SMA Investment Holdings Ltd (for whom BKV Ltd claim to be entitled to give instructions) v Harbour Fund II LP
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 28 February 2023 |
| Neutral Citation | [2023] EWHC 428 (Comm) |
| Docket Number | Case Nos: CL-2022-000330 and CL-2017-000323 |
| Court | King's Bench Division (Commercial Court) |
And in the Matter of Gerald Martin Smith
And in the Matter of the Criminal Justice at 1988
[2023] EWHC 428 (Comm)
Mr Justice Foxton
Case Nos: CL-2022-000330 and CL-2017-000323
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF A PART 8 CLAIM
Daniel Saoul KC, Richard Hoyle and Lorraine Aboagye (instructed by Harcus Parker LLP) for Harbour Fund II LLP, the Viscount and Stewarts Law
Anthony Peto KC and Alina Gerasimenko (instructed by St Paul's Solicitors) for Minardi Investments Limited
Hearing date: 10 February 2023
Further written submissions: 14 and 16 February 2023
Judgment Approved
by the court for handing down (subject to editorial corrections)
I direct that 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 HONOURABLE Mr Justice Foxton
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Tuesday 28 February 2023 at 14:00.
The Honourable
This hearing was listed to determine the following applications:
i) the application of the parties represented by Harcus Parker LLP ( the Harcus Parker Parties) for an order transferring shares held by SMA Investment Holdings Ltd ( SMA) on bare trust for the beneficiaries to the Harbour Trust ( the Shares) to trustees I have previously appointed to that trust ( the New Trustees);
ii) the application issued on the instructions of BKV Limited ( BKV), which claims to be a director of SMA and authorised to represent it, to challenge the jurisdiction of the court to hear a claim brought by the Harcus Parker Parties seeking relief against SMA (that claim having been brought by way of a Part 20 claim in proceedings commenced against the Harcus Parker Parties and in which the Harcus Parker Parties seek the same order for transfer of the Shares); and
iii) the Harcus Parker Parties' application to continue a worldwide freezing order ( the WFO) which I granted on a “without notice” basis against SMA in relation to the assets it had been found to be holding as bare trustee for the Harbour Trust.
The applications were listed for 1/2 a day. In the event:
i) on 8 February 2023, solicitors acting for Minardi Investments Limited ( Minardi) wrote to Harcus Parker LLP saying that they intended to intervene in the Part 20 Claim, to wish they would be joined, for the purpose of resisting the order for transfer of the Shares, and seeking an adjournment of the hearing to allow time for new counsel to get up to speed;
ii) no one was instructed to appear by BKV in support of its jurisdictional challenge;
iii) the Harcus Parker Parties also issued an application for summary judgment on its claim for an order requiring SMA to transfer the Shares.
I heard argument on the adjournment application, but reserved judgment. I also permitted the Harcus Parker Parties to make full submissions on the other applications (because these overlapped extensively with their submissions on the adjournment application), while acknowledging the very real difficulties which Minardi's recently instructed counsel team had in offering any effective response to those submissions. I also made an order for the service of short supplemental submissions.
Finally, I made an order continuing the WFO and ordering that legal title to the Shares be transferred to the New Trustees on an interim basis (to be held subject to further order of the court) and reserved judgment on all other points, including the adjournment application made by BKV.
THE CONTEXT IN SUMMARY
The context in which the issues considered in this judgment arise will be familiar to all those who will read it, save for Minardi's new counsel team, but unfortunately a proper understanding of that context is essential to the fair resolution of the matters in issue. By way of a very brief background summary:
i) The disputes originate in dealings between two thoroughly dishonest individuals, Dr Gerald Martin Smith and Mr Andrew Ruhan, in 2003. Their dealings led to extremely hard-fought litigation, in which two other individuals who I have found to be thoroughly dishonest, Mr Simon Cooper and Mr Kevin McNally, featured prominently, and in the course of which various assets moved from Mr Ruhan's control to Dr Smith's control in circumstances involving dishonest breaches of fiduciary duty by Messrs Cooper and McNally.
ii) Dr Smith has twice been convicted of separate offences of dishonesty, and on the second occasion the Serious Fraud Office obtained a confiscation order over his realisable assets in the sum of £40m. However, Dr Smith's propensity to dishonesty and obfuscation, and the legal chaos generated by his dealings with Mr Ruhan and the subsequent litigation, made identifying Dr Smith's realisable property a challenging task.
