Family Law Hub

Thursfield v Thursfield [2011] EWHC 3539 (Ch)

  • Neutral Citation Number: [2011] EWHC 3539 (Ch)

    Case No: 1 BM 30278




    Royal Courts of Justice

    7 Rolls Buildings,

    Fetter Lane, London

    EC4A 1NL

    Date: Tuesday, 6th December 2011



    (Sitting as a Judge of the High Court)

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    DAVID THURSFIELD (Defendant)

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    Digital Transcription by Marten Walsh Cherer Ltd.,

    1st Floor, Quality House, 6-9 Quality Court, Chancery Lane, London, WC2A 1HP.

    DX 410 LDE

    Telephone No: 020 7067 2900. Fax No: 020 7831 6864

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    LANCE ASHWORTH QC (instructed by SGH Matineau LLP) for the Claimant

    CHRISTOPHER PARKER QC (instructed by Messrs. Clintons) for the Defendant

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    1. There are a number of applications before me. The first is to set aside permission to serve out with an order for substituted service made in August of this year. The second is to set aside or discharge a freezing injunction that was made in May of this year and has been continued. There are further applications for disclosure of information in aid of the freezing injunction, if it remains in being. I have had the benefit of nearly 2,000 pages of documents in the bundles for applications which, the Court of Appeal have told us on many occasions, should not be prolonged. I apologise to the extent to which I, by showing interest in the submissions, which have been very ably advanced on both sides, have contributed to the prolonging of the hearing.

    2. I will deal first with, because it is first in time, the freezing order. On 27th May of this year, I made in private a without notice freezing order against the defendant. The defendant is the former husband of the claimant wife. The nature of the proceedings, to which the application related, was to enforce a judgment against the defendant in Michigan in January of this year, and which the claimant had previously had little success in enforcing.

    3. The history of the Michigan proceedings has been drawn out. The proceedings were begun as long ago as 2005 and, after earlier orders and reviews, resulted in a final order for the first time only in January of this year. There had been a settlement agreement relating to matrimonial proceedings. The order sought to be enforced here was not, however, made in the matrimonial proceedings, but by way of enforcement of the settlement agreement. The settlement agreement itself was dated 16th April 2005.

    4. The nature of the proceedings was a claim for damages in the Oakland County Circuit Court, relying upon inadequate disclosure of assets in breach of the settlement agreement. In particular, there was a sum of US $399,999 claimed as undisclosed income, together with a claim for US $1.7 million as further undisclosed income in the form of a loan. In addition, there was a further loan of US $4 million, which emerged after the date of the settlement agreement, and which it was said was income, and to which under the terms of the settlement agreement, it was said that the claimant was entitled to 25%.

    5. Initially, on 22nd January 2009, the United States court awarded 100% of the US $399,999 as undisclosed assets and 25% of the US $1.7 million loan and of the additional US $4 million loan as a contractual entitlement under the terms of the settlement agreement. Both parties reviewed that decision before the Michigan court. One of the aspects that most troubled the claimant was that a preliminary injunction, which had been granted by the Michigan court, was discharged, because it was said to be no longer needed.

    6. On 4th May 2009, the matter was reconsidered. The Judge in the January judgment had said that the claim before the court was for breach of contract and fraud. The same Judge also referred to the need to enforce a consent order in the divorce proceedings. It was recognised in the later judgment in May that the court was concerned solely with contractual rights. Nevertheless, the Michigan court applied what appears to have been a case decided under its matrimonial jurisdiction, known as Sands v Sands, to forfeit, in effect, in favour of the claimant all undisclosed assets, which it was said included the US $399,999. If the US $1.7 million loan was a loan which had been forgiven before the settlement agreement or which the defendant knew before the settlement agreement would be forgiven, the claimant was to receive 100% of that also. As previously ordered, 25% of any loan given after the settlement agreement to the defendant that was known would be forgiven (or 25% of any pre-settlement agreement loan which was forgiven or known to be forgiven but only after the settlement agreement) was also to be paid to the claimant. There was to be a further hearing about all that. The primary issue therefore was whether and when the loans were or were known to be forgiven. The Judge had previously accepted the genuineness of the loans as loans when made.

