John Forster Emmott v Michael Wilson & Partners Ltd
| Jurisdiction | England & Wales |
| Judge | HHJ Waksman |
| Judgment Date | 02 February 2016 |
| Neutral Citation | [2016] EWHC 1152 (Comm) |
| Docket Number | No: CL-2015000249 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 02 February 2016 |
[2016] EWHC 1152 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
7 Rolls Building
Fetter Lane
London
EC4A 1NL
His Honour Judge Waksman QC
(Sitting as a High Court Judge)
No: CL-2015000249
Philip Shepherd QC (instructed by Kerman & Co LLP, Solicitors) appeared on behalf of the Claimant
Nicholas Lavender QC (instructed directly by Michael Wilson & Partners Limited) appeared on behalf of the Defendant
APPROVED JUDGMENT
Tuesday, 2 February 2016
HHJ Waksman QC:
INTRODUCTION
The Claimant, Mr John Emmott, is a judgment creditor of the Defendant, Michael Wilson & Partners Ltd ("MWP") by reason of (a) an arbitration award made in his favour and against MWP in the sum of £3,209,000 and $841,212, inclusive of interest to December 2013 and future interest at 8% and (b) a consequential judgment on the award given Burton J on 26 June 2015 when he also rejected an appeal by MWP against the award. There are also untaxed costs of the arbitration in respect of liability and quantum hearings that I am told exceed £2 million. Some of those were awarded on an indemnity basis. MWP has not paid any of those sums and shows no sign of doing so.
There is presently standing to the credit of MWP in the Court Funds Office ("the CFO") the sum of £316,000. That sum arises in this way. MWP had a dispute with a number of persons I will call collectively the Asubayevs as to the level of fees MWP had charged them. They sought taxation of those fees as if MWP was a firm of solicitors. A decision of the taxing master was appealed to Walker J who held that the costs master had no jurisdiction to deal with this because MWP was not solicitors' firm and the Court of Appeal upheld that decision. MWP therefore won. However, it had previously paid into court £150,000 by way of security for costs. Further, before Walker J, the Asabayevs had been ordered to pay out to MWP £100,000 on account of its costs being the successful party. However, they wanted a stay of execution pending the appeal they intended to bring. That was granted provided that the £100,000 was paid into court instead. This took place. In addition, they were ordered to pay a further £66,000 as security for costs of the appeal and that brings us to a total of £316,000 paid into court.
The appeal was heard on 14 and 15 October 2014. Judgment was given on 20 November 2014. On the dismissal of the appeal, the Court of Appeal made a number of ancillary orders set out in its order dated 2 December and sealed on 4 December. First, by paragraph 4(a) it ordered that there should be payment out forthwith to MWP the sum of £66,000 which had been paid into the CFO by the Asabayevs. Secondly, the other sum of £100,000 which had been paid into court by them should be paid out to MWP — see that is paragraph 5(a). Then by paragraph 5(b), all the sums paid into court by MWP pursuant to earlier orders should be paid out back to MWP.
MR EMMOTT'S APPLICATION
However, by an application made on 4 November 2015, Mr Emmott seeks payment of all those sums now to himself pursuant to CPR 72.10. This is a short provision and it reads as follows:
"If money is standing to the credit of the judgment debtor in court —
(a) the judgment creditor may not apply for a third party debt order in respect of that money; but
(b) he may apply for an order that the money in court, or so much of it as is sufficient to satisfy the judgment or order and the costs of the application, be paid to him.
(2) An application notice seeking an order under this rule must be served on —
(a) the judgment debtor; and
(b) the Accountant General at the Court Funds Office.
(3) if an application notice has been issued under this rule, the money in court must not be paid out until the application has been disposed of."
This forms the last part of a rule which otherwise deals with third party debt orders (previously known as garnishee orders). There is a small note to the provision which reads as follows:
"It is not appropriate for the court itself to be the subject of court proceedings and therefore it is not and never has been possible to obtain a third party debt order in respect of money in court. However, where there is money in court standing to the credit of the judgment debtor, rule 72.10 provides a simple and alternative procedure which a judgment creditor can use. It has been held (unreported) that money paid into court in other pending proceedings is not money standing to the credit of the judgment debtor in court as it remains subject to the direction of the court in these proceedings."
