Sean Richard Ormsby Lindsay v Jared Michael O'Loughnane

Hearing dates: 28 February, 1–3, 6 March, 29, 30 November 2023, 20–22 March 2024

Written Submissions received subsequently and last on 29 May 2024

Approved Judgment

This judgment was handed down in court (no attendance) at 2.12pm on 28 August 2024 and has been circulated on that day to the parties or their representatives by e-mail and released the next day to the National Archives.

Introduction

This is my judgment in relation to Applications made by the applicant claimant Sean Lindsay (“the claimant”) to have the proceeds of sale of various properties (“the Properties”) to be paid out to him as the person entitled to the benefit of final charging orders obtained over the Properties securing a substantial judgment debt payable by the first defendant/respondent Jared O'Loughnane (“Jared”) who was their registered owner. The second respondent (James French, “French”) and the fourth respondent (Andrew Heaphy, “Heaphy”) each contend (French having died during the trial now by Karen Drayton who has been appointed to represent his estate (“the French Estate”) for these purposes) that they each have the benefit of equitable charges over the Properties which were created earlier in time than and so have priority over the claimant's charging orders.

The claimant contends that the asserted equitable charges do not have that effect as: (1) the relevant documents (or at least the loan agreements underpinning them) were only signed, at least by Jared, after the granting of the charging orders (2) the relevant documents did not give rise to equitable charges over the relevant properties for numerous reasons (3) the equitable charges were released as a consequence of law arising from a transaction relating to another property which was also the subject of their security (4) the equitable charges should not be enforced for various reasons including as (i) they were designed to prejudice the claimant in relation to his claims against the first defendant (ii) they were entered into in contravention of a worldwide freezing order (“the WFO”) affecting the claimant (iii) the chargees intend to pay over any monies received to the first respondent (iv) the monies provided by the chargees did not belong to them (5) the equitable charges should be set aside as being transactions at an undervalue intended to defeat creditors under section 423 (“section 423”) of the Insolvency Act 1986 (“the 1986 Act”). The claimant has also raised other contentions during the history of this part of the litigation but those other contentions have not been pursued.

The claimant has appeared before me by Mr Brian Hurst, direct access counsel. Jared has appeared before me by video link representing himself. French and then the French Estate and Heaphy have appeared before me by Mr Gary Pryce of counsel instructed by Clarke Kiernan solicitors.

This case raises important points with regard to the standard wordings of WFOs and property transactions entered into by a defendant designed to provide monies for their legal costs, but which have the effect of diminishing their assets other than by way of simple payment of monies to their lawyers (and where such simple payment of the defendant's monies is generally permitted by the standard wordings of WFOs). For those reasons, I have left my consideration of the WFO argument to the end of this judgment. In that section, I have also expanded various matters from the draft judgment which I circulated in order to make clear my reasoning in relation to certain matters raised by Mr Hurst in emails subsequent to it.

I have had before me some 18 lever-arch files of documents, multiple written submissions and numerous bundles of authorities, and the evidence and oral submissions took some 9 days of court time (although this was both affected and limited by the second respondent, French unfortunately losing mental capacity and then dying over the trial period before he could give oral evidence). Bearing in mind that this dispute relates to claims of the second respondent for (now) £37,889 odd and from the fourth respondent for £24,999 (but in each case with interest from, perhaps, mid-2010 and which may add up to, say, another 100%), at first sight this process seems to have been at least potentially disproportionate. That seems to have occurred due to this being part of a larger war between the claimant and Jared (who has already been held to have defrauded the claimant as to which I refer below) into which it is relatively common-ground that the other respondents have been dragged.

However, it does mean that in order to save court resource and to accord with the overriding objective ( CPR1.1) I have sought to keep this judgment within bounds, and, in particular, to summarise both matters which I consider to be of limited relevance to what I have to decide and the parties' various submissions. Further, at an earlier stage in this litigation, I refused a summary judgment application brought by the Claimant and a transcript of my judgment has Neutral Citation Number [2022] EWHC 3712, and in order to save time, I have used elements of that transcript within this judgment. However, in preparing this judgment, I have reviewed the full documentary materials, witness evidence and the oral and written submissions before me in order to ensure accuracy and that this judgment represents a full fresh determination of all matters before me.

History

Initial History

This matter arises from underlying litigation brought by the claimant against the Jared alleging that Jared had made fraudulent misrepresentations causing the claimant to make failed investments and causing him very substantial loss. I set out below matters which are either not contested or were found to be the case by Flaux J in a trial in early 2010 and where the written judgment has Neutral Citation Number [2010] EWHC 529.

Jared has carried on various businesses including businesses supplying foreign exchange (“Forex”) trading services; and enabling individuals and others to convert their monies from one currency to another (usually involving pounds sterling as either the sale or purchase currency). In 2000 he incorporated a company FX Solutions Ltd (“FXS”) in which he was a director and shareholder, and his only co-shareholder (after another, Kevin Gunning, had left) and co-director was a Penny Compton (“Penny”) his wife and who is also known as Penny O'Loughnane. Jared and Penny also were the sole shareholders and directors of another company Global FX Limited (“Global”) but which was only to trade actively from 2008. Those companies used HSBC Bank Plc (“HSBC”) as their bankers and including both to hold the monies provided to them by their customers and to purchase foreign currency en bloc which was then held in an HSBC account denominated in the relevant currency (e.g. Euros or US Dollars) before being paid out to particular customers.

The claimant originally traded satisfactorily with FXS during 2005–2007. However, by June 2008 FXS became insolvent and Jared (with Penny as co-director) was operating Global in its place. When the claimant sought to convert some £185,000 then, Jared did not inform the claimant of what was happening but supplied him with Global trading notes as if that was simply a new trading name of FXS. The claimant's monies were not used to purchase currency for the claimant but to pay other creditors and expenses of FXS and Jared. However, Jared told the claimant that there was simply a delay due to “banking errors”; although eventually the claimant was paid his monies from other customers' monies. The claimant then paid another total of £565,000 in September 2008 to be converted into Euros for him, and again the claimant's monies were not used to purchase currency for the claimant but to pay other creditors and expenses of FXS and Jared, and this time nothing was paid to the claimant.

Flaux J was to hold, and which has not been challenged (except possibly by Jared who is bound by Flaux J's findings being the defendant at the relevant trial) that Jared induced the claimant to provide his monies by fraudulent misrepresentations and which were part of “a widespread pattern of deception [which] was committed on the clients of [FXS] of which [Jared] was the architect.”

On 18 September 2008 FXS and Global entered into administration and are now in liquidation with a Mr Andrew Tate (“Tate”) being one of the joint liquidators. Tate appears to have instructed and to continue to instruct Mr Hurst, who has appeared as counsel for the claimant, in relation to various matters. However, the respondents complain that Tate (and the claimant) have not provided them with general access to the documents in the liquidation, and that Mr Hurst has often taken the position that he will not volunteer or disclose documents and information because he says that he owes duties of confidentiality to Tate and the liquidation. Mr Hurst responds that the respondents should have made a third party disclosure application against Tate if they wanted documents from the...