iii) In circumstances which I will have to consider in more detail, in 2017 Mr Justice Popplewell gave directions for a trial intended to resolve competing claims to assets which had changed control during the litigation against Mr Ruhan.
iv) That litigation has resulted in two significant trials before me. The first – the so- called Directed Trial – took place between January and March 2021, and was subject to a judgment reported at [2021] EWHC 1272 (Comm) ( the Directed Trial Judgment), a heavy interlocutory judgment reported at [2021] EWHC 1273 (Comm) and a lengthy consequential judgment reported at [2021] EWHC 2803 (Comm). The only party to obtain permission to appeal against findings made in that judgment was Phoenix (who received permission only on a limited part of its case). That appeal was dismissed on 20 January 2023 ( Phoenix Group Foundation v Harbour Fund II LLP [2023] EWCA Civ 36).
v) The second significant trial determined “upstream” issues relating to ownership of some of the assets in the Directed Trial, in proceedings brought by HPII against Mr Andrew Ruhan and Mr Anthony Stevens. Judgment was handed down on 23 February 2022, following a trial starting in late November 2021 and finishing in January 2022: Hotel Portfolio UK Ltd v Ruhan [2022] EWHC 383 (Comm), with another significant consequentials judgment, [2022] EWHC 1695 (Comm). There has been no appeal by Mr Ruhan against that decision, although there is an outstanding appeal on issues of quantum by Mr Anthony Stevens.
It might have been expected that those judgments would bring an effective end to this long-running set of claims. However, that has not proved to be the case. There have been a series of hearings and applications arising from various aspects of the litigation or offshoots of it, each generating a large volume of associated paper applications. These have included judgment on a substantial Part 8 Claim brought, inter alia, by Mr Thomas and Mr Taylor, but with funding from companies linked with Dr Smith and Mr McNally, in circumstances in which Mr Thomas had been adopting positions which favoured the interests of associates of Dr Smith and Messrs Cooper and McNally: Ticehurst, Taylor and Thomas v Harbour Fund II LLP [2022] EWHC 3053 (Comm).
There are a number of reasons why the extensive judicial resources already devoted to the resolution of these disputes has not led to any abatement in the demands they continue to make on the court's time. To some extent it reflects the inherent complexity of the underlying facts, which themselves reflect the propensity of some of the leading players for dishonest and opaque dealings. However, I am satisfied it is to a very significant extent the result of the refusal of a number of the key protagonists to accept the court's decisions. This has led to a number of strange alliances:
i) At the Directed Trial, Minardi was said to be owned by Mr Anthony Stevens (who I later found to be acting as a nominee for Mr Ruhan pursuant to a dishonest arrangement they had put in place and operated over many years). Minardi's claims were opposed by Messrs Thomas and Taylor, who were represented by Mr Crossley of St Paul's Solicitors. At the hearing, it was Minardi's case that Messrs Cooper and McNally had acted in dishonest breach of trust in transferring assets to SMA. It was Mr Crossley's submission that Dr Smith had been and was continuing to be thoroughly dishonest in his dealings.
ii) After the Directed Trial, Mr Thomas began to adopt positions in his capacity as a trustee of the Harbour Trust which were opposed to the interests of the Harbour Trust, and favourable to those of persons linked with Dr Smith and Messrs Cooper and McNally. He received litigation funding from companies linked with those individuals.
iii) In 2021, a company called Marlborough Developments Ltd ( MDL) commenced proceedings in the Chancery Division against Mr Ruhan claiming some £800m. The statement of truth for MDL was signed by Mr Anthony Smith, Dr Smith's brother and another individual whose evidence on oath I have been unable to accept ( Milson and Standish v Gerald Martin Smith and the Estate of Phyllis Smith [2023] EWHC 255 (Comm)). The basis on which Mr Anthony Smith could have personal knowledge of the matters...
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Sodzawiczny v Smith
...more recent summaries of their convoluted history can be found in my judgment in SMA Investment Holdings Ltd v Harbour Fund II LLP [2023] EWHC 428 (Comm), in which I chronicled the many findings of dishonesty against Dr Smith, Mr Ruhan, Mr Cooper and McNally, and the various applications b......