INTRODUCTION
- On 22 March 2005 David Richards J granted a freezing injunction against Azuri Limited ("Azuri") which was not then (indeed is not now) a party to this action. The injunction was granted under what is frequently described as the court's "Chabra" jurisdiction as a freezing injunction against a third party by way of ancillary relief (in aid of, and as part of, the freezing relief already granted against the first four defendants to this action). The issue before me, on this application by order, is whether that injunction should be continued or, to put it somewhat differently, not discharged. The difference between the two formulations is not mere pedantry, as will become apparent below, Further, if the injunction be continued (or not discharged) subsidiary questions arise as to (1) whether Azuri should be joined as party to this action and (2) whether any issue arises as between the claimants and Azuri which needs to be tried and, if so, how and when that issue should be tried.
BACKGROUND
- This litigation involves a bitter dispute between various members of the Dadourian family. It has already involved a very substantial number of interim applications being heard by this court. One of such interim applications was heard by Laddie J on 16 February 2005 and I gratefully utilise the summary in his judgment of the basic background to this litigation.
- The claimants are Dadourian Group International Inc ("the company"), Alex Dadourian and Haig Dadourian. The third defendant is Jack Dadourian ("Jack") and the fourth defendant is Helga Dadourian, his wife ("Helga"). The first defendant is Paul Francis Simms. He was a partner in the well known firm of solicitors, Bower Cotton. Following the Law Society's intervention into that practice and subsequent disciplinary proceedings Mr Simms was struck off on 2 February 2004.
- This litigation arises out of an arbitration between the claimants and a company called Charlton Corporation plc ("Charlton"). In essence, the claimants and Charlton entered into an agreement relating to the manufacture of hospital beds and related equipment. The agreement went sour. In November 1998 Charlton brought breach of contract proceedings against the company and claims of fraudulent misrepresentation against Alex Dadourian and Haig Dadourian. Those proceedings were commenced in the Supreme Court, New York County, USA.
- In the spring of 1999 the US District Court, Southern District of New York, halted that action. It ordered that the dispute be determined by arbitration pursuant to an arbitration clause in the contract. That was to include the claims against Alex Dadourian and Haig Dadourian. The arbitration was commenced very shortly thereafter. The company, Alex Dadourian and Haig Dadourian counterclaimed for, amongst other things, fraudulent misrepresentation.
- In July 2002 the arbitrator dismissed Charlton's claims on the grounds that it had failed to provide security in response to an order so to do. The arbitrator also upheld the company's counterclaim for fraudulent misrepresentation. An early attempt on Charlton's side to have the arbitrator removed for bias failed. The arbitrator held that the fraudulent misrepresentations had been made by the first defendant and another individual, Mr Selim Rahman (the managing director of Charlton). Mr Rahman is the second defendant to this action. It is alleged by the claimants that during the course of that arbitration the first defendant gave evidence that Jack and Helga were shareholders in Charlton via nominee offshore entities or trusts.
- The arbitrator made an order in the claimants' favour in the sum of approximately $4.5 million. None of it has been paid. This has led to the current action in England. It is alleged by the claimants:
(1) that the first four defendants to this action are properly to be regarded as Charlton's privies and are so bound by the arbitrator's awards and findings to the same extent as if they were Charlton;
(2) that the first and second defendants are liable to the company for fraudulent misrepresentation, alternatively negligent misrepresentation, and that Jack and Helga are vicariously liable to the company for such fraudulent/negligent misrepresentations of the first and second defendants;
(3) that the first and second defendants together with Jack and Helga are liable to the company for conspiracy, pursuant to which the first and second defendants made the fraudulent misrepresentations in question to the company;
(4) that the first and second defendants together with Jack and Helga are liable to the claimants for another conspiracy. Under that conspiracy it is alleged that the New York action and the arbitration were dishonestly commenced and prosecuted by Charlton, dishonest because the conspirators knew that there was not a shed of truth in any suggestion that the company was in breach of contract or that either Alex Dadourian or Haig Dadourian had been guilty of fraudulent misrepresentation;
(5) that the first and second defendants and Jack and Helga are liable to the claimants for the tort of malicious abuse of process by the commencement and prosecution of the New York action and the arbitration;
(6) that Jack and Helga are liable to the claimants to the extent of Charlton's liability to them by reason of the piercing of Charlton's corporate veil;
(7) that the first and second defendants and Jack and Helga are liable to the company for having procured Charlton's breach of the relevant option agreement as between the company and Charlton.