    7. It appears from the latest evidence that the result of seeking a review in time was that the previous order of January 2009 no longer took effect, so that the preliminary injunction continued. There is reason to believe that there had been breaches of the preliminary injunction even before January 2009; namely the sale of a property in Cheltenham for £1.65 million in 2008 and strange dealings with the $4 million loan received from the defendant's employer, which was deposited into a Swiss bank account. The reason for that was explained, as follows, by the defendant in an oral examination which took place in Michigan in August 2009:

    "Because I did not want to be encumbered by you people and constrained on what I do with any of the money that I earned or borrowed. It becomes tiresome when you meddle in my affairs."

    8. The clear implication from that was that having the money in a Swiss bank account would enable him, notwithstanding the preliminary injunction, to deal with those moneys without constraint. Moreover, it is clear from bank statements that I have seen that, in 2009 and 2010, there were lots of drawings from the defendant's bank accounts, which appeared, at least arguably in some cases, to be breaches of the injunction.

    9. The order of 4th May 2009 expressly reinstated the injunction. However, this is something which the defendant has suggested he did not really take on board -- an astonishing statement from someone who had been fighting so strenuously in the Michigan proceedings. At all events, it is clear that the Michigan injunction was not being obeyed, notwithstanding its express reinstatement.

    10. In 2009, it appears that the address for the defendant on one of his Barclays international accounts was an address in Cheltenham, known as Prospect House.

    11. On 11th August 2009, as I have said, there was an oral examination at the Oakland County Circuit Court. It was asserted on the defendant's part by his attorney that there was no indication that, once there was a judgment, he would not pay. His primary residence was then said to be in the Bahamas. He was also said to rent property in Majorca but only for five or ten weeks at a time. He gave various other explanations as to what had happened to his assets.

    12. It was also noted that he had changed his bank to UBS a few weeks prior to the oral examination - and I quote - "Because of you people." He also confirmed that the US $1.7 million was a loan against future earnings, which one can see might well give it the character of income. As to the additional amount of US $4 million, which brought the amount outstanding under the supposed loans to US $5.7 million, he said it was most unlikely that he could repay it unless he gave the lender everything that he had. That at least suggested that he then had assets totalling at least US $5.7 million in value. He also said that the US $4 million was still in his Swiss Barclays accounts.

    13. It was apparent that he had filed tax returns every year from 2005 in the UK, saying it was illegal if he did not. He claimed to have sold a condominium in the Bahamas, but nonetheless, still had his primary residence there. It appeared, also, that he may have invested in another property that he had bought in the Bahamas.

    14. On 14th October 2009, a deposition was taken from a Maria Shiavo. She claimed that the defendant's gentleman's agreement with his employer was that he would only be shown as getting US $800,000 until after his divorce was final, and that his original salary was meant to be $2 million a year. She also alleged that he had purchased a condominium in the Bahamas. She was the defendant's former personal assistant.

    15. As I have said, one of the issues left outstanding, after the May order, was the current status of the loans of US $1.7 million and US $4 million. A hearing was scheduled to take evidence on that issue in October 2009. The defendant did not appear and the hearing was rescheduled for 18th March 2010. In the meantime, on 6th November 2009, a BVI company, which owned Prospect House, at least notionally, and of which the defendant is said to have been a tenant, granted a charge to secure a loan to the defendant of £1.4 million. This suggests that there was something more than the relationship of landlord and tenant between the defendant and the BVI company.

    16. On 14th January 2010, Maria Shiavo alleged, through an investigator for the claimant, that the defendant had offered her US $100,000 to retract her previous statement. On 25th January 2010, the Michigan court ordered the defendant to attend the rescheduled March hearing and make specific disclosure of various documents. The defendant failed to attend that hearing and did not make the required disclosure. As a result, the defendant was defaulted and not allowed, in effect, to advance his contentions as regards the moneys from his employer - namely, as to whether or not the loans had been or would be forgiven. The court went on to rule that the US $1.7 million, having been received before the settlement agreement, was forfeit under the Sands v Sands principle and that 25% of the $4 million was due to the claimant.

    17. That ruling was eventually made on 1st December 2010. In addition, there were orders in relation to pension payments and in respect of costs, which amounted to in excess of US $1 million. There was a formal order made at the beginning of January 2011 for the payment of around US $6 million. It is clear, from the earlier December judgment and order, what the constituent elements of that sum were.

    18. In the meantime, on 12th April 2010, a planning application was made by the BVI company, which was completed, at least in part, by the defendant. A receiver had also been appointed by the Michigan court, on 25th August 2010, following default by the defendant under an order of 14th July 2010 requiring him to open a bank account in Michigan with an initial balance of US $2 million. That order, as well as providing that, in the event of failure to comply, a receiver would be appointed over the defendant's assets -- that is to say all of them - provided also that a criminal bench warrant would be issued, which in fact occurred, to secure the defendant's attendance.

