Koshy v Deg-Deutsche Investitions-Und Entwicklungsgesellschaft Mbh [2006] EWHC 17 (Ch) (20 January 2006)

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England and Wales High Court (Chancery Division) Decisions

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Cite as: [2006] EWHC 17 (Ch)

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		Neutral Citation Number: [2006] EWHC 17 (Ch)
		Case No: HC5C0027

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

20 January 2006

B e f o r e :

THE HONOURABLE MR JUSTICE RIMER
____________________

Between:

	THOMAS KOSHY	Claimant
	- and -
	DEG-DEUTSCHE INVESTITIONS-UND ENTWICKLUNGSGESELLSCHAFT MBH (2) GWEMBE VALLEY DEVELOPMENT COMPANY LIMITED (in Receivership)	Defendants

____________________

Mr Andrew Thompson (instructed by CMS Cameron McKenna LLP) for the Defendants
Mr John McDonnell QC and Mr Adam Chichester-Clark (instructed by De Cruz Solicitors) for the Claimant
Hearing dates: 7, 10, 11, 12 and 13 October 2005
____________________

HTML VERSION OF JUDGMENT
____________________

MR JUSTICE RIMER:

Introduction

This is an application in a claim commenced by Thomas Koshy on 9 February 2005. It is made by the defendants, who are: (i) DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH ("DEG"), and (ii) Gwembe Valley Development Company Limited ("GVDC"). Mr Koshy's claim is a further instalment in litigation which has been waged between the same parties since November 1996, being litigation in which DEG and GVDC brought separate actions against Mr Koshy. The main heads of relief sought by the new claim are the setting aside of two orders made against him in that litigation: (i) a costs order made by Harman J in favour of DEG on 20 March 1998, and (ii) an order for an account of profits made by me in favour of GVDC on 12 December 2001. In addition, Mr Koshy asserts that the circumstances in which DEG and GVDC obtained the orders entitle him to damages.

The defendants' application is dated 24 March 2005 and asks for the striking out of the claim, or parts of it, under CPR Part 3.4, alternatively for the entry of summary judgment under CPR Part 24.2. The basis of the application is that it is said that: (i) Mr Koshy is prevented from bringing the claim to set aside Harman J's order by reason of an election he made during the hearing in July 2003 of his unsuccessful appeal to the Court of Appeal against that order; (ii) if his election did not in terms preclude this claim, the claim is in substance directed at achieving that which he elected against and so is an abuse of the process of the court; (iii) the claim anyway has no prospect of success on the merits; (iv) the claim to set aside my order of 12 December 2001 is misconceived and also has no prospect of success; and (v) the claims for damages are in consequence, or anyway, also misconceived.

To understand the points at issue involves a revisiting of the earlier litigation. This has been the subject of many judgments since 1996, at least six of which have been reported. In order, however, for this judgment to be intelligible on a stand-alone basis, I must summarise the relevant history.

Background facts

GVDC is a Zambian company that was established in 1985 for the purpose of carrying on a farming venture in Zambia. Lummus Agricultural Services Co Limited ("Lasco") is a UK company which became owned as to two-thirds by Mr Koshy and had a shareholding in GVDC. Mr Koshy was a director of Lasco and became the managing director of GVDC. DEG is a bank owned by the German government which between March 1987 and March 1988 invested DM5 million by way of loans to GVDC and US$1 million by way of an equity investment in it. Mr Koshy had also procured Lasco to invest 56.4 million Zambian kwacha ("K") in GVDC. At the time Lasco did so, the dollar equivalent of K56.4 million was approximately US$5.8 million, although the cost to Lasco of the K56.4 million was only US$1.04 million. Mr Koshy's ability to acquire the kwacha at such a discount against the official rate of exchange was because he used the "pipeline dismantling" system I explained in paragraphs 14 to 18 of my judgment delivered after the trial of the earlier litigation (see [2002] 1 BCLC 478). A central claim made by DEG against Mr Koshy in that litigation was that he procured GVDC to acknowledge a debt liability to Lasco for the K56.4 million advance in the dollar amount of US$5.8 million rather than the actual dollar cost of the kwacha, - an exercise which on paper gave Lasco an enormous immediate profit - whilst misleading DEG into believing that the true cost to Lasco of the kwacha it advanced to GVDC had been US$5.8 million. DEG's case was that, but for such misleading, it would not have made its investment in GVDC.

The circumstances in which DEG ultimately came to make that claim were that the farming project collapsed and GVDC became insolvent. In 1993 and 1994, DEG and Lasco successively made purported (and competing) appointments of receivers in respect of GVDC. The receivers appointed by DEG were Mr John Ward and Mr Elmo Jayetileke, the latter being replaced in June 1996 by Mr Nicholas Allen. Those competing appointments gave rise to litigation in Zambia, they were also the subject of a chapter in the later English litigation, and I considered them in a judgment delivered on 13 December 1999 (see [2000] 2 BCLC 705).

The English litigation was started in November 1996, when two actions were started against Mr Koshy and Lasco (various companies with which Mr Koshy is or was associated were later added as defendants in each action). The first action was commenced by DEG on 8 November 1996. By that action DEG claimed, inter alia, damages for alleged deceit inducing DEG's investment in GVDC in 1987 and 1988, relying in part upon the allegation that Mr Koshy had deceived it as to the cost of Lasco's investment in GVDC. On the same day as the writ was issued, 8 November 1996, DEG made an ex parte application to Harman J for worldwide freezing orders against Mr Koshy and Lasco, which the judge granted until 20 November 1996.

As the action was started more than six years after DEG's investment in GVDC, there was an obvious question as to whether the claim was statute-barred. DEG's solicitors, Cameron Markby Hewitt (now CMS Cameron McKenna LLP, whom I will call "Camerons"), were sensitive to this (it was also the first point that Harman J raised with Mr Simon Browne-Wilkinson, counsel for DEG on the application), and the main affidavit in support of the freezing order application sought to meet it. That affidavit was one made on 8 November 1996 by David Kidd, then a partner in Camerons. At the heart of DEG's case was the assertion that, until June 1996, it had no idea that Lasco had not advanced to GVDC the amount of dollars that the loan documentation purported to show it had advanced and that it was only its discovery of the true position in June 1996 that led it to the conclusion that it had a claim for damages in deceit against Mr Koshy upon this basis. Its case was that, in these circumstances, section 32 of the Limitation Act 1980 had deferred the running of time. Mr Kidd dealt with this in his affidavit, where he said:

"12. On 8^th June 1996 the Receivers discovered a document, being a telex dated 13^th May 1986 (at page 11) that appeared to show that Lasco had never made a loan to GVDC of several million dollars. Instead it appeared that only a small part of the Kwacha funds which Mr Koshy and Lasco claimed to have introduced into GVDC, as a result of the outlay by Lasco of several millions of dollars, could be said to have been purchased and provided to GVDC by Lasco. Since that date extensive investigations have taken place into funding allegedly provided by Lasco to GVDC, from which it has become apparent that most funds claimed to have been provided by Laso actually came from the Zambian government. …

97. As I have explained in paragraph 12 above it was not until June 1996 that the Receivers by chance discovered an apparently mis-filed document (page 11) which led to the discovery of the true cost to Lasco of the pipeline funds. That true cost had been persistently and deliberately concealed from DEG as I have explained above. I am also informed by Mr Ward and believe that it appears that steps had been taken to ensure that no documents were available within the files of GVDC which would have exposed the true position.

98. I do not believe that DEG should with reasonable diligence have discovered the fraud or concealment at some earlier date. Until discovery of the mis-filed document DEG did not have reason to believe that the representations made by Mr Koshy as to the cost of the pipeline funds to Lasco were untrue."

On 20 November 1996, the freezing orders were continued on an inter partes basis, without prejudice to the defendants' right to apply to have them set aside. On 4 December 1996, Mr Koshy and Lasco made such an application, making assertions of material non-disclosure at the ex parte application. They did not, however, rely on the point at the heart of the new claim, which goes to the truth of Mr Kidd's assertions in the quoted paragraphs that the events of 8 June 1996 were a "chance discovery". (Mr Kidd promptly withdrew his allegations as to the alleged misfiling of the critical document and the taking of steps to ensure that the relevant documents would not have been available within the GVDC files, and those points were not relied on either).

That application was heard by Harman J over some 12 days in March and April 1997, together with an application for summary judgment against Mr Koshy and Lasco in the action which GVDC had in the meantime (on 15 November 1996) also commenced. The latter action was brought at the suit of the GVDC receivers (Messrs Ward and Allen) whom DEG had purportedly appointed. The GVDC action was funded by DEG, and Camerons acted for GVDC, instructed by the receivers. GVDC's primary claim against Mr Koshy was for an account of profits.

During the hearing before Harman J, Mr Kidd made a further affidavit (sworn on 1 April 1997) as to the "chance discovery" in June 1996. He said:

"12. My firm has acted for the Receivers of GVDC since their appointment in September 1993, initially in relation to the conduct of the receivership generally and then in relation to litigation in Zambia with, inter alia, [Lasco]. Between 6^th and 8^th June 1996 I visited the Receivers and lawyers in Zambia in connection with both matters relating to the receivership and the Zambian litigation.

