Michael Wilson & Partners, Ltd v Thomas Ian Sinclair and Others
| Jurisdiction | England & Wales |
| Judge | Sir Richard Field |
| Judgment Date | 03 October 2017 |
| Neutral Citation | [2017] EWHC 2424 (Comm) |
| Docket Number | Cases No: CL-2010-000804 and 2011 Folio 1082 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 03 October 2017 |
[2017] EWHC 2424 (Comm)
Sir Richard Field (sitting as a Deputy Judge of the High Court)
Cases No: CL-2010-000804 and 2011 Folio 1082
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Brian Doctor QC (instructed by Michael Wilson & Partners Ltd) for the
Claimant
The 1st Defendant was unrepresented and appeared in person
The 2nd Defendant was unrepresented and appeared by one of its Directors, Mr Brian Savage
The 3rd and 4th Defendants did not appear and were unrepresented
Hearing dates: 11 & 12 September 2017
APPROVED JUDGMENT
Introduction
On 11 and 12 September 2017 the Court heard two applications made by the Claimant ("MWP"). The first application ("the unless order application") was for an order that unless the 1st and 2nd Defendants (together "the Sinclair Defendants") pay sums due under costs orders made against them in the instant proceedings ("the Max Action") totalling, with interest, £1,173,111.53, within 14 days, they were to be barred from defending the claim made herein against them. The second application ("the disclosure application") sought an order for disclosure against the Sinclair Defendants consequent on an order of Flaux J dated 18 May 2015 and sealed on 8 June 2015. This application succeeded and the parties were directed to agree the order, failing which the order was to be settled by the Court.
In this judgment I deal mainly with the unless order application. However, I also take the opportunity to expand somewhat on the reasons I gave in the course of the hearing for granting the disclosure application.
The Claimant brings two claims in this court, the Max Action, CL-2010-000-804, and "the Temujin Action", CL-2011-1082. The background to these actions is as follows. The Claimant provides legal and business consultancy services in Kazakhstan. Mr Michael Wilson is its Managing Director. In about the first half of 2005, the 2nd Defendant ("Sokol"), a company incorporated in Delaware, USA, acting by its Managing Director and major shareholder, the 1st Defendant ("Mr Sinclair"), instructed the Claimant to act on its behalf in respect of a transaction ("the Max 1 transaction") by which Sokol acquired certain Kazakhstan oil field assets which were sold on to Max Petroleum plc ("Max"), a company listed on the AIM in London. The MWP partner in charge of carrying out Sokol's retainer of MWP for the Max 1 transaction was Mr John Forster Emmott.
Shortly before the conclusion of the Max 1 transaction, on the instructions of Mr Sinclair, certain members of Sokol's deal team were rewarded with shareholdings in Max. Some 134.1 million shares were issued on 4 August 2005 to 25 allottees (including Sokol). 14.75 million of these shares (the "Max shares") were issued to the 3rd Defendant ("EPIL"), the trustee of a trust in which Mr Emmott is interested. US$950,000 was also paid to EPIL in connection with the Max 1 transaction.
In June 2006, Mr. Emmott left MWP to work for a competing firm known as "Temujin" that had been set up by two previous employees of MWP, Mr Nicholls and Mr Slater. Temujin acted for Sokol (acting by Mr Sinclair) in respect of a number of natural resource projects.
Mr Emmott's relationship with MWP was governed by an agreement that contained an arbitration clause. On 14 August 2006, MWP brought a claim in arbitration proceedings against Mr Emmott claiming that the Max shares issued to EPIL were for the benefit of Mr. Emmott as his reward for his participation in and contribution to the Max 1 transaction and that, since Mr. Emmott was involved in that transaction as the agent and employee of MWP, the Max shares and the US$950,000 were received by Mr Emmott in breach of the fiduciary and contractual duties he owed to MWP. MWP further claimed that: (i) the Sinclair Defendants wrongly participated in Mr Emmott's alleged breaches of duty; and (ii) Mr Emmott had been party to an actionable conspiracy with Mr Sinclair and Sokol to form and divert work to Temujin. It was Mr. Emmott's case in the arbitration that the Max shares were 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.