    19. There were other orders granting further relief to the claimant in respect of the defendant's entitlements to pensions from Ford, both in the USA and the UK. Relevantly, the defendant came under an obligation to pay half his UK pension to the claimant.

    20. On 14th October 2010, the defendant received a sum in excess of £250,000 from his UK pension scheme into a Jersey account. The defendant proceeded to deal with that money as he wished, in apparent breach of the preliminary injunction, which, on any footing, had now been reinstated, and without regard to the claimant's rights under the pension orders. As I have said, his only explanation is that he did not take the reinstatement of the preliminary injunction on board -- an assertion which is frankly incredible. What appears to be the more likely explanation is that the bank did not take it on board and were not notified of the reinstatement and the defendant took full advantage of that. No explanation is offered for ignoring the claimant's right to receive part of the UK pension.

    21. It appears that earlier, before the initial discharge of the preliminary injunction in January 2009, the banks had been complying with it. As I have said, a final order was made in January 2011, but that was followed by an appeal on 24th January 2011. That appeal was, on 9th March 2011, dismissed for want of prosecution. It has subsequently been reinstated. However, it had not been reinstated, nor was its reinstatement contemplated, when I made the freezing order and (subsequently) the order giving permission to serve out of the jurisdiction.

    22. The claimant undertook various investigative steps through private investigators before bringing these proceedings. The criminal bench warrant, which had been lifted for a short while, so as to facilitate the defendant's attendance for an examination, was issued, again, in April 2011, the defendant having refused to attend a further examination or to produce all the necessary documents. There were further investigations, in May 2011, relating to the defendant's whereabouts. There was some suggestion that he may have had and might still have a connection with a property here owned by third parties, in fact, his new wife's parents. The evidence was not strong, and largely speculative.

    23. The claim form and particulars of claim were issued out of the Chancery Division in Birmingham on 26th May 2011, supported by an affidavit of the claimant and a member of her solicitors, Mr. Holden, and a skeleton argument of Mr. David Stockill of Counsel. That came before me and I granted a worldwide freezing order. It seemed then that the claim was more or less unanswerable. At my questioning, Mr. Stockill stated that there were no multiple damages in the award of the Michigan court. It was said that the defendant was domiciled in England. That, at least in common law terms, appeared to be justified. It was also said that he had assets here. He had certainly owned or had some apparent interest in a property here. That property, held in the name of a BVI company, had, in fact, been transferred to an English company, which appeared, on its face, to have no connection with the defendant. I now know that bank statements continued to be sent there for the defendant for some months thereafter. His UK pension trustees were also here.

    24. A great deal of attention has been focused upon the skeleton argument that was put in by Mr. Stockill. He asserted that the United States proceedings had demonstrated that the defendant was a deceitful concealer of assets and that this had been forensically proved. That is criticised, because, in fact, the defendant did not have the opportunity to prove the contrary, because of the defaulting of his claim for non-attendance in Michigan.

    25. Mr. Stockill, at one point, claimed that the amount of assets concealed prior to the settlement agreement was US $6 million, which included the US $4 million that came later. That still left US $2 million. However, there is no doubt, as Mr. Ashworth QC has accepted before me, that that was an inaccurate statement. It is also said, on the part of the defendant, that there were serious non-disclosures on this occasion.

    26. It is said that upon a proper analysis of the United States proceedings, it can be seen that there is a potential defence, which was not mentioned to me -- as indeed it was not -- of the proceedings being vitiated by an absence of natural justice. It is said that there was no proper assessment process of the damages in question. However, it seems to me that there is nothing in that. There were judgments and orders of the Michigan court, both the initial judgment and order of January 2009 and the later judgment and order of December 2010, which demonstrated quite clearly how it was that the court had reached the assessment of damages enshrined in its January 2011 order. The defendant disagrees with the court's reasoning but it is clear what the court decided, and what the process of assessment was.

    27. The matter is now under appeal, the appeal having been reinstated, and we will know eventually from the Michigan Court of Appeals whether, and to what extent, the January 2011 judgment can stand. As the constituent parts of the judgment are all known, as is the reasoning for each constituent part, then, even if the appeal is set aside in part (and there is no prospect of it being set aside in whole, because not every element is under appeal) the court will still have as an enforceable judgment the remaining constituent elements, though credit will have to be given for payments made or recovered. The same applies, even if this court ultimately decides that parts of the judgment are vitiated by natural justice. Those parts are readily severable.

