Tonstate Group Ltd v Edward Wojakovski
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli |
| Judgment Date | 28 April 2020 |
| Neutral Citation | [2020] EWHC 1004 (Ch) |
| Date | 28 April 2020 |
| Docket Number | Case No: BL-2018-000544 BL-2019-000304 |
| Court | Chancery Division |
[2020] EWHC 1004 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
DERIVATIVE ACTION
7 Rolls Building
Fetter Lane
London EC4 1NL
Mr Justice Zacaroli
Case No: BL-2018-000544
BL-2018-002541
BL-2019-000304
Andrew Fulton and Sam Goodman (instructed by Rechtschaffen Law) for the Claimants in claim no BL-2018-000544 and BL-2019-000304
Mo Haque QC (instructed by Candey Limited) for the First Defendant in claim no BL-2018-000544 the Petitioner in claim no BL-2018-002541 and the Defendant in claim no BL-2019-000304
Hearing date: 24 April 2020
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.
Background
This is an application for a debarring order made in the context of three related actions:
i) 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”);
ii) 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
iii) 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”).
All three actions are being case managed together.
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).
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.
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.
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.
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.
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).
The application for a debarring order
By an application notice dated 8 April 2020, Mr and Mrs Matyas and TGL (who I will refer to as “the claimants”) applied (among other things) for an order that Mr Wojakovski be debarred from further participation in “the litigation” unless he discharges accrued costs orders.
In form, this was an application for an “unless” order. At the hearing, however, Mr Fulton, who appeared with Mr Goodman for the claimants, indicated that the claimants were now seeking an immediate debarring order in light of revelations made by Mr Wojakovski in evidence served on the day before the hearing.
It is common ground that the costs order dated 2 March 2020 was a final order and that Mr Wojakovski has failed to pay any of the sums due pursuant to it.
The law
The principles to be applied on an application to debar a party from participating in proceedings as a result of non-payment of costs orders were summarised by Sir Richard Field in Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (Comm), at [29]:
“(1) The imposition of a sanction for non-payment of a costs order involves the exercise of a discretion pursuant to the Court's inherent jurisdiction.
(2) The Court should keep carefully in mind the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation, namely, that they serve to discourage irresponsible interlocutory applications or resistance to successful interlocutory applications.
(3) Consideration must be given to all the relevant circumstances including: (a) the potential applicability of Article 6 ECHR; (b) the availability of alternative means of enforcing the costs order through the different mechanisms of execution; (c) whether the court making the costs order did so notwithstanding a submission that it was inappropriate to make a costs order payable before the conclusion of the proceedings in question; and where no such submission was made whether it ought to have been made or there is no good reason for it not having been made.
(4) A submission by the party in default that he lacks the means to pay and that therefore a debarring order would be a denial of justice and/or in breach of Article 6 of ECHR should be supported by detailed, cogent and proper evidence which gives full and frank disclosure of the witness's financial position including his or her prospects of raising the necessary funds where his or her cash resources are insufficient to meet the liability.
(5) Where the defaulting party appears to have no or markedly insufficient assets in the jurisdiction and has not adduced proper and sufficient evidence of impecuniosity, the court ought generally to require payment of the costs order as the price for being allowed to continue to contest the proceedings unless there are strong reasons for not so ordering.
(6) If the court decides that a debarring order should be made, the order ought to be an unless order except where there are strong reasons for imposing an immediate order.”
In Siddiqi v Aidiniantz [2020] EWHC 699 (QB), Saini J, at [28] – [30], having cited Sir John Chadwick in Crystal Decision (UK) Limited v Veatech Corporation [2008] EWCA Civ 848 at [17]–[18], referred to a litigant not being able to continue with his or her claim without satisfying an existing and non-appealed costs order...
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