Michael Wilson & Partners, Ltd (Claimant/ Appellant) v Thomas Ian Sinclair and Others John Forster Emmott (Part 20 Defendant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Richards,Lord Christopher Clarke |
| Judgment Date | 23 July 2015 |
| Neutral Citation | [2015] EWCA Civ 774 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2012/2616(F) |
| Date | 23 July 2015 |
and
[2015] EWCA Civ 774
Lord Justice Richards
and
Lord Justice Christopher Clarke
Case No: A3/2012/2616(F)
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Teare
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Samek QC, David Holland QC and Adam Solomon (instructed by public access) for the Appellant
Philip Shepherd QC (instructed by Trowers & Hamlins) for the First and Second Respondents
The Part 20 Defendant did not appear and was not represented on the appeal
Hearing date : 16 June 2015
The application before the court is of an unusual nature. The appellant, Michael Wilson & Partners, Limited ("MWP"), applies under CPR rule 3.1(7) for the revocation of an order made by Lewison LJ by which, after an oral hearing, he dismissed an application for reconsideration of orders he had previously made on the papers (i) refusing to lift a stay on the appellant's appeal and (ii) striking out the appeal in consequence. MWP has to overcome the double hurdle of persuading us to exercise our discretion under rule 3.1(7) to revisit Lewison LJ's order and of persuading us that the order was wrong and that we should make a different order. The former aspect engages the principles summarised in Tibbles v SIG plc [2012] EWCA Civ 518, [2012] 1 WLR 2591 (" Tibbles"). The latter aspect engages the principles relating to relief from sanction laid down in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795 (" Mitchell"), as restated in Denton & Others v TH White Ltd [2014] EWCA Civ 906, [2014] 1 WLR 3926 (" Denton"). But the two aspects are intertwined, in that it is the very difference between the way Lewison LJ applied Mitchell (a judgment handed down shortly before his decision) and the approach required by the subsequent restatement in Denton that lies at the heart of the argument that we should revisit his order.
I need to set out the history of the case in some detail in order to place the submissions in their proper context.
The history of the case
MWP is a company which provides legal and business consultancy services in, among other places, Kazakhstan and Azerbaijan. Until 30 June 2006 a Mr Emmott was a director and employee of the company. The second respondent, Sokol Holdings Inc ("Sokol"), is a Delaware company with interests in, among other places, Kazakhstan. The first respondent, Mr Sinclair, has at all material times been its managing director.
In what follows I will concentrate on the present proceedings, brought in the Commercial Court, and on an arbitration directly relevant to it. We have been referred to related litigation in the Commercial Court, in Australia, in the Bahamas and in the USA, but all of that can be left on one side for the purposes of the main points arising on this application.
The nature of the present proceedings
The present proceedings relate to a transaction called the Max 1 Transaction which involved the acquisition and on-sale of interests in certain Kazakh oilfields by Sokol, ultimately to Max Petroleum plc ("Max"). Sokol engaged MWP in relation to the transaction. MWP alleged that certain Max shares were issued, and that payments in the sum of US$950,000 were made, for the benefit of Mr Emmott personally in circumstances where they represented the fruits of property and opportunities belonging to MWP, which Mr Emmott exploited for his personal benefit in breach of his contractual and fiduciary duties to MWP; alternatively, that they were secret commissions paid to Mr Emmott; and that Mr Sinclair and Sokol procured the issue of the shares and the making of the payments knowing and intending that Mr Emmott would thereby breach his duties. Mr Sinclair and Sokol denied the claims and pleaded a set-off and counterclaim on the grounds of alleged negligence on the part of MWP. Mr Emmott was subsequently joined as a Part 20 defendant.
By reason of an arbitration clause in the contract of engagement between MWP and Mr Emmott, MWP had to bring its claims against Mr Emmott in arbitration. Mr Sinclair declined to become a party to that arbitration. In the arbitration, Mr Emmott admitted that the sum of US$250,000 was paid for his benefit and that he should account for it to MWP. The arbitral tribunal otherwise concluded that Mr Sinclair had not given Mr Emmott any Max shares and was under no obligation to do so and that Mr Emmott had no interest in any of the relevant Max shares and had not made a profit, secret or otherwise, for which he should be made liable to account to MWP.