13. On the afternoon of 8^th June 1996 (a Saturday) the Receivers and I spent some time looking through certain files which were relevant to issues in the Zambian proceedings, one of which is GVDC's entitlement to an important part of the farm on which the power station, water intake and pumps and managers' accommodation is situated [this is generally referred to as 'the ransom strip litigation']. The Receivers believe that the land and all work undertaken on it was paid for by GVDC, but in 1994 Mr Koshy procured that the land be registered in the name of Lasco Zambia Limited, a company owned and/or controlled by him.

14. The particular files inspected by the receivers and me on 8^th June 1996 were fixed asset files, because we wished to ascertain whether those files contained evidence of payments by GVDC for assets constructed on the land referred to in paragraph 13 above. Among these files was the file labelled 'Power Lines' exhibited as 'DJK3' to my affidavit in the GVDC proceedings. … Whilst looking through that file Mr Ward discovered the copy telex from IBM to Mr Koshy dated 13^th May 1986 which, although not relevant to the question of GVDC's entitlement to the above-mentioned land, led to investigation of the matters to which the present proceedings relate."

Harman J delivered his reserved judgment on 6 February 1998 and his orders on the two applications followed on 20 March 1998. He dismissed Mr Koshy's and Lasco's applications against DEG with costs and entered summary judgment for GVDC against Mr Koshy and Lasco. The present claim is concerned in part with Harman J's order on the failed application to discharge the freezing orders, in particular the order requiring Mr Koshy to pay DEG's costs, DEG's bill for that application totalling the enormous sum of £359,415. I will refer to this as "the Harman Order." Mr Koshy did not at that stage seek the Court of Appeal's leave to appeal against it (leave having been refused by Harman J), although he did appeal against the GVDC order. The orders for costs against Lasco resulted in an order made by Park J on 7 August 1998 for the compulsory winding up of Lasco, after which it took no further part in the proceedings.

On 14 December 2000, the Court of Appeal (Pill, Chadwick L.JJ and Wright J) held that the receivers of GVDC purportedly appointed by DEG had been invalidly appointed. That decision would probably have brought the GVDC action to a full stop, but the court itself then appointed Mr Michael Rollings as receiver of GVDC's cause of action in the English proceedings. Mr Rollings ratified the GVDC proceedings and instructed Camerons to continue their prosecution. By a case management order made on 28 March 2001, the Court of Appeal set aside Harman J's summary judgment order against Mr Koshy in the GVDC action and so set the stage for a combined trial of both the DEG and GVDC actions which took place before me over 42 days between 24 April and 26 June 2001. I delivered my reserved judgment on 26 October 2001 ([2002] 1 BCLC 478), and my orders following that judgment were made on 12 December 2001. I dismissed DEG's action against Mr Koshy but ordered an account of profits against him in the GVDC action.

In paragraph 78 of my judgment, in the course of setting out the facts, I said this in relation to the matters to which Mr Kidd had referred in his affidavits of 8 November 1996 and 1 April 1997:

"78. On 13 May 1986, IBM sent a telex to [Hoechst (Zambia) Limited] confirming the transaction. It is somewhat obscurely worded but conveyed that it was selling its K5.8m at a rate of K10.8 to $US1, or $US540,000. DEG's evidence is that it first saw this in June 1996, from which it first discovered the cost to Lasco of the IBM debt. Mr David Kidd is a partner in [Camerons], DEG's solicitors. He said he went to Zambia in June 1996 in order to review the state of play in connection with some then rather static litigation being pursued by the receivers of GVDC to recover a strip of land they claimed belonged to GVDC, but to which Lasco (Zambia) Ltd, another Koshy company, was asserting title. Mr Kidd said he was going through some files and found the telex. By what appears to be a remarkable coincidence, he said that Mr Ward, the receiver, had himself also unearthed a few minutes before a letter which Mr Ward said was one dated 1 July 1987. In that letter, GVDC referred to the takeover of the IBM debt and the Energo-Invest debt (to which I come next), and the receipt of K56.4m, and asked the [Central Bank of Zambia] to confirm that GVDC could recognise a liability of $US5.8m to Lasco. For reasons which are not obvious, since the documents had nothing to do with the ransom strip litigation – and inspired, apparently, by an element of telepathy – Mr Kidd and Mr Ward promptly exchanged this information; and the consequence was that DEG claims that in due course it realised, for the first time, that Lasco and Mr Koshy had in fact made a large profit on the pipeline transaction at GVDC's expense. DEG's case is that, down to that point, it had no idea that any profit had been made or intended.

In paragraph 236, having given my reasons for dismissing the DEG claim, I said this:

"I add this also. I accept that it was only in and following June 1996 that DEG unearthed documents which told them for the first time the approximate size of the hoped-for profit. But I do not accept that this discovery was a matter of complete chance whilst Mr Kidd and Mr Ward were diligently working away on the current (in fact then rather static) state of play in the ransom strip litigation. I find that it was always obvious to DEG that Lasco was intending to make a profit. I derived from Mr Flosbach's evidence, although he was reluctant to say so in terms, that the making of such a profit was obvious to him and the GVDC receivers by the end of 1993; and I find that what DEG eventually found in June 1996 was something for which they had, by then, belatedly decided to search. This was by way of a preliminary to, as Mr Page [counsel for Mr Koshy] put it, the opening up of a second front against Mr Koshy in England."

As appears from those passages, Mr Kidd's evidence at the trial was that it was he who had discovered the telex of 13 May 1986. In paragraphs 12 and 97 of his affidavit of 8 November 1996 he had said that "the Receivers" had discovered it, which was technically correct but was perhaps a less than frank way of describing what had actually happened; and in paragraph 14 of his affidavit of 1 April 1997 he said that Mr Ward had discovered it, an assertion made 10 months after the event, but one by which he no longer stood when he gave evidence at the trial over four years later on 11 May 2001. More significantly, Mr Koshy seized upon my finding in paragraph 236 as being to the effect that the "chance discovery" points made in the paragraphs quoted from Mr Kidd's affidavits of November 1996 and April 1997 (the former being made in support of the ex parte freezing order application) were knowingly and deliberately untrue. He wished to deploy that point with a view to showing that, but for such alleged misleading, the ex parte freezing orders would not have been granted; and that, had Harman J learnt of such misleading during the subsequent application to set those orders aside, he would have set them aside and would not have made the Harman Order for costs against Mr Koshy that he did.

The new claim, commenced by Mr Koshy in February 2005, is his third attempt to make good that point and to have the Harman Order set aside but it is one that the defendants say should be struck out. I must now summarise Mr Koshy's first two attempts, which both failed. They are of direct relevance to the defendants' assertion that the new claim should be struck out.

Mr Koshy's appeal against the Harman Order

In December 2001, Mr Koshy sought permission from the Court of Appeal to appeal out of time against the Harman Order, the essential ground of appeal being that which I have just summarised. Permission to appeal was granted by the Court of Appeal (Chadwick LJ and Charles J) on 11 March 2002 (see [2002] EWCA Civ 484), Chadwick LJ pointing out, in paragraph 29 of his judgment, that the Harman Order could not have been set aside by me on an application made at the end of the trial and that "[t]he only way of disturbing [it] is on an appeal". Permission was given on terms that the only material upon which Mr Koshy could rely in support of the appeal was paragraphs 78 and 236 of my judgment.

The appeal came on for hearing (with other appeals against my orders made after the trial) before the Court of Appeal (Mummery, Hale and Carnwath L.JJ) on 16 July 2002. Mr Koshy was represented by Mr Hugo Page QC and DEG by Mr Andrew Thompson. The issue raised on the present application as to the nature of an election made by Mr Koshy at that hearing makes it necessary to refer extensively to the transcript of the proceedings. The transcript is not perfect, but it is the best record there is.

The court dealt first with the appeal against the Harman Order, the transcript recording Mummery LJ as observing that it was "quite a useful, gentle introduction to the more complicated story." Mr Page opened the background and referred to Chadwick LJ's observations that the only way in which the Harman Order might be disturbed was on an appeal. Mummery LJ's observation on that was that the normal way of challenging a judgment or order said to have been obtained by fraud was by bringing a new action to set the judgment or order aside. The court's exchanges with Mr Page show that, just as I would expect, he was fully aware of the availability of that route, and he is recorded as saying that he had raised that point with Chadwick LJ when applying for permission to appeal and that:

"The answer I gave him, which I had been satisfied to [sic], was that the usual reasons for having a separate action to set aside a judgment for fraud is that it is desirable that a court of first instance should have the opportunity of looking at the facts and deciding whether there has been a fraud or not. In this case, Rimer J has already done that."

