R Martin Kay v Scan-Thors (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Gross,Mr Justice Sweeney |
| Judgment Date | 23 May 2018 |
| Neutral Citation | [2018] EWHC 1233 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/5897/2016 |
| Date | 23 May 2018 |
and
and
[2018] EWHC 1233 (Admin)
Lord Justice Gross
and
Mr Justice Sweeney
Case No: CO/5897/2016
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Adrian Darbishire QC and Rachna Gokani (instructed by Peters & Peters Solicitors LLP) for the Claimants
Simon Myerson QC and George Hazel-Owram (instructed by Kuit Steinhart Levy LLP) for the Interested Party
Hearing date: 5 December 2017
Introduction
This case underlines the importance of compliance by prosecutors, public and private alike, with their duty of candour when applying ex parte for the issue of summonses in the Magistrates' Court.
By permission of Collins J, granted on 4 May 2017, the Claimants, Scan-Thors (UK) Limited (“Scan-Thors”) and its Managing Director, Martin Kay (“Mr Kay”), seek judicial review of the decision of District Judge (Magistrates' Courts) Mallon (“the DJ”) who, on 7 October 2016 in the Leeds Magistrates' Court, refused to:
(1) Dismiss summonses for offences of fraud (in the period between 2007 and 2012) which had been issued against the Claimants in that court on 19 May 2016, on the basis of an information laid on 7 April 2016 at the behest of the Interested Party, Marek Karwan (“Mr Karwan”), a private prosecutor who is the President of Adriana SA (“Adriana”), a company registered in Poland.
(2) Stay the proceedings as an abuse of process – finding that the appropriate venue for the determination of that issue was the Crown Court.
The Claimants assert (as they did before the DJ) that, although represented by solicitors when applying ex parte for the summonses, Mr Karwan failed, in breach of his duty of candour, to bring to the attention of the judge who dealt with the application that:
(1) On 26 July 2012 he had entered into a binding ‘Settlement Agreement’ with the Claimants in which he had undertaken not to prosecute them for the matters the subject of the information and summonses.
(2) The very matters raised had (at his request) twice been considered by a Polish Regional Public Prosecutor (over a total period of some five months) and thereafter reviewed by a Polish Regional Court, each of which (respectively in detailed written justifications and a detailed judgment) had reached the conclusion that there was no evidence of the Claimants having committed any criminal offences.
(3) He had only attempted to initiate the Polish criminal proceedings after he had found himself at risk of losing nearly £560,000 in arbitration proceedings between Scan-Thors and Adriana in Poland, and had attempted to use the fact of the criminal complaint in Poland to bring about a stay of those arbitration proceedings.
(4) Adriana had lost those arbitration proceedings and had been compelled to pay nearly £560,000 to Scan-Thors.
(5) At the time of applying for the summonses, Adriana was the subject of further arbitration proceedings in Poland, in which Scan-Thors was seeking unpaid commission payments and damages in excess of £4 million, and that he had initiated the proceedings in this country only after he had found Adriana to be at risk of that further loss.
(6) It was his intention (as shown by what later happened) to use the fact of the criminal proceedings in this country as the basis of an application to suspend the ongoing arbitration proceedings in Poland, or otherwise to gain a commercial advantage in that dispute.
The Claimants now challenge the DJ's refusal to dismiss the summonses and her conclusion that their abuse of process application should be determined in the Crown Court, and invite the Court to quash her decision and to dismiss the summonses. They argue, in summary, that the DJ erred in law in that:
(1) Whether a case is a proper one for the issuance of a summons is a matter for the Magistrates' Court, and for this Court on review. The Magistrates' Court also has the power to reconsider the decision to issue a summons, as well as the power to stay the proceedings, summonses having been issued, and this Court has recognised the importance of Magistrates' Courts taking action where it appears that a summons should not have been issued.
(2) The additional material before the court required her to reconsider the question of whether this was a proper case in which to issue summonses.
(3) Had she been the judge dealing with the initial application for summonses, and had she been provided (as she should have been) with the additional material, and thus the whole of the relevant circumstances, she would have been bound to consider and determine, on that material, whether this was a proper case for the issuance of summonses – and that would have been so even if the question was a complex one, which it was not. Hence it was not lawful for her to refer that question on to the Crown Court. The Magistrates' Court was the correct forum, in which the position should have been regularised at the earliest opportunity.