- In addition to the first four defendants there are a further seven defendants to the present action. They are the former partners of the first defendant in Bower Cotton. The claimants say that they are liable for the wrongdoings of the first defendant by virtue of the provisions of sections 5 and 10 of the Partnership Act 1890.
- An integral part of the claimant's claim against Jack and Helga is the postulate that they owned, directed and controlled Charlton. Various of the fraudulent misrepresentations relied upon by the claimants were to the effect that Jack and Helga had no beneficial interest in, or control of, Charlton. Indeed, it is expressly alleged that the company would not have entered into its contractual arrangements with Charlton had it known that Charlton was a company in which Jack and Helga were involved (other than as intermediaries). The shareholding in Charlton was held by a Panamanian company, Ancon Group Incorporated and it is the claimants' case in this action that Ancon Group Incorporated is, ultimately, controlled by "family trusts" of Helga and/or Helga and Jack. An admission to this effect was, allegedly, made by the first defendant during the course of the arbitration.
- On 3 February 2004 the claimants obtained, in this action, a worldwide freezing injunction against the first defendant, the second defendant and Jack and Helga from Lindsay J. That order was continued by Lewison J on 13 February 2004. The first defendant sought permission to appeal the freezing injunction but his application was rejected by Dyson LJ on 13 May 2004. The freezing injunction was limited to the sum of US $5.5 million.
- On 16 February 2005 there came before Laddie J certain applications by the first defendant, Jack and Helga to set aside various earlier orders made against them. Two of the issues which arose before Laddie J are relevant for present purposes:
(1) one of those issues arose in the context of permission granted by Lewison J on 13 February 2004 to enforce the worldwide freezing order in Switzerland. Technical difficulties had arisen, subsequently, primarily over the question whether the order of Lewison J of 13 February 2004 had "continued" the earlier order of Lindsay J of 3 February 2004. I shall have to return to this, in due course, when I consider whether, if I grant the claimants the relief they now seek, I should merely refuse to discharge the earlier order of David Richards J or make a new separate, and distinct, order by way of continuation;
(2) the second issue concerned whether the claimants should be granted permission to enforce the order of Lewison J of 13 February 2004 in Switzerland. Laddie J held (paragraph 52) that the claimants need only demonstrate a real prospect that there were assets in the country where enforcement was sought. It is the observations made by Laddie J in respect of submissions on the evidence on that issue which are relevant for present purposes.
- Counsel for Jack and Helga conceded before Laddie J that the claimants had made out, to a sufficient level of confidence, the factors which needed to be satisfied to justify a worldwide freezing order. In other words, as Laddie J recorded, counsel accepted (for that application at least) that the claimants had made out a good case not only that Jack and Helga had assets but that there was an appreciable risk that they would seek to hide or dissipate those assets. Laddie J regarded counsel's concession as amounting to little more than an acknowledgement of the inevitable. The evidence before him, he said, painted a picture of Jack and Helga which was far from flattering. Laddie J recorded that he had been taken through material which indicated that this was not the first case in which Jack had avoided complying with an order for very substantial damages made against him in proceedings in which he had been found to have defrauded others. Laddie J said that the material before him all suggested that Jack had taken steps to avoid his obligations by putting his money into trusts which were, effectively, for the benefit of Helga. The material suggested that the first defendant, who for 20 years had been Jack's lawyer, had been closely involved in these activities, being a director or executive of some of the companies through which Jack was alleged to have carried out his illicit activities and playing a part on the financial side, including being involved in discussions with banks and having input into the movement of funds. Laddie J indicated that he had been taken by counsel 'for the claimants through a great deal of material which was alleged to demonstrate that Jack's assets, or most of them, were likely to be held in nominee companies or trusts, the beneficiary of which was Helga and that there was evidence of some at least of these assets been held in Switzerland. Laddie J recorded that he found counsel for the claimants' arguments compelling and well supported by the documents before the court.