Mr Page's point was, therefore, that my findings in paragraphs 78 and 236 had provided a basis of fact sufficient to enable Mr Koshy to contend that the Harman Order should be set aside, although he promptly agreed with remarks from the court to the effect that my findings had not amounted to a finding of fraud on the part of DEG. But he said that they showed that there had at least been a material non-disclosure to Harman J, which justified a reversal of the Harman Order. It then appeared that Mr Page's "material non-disclosure" argument included the assertion that there had also been positive misleading of Harman J, which he recognised may be no different from fraud, in which case, so he asserted, fraud is what I had found. There is no doubt that an allegation of deliberate misleading was at the heart of the case being made by Mr Koshy.

At this point in the argument, Mr Thompson made an application to adduce further evidence on the appeal against the Harman Order. DEG's point was that, in paragraph 236, I had not been addressing myself to the specific question of whether Harman J had been misled in November 1996; and DEG wished to adduce evidence on the appeal going to that question. DEG's first substantive point in answer to the appeal was related to this. It was that Mr Koshy had adopted the wrong procedure by simply appealing against the Harman Order. The submission was that what Mr Koshy could and should have done was to make an application to me after the delivery of my judgment on 26 October 2001 for an order discharging Harman J's original ex parte freezing order dated 8 November 1996. Any success on that would not, by itself, have resulted in a reversal of the inter partes Harman Order, but if I had made a finding that the ex parte order ought to have been discharged for deliberate non-disclosure or misleading, that would have provided a proper factual basis for an appeal against the Harman Order. That way of putting DEG's case reflected Mr Thompson's recognition, in line with Chadwick LJ's observations, that it would not have been open to me at the conclusion of the trial to entertain a direct challenge to the inter partes Harman Order, since one High Court judge cannot (save in various particular circumstances, none of which was applicable) review the inter partes decisions of another such judge. Mr Thompson made DEG's position clear by saying, in response to some observations from Hale LJ, that:

"My Lady, what we would submit it is perfectly that [sic: is that it is perfectly obvious that?] there should have been by one route or another – leaving aside for the moment which would have been better – a proper trial process addressing the issue of whether Harman J was misled and, if so, how and by whom, inadvertently, dishonestly or whatever. For this purpose, in our submission, it does not really matter how best that ought to have been achieved but that clearly has not been achieved."

By this point in the argument it is apparent that the court was disenchanted by the prospect of hearing an appeal against the Harman Order at which further evidence – which would be subject to cross-examination - was to be adduced. Mummery LJ suggested that the way forward might be to regard Mr Page as having identified sufficient material:

"… to enable us to direct an issue to the trial [sic: to be tried?], not by us [but?] by people who try issues? That is the issue of nondisclosure to impact on the correctness of the order for costs. The last thing I am going to allow is this court to be turned into conducting a trial by admitting evidence and then having cross-examination, having discovery. That is an inappropriate procedure."

Shortly after that Mummery LJ said that Mr Koshy "may not have to start a fresh action" and that "we can make any order that the court below have not made [sic: could have made?]." He then asked why the court could not direct the matter to be resolved on an issue remitted to the Chancery Division, adding a little later that he was not sure it really mattered to Mr Page where the issue was decided, so long as it was decided somewhere: Mummery LJ was, however, firm that the "somewhere" was not the Court of Appeal. After further discussion with Mr Thompson, the following exchanges took place, which I have abbreviated in part to what is material. For ease of subsequent reference, I have numbered the exchanges:

"1. Lord Justice Mummery: Let us just see where we are then, Mr Thompson. Would you object to us remitting an issue to be tried to Rimer J along the lines of (1) whether there was material nondisclosure to Harman J, (2) if there was, what impact that has on the order for costs? Would you object to that as a way of disposing of this appeal?

2. Mr Thompson: My Lord, I cannot object to that.

3. Lord Justice Mummery: You would not object to that. Mr Page, why does that not meet your concerns? You are boxed in on this appeal by the two paragraphs of Rimer J's judgment.

4. Mr Page: My Lord, so far as I am concerned, I would like your Lordships to decide this on the basis of Rimer J's findings. … I am not asking for this appeal to be turned into a first instance trial. It is only this late application to adduce further evidence that is having that effect.

5. Lord Justice Mummery: What happens if you fail in that appeal?

6. Mr Page: Sorry, my Lord.

7. Lord Justice Mummery: What happens if you fail in your attempt to persuade us to decide it in your favour on the basis of Rimer J's findings?

8. Mr Page: Well, then I lose.

9. Lord Justice Mummery: That is an end to the whole matter?

10. Mr Page: Yes.

11. Lord Justice Mummery: You cannot then reopen it before anybody else?

12. Mr Page: I suppose your Lordships might say ---

13. Lord Justice Mummery: I am just trying to see where we are going.

14. Mr Page: My Lord, perhaps if I am able to make an election I ought to take instructions before I do because ---

15. Lord Justice Mummery: It would mean doing that, you see.

16. Mr Page: This is not an issue that has come up before, but the third point I was going to make is that either the result that we want follows from Rimer J's judgment or it does not. If it does not follow from it, then I have obviously got my back to the wall.

17. Lord Justice Mummery: Let us just see where we are. Mr Thompson is not opposing that; as I understand it you are, you would want to go on and have a decision of this court on the basis of Rimer J's findings. If you win, fine for you. If you lose, I would have thought that precludes you from seeking to reopen that costs order in any other way. You have elected for that way of being ---

18. Mr Page: My Lord, before formally making an election, I think I owe it to my client to take instructions. I can do that ---

19. Lord Justice Mummery: You can if you like (inaudible) whether to start thinking at the moment. Our thinking at the moment, I think – we discussed this before we came in being aware of what the issues were on this appeal – is really not to allow this new evidence in that Mr Thompson wants, all these statements because where do we get to? You then want cross-examination, you then want discovery and we get the Appeal Court drawn into a trial process, which is not appropriate. We are left then, as I see it, unless Mr Thompson wants to make further arguments about his further evidence, with hearing your appeal without this new evidence. But on your appeal, you are limited to some arguments based on Rimer J. If you win that, you are happy. If you lose that, as I see it at the moment that is the end. You have elected to have that issue decided in that way and you have precluded the possible procedure that I have suggested of directing this to be tried as an issue.

20. Mr Page: If your Lordships need me to make a choice, and your Lordships could not have put it in a clearer way, if I may say so, would it be possible for me to take instructions.

21. Lord Justice Mummery: Certainly.

22. Mr Page: Because it is not a choice that I have discussed with my client.

The court then adjourned to enable Mr Page to take instructions from Mr Koshy. When the hearing resumed, Mr Page made this statement:

"23. Mr Page: My Lord, upon instructions, I would like to elect to have this matter decided here on the basis of those two paragraphs in Rimer J's judgment, and either we win or lose and, as your Lordships have very clearly pointed out, if we lose then that is it. My client says this is a very costly litigation and he just does not have the resources to have another hearing before Mr Justice Rimer, or whichever judge it may be. He would rather it was just dealt with here and now."

The court then gave Mr Thompson the opportunity to make further representations on the application to adduce further evidence, but he had been sensitive to the way the wind was blowing on that topic and so did not press it. The court then proceeded to hear the substance of Mr Koshy's appeal against the Harman order. When it came to his submissions, Mr Thompson repeated his argument that, by proceeding straight to an appeal against the Harman J order instead of first instituting a fact-finding inquiry before me on a post-judgment application for the discharge for non-disclosure of the ex parte freezing order, Mr Koshy had adopted the wrong procedure, which should itself be a ground for a dismissal of the appeal. At the end of proceedings on 16 July 2002, the appeal was adjourned part heard to the following day.

Overnight, and in light of the way in which Mr Thompson was arguing the appeal, Mr Page provided the court with a note about the election that Mr Koshy had made. It read as follows:

"Mr Koshy's election to proceed with the appeal rather than trial of an issue before a Chancery Judge

This election was made on the basis that the Court of Appeal would be deciding the substantive issue (ie whether the Judgment of Rimer J, insofar as his findings could not be successfully challenged, established that there had been a material non-disclosure if so the effect of that).

I noted that Mr Thompson continued to submit that the Appeal was not the appropriate route for Mr Koshy to challenge the decision of Harman J.

I assume, and would like to be corrected if I am wrong, that if the Court decides that Mr Thompson is correct on the procedural issue and so the Court does not decide the substantive issue, the other route will not be closed to Mr Koshy."

The hearing resumed on 17 July 2002. The court had read Mr Page's note, and the proceedings opened with the following exchanges (I have corrected the transcript's error that it was Carnwath LJ rather than Mummery LJ who was the main judicial spokesman):

"24. Mr Page: I think Miss Dobson [sic: should be Mr Thompson] and I would just like your Lordships to say what you thought I was electing today [sic: yesterday?]. I am not asking to withdraw my election, simply that it should be clarified what happens if your Lordships accede to his submission that this is not the appropriate moment for the substance of the appeal to go into, whether I have in those circumstances elected that it will never be gone into or whether in those circumstances it can still go back to the Chancery Division.

