Kevin Taylor v Mohammed Khodabakhsh
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Falk |
| Judgment Date | 23 March 2021 |
| Neutral Citation | [2021] EWHC 655 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2020-000437 |
| Date | 23 March 2021 |
[2021] EWHC 655 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mrs Justice Falk
Case No: BL-2020-000437
James Ramsden QC and Daniel Benedyk (instructed by Keystone Law) for the Claimant
Lance Ashworth QC and Dan McCourt Fritz (instructed by Archerfield Partners LLP) for the Defendants
Hearing dates: 9 and 10 March 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is my decision on the Claimant's on-notice application for freezing and proprietary injunctions, together with certain other relief, against the Defendants. The application was issued in proceedings that seek to set aside a decision of Ms Julia Dias QC, sitting as a Deputy High Court judge (the “Decision”), on the basis that it was procured by fraud. The application was issued as long ago as 17 April 2020.
Background and procedural history
The background and procedural history are relatively complex. I will attempt to confine myself to the salient points.
On 24 July 2015 the Claimant, Kevin Taylor, agreed to lend the sum of US$1,591,040 for a period of six months pursuant to written Heads of Terms (“the Heads of Terms”) which named the borrower as Van Dutch Marine Holdings Ltd (“VDMH”). VDMH is a Maltese company. It has a subsidiary incorporated in England and Wales, Van Dutch Marine Ltd (“VDML”). VDMH is co-owned by two individuals, Hendrik Erenstein and Ruud Koekkoek. VDMH, VDML, Mr Erenstein and Mr Koekkoek are referred to below as the “Original Defendants”. At the relevant time VDML carried on a business of designing, manufacturing and selling luxury leisure yachts under the “Van Dutch” brand.
The Heads of Terms contemplated that a formal loan agreement would be entered into. A loan agreement was produced with all four of the Original Defendants named as parties, and was executed by them. However, it was never executed by Mr Taylor and it did not take effect. Further, Mr Taylor did not receive the benefit of the security that he had been offered.
The loan was not repaid on maturity. On 17 May 2016 Mr Taylor commenced proceedings against the Original Defendants seeking damages for breach of contract and misrepresentation, alternatively rescission or damages in lieu. On 21 June 2016 Mr Simon Monty QC, sitting as a Deputy High Court judge, granted a limited proprietary freezing order related to the security that had been offered and made orders for disclosure. The disclosure orders were not complied with. Norris J extended the relief granted to include a worldwide freezing order, in the sum of approximately £2.1 million, on 7 July 2016. Permission was also obtained to commence committal proceedings against Mr Erenstein and Mr Koekkoek. On 21 July 2016 Robin Hollington QC, sitting as a Deputy High Court judge, continued the injunctions “until further order”. Mr Taylor's position is that these injunctions have never been discharged.
On 2 August 2016 Mr Taylor obtained default judgment against the Original Defendants for the amount of the loan, contractual interest to date and further damages to be assessed. Damages were awarded after assessment by an order dated 24 November 2016. The default judgment remains unsatisfied. No steps have been taken to set it aside and some steps were taken towards enforcing it.
On 21 September 2017, following an application made a week earlier, a consent order was made by Morgan J which joined the Defendants and Respondents to this application, namely Mohammed Khodabakhsh, New Beginnings Technologies LLC (“NBT”) and Rhino Overseas Inc (“Rhino”) (together, “the Additional Defendants”), as defendants to the proceedings and gave Mr Taylor permission to amend his particulars of claim to advance claims against the Additional Defendants for breach of contract, misrepresentation, conspiracy, unjust enrichment and constructive trust. I will refer to these proceedings against the Additional Defendants, which resulted in the Decision, as the “Original Proceedings”.
