Michael Wilson & Partners Ltd v Thomas Ian Sinclair and Others
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 21 September 2012 |
| Neutral Citation | [2012] EWHC 2560 (Comm) |
| Docket Number | Case No: 2010 FOLIO 1194 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 September 2012 |
[2012] EWHC 2560 (Comm)
Mr. Justice Teare
Case No: 2010 FOLIO 1194
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings,
Fetter lane. London EC4A 1NL
Michael Fealy and Nicholas Sloboda (instructed by DLA Piper) for the Defendants and Part 20 Claimants
Charles Samek QC and David Mumford (instructed by Healys LLP) for the Claimant
Philip Shepherd QC (instructed by Michael Robinson) for the Part 20 Defendant
Hearing dates: 18–20 July 2012
This is an application by the First and Second Defendants ("the Sinclair Defendants") to strike out, or obtain summary judgment in respect of, a claim by the Claimant ("MWP") for or in respect of certain shares ("the Max shares") which the Third Defendant ("EPIL") received from an AIM listed company ("Max"). MWP claims that EPIL received the Max shares on behalf of the Part 20 Defendant ("Mr. Emmott") in breach of fiduciary duty by Mr. Emmott. The Max shares are, it is said, beneficially owned by MWP. The Sinclair Defendants and Mr. Emmott say that the shares were never received by EPIL on behalf of Mr. Emmott. Instead, they were received by EPIL on behalf of Mr. Sinclair, the First Defendant, and there was therefore no breach of fiduciary duty by Mr. Emmott. The application to strike out is supported by Mr. Emmott. It is opposed by MWP.
It is a remarkable feature of the claim brought by MWP that the central allegations made in it have already been determined against MWP in an arbitration in which MWP, Mr. Emmott and Mr. Sinclair have been involved, for the past 6 years. I use the word involved deliberately. MWP and Mr. Emmott were party to that arbitration. Mr. Sinclair was not. He did however give evidence to the arbitral tribunal. His interest in the arbitration was such that he funded Mr. Emmott's defence of the claim brought in the arbitration by MWP against Mr. Emmott. The arbitrators (Lord Millett, Christopher Berry and Valerie Davies) held that there was no relevant breach of fiduciary duty by Mr. Emmott and that the Max shares were beneficially held by Mr. Sinclair. Notwithstanding that award (which was unsuccessfully challenged by MWP under sections 68 and 69 of the Arbitration Act 1996; see MWP v Emmott [2011] EWHC 1441 Comm) MWP now seeks to raise the same issues in this, the Max action. The application to strike out therefore raises interesting questions regarding the interplay between arbitration and litigation.
Before considering the parties' submissions as to whether MWP is able to raise the same issues again in this court it is necessary to describe the facts in a little more detail.
MWP is a company which provides legal and business consultancy services in, among other places, Kazakhstan. Michael Wilson is its Managing Director. At the times relevant to these actions until 30 June 2006, John Forster Emmott was a director and employee of MWP.
Mr. Sinclair has at all material times been the Managing Director and a major shareholder of Sokol, a company incorporated in Delaware with interests in (among other places) Kazakhstan. Sokol was formerly a client of MWP and it engaged MWP in connection with various natural resource transactions in Kazakhstan (and elsewhere), including the transaction with which the Max Action is principally concerned (referred to as the "Max 1 Transaction").
Butterfield is the trustee (since 22 August 2006) of a trust in which Mr. Emmott is interested and is understood directly or indirectly to own EPIL, a Bahamian international business company.
The Max 1 Transaction involved the purchase and on-sale of interests in certain oilfields in Kazakhstan by Sokol, eventually to Max, which is an AIM listed company. MWP was engaged by Sokol in relation to the Max 1 Transaction, ultimately pursuant to a written letter of engagement dated 6 January 2005 (the "Sokol Engagement Letter"). Mr. Emmott acted on MWP's behalf in connection with it. He played a significant role in furthering its success.
Shortly before the conclusion of the transaction certain players who were important to the success of the deal (the so-called "deal team") were rewarded by the issue of shares in Max. 134.1 million shares in Max were issued on or about 4 August 2005 to some 25 allottees (including Sokol), in accordance with instructions given by Mr. Sinclair.
