Michael Ward v Katharine Anne Savill
| Jurisdiction | England & Wales |
| Judge | Robin VOS |
| Judgment Date | 15 June 2020 |
| Neutral Citation | [2020] EWHC 1534 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: BL-2019-000676 |
| Date | 15 June 2020 |
[2020] EWHC 1534 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
BUSINESS LIST (ChD)
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Robin VOS
(SITTING AS A JUDGE OF THE CHANCERY DIVISION)
Claim No: BL-2019-000676
Hugh Miall (instructed by Morgan Rose Solicitors) appeared for the Claimants
James Mather (instructed by Kingsley Napley LLP) appeared for the Defendant
Hearing date: 19–20 May 2020
Approved Judgment
DEPUTY JUDGE
Introduction
The Claimants are 65 individuals who invested in one or both of two film development schemes. Each of the schemes was operated through an English limited liability partnership. The investment took the form of a payment of a sum of money to the relevant LLP.
The promoters of the film schemes were the Defendant's husband, Charlie Savill, and two other individuals.
The Claimants believed that their investments had been procured by fraud and that the funds which had been invested were diverted through a series of offshore entities for the benefit of the three promoters.
In 2015, the Claimants (along with other individuals who had invested in the two film schemes and two other similar film schemes operated by separate LLPs and promoted by the same individuals) therefore brought a claim against the three promoters and the four LLPs (“ the 2015 Proceedings”).
Following a hearing in March 2018, the Claimants in the 2015 Proceedings (“ the 2015 Claimants”) obtained a default judgment (no defence having been entered) against the seven defendants to those proceedings (“ the 2018 Judgment”). The order made by Butcher J (“ the 2018 Order”) as a consequence of his judgment included a declaration that the 2015 Claimants had a beneficial interest in the money paid by them to the LLPs.
The Defendant, Mrs Savill, is the registered the owner of a substantial property in West London. The Claimants say that the property was purchased using funds which derived from their investments into the LLPs. They have therefore brought the current proceedings in order to establish that they have a proprietary interest in that property by way of a tracing/following claim.
As the starting point for their claim, the Claimants rely on the declaration relating to their beneficial interest in the money invested in the LLPs contained in the 2018 Order.
In her Defence, Mrs Savill does not deny that the court made a declaration contained in the 2018 Order that the Claimants have a beneficial interest in the money which they invested in the LLPs. However, she says that as she was not a party to the 2015 Proceedings, she is not bound by any judgment in those proceedings. As a result, she says that the Claimants must prove in the current proceedings that they do have a beneficial interest in those funds.
The Claimants, on the other hand, say that, whilst Mrs Savill is not bound by the 2018 Order, she cannot ignore its effects. On the contrary, they say that, in the absence of any challenge from Mrs Savill, they are entitled to rely on the 2018 Order as establishing their beneficial interest in the funds invested in the LLPs and therefore as the foundation of their proprietary claim against the property owned by Mrs Savill.
On 20 January 2020, Deputy Master Henderson approved a consent order in which it was agreed that the court would determine the following question as a preliminary issue:
“Whether, contrary to paragraphs 8(c), 9(a) and (b) of the Defence, the declaratory judgments obtained by the Claimants in Claim CL 2015-000136 have such legal effect (including against the Defendant) so as to allow the Claimants to found their proprietary claim against the Defendant in relation to their alleged beneficial interest in [the property] without re-pleading and proving the facts or matters relied on by them in Claim CL 2015-000136 in order to obtain those declaratory judgments.”
This is the sole issue for me to determine.
The 2015 Proceedings
In the 2015 Proceedings, the 2015 Claimants claimed damages arising as a result of the alleged fraud as well as declarations relating to their beneficial ownership of the funds invested in the LLPs and their right to trace into property held by the defendants to those proceedings.
The 2015 Proceedings were delayed as a result of the first three defendants (Mr Savill and his two colleagues) being subject to a criminal prosecution and ultimately being convicted of conspiracy to cheat the public revenue in May 2016. This meant that particulars of claim were not served until early 2017.