    28. In the circumstances, I am not surprised that I was not told that there was a potential defence of the absence of natural justice. The points, which have been ably argued before me and which may conceivably bear fruit at the end of the day, do not leap out from the page and, given the absence of an appeal at that stage, cannot have been thought likely to emerge. It does not seem to me that the duty of making full and frank disclosure extends to inventing fanciful defences, as they then appeared, as opposed to dealing with real defences.

    29. It seems to me, also, that much of the argument before me was directed to showing that the Michigan court was simply wrong on the merits and on the appropriate law, which is not a proper basis for challenging the enforceability of a foreign judgment. It was said that the forfeiture of part of the amounts claimed could not be regarded as damages, and that non-disclosure of assets did not extend to non-disclosure of income. However, even in this country, restitutionary claims awarding the entirety of a gain from elicit activities may be awarded in contract as damages. They are not very common and they are not parallel to the present case, but they exist. It would be odious for an English court to denounce another court, which has a different system of law from us, albeit one rooted in the common law, as lacking in natural justice just because the result is different. It is a well known feature of the common law that it has developed incrementally and continues to develop by reference to and analogy with other areas of the law. I am in no position to say that the application of a principle derived from matrimonial jurisprudence, namely Sands v Sands, is inappropriate under Michigan law. The Court of Appeals there will tell us in due course. The same court will also presumably reconsider whether or not the non-disclosure of income fell within the relevant parts of the settlement agreement. In the circumstances, it seems to me that there was no material nondisclosure as regards the United States proceedings.

    30. It is also said that I was not told sufficient about the purpose behind the proceedings before me in May. It is said that I should have been told that the real purpose was to get at the UK pension fund. It is now plain that the UK pension fund, which the US-appointed receiver claimed in March of this year, is immune from his grasp in this sense: the pension fund trustees have asserted that they do not recognise the receiver and have also relied upon an inalienability clause as defeating the receiver's claim. It is said that that was the real reason driving the claimant into this jurisdiction.

    31. That, I readily infer, certainly was one of the reasons. Indeed, the claimant's solicitor in his most recent evidence has confirmed that he was told in the past -- he does not say exactly when -- by his client that the receiver had told her that she would need to take proceedings in England. It seems to me that was a very good reason for taking proceedings in England and that the claimant would have been well advised to have told me that on 27th May. The frustrated attempt of the Michigan receiver to get any part of the UK pension seems to me to justify without more proceedings in this jurisdiction to enforce the final judgment of the Michigan court.

    32. I do not, however, consider that there was material nondisclosure in this respect. It would have been helpful, and indeed preferable, to know about the trustees' attitude. Ultimately, though, what the claimant did not direct my attention to was something which, upon a proper analysis, helped her case. The receiver was getting nowhere, and that was reason enough for the claimant to see if she could do better here. Nor do I think there was material nondisclosure in not directing my attention to reliance on the inalienability clause as preventing the receiver from obtaining any part of the pension. It is common ground before me that, as a result of statutory intervention, the inalienability clause is ineffective as against the claimant when it comes to enforcement except as regards what I was told by the defendant's counsel was a very small minimum payment.

    33. The pension itself is £90,000 a year roughly, which is a substantial sum and, which, over a period of time, would obviously be of great use to the claimant in obtaining partial satisfaction (even ignoring, as I do, her continuing right to receive half of the pension, as enforcement of that obligation is not sought in these proceedings). It seems to me, therefore, that on that ground alone there is a sufficient link with the jurisdiction to justify at least a domestic injunction.

    34. In addition, there was also evidence before the court as to the extent to which the defendant, whose lifestyle and assets were international in character, had, in fact, not paid any serious attention to orders of the United States court. That was criticised in powerful terms by Mr. Stockill. I am bound to say that judged on the evidence before me then, and judged by the evidence before me today, he did do justifiably.

    35. It is the defendant's case, expressed through counsel, that these proceedings are effectively a waste of time because the defendant has dissipated all his assets. He has, in response to the original freezing order, put in an affidavit of his assets saying that his only assets worth above £10,000 are his interests in the two pension funds. Nothing is coming out of the United States pension fund because of the intervention of the receiver. Nothing is, in fact, coming out of the UK pension fund either, because of the combined effect of the freezing order and representations made by the claimant's solicitors to the pension fund and the defendant's bank, arising out of concerns as to the defendant's potential abuse of legal and living expenses exceptions to the freezing order. Whether or not the claimant's solicitors were justified in their concerns is something I may have to return to.

