Harrington & Charles Trading Company Ltd ((in Liquidation)) and Others v Mehta and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Miles |
| Judgment Date | 21 April 2023 |
| Neutral Citation | [2023] EWHC 998 (Ch) |
| Docket Number | Cases No: BL-2022-000913 / BL-2022-001515 |
| Court | Chancery Division |
[2023] EWHC 998 (Ch)
Mr Justice Miles
(sitting with Master Kaye)
Cases No: BL-2022-000913 / BL-2022-001515
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND & WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Ian Wilson KC and Mr James McWilliams (instructed by Hogan Lovells International LLP) for the Claimants
Mr Thomas Grant KC and Mr Daniel Petrides (instructed by Withers LLP) for the Defendants
Mr Justin Higgo KC and Mr Paul Adams (instructed by Howard Kennedy LLP) for the Third Defendant
st April 2023
APPROVED JUDGMENT
Mr Justice MilesIntroduction
The application before the court concerns two sets of proceedings in which the claimants allege that various defendants have been involved in or benefited from an alleged fraud concerning many hundreds of millions of dollars. I sat with Master Kaye who is jointly case managing this case with me. This judgment reflects our joint views. I am however responsible for its contents.
There have been three claims commenced in the Business List. There are also related insolvency applications which rely on provisions of the Insolvency Act 1986. The Business List claims are:
a. Claim No. BL-2022-000913 issued on 31 May 2022 (the “May Action”), in which five companies and one LLP (all in liquidation) and their joint liquidators bring claims against four members of the Mehta family (the “Mehta Defendants”) who are alleged to have orchestrated the alleged fraud, and another individual (“Mr Obidah”), who is alleged to have acted in concert with the Mehta Defendants;
b. Claim No. BL-2022-001010 issued on 23 June 2022 (the “June Action”), in which an additional company in liquidation called Docklands and its joint liquidators (who are the same liquidators as in the May Action), bring the same claims against the Mehta Defendants and Mr Obidah as are brought in the May Action; and
c. Claim No. BL-2022-001515 issued on 23 September 2022 (the “September Action”), in which the same entities and officeholders as in the May and June Actions (together the “Claimant Companies” and the “Joint Liquidators”) bring claims against two Singaporean companies connected to the Mehta Defendants, IIA Technologies Pte Limited (“IIA Technologies” or “IIA”) and Polishing Technologies Pte Ltd (“Polishing Technologies” or “PT”), and another individual (“Mr Kothari”).
The claimants' case in all three claims is that there was a complex international fraud. It is sufficient here to give a highly simplified summary of the claimants' case. The claimants contend that the proceeds of gold bullion advanced under bullion facilities by Standard Chartered Bank and other banks to two Indian companies controlled by the Mehta defendants known as Winsome and Forever Precious were misappropriated, laundered and concealed through multiple layers of corporate entities before, ultimately, being paid to, or for the benefit of, the Mehta defendants or entities connected with them.
The claimants contend that this caused Winsome and Forever Precious to default on their obligations to the various bullion banks, and that as a result claims were made under standby letters of credit provided by a consortium of banks by way of security for the advances made by the bullion banks.
The claimant companies, which were all UK registered, were all entities in what was known as the Transaction Services Unit or TSU division of the Amicorp Corporate Group, a group of companies which provides company administration and other services.
The claimants allege that these companies were wrongfully used as part of a complex structure pursuant to which part of the proceeds of the alleged fraud were misappropriated, and in such a way as to expose the claimant companies to substantial claims from the consortium banks.
Between 2021 and 2022 some of the claimant companies were restored to the register of companies on the application of Standard Chartered Bank and the joint liquidators were ultimately appointed over each of them.
The claimants allege that the advances made to Winsome and Forever Precious under the precious metals facilities were misappropriated and laundered pursuant to a complex fraudulent scheme orchestrated by the Mehta defendants and others acting in concert with them, including Mr Obidah and Mr Kothari. The claimants allege at all times the first defendant controlled Winsome and Forever Precious and that he was one of the guarantors of Winsome and Forever Precious' obligations.