25. Lord Justice Mummery: You have elected that this decision will be the decision.

26. Mr Page: Right.

27. Lord Justice Mummery: That is what I thought when you said, when I explained it to you yesterday, I had made it crystal clear.

28. Mr Page: I thought it was clear, my Lord. What I thought I was electing was either that this court would hear a substantive appeal.

29. Lord Justice Mummery: The court is going to hear the substantive appeal, yes, but it may decide that you fail on procedural grounds, but you have elected against any other procedure.

30. Mr Page: Right, I understand, my Lord.

31. Lord Justice Mummery: You turned down the suggestion, which Mr Thompson did not object to, that the matter should be remitted to the Chancery Division as an issue to be tried.

32. Mr Page: Yes.

33. Lord Justice Mummery: I thought I put it to you that if you pursued this appeal, having turned down that offer, you were putting all your eggs into this basket.

34. Mr Page: As I say, I am not asking to withdraw my election and I am grateful to your Lordship for having clarified it.

35. Lord Justice Mummery: Yes.

36. Mr Thompson: My Lord, we are grateful for that clarification.

The court then heard the remainder of the argument on Mr Koshy's appeal against the Harman Order. At its conclusion, the court reserved its judgment. It then embarked on the other appeals, the hearing of which was not completed in the four allotted days, and so they were adjourned to 12 and 13 December 2002 when the argument was completed, following which the court also reserved its judgment.

On 28 July 2003, the court delivered its reserved judgment on certain of the appeals (see [2004] 1 BCLC 131). It delivered its judgment on Mr Koshy's appeal against the Harman Order on 24 November 2003 (see [2003] EWCA Civ 1718). The court dismissed the appeal. The leading judgment was that of Mummery LJ, with whom Hale and Carnwath L.JJ agreed, and the essence of his reasoning for dismissing the appeal was as follows:

"23. … When Rimer J made his findings of fact the issue of non-disclosure by DEG to Harman J was not before him. He was not addressing that issue. I do not think that it is satisfactory simply to lift findings of material fact out of his judgment and use them without more to set aside the Harman Order. In my judgment, it would be wrong and potentially unfair to DEG in these circumstances for the court to set aside the costs order made by Harman J. If the exercise of discretion is to be reviewed in circumstances of alleged material non-disclosure with a view to making a different order for costs, it can only be fairly and satisfactorily done in this case by an application at first instance, in which the issues of fact are defined and on which evidence can be adduced by both sides about the circumstances in which the orders were made, including the orders for costs."

Mr John McDonnell QC, who appeared with Mr Adam Chichester-Clark for Mr Koshy, submitted to me that in that last sentence Mummery LJ was indicating that the right procedure for Mr Koshy to adopt in order to ventilate his complaint about the alleged non-disclosure to Harman J was an application at first instance at which the relevant facts could be explored and findings made. He said that Mummery LJ was therefore making it clear that, whatever Mr Koshy had elected against, it was not against his commencement of his new 2005 claim directed at setting aside the Harman Order, which would enable just the kind of fact finding exercise to which Mummery LJ had referred.

I have no hesitation in rejecting that argument. I will in due course make my decision as to the nature of the election that Mr Koshy made – it not being disputed that he did make an election – but I am clear that Mummery LJ was not there giving Mr Koshy the green light to start an alternative procedure such as he has now commenced. In my judgment, the point that Mummery LJ was making was that that was the procedure that Mr Koshy should have adopted in the first place, whereas instead he took the mistaken course of proceeding straight to an appeal against the Harman Order. Although 16 months had elapsed since Mr Koshy had made his election, the court had not forgotten it, and Mummery LJ referred to it in paragraph 17:

"17. During the hearing of the appeal Mr Thompson appearing for DEG indicated that DEG would agree to the suggestion that the application to set aside the Harman Order should be remitted to Rimer J. Mr Koshy indicated, however, that he would not agree to that course. He wished to pursue the appeal. It was made clear that he would rather take the risk that the appeal might be dismissed than have the matter of costs in the Harman Order referred back to the judge at first instance. In those circumstances DEG contended that, as he had not taken that course, his appeal should be dismissed as misconceived and he should be ordered to pay the costs of the appeal."

It is worth noting, in the context of the discussion to which I shall come as to the nature of the election that Mr Koshy made, that Mummery LJ there described Mr Koshy's decision to pursue the appeal as embracing a willingness to incur "the risk that the appeal might be dismissed [rather] than have the matter of costs in the Harman Order referred back to the judge at first instance." If, despite the decision he so made, Mr Koshy remained (i) entitled to issue an application in the DEG action for a trial of the same issue as that against which he had elected, or (ii) to issue his 2005 claim, which also (in substance) seeks a trial of that issue, it is difficult to identify the nature of the "risk" that Mummery LJ understood him to have incurred: Mummery LJ cannot have been referring simply to the risk of an adverse costs order on the dismissal of the appeal. Mr Koshy has, however, successively asserted that both alternatives remained open to him despite his election to pursue the appeal against the Harman Order.

The application before Hart J

The essential outcome of other appeals to the Court of Appeal against my orders of 12 December 2001 in the DEG and GVDC actions was that (i) on 3 September 2002, DEG abandoned its appeal against my dismissal of its action, and (ii) Mr Koshy's appeal against my order in the GVDC requiring him to make an account of profits was dismissed, although on GVDC's cross-appeal the Court of Appeal widened the nature of the account that I had ordered. Petitions by both sides to the House of Lords for leave to appeal (in GVDC's case, against the dismissal of their appeal against my order refusing to order Mr Koshy to pay compensation for breach of fiduciary duty) were refused on 22 January 2004 and so, apart from taking the account of profits, all that remained in the proceedings was to sort out the costs liabilities. That was potentially complicated, since there were orders both ways in two related actions and substantial sums were involved.

On 9 and 10 June 2004, I heard an application by GVDC for (inter alia) an interim costs order against Mr Koshy. On 7 June 2004, by way of a last minute bolstering of his response to that application, Mr Koshy issued an application notice in the DEG action asking for the setting aside of the Harman Order. His hope was that success on that application would have a material impact on the costs position as between himself and GVDC, on the basis (as I have held) that he is entitled to set off against GVDC's costs claims the net amount of DEG's costs liability to him in the DEG action.

I was not required to rule on Mr Koshy's application of 7 June 2004 – which was not before me for decision - but following the delivery on 15 October 2004 of my reserved judgment on the matters that were before me (see [2004] EWHC 2202 (Ch)) I directed the trial of two preliminary issues on that application. They were:

"(a) The issue of whether the court has jurisdiction to make the Order sought on Mr Koshy's application.

(b) The issue of whether Mr Koshy is not entitled to the relief which he seeks on his application as a result of his election before the Court of Appeal in July 2002."

Those two issues came before Hart J on 8 and 9 December 2004, whose judgment on them followed on 13 December 2004 (see [2004] EWHC 2896 (Ch); [2005] 1 WLR 2434). Hart J ruled against Mr Koshy on the first issue, applying the conventional principle, to which I have referred, that (subject only to inapplicable exceptions) one High Court judge has no jurisdiction to vary a perfected order of another such judge. He rejected an argument that in the last sentence of paragraph 23 of his judgment of 24 November 2003 Mummery LJ should be interpreted as having decided that an application such as that which Mr Koshy had made was legally possible. I need not consider this aspect of Hart J's decision any further, because no like question of jurisdiction arises in relation to Mr Koshy's new 2005 claim. There is no dispute that, in principle, an order alleged to have been obtained by fraud can be the subject of challenge by a new claim issued for the purpose of having such order set aside, although it is disputed that the criteria for such a claim are met in this case.

Hart J then turned to the second preliminary issue. He referred to the material exchanges that had taken place during the argument in the Court of Appeal on 16 and 17 July 2002. He recorded that Mr Page accepted that an election had been made. (Mr Page did not in fact appear before Hart J – Mr Koshy was in person - but the judge had the benefit of a skeleton argument that he had prepared for that hearing). Mr Page's written argument was, however, that the only choice with which he had been faced by the Court of Appeal was between (i) a remission of an issue to be tried in the Chancery Division, and (ii) the continuation of the appeal to the Court of Appeal. His argument was, as Hart J put it (see paragraph 28), that "the question of whether it would be open to Mr Koshy [if he lost the appeal] thereafter to invoke a free-standing jurisdiction of the Chancery Division (which for this purpose must be assumed to have existed, albeit not then present in the minds either of the Court of Appeal or of Mr Koshy's advisers) was not before the Court of Appeal." If that was right, it was argued that Mr Koshy's election had not precluded the making of his application dated 7 June 2004.

The contrary argument, advanced by Mr Thompson for DEG (who advanced a like argument to me), was that Mr Koshy's election went wider than a mere election against the remission by the Court of Appeal of an issue to the Chancery Division. It was an election in favour of the pursuit of the appeal as against "any other procedure" (see para. 29 of my transcript quotations) and so extended to precluding the making of the application dated 7 June 2004, the only difference between the adoption of that course and the remission of an issue being (in effect) the issue of the application notice, a mere piece of paper.

