Sinclair Investment Holdings SA v Cushnie and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann:,Thomas Ivory QC,THE HONOURABLE MR JUSTICE RIMER,Mr Justice Mann,MR JUSTICE RIMER |
| Judgment Date | 20 March 2006 |
| Neutral Citation | [2006] EWHC 573 (Ch),[2006] EWHC 219 (Ch),[2004] EWHC 218 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC03C04463 |
| Date | 20 March 2006 |
[2004] EWHC 218 (Ch)
The Honourable Mr Justice Mann
Case No: HC03C04463
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Daniel Brennan Q.C., Simon Colton (instructed by Pitmans) for the Claimant
Michael Briggs Q.C., Mr Richard Walford (instructed by Peters& Peters) for the First, Second and Fourth Defendants
Hearing dates : 29 th January and 3 rd February 2004
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 Nature of the Applications
There are, in effect, two applications before me in this matter, both made by the First Defendant, Mr Carlton Cushnie. The first is in substance an application the effect of which is to seek fortification of a cross-undertaking in damages as will appear when I set out the background to this matter. Mr Cushnie has given an undertaking not to dispose of one of his assets pending trial of this action. The Claimant has given the usual cross-undertaking in damages and Mr Cushnie says that the evidence as to the means of, or available to the Claimant is such that the cross undertaking should be fortified by some appropriate form of financial support. The second application is an application by Mr Cushnie and the Second and Fourth Respondents for security for costs.
Background
Some of the events which are relevant to this action have given rise to a criminal prosecution in respect of which Mr Cushnie is currently standing trial. In order not to risk any interference with that trial by means of inadvertent publicity, and since the submissions before me dealt to some extent with the merits of the case against Mr Cushnie and not merely technical matters, at the outset of this hearing I acceded to an application that the hearing should be held in private. In the light of that concurrent criminal trial, and because I believe that this judgment can do justice to the applications without a lot of detail, there are areas of this judgment in respect of which I do not indulge in great detail.
On 9th April 1997, the Claimant ("Sinclair"), a BVI incorporated company, entered into an agreement with Trading Partners Limited ("TPL) under which Sinclair invested a sum of £2.35 million for the purpose of its being applied in certain transactions. The agreement provided that, pending the application of the money, it should be held on trust for Sinclair. The claims made in this action arise because it is said that instead of either holding the money on trust or applying it in the anticipated transactions, it was in fact misapplied by being mixed with the funds of another company, Versailles Trade Finance Limited and thereafter further misapplied. The events are said to have been part of the activities of the latter company's parent company Versailles Group Plc ("Plc") a Stock Exchange Listed Company.
Mr Cushnie was the Chairman and Chief Executive officer of the Plc. He was also the 99% majority shareholder of Marrlist Limited ("Marrlist") and English company which in turn was a majority shareholder of Plc. He was obviously deeply involved in the affairs of the Versailles Group; his involvement in the events which are the subject of this action is in dispute.
The nature of the claim against Mr Cushnie is set out in Particulars of Claim which have been served. Putting it shortly, it is alleged that Mr Cushnie owes TPL, VTFL and Sinclair fiduciary duties in respect of which he was in breach by applying, or permitting the application of, the money that Sinclair had paid to TPL. There are then claims that he participated in a breach of trust and allowed the Sinclair monies to be applied in "cross-firing" involving other companies said to be controlled by him. In addition it is said that he made an illegitimate profit through this sort of activity in so far as he held shares in Plc, some of which he sold at a profit in November 1999, shortly before the receivership of Plc in January 2004. An account of those profits is sought. There are knowing receipt and knowing assistance claims and claims that Mr Cushnie conspired with others, including a Mr Clough who was another director of TPL. It is not necessary for me to set out any further details of the claims at this stage.
A defence has not yet been served in these proceedings, and judging by some of the submissions made to me by Mr Briggs Q.C. on behalf of Mr Cushnie it is not planned that it will be served for some time. The full scope of the dispute between the parties is therefore not known, which will become relevant as appears below. However, it is right to observe that at the beginning of the current criminal trial an Agreed Statement was read into the court record, and it was common ground before me that I could treat it as accurately summarised as follows (taken from the skeleton argument of the Claimant):
"(1) The annual accounts of VTF and VGPLC between 1992 and 1999 contained figures for 'turnover' and 'debtors' which were falsely inflated: para 17.
