DEG wanted to challenge my dismissal of its action, but it abandoned that appeal in September 2002. Mr Koshy appealed against my decision to order an account against him in the GVDC action but that appeal was dismissed. GVDC appealed against the form of the account of profits I had ordered, and its appeal was successful, the Court of Appeal ordering a wider form of account. GVDC also appealed against my dismissal of its claim for compensation for breach of fiduciary duty but that appeal was dismissed. The Court of Appeal (Mummery, Hale and Carnwath L.JJ) handed down its judgment on the appeals in the GVDC action on 28 July 2003 and it is reported at [2004] 1 BCLC 131. I will also take that judgment as read.
The Court of Appeal dealt on 24 November 2003 with the costs of the GVDC appeals and with other appeals on costs. Mr Koshy challenged my order for costs in the DEG action and was successful to the extent that the court awarded him 80% of his costs in place of the 50% I had awarded. It dismissed Mr Koshy's appeal against my order for costs against him in the GVDC action. It dismissed GVDC's appeal against my refusal to award it the costs reserved to me by an order of the Court of Appeal of 28 March 2001. It ordered Mr Koshy to pay GVDC 50% of (i) GVDC's costs of his appeals and (ii) 50% of GVDC's costs of its own appeals. On the same day, GVDC also made an application to the Court of Appeal for a payment by Mr Koshy on account of his costs liability in the action and on the appeals. The court declined to deal with that application and directed that any application by GVDC for such a payment should be made to me (if reasonably possible) or else to another judge of the Chancery Division. The court also directed that no order for costs made by me in the GVDC action or by the Court of Appeal was to be enforced without the permission of a judge of the Chancery Division.
The explanation for that last order is that Mr Koshy wanted to take to the House of Lords the issue of whether he should have been ordered to account at all; and GVDC wanted to take to the House of Lords the issue raised by its claim for compensation for breach of fiduciary duty. Mr Koshy and GVDC both petitioned the House of Lords for leave to appeal. It was because the Court of Appeal knew of the wish on both sides to petition the House of Lords that it made the last order to which I have referred. It had in mind that, so long as those petitions were pending, it might be unjust for any costs orders to be enforced. In the event, the House of Lords refused both petitions for leave on 22 January 2004. All that then remained to be done in the GVDC action was (i) the taking of the account of profits; (ii) the detailed assessment of GVDC's costs; (iii) should GVDC so wish, an application by it for an order for a payment on account of costs; and (iv) the obtaining of permission by GVDC to enforce its costs orders.
GVDC's application dated 10 March 2004
On 10 March 2004 GVDC issued the application notice now before me. It seeks relief under four heads: (i) the payment by Mr Koshy of £246,991.25 on account of the costs he has been ordered to pay; (ii) permission to enforce the costs orders against him; (iii) directions as to the taking of the account of profits; and (iv) a variation of the freezing order of 18 December 2001 so as to increase the limit from US$500,000 to US$12,000,000: this is said to be justified because (a) the wider form of account ordered by the Court of Appeal has increased Mr Koshy's liability to GVDC, and (b) the order ought also to provide protection for GVDC's claims in respect of Mr Koshy's costs liabilities, which at present it does not.
Argument on these issues (mainly the first and fourth: there was almost none on the second and third) occupied two court days. That is an unusual length of time for issues such as these but, like many issues in this litigation, the points were not easy and there is much at stake for both sides. I will take each issue in turn.
The application for a payment on account of costs
GVDC's application notice asks for an interim payment of £246,991.25, although in opening Mr Thompson, who again appeared for GVDC, pressed only for the round figure of £240,000. He submitted that in principle the court ought, in a case in which it has ordered a detailed assessment, to be disposed to order a payment on account. He referred me to Jacob J's familiar explanation in Mars UK Ltd v. Teknowledge Ltd [2000] FSR 138, at 153, of why it will ordinarily be just to do so. Mr Page QC, who again appeared for Mr Koshy, did not suggest that that explanation provides other than a sound general guide as to the approach it will usually be just for the court to adopt. Mr Thompson submitted that there are no circumstances in the present case pointing away from the exercise by the court of its discretion to order an interim payment. In particular, all avenues of appeal have been exhausted and so this is not a case in which such an order might have the effect of stifling an appeal.
There is, Mr Thompson...
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