In June 2017, the 2015 Claimants made an application to (amongst other things) join additional corporate entities and certain individuals (including Mrs Savill) as defendants to the 2015 Proceedings and to amend their particulars of claim.
In July 2017, the 2015 Claimants applied for a worldwide freezing order against (amongst others) Mrs Savill in order to prevent her dealing with the London property.
In February 2018, the 2015 Claimants applied for default judgment against the original seven defendants to the 2015 Proceedings on the basis that no defence had been filed.
Shortly before the hearing of these three applications in March 2018, the 2015 Claimants agreed to withdraw their application to join Mrs Savill as a defendant and for the grant of a worldwide freezing order against her. This was confirmed by a consent order approved by the Judge under which Mrs Savill gave certain undertakings and the Claimants agreed that:
“In any future proceedings [Mrs Savill] shall be permitted to raise any argument in those future proceedings that she could have raised in the current proceedings had she been joined to the current proceedings”.
Mrs Savill and her counsel were however present at the hearing in March 2018 although took no part in the proceedings.
In his 2018 Judgment, Butcher J approved the joinder of the new defendants and the amendments to the particulars of claim. It is worth noting that the amended particulars of claim sought declarations against all of the proposed new defendants relating to the beneficial ownership of the sums invested by the 2015 Claimants and their ability to trace into property held by each of the new defendants which represents the traceable proceeds of those funds.
The 2018 Judgment also gave default judgment against the original seven defendants. As far as the proprietary claims were concerned, the terms of the 2018 Order made by Butcher J were as follows:
“ IT IS DECLARED THAT:
(a) Each of the Claimants was induced to invest into the Schemes (as defined in the Particulars of Claim dated 10 February 2017) by reason of the fraudulent misrepresentation of one or more of the Defendants.
(b) Each of the Claimants has or retains a beneficial interest in the monies paid to one or more of the Fourth to Seventh Defendants during the commission of the Schemes as described in the Particulars of Claim, and in the amounts as set out in Annex A to the Particulars of Claim.
(c) The Claimants are entitled to trace into property in the First to Seventh Defendants' hands which represents monies invested into the Schemes and subsequently paid away and the traceable proceeds thereof.”
The issues for consideration
As set out above, the preliminary issue which I have to determine is whether the declarations in the 2018 Order are sufficient to allow the Claimants to bring a tracing/following claim against Mrs Savill in respect of the London property owned by her or whether the Claimants need to re-plead and prove the facts and matters relied on by them in obtaining those declarations.
The Claimants put forward two reasons why the declarations contained in the 2018 Order are sufficient:
(a) The 2018 Judgment is a judgment in rem and so binds the whole world.
(a) Even if the 2018 Judgment is not a judgment in rem, the effects and consequences of the declarations contained in the 2018 Order continue to have effect unless and until they are challenged by someone who has standing to do so by way of an application as part of the 2015 Proceedings to set aside the relevant part of the 2018 Judgment/Order.
I shall deal first with the effects and consequences of the 2018 Judgment/Order on the basis that these are not decisions in rem. I shall then go on to consider whether the 2018 Judgment/Order were in fact decisions in rem.
The effect and consequences of the 2018 Judgment/Order
Mr Miall, on behalf of the Claimants, accepts that, as she was not a party to the 2015 Proceedings, Mrs Savill is not bound by the 2018 Judgment/Order in the sense that there is no estoppel “per rem judicatam” preventing her from challenging the conclusions reached by the judge in those proceedings. However, he says that, in the absence of such a challenge, this does not mean that Mrs Savill can simply ignore the legal effects and consequences of the 2018 Judgment/Order. He stresses the need to distinguish between whether a judgment is binding on someone who is not a party to the proceedings and whether a judgment has some legal effect or consequence in relation to a stranger to the proceedings in the absence of any challenge to the judgment.
In support of this, Mr Miall referred to Halsbury's Laws of England Volume 12A (2015), para 1591 which states that:
“Every final judgment is conclusive evidence against all the world of its existence, date and legal consequences.”
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