- I would, of course, be entitled to come to a different conclusion from that of Laddie J on the evidence before me. But having considered that evidence I can see no reason, whatsoever, why I should do so. I start, therefore, with the postulate that the worldwide freezing orders as made by Lindsay J, and Lewison J were supported by a good arguable case that there was an appreciable risk that Helga and Jack would seek to hide or dissipate their assets, via offshore companies or trusts.
THE PARIS FLAT
- The present application concerns, ultimately, an apartment at 18 Rue de la Tremoille, Paris, 75008 ("the flat") given by Helga as her address in, for example, her fifth witness statement of 5 May 2005. It may well be that she and Jack live elsewhere for part of the year but, on the evidence before me, the flat can clearly properly be described as, at the very least, one of the homes of Helga and Jack.
- Helga's evidence is that the flat was purchased, in her own maiden name, in 1984. She says it was purchased from her own resources. Mr Freedman QC, for the claimants, invites me to infer that those resources had been transferred to her by Jack, in anticipation of his major bankruptcy which occurred in 1981. That may, or may not, be the case but I do not find it necessary for the purposes of my decision to base myself on any such inference.
- Helga's evidence also is that in 1994 she established a "trust" (for good tax planning and succession reasons). That trust is now known to be Brinton Establishment ("Brinton"), an Anstalt based in Vaduz and established under the laws of Liechtenstein. Brinton's name was "Wildhorse Establishment" prior to 31 August 1999.
- The flat was transferred by Helga to a French company ("the SCI") in return for shares issued to Helga in, according to her evidence, October 1997. It would seem, from Helga's evidence, that a small number in the shares in the SCI became vested in a Delaware company, Tracey Investments Inc, but the vast majority appear to have been retained by her, again according to her evidence, until September 2001 when she transferred her shareholding in the SCI to Azuri in return, it would seem, for shares in Azuri. She then transferred those shares in Azuri to a Mr Sturman (who is a US national) to hold as trustee for Brinton. Subsequently, Mr Sturman on 31 January 2005 transferred those shares to Maître Croisier, a Geneva lawyer, again to hold on trust for Brinton.
- The net effect of all this, therefore, is that the flat is fully owned by the SCI which, in turn, is fully owned by Azuri. The shares in Azuri are, now, held by Maître Croisier on trust for Brinton.
- I must now deal with Azuri. Azuri is registered in England and Wales and was incorporated on 28 October 1999. Its corporate director is Citilegal Directors Limited and one of the directors of Citilegal Directors Limited is a Victoria Novikova, who is the wife of the first defendant.
- It is fair to say that the information about the shareholdings in the various companies interested in the flat has emerged gradually, through the evidence, and in a somewhat opaque way. Indeed, there appear to be contradictions in the evidence as to who held precisely what shareholding in what company and at what particular time. Again, Mr Freedman invites me to draw adverse inferences from this. Again, he may well be right in saying that such adverse inferences should be drawn but, for my part, I do not find it necessary to found my decision on such adverse inferences.
