Sodzawiczny v Smith
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 07 February 2024 |
| Neutral Citation | [2024] EWHC 231 (Comm) |
| Year | 2024 |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case Nos: CL-2021-000211 & CL-2023-000893 |
[2024] EWHC 231 (Comm)
THE HONOURABLE Mr Justice Foxton
Case Nos: CL-2021-000211 & CL-2023-000893
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF ARBITRATION CLAIM
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
David Caplan (instructed by Charles Russell Speechlys LLP) for the Applicant
Dr Smith in person
Dr Cochrane did not appear and was not represented
Hearing dates: 26 January 2024
Judgment Approved by the court for handing down (subject to editorial corrections)
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 Wednesday 07 February 2024 at 10:30am.
INTRODUCTION
This is an application by the Claimant ( “Mr Sodzawiczny”) for an “anti-arbitration” injunction ( “AAI”) to prevent Dr Smith and Dr Cochrane from pursuing an LCIA Arbitration which they purported to commence on 6 December 2023.
The court must also consider Dr Smith's application under s.9 of the Arbitration Act 1996 ( “the 1996 Act”) to stay enforcement of the judgments entered in respect of certain arbitration awards under s.66 of the 1996 Act and, as the matter developed in argument, to stay the AAI application.
For those familiar with Dr Smith's name, it will be apparent that these applications represent the latest in a series of costly and time consuming disputes which have occupied the Commercial Court since 2012. One of 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 brought by those unwilling to accept the determinations made by impartial tribunals of the various claims.
In concluding that judgment, at [103–104], I noted:
“As will be apparent from the foregoing, there is a real risk in this case that individuals who are bound by, but unhappy with, the outcome of the Directed Trial have been and are continuing to instigate proceedings and applications in these proceedings and elsewhere to challenge the outcome of the Directed Trial or by way of a collateral attack on its conclusions. The scale of these activities and the legal costs and court time they are consuming, mean that considerable vigilance will be required on the court's part to ensure that its judgments are respected and its processes are not abused.
If activities of this kind continue, there will need to be careful consideration of a number of matters, including:
i) whether there are any individuals who may have breached court orders and undertakings and, if so, whether the court's committal jurisdiction should be engaged;
ii) whether officers of the court should be given control of any companies which have changed hands in questionable circumstances, and which are being used in this process;
iii) whether further injunctions could or should be granted against individuals where there is a sufficiently arguable case that they are engaged in activities intended to challenge a judgment which is binding upon them;
iv) the consequences of undischarged costs orders in the litigation to date; and
v) who has been funding these various applications and whether any orders against the funding parties or those controlling them would be appropriate.”
As will be apparent from what follows, those warnings are falling on deaf ears.
THE BACKGROUND FACTS
In 2005, Mr Sodzawiczny claims that he was involved in the foundation of a profitable data centre business (which became known as Sentrum) with Mr Andrew Ruhan, on the basis of an oral agreement with Mr Ruhan that Mr Sodzawiczny would receive a share of the profits on terms to be agreed. The Sentrum business began with a data centre in Camberley.
On 24 June 2005, Mr Sodzawiczny was sent a letter before action by Manches LLP on behalf of a company called Marlborougtech Limited ( “MTech”), alleging that he had diverted the Camberley data centre opportunity from them in breach of fiduciary duty. That letter contained a relatively detailed statement of the matters relied upon, and intimated an intention to bring a claim for damages and for an account of profits.
On 12 August 2005, Manches LLP wrote to Mr Sodzawiczny again, referring to the fact that the sale of the Camberely property had now completed, and stating that MTech's loss had crystallised.
In 2006, the Sentrum Camberley business was sold to a Merrill Lunch subsidiary. Mr Sodzawiczny claims that following this sale, he reached an oral agreement with Mr Ruhan under which Mr Sodzawiczny agreed to assist in creating a data centre business ( “the Sentrum Group”) in return for 15% of the future profit from any sale of the group.
On 6 May 2008, MTech was dissolved.
The bulk of the Sentrum Group was sold in 2012 to a company called Digital Reality.
