Kevin Taylor v Van Dutch Marine Holding Ltd and Others TCA Global Credit Master Fund LP (Third Party/Applicant)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 27 March 2017 |
| Neutral Citation | [2017] EWHC 636 (Ch) |
| Docket Number | Case No: HC-2016-001519 |
| Court | Chancery Division |
| Date | 27 March 2017 |
[2017] EWHC 636 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr Justice Mann
Case No: HC-2016-001519
Mr Stephen Midwinter QC (instructed by Reed Smith LLP) for the Third Party/Applicant
Ms Marion Smith (instructed by Keystone Law) for the Claimant/Respondent
Hearing date: Friday, 24 th March 2017
Introduction
This judgment gives my reasons for the decision which I indicated I had reached on 24 th March, in favour of the intervener in this action.
This is an application by a secured creditor of a defendant against whom a freezing order has been made. The secured creditor seeks an amendment to the freezing order to the effect that nothing in the order should prevent or restrict it from enforcing any rights it might have pursuant to its facility agreement and debenture. One would have thought, at first sight, bearing in mind the nature and purpose of a freezing order, that the application might be thought to be unnecessary, or at least no more than a precaution, and that it could not be opposed, but in this case the claimant (who has the benefit of the freezing order) opposes the application for the time being on the footing that it should be delayed and determined with some rather complicated proceedings in which, it is said, the ownership of certain assets is to be determined. His submissions that the matter ought to be adjourned over to those other events is backed up by an application seeking that as specific relief.
The intervening third-party with the benefit of the debenture is TCA Global Master Fund LP (" TCA" — a Cayman limited partnership). It was represented by Mr Stephen Midwinter QC. The claimant was represented by Miss Marion Smith QC. The second defendant, which is the chargee under the debenture, was not represented at the hearing before me.
The facts – more detail
The claimant claims that all four defendants in this case are jointly and severally liable on a bridging loan for a considerable sum of money. On 2 August 2016 judgement was entered against them for a liquidated some of over US$2.5 million, and a later judgement of 24 th of November 2016 assessed further damages at over €1.3 million against the first defendant and a further sum of over US$400,000 is against all four defendants jointly and severally.
On 21 st year 2016 a freezing order was made against all four defendants and it was continued by Norris J on 7 July 2016. The order restrained the defendants from dealing with certain Van Dutch boats or hulls over which the first claimant also claimed a charge, restrained dealings with shares in the first defendant (again over which the claimant also claimed a charge or pre-emption rights) and contained a further general restraint on dealing with the assets of any of the respondents in the normal way. The order contained a number of disclosure orders, which had to be complied with by all the defendants. Although the claimant (Mr Taylor) claimed a charge over assets, this application turns on potential conflicts between the pure freezing order element on the one hand and the claimant's debenture on the other. Mr Taylor's charge was not deployed as the basis for resisting the order which TCA seeks.
That order has led to considerable satellite litigation. There were complaints about non-disclosure which led to committal proceedings and committal orders. Those orders were then followed by an application in which the third and fourth defendants, on whom prison sentences had been imposed, to "remit" the sentences. While those applications were outstanding the claimant made a further application for the committal of the third and fourth defendants on the basis of their intentional interference with the due administration of justice. In the course of all that the defendants asserted that certain assets which were thought to have been owned by the second defendant were in fact owned by some entity called Rhino, which was said in turn to be owned by a third party, namely a Mr Khodabakhsh. That claim seems to be hotly contested hand has seriously complicated what was already a fairly complicated matter. Directions have been made for further disclosure in relation to the claims about ownership and it is said that documents about this are being improperly retained and not disclosed. Mr Taylor apparently intends to enforce this new disclosure order, presumably by further committal applications. The application to remit the sentences has been dismissed. Nonetheless, what remains is a matter which it will not be straightforward to determine. It seems that the claimant is seeking to establish the true position as to ownership of assets by the medium of disclosure orders and, probably, committal applications. Miss Smith's case on these applications is that the present application should be stood over to be heard with all those other outstanding matters.
The interest of TCA in the matter arises via a debenture given by the second defendant on 4th November 2014 in order to secure a facility of US$2.5 million or such further sum up to US$7.5 million as might be agreed between TCA and the second defendant. The debenture contains a fixed and floating charge in familiar form. The fixed charge catches certain specified property including "all the Intellectual Property" of the second defendant, as defined. The enforcement rights include the right to appoint a receiver who may dispose of charged property. There seems to be no dispute as to the validity of that charge.
It is that charge that TCA now seeks to enforce. It seems to have done some sort of deal with a Florida company called Vandutch Inc, which, contrary to the suggestion arising from its name, is not related to either of the first two defendants (it takes its name from a style of boat). The agreement (by deed) between that company and TCA specifies that TCA intends to take enforcement action against the second defendant pursuant to the debenture to recover the amounts owed to it. As a result of that it is said to be expected to be in a position to be able to procure the appointment of a receiver or similar officer, and if it did it would serve a Transfer Notice which would lead to a sale by TCA. Although the deed did not impose any obligation on TCA to do so, TCA had the right to confirm that the second defendant's trademarks would be transferred to the Florida company for a sum of just over US$1 million. The agreement seems to me to be in the nature of a sort of put option. Its operation presumably must depend on whether or not any receiver can be persuaded to adopt the transaction. It presupposes that TCA will be able to appoint a receiver or similar officer.
TCA apparently decided that it would be a good idea to avoid any problems by asking the claimant to consent to its being able to enforce the debenture, notwithstanding the freezing order. The claimant, however, did not agree that. After some negotiation which apparently included an offer by the claimant to buy the trademarks for a sum less than TCA was hoping to obtain on the Florida company, TCA decided to make the present application in order to clear its path.
Does the freezing order as an obstacle to TCA's enforcement of its security? – the principles
In the absence of authority it would seem to me to be clear that principle does not stand in the way of a secured creditor enforcing its security over charged assets caught by a freezing order. The whole point of a freezing order, as is now well-established, is to prevent a defendant from dissipating its assets improperly in the face of a claim by the claimant. It is a remedy which operates personally against the defendant (or any other person identified as a respondent in the injunction and against whom the injunction is specifically directed). It does not operate so as to give security to the creditor; and it does not operate so as to affect the genuine rights of third parties over those assets.
The present injunction operates in exactly that way. It is in familiar form and I do not need to set out its terms in this judgement. It operates to prevent each of the defendants from dissipating or disposing of their respective assets. It does not in terms bar anyone else, who might have an independent right over the assets, from disposing of them. Third parties might be caught by the order if, for example, their acts fell to be treated as acts of the defendants, or if they were otherwise acts done so is to defeat the order in some improper way, but that is different.
Thus, in my view, a third party with security over property which is frozen by the freezing order would not need to obtain permission in order to exercise that security because the exercise of disposal rights under that security would not be an act prohibited by the order. If, for example, the third party uses a power of sale in order to dispose of the property, that would not be a disposal by the defendant notwithstanding any technicality which might arise out of the fact, which is common to many securities, that the exercise of a power of sale is technically done as agent for the mortgagor. Nor would it be any form of dissipation because the secured debt already exists and the secured property is already encumbered with it. The enforcement by the mortgagor would not be an infringement of the letter of the order; nor would it be contrary to the spirit of the order which, as I have explained, does not operate so as to give the claimant a prior right in the form of security over the assets. If the freezing order does...
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