Skatteforvaltningen (The Danish Customs and Tax Administration) v Sanjay Shah
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 24 June 2020 |
| Neutral Citation | [2020] EWHC 1658 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 June 2020 |
| Docket Number | Case Nos: CL-2018-000297; CL-2018-000404; CL-2018-000590; CL-2019-000487 |
[2020] EWHC 1658 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Foxton
Case Nos: CL-2018-000297; CL-2018-000404; CL-2018-000590; CL-2019-000487
Michael Fealy QC and James Ruddell (instructed by Pinsent Masons LLP) for the Claimant
Nigel Jones QC, Lisa Freeman and Laurence Page (instructed by Meaby & Co) for Sanjay Shah
Daniel Edmonds (instructed by Stewarts Law LLP) for Priyan Shah and Gerard O'Callaghan
Hearing date: 19 June 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.
circulated: 22 June 2020
This judgment relates to two applications issued in the context of a very substantial and complex action commenced by the Danish tax authority, Skatteforvaltningen (“SKAT”), arising out of what SKAT alleges to be a substantial fraud relating to tax payable by Danish companies on shareholder dividends. Four actions – CL-2018-000297, CL-2018-000404, CL-2018-000950 and C-2019-000487 — have been consolidated into one set of proceedings (“the SKAT Proceedings”). Mr Justice Andrew Baker is the assigned judge for the SKAT Proceedings, and has heard a number of applications relating to them.
These particular applications concern what are said to be four loans granted by the 34 th Defendant, Sanjay Shah, to the 21 st and 22 nd Defendants, Priyah Shah and Gerald O'Callaghan (“the Stakeholder Defendants”) on 3 June 2015 (“the Loans”) and which are said to have fallen due for payment on 3 June 2020 in the agreed net sum of £13,645,520 (“the Loan Proceeds”).
i) On 4 June 2020, Sanjay Shah and a group of Defendants for whom his solicitors also act (together “the Sanjay Shah Defendants”) applied for an order requiring the Stakeholder Defendants to pay the Loan Proceeds to his solicitors, Meaby & Co, so that they could be used to meet their legal costs and expenses (“the Sanjay Shah Application”).
ii) On 5 June 2020, the Stakeholder Defendants applied under s.19 of the Senior Courts Act 1981, CPR r.3.1(2)(m), r.25 and/or r.86 for an order that the Loan Proceeds be paid into court (“the Stakeholder Application”).
In this judgment, I shall refer to the Loans and the Loan Proceeds, without making any findings on the issue (to the extent there is an issue) as to whether this was the actual or intended legal effect of the transactions.
The Sanjay Shah and Stakeholder Applications were made in circumstances in which SKAT has brought personal and proprietary claims against the Sanjay Shah and the Stakeholder Defendants, and obtained worldwide freezing orders and proprietary injunctions against them (collectively “the Injunctions”). In broad terms the Sanjay Shah Application is intended to ensure that the Sanjay Shah Defendants obtain the Loan Proceeds and can use them to meet their legal expenses, and the Stakeholder Application is intended to ensure that the Stakeholder Defendants are not at risk in repaying the Loans, and later finding themselves faced with a claim that they paid the wrong person or otherwise remain liable for the amount of the Loan Proceeds.
The Sanjay Shah and Stakeholder Applications were the subject of extensive correspondence between the parties. This achieved some narrowing of the issues, including agreement that the Loan Proceeds should initially be paid by the Stakeholder Defendants into court on a basis which preserves the claims of SKAT and the Sanjay Shah Defendants, while protecting the Stakeholder Defendants from the risk of “double jeopardy” in respect of the payment. The terms of that agreement were recorded in a consent order (“the Consent Order”). However, the status of that payment, and whether or not the Sanjay Shah Defendants are entitled to receive the Loan Proceeds and use them to pay legal expenses, remain very much in dispute.
The issues which arise for determination today are:
i) Whether there are competing claims to the Loan Proceeds, such that the jurisdiction in CPR 86.1 or some similar jurisdiction is engaged?
ii) Whether the Court can, and should now, determine any such claims?
iii) Whether any orders should be made in relation to the funds to be paid into court today, and, if not, what is the appropriate method of resolving claims to the funds?
iv) What costs orders should be made?
