Tonstate Group Ltd ((in Liquidation)) v Rosling King LLP
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leech |
| Judgment Date | 31 July 2024 |
| Neutral Citation | [2024] EWHC 2005 (Ch) |
| Court | Chancery Division |
| Docket Number | BL-2023-001104 |
[2024] EWHC 2005 (Ch)
Mr Justice Leech
BL-2023-001104
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Mr Andrew Fulton KC (instructed by Rechtschaffen Law) appeared on behalf of the Claimants
Mr Patrick Lawrence KC (instructed by Reynolds Porter Chamberlain LLP) on behalf of the Defendant
Hearing dates: 18 and 19 June 2024
Approved Judgment
I. The Applications
By Application Notice dated 9 November 2023 (the “ Claimants' Application”) the Claimants applied to strike out those parts of the Defence of the Defendant, Rosling King LLP (“ Rosling King”), in which they challenged the correctness of the decision of Zacaroli J (as he then was) in Tonstate Group Ltd v Wojakovski [2019] EWHC 3363 (Ch). In that decision (to which I will refer as the “ Duomatic Judgment”) he held that the principle named after Re Duomatic Ltd [1969] 2 Ch 365 had no application to a number of payments made for the unlawful purpose of defrauding HMRC. For ease of reference.
By Application Notice dated 19 January 2024 (the “ Defendant's Application”) Rosling King also applied to strike out two of the three claims which the Claimants advanced against them pursuant to CPR Part 3.4(2) because the relevant paragraphs in the Particulars of Claim disclosed no reasonable grounds for bringing the claim. They also applied for reverse summary judgment pursuant to CPR Part 24.2(a)(i) because the Claimants had no real prospect of succeeding on those claims and because there was no other compelling reason to deal with them at trial.
I heard both applications over two days. Mr Andrew Fulton KC, who appeared for the Claimants, opened the Claimants' Application. Mr Patrick Lawrence KC, who appeared for Rosling King, then made his submissions on the Claimants' Application and opened the Defendant's Application. Mr Fulton then replied to Mr Lawrence before Mr Lawrence had the last word on his application. Both counsel submitted further materials after the hearing which I have taken into account in preparing this judgment. Mr Fulton submitted draft amended Particulars of Claim but Mr Lawrence has not so far made any submissions in relation to them following the hearing.
II. Procedural History
A. The Claims against Mr Wojakovski
(1) The Claims
The background to the Applications was conveniently set out by Zacaroli J in a subsequent judgment dated 30 April 2021 which he handed down after the Duomatic Judgment: see [2021] EWHC 1122 (Ch). For present purposes, is not necessary to describe the issues which he had to determine on that occasion but I cite his summary of the litigation at [7] to [11] and I gratefully adopt the terms which he defined in bold (below):
“7. There is a long and complicated background to the underlying litigation. There are three actions:
(1) Action number BL-2018-000544, a derivative action in which the claimants, principally Tonstate Group Limited (“ TGL”) and other companies in the Tonstate Group and companies in a related group known as “ THH Group”, seek the return of money wrongfully extracted from them by the first defendant, Mr Wojakovski (the “ Main Action”);
(2) Action number BL-2019-000304, in which the claimants, Mr and Mrs Matyas, seek the rescission of transfers of shares in TGL made by them to Mr Wojakovski (the “ Shares Claim”); and
(3) Action number BL-2018-002541, an unfair prejudice petition in which Mr Wojakovski seeks various orders against Mr and Mrs Matyas and other entities in the Tonstate Group (the “ Petition”).
8. I provided a summary of the background in a judgment dated 28 April 2020, in relation to an application for a debarring order made by the Claimants against Mr Wojakovski: [2020] EWHC 1004 (Ch). For convenience, I set out paragraphs 3 to 8 of that judgment:
“3. By way of very brief background, the Tonstate Group is a group of companies that have been involved in the property investment business for over a quarter of a century. Mr Wojakovski was formerly married to Mr Matyas's daughter. The entire group is effectively deadlocked, as a result of the current dispute between Mr Wojakovski (who is the beneficial owner of 50% of the group) and Mr Matyas (who, with his wife, is the beneficial owner of the other 50% of the group).
4. It is common ground that both Mr Matyas and Mr Wojakovski had, for some years, been extracting funds from the Tonstate Group without lawful authorisation. Mr Wojakovski contends that all of the extractions that he made were done with Mr Matyas' knowledge and consent. Mr Matyas denies this. In light of Mr Wojakovski's admission that the extractions made by him were done for the purpose of defrauding the revenue, I concluded (for reasons set out in a judgment dated 5 December 2019) that even if all the shareholders in the Tonstate Group had consented to the extractions, Mr Wojakovski's defence based on the Duomatic principle was bound to fail.