- What, however, I do consider to be of greater importance is the extreme reluctance on the part of anyone involved with Azuri, and on the part of Helga, to disclose information concerning Brinton. The order of David Richards J of 22 March 2005 contained an undertaking by Azuri to provide information as to for whom Maître Croisier was holding his shares in Azuri. By witness statement of 24 March 2005 Ms Novikova disclosed only that Mr Sturman had held the shares in Azuri as nominee on behalf of an "establishment" into which she believed the assets comprising the trust were settled. Whilst exhibiting the share transfer form transferring those shares from Mr Sturman to Maître Croisier, Ms Novikova indicated that details of that establishment had been omitted from the share transfer form as exhibited, albeit it was confirmed that Maître Croisier had acquired those shares as nominee on behalf of "that" establishment. The share transfer form, as exhibited, had been redacted, so that the name of Brinton had been excised therefrom. So the claimants were no wiser as to the name of the person on whose behalf Maître Croisier held the shares in Azuri. This was in accord with earlier evidence given by Maître Croisier in his witness statement of 16 November 2004. In paragraph 4 of that witness statement he set out his understanding that Helga was extremely concerned, for personal reasons, to ensure that the particular name of the relevant establishment [ie Brinton] was not revealed to the claimants. For that reason, he there exhibited various documents (copies of letters and the statutes of Brinton), which deleted any reference to the name of Brinton. In an earlier witness statement of 18 November 2004 Helga had described in the most general of terms the establishment of the trust, resolutely refusing to give any details as to its name or otherwise.
- All this led to the claimants making further application to the court and obtaining an order from Evans-Lombe J on 22 April 2005 requiring Azuri to provide the full name and details of the establishment on whose behalf Maître Croisier held the shares in Azuri. That information was provided by Julie Eagle, another director of Citilegal Directors Limited, by witness statement of 5 May 2005. Brinton was identified as the name. The full address of Brinton in Vaduz was given and the directors of Brinton were identified as a Dr Junior and a Dr Goop. Certain unredacted statutes of Brinton were exhibited. What were not exhibited, 'however, were any bylaws of Brinton. Azuri served certain further evidence, namely a witness statement of Dr Grabher, an independent Liechtenstein lawyer, dated 29 June 2005. It is quite clear from his witness statement that Dr Grabher had had access to the bylaws of Brinton and yet, to date, the same have not been provided to the claimants, notwithstanding the terms of the order of Evans-Lombe J.
- It may be that it will ultimately be established that there is an innocent explanation for all of this coyness and obfuscation but, at this interim stage and in the context of the evidence before me as a whole, I am entitled to draw the clear inference that Helga was concerned that the claimants should be not discover the name of Brinton and, even more importantly, that Azuri was anxious to follow Helga's wishes. Indeed, Ms Novikova expressly states this latter point, expressly recording that the Share Transfer Form she exhibits has been redacted for the reasons stated by Maître Croisier. And, as I have indicated, Maître Croisier's reasons were expressed in his witness statement to be based on Helga's wishes.
BRINTON
24. The essence of Helga's evidence is that Brinton was established, in 1994, for good tax planning and succession reasons, following the taking of professional advice. She describes Brinton, in a witness statement of 18 November 2004, as a trust holding significant assets on a discretionary basis. She says that the potential beneficiaries thereof include not merely Jack's children from an earlier marriage but, also, his grandchildren and great grandchildren and also her brother and his children. In paragraph 13 of that witness statement she records that she has been advised that it is not necessary for her to provide the name of the trust (save in the event that the court orders her so to do). She says (paragraph 15) that payments by the trust are at the discretion of the trustees and that she is merely one of a list of potential discretionary beneficiaries. Whilst she is entitled to give her suggestions to the trustees as to the manner in which they may confer benefits, her requests in this respect have no legal effect. She does, however, admit (paragraph 17) that she has been receiving approximately $100,000 per annum from the trust to assist with living expenses. In addition, she admits that the trust has paid the disbursements each year relating to the flat.
- That evidence is to he contrasted with the evidence of Dr Grabher, served on behalf of Azuri, in which he states (paragraph 3) that pursuant to the bylaws of Brinton the same constitutes a discretionary structure. Its form means, in particular, that whilst Helga is named as the principal beneficiary, she has no legal entitlement to the payments made by Brinton. This, as far as I can see, is the first reference to Helga as being the principal beneficiary of Brinton.