Having summarised the opposing arguments as to the nature of the election, Hart J did not make a decision as to its precise nature. He did not do so because he went on to record and accept a further argument from Mr Thompson, as follows:

"30. Mr Thompson further submitted to me that, even if upon a true construction of the election it had only the narrow effect contended for by Mr Page's skeleton, the fact that it had been made at all rendered the present application an abuse of the process of the court: the present application raised precisely the same substantive issues and invited precisely the same procedural consequences as would have obtained had Mr Koshy accepted the Court of Appeal's suggestion that the case be remitted to this Division for the trial of an issue. Accordingly, it was submitted, the present application fell squarely within the principle elaborated by the judgment of the House of Lords in Johnson v. Gore Wood [2002] AC 1, particularly by Lord Bingham of Cornhill, at pp 22- 31, whereby the court has jurisdiction to control its own process to ensure that it is not abused by a party by seeking to use the court's procedures to re-open a matter which either has, or should have been, litigated on an earlier occasion.

31. In my judgment there is no answer to the latter submission in this case. Before the Court of Appeal Mr Koshy was offered the opportunity to litigate the exact issue which he now seeks to raise by this application in a manner which was not discernibly different from the manner in which (if it is permitted to proceed) it will now be determined. He chose not to avail himself of that opportunity. I would only add that, in so far as it may be said that the precise procedural mode of trial of the issue mooted by the Court of Appeal had not been laid down, the same can be said of this application. What can be said is that it is clear that the Court of Appeal had in mind that it would involve a fact-finding process with all the usual attendant safeguards which such a process usually involves. Nothing less is now sought.

32. Although Mr Thompson did not make the point in terms, it seems to me that the question of abuse can be quite simply tested. If the argument in Mr Page's skeleton is correct, then whichever election had been made by Mr Page should not have precluded this application. Thus, even if he had elected for a remission of the issue by the Court of Appeal and subsequently lost on the remitted issue, the logic of the submission would appear to be that Mr Koshy would, nevertheless, at no stage have given up his right to make the present application, and that this court would have a jurisdiction (which it should exercise) to entertain this application. That would be odd. Some, risking an affront to a modern sensibility, might describe it as a reductio ad absurdum. Preferring myself to choose words which are, in the language of section 2(8) of the Civil Procedure Act 1997 'both simple and simply expressed', I think that the result is simply mad.

33. Accordingly, I decide the second preliminary issue against Mr Koshy."

Mr McDonnell advanced a polite criticism of Hart J's judgment to the effect that the judge had not decided the second preliminary issue. He had disposed of it by deciding an issue which was not before him, namely, whether – on the assumption, but without deciding, that Mr Page was right as to the narrow width of the election – the application notice of 7 June 2004 was an abuse of the process of the court. Mr McDonnell said that the judge did not do what the second preliminary issue required him to do, namely to decide whether the issue of that application was something against which Mr Koshy had elected.

I agree with Mr McDonnell that Hart J did not decide the nature of the election that Mr Koshy made – in particular, whether it had only the narrow effect contended for by Mr Page or the wide effect contended for by Mr Thompson – but I disagree that Hart J did not decide the second preliminary issue. The judge's decision was that, even if the election had only the claimed narrow effect, it precluded the making of the application dated 7 June 2004 which, for the reasons he explained, was an abuse of the process of the court. In my judgment, that was a sufficient decision on, and disposal of, the second preliminary issue.

Mr Koshy's 2005 claim

Mr Koshy did not appeal against Hart J's decision. Instead, he started his February 2005 claim. The claim seeks the setting aside of the ex parte order of 8 November 1996, and the judgments of Harman J and of myself dated 6 February 1998 and 26 October 2001 respectively. The claim to set aside the two judgments is misconceived. They are simply the reasons given by Harman J and myself respectively for our orders later made on 20 March 1998 and 12 December 2001 respectively. It is only those orders which Mr Koshy might claim to set aside. One of my orders of 12 December 2001 was for the dismissal of the DEG claim. It seemed improbable to me that Mr Koshy also wanted that order set aside, although that is what the particulars of claim were apparently asking for. Mr McDonnell, however, made it clear that, apart from damages, all that Mr Koshy wants is the setting aside of the Harman Order and my order of 12 December 2001 in the GVDC action.

I come now to the substance of the applications by DEG and GVDC to have the claim form struck out. I deal first with the application in so far as it is directed at striking out Mr Koshy's claim to set aside the Harman Order in the DEG action and to claim damages flowing from its making.

The DEG application

In his new claim, Mr Koshy again seeks to set aside the Harman Order in reliance on what he asserts to have been a fraudulent misleading of Harman J by Mr Kidd. The pleaded case relies upon the alleged inconsistencies between Mr Kidd's affidavit evidence to Harman J and his oral evidence to me under cross-examination and upon my findings in paragraphs 78 and 236 of my October 2001 judgment. The substance of the case is the same as that which Mr Koshy had sought to make before the Court of Appeal. To the extent that the pleaded case relies upon my findings in paragraphs 78 and 236, Mr McDonnell conceded that those findings do not constitute an estoppel against DEG in the new claim and that, if the claim is to proceed, Mr Koshy would have to make good his fraud allegations by evidence.

DEG advanced alternative submissions as to why the new claim against it is an abuse. I summarised them at the beginning of this judgment. The first submission was that Mr Koshy's election was sufficiently wide to preclude the bringing of this fresh claim.

Is the claim directly precluded by Mr Koshy's election?

Mr Thompson submitted that the nature of the election has to be ascertained by reference to the context in which it was made. On the one hand, Mr Koshy was arguing to the Court of Appeal that my findings in paragraphs 78 and 236 were conclusive on the issue of whether Harman J had been misled. On the other hand, DEG was arguing that my findings were not addressed to the specific question of whether Harman J had been misled and that there had been no primary fact-finding by me on that issue. DEG's primary submission on the appeal was that the latter omission could have been remedied by Mr Koshy applying to me after the delivery of my judgment on 26 October 2001 for a discharge of the ex parte order of 8 November 1996, an application in which I could have directed an issue as to whether there had been any relevant misleading. If that had resulted in a finding that there had been such misleading, that would have provided a basis for an out of time appeal against the Harman Order itself (an order which, as it seems to me – in company with Chadwick LJ and Hart J – could not have been the subject of any such issue).

DEG's secondary position on the appeal was that in any event it would be unjust for the Court of Appeal to assess the question of the alleged misleading of Harman J by reference simply to the findings that I had made (which had not been addressed to that specific question), and that if the appeal was going to investigate whether there had been any misleading, then fairness demanded that DEG should be entitled to adduce further evidence on the topic.

The Court of Appeal was obviously sensitive to DEG's latter point. It was also manifestly reluctant to turn itself into (in effect) a first instance fact-finding tribunal, which it would have to do if further evidence was to be admitted which, as was inevitable, would then be subject to cross-examination. In these circumstances, it is not surprising that Mummery LJ regarded the sensible answer to the practical problem that was raised by the opposing positions to be a trial of the relevant question before a first instance judge. He said, however, that it may not be necessary for Mr Koshy to start a new action (which is the conventional way of challenging orders said to have been induced by fraud), since the Court of Appeal could make any order that the court below could have made; and he then asked why the matter could not be the subject of a direction for the trial of an issue in the Chancery Division. That in due course gave rise to the exchanges with Mr Page in which the election was made.

I do not myself fully understand upon what basis Mummery LJ considered that the court below could have directed such an issue and neither counsel was able to explain it: the problem being the limit on a High Court judge's jurisdiction to which I have referred. As for the proposal that the Court of Appeal could direct the issue, it may be that reliance was being placed on CPR Part 52.10(2)(b). But I do not discuss this further since the court and counsel at the appeal hearing were apparently at one that such an issue could be directed and I infer that Mummery LJ regarded it as a preferable alternative to the starting by Mr Koshy of a new claim, no doubt because it was likely to be cheaper and quicker. The exchanges with Mr Page therefore proceeded on the basis that he was being given the option of (i) pursuing his appeal, or (ii) agreeing to the direction for the trial of an issue at first instance.

Mr Page's position was that he wanted to press on with his appeal, relying simply on my findings (see para. 4 of the transcript quotations). If the appeal failed, he appeared to agree with Mummery LJ that that was "an end to the whole matter" and that it could not be "[reopened] before anybody else" (paras. 5 to 15). Unfortunately, Mr Page was cut off in mid-sentence at para. 12, and so we do not know whether what he was going to say was of direct materiality in relation to Mummery LJ's statement at para. 11, but since it appears that he did not try again, I infer that it was not. Pausing at this stage, I interpret Mr Page as there acknowledging that if the appeal failed, the claim to set aside the Harman Order could not be re-opened in any manner. That would obviously include an attempted re-opening of it by an application such as that of 7 June 2004 or by a claim form such as that issued on 9 February 2005.

