Kea Investments Ltd v Eric John Watson and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee |
| Judgment Date | 02 October 2020 |
| Neutral Citation | [2020] EWHC 2599 (Ch) |
| Date | 02 October 2020 |
| Docket Number | Claim No: HC-2015-001647 |
| Court | Chancery Division |
[2020] EWHC 2599 (Ch)
Lord Justice Nugee
Claim No: HC-2015-001647
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building, Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Elizabeth Jones QC, Justin Higgo QC, Gareth Tilley and Zahler Bryan (instructed by Farrer & Co LLP) for Kea Investments Ltd
Thomas Grant QC and Andrew McLeod (instructed by Ashfords) for Mr Watson
Hearing dates: 22, 24, 27, 28, 29, 30 April, 1, 4, 5, 6, 7, 11, 12, 13, 14, 15 and 18 May 2020
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
By application notice dated 7 June 2019 the Claimant, Kea Investments Ltd ( “Kea”), applies to commit the 1 st Defendant, Mr Eric Watson ( “Mr Watson”) for a number of alleged acts of contempt in failing to comply with Orders of the Court.
I attach as an appendix a Schedule giving the particulars of contempt alleged, in the amended form for which I gave permission during the hearing, consisting of 5 counts, split into a number of sub-counts. In the event not all the counts and sub-counts were proceeded with. Those that remain in issue are the following: Counts 1(a) to (e), Counts 3(c)(i) and (d) to (f) and Count 4, making 10 sub-counts in all. I have shaded in grey those that were not proceeded with. I should record that Ms Jones made it clear in closing submissions that she is not asking for them to be adjourned – they are being dropped altogether.
Even so, despite the application notice having originally given an estimate of 5 days, the hearing in fact lasted 17 days, not least because of a desire on the part of Kea's legal team to lay out thoroughly and carefully the material on which they rely to prove the contempts, not only for my benefit but for that of Mr Watson and his legal team, and equally a desire to ensure that Mr Thomas Grant QC, who appeared for Mr Watson, should have every opportunity to say what he wanted to say on Mr Watson's behalf. I am very grateful to the parties and their respective lawyers for their co-operation in enabling the hearing to take place despite the inevitable restrictions caused by the Covid-19 pandemic, which meant that the hearing had to take place as a fully remote one. Despite the occasional technical glitch, this worked well and I am satisfied that the hearing was both fair and thorough, and that the parties have not been materially disadvantaged by the hearing taking place in this way.
Background
I can conveniently take the background from another judgment delivered by me earlier this year in this action: Kea Investments Ltd v Watson [2020] EWHC 472 (Ch) at [2]–[4] as follows:
“2. … In April 2015, Sir Owen Glenn and Kea brought proceedings for fraud and breach of fiduciary duty against the 1 st Defendant, Mr Eric Watson ( “Mr Watson”), and others. The proceedings were tried by me and after a lengthy trial, I handed down judgment on 31 July 2018 ( “the Main Judgment”) in Kea's favour, holding (among other things) that investments totalling £129m which Kea had made into a joint venture called Project Spartan had been procured by deceit on the part of Mr Watson and breach of fiduciary duty: see Glenn v Watson [2018] EWHC 2016 (Ch). I held that Kea was entitled to set the joint venture agreements aside and recover the monies paid over to the joint venture vehicle, together with interest, and that insofar as the joint venture vehicle was unable to pay, Kea was entitled to equitable compensation for the shortfall from Mr Watson. Kea was also entitled to trace into, and elect whether to claim, assets acquired by Mr Watson with some £12m of its money which had found its way into the hands of a company associated with Mr Watson.
3. After further argument on 10 and 13 September 2018 the Main Judgment was given effect to by an Order made by me and sealed on 14 September 2018. This did not quantify precisely the amount of equitable compensation that Mr Watson was liable to pay Kea, as that depended on the extent to which Kea was able to find, and elected to claim, traceable assets, but it set a maximum figure for equitable compensation of about £43.5m, and ordered Mr Watson to make an interim payment of slightly over £25m, together with over £3.8m on account of costs. Mr Watson did not appeal the findings in the Main Judgment or the Order of 14 September 2018, save in respect of the interest rate used in the calculation of the quantum of equitable compensation, which I had set at 6.5% pa and which he appealed with my permission. The appeal was dismissed by the Court of Appeal in October 2019: see Watson v Kea Investments Ltd [2019] EWCA Civ 1759. That means that there is no longer any doubt that Mr Watson is liable, at the very least, for the two sums which I ordered him to pay.