(4) She was asked to consider the conduct of the prosecutor in English proceedings – which analysis was one of English, not Polish, law.
The Defendant court has taken no part in these proceedings.
Mr Karwan argues, in summary, that:
(1) He complied with any duty of candour to which he was subject – choosing not to disclose the existence of the “Settlement Agreement” as it was irrelevant to the question of the issue of the summonses, and the Claimants knew that his position was that it was unenforceable.
(2) The DJ did not err in law in that she:
(a) Considered all the evidence, authorities and written submissions and dealt with all the issues.
(b) Considered and refused the Claimants' application to dismiss the summonses and declined to withdraw them, because the Claimants had failed to persuade her that it was appropriate to order withdrawal.
(c) Did not conclude that the issuance of the summonses, and whether they should be dismissed, was a matter for the Crown Court – but rather, having considered the abuse argument and the relevant authorities, concluded that she should not determine the abuse application and that the Crown Court was the proper forum for the determination of any abuse application.
(3) In reality, the Claimants' complaint was that the DJ should have determined the applications in their favour – which was not a matter that should be the subject of judicial review. Unless the judge simply accepted what the Claimants said about motive, failure to disclose, and the settlement agreement, she was bound to consider that those issues were fact dependent, whereas the Claimants had chosen not to submit evidence.
(4) In contrast, he had submitted evidence which showed, to the requisite standard, that, amongst other things, the alleged frauds had been committed; the settlement agreement was governed by Polish law (which prohibits undertakings not to prosecute); the Polish investigation concerned offences with a different actus reus and mens rea; he had an explanation for not disclosing the undertaking when applying for the summonses; and he had a genuine, legitimate motive for prosecuting the offences.
Background
The commercial relationship between Adriana and Scan-Thors appears to have begun in the late 1990s. Adriana is a furniture manufacturing business based in Poland. Scan-Thors is based in this country, and acted as a middle man in the purchase of furniture from Adriana, the import of that furniture into this country, and its onward sale to retailers – principally DFS.
The materials before the Court, including the materials which it is argued should have been disclosed to the court in accordance with Mr Karwan's duty of candour, indicate, amongst other things, that:
(1) On 14 September 2000 Scan-Thors and Adriana entered into a formal cooperation agreement.
(2) In 2003/4 Adriana began to get into financial problems.
(3) In September 2007, at a cost of around £1.5 million, Scan-Thors acquired a 30% shareholding in Adriana, Mr Kay was given a seat on Adriana's Management Board, and Mr David Johnson (another employee of Scan-Thors) was given a seat on Adriana's Supervisory Board.
(4) It is asserted that over the years that followed, Mr Kay represented in pricing negotiations that DFS required a discount of 5%, to which Mr Karwan agreed.
(5) Scan-Thors continued to give financial help, by way of substantial loans, to Adriana which, in January 2010, reached agreement with its creditors.
(6) By late 2011 / early 2012 the debt owed by Adriana to Scan-Thors was approximately £2 million, and it was around that time that it is alleged that Mr Karwan discovered that Mr Kay's claim that DFS required a 5% discount was false, and that the relationship between the two companies became increasingly acrimonious.
(7) Nevertheless, in May 2012 loan agreements were signed in relation to loans made by Scan-Thors to Adriana totalling in excess of £820,000.
(8) On 26 July 2012 Scan-Thors and Adriana concluded a set of six inter-related agreements, with a view to amending and gradually terminating their commercial relationship. Under the ‘Share Purchase Agreement’ Scan-Thors sold back, at a very considerable loss, its 30% shareholding in Adriana. The ‘Settlement Agreement’, which was signed by Mr Karwan personally and by (or on behalf of) the Claimants, and which did not seek to exclude any public prosecution, provided (my emphasis) that:
“ 1. No ‘further claims’ clauses
1.1 The parties do hereby confirm that today's execution of: (1) a share purchase agreement, (2) a loan agreement, (3) a cooperation agreement – regulates all mutual relationships between them and is the result of the amicable settlement of any past or potential disputes between them.
1.2 Therefore, for...
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