Mr Sodzawiczny claims that he met Mr Ruhan at the Lazy Cow pub on 22 September 2012, where they orally agreed that in addition to an entitlement to 15% of the net proceeds of the sale to Digital Reality, he would receive various other rights. Mr Sodzawiczny claims that his 15% profit share was worth £21.75m, of which £20m was to be paid into an Isle of Man offshore trust structure administered on Mr Ruhan's behalf by his personal lawyers and close advisers, Mr Simon Cooper and Mr Simon McNally.
In circumstances which were the subject of findings by me in a judgment known as the Directed Trial Judgment ( [2021] EWHC 1272 (Comm), [73–87]), the assets within that structure were transferred by Mr Cooper and Mr McNally into the control of Dr Smith and his sometime wife Dr Cochrane in late 2013/2014, in circumstances which I found to involve a fraudulent breach of trust of which Dr Smith was aware. That transfer took place in the context of ongoing proceedings commenced by a company and two individuals (known as “the Orb Claimants”) against Mr Ruhan, in which Dr Smith was very closely involved in advising the Orb Claimants.
On 9 April 2014, Stewarts Law LLP for the Orb Claimants wrote to Mr Sodzawiczny stating that their clients had taken control of the assets which were subject to the Isle of Man structure.
Mr Sodzawiczny says that in 2014, he made enquiries of Dr Smith and his close business associate Ms Dawna Stickler as to what had happened to his £20m, and this led to discussions culminating in a series of agreements with a company controlled by Dr Smith and managed by Ms Stickler on Dr Smith's behalf, called Provinci Ltd ( “Pro Vinci”). Dr Smith referred me to material showing the initial involvement of Mr Phil Barton in facilitating those discussions.
These agreements included a Confidential Settlement Deed ( “the Settlement Agreement”) to which Mr Sodzawiczny, Mr Cooper, Mr McNally and Dr Cochrane (but not Dr Smith) were parties. The Settlement Agreement contained an LCIA Arbitration Agreement.
Given the centrality of the Settlement Agreement to the events with which these applications are concerned, the following should be noted:
i) The recitals recorded by way of background Mr Sodzawiczny's account of his dealings with Mr Ruhan, including the alleged profit share agreement, and Mr Ruhan's subsequent denial of any such agreement.
ii) The recitals recorded threats by Mr Sodzawiczny to bring proceedings against the other parties alleging that they held assets on trust for him (a state of affairs defined as “the Dispute”).
iii) The recitals stated that the Settlement Agreement had been entered into to settle the Dispute.
iv) It provided for Pro Vinci to pay £12m in settlement, to be paid in instalments.
v) It otherwise contained release provisions in wide terms.
vi) It provided that the Settlement Agreement constituted “the compromise of disputed matters” and was not an admission of liability or wrongdoing.
On 31 March 2015, Pro Vinci commenced an LCIA arbitration against Mr Sodzawiczny seeking a declaration that it was not liable to make further payments under the Settlement Agreement because it was no longer in a position to procure payment by others. Mr Sodzawiczny counterclaimed for the outstanding balance under the Settlement Agreement. On 5 April 2016, an award was made in Mr Sodzawiczny's favour ( “the Pro Vinci Award”). On 15 June 2016, the Pro Vinci Award was made a judgment of the court following an application under s.66 of the 1996 Act.
Pro Vinci went into liquidation on 3 April 2017.
On 22 May 2018, Mr Sodzawiczny commenced Commercial Court proceedings against, among others, Dr Smith, Mr Cooper and Mr McNally making various claims of breach of trust and dishonest assistance ( “the 2018 Proceedings”). On the application of Mr Cooper and Mr McNally, M Justice Popplewell stayed the 2018 Proceedings against those defendants under s.9 of the 1996 Act: Sodzawiczny v Ruhan and others [2018] EWHC 1908 (Comm). He also found that Dr Smith and Ms Dawna Stickler were third party beneficiaries of certain settlement and release provisions in the Settlement Agreement, and were entitled to seek to enforce those provisions in arbitration under s.8(2) of the Contracts (Rights of Third Parties) Act 1999. Accordingly, the proceedings against Dr Smith and Ms Stickler were also stayed.
As a result, Mr Sodzawiczny commenced an LCIA Arbitration against Dr Smith, Ms Stickler and Messrs Cooper and McNally ( “the Second LCIA Arbitration”).
On 25 March...
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