The exchanges did not, however, end there. At para. 17, Mummery LJ repeated that, if Mr Koshy elected to proceed with the appeal, that would preclude him "from seeking to reopen that costs order in any other way" (my emphasis). At para. 19, Mummery LJ made clear that the court was (in effect) already at least 90% decided that it was going to refuse Mr Thompson's application to adduce fresh evidence, but he was still requiring Mr Page to make an election, saying that an election to press on with the appeal would preclude "the possible procedure that I have suggested of directing this to be tried as an issue." Mr McDonnell is entitled to say that Mummery LJ was there focusing on an election against a particular form of procedure and, by inference, not also against other procedures directed to the same substantive end; although that does not lie easily with Mummery LJ's statements as to the wider consequences of such an election that he had had made in paragraphs 9, 11, 15 and 17. Mr Page nevertheless said (at para. 20) that the court could not have put the choice more clearly.

Mr Page then took instructions and made the election in the terms recorded at para. 23. He did so before the court had ruled on the application to adduce further evidence, but he cannot have been in any doubt by that stage as to the likely outcome of that application: see again para. 19. Mr Page's statement was to the effect that Mr Koshy had elected to have the matter decided by the Court of Appeal on the basis of the two paragraphs of my judgment "and either we win or lose and, as your Lordships have very clearly pointed out, if we lose then that is it." (My emphasis). In my judgment, the sense of what Mr Page was there saying was an acceptance of the sense of what Mummery LJ had conveyed at paras. 9, 11, 15 and 17 – namely, that a failure of the appeal would mark the end of the road and Mr Koshy could not re-open his challenge to the Harman Order in any other way.

The substantive argument then proceeded. When Mr Thompson re-argued his point that Mr Koshy's procedure was wrong, so that his appeal should be dismissed on that ground alone, Mr Page became concerned by the prospect that the Court of Appeal might (a) decide the appeal on that procedural ground and therefore (b) never deal with the merits of the appeal at all, ie as to whether my findings justified a conclusion that Harman J had been misled. That would (or might – depending on its nature) prove the election to have been a disastrous one and so overnight he wrote his note to the court. He raised in it the question whether, if he lost the appeal on a purely procedural ground, "the other route will not be closed to Mr Koshy" – plainly a reference to the directing of an issue for trial in the Chancery Division.

On one view, Mr Page having made the election on 16 July 2002, the exchanges of 17 July 2002 were strictly irrelevant. By that I mean that, the "deal" having been made on 16 July, its terms can strictly only be ascertained by reference to the exchanges of that day, and subsequent statements cannot be relevant to their interpretation. In the present context, however, I do not consider that approach to be appropriate. That is because, as Mr Page's observations at para. 24 show, he was asking the court to clarify the nature of the election he had made the day before, and he was plainly displaying a readiness to accept their clarification as definitive of its nature and extent: otherwise there would have been no point in asking for it.

In fact, para. 24 itself provides a pretty good clue as to the width of the election Mr Page understood Mr Koshy to have made. He there said that what he wanted to know was whether, if the appeal was dismissed on the basis of Mr Thompson's procedural point, he had elected "that it will never be gone into or whether in those circumstances it can still go back to the Chancery Division." One thing about which Mr Page can have been under no illusion was that by then he had already elected against the direction of an issue to be tried by the Chancery Division. But the sense of his inquiry was that he wanted clarification as to whether the election would bite to its full extent if the appeal was dismissed on a procedural ground rather than on the substantive merits. It is, however, implicit in his question that, if the appeal were to be dismissed after a consideration of the merits, he accepted that the effect of his election was that "it [the challenge to the Harman Order] will never be gone into….", a choice of words consistent only with an understanding by Mr Page that the effect of the election was to shut out not just the option of the direction of an issue, but all other procedures by which the Harman Order might have been challenged.

There then followed, by way of answer to Mr Page's question, the important exchanges between Mummery LJ and Mr Page at paras. 25 to 35. Mr Page agreed with Mummery LJ that Mr Koshy had elected that the Court of Appeal's decision would be "the decision" (para. 25, my emphasis); that Mr Koshy had "elected against any other procedure" (para. 29, my emphasis); he had turned down the suggestion that the matter should be remitted to the Chancery Division as an issue to be tried (para. 31); and that if Mr Koshy elected to pursue the appeal, having turned down that offer, he was "putting all [his] eggs into this basket" (para. 33, my emphases). In short, the court's answer to Mr Page's question at para. 24 was that, were the appeal to be disposed of on the basis of Mr Thompson's procedural point, a substantive challenge to the Harman Order would, in Mr Page's words "never be gone into…."

In my judgment, it is plain that, taking the exchanges between Mummery LJ and Mr Page as a whole, their formal essence was that Mr Koshy was being offered a choice between (i) pursuing his appeal based on the two paragraphs of my judgment, or (ii) the remission to me or another judge of an issue directed at the trial of the factual question of whether the Harman Order had been induced by deliberate non-disclosure. It is therefore obvious that if Mr Koshy elected for alternative (i), and his appeal failed, he was irreversibly precluding the remission of an issue under alternative (ii). That much is agreed.

I consider, however, that it would be wrong to interpret Mr Koshy's election for alternative (i) as merely precluding the particular procedural route offered by alternative (ii) whilst still leaving open any other alternative procedural route that would achieve the same substantive result as alternative (ii). That would be to allow the particular form of the election to triumph over its intended substance. It is in my judgment apparent from the transcript that Mummery LJ was not focusing on the direction of an issue as the limit of what Mr Koshy would be electing against if he chose to pursue the appeal. He had already expressly adverted to the commencement of a new claim as being the usual route by means of which a litigant can seek to set aside a prior order on the grounds of alleged fraud; and, before suggesting that the court might direct an issue, he had said that it may not be necessary for Mr Koshy to start such a new action. In my judgment, it is plain, therefore, that Mummery LJ was simply proposing, and then focusing on, the direction of an issue as the most convenient and economical way of achieving a trial of the factual issues to which Mr Koshy's complaint about the Harman Order gave rise, although he had also had in mind the conventional alternative route that was in principle also open to Mr Koshy.

It is in my view also plain, and wholly consistent with that, that Mummery LJ regarded an election to pursue the appeal as not just (as was obvious) precluding the direction of an issue, but as also precluding any alternative procedural route directed at achieving a like trial of the factual issues. I regard this as apparent from Mummery LJ's choice of language in paras. 9, 11, 15, 17, 25, 29 and 33. I regard it as also apparent that Mr Page was agreeing with all that Mummery LJ there said. For reasons given, I also regard it as implicit in Mr Page's own question at para. 24 that this is how he had understood the election, and the subsequent exchanges confirmed that.

All that appears to me not only obvious from the transcript, I take the view that any other interpretation is an improbable one. If at the end of the relevant exchanges on 17 July 2002, Mr Page had asked for the court's guidance as to whether, were Mr Koshy's appeal to be dismissed, it would still be open to him either to (i) make an application before a Chancery judge asking for the direction of an issue as to the alleged non-disclosure, or (ii) start a new claim for the setting aside of the Harman Order on the grounds of non-disclosure, I apprehend that he would have received the shortest of answers in negative terms: because Mummery LJ had already made it clear that Mr Koshy had elected against any such alternative procedures. I hold, therefore, that Mr Koshy's election was in the wider form contended for by Mr Thompson and that it precluded him from making the application dated 7 June 2004 upon which Hart J ruled and also from starting his new February 2005 claim against DEG. I add that, for reasons earlier given, that conclusion is also apparently in line with what Mummery LJ said in paragraph 23 of his judgment delivered on 24 November 2003.

I should, however, record that I am not wholly confident that the choice that Mr Koshy made before the Court of Appeal was strictly an "election" in the sense in which that word is ordinarily used. A party is usually only regarded as being put to, or as making, an election when he has to choose between alternative and inconsistent rights or remedies: for example, whether to accept the repudiation of a contract or to affirm the contract ( see, for example, Motor Oil Hellas (Corinth) Refineries SA v. Shipping Corporation of India (the "Kanchenjunga") [1990] 1 Lloyd's Rep. 391, at 398, per Lord Goff of Chieveley); or whether, at the point of judgment, to opt for an account of profits made in breach of fiduciary duty or for damages for the loss suffered by that breach (see Personal Representatives of Tang Man Sit v. Capacious Investments Ltd [1996] AC 514, at 521, per Lord Nicholls of Birkenhead).