    36. Therefore, the defendant is apparently living on nothing other than perhaps the goodwill of his wife or other people, who, for some reason, see themselves as owing him a favour. The alternative possibility, of course -- and it is, I am bound to say, a real possibility on the evidence that I have seen - is that there still are assets now secreted which the defendant has recourse to and which are in truth his own. In those circumstances, it seems to me that the comments of Mr. Stockill, both in his skeleton argument, and in the note of the hearing, were entirely justified as regards the propensity of the defendant to dissipate or secrete assets.

    37. There was also in May evidence before me showing connections with this jurisdiction. There is no doubt that the defendant has lived here in the past, that he or the BVI company with which he, on the face of it, clearly had a close, if not a beneficial, connection, had sold property within the jurisdiction, and that he continued to have a connection with the property and the BVI company after that sale. There was, also, evidence of his being here in March 2011.

    38. The investigator's report, as I have said, showed weak evidence of a connection with his wife's parents' address. All of that was properly put before me and I do not consider that there was any misrepresentation or non-disclosure there. The impression I was under, at that hearing, was that the claimant simply did not know where the defendant was. The likely candidates were England, the Bahamas or Majorca. That is not surprising, because those were the areas identified in the previous oral examination. Even today, we do not know, or at least the claimant and the court do not know, where the defendant resides. It is said that the defendant has a good reason for withholding his proper address. In his own evidence, he gives his address care of his present solicitors. The good reason, he says, is that his former wife has harassed and intimidated him and that this is the true purpose behind these proceedings, just to pile pain upon pain. I do not consider his fears to be a sufficient reason for withholding his address. He is of course free to be as secretive as he wishes, for whatever reason. It is simply that the reason he has given has no conviction whatsoever.

    39. His former wife is, in fact, as things stand, a judgment creditor for many millions of dollars; something which has taken her since 2005 to attain. The defendant has, at least in recent times, since his last reverse in the United States, plainly adopted the line of defeating the wishes of the United States court -- not by the conventional means of an appeal simpliciter, though there is now a reinstated appeal -- but by taking such other steps, legitimate or not, as may be available to him to dissipate and secrete his assets while still living, so far as one knows, a comfortable lifestyle with the ability to fund his solicitors and US attorneys.

    40. It is said that there was misrepresentation or non-disclosure as to who was the worst party in the marriage, which would have shed light on my attitude towards the motive behind these proceedings. It is fair to say the claimant started this by going on at some length in her original affidavit about how bad her former husband was during the marriage. That has understandably, though mainly if not wholly irrelevantly, elicited a response which has sought to portray the claimant as an alcoholic of some long standing who has tried to commit suicide on many occasions. It is also said on the defendant's part that it can be demonstrated, even without cross-examination, that the claimant has lied on a number of occasions. While she denied ever having attempted to commit suicide in her evidence in reply -- except possibly upon an occasion when she took some pills, which she thought were harmless but, in fact, were potentially deadly as a result of her husband, as she appears to see it, planting them for her use and thereby trying to induce her own self-destruction -- she said that the stories, that apart, were largely invented.

    41. The allegations certainly go back many years and relate to the period from 2003 when the marriage was splitting up. There is also independent corroboration of the fact that she has, from time to time, to put it colloquially, hit the bottle at stressful times in her life, such as the divorce itself and her husband's subsequent remarriage. I consider it is entirely possible, if not probable, that the claimant may have understated her own difficulties in the past. However, even upon the footing that she was less than truthful about some of those events, it does not seem to me that they were, in their context, sufficiently germane to these proceedings to have any impact on my decision. Still less can I conclude that these proceedings amount to a campaign of harassment. Therefore, I do not consider that I was misled on any material point or that there was any material nondisclosure in this respect. Any overstatement or misstatement of the case was, in my judgment, irrelevant. I certainly did not approach the case, as I do not think any judge would have done, on 27th May, or subsequently, upon the footing that there was only one side to be heard in this marital history.

