Hotel Portfolio II UK Ltd ((in Liquidation)) v Andrew Joseph Ruhan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 24 May 2024 |
| Neutral Citation | [2024] EWHC 1263 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000226 |
and
[2024] EWHC 1263 (Comm)
Mr Justice Jacobs
Case No: CL-2018-000226
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
James Pickering KC and Samuel Hodge (instructed by Spring Law) for the Claimants
Sebastian Kokelaar (instructed by Richard Slade and Partners LLP) for the 2 nd Defendant
Hearing dates: 7 th – 8 th May 2024
Approved Judgment
This judgment was handed down remotely at 9:00am on Friday 24 th May 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
A: The parties and the application
This judgment concerns an application by the Second Defendant (“Mr Stevens”) for an order discharging certain provisions of the order of Master McCloud dated 9 October 2023 (“the McCloud Order”). Under that order, an independent IT consultant is to make a copy of the hard drive of Mr Stevens' computer and mobile phone and search it in order to determine, amongst other things, whether it contains certain files belonging to 9 companies of which Mr Stevens was previously a director, namely Atlantic 57 Consultancy Ltd, Grenda Investments Ltd, Pascale Investments Ltd, Lenon Securities Ltd, Latimore Finance Ltd, Giotto Investments Ltd, Bluestone Securities Ltd, Grayview Overseas Ltd and Kilgore Securities Ltd (“the companies” or “the 9 companies”). All of the companies are incorporated in the BVI apart from Kilgore Securities Ltd which is incorporated in Belize. These companies are held within a trust structure called the JADES 2014 Trust (“the Jades trust”).
The basis for the application is that the implementation of these provisions would expose Mr Stevens (and the IT consultant) to criminal liability in Italy, where Mr Stevens resides and where the computer and mobile phone are located.
The application is opposed by the Claimants (“HPII”). It contends that the implementation of the McCloud Order would not give rise to any real risk of a criminal prosecution in Italy. HPII also contends that compliance with the order would not in fact give rise to any criminal offence under Italian law. Even it did, HPII contends that the application should still be dismissed because it is a “dishonest ploy” designed to thwart enforcement of its judgment against Mr Stevens and therefore an abuse of the court's process.
The McCloud Order was made in the context of enforcement proceedings against Mr Stevens, and specifically in the context of an application under CPR Part 71 which contains rules providing for a judgment debtor to be required to attend court to provide information, for the purpose of enabling a judgment creditor to enforce a judgment or order against him.
Those enforcement proceedings themselves stem from a judgment of Foxton J dated 23 February 2023 following an 11-day trial: [2022] EWHC 383 (Comm). Foxton J held that Mr Stevens had dishonestly assisted in various breaches of fiduciary duty by Mr Ruhan, who was a director of HPII. Mr Ruhan had failed to disclose his interest in the sale of certain hotels by HPII in 2005. On 7 July 2022, Foxton J ordered Mr Stevens to pay HPII equitable compensation in the sum of £102.26m plus compound interest in the sum of £59.93m by 4pm on 1 August 2022. He also ordered Mr Stevens to pay HPII's costs of the proceedings with a payment on account of £2.162m to be made by the same date.
Mr Stevens did not make these payments. On 12 September 2022, HPII issued an application under CPR Part 71 for an order requiring Mr Stevens to attend court for questioning as to his means and to disclose documents that were, as HPII contended, relevant to enforcement of the judgment against him (“the Part 71 Proceedings”). The orders sought were made by Master Gidden on 11 October 2022. The Part 71 Proceedings are on-going. There have been multiple hearings, including three examinations of Mr Stevens where he answered many questions, and Mr Stevens has disclosed a substantial number of documents in the course of them. The evidence given at those hearings, and the documents produced, have assisted HPII to advance aspects of its present case concerning abuse of process. This is substantially founded on an argument that Mr Stevens continues to control and is a de facto director of the 9 companies.
The McCloud Order was made in the course of the Part 71 Proceedings, described in more detail in Section B below.
