Koshy v DEG-Deutsche Investitions- und Entwicklungsgesselschaft mbH
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE RIMER |
| Judgment Date | 20 January 2006 |
| Neutral Citation | [2006] EWHC 17 (Ch) |
| Docket Number | Case No: HC5C0027 |
| Court | Chancery Division |
| Date | 20 January 2006 |
[2006] EWHC 17 (Ch)
The Honourable Mr Justice Rimer
Case No: HC5C0027
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Andrew Thompson (instructed by CMS Cameron McKenna LLP) for the Defendants
Mr John McDonnell QC and Mr Adam Chichester-Clark (instructed by De Cruz Solicitors) for the Claimant
Hearing dates: 7, 10, 11, 12 and 13 October 2005
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.
MR JUSTICE RIMER:
Introduction
This is an application in a claim commenced by Thomas Koshy on 9 February 2005. It is made by the defendants, who are: (i) DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH ("DEG"), and (ii) Gwembe Valley Development Company Limited ("GVDC"). Mr Koshy's claim is a further instalment in litigation which has been waged between the same parties since November 1996, being litigation in which DEG and GVDC brought separate actions against Mr Koshy. The main heads of relief sought by the new claim are the setting aside of two orders made against him in that litigation: (i) a costs order made by Harman J in favour of DEG on 20 March 1998, and (ii) an order for an account of profits made by me in favour of GVDC on 12 December 200In addition, Mr Koshy asserts that the circumstances in which DEG and GVDC obtained the orders entitle him to damages.
The defendants' application is dated 24 March 2005 and asks for the striking out of the claim, or parts of it, under CPR Part 3.4, alternatively for the entry of summary judgment under CPR Part 24.The basis of the application is that it is said that: (i) Mr Koshy is prevented from bringing the claim to set aside Harman J's order by reason of an election he made during the hearing in July 2003 of his unsuccessful appeal to the Court of Appeal against that order; (ii) if his election did not in terms preclude this claim, the claim is in substance directed at achieving that which he elected against and so is an abuse of the process of the court; (iii) the claim anyway has no prospect of success on the merits; (iv) the claim to set aside my order of 12 December 2001 is misconceived and also has no prospect of success; and (v) the claims for damages are in consequence, or anyway, also misconceived.
To understand the points at issue involves a revisiting of the earlier litigation. This has been the subject of many judgments since 1996, at least six of which have been reported. In order, however, for this judgment to be intelligible on a stand-alone basis, I must summarise the relevant history.
Background facts
GVDC is a Zambian company that was established in 1985 for the purpose of carrying on a farming venture in Zambia. Lummus Agricultural Services Co Limited ("Lasco") is a UK company which became owned as to two-thirds by Mr Koshy and had a shareholding in GVDC. Mr Koshy was a director of Lasco and became the managing director of GVDC. DEG is a bank owned by the German government which between March 1987 and March 1988 invested DM5 million by way of loans to GVDC and US$1 million by way of an equity investment in it. Mr Koshy had also procured Lasco to invest 56.4 million Zambian kwacha ("K") in GVDC. At the time Lasco did so, the dollar equivalent of K56.4 million was approximately US$5.8 million, although the cost to Lasco of the K56.4 million was only US$1.04 million. Mr Koshy's ability to acquire the kwacha at such a discount against the official rate of exchange was because he used the "pipeline dismantling" system I explained in paragraphs 14 to 18 of my judgment delivered after the trial of the earlier litigation (see [2002] 1 BCLC 478). A central claim made by DEG against Mr Koshy in that litigation was that he procured GVDC to acknowledge a debt liability to Lasco for the K56.4 million advance in the dollar amount of US$5.8 million rather than the actual dollar cost of the kwacha, —an exercise which on paper gave Lasco an enormous immediate profit —whilst misleading DEG into believing that the true cost to Lasco of the kwacha it advanced to GVDC had been US$5.8 million. DEG's case was that, but for such misleading, it would not have made its investment in GVDC.
The circumstances in which DEG ultimately came to make that claim were that the farming project collapsed and GVDC became insolvent. In 1993 and 1994, DEG and Lasco successively made purported (and competing) appointments of receivers in respect of GVDC. The receivers appointed by DEG were Mr John Ward and Mr Elmo Jayetileke, the latter being replaced in June 1996 by Mr Nicholas Allen. Those competing appointments gave rise to litigation in Zambia, they were also the subject of a chapter in the later English litigation, and I considered them in a judgment delivered on 13 December 1999 (see [2000] 2 BCLC 705).
