JP SPC 4 and Another (Applicants/Claimants) v Schools and Others Claire Schools and Another
| Jurisdiction | England & Wales |
| Judge | Judge Keyser |
| Judgment Date | 08 November 2013 |
| Neutral Citation | [2013] EWHC 4156 (Ch) |
| Date | 08 November 2013 |
| Court | Chancery Division |
| Docket Number | Case No: HC13D02021 |
[2013] EWHC 4156 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
His Honour Judge Keyser Q.C.
(Sitting as a Judge of the High Court)
Case No: HC13D02021
Mr P Mcgrath QC and Mr D Peters (instructed by K&L Gates) appeared on behalf of the Claimants
Mr S Myerson QC (instructed by Rodney Warren & Co) appeared on behalf of the Defendants
Mr Datta (instructed by Rodney Warren & Co) appeared on behalf of the Respondent Claire Schools
The Respondent Solis International Foundation was unrepresented
Judge Keyser Q.C. I am concerned with two applications on behalf of the claimants.
The first, by application notice of 29 October 2013, is to join Claire Schools, the wife of the first defendant, as a party to the proceedings and to the worldwide freezing order that was made against the defendants by Proudman J on 25 May 2013. That application is supported by the first affidavit of the claimant's solicitor, Anne Theresa McCarthy, dated 29 October 2013.
The second application, by application notice of 5 November 2013, is effectively an ex-parte application to vary the first application so as to include Solis International Foundation, which is a trust registered in Panama, and for permission to serve the application outside the jurisdiction. That application is supported by a second affidavit of Anne Theresa McCarthy dated 5 November 2013.
I ought to say a word about the background to the matter, although it is something that the parties will be obviously made aware of. In brief, the claimants are the corporate vehicles for two investment funds based in the Cayman Islands, who bring the case at the direction of the receivers of the business and assets of the portfolios through which the funds were operated.
The first defendant, Mr Schools, is a solicitor in England and the funds were "the brainchild", as he puts it, of himself and of the 13th defendant, David Kennedy. The purpose of the funds was to provide finance for low-value but high-volume litigation — possibly — though nothing turns on this for present purposes — by providing general funding to the firms that would carry on the litigation, rather than by providing funding for specific cases. Each case of this kind, viewed alone, may have a typical value of only a few hundred or at most a few thousand pounds and, as such, would be uneconomic to run. However, when taken together in large numbers these cases represent significant litigation and, for the solicitors who run them, an attractive business opportunity.
The claimants' business model was relatively simple. The Fund received moneys from third party investors. Its investment manager until early 2012 was The Synergy Solution Limited, a UK company of which the first defendant and the 13 th defendant were the directors; thereafter it was a company called Tangerine Investment Management Limited. The Fund's fund manager, Synergy (IOM) Limited, the 6 th defendant, lent those moneys to firms of solicitors (the "Panel Law Firms") that conducted the high-volume, low-value litigation. The purpose of the loans was to fund the firms' practices rather than specific cases, but the loans were to be repaid, with a percentage uplift, upon the conclusion of the relevant litigation.
The business was carried on, apparently without problems, and payments of around £10m had already been made by Panel Law Firms, when in about August 2012 an article appeared in an internet publication called OffshoreAlert, alleging that the Fund was the vehicle for a Ponzi fraud. The receivers do not in fact support the allegation that there was a Ponzi fraud. But the publication of the allegation was harmful enough to the claimants' business. And it led to the investigation that has, in turn, resulted in these proceedings.
The claimants' case is that, in conspiracy with the other defendants, and by means of breaches of his fiduciary duties to the Fund and other wrongs, Mr Schools defrauded the Fund of many millions of pounds — used them, indeed, as a method of siphoning off fraudulently many millions of pounds. Part of this is put in terms of the payment of funds to Panel Law Firms that were overwhelmingly owned or controlled by the first defendant and other defendants who had a significant controlling presence within the funds. Part of it, however, relates to something approaching £38 million that was paid, so it is said, to entities other than the Panel Law Firms and in respect of, the claimants say, services or provisions that were either illusory or were at best nothing remotely like the enormous amounts involved.
Briefly, because it is of some relevance, the 10th defendant, Noble Finance Limited, the 11th defendant, Sadira Limited, and the 12th defendant, Loret Investments Limited, are companies incorporated in the Republic of the Marshall Islands. They have a single and common corporate director, Portland Financial Management SA which, as I understand it, is a Swiss asset management company.
The 7th defendant, Check Mate Audits Limited, is an English company. It was owned by Mr and Mrs Schools, the first defendant and the first respondent of the present applications, until April 2012 and they were also its directors. Since that date, the shares have belonged to Noble Finance Limited and Portland has been its director.
The sixth defendant is an Isle of Man company. It is owned by Noble Finance Limited. The owner of Noble Finance, Sadira and Loret Investments, and therefore indirectly of Check Mate and Synergy, is Solis International Foundation. Solis is apparently the sole owner of Midas Assets LLC, a corporation based in Delaware. I was informed that Midas' director is Portland. In any event, it is beneficially owned by Solis.
The worldwide freezing order made by Proudman J and subsequently continued at an inter partes hearing applies to both the individual and the corporate defendants, albeit in slightly different terms.
The claimant's case is that this corporate structure that I have indicated, with Solis at this stage of the story sitting at the top as the owner of what lies beneath, is simply a complicated vehicle for a fraud. Proudman J was satisfied that there was a good arguable case that that was so. It is not for me to make any findings but I shall say, as I have already said, that the evidence taken as a whole is in my view strongly resonant of fraud.
One of the main questions then is who owns Solis. I shall take this point relatively briefly. There has been much evidence on the point. The first defendant has, I think it fair to say, distanced himself from Solis. His evidence has been that he has no interest in the defendants who have Portland as their director, and are therefore known as the Portland defendants; for present purposes this includes, either directly or by chain of command, the sixth, seventh, tenth, eleventh and twelfth defendants. He has denied having a beneficial interest in them or any control of them. He has given evidence that tended to suggest that he stands at arm's length from those defendants. But subsequently in his witness statement of 10 October he stated in paragraph 69:
"The beneficiary of the Solis Trust is Claire Schools and, in the event of her death, her children. I am not a beneficiary."
That was perhaps at the time surprising.
Mrs Schools in her affidavit had earlier indicated that she did not have involvement with the Portland defendants, which I have to say, taken in the wider sense, ( several inaudible words). However, in her statement made on 4 November 2013 she states that she understands that, contrary to information supplied by the Portland defendants, she has no beneficial interest in the Solis Foundation. She then goes on to say, in an intriguingly drafted passage:
"I am unaware of any interest I may have in any of the companies known as the Portland Companies which, as has now been explained to me, are owned by the Solis Foundation of Panama. I see from the Foundation document that I am not named as a beneficiary. [In fact the Foundation document does not identify beneficiaries.] At the time I made my Affidavit in connection with the Norwich Pharmacal proceedings, I was not aware of the interests that I had or have been said to...
To continue reading
Request your trial