4. Mr Watson has not voluntarily paid a penny of either sum. Kea has managed to identify, and compel payment from, various assets, and has thereby obtained comparatively small sums towards the judgment debt but is still owed the vast majority of it, and has found it difficult to locate, let alone execute against, any substantial assets. This is particularly frustrating for Kea as Mr Watson formerly allowed himself to be represented as one of New Zealand's wealthiest men, but now claims to be impecunious. I am not directly concerned on the present applications with whether he is right about that, but it is clear that Kea and its legal team do not believe him, and there have been numerous post-judgment applications, all heard by me, in which Kea has sought to pursue its rights as judgment creditor against Mr Watson and in which Mr Watson has claimed not to have any assets.”
The counts that remain in issue are all concerned with attempts by Kea to obtain information from Mr Watson about various assets. As appears from the Schedule, Count 1 is based on a pre-trial Order dated 28 April 2016 ( “the April Order”) in which Kea was seeking information about a sum of over £12m ( “the Munil Money”) to which Kea asserted a tracing claim; Counts 3 and 5 are based on post-trial orders (i) made on 10 and 13 September and sealed on 14 September 2018 ( “the September Order”) and (ii) made on 12 November 2018 ( “the November Order”) respectively, in which Kea was seeking information about Mr Watson's own assets.
In essence Kea's case is that Mr Watson has been deliberately reticent in providing information about the Munil Money and his own assets as part of a strategy to frustrate Kea's attempts at recovering assets to which it has a proprietary claim and enforcing its judgment. Ms Jones QC, who appeared for Kea, set out in some detail Kea's position to the effect that this strategy has served Mr Watson well and made life more difficult for Kea: it is not necessary to go into the details but in summary Kea says that if it had had the information it should have done, it would have been able much more easily to decide whether to elect for tracing claims or personal claims (in relation to the Munil Money); secure assets and recover from them; and decide whether to join other parties and pursue claims against them.
The contempt jurisdiction
Ms Jones began her submissions with some observations on the law and practice in relation to contempt. Although much of this was not in dispute, this was a helpful exercise and I will set out the points she made.
The power of the Court to commit for contempt those who disobey its orders is an essential part of the machinery of the administration of justice: see JSC BTA Bank v Ablyazov [2012] EWCA Civ 1411 (“ Ablyazov (CA)”) per Rix LJ at [188]:
“The authorities demonstrate that it is vital for the court, in the interests of justice, to have effective powers, and effective sanctions. Without these, it would be possible for a defendant (or, in a different situation, a claimant) to flout the orders of the court, which are the court's considered means by which to keep the scales of justice for the parties even. If once it became known that the court was unable or unwilling to maintain the effectiveness of its orders, then it would lose all control over litigation of this kind, with terrible consequences for the administration of justice. Those wrongly accused of fraud would be relieved of a certain amount of inconvenience, but fraudsters would rejoice and hitch a free ride to interminable litigation on the back of ill-gotten gains.”
One of Mr Grant's submissions was that the committal application in the present case was not being pursued for good and proper reasons but was part of a personal vendetta by Sir Owen against Mr Watson, and as such an abuse of process that should be struck out. He did not however suggest that it would be possible to stop the application in limine, accepting that it would be necessary to hear the application fully before considering this point. I will therefore come back to it at the end after considering the substantive matters.
The procedural framework for committal applications is found in CPR Part 81. I was referred to the following rules:
(1) CPR r 81.3(b) defines “committal application” as any application for an order committing a person to prison.
(2) CPR r 81.4(1) provides:
“If a person
(a) required by a judgment or order to do an act does not do it within the time fixed for a judgment or order …
then, subject to the Debtors Acts 1869 and 1878 and to the...
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