    42. It is said that there was insufficient debate on the 27th May, before me, as to why, after all the delay, or indeed at all, worldwide relief was necessary. It was said I should have been told, explicitly, that the order in Michigan was a worldwide one. However, it was clear from the description in Mrs. Thursfield's affidavit that it was worldwide. It was also said that I should also have been told, explicitly, that the receiver was still in place, which I have to say I would have assumed on the material that was then before me and I am sure did.

    43. Mr. Stockill, it is said, wrongly told me that the Michigan orders and receiver did not feature in the case before me. I took that to mean that he was not relying upon those as additional features for justifying the relief that he was seeking, even though he might have prayed them in aid. I do not consider that he was trying to shove them under the carpet. I do not consider that there was any material non-disclosure in that respect. I was well aware that there were Michigan proceedings. The key point, as to the Michigan proceedings, was that they had proved, in many respects, ineffective, although leading to a final judgment. Therefore, some help from this jurisdiction was needed, a jurisdiction with which the defendant appeared, both historically and currently, to have connections.

    44. As Mr. Stockill put it at the end of a later skeleton argument, even if the result was to drive the defendant away, there would still be at least one asset here, namely the Ford pension fund. I did not read that as in any way suggesting that driving the defendant away was the aim of the proceedings, as opposed to a realistic assessment of what their effect might be, given the character, as it appeared from the evidence, of the defendant.

    45. I do not consider that it would have been of any great advantage for me to consider, in any greater detail than I did, the reasons for the relief that was sought from me. They seemed to me to be obvious. The defendant was clearly suable here, if only for the reason that a foreign judgment can only be enforced in England by English proceedings. Moreover, the indications were that the connections with England - in addition to what I have mentioned, he had family including children here -- would be of advantage to the claimant. The defendant might feel less inclined to stay away from England than Michigan. As it happens, these proceedings have had the effect of alerting banks in Jersey to the need to exercise restraint. The fact that that is technically an offshore bank has not had a detrimental effect. It might have been said that that could have been the position in Michigan as well, but it was no longer the position. The defendant was clearly staying away from the Michigan court. He might or might not stay away from the English court.

    46. It is said that there was no sense in supposing that the defendant would have been more likely to take part in this jurisdiction, because of his pension fund here, given that the pension fund in the United States was already under the control of the receiver. So, why, the argument goes, would the defendant bother with his pension fund here? The answer to that is that, having lost his United States pension, that might make it all the more important for him to keep his hands on his UK pension. At all events, I certainly would not assume that a pension of £90,000 a year is something that anybody would give up willingly.

    47. Subsequently, efforts were made to locate the defendant, unsuccessfully. Accordingly, on 5th August 2011, I made an order permitting service out of the jurisdiction and allowing for substituted service upon the defendant's solicitors, who by then were known: Messrs. Clintons. Two gateways have been relied upon. The first gateway is one of domicile and the second gateway is enforcing a foreign judgment in England. It seems to me that the enforcement of the judgment in England has always been an appropriate gateway. I need not in those circumstances consider the extent to which domicile is made out in this case, or (when dealing with someone who does not claim to be a domiciliary of another Member State or contracting party to the Civil Jurisdiction and Judgments Act 1982) the extent to which domicile in the relevant rule means residence or domicile at common law,

    48. Accordingly, it seems to me that the gateway of enforcing a foreign judgment is clearly open. It is said, however, that no sufficient advantage was shown for suing the defendant in England. It was initially said that the immunity of his pension fund, because of the inalienability provision, should have been disclosed. I do consider that, on this application also, it would have been better had the apparent difficulties been disclosed; namely, that attempts to get the pension fund had been rebuffed at the suit of the receiver and that a potential defence had been put forward. I cannot, however, regard that as material in the light of the clear acceptance that the pension fund could not rely upon the inalienability clause to prevent enforcement by the claimant. It is accepted that one way or another, through bankruptcy or attachment of earnings, and it may be in other ways too, that the pension fund, apart from the minimum payment, which is insignificant, can be attacked.

    49. Accordingly, as full disclosure would have involved telling me that as well, it seems to me that it is barely possible to regard the non-disclosure as material. However, to the extent that it is material, no mischief of any kind has occurred. I would not regard that, while in no way diminishing the importance of the disclosure requirements generally, as justifying setting the order aside. Various other allegations of non-disclosure have been made all reflecting the points that were made in relation to the freezing order, which I have not been impressed by, for the reasons I have already given.