The first of the Additional Defendants, Mr Khodabakhsh, is an engineer and inventor who as explained below became involved with the Van Dutch business in connection with a proposed joint venture. NBT is a company incorporated in Delaware that Ms Dias QC found was owned by Mr Khodabakhsh (although the evidence before me from his former associate, an individual called Terry Vechik, is that Mr Vechik co-owns it). Rhino is a Panamanian company which, following VDMH's incorporation in April 2015, was owned by VDMH as a sister subsidiary to VDML. Rhino owns the intellectual property rights, moulds and tools relating to VDML's yacht business: as I understand it, the only valuable capital assets of the business. Mr Khodabakhsh's position, and that of Mr Vechik at the trial in the Original Proceedings, is that NBT has been the beneficial owner of Rhino since 30 May 2015. This is not accepted by Mr Taylor.
The starting point for the involvement of the Additional Defendants in the Original Proceedings was the committal proceedings against Mr Erenstein and Mr Koekkoek. Those proceedings led to Mr Erenstein and Mr Koekkoek being committed to prison for six months by Warren J, suspended to allow them a further chance to comply, on the basis that the judge would then consider whether to remit the sentence in whole or in part. Mr Erenstein and Mr Koekkoek then purported to provide the disclosure required and applied to vary or set aside Warren J's judgment (the “remittal application”). In affidavits served on 23 November 2016 in support of the remittal application, they asserted among other things that valuable assets which Mr Taylor had understood to be owned by VDML were in fact owned exclusively by Rhino, and that Rhino was not owned by the Original Defendants but was instead owned by Mr Khodabakhsh.
The assertions as to ownership of Rhino were supported by statements signed by Mr Khodabakhsh in December 2016, introduced in circumstances that Mr Taylor says are summarised in recitals to an order made by Barling J on 12 January 2017, at an adjourned hearing of the remittal application. The recitals to this order refer to Mr Khodabakhsh effectively intervening in the proceedings by producing what purported to be his First Affidavit, but which is recorded to have been a document of a “wholly unsatisfactory nature”, at a hearing on 8 December 2016, asserting that he owned Rhino. On the same day Barling J ordered that if Mr Erenstein and Mr Koekkoek intended to rely on the evidence then a duly sworn affidavit was required to be served by 15 December 2016. A further document stated to be Mr Khodabakhsh's First Affidavit, and maintaining his ownership of Rhino, was then filed and served on 15 December. This purported to exhibit documents relating to the ownership of Rhino but did not in fact do so, Mr Khodabakhsh's position apparently being that he needed to return to the United States to get them. The recitals further record that Mr Khodabakhsh then arrived late at court for the hearing on 12 January having apparently brought certain documents with him, and then absented himself without notice during a short adjournment, taking the documents with him. The recitals state that counsel and solicitors representing Mr Erenstein and Mr Koekkoek then withdrew from their representation “on the grounds of professional embarrassment”, apparently by reference to the documents they had seen. This led to Barling J's order of 12 January, which was an order against Mr Khodabakhsh (then a non-party) to preserve and disclose the documents he had brought to court and shared with counsel and the solicitors, together with any other documents relating to the ownership of Rhino.
I should record that although Mr Ramsden, for Mr Taylor, relied on these recitals, Mr Ashworth, for the Defendants, referred me to witness evidence of Mr Khodabakhsh on this issue which was not challenged at the trial in the Original Proceedings. This evidence points out that Mr Khodabakhsh was not a party to the claim at the time, had not been given notice of any application and was not involved in drafting the order. No order had been made requiring him to attend or stay at court and he remained in the vicinity of the court, having told the Original Defendants' solicitor where he was, and left only when he was told that the hearing had concluded.
NBT first appeared in the proceedings on 21 April 2017, through an email sent to Mr Taylor's solicitors which asserted that it and not Mr Khodabakhsh owned Rhino, and that Mr Khodabakhsh had acted on its behalf.
These events led to applications by Mr Taylor seeking further disclosure and ultimately to the joinder of the Additional Defendants.
The claims in the Original Proceedings were tried in April and June 2019. The Decision ( [2019] EWHC 1951 (Ch); [2019] Bus LR 2610) was handed down on 22 July 2019, and dismissed all of Mr Taylor's claims. Mr Taylor was ordered to pay costs, including an interim payment on account of £400,000.
Limited permission was given by Rose LJ to appeal certain aspects of the Decision. On 23 January 2020, before the appeal was heard, Mr Taylor applied in the appeal seeking permission to rely on new evidence involving...
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