Preliminary matters
Pursuant to the Injunctions and for the purpose of the present applications, the Sanjay Shah Defendants have produced and referred to correspondence exchanged with SKAT's solicitors which addresses in detail matters relevant to their funding position, together with an affidavit filed in response to the Injunctions. This material was identified in a schedule to a draft order produced by the Sanjay Shah Defendants and for that reason I will refer to it as the “Schedule 1 Material”. The Sanjay Shah Defendants say that the Schedule 1 Material is confidential, and for that reason sought an order that confidentiality in that material be preserved. The Sanjay Shah Defendants relied on CPR 39.2(3)(c), which allows a court to sit in private where the hearing “involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality”.
In addition, SKAT has filed a witness statement which refers to material obtained under compulsion from the Stakeholder Defendants and which is said to contain confidential information (“the Stakeholder Material”). The material is substantial and describes in detail the personal and professional financial affairs of the Stakeholder Defendants over approximately 6 years. The Stakeholder Defendants requested that I conduct the hearing in private under CPR 39.2(3)(c) to the extent that this material is referred to, and that only a redacted copy of the witness statement referring to the Stakeholder Material be available on the court file.
I am satisfied that the Schedule 1 Material and the Stakeholder Material does contain confidential and personal financial material (together “the Confidential Information”), and that such confidentiality is likely to be damaged by reference to the material on the hearing of the applications if no further order is made. Further, the Confidential Information was of only very limited relevance to the issues to be determined at this hearing. In those circumstances I am satisfied that I should make an order for the purposes of this hearing to protect that confidentiality.
A similar application has already been made in a similar context in the SKAT Proceedings. It was determined by Mr Justice Bryan: Skattteforvaltningen v Edo Barac and others [2020] EWHC 377 (Comm) at [13]–[19]. Mr Justice Bryan set out the applicable legal principles, which rightly emphasise the importance of the principle of open justice. Balancing the competing considerations, Mr Justice Bryan held that the appropriate course in the application before him was for the hearing to proceed in public but he ordered that there should be no reporting of the financial information and assets revealed during the course of the hearing. I gratefully adopt the reasoning of Mr Justice Bryan, with which I am in full agreement.
I decided that it was not necessary to sit in private at this hearing, on the basis that the hearing could be conducted without express reference to the Confidential Information. However:
i) Like Mr Justice Bryan, I have made an order that there should be no reporting of the financial information and assets revealed during the course of the hearing.
ii) Under CPR 5.4C, for the purpose of access to the court file or the hearing bundles and skeleton arguments, I have ordered that access should be limited to versions of those documents in which the Confidential Information has been redacted.
However this order is not intended to pre-judge any issues of privacy and confidentiality which may arise at any future hearing.
The relevant background
As I have stated, SKAT obtained both proprietary and freezing injunctions against the Sanjay Shah and Stakeholder Defendants. The order granted by Mr Justice Jacobs against the Sanjay Shah Defendants on the “without notice” application did not refer to the Loans (either as a specified asset for the purpose of the freezing order relief or as an asset which was subject to the proprietary injunction). The proprietary order made by Mr Justice Jacobs against the Stakeholder Defendants did extend to the payments advanced under the Loans, but was formulated in terms which reflected the fact that, at that stage, SKAT had not been able to trace those payments beyond the personal bank accounts of the Stakeholder Defendants. However the order required Stakeholder Defendants to disclose the “nature, extent, value, what has become of and who now holds all and any assets derived from (inter alia) the payments received from the Sanjay Shah Defendants”.
When that disclosure was provided, it became apparent that the amounts paid to the Stakeholder Defendants pursuant to the Loans were now held by a company under the Stakeholder Defendants' control, which I shall call X Co. At the second return date for the freezing and proprietary injunction, which came before Cockerill J on 12 October 2018, the orders against the Stakeholder Defendants were discharged in return for various...
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