Michalis S. A. Kallakis v AIB Group Plc
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder |
| Judgment Date | 28 February 2020 |
| Neutral Citation | [2020] EWHC 460 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000510 |
| Date | 28 February 2020 |
[2020] EWHC 460 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mrs Justice Moulder
Case No: CL-2018-000510
Mr Michalis Kallakis represented himself
Mr Sandy Phipps (instructed by CMS Cameron McKenna Olswang LLP) appeared for the First, Second and Fifth defendants
Hearing dates: 12 February 2020
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.
THE HONOURABLE Mrs Justice Moulder
Introduction
This is the reserved judgment on the application by the first, second and fifth defendants (“AIB”) for summary judgment and/or strike out (the “Application”).
The Application was made on 26 July 2019. The defendants rely on a witness statement of Ms Vanessa Whitman dated 26 July 2019 in support of the application and a second witness statement from Ms Whitman dated 13 December 2019. Ms Whitman is a solicitor at CMS Cameron McKenna Nabarro Olswang LLP, solicitors to AIB, having day-to-day conduct of this matter
In response the claimant relies on his own witness statement dated 31 October 2019.
There were two further witness statements before the court, neither of which were relevant to the issues to be determined: one an unsigned witness statement which the claimant says was produced by Mr Michael Cooke, a former employee of AIB, and a witness statement of Mr Andrew Makins dated 29 October 2019. In correspondence it was denied that Mr Cooke made the witness statement. The claimant subsequently obtained a witness summons requiring the attendance of Mr Cooke at the hearing of the Application. However in view of the fact that the witness statement goes largely to the issue of the price obtained on the sale of the properties and having heard the way that the Application was put by counsel for AIB in oral submissions, the court ruled that it was not necessary to hear oral evidence from Mr Cooke to determine the Application.
There is also an application by AIB (the “Variation Application”) in the event that the Application does not succeed or is granted only in part, to vary the order made (without a hearing) on 12 July 2019 on the application to join the fifth defendant, to permit the joinder of the fifth defendant in substitution for the first and second defendants.
Representation
At the hearing the claimant appeared in person and AIB was represented by counsel. The third and fourth defendants were not represented and did not appear.
The court exercised its discretion to allow the claimant's McKenzie friend, Mr Darren Stapleford, to address the court on behalf of the claimant. Mr Stapleford told the court that he was called to the Bar in 2011 but is not currently practising, he was not being paid for his attendance but was familiar with the matters in issue having assisted the claimant in, amongst other things, drafting documents including the skeleton argument. Having regard to these factors and the complex nature of the issues raised on this Application, it was in furtherance of the overriding objective for Mr Stapleford to be granted rights of audience on this occasion.
Background
The background to these proceedings is taken largely from the first witness statement of Ms Whitman.
In summary, the fifth defendant, Allied Irish Banks plc (the “Bank”) was introduced to the third defendant who is the father of the claimant. The Bank entered into a number of transactions between October 2003 and November 2007 pursuant to which the Bank lent in excess of £740 million to 14 companies controlled by the third defendant for the purpose of purchasing freehold or long leasehold properties in England. The companies were special-purpose vehicles (“SPVs”) incorporated in the BVI which each held a property. The fourth defendant, Michael Becker, was the sole director and shareholder of each of the SPV companies.
The structure advanced by the third and fourth defendants was in fact a sham. In September 2008 the Bank discovered that documentation supposedly entered into by Sun Hung Kai Properties Ltd in connection with the properties was not genuine.
Negotiations took place between the Bank and lawyers for the third defendant over the period from September 2008. As part of those negotiations, whilst not accelerating the facilities or enforcing its security, the Bank required the third defendant to procure the payment of all rents due from tenants to an account controlled by the Bank. On receipt of those monies, the Bank allocated the funds first to discharge outstanding capital and then to interest. As a result, there was a shortfall in the amount received in respect of the interest amount due on the October payment date and thus a payment default under the facilities. Notwithstanding the default, negotiations appeared to continue regarding arranging a sale of the properties but without warning, the Bank effectively broke off the negotiations on 20 November 2008 serving notice of default under the Facility Agreements and the following day, on 21 November 2008, and in purported exercise of its power of sale, completing the sale of the properties as mortgagee that same day. The properties were sold to 14 individual entities which form part of the Green Property Group (“Green”). The purchase by those entities were funded by AIB through facilities granted to them by AIB which included a provision for additional amounts to be paid if the properties were resold.
The Bank denies that the terms of the sale to Green and the associated lending were unusual and further denies that the sale was at an undervalue. The Bank asserts that it did not profit from the sale to Green.
The third defendant and his business associate Alex Williams were subsequently found guilty in 2013 of conspiring together with the fourth defendant to defraud the Bank by causing the Bank to advance monies for the purpose of funding the purchase of properties by companies owned or controlled by the third defendant.
It appears to be common ground that the SPVs were struck off the BVI register in 2015 for failing to appoint a registered agent (paragraph 15 of the Reply and schedule 2 to the Defence). AIB also accepts that prior to the SPVs being struck off the register in the BVI, two of the companies were placed in liquidation in England at the instigation of AIB and two companies were placed in liquidation apparently on the petition of HMRC.
The Claims
The claimant is 21 years old. He was therefore a minor at the time of the events in 2008 and was not involved. However he asserts that he is a beneficiary under the Hermitage Syndicated Trust (the “Trust”). The claimant's case is that Mr Becker was and is the trustee of the Trust (the “Trustee”), the claimant is one of four beneficiaries (the other beneficiaries being his siblings) and the Trust was the sole shareholder in each of the SPVs.
By the present proceedings, the claimant brings three claims (together the “Claims”) which in summary are as follows:
i) that the Bank has caused loss by repossessing the properties and/or by seizing control of the SPVs and/or by making a number of false and/or negligent misrepresentations to gain control of the SPVs and the properties (paragraphs 31 and 32 of the POC) (“Claim 1”);
ii) the Bank sold the properties without legal authority to do so (paragraphs 33 – 36 of the POC) (“sale without legal authority” or “Claim 2”); and iii) the Bank owed and breached a duty to obtain the best possible price upon sale of the properties (paragraphs 37 to 47 of the POC) (“undervalue sale” or “Claim 3”).
The basis of the Claims advanced by the claimant are:
i) in his personal capacity as a beneficiary of the Trust (Basis 1);
ii) on behalf of the Trust pursuant to an equitable assignment (Basis 2);
iii) on behalf of the Trust by way of a derivative action (Basis 3);
iv) in his personal capacity by way of a derivative action on behalf of the SPVs (Basis 4).
The Claims which the claimant seeks to bring on behalf the Trustee are said to be:
i) losses suffered by the Trust as shareholder of the SPVs (Basis 3A);
ii) a derivative action in respect of losses suffered by the SPVs (Basis 3B).
Relevant law-Application for strike out/summary judgment
CPR3.4 (2) states:
“The court may strike out a statement of case if it appears to the court –
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
…”
CPR 24.2 states:
“The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”
AIB referred the court to the summary of the relevant principles as set out in the judgment of Picken J in Magdeev v Tsvetkov [2019] EWHC 1557 (Comm). At [30] the judge stated:
“The principles by reference to which a claim's prospects of success should be assessed at the strike out/summary judgment stage were summarised by Lewison J (as he then was) in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) at [15] (approved by the Court of Appeal in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 at [24]). They are as follows:
“i) The court must consider whether the claimant has a...
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