Hence in this case, the money became subject to the credit of MWP upon the Court of Appeal making the orders which it did.
In opposition to this application, Mr Wilson filed two witness statements. The first was on 19 November 2015 and the second was on 27 January 2016 and in between those, there was evidence in response from Mr Emmott.
On the face of it, the position is simple. Mr Emmott has made out the conditions set out in 72.10 and should be entitled to an order for payment out of the £316,000 to him.
In Mr Wilson's first witness statement in opposition, he set out a mass of different and varied arguments, most of which were irrelevant or had been disposed of in prior applications and court hearings. However, he then instructed Mr Lavender QC to present his case today who has wisely confined himself to effectively one point only, which is this: although MWP paid in this sum, or at least £150,000 of it as security for costs, it was in truth no security at all because it was at all times or later became, subject to an immediate charge in favour of a BVI company called Kaz Holdings Incorporated ("KHI"), whose registered office is the same as MWP. Indeed, according to the evidence, it was the vehicle of Mr Wilson or MWP, although Mr Wilson has said that that position has changed recently.
It has also been asserted by MWP, and it is really no more than that, that the £150,000 payment-in was funded directly by KHI. As to the monies paid in by the Asubayevs, it is said that immediately upon the Court of Appeal directing that they be paid out to MWP, they became assets of MWP and were caught by the charge. That is put on the basis that either there was at all times a fixed charge capturing those sums, or in any event there was a crystallisation of a floating charge which occurred either automatically or on the giving of notice by KHI.
In the light of all that, Mr Lavender's short point is simply to say that as the monies about to be paid to MWP are encumbered in favour of a secured creditor, namely KHI, Mr Emmott as unsecured creditor cannot have them. Somewhat curiously, however, Mr Lavender contends that the money should still go now to MWP, even though in truth it now has no right to it.
The existence and authenticity of the underlying security and loan documents said to have been executed by MWP in favour of KHI and the true extent of any real indebtedness between them have been the subjects of findings and comments in the arbitration, in the Court of Appeal (on a different appeal from that referred to above) and in this application. The Court of Appeal hearing was concerned with alleged breach by MWP of a worldwide freezing order granted against it and in favour of Mr Emmott. It was made following the arbitration award and in order to secure payment of that award. MWP had been found guilty of contempt of court, being in breach of that order in one respect and he was also fined £25,000 for failure to disclose assets. I will return to those matters later.
Most importantly for today's purposes are these facts. In his first witness statement, Mr Wilson, along with many other matters, did refer in general terms to monies owed to KHI and the charge and so on, but in his second statement dated 27 January he refers (for the first time, it would appear, in any proceedings) to some correspondence which I must read out. First of all, on 13 November 2014, in other words shortly before the Court of Appeal gave judgment in the Asubayev matter but after the appeal was heard, Mr Wilson wrote to KHI to say that:
"With regard to clause 13(a) the fixed and floating charge, we are writing to notify you that application by Mr Emmott in the BVI High Court to appoint a liquidator over MWP and its assets…"
And indeed that application had been made. The following day a letter was apparently received from KHI thanking Mr Wilson for that letter and saying that:
"As you know, by reason of the application to appoint a liquidator, our security interest over the charged assets has now crystallised so we are entitled to enforce our security and the entire balance outstanding under the loan agreement has become due and payable. The legal title of the charged assets vests in ourselves. Our powers of sale have become exercisable. We are entitled to enforce all or part of the security without limitation which entitles us to appropriate all or any of the charged assets. As discussed and without prejudice to KHI's rights, we are willing to now agree until further notice that in order to allow MWP to carry on its business, it shall be entitled to continue to operate its current bank accounts, but not to deal with all monies on deposit or other assets. This may be revoked at any time."
Then on 24 November 2014, there was a further letter from KHI referring to the debenture in 2009 and a fixed and floating charge of 1998 which says as follows:
"In the light of the judgment of the English Court of Appeal handed down in favour on 23 November…[ie the day before the letter was written] …Without prejudice to all of the other provisions of the debenture and fixed and floating charge, we hereby give you...
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