    50. Particular criticism was made of the use, both on the freezing order application, and on the application to serve out, of Miss Shiavo's statements. A number of inconsistencies have been fully highlighted by the defendant's solicitor. In my judgment, there is nothing in this point. It seems to me that the core elements of Miss Shiavo's evidence are not thereby irretrievably damaged. One would, as I am sure I did, automatically view someone in the position of Miss Shiavo as someone whose credibility would have been challenged by the other side. One anticipates, as happened in this case, a vigorous denial. For my part, I did not place any great reliance upon her evidence, though strictly the complaint is that Mr. Stockill did.

    51. It seems to me that the critical evidence against the defendant in this case was very simple, namely the judgment and the steps taken by the defendant to evade its consequences. All of those screamed out for assistance from such other courts as might have jurisdiction, including this court. It is upon that basis that I assumed jurisdiction and granted worldwide relief, because of the international nature of the defendant's lifestyle, so as to give the claimant as much help as I considered she was prima facie entitled to.

    52. It is also said that no express mention was made of the two day creditor's examination of the defendant in August 2010. That is true, but the bits that have made an impression on me from that two day examination seem to me to advance the claimant's case and not to hinder it. They demonstrate someone who had been breaching the previous injunctions, on the face of it, and who, despite the assertions made by his attorney, was not someone who one could confidently expect would obey any order of the Michigan court.

    53. In those circumstances, I do consider, subject to one point, that both the order for service out and the freezing order were properly made and I will continue them. I do consider that there is a real advantage to the claimant here and that I should not limit the relief I grant, given the defendant's international lifestyle and manner of asset holding, to the jurisdiction of this court.

    54. The one point which I now have to consider is the complaint that is made as to the conduct of the claimant's solicitors. The first complaint relates to the order I made as to delivery up of the passport. A request was made in correspondence at a relatively early stage for confirmation that that only arose if he was to come to the jurisdiction. That confirmation was eventually given, but not until the order for leave to serve out and substituted service was granted, at which time the note of the May hearing was forwarded to Clintons by way of service. It was clear from my judgment at the conclusion of that hearing, which was a short statement of reasons, that I regarded that part of the order as arising only if he came within the jurisdiction. I was not ordering him to come within the jurisdiction, or to surrender his passport from abroad.

    55. The claimant's solicitors appreciated that to give effect to my order a variation was required. That variation was put to the defendant's solicitors and complaint is made as to the terms of that variation because it is said that they amounted, effectively, to requiring the defendant to admit that he had been in breach of the order and to submit to the jurisdiction. It seems to me that there was oversensitivity there and I do not regard the claimant's solicitors as having acted in any way improperly in putting forward that variation. Nor do I consider that they acted improperly by not sending the note of the hearing until they were able to effect service.

    56. The basis of my order was apparent from the note of the hearing which, had the defendant facilitated service at an earlier stage, would have become apparent to him then. No harm has been done by that episode anyway and I do not consider it a reason for discharging any of the orders, or refusing to continue them.

    57. It is also said that the claimant's solicitors represented to Barclays that they would be in contempt if they released funds to the defendant to fund legal expenses. It is clear from the correspondence that there was suspicion on the claimant's side as to what exactly the defendant might be up to in instructing lawyers. The claimant's solicitors may have been oversensitive but they were entitled to be suspicious at that stage, as the defendant was not in fact taking part in these proceedings, or facilitating service. The solicitors in question might not have been instructed in connection with the litigation at all. The claimant's solicitors also expressed the view, wrongly as is now conceded, that to be notified simply by the copying in of a fax from the defendant, as did in fact occur, of the source from which he was proposing to pay legal expenses, was insufficient. That, however, was not the real basis of their complaint. The real basis was their suspicion that the defendant may be misusing the legal expenses exception for improper purposes. Moreover, no harm was done because the moneys that were sought to be moved were in fact moved before their letter was fully considered, or indeed received.

    58. There is also a complaint of preventing the UK pension being paid to the defendant or to a frozen account in Jersey. That is dwelt upon at some length by the defendant's solicitor in his evidence. Again, however, I do consider that the claimant's solicitors were entitled to be concerned as to what might become of the pension moneys when paid and, whether or not the pension moneys are frozen within the pension trustee, or in a frozen account, seems to me to be neither here nor there. Again, no mischief has occurred because the defendant is able to live and is able to fund his proceedings from, so he says, third party moneys.