B: Chronology of events leading to the McCloud Order and beyond
– August 2023 and the order of Deputy Master Bard
The application for orders under Part 71 were made on 12 September 2022. On 11 October 2022, Master Gidden made Part 71 orders against Mr Stevens. He was required to attend, by video-link, for cross-examination as to his assets. He was also ordered to produce various documents.
HPII's application had been made without notice, and on 10 November 2022 Mr Stevens applied to set aside the orders made against him. That application was heard on 15 December 2022 by Deputy Master Kay, and was dismissed by order dated 28 December 2022. In so far as the set aside application was based on an argument that Master Gidden's order was disproportionate or oppressive, the application was certified as totally without merit. Mr Stevens' application had also sought a variation of the documents which were to be produced. This application was adjourned upon terms which included the provision by Mr Stevens of responses to certain questions. Deputy Master Kay subsequently produced a substantial written judgment, dated 28 December 2022, on the various issues raised by Mr Stevens on the set aside application (which included issues concerning service).
An application for permission to appeal against the orders of Deputy Master Kay was dismissed by Foxton J in trenchant terms on 17 January 2023. Amongst his reasons for refusing permission were the following:
“…
(2) However, the challenge to the alternative service order is not arguable. The question of whether the test for an alternative service order is met is context dependent ( M v N [2021] EWHC 360 (Comm).
(3) In this case, D2 has solicitors on the record and has participated in lengthy trial. He has been found to have acted dishonestly and assisted in a scheme to hide the ownership of assets. He has been coy before the court on previous occasions as to his address (at the Consequential Hearing in June 2022). D2 has also advanced a series of meritless objections to the CPR 71 application, which Deputy Master KC was right to conclude that “the primary purpose of the Second Defendant's applications … is at least to slow down if not prevent or frustrate the Claimants' endeavours to enforce the judgment”.
(4) Those factors provide ample grounds for the alternative service order made by Master Giddens and for Deputy Master Kay KC's refusal to set that order aside. There is simply no prospect of the court on appeal interfering with the exercise of that discretion, and the permission to appeal application can only be seen as a further attempt to frustrate or delay the enforcement process.”.
On the same day as the hearing of the application before Deputy Master Kay, Mr Stevens resigned from 8 of the 9 companies. In early January, he resigned from the 9th company. In relation to their abuse of process arguments, HPII contended that the timing of these resignations was not coincidental. HPII argues that they were part of a ploy to frustrate enforcement of the judgment.
In consequence of the dismissal of the set aside application, a hearing date for the examination of Mr Stevens under Part 71 was fixed for 31 January 2023. Shortly before that hearing, which was the first of three examinations which have in fact taken place, Mr Stevens disclosed to HPII that he had resigned as a director of the 9 companies. In the case of each company, Mr Stevens had executed a “Deed of Resignation & Release”. Clause 1.3 of that document was in the following terms (in the case of the deed relating to Pascale Investments Ltd):
“Mr Stevens shall, forthwith, return to Pascale all its books and records in his possession and control and, where those books and records are in electronic form, he shall perform this obligation by providing copies of all documents in electronic form on an appropriate storage device and thereafter irretrievably removing, deleting and purging all such documents from his electronic systems.”
Mr Stevens contends that, in accordance, with this obligation, he has indeed deleted documents from his devices. Following the first examination on 31 January 2023, Deputy Master Kay made an order on 9 February 2023. This required Mr Stevens to produce various further documents. It also required the parties' solicitors to liaise regarding potential arrangements for Mr Stevens' devices to be inspected in order see whether certain documents and files, said to have been deleted, could be retrieved. Mr Stevens gave an undertaking to preserve his devices and not to delete further files. The relevant part of the order concerning inspection of devices was as follows:
“6. The Claimants' and the Second Defendant's solicitors shall liaise regarding arrangements (or potential arrangements) for:
(1) the Second Defendant's computer, and his mobile telephone, to be examined by an independent forensic IT consultant (who is to be agreed if...
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