The Official Receiver v Johannes Christian Martinus
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 05 July 2021 |
| Neutral Citation | [2021] EWHC 1842 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2018-009045 |
[2021] EWHC 1842 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST
Rolls Building
Fetter Lane
London EC4A 1NL
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Case No: CR-2018-009045
and
Raj Arumugam (instructed by Government Legal Department) for the Applicant
Tom Smith QC (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the First Respondent
Caley Wright (instructed by Blake Morgan) for the Requesting Creditor
Hearing dates: 18 June 2021
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.
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Chief ICC Judge
Introduction
Transworld Payment Solutions UK Limited (“the Company”) was dissolved in May 2010.
In September 2014 the liquidator of TC Catering Limited (a partner of Mr Hunt) obtained a double-barrelled order to restore and wind up the Company.
Mr Hunt was appointed liquidator of the Company. Owl Limited (“Owl”) is a creditor of the Company. Mr Hunt is the appointed liquidator of Owl.
As liquidator of Owl Mr Hunt made a request (the “Request”) to the Official Receiver for the public examination of Mr Deuss, a resident of Bermuda, pursuant to section 133(2) of the Insolvency Act 1986 (the “Section 133 Application”).
On 2 December 2020 Mr Deuss successfully resisted the Section 133 Application (the “December 2020 Judgment”). He now seeks to join Mr Hunt in his personal capacity to the Section 133 Application and obtain a third-party costs order against him.
I am told that there is no authority where a third-party costs order has been made following a failed application pursuant to section 133 of the Insolvency Act 1986.
Prior to the substantive hearing of the Section 133 Application ICC Judge Jones was asked to determine whether the Section 133 Application had extra territorial effect. He handed down judgment on 27 January 2020 (the “January 2020 Judgment”) finding that that there are no territorial limits.
The remainder of the hearing before the Judge was taken up with directions for the substantive hearing of the Section 133 Application.
The Official Receiver seeks her costs of the challenge made by Mr Deuss in respect of the jurisdiction issue but does not pursue a costs order in so far as the hearing before Judge Jones related to directions.
Her position is neutral as to the outcome between Mr Hunt and Mr Deuss but seeks an order for her costs against OWL.
Background in brief
For ease of reference, I provide some of the salient background facts set out in the December 2020 Judgment which may be found at [2020] EWHC 3441.
Mr Deuss is aged 78. He was President, CEO and a director of First Curacao International Bank N.V. (“FCIB”). He was at all material times the ultimate beneficial owner of the Company but he contends not a director, officer or employee.
Mr Hunt contends that the Company was involved in missing trader, intra-community VAT fraud (known as “MTIC fraud”). That fraud involved FCIB. Mr Deuss contends that FCIB was itself a victim of the fraud. Creditor claims in the Company's liquidation are said to have soared to in excess of £415 million.
As an alleged victim of fraud perpetrated by FCIB the Company issued a claim in September 2020 against Mr Deuss, among others. The core of the allegations is that FCIB and Mr Deuss acted dishonestly by causing, allowing or otherwise assisting in the MTIC fraud.
Mr East is a solicitor acting for Mr Deuss. In a witness statement produced by Mr East, he explained that there had been a settlement following extensive negotiations in 2014 and 2015 whereby Mr Hunt (and other liquidators) came to terms releasing all former officers and employees of FCIB from any new claims or demands. Mr Deuss was a party to the settlement.
Mr Hunt had not recovered the books and records of the Company. He had made investigations of the Company's de jure director who had identified Mr Deuss as having overall control of the Company. Mr Hunt had written to Mr Deuss seeking information, but Mr Deuss had not cooperated. He had offered to meet Mr Deuss for the purpose of interviewing him at a location of his choice. Mr Deuss had not responded.
On 23 November 2017 Owl made the Request to the Official Receiver, for the public examination of Mr Deuss in the Brighton County Court. The Official Receiver made an application under section 133 and an order was granted on 4 January 2018. However due to a technical deficiency, that order was later set aside and the Section 133 Application was later issued on 2 July 2018. It was transferred to the High Court on 4 October 2018.
I have mentioned that the issue of jurisdiction arose. Further, the Official Receiver was concerned about the complexity of the Section 133 Application and sought directions as to whether it should be discontinued. She was also concerned at the rising costs and asked the court to direct that the deposit be increased to reflect the contentious nature of the proceeding. The matter was listed before ICC Judge Jones which led to the January 2020 Judgment.
Mr Hunt was given permission to file evidence to identify the topics which he felt were the proper subject of a public examination.
Following the handing down of the December 2020 Judgment Mr Deuss, by his solicitors, wrote to Mr Hunt to put him on notice that they would be seeking a third-party costs order. The application was subsequently issued.
Public examinations
In the January 2020 Judgment ICC Judge Jones commented:
“[I]t is important to make clear as a matter of general principle that a risk of costs should not exist if it will have the effect (whether through intimidation or otherwise) of avoiding public examinations in conflict with the Intention of Parliament and the Statutory Purpose.”
The leading judgment in In Re Casterbridge Properties [2004] 1 WLR 602 was given by Chadwick LJ. It provides a detailed consideration of public examinations. I shall cite some of his judgment here starting at paragraph 45, 48 and 49 where he states:
“In reaching that conclusion I have had regard to the legislative history of section 133 of the 1986 Act, to the comparable provisions in bankruptcy, and to the recommendations of the Review Committee on Insolvency Law and Practice chaired by Sir Kenneth Cork…”
The provisions in section 270(1) of the 1948 Act were the subject of comment and recommendation by the Cork Committee, in its report published in 1982, in paragraphs 653 to 656, under the heading “Public Examination”:
“653. Under the existing law and procedure a public examination can only be held in a winding up case if the Official Receiver makes a further report to the Court under section 236 (2) of the Act of 1948 alleging fraud in relation to the company; in these circumstances the Court may order a public examination to the person against whom the allegations have been made. In practice, the provisions enabling a public examination to be held are no longer invoked. A public examination does not appear to have been held since 1935.
654. We believe that this approach to the public examination requires to be reviewed. If, as we recommend, the whole purpose of a Compulsory Winding-up Order is to deal with cases which are of sufficient gravity to justify a full investigation then, we believe, a public examination has a role to play in those proceedings
656. We believe, as did the Jenkins Committee, that the revival of the public examination as a factor to be reckoned with in winding up proceedings is desirable. By exposing serious misconduct, it will help to promote high standards of commercial and business morality and will also serve as a form of sanction against former officers of the failed company who have not adequately assisted the Official Receiver and the liquidator in the course of the respective investigations and administration of the company's affairs.””
At paragraph 50 Chadwick LJ explains the statutory purpose behind the change in legislation:
“In my view the clear statutory purpose behind the change that was made in the 1986 legislation — in recognition of the recommendations — was, first, to make greater use of public examination in cases where companies were being wound up by the court and, second, to assimilate the practice in corporate insolvency with that which had existed in individual insolvency since at least the Bankruptcy Act 1869.”
The legislative purpose of public examinations provides useful context to the application made by the Official Receiver and the Request.
Third-party costs orders- the principles
That there is no authority for the proposition that a third-party costs order may be made following a failed application for a public examination may be due to the nature of such applications. First, the Section 133 Application was not made by Mr Hunt. Only the Official Receiver may apply in England and Wales. Secondly, the Official Receiver “shall” make an application at the request of one-half, in value, of the company's creditors; or three-quarters, in value, of the company's contributories, unless the court orders otherwise. And thirdly, the requesting creditor was Owl and not Mr Hunt in his personal capacity.
Although there is no authority...
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