In consequence of the findings of the arbitral tribunal, Mr Sinclair and Sokol applied to strike out MWP's claims in relation to the Max shares and the sum of US$950,000 in the present proceedings. Teare J acceded to the application, holding that it was an abuse of the process of the court to permit MWP to challenge the findings of the tribunal by advancing those claims.
In addition to striking out the relevant parts of the amended particulars of claim, Teare J's order, dated 21 September 2012, provided that MWP was to pay a sum of £125,000 by 12 October 2012 on account of the defendants' costs and a further sum of £25,000 on account of Mr Emmott's costs.
Teare J granted permission to appeal against the strike-out order. MWP filed its appellant's notice on 12 October 2012. The appellant's notice also sought a stay of execution of Teare J's order for payments on account of costs. MWP had not paid those costs or sought a stay of execution from Teare J himself.
Mr Sinclair and Sokol cross-applied for security for the costs of the appeal and for an order that Teare J's grant of permission to appeal be set aside.
Rix LJ's order
The application and cross-applications came on before Rix LJ on 16 January 2013. He refused to set aside the grant of permission to appeal and he made the following further orders:
i) Provided that MWP paid the total sum of £150,000 (in respect of the payments on account of costs as ordered by Teare J) into the Court Funds Office by 4.30 pm on 18 January 2013, MWP was granted a stay of execution of the provisions of Teare J's order relating to those payments on account.
ii) If MWP failed to pay that sum of £150,000 into the Court Funds Office by that time, the appeal was to be stayed.
iii) MWP was to pay a further sum of £150,000 into the Court Funds Office by 4.30 pm on 30 January 2013 as security for the costs of the appeal. If MWP failed to pay the money into the Court Funds Office, the appeal was to be stayed.
iv) MWP was to pay Mr Sinclair's and Sokol's costs of the applications, summarily assessed in the sum of £39,000, by 4.30 pm on 30 January 2013. If MWP failed to pay those costs, the appeal was to be stayed.
MWP was therefore ordered to make total payments of £339,000 by the times specified, failing which the appeal was to be stayed.
Certain features of the hearing before Rix LJ should be stressed. First, the evidence and submissions on behalf of MWP were to the effect that MWP was a large and profitable business which could and would make the payment on account of costs immediately if no stay of execution was ordered and against which no order for security of costs was required. The impression created was summed up by Rix LJ's observation in ordering security for costs: "You are full of money; 14 days or the appeal is stayed".
Secondly, counsel for Mr Sinclair and Sokol submitted that the sanction for failure to pay the relevant costs into court should be that the appeal be struck out rather than stayed, because "it will suit MWP to stay this appeal indefinitely" and a stay "is an empty sanction", which "raise[s] the possibility that six or eight or ten months down the line we would raise our counterclaim, they will put the money into court and the appeal becomes live again". Rix LJ expressly declined to take that course. He said in his judgment:
"Mr Fealy submits that I should order a sanction of the dismissal of the appeal unless the monies are paid within a certain shortish length of time. I will not say that. I will require immediate payment or a stay, and any payment of that beyond an immediate payment will require the stay to be undone. If Mr Fealy has concern that MWP wants nothing more than for the appeal to go off into the long grass, for which he has not given an explanation, then that is a matter that would have to be addressed in the future were there to be a breach of my order."
Written post-hearing submissions led to a one-week extension of the time for payment into court of the sums on account of costs. The adjustment, reflected in the order as drawn up, was communicated to the parties in the following email from Rix LJ's clerk:
"Lord Justice Rix has settled the Order in this matter. He has taken account of the various post-hearing submissions he has received in writing. In order to assist all parties he has extended the time for the payment of the payment on account of costs (£150,000) to this Friday 25 January. For similar reasons he has inserted a 'Liberty to apply'. However, he would make clear to Michael Wilson & Partners that, in the light of the submissions made in court that payment on account of costs ordered by the judge could be effected immediately, and that MWP was a prosperous firm, MWP...
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