5. There being no other defence raised to the Main Claim, on 20 November 2019 I therefore granted judgment in the Main Action against Mr Wojakovski for the sum of £12,994,642.43, being the sum of the monies he admitted he had wrongfully extracted from the Tonstate Group companies. In addition an Account was ordered against him of all payments wrongfully extracted from the Tonstate Group companies. These orders were temporarily stayed.
6. Subsequently, Mr Matyas consented to an Account being ordered against him in the same terms as that ordered against Mr Wojakovski and consented to repaying such amounts as he accepted he had wrongfully extracted from the companies. This was formalised in an order dated 16 January 2020, recording various matters either agreed or determined at a case management conference on that date. Among other things, in that order:
i) I directed a trial of the Shares Claim, along with the trial of certain claims made by Mr Wojakovski in the Main Action (the “ Additional Claims”);
ii) The Petition was stayed pending determination of the above claims;
iii) The stay on payment of the judgment debt owed by Mr Wojakovski was extended until 31 March 2020;
iv) Mr Wojakovski was restrained from dealing with any of the funds extracted from the Tonstate or THH companies or their proceeds;
v) Directions were given in relation to the taking of the mutual Accounts by Mr Matyas and Mr Wojakovski, including directions for disclosure.
7. The case management conference was restored for a further hearing on 2 March 2020. On that occasion:
i) The trial of the Shares Claim and the Additional Claims was listed for a hearing commencing on 18 June 2020 with a time estimate of 12 days, and directions were given for further disclosure, witness statements and other procedural matters relating to the trial;
ii) Mr Wojakovski was ordered to pay 85% of the total costs of (1) the case management conference held on 16 January 2020 and (2) the costs of all of the applications heard at the case management conference on 16 January 2020 or withdrawn by Mr Wojakovski. These costs were summarily assessed in the sum of £61,740.64. They were apportioned as to £23,152.74 in favour of TGL and as to £38,587.90 (plus VAT of £7,717.58) in favour of Mr Matyas. Those sums were payable by 30 March 2020.
iii) Mr Wojakovski was ordered to provide security for costs in respect of the defence of the sixth and seventh respondents to the Petition, in the sum of £135,244.90, such sum to be paid into court by 30 March 2020.
8. Mr Wojakovski has failed to pay any of the sums which fell due for payment by him on 30 March or 31 March 2020 (the judgment debt in the Main Action, the costs order of 2 March 2020 and the security for costs ordered on 2 March 2020).”
9. Subsequent to that judgment, the Shares Claim and the Additional Claims were settled on 20 May 2020. So far as the Shares Claim is concerned, it was settled on terms that Mr Wojakovski's shares in TGL were transferred to Mr Matyas, Mrs Matyas, and to Nadine Wojakovski, save for 22,500 (i.e. the Shares) which he was entitled to keep.
10. On 2 June 2020, the Claimants filed an application for an interim charging order over the Shares, in respect of the judgment debt obtained in the Main Action. On 7 July 2020 Candey consented on behalf of Mr Wojakovski to a final charging order. The charging order was made final (by consent) by an order dated 21 July 2020.
11. On 18 August 2020 a bankruptcy petition against Mr Wojakovski was presented by Mrs Rachel Robertson, who had been joined as a defendant to the Petition. On 15 October 2020 I made a bankruptcy order on that petition.”
The Claimants and a number of other Tonstate companies also commenced proceedings against Mishcon De Reya LLP (“ Mishcon”), the firm of solicitors who acted for Mr Wojakovski between 2017 and 2019. They claimed equitable proprietary relief and knowing receipt in relation to the sums with which Mr Wojakovski paid their invoices. In a judgment dated 9 November 2022 Master Pester granted summary judgment in relation to the claim that the Claimants had a proprietary interest in the relevant funds on the basis that the Claimants and the other Tonstate companies had a proprietary interest in the funds used to pay Mishcon.
On 5 December 2023 Edwin Johnson J handed down a judgment in which he found that Mr Wojakovski had committed a contempt of court and imposed a suspended sentence: see [2023] EWHC 3119 (Ch). He also gave the following more detailed description of one of the critical periods of the underlying litigation with which I am concerned at [13] to [17]:
“13. On 20th November 2019 Zacaroli J made an order striking out parts of the Defence filed by...
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