14.75 million of those shares (the "Max Shares") were issued to EPIL. It is MWP's case that the Max Shares were issued to EPIL for the benefit of Mr. Emmott as his reward for his participation in and contribution to the Max 1 Transaction. MWP further says that since Mr. Emmott was involved in the transaction as the agent and employee of MWP, the Max Shares ought to have come to it (in addition to the fees which it was paid or due pursuant to the Sokol Engagement Letter). It is MWP's case that, wrongfully and in breach of his contractual and fiduciary duties to MWP, Mr. Emmott connived with the Sinclair Defendants to divert the Max Shares to Mr. Emmott personally (though EPIL), when he ought to have ensured that they were granted to MWP.
EPIL also received in connection with the Max 1 Transaction a sum of $950,000. MWP likewise says that this sum (the "Max Funds") ought to have come to it, and that again wrongfully and in breach of duties Mr. Emmott diverted that opportunity to himself. Mr. Emmott has admitted that US$250,000 of the Max Funds were paid for his benefit and that he should account for them to MWP.
In June 2006 Mr. Emmott left MWP to work for a competitor business known as "Temujin". MWP says that Mr. Emmott conspired with two other former employees, Mr. Nicholls and Mr. Slater, in late 2005 to form Temujin and take advantage of work and opportunities belonging or available to MWP. The work and opportunities included projects in which the Sinclair Defendants were concerned. The role of the Sinclair Defendants in this alleged conspiracy, and their assistance and procurement of the alleged breaches of contract and fiduciary duty which it involved, are the subject of the Temujin Action.
On 14 August 2006, shortly following Mr. Emmott's departure, MWP commenced arbitration proceedings against Mr. Emmott pursuant to the arbitration clause in Mr. Emmott's contract of engagement with MWP (the "Emmott Arbitration"). In the Emmott Arbitration MWP pursued claims for breach of contract and fiduciary duty on Mr. Emmott's part in connection with a wide range of matters, including his undisclosed profit represented by the Max Shares and Max Funds, and his participation in the conspiracy to form and divert work to Temujin. It was Mr. Emmott's case in the Emmott Arbitration that the Max Shares were in fact intended for Mr. Sinclair's benefit and that they were simply warehoused by EPIL because Mr. Sinclair did not have his own offshore holding arrangements set up in time. In support of its claims in the arbitration MWP obtained freezing, disclosure and receivership orders from the Commercial Court (2006 Folio 921).
MWP invited Mr. Sinclair to join the Emmott Arbitration as a party in order that the claims in respect of the Max Shares could be determined conclusively as between the parties concerned. He refused.
On 19 October 2006 Mr. Sinclair issued proceedings in the Supreme Court of the Bahamas (the "Bahamian Action") seeking a declaration that the Max Shares belonged to him. EPIL was a Defendant to that action and gave a voluntary undertaking on 20 July 2007 (previously given orally at a hearing on 26 and 27 March 2007) that it would " …hold safe and…not dispose of, transfer, charge or otherwise deal in the 14.75 million shares in Max Petroleum plc presently held by EPIL until the conclusion of these proceedings..". MWP, which was also joined as a Defendant, successfully challenged the jurisdiction of the Bahamian Court. Accordingly, the Bahamian Court gave no decision on the merits. In his submissions to the Bahamian Court of Appeal counsel for MWP, Mr. Simms, said that if MWP's claims to beneficial ownership of the shares were held in the London arbitration to be wrong "then it will abandon its claim to the shares and that is the end of the matter."
The tribunal in the Emmott Arbitration issued its Second Interim Award adjudicating on the liability aspects of MWP's claims on 22 February 2010. (It was re-issued on 6 April 2010 with typographical and other corrections.) Among other findings, the Emmott tribunal found that (1) Mr. Sinclair had not given Mr. Emmott any Max Shares and was under no legal obligation to do so, and (2) Mr. Emmott had no interest in any of the Max Shares and had not made a profit, secret or otherwise, for which he would be made liable to account to MWP. However, Mr. Emmott was held liable to account for US$250,000 of the Max Funds but not the balance. The tribunal concluded that MWP had "no claim to any of the 14.75 million shares in Max held by the trustee of Mr. Emmott's Bahamian trusts and that they are held to the order of Mr. Sinclair. We shall authorise and direct each of the parties to inform the relevant trustees and the Supreme Court of the Bahamas of this finding but not of the reasons on which it is based."
By its Seventeenth Procedural Order dated 24 March 2010, paragraph 5, the tribunal stated that the parties were "authorized and instructed to inform the relevant Bahamian Court and the relevant Trustees of the dismissal of MWP's claim to any interest in shares in Max Petroleum."
On 6 April 2010 the tribunal...
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