THE LAW
- The jurisdiction to make a freezing injunction against a third party is undoubted. The jurisdiction is exercised as, in effect, ancillary relief granted by the court in aid of, and as part of, the freezing relief granted against the defendant to the substantive claim. Exercise of the jurisdiction can occur where there is good reason to suppose that the assets of the third party are, in truth, the assets of the injuncted defendant (see, eg, SCF Finance Co Limited v Masri [1985] 1 WLR 876 per Lloyd LJ at 884 B–F). A classic case where there would be good reason for supposing that the assets are, in truth, the assets of the defendant is where there is good reason for supposing that the assets are held by the third party on bare trust (or as nominee) for the defendant. But I would reject any suggestion that the "Chabra" jurisdiction is limited to such a case. In International Credit and Investment Co (Overseas) Limited v Adham [1998] BCC 134 at 136 Robert Walker J pointed out that it had become increasingly clear, as the English High Court regrettably had to deal more and more often with major international fraud, that the court would, on appropriate occasions, take drastic action and would not allow its orders to he evaded by the manipulation of shadowy offshore trusts and companies formed in jurisdictions where secrecy was highly prized and official regulation was at a low level. The present is undoubtedly a case of shadowy trusts and companies (although I hasten to add that I make no adverse comment, whatsoever, about the level of official regulation or level of secrecy in a country such as Liechtenstein). Robert Walker J went on to indicate that a freezing injunction may indeed, in appropriate circumstances, be justified and necessary where parties have the ability to switch real assets from one shadowy hand to another in such a way that it is difficult to keep track of where they are. That, he said, was the justification for orders which looked through offshore companies in order to find the real assets – or which did, if you looked, pierce the corporate veil (to use that vivid, but imprecise, metaphor which is sometimes used). Robert Walker J then went on to consider the decision in Re a Company [1985] BCLC333 where Cumming-Bruce LJ (at 337–38) indicated that the court would use its powers to pierce the corporate veil if it were necessary to achieve justice, irrespective of the legal efficacy of the corporate structure under consideration.
- In Yukong Line v Rendsburg [2001] 2 Lloyd's Law Reports 113 Potter LJ indicated (at paragraph 44) that whilst it was plain that the court's Chabra-type jurisdiction 'would only be exercised where there were grounds to believe that a co-defendant was in possession or control of assets to which the principal defendant was beneficially entitled, it did not seem to him that the jurisdiction was limited to cases where such assets could be specifically identified in the hands of the co-defendant. Once the court was satisfied that there were such assets in the possession or control of the co-defendant, the jurisdiction existed to make a freezing order as ancillary and incidental to the claim against the principal defendant, although there was no direct cause of action against the co-defendant. Since the purpose of granting such an injunction against the co-defendant was to preserve the assets of the principal defendant so as to be available to meet a judgment against him, the form of order made against the co-defendant should be as specific as the circumstances permitted in respect of the principal defendant's assets of which the co-defendant had possession or control. Thus, generally, the form of injunction would be tailored to that purpose and should be no wider than was necessary to achieve it. However, subject to that requirement, if a co-defendant was mixed up in an attempt to make the principal defendant judgment-proof and the assets or their proceeds were not readily identifiable in his hands it was open to the court, where it was just and convenient to do so, to make an order which caught the co-defendant's general assets up to the amount of the principal defendant's assets of which he appeared to have possession and control. That was, in fact, the position in Chabra (TSB Private Bank International SA v Chabra [1992] 1 WLR 231) itself.
- In Mercantile Group (Europe) AG v Aiyela [1994] QB 366 there was a concession on behalf of Mrs Aiyela that there was evidence to suggest that Mr .Aiyela was determined to frustrate the execution of the judgment against him and that Mrs Aiyela had no independent financial means and that monies emanating from her husband, or companies which he controlled, had been paid into bank accounts in her name. Mrs Aiyela disputed these conclusions, but accepted they gave rise to at least a triable issue. On this basis, it was conceded that if there were jurisdiction to make the orders in question against Mrs Aiyela, the exercise of that jurisdiction against her could not be challenged.
- In C v L [2001] 2 All ER (Comm) 446 Aikens J said (at paragraph 75) that, generally, it must be arguable that the assets, even if in the third party's name, are in fact beneficially owned by the relevant defendant before a Chabra-type injunction can be granted.
