Skatteforvaltningen (The Danish Customs and Tax Administration) v Edo Barac & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan |
| Judgment Date | 07 February 2020 |
| Neutral Citation | [2020] EWHC 377 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000297 |
| Date | 07 February 2020 |
[2020] EWHC 377 (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 Mr Justice Bryan
Case No: CL-2018-000297
James Goldsmith and KV Krishnaprasad (instructed by Pinset Masons) for the Claimant
Paul Lowenstein QC (instructed by Brown Rudnick LLP) for the Defendant
Hearing date: 7 February 2020
Approved Judgment
Introduction.
A1. The Application .
There are before me today three applications (“the Applications”):
(1) an application made for this hearing to be in private and/or an anonymity order (“the Privacy Application”). Pursuant to this application, I have made an order that there be no reporting of financial information and assets revealed during the course of the hearing pursuant to the Privacy Application, and this judgment is redacted accordingly;
(2) an application for variation of a proprietary injunction brought by the Defendant against the claimant (“the Variation Application”). The Defendant (Mr Barac) seeks a variation of a proprietary injunction made on 27 June 2018 against him (“the Proprietary Injunction”), and subject to a Consent Order dated 8 March 2019 (“the Consent Order”). The Proprietary Injunction was made in connection with the claimant (“SKAT”)'s attempts to recover monies and property in respect of an alleged tax fraud said to have been perpetrated by numerous defendants allegedly including Mr Barac. Mr. Barac now seeks to vary this Proprietary Injunction to access further funds to meet his living and legal expenses.
(3) an application to amend the claimant's re-re-amended particulars of claim (“RRAPOC”) brought by the Claimant against the Defendant to plead a further particular of an existing claim against Mr. Barac (“the Amendment Application”).
I will deal with the Background Facts (A.2), followed by the Privacy Application (at B) then the Variation Application (at C.1 and C.2). I have dealt with the Amendment Application in the course of argument and do not propose to repeat my reasons in this judgment.
A.2 Background Facts.
Underlying dispute .
The underlying dispute concerns a purported fraud in connection with refunds to certain foreign shareholders of a tax payable by Danish companies on shareholder dividends to SKAT (“the WHT”) pursuant to double tax treaties.
(1) Between August 2012 and July 2015, SKAT received applications for WHT refunds from tax reclaim agents (“the Agents”) who claimed to be acting on behalf of US pension funds and certain entities in the UK and Luxembourg (“the WHT applicants”). In response, SKAT paid out approximately Danish krone 12.09 billion (circa £1.44 billion).
(2) SKAT's case is that it was induced to pay out these sums by fraudulent misrepresentations made as part of a conspiracy or several conspiracies (“the WHT Scheme”) and/or that SKAT was mistaken in making payments pursuant to the WHT applications. SKAT alleges that the WHT fraud involved a closed loop of circular transactions whereby via intermediaries a “seller” agreed to sell shares in a Danish company to a “buyer” who simultaneously agreed to loan the same shares to the “seller”, which was later reversed by a series of opposite transactions. In fact, according to SKAT, the seller did not own any shares, the buyer never paid for the shares and neither party had received any dividends: therefore, no WHT was ever deducted and paid to SKAT. The WHT applicants, it is said, were not entitled to claim from SKAT a refund of WHT that was never paid in the first place.
SKAT commenced four claims against a total of around 81 defendants, including Mr Barac who they allege knowingly participated in the conspiracy. Somewhere around 75 of those defendants remain active with, at least at one point, 27 separate legal teams having been retained, although the precise figures may have changed as at today's date.
SKAT alleges that the main animating mind of the fraud was a Mr. Sanjay Shah (“Mr Shah”), who received large sums of money that SKAT alleges to be traceable to the fraud. SKAT further alleges that he also organised sharing the fraud proceeds with other alleged participants, including Mr Barac.
Amongst other matters, SKAT alleges that Mr Shah was the ultimate owner of multiple companies including inter alia Solo Group Companies. SKAT claims that Solo Capital Partners LLP (“SCP”) and individuals and entities formerly associated with it were the principal parties to the WHT Scheme. Mr Shah was SCP's principal holder, and it is said Mr Barac was a member between 31 March 2012 and 31 March 2014. SKAT also claims that, in return for what is said to be Mr Barac's participation in the fraud — which I should make clear Mr Barac strongly denies — he received substantial payments from Mr. Shah and SCP.