(2) The turnover figures were falsely inflated by showing monies paid to and received from companies associated with VGPLC as if they were genuine trading payments and receipts: para 20(a).
(3) The 'associated companies' referred to in para 20(a) included at least Palmerston, VTL, TPL, Discgift, Superhandy and Artagent: para 23. The Prosecution alleges, but Mr Cushnie denies, that Marrlist and HBL (Henri and Bernard Leong Son) were also associated companies.
(4) From the commencement of trading of VTF, wealthy individuals known as 'Traders' provided monies by way of loans / investments which were intended to be pooled and used to finance specific transactions of a nature similar or identical to the business of VTF: para 29.
(5) The turnover of VTL was inflated by, among other things, showing monies paid to and received from other companies associated with VGPLC as if they were genuine trading payments and receipts: para 34.
(6) The 'associated companies' referred to in para 34 included at least Palmerston, VTF, Discgift, Superhandy and Artagent: para 36. The Prosecution alleges, but Mr Cushnie denies, that Marrlist was also an associated company.
(7) The turnover and debtors of TPL, contained in accounts produced to auditors for the years ending February 1997 and February 1998, were fictitiously inflated (see para 43).
(8) Between 1995 and 1999, the share price of VGPLC increased. Marrlist owned 53% of the shares at 8 December 1999."
In a witness statement provided in these proceedings by Mr Oliver, Mr Cushnie's solicitor, it is explained on behalf of Mr Cushnie that he views himself as a victim of a fraud committed by Mr Clough, who was the Versailles Group's former Finance Director. He says that "the question of whether Clough acted alone or otherwise is the central issue in the criminal trial." In his submissions to me on behalf of Mr Cushnie, Mr Briggs said that the question of honesty was likely to be the central issue in these proceedings. Other than this, Mr Cushnie's defence can only be imagined.
According to the evidence, the initial advice given to Sinclair was to await the outcome of the criminal proceedings before launching its own civil proceedings. However, that position apparently changed when some evidence came to hand which Sinclair considered demonstrated that Mr Cushnie intended to put his assets, or some of them, beyond the reach of creditors. Mr Cushnie is effectively the owner of a substantial property near St Tropez in France, called L'Ecossaise. It is in fact held by an entity known as SCI Sacaleca, which is the Second Defendant in this action. In June 2001, which was one month before Mr Cushnie was charged with the offences which are the subject of the current criminal prosecution, Mr Cushnie executed a document known as an Acte de Cession, the effect of which is to transfer Mr Cushnie's 99 shares in SCI Sacaleca to his sister who is to hold them "on behalf of the Zi-Ver-Tel Trust" but subject to two conditions. The first is that proceedings should be commenced against Mr Cushnie prior to 1 st January 2005 for an amount exceeding £100,000.00 damages if the action is linked to the liquidation of the Versailles Group or is based on actions performed by Mr Cushnie or a failure to perform actions for the period between 1 st January 1990 and the 2 nd December 2000. The second condition is one relating to a transfer which is not relevant for these purposes. If the condition is fulfilled and the property is transferred, then the transferee is to pay 50 million francs by means of a promissory note signed by the trustee on behalf of the trust. Mr Cushnie admits this document and has put forward the explanation that it is, or is part of, some sort of arrangement to save some sort of inheritance tax. Sinclair has obtained some evidence from a French lawyer to the effect that this explanation makes no sense as far as she is concerned. That evidence has not been met by Mr Cushnie although he may say that he has not really had time to do so. Be that as it may, it seems to me for present purposes that that explanation given by him is highly unconvincing.
Not surprisingly, Sinclair thought that that document demonstrated an intention to dissipate assets, and on 22nd December 2003 they issued a claim form seeking their relief. On the same day they made an application for a freezing order which was granted by Blackburne J. The order was a worldwide freezing order limited to £5m, and it makes specific reference...
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