- For my part, I do not believe it is necessary to establish beneficial ownership in a strict trust law sense. Clearly, if assets are held on a bare trust then the Chabra jurisdiction can be exercised. But, in my judgment, even if the relevant defendant to the substantive claim has no legal or equitable right to the assets in question (in the strict trust law sense) the Chabra jurisdiction can still be exercised if the defendant has some right in respect of, or control over, or other rights of access to, the assets. The important issue, to my mind, is substantive control. The view expressed in Gee on Commercial Injunctions 5th Edition 2004 at 13.007 is that if a network of trusts and companies has been set up by a defendant to hold assets over which that defendant has control and that this has, apparently, been done to make himself judgment-proof, then such would be an appropriate case for the granting of freezing relief against a relevant non-party. I agree. What needs to be considered is the substantive reality of control, not a strict trust law analysis as to whether the third party is a bare trustee. Thus, in my judgment, placing assets in a discretionary trust would not prevent the Chabra jurisdiction being exercised against that discretionary trust if the substantive reality were that the relevant defendant controlled the exercise of the discretionary trust. Any other analysis 'would entirely defeat the ability of the English courts to take drastic action and would allow the court's orders to be evaded by manipulations, entirely contrary to the court's powers and duties as identified by Robert Walker J in International Credit and Investment Co (Overseas) Limited v Adham (above). Whether this be described as identifying the discretionary trust as a "sham", as piercing the corporate veil, or as seeking to identify a controlled discretionary trust as a bare trust does not, to my mind, particularly matter. Certainly, at the interim stage, all that matters is to ascertain whether there is good reason to suppose that the relevant defendant controlled the assets in the discretionary trust.
- As to "good reason" it was common ground before me that this meant "good arguable case". There was, perhaps, less agreement as to what, precisely, "good arguable case" meant in precise terms. Mr Freedman referred me to Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft GmbH [1983] 2 Lloyd's Rep 600 at 605 where Mustill J described a good arguable case as "one which is more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50% chance of success". Mr Clarke, for Azuri, said 'that a good arguable case is one which has to be something more than merely capable of argument but, obviously, not one as strong as that required for summary judgment under CPR Part 24. For my part, I think that the Chabra jurisdiction has to he exercised with considerable care, depending on the facts of each particular case. What the court requires is "good reason to suppose". It may well require far greater persuasion that there is "good reason to suppose" in some cases, than in others.
GOOD REASON TO SUPPOSE
- In my view there is "good reason to suppose" (however high that test may be) that the assets of Azuri are, via Brinton, in truth the assets of Helga, or Helga and Jack.
- The essence of Mr Clarke's submissions to me on behalf of Azuri were:
(1) that Brinton could not be regarded as a sham. It was properly constituted in Liechtenstein and established a true discretionary trust;
(2) it would be only natural 'for the trustees of that discretionary trust to be sympathetic and non-hostile to Helga. Hence the benefits which she had received therefrom. But sympathetic exercise of discretion was not the same thing as legal entitlement to the assets in the discretionary trust;
(3) that Helga's bona fides in establishing Brinton, and dealing with the flat in the way in which she had, were established by her evidence that these arrangements were put into place for tax planning and succession reasons. Helga's bona fides could be seen from the fact that the flat had been purchased in her own maiden name, notwithstanding the earlier bankruptcy of Jack. The flat had remained in her own name until 1997.
- I express no view as to whether these arguments will, ultimately, prevail at trial of the relevant Issue as between the claimants and Azuri. But for present, interim, purposes I accept that these arguments are not without some force. However, these arguments do not prevent me from reaching the clear conclusion that the claimants have established, to my satisfaction, that there is good reason for supposing that the assets of Azuri (and of Brinton) are in truth the assets of Helga, or Helga and Jack. I am satisfied that there is good reason to suppose that the assets of Azuri and Brinton are under the direct control of Helga, or Helga and Jack. I reach that conclusion even if, ultimately, Brinton be held to be a true discretionary trust (and not, as Mr Freedman has asserted on the claimants' behalf, a "sham"). But there is even, to my mind, good reason to suppose that the discretionary trust is, indeed, a sham or one where the corporate veil could be pierced. In simple terms, to use a phrase employed by Mr Freedman and borrowed from Wallersteiner v Moir [1974] 1 WLR 991, I am satisfied that there is good reason to suppose that each of Azuri and Brinton dance to the bidding of either Helga or Helga and Jack. And I reach these conclusions however high the test for "good reason to suppose" may be.