Proceedings .
On 4 May 2018, SKAT commenced proceedings against Mr Barac. On or around 27 June 2018 Jacobs J made a worldwide freezing order (“WFO”) against Mr Barac, amongst other respondents, including a Proprietary Injunction. The WFO and the Proprietary Injunction were continued by Jacobs J on 13 July 2018, and again by Cockerill J on 12 October 2018. At that time Cockerill J made additions to the list of assets caught by Schedule D of the Proprietary Injunction to reflect the scope of SKAT's proprietary claim against Mr Barac.
The Consent Order dated 9 March 2019 permitted Mr Barac access to £323,390.39 from funds (“the Bank Funds”) held in two accounts identified at the hearing (“the Bank Accounts”), subject to Mr Barac selling two of his assets (shares in a company named at the hearing (“the Company”) and a property named at the hearing (“the Property”), and to hold the net proceeds of these sales subject to the Proprietary Injunction. Both items have now been sold, and have been used to, in part, replenish the Bank Funds.
Mr Barac now seeks to vary the Proprietary Injunction for access to the following further funds to meet his living and legal expenses:
(1) monies held in an account representing the proceeds of the repayment of a loan advanced by Mr. Barac to the Company (“the Company Loan Proceeds”);
(2) monies held in an account which are the net proceeds of the sale of the Property (“the Property Sale Proceeds”);
(3) a sum set out in the hearing held in a different bank account constituting the rental proceeds of the Property (“the Rental Proceeds”).
On or around 6 February 2020, after a three-day case management conference, Andrew Baker J handed down several orders in relation to parties in the SKAT litigation. Amongst other things, he ordered that there should be a further CMC to consider matters relevant to disclosure listed for the week commencing 30 March 2020, and a further CMC to be listed in July 2020 (“the February Order” and “the July 2020 CMC”).
In advance of that July 2020 CMC, the parties were ordered to “consider and use reasonable endeavours to seek to agree whether a trial of preliminary issues or ways to determine the issues in the First to Fourth claims, other than in a single trial or the two trials proposed at the January 2020 CMC, would be feasible […]” (the February Order at [9A]). As will be seen, the February Order and what it envisages is of some considerable potential relevance to the variation application, which I deal with later.
B. The Privacy Application
Due to the sensitive nature of the financial information discussed at this hearing, and in circumstances where, perfectly understandably, members of the public and the Press are in court, an application is made before me that this hearing be in private.
B.1 The Legal Principles
The relevant provisions are set out in CPR r39.2:
“(1) The general rule is that a hearing is to be in public. A hearing may not be held in private, irrespective of the parties' consent, unless and to the extent that the court decides that it must be held in private, applying the provisions of paragraph (3).
(2) In deciding whether to hold a hearing in private, the court must consider any duty to protect or have regard to a right to freedom of expression which may be affected.
(2A) The court shall take reasonable steps to ensure that all hearings are of an open and public character, save when a hearing is held in private.
(3) A hearing, or any part of it, must be held in private if, and only to the extent that, the court is satisfied of one or more of the matters set out in sub-paragraphs (a) to (g) and that it is necessary to sit in private to secure the proper administration of justice
[…] (c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality”
The background to this is the principle of open justice, which is well established. The origins and rationale for the principle are stated by Lady Hale in Cape Intermediate Holdings v Dring [2019] UKSC 38 [42] and [43], referring to Scott v Scott [1913] App. Cas 417. Further, the test is one of necessity and not of discretion ( AMM v HXW [2010] EWHC 2457 (QBD) per Tugendhat J. This is reflected in the wording of rule 39.2(3): “A hearing [or part of a hearing] … must be held in private if […]the court is satisfied that one or more of the factors specified in the subparagraphs are satisfied and […] it is necessary to sit in private to secure the proper administration of justice […]” (emphasis added).
The court also needs to consider proportionality: namely, whether the proper administration of the justice can be achieved by a lesser measure or a combination of measures, such as imposing reporting restrictions or anonymising parties or restricting access to court records. This is because a private hearing will...
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