In this case, it is not obvious to me that Mr Koshy was being required to choose between alternative or inconsistent rights or remedies. The Court of Appeal (Chadwick LJ and Charles J) had given him an unconditional permission to appeal against the Harman Order in reliance upon the two paragraphs of my judgment. On one view, therefore, it might be thought both that he was entitled to pursue that appeal without being subjected to further conditions and that the Court of Appeal was under a duty to hear it. The appeal was either going to succeed or fail, but if (as it did) it failed on the ground that my findings in paragraphs 78 and 236 of my judgment were insufficient to provide the requisite basis for success, it is also not obvious to me why it would then have been inconsistent for Mr Koshy to start a new claim directed at overturning the Harman Order, being one in which he sought to prove facts that were sufficient to overturn it. It does not appear to me that the adoption of that course of action would be any different in substance from that in which a claimant seeks an early victory by way of a summary judgment application under CPR Part 24 and, upon failure, proceeds to trial. The only formal difference is that that particular course is recognised by the CPR. It is possible that DEG might have argued that, given the failed appeal, any such new claim was an abuse of the process, and Mr Thompson submitted that it would have been. But, absent the making by Mr Koshy of any such "election" as he made in this case, I am not convinced that any such argument would or ought to have succeeded.

As to the last point, I recognise, however, that it would probably have made all the difference to the success of such an argument if the hearing of the appeal had not been confined to Mr Koshy's arguments on paragraphs 78 and 236 but had extended to the adducing of fresh evidence from DEG upon which there had been cross-examination. If that had been how events had turned out, then it can readily be seen that there would in effect have been a trial of the relevant issue before the Court of Appeal, so that for Mr Koshy then to start again by way of a new claim probably would have been an abuse of the process.

That, however, is not what happened. By the time that Mummery LJ was putting Mr Koshy to his election, it appears that the court had all but formally decided not to let in the fresh evidence that DEG wanted to call (see para. 19 of the transcript); and I infer that Mr Koshy's election was made on the basis that such evidence was (or was probably) not going to be admitted. That being so, the effect of the election to which Mr Koshy was put was, if he chose to pursue his appeal, to subject himself to a further condition as to the future course which might otherwise have been open to him (namely, starting a new claim), not being one which (at least arguably) would be either inconsistent with the pursuit of his failed appeal or an abuse of the process of the court.

The outcome was, therefore, somewhat unsatisfactory from Mr Koshy's viewpoint. By making the choice he did, he had agreed to confine himself to a case built exclusively on two paragraphs in my judgment, when it must have been obvious to him that the Court of Appeal's view was that the fair disposal of the point he wanted to make required a wider factual inquiry than was reflected in those paragraphs. One might think it would also have been obvious to him that, given that expression of view, his appeal was far from gilt-edged, yet he still chose to put all his eggs into the appellate basket. In paragraph 18 of his judgment dismissing the appeal, Mummery LJ said he did not regard the result "as entirely fair or satisfactory". I do not wholly understand that observation. If, as the court held, the appeal did not deserve to succeed, its dismissal was neither unfair nor unsatisfactory. Whether Mummery LJ also had in mind that Mr Koshy's election meant that a legitimate issue as to the alleged misleading of Harman J could and would never be investigated its is not clear.

In the circumstances I have outlined, I therefore have reservations as to whether Mr Koshy's decision to pursue his appeal was in the nature of a true election. But even if it was not, I do not regard that as making any material difference to the outcome of the present application. The Court of Appeal's view was that the just disposal of the issue that Mr Koshy's appeal had raised was either (i) the pursuit of the appeal, or (ii) a first instance trial of the factual questions it raised. But it was plainly of the view that both options should not be open to Mr Koshy and it gave him a choice as to which he wanted to pursue. If he chose the former, and failed, he was to understand that he could not re-open the matter in any other way, including (in my judgment) by a claim such as his new claim. Mr Koshy chose to pursue the appeal and must therefore be taken to have accepted that the price of doing so was the abandonment of all alternative procedural routes in the event of failure. He was therefore agreeing that he would not take any other procedural routes, and the Court of Appeal heard his appeal on that basis. In my view, in those circumstances the issue by Mr Koshy of his new 2005 claim was and is an abuse of the process of the court, since he was thereby taking a course which the Court of Appeal had made plain was not to be open to him and which he had agreed he would not take. I propose, therefore, to make an order striking the 2005 claim out. This must, in my judgment, extend also to the claim for damages for the allegedly fraudulent obtaining of the Harman Order: if it is not open to Mr Koshy to challenge the making of that order on the ground of Mr Kidd's alleged misleading of Harman J, nor can it be open to him to claim damages for such alleged misleading.

If, contrary to my view, Mr Koshy's election was of the narrow nature for which Mr McDonnell contended, then I think it would logically follow that, despite the language of the transcript apparently pointing in a different direction, the substance of the election was understood on both sides as going no wider than an election against the remission of an issue to a Chancery judge. But even in that circumstance, I am in respectful agreement with the approach adopted by Hart J in paragraphs 30 to 32 of his judgment of 13 December 2005. In my view, for the reasons he gave, Mr Koshy's 2005 claim is as much an abuse of the process as was his application of 7 June 2005.

The DEG application – further points

That is enough to dispose of the new claim in so far as it is directed to setting aside the Harman Order. Mr Thompson also made various other points. He said that whilst it is well-established that it is in principle open to an unsuccessful litigant to start a new claim to set aside an adverse judgment on the ground that it had been obtained by fraud, such a claim will only be permitted to proceed if the claimant can rely on fresh evidence that has been discovered since the first trial, being evidence which could not have been produced with reasonable diligence before and being such that, had it been put forward at the trial, it would probably have caused a different conclusion to be reached: see Owens Bank Ltd. v. Bracco and Another [1992] AC 443, at 459, per Lord Bridge of Harwich.

That general principle is not, I think, in question although Mr Thompson said that it is not applicable to the circumstances of the present case because Mr Koshy is not seeking to have a judgment at trial set aside, he is merely seeking to have an interlocutory order set aside. He said that the point of the jurisdiction is that, if the judgment at trial is set aside, there can and will be a re-trial. But if the interlocutory Harman Order is set aside, there can be no question of there being any re-hearing of the applications that were argued before Harman J in the spring of 1997. Therefore, said Mr Thompson, there is no jurisdiction in the court to entertain the substance of Mr Koshy's claim.

I do not propose to decide that point since, for reasons given, I do not have to, although my provisional view is that it is unlikely to be correct and that, if it were, it would have the potential for causing injustice. The assumed scenario is the hearing of an inter partes interlocutory application resulting in an adverse decision for one party, who later learns of evidence, of which he could not previously reasonably have been aware, showing that the successful party had obtained the order by fraud. I was shown no authority to the effect that in such circumstances a new claim could not be commenced directed at setting aside the order, and I was not persuaded that Mr Thompson's submission correctly reflects the law. But I make no decision on the point.

Secondly, Mr Thompson argued that there was no material before the court sufficient to show that Mr Koshy had what he called a prima facie case of fraud by perjury on the part of Mr Kidd. Mr McDonnell, by contrast, engaged in a lengthy and detailed argument, which involved a meticulous trawl through much of the evidence in the case, to the effect that there was more than sufficient material to show that Mr Koshy had a real case that Harman J had been deliberately misled.

Since I have decided that Mr Koshy's claim against DEG in relation to the Harman Order is to be struck out, this issue does not arise either and in those circumstances I see no merit in an extended analysis of the question of whether Mr Koshy has a sufficiently solid factual case deserving of a trial. I propose simply to say that, had I not concluded that the claim must be struck out in consequence of Mr Koshy's election, I would not have struck it out.

I turn to GVDC's application to strike out Mr Koshy's claim (i) to set aside my order dated 12 December 2001 in the GVDC action requiring him to make an account of profits and (ii) to recover damages.

The GVDC application

Mr Koshy's pleaded case is that not only was the Harman Order in the DEG action obtained by fraud, so was my order dated 12 December 2001 in the GVDC action. The essence of the case appears to be that Mr Kidd had allegedly foreseen that the proposed GVDC action would, if it were a stand-alone action, be likely to be the subject of a successful forum non conveniens challenge by Mr Koshy, on the basis of an argument that Zambia was a more suitable forum. Any like claim thereafter brought by GVDC in Zambia would then have been met with a successful challenge by Mr Koshy to the title of the receivers who had procured its bringing, after which Mr Koshy would have procured GVDC's ratification of those of his activities for which he might otherwise have been required to account.

Having allegedly foreseen this, Mr Kidd is further said to have conceived the idea that if a related action by DEG were already on foot in advance of the launching of the GVDC action, that would be likely to defeat the prospect of a successful forum challenge by Mr Koshy in the GVDC action. It was, however, obviously also important that the DEG action could withstand a strike-out challenge on the ground that it was fatally statute-barred, and so Mr Kidd decided to engage in his allegedly dishonest misleading of Harman J in order to pre-empt any such challenge. It is alleged that Mr Kidd's intentions worked as planned. The basis of the case is that his dishonest scheming led inexorably to the making by me in December 2001 of the GVDC order, which would not otherwise have been made, and nor would any like order have been made in Zambia. By way of a further allegation (which looks to be something of an afterthought) there appears to be an attempt to extend the case to including an allegation of conspiracy by DEG and GVDC, the relevant part of the pleading being:

"52. Further, DEG and GVDC, acting by and with the knowledge of Mr Kidd, conspired together to deceive the UK High Court, Mr Koshy and Lasco as particularised above."