- The reasons for my conclusions are as follows:
(1) there is clearly a good arguable case that Helga and Jack will dissipate their assets and seek to make themselves judgment-proof. I refer to the matters I set out under the heading "Background" above and the judgment of Laddie J which I there summarised;
(2) there is clear evidence that Helga and Jack will utilise offshore companies, and trusts, for the purpose of the conduct of their business and for the purpose of defeating creditors. This action arises out of the Charlton arbitration where, ultimately, Charlton was, it would seem, owned by Brinton. The arbitration award included the sum of US $75,000 for fraudulent misrepresentations made by the first and second defendants concerning the beneficial ownership of the shareholding in, and financial position of, Charlton. There is good reason to suppose that the activities of the first and second defendants in respect of Charlton were effected in conjunction with Helga and Jack;
(3) Helga has received very substantial benefits from Brinton. Whilst I accept that such benefits could be consistent with independent, sympathetic, trustees exercising their discretion in Helga's favour, such benefits are equally consistent (and in my view on the evidence presently before me much more likely to be consistent) with Jack and/or Helga having control over Brinton and the exercise by Brinton of its discretions. I must identify certain of those benefits. I have already referred, above, to the US $100,000 per annum and the disbursements paid in respect of the flat. A further benefit is that since the shares in Azuri became held on trust for Brinton, Brinton has allowed Helga and Jack to occupy the flat. In addition, there is clear evidence that other benefits have been obtained by Helga and Jack from Brinton (the right of occupancy of an apartment at 39 Lennox Gardens, Knightsbridge, the right of occupancy of a holiday home in Naples, Florida, the payment of travel costs and medical bills and, most importantly, the payment of legal costs in connection with this action);
(4) I find it surprising, in the extreme, that Helga would have transferred her shares in Azuri to nominees for Brinton had Helga and Jack not expected to exercise control over Brinton. Thereby, Helga was transferring their home to what is alleged to be a truly independent discretionary trust. In bona fide exercise of the trustees' discretion the trustees might well have chosen not to allow Helga and Jack to continue to live in the flat. It is highly likely that Helga and Jack expected Brinton to dance to their own tune in respect of the flat;
(5) it is instructive that Azuri is a company whose director is Citilegal Directors Limited, of which the first defendant's wife is a director. Azuri certainly danced to Helga's tune in 'failing, initially, to provide the name of Brinton;
(6) the coyness of Helga, Maître Croisier and Ms Novikova in their reluctance to name and identity, Brinton is hardly something which inspires confidence in their version of events;
(7) the whole complicated structure by which the flat is held, whilst perhaps arguably consistent 'with the alleged tax planning and succession advice, is equally consistent (in my view more consistent) with an intent to defeat creditors, with Brinton holding the assets of Helga and Jack to their order and under their control.
- Accordingly, taking the evidence as a whole, I am of the clearest view that, however high the test, there is good reason to suppose that the assets of Brinton (and hence Azuri) are in truth the assets of Helga, or Helga and Jack.
CONTINUATION/REFUSAL TO DISCHARGE
- Mr Freedman suggests that, granted the conclusions which I have reached, I should not make an express order continuing the injunction granted by David Richards J. Rather, I should simply refuse to discharge that injunction. Mr Freedman points out that the order of David Richards J was expressed to continue "until further order". Therefore, the question before me is not one of "continuation" strictly so called but, rather, one as to whether a further order should be made discharging the order of David Richards J.