The English litigation was started in November 1996, when two actions were started against Mr Koshy and Lasco (various companies with which Mr Koshy is or was associated were later added as defendants in each action). The first action was commenced by DEG on 8 November 199By that action DEG claimed, inter alia, damages for alleged deceit inducing DEG's investment in GVDC in 1987 and 1988, relying in part upon the allegation that Mr Koshy had deceived it as to the cost of Lasco's investment in GVDC. On the same day as the writ was issued, 8 November 1996, DEG made an ex parte application to Harman J for worldwide freezing orders against Mr Koshy and Lasco, which the judge granted until 20 November 1996.
As the action was started more than six years after DEG's investment in GVDC, there was an obvious question as to whether the claim was statute-barred. DEG's solicitors, Cameron Markby Hewitt (now CMS Cameron McKenna LLP, whom I will call "Camerons"), were sensitive to this (it was also the first point that Harman J raised with Mr Simon Browne-Wilkinson, counsel for DEG on the application), and the main affidavit in support of the freezing order application sought to meet it. That affidavit was one made on 8 November 1996 by David Kidd, then a partner in Camerons. At the heart of DEG's case was the assertion that, until June 1996, it had no idea that Lasco had not advanced to GVDC the amount of dollars that the loan documentation purported to show it had advanced and that it was only its discovery of the true position in June 1996 that led it to the conclusion that it had a claim for damages in deceit against Mr Koshy upon this basis. Its case was that, in these circumstances, section 32 of the Limitation Act 1980 had deferred the running of time. Mr Kidd dealt with this in his affidavit, where he said:
"12. On 8 th June 1996 the Receivers discovered a document, being a telex dated 13 th May 1986 (at page 11) that appeared to show that Lasco had never made a loan to GVDC of several million dollars. Instead it appeared that only a small part of the Kwacha funds which Mr Koshy and Lasco claimed to have introduced into GVDC, as a result of the outlay by Lasco of several millions of dollars, could be said to have been purchased and provided to GVDC by Lasco. Since that date extensive investigations have taken place into funding allegedly provided by Lasco to GVDC, from which it has become apparent that most funds claimed to have been provided by Laso actually came from the Zambian government. …
97. As I have explained in paragraph 12 above it was not until June 1996 that the Receivers by chance discovered an apparently mis-filed document (page 11) which led to the discovery of the true cost to Lasco of the pipeline funds. That true cost had been persistently and deliberately concealed from DEG as I have explained above. I am also informed by Mr Ward and believe that it appears that steps had been taken to ensure that no documents were available within the files of GVDC which would have exposed the true position.
98. I do not believe that DEG should with reasonable diligence have discovered the fraud or concealment at some earlier date. Until discovery of the mis-filed document DEG did not have reason to believe that the representations made by Mr Koshy as to the cost of the pipeline funds to Lasco were untrue."
On 20 November 1996, the freezing orders were continued on an inter partes basis, without prejudice to the defendants' right to apply to have them set aside. On 4 December 1996, Mr Koshy and Lasco made such an application, making assertions of material non-disclosure at the ex parte application. They did not, however, rely on the point at the heart of the new claim, which goes to the truth of Mr Kidd's assertions in the quoted paragraphs that the events of 8 June 1996 were a "chance discovery". (Mr Kidd promptly withdrew his allegations as to the alleged misfiling of the critical document and the taking of steps to ensure that the relevant documents would not have been available within the GVDC files, and those points were not relied on either).
That application was heard by Harman J over some 12 days in March and April 1997, together with an application for summary judgment against Mr Koshy and Lasco in the action which GVDC had in the meantime (on 15 November 1996) also commenced. The latter action was brought at the suit of the GVDC receivers (Messrs Ward and Allen) whom DEG had purportedly appointed. The GVDC action was funded by DEG, and Camerons acted for GVDC, instructed by the receivers. GVDC's primary claim against Mr Koshy was for an account of profits.
During the hearing before Harman J, Mr Kidd made a further affidavit (sworn on 1 April...
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