MWP invited Mr Sinclair to join in the arbitration as a party in order that the claims in respect of the Max shares and the US$950,000 could be determined conclusively as between the parties concerned, but he refused. To a significant extent, Mr Sinclair financed Mr Emmott's defence in the arbitration.
On 22 February 2010, the arbitral tribunal ("the tribunal") issued its Second Interim Award ("the liability award") in which it found, amongst other things, 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 US$950,000 but not the balance. The tribunal also held that MWP had no claim to any of the 14.75 million Max shares held by the trustee of Mr. Emmott's Bahamian trusts, these shares being held to the order of Mr. Sinclair.
In paragraph 5 of its Seventeenth Procedural Order dated 24 March 2010, 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."
By its award on quantum issued on 5 September 2015 ("the quantum award"), the tribunal awarded sums to both sides giving rise to a net award in favour of Mr Emmott of £3,209,613 and US$841,213, plus interest.
The Max Action was commenced on 12 October 2010. Proceedings were served on the Sinclair Defendants in the jurisdiction and the pleadings closed on 22 February 2011. Mr Emmott is not sued by MWP in the Max Action but he was joined in as a party under CPR Part 20 by the Sinclair Defendants and subsequently by MWP after the Sinclair Defendants discontinued their Part 20 claim against him.
On 8 June 2011, Andrew Smith J dismissed MWP's applications to challenge the tribunal's award under sections 68 and 69 of the Arbitration Act 1996 and in September 2011 EPIL transferred the Max shares to Mr. Sinclair.
On 26 June 2015, Burton J dismissed MWP's appeal against the tribunal's quantum award and gave Mr Emmott leave to enforce that award as a judgment of the Court ("the enforcement judgment"). MWP's application for permission to appeal Burton J's order was refused by the Court of Appeal (Longmore LJ) on 19 October 2015.
In the Max Action, MWP claims, inter alia: (1) that the Max shares and the US$950,000 were opportunities belonging to MWP which Mr. Emmott wrongly exploited for his personal benefit in breach of his contractual and fiduciary duties to MWP; (2) alternatively, that the Max shares and the US$950,000 were secret commissions or bribes paid to Mr. Emmott; (3) that the Sinclair Defendants procured the issue of the Max shares and the payment of the US$950,000 for Mr. Emmott's benefit knowing and intending that Mr. Emmott would thereby breach his duties; (4) declarations against, inter alios, the Sinclair Defendants that the Max shares and the US$950,000 were held by EPIL on constructive trust for MWP; (4) damages for fraud and equitable compensation for dishonest assistance in Mr. Emmott's breaches of his fiduciary and contractual duties against the Sinclair Defendants.
The Sinclair Defendants roundly deny the claims made against them, alleging (inter alia) that the Max shares were issued to EPIL for the sole benefit of Mr. Sinclair and held by EPIL on bare trust for Mr. Sinclair. They also deny that they made or procured the payment of the US$950,000.
In July 2012, the Sinclair Defendants applied to Teare J to strike out the claim made against them in the Max Action on the ground that the claim was an abuse of process given that the same allegations as are made by MWP in the Max Action were heard and rejected in the arbitration. In a judgment handed down on 21 September 2012, Teare J acceded to that application and struck out the claim in respect of the Max shares and the US$950,000, leaving only a claim in debt based on an invoice.
Teare J gave MWP permission to appeal the strike out order. On 21 January 2013, the Court of Appeal (Rix LJ) ordered MWP to pay £339,000 into court as security both for the costs of the appeal ordered by Teare J and in respect of the Sinclair Defendants' costs of their applications for security for costs. The sums making up the £339,000 were not paid into Court within the times ordered and on 17 July 2013, on the application of the Sinclair Defendants, Lewison LJ struck out MWP's appeal and ordered MWP to pay the Sinclair Defendants the separate sums of £40,000 and £125,000.
On 23 July 2015, the Court of Appeal overturned the order of Lewison LJ and MWP proceeded in early November 2016 to appeal against Teare J's strike out order. Earlier, the £339,000 ordered by Rix LJ to be paid into court had been received by the CFO on 21 May 2013. On 13 January 2013, the Court of Appeal allowed MWP's appeal and made extensive orders as to repayment by the Sinclair Defendants and costs that were to be paid by the Sinclair Defendants to MWP within 14 days. These costs, which totalled...
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