    59. I am, in general terms, concerned that the effect of a freezing order should not be overstated and should not be used oppressively. However, I am not, in the circumstances, persuaded that there has been oppression in this case. The claimant's suspicions were increased by the refusal of the defendant to submit to the jurisdiction and they were entitled to express their concerns, both to the banks and to the pension fund. The bank was protected anyway by the terms of the freezing order in respect of any payment which appeared to be allowed by the order. In those circumstances, that complaint is not accepted.

    60. Complaint is also made of the refusal hitherto to lift the £15,000 ceiling on legal expenses. I accept that the current state of authorities reflected in Revenue & Customs Commissioners v Begum [2010] EWHC 2186 (Ch) is against the imposition of a cap. However, curiously, the existence of a cap appears in the standard form in the White Book. I do not think it can have appeared in the standard form that David Richards J was looking at in that case.

    61. The refusal to lift the cap in this case seems to me to be something of a red herring. On the evidence, the cap has not incommoded the defendant at all. He has been able to fund both these proceedings and his US appeal out of undisclosed assets said to be third party moneys, and the available UK assets as disclosed are relatively meagre.

    62. It is also said that I should set aside the order for substituted service, as the existence of Clintons as a potential address was only known as a result of the non-disclosures and misrepresentations previously made, resulting in the improper granting of the freezing order. It was only because of the freezing of monies in Jersey that Clintons were instructed.

    63. I have already indicated that there were unfortunate misstatements or overstatements by Mr. Stockill at the outset of the case, but they were not misstatements or overstatements which would have caused me to act any differently, namely the difference between US $2 million (strictly US $2,099,999 million) and US $6 million, and (possibly) the extent to which deception had been forensically proved. As to the first of those points, I cannot believe that it was anything other than a mistake on Mr Stockill's part, and the contrary has not been suggested. It was however a mistake that should not have been allowed to occur and would have been prevented by a fuller consideration of the previous litigation history. Nevertheless, the difference between the two amounts (though substantial) was not critical to the granting of the order. As to the second point, it was established that there had been non-disclosure of the US $2 million. Whether all or any of that should have been disclosed is a matter that will now be determined by the Michigan Court of Appeals. What was not in one sense forensically proved was knowledge of forgiveness of the loans totalling US $6 million, as that resulted from (at least in part) a defaulting of the defendant. That does not seem to me to matter, as the significant result was the final judgment which the claimant now seeks to enforce.

    64. At the end of the day, there is nothing in the alleged, apparent or even real misstatements, overstatements or non-disclosures which, to my mind, comes anywhere near justifying discharging any of the orders or not continuing them. Further, in those circumstances, nothing was improperly gained from the freezing order. Even had it been, it seems to me that it would not undermine the order for substituted service, as that order was effective to bring the detail of the proceedings to the attention of the defendant, which was its very aim.

    65. There are two further applications before me for the claimant. The first application is for further information arising out of what is considered to be the unsatisfactory affidavit of means and assets of the defendant. I was referred to JSC BTA Bank v Ablyazov, [2011] EWHC 2664 and JCS BTA Bank v Solodchenko [2011] EWHC 2163. Those cases confirm that the court has a wide jurisdiction to make such other orders as are required to ensure that its previous orders are effective, including disclosure of the source of funding.

    66. In the present circumstances there is a very real possibility that there remain assets available to the defendant which are in truth his, and which should therefore be disclosed. I am not going to repeat my reasons for that conclusion. It also seems to me that the identity of the funders may be relevant in that context as well. I shall accordingly, despite the attractive submissions of Mr. Parker QC to the contrary, grant the orders in the form as amended by Mr. Ashworth QC during the course of the argument. The effect of those orders is, first of all, to ascertain more precisely what the assets are by asking a series of targeted questions, many of them relating to what has happened to assets previously held but which now appear to have disappeared. It is sometimes necessary to jog forward from that point, rather than to start at the end, because it is only by jogging forward from that point that one will get to the end. It may be that that would result in the identification of nominees who can be joined into these proceedings, or quite conceivably people who will be, if not nominees, vulnerable to the impugning of a transaction under grounds such as Section 423 of the Insolvency Act 1986. That is very much hypothetical at this stage but it is all a real possibility. It seems to me, therefore, that the order has a real purpose, as does the further order sought requiring the source of funds to be identified.

    67. It is said that there is a risk here of intrusion into third-party privacy. I agree that there is such a risk but it is sometimes necessary to take that risk on board in order to ensure that orders of the court are fully effective. This is such a case. I shall therefore grant the orders that are sought.

Judgment, published: 03/01/2013


Published: 03/01/2013


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