- The reason Mr Freedman makes this submission is simple. Permission to enforce the order of 22 March 2005 in France has already been obtained. Mr Freedman's concern is that if I were to make a new order, continuing the original order, further permission to enforce in France would be required in respect of my new order. The background to this lies in one of the issues ventilated before Laddie J on 16 February 2005. Difficulties, which I need not identify, had arisen over enforcement in Switzerland of the earlier orders of Lindsay J and Lewison J. One of the sub-issues was whether the order of Lewison J of 13 February 2004 merely "continued" the earlier order of Lindsay J of 3 February 2004 or was, itself, a separate and distinct order. Laddie J held that the order of Lindsay J had expired notwithstanding the making by Lewison J of a continuation of that order on 13 February 2004. Laddie J indicated that, although colloquially speaking the order of 13 February "continued" the earlier order, it was a separate and distinct order, the order of 3 February having expired on the return day.
- The order of Lindsay J was in different terms from the order of David Richards J. The order of Lindsay J was expressed to continue "until the return date or further order". That order, itself, defined the return date as 13 February 2004.
- Now, in the present case, it is true that the order of David Richards J of 22 March 2005 was expressed to continue "until further order" but paragraph (5) of that order expressly provided that the issue of the continuation thereof should be listed as an application by order to be heard on the first available date after 13 May 2003.
- Mr Clarke points out to me that the matter initially came before David Richards J on effective, but very short, notice when Azuri accepted that a freezing injunction was necessary pending the filing of evidence and the determination of the substantive application. In the ordinary course of events, an order such as that made by David Richards J would continue only until the return date, when the matter could be substantively heard (if necessary as an application by order). And, in the ordinary course of events, it is for the person seeking the injunction to justify continuation thereof, not for the respondent to the application to justify discharge. I am not prepared to deal with the present application by order simply by refusing to discharge the order of David Richards J of 22 March 2005. Rather, I intend 'to order that the order, as made by David Richards J on 22 March 2005, do continue. And it seems to me, granted what was decided by Laddie J, that in so acting I am making a new, separate, and distinct order, and that is my intention. That intention seems to me to accord with basic practice, and the proper rules of procedure. The claimants will no doubt consider whether what I have done requires further application for permission to enforce my order in France.
AZURI AS A PARTY
- It was common ground that if I were to continue the order of David Richards J then Azuri should be joined as a party to this action (the legal test necessary to enable Azuri to be joined having been satisfied by my very decision to continue the order of David Richards J). Accordingly, I order that Azuri be joined as twelfth defendant to this action.
TRIAL OF ISSUE
- Self evidently there is an Issue which requires trial as between the claimants and Azuri as to whether the assets of Azuri (and by necessary implication Brinton) are the assets of Helga or Helga and Jack available to satisfy any judgment obtained in this action by the claimants against Helga and Jack. To use the language of SCF Finance Co v Masri, I am not prepared to accept, without there being 'further inquiry, either the assertion of the claimants that the assets of Azuri (and by necessary implication Brinton) are the assets of Helga or Helga and Jack or the assertion of Azuri that its assets (and by necessary implication the assets of Brinton) are not the assets of Helga or Helga and Jack.
- Consideration must, therefore, be given as to how this issue is to be tried, and when, and as to whether statements of case, witness statements, disclosure etc are needed for the purposes of the trial of this particular issue ("the Azuri issue"). Although neither Helga nor Jack appeared before me, I did receive a written submission from their counsel indicating that their counsel had submissions to make as to how, and when, and in what manner, the Azuri issue should be tried. The essence of those submissions was that it would be inappropriate for the court to make directions relating to the trial of the Azuri issue without all defendants being heard thereon. I did not understand Mr Freedman to dissent from that proposition. Accordingly, there will have to be a further hearing as to how the Azuri issue is to be tried, and when. I will hear further submissions as to how, and when, that hearing over conduct of the Azuri issue is to take place.
- The order which I have made will continue until trial of the Azuri issue or any further order of the court in the meantime. A minute recording the appropriate form of order in accordance with my decision above should, if possible, be agreed and lodged. If there are disputes as to the form of order I will hear further submissions thereon.