I am not satisfied that any sufficient plea of conspiracy is in fact there made. The whole case appears to be founded on allegations as to what Mr Kidd intended, did and caused. Apart from the fact that, if and so far as the case is founded on alleged conspiracy, there appears to be no evidence supporting it, there are, in my judgment, anyway serious difficulties in Mr Koshy's pleaded challenge to the GVDC order.

First, the pleaded case is dependent upon proof that Mr Kidd engaged in a deliberate misleading of Harman J, such misleading being directed at obtaining and maintaining the freezing orders in the DEG action and at providing an answer to the limitation challenge which it is said Mr Koshy would otherwise have made by way of a strike out application in that action. In my judgment, the making of a case along those lines necessarily involves a challenge to the Harman Order on a basis that I have ruled is precluded by Mr Koshy's election. The Court of Appeal gave Mr Koshy the opportunity to have an issue tried at which he could seek to prove the dishonest misleading of Harman J by Mr Kidd, but he turned it down, agreeing (as I have held) that he would not re-open that question by any other procedure. He is not entitled to re-open the same question, and advance the same case, as part of a bid to set aside the GVDC order, a bid which is dependent on what Mr Kidd did in his capacity as a solicitor for DEG. If, as I hold, it is not open to Mr Koshy to seek to prove the dishonest misleading of Harman J by Mr Kidd, then he cannot make good his pleaded case in relation to the GVDC order.

Secondly, assuming that Mr Kidd had not given evidence as to the "chance discovery" in June 1996, it does not follow that DEG could not have advanced essentially the same claim that it did advance in its action, or that it would have been struck out at an early stage. Absent Mr Kidd's evidence, the critical question for limitation purposes would have been whether DEG had the means of discovering the existence of its deceit claim before November 1990. After the trial, I held that it could, but in the light of Dr Polzer's affidavit of 22 January 1997 (which was before Harman J at the 1997 hearing) it appears to me improbable that Mr Koshy and Lasco could have achieved a strike out of the DEG action on the basis that it was doomed to failure on limitation grounds. A basic plank of their unsuccessful case before Harman J for the discharge of the freezing order was that DEG had fully understood the "pipeline dismantling" system in 1986 and 1987 and therefore had not been misled as to the profit that Lasco was making on its loan to GVDC.

Thirdly, Mr Koshy is in difficulty in his point that, upon a successful striking out of the DEG action, he could have made a successful application to stay the GVDC action on the basis that it was more suitable for a trial in Zambia. Whilst he could have made such an application, the decision of the Court of Justice of the European Communities in Owusu v. Jackson and others [2005] QB 801 shows that it would probably have failed. That decision is to the effect that where (as here) the English court's jurisdiction to entertain the GVDC claim against Mr Koshy and Lasco was based on their domicile in England and Wales (and so on the mandatory provisions of article 2 of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (as amended)), it is not open to the English court to decline jurisdiction on the ground that the court of a non-contracting state would be a more appropriate forum. Mr Thompson accepts that, in 1996/1997, the issue ultimately decided by the Owusu case on 1 March 2005 was something of an open question (see the discussion in para. 12-017 in Dicey and Morris on The Conflict of Laws, 13^th Edition, Volume 1, 200), but he says that it has now been resolved. He says also that, given the known uncertainty of the position in 1997, Mr Koshy would not have made any stay application because he would have known that it would have ended up in the ECJ.

I can see no sound basis for assuming that the outcome of any forum non conveniens application that Mr Koshy might have made would have been other than in line with the law as now explained in Owusu, namely an outcome unfavourable to Mr Koshy. Mr McDonnell submitted that the questions left unanswered in paragraphs 47 to 52 in the ECJ's judgment in Owusu showed that the outcome of any such stay application was not as clear-cut as that, and he said that the various proceedings pending in Zambia would be regarded as related proceedings, relying primarily on the assertion that in both the GVDC action and the Zambian proceedings there was an issue as to the validity of the receivership. In my view, he was wrong in that assertion: Mr Koshy's defence to the GVDC action raised no such issue. It is correct that, rather later, in 1999, Mr Koshy did seek to challenge the authority of the GVDC receivers to bring the GVDC action, the story about which I explained in my judgment of 13 December 1999 (see [2002] 2 BCLC 705). I will not rehearse that story here but mention merely that, at page 713, I pointed out that, when the GVDC action was started in November 1996, Mr Koshy raised no point as to the validity of the receivers' appointment; and, at page 727, I also recorded that Mr Michael Briggs QC (his then leading counsel) asserted that Mr Koshy could not have raised such a challenge, although I then went on to identify three arguments that had been advanced to me that could have been advanced by way of such a challenge, although they were not arguments which I considered would have succeeded.

More generally, even if (contrary to my view) the Owusu point ought not to be regarded as carrying the day on this issue against Mr Koshy, and the court would have had jurisdiction to stay the GVDC action on forum non conveniens grounds, I consider that Mr Koshy would have borne the burden of proving that Zambia was clearly the more appropriate forum for the action (Spiliada Maritime Corporation v. Cansulex Ltd [1987] AC 460) and that in any such venture he would probably have failed. It is correct that some, remotely related, Zambian proceedings were already on foot, but that is not a factor which I consider would have enabled Mr Koshy to discharge the burden. GVDC was a party to certain of those proceedings, but Mr Koshy was not. The issues in them were quite different from those in the GVDC action. They had also been underway for some considerable time by November 1996, and it would have been procedurally inconvenient to introduce into them the new GVDC claim at that relatively late stage. I have dealt with Mr McDonnell's main point that, like the Zambian proceedings, the GVDC action raised an issue as to the title of the GVDC receivers. The main witness in the GVDC action was Mr Koshy, who lives in Surrey. Other potential witnesses were resident in Germany, the Netherlands and the USA. The only witnesses from Zambia who, in the event, gave evidence at the GVDC trial were Mr Peiris (for Mr Koshy) and Mr Ward (for DEG and GVDC). No plea of Zambian law was made in the GVDC action by either side. I conclude that, even had the GVDC action been a stand-alone action, any challenge to it on forum non conveniens grounds would have failed. I add that I do not regard that issue as one which could only be fairly decided at a trial of the present claim. The disposal of any such application would not have depended on oral evidence, and I am as well able to decide that question now as would be the judge at any trial of the present claim.

Fourth, as regards his bid to set aside my order in the GVDC action, Mr Koshy faces a further fundamental difficulty. Whilst it is in principle open to a disappointed litigant to start a new claim to set aside a judgment said to have been obtained by fraud, the court will only permit the bringing of such an action if it is based on fresh evidence discovered since the first trial, being evidence which could not have been produced at the first trial with reasonable diligence (Owens Bank Ltd v. Bracco and another [1992] 2 AC 443, at 459).

In this case, there is no such new evidence. The whole of Mr Koshy's bid to challenge the Harman Order (first by an appeal, then by an application in the DEG action and now by this claim) and the GVDC order (by this claim) has been inspired exclusively by my findings in paragraph 78 and 236. Those findings were not "new evidence" within the meaning of the condition just described. They were findings I made on the basis of the evidence I had read and heard in the course of trying the DEG and GVDC actions, and on the basis of the submissions of counsel. Mr McDonnell conceded that they constitute no relevant estoppel against anyone, and that, if the present claim were to be permitted to proceed, Mr Koshy would have to make good his assertions by evidence. He has, however, no new evidence on the basis of which to make his case. All he is wants to do is to re-open, at a new trial, issues which it was open to him to raise on the evidence adduced at the first trial. He has, in effect, viewed my findings as showing that he could perhaps have run a wider case in answer to the GVDC claim than he did. In my judgment, his new claim is not founded on anything which can fairly be judged to be fresh evidence only discovered since that trial. That is fatal to Mr Koshy's bid to set aside the GVDC order on the ground of alleged fraud.

There remains his separate claim for damages allegedly suffered by the obtaining of the GVDC order. Since, for reasons given, that claim is not based on new evidence discovered since the trial, I cannot see why, in principle, the assertion that the pursuit of the GVDC claim was all part of a dishonest plan, of which Mr Kidd is alleged to have been the architect, could not have been raised defensively at the first trial, although it may be that Mr Koshy could not have pleaded it before the giving of the oral evidence at that trial. If so, then the attempt to rely on the point in this new claim is an abuse of the process. But since, for reasons given, I anyway do not consider that (i) it is open to Mr Koshy to contend that Mr Kidd dishonestly misled Harman J, or (ii) that he has any real prospect of proving on the facts that Mr Kidd's alleged dishonesty "caused" the making of the GVDC order dated 12 December 2001 (which is what Mr Koshy asserts), I also regard the damages claim as having no real prospect of success either. I will strike that claim out as well.

Result

I will strike out the whole of Mr Koshy's claim issued on 9 February 2005.

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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Koshy v Deg-Deutsche Investitions-Und Entwicklungsgesellschaft Mbh [2006] EWHC 17 (Ch) (20 January 2006) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2006/17.html Cite as: [2006] EWHC 17 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		20 January 2006