The claimants allege that the payments of the money through these layers of companies was pursuant to a pre-ordained plan, but were disguised via sham derivatives contracts between the various companies.
The first alleged layer was a series of UAE companies associated with Mr Obidah – which were parties to distribution contracts with Winsome and Forever Precious. The second layer consisted of the claimant companies and an Irish company which has been dissolved and which apparently could not be restored to the register. The third layer consisted of Docklands, the additional claimant in the June Action. Beneath that were a series of other companies incorporated in various jurisdictions. The claimants contend that large payments were made through these other companies which ended up with some of the monies being received by companies associated with the Mehta defendants.
The claimants' case in this respect includes the following. They say that Al Mufied, one of the layer one companies, received payments totalling about US$1.2 billion from a UAE-based refinery called Emirates Gold DMCC. They say that between April 2012 and April 2013, of that US$1.2 billion, sums totalling about US$875 million were transferred away from Al Mufied including by payments to the 13 UAE companies found in layer one.
The joint liquidators in their evidence say they are continuing to trace the onward payments from Al Mufied but at the moment they allege that the material part of the sums received by that company were paid on to entities connected with the Mehta defendants, including payments back to Winsome and Forever Precious. The claimants allege that notwithstanding these material payments, the first defendant and Mr Obidah, falsely told the consortium banks that the layer one companies were unable to pay Winsome and Forever Precious a sum of some US$700 million, and as a result Winsome and Forever Precious did not make full repayment of the sums then due and owing.
The claimants say that between about July 2012 and April 2014 the total sum of over US$1 billion derived from the alleged fraud was transferred from the layer one companies to the layer two companies, including the claimant companies. These companies were, at that stage, under common ownership and/or control via the Amicorp Group.
The claimants allege that between July 2012 and March 2014 the layer two companies transferred to Docklands, the layer three company, sums totalling just over US$1 billion. Docklands was also part of the Amicorp Group.
The claimants allege that proceeds of the fraud were then passed through a series of other entities. These include a company called Al Noora, an entity which received some US$687 million, and which the claimants contend was owned or controlled by some or all of the Mehta defendants. Payments were also made to other entities alleged to have been owned or controlled by various of the Mehta defendants, including a company called Marengo Investments Group, which received some US$163 million. It is not disputed that the defendants had an interest in that company.
Specially as to the defendants to the September Action, the claimants allege that IIA received some US$8.42 million, and that PT received a total of over US$13.4 million.
The claimants say in their evidence that, of the funds which passed through the claimant companies, a significant portion of the funds — totalling about US$610 million — were paid back to certain layer one companies, and in turn paid on again to the layer two companies, and then to Docklands for onward payment. The joint liquidators currently contend that a sum of approximately US$440 million ultimately exited the laundering scheme and was paid to the ultimate recipients which they say are connected with the Mehta defendants.
It is important to record that at the moment the details I have set out are allegations and not facts. The defendants contend that the claim is baseless. They have not however yet put in detailed evidence addressing the allegations that are being made. Nor have they served defences.
The claimants bring their claims under a large array of causes of action including for breach of fiduciary duty, dishonest assistance, conspiracy, constructive trust, misfeasance, fraudulent trading, claims under section 423 of the Insolvency Act 1986, and for a contribution.
Procedural history
On 27 May 2022 the claimants obtained a worldwide freezing order and proprietary injunction from Mr Justice Edwin Johnson.
The May Action was commenced on 31 May 2022, together with a related Insolvency Act application making claims under the 1986 Act.
The Mehta defendants were served on 6 June 2022 within the jurisdiction.
On 23 June 2022, the June Action and a related Insolvency Act application was issued.
On 6 July 2022 the Mehta defendants filed acknowledgments of service in the May Action indicating their intention to challenge jurisdiction and made applications to discharge the freezing order, challenge jurisdiction on forum grounds, and to strike out the May...
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