Mrs Justice May:
- This is my decision on the return date for a freezing injunction granted by Mr Justice Sweeney on 17 December 2015 and extended by consent on 23 December and 19 January 2016 until this substantive return date.
- The injunction was granted against the First and Second Respondents (respectively "Mr Terry" and "Ms Drewett", a married couple) in circumstances where the Applicants (respectively "Mr Taylor" and "the companies") have a judgment against Mr Terry for £1,686,874.92 and £578,701 together with payment on account of costs of £50,000.
- The chronology of proceedings in which that judgment was given is as follows: the claim form was issued in late 2012. In February 2013 Master Kay QC gave judgment in default of defence with damages to be assessed. An attempt by Mr Terry to set aside the judgment failed and his requests for permission to appeal that decision were subsequently denied first by Mrs Justice Andrews in April 2013 and then by Mr Justice Hickinbottom in May 2014. The assessment was listed for November 2014 but was not finally determined until 12 May 2015 when Master Kay QC awarded the sums which I have set out.
- Although there was no judgment against Ms Drewett, nor any proceedings contemplated against her at the time, the freezing order was sought and obtained against her as well, purportedly in accordance with the Court of Appeal decision in S.C.F Finance Co Ltd v Masri and Another [1984] 2 WLR 58 (Masri). After the grant of the injunction, in January 2016, an Insolvency Act claim was issued in the QBD against Mr Terry and Ms Drewett seeking to set aside transfers of various assets made by Mr Terry to his wife in 2015 and prior years on the basis that they had been done for the purposes of avoiding paying creditors. Those proceedings have now been transferred to the Chancery Division.
Issues for determination
- Mr Watson-Gandy, for the Applicants, applies to continue the freezing injunction against both Mr Terry and Ms Drewett. Mr Jarman, for Mr Terry, submits that there has been material non-disclosure such that the injunction should be discharged without more. Alternatively he submits, there is no real risk of dissipation justifying any order, nor is it just and convenient to allow it to continue. Mr Ditchburn, for Ms Drewett, submits that the order against his client was irregular and ought not to continue for that reason. So far as his client is concerned, he says, there is, in any event, no risk of dissipation.
- The issues for me to decide are accordingly as follows:
(1) Was there any non-disclosure of a material fact at the without notice hearing before Sweeney J in December last year and, if so, what should be the consequence of that non-disclosure?
(2) Is there a real risk that Mr Terry will dissipate his assets in the absence of an order?
(3) Is it anyway just and convenient to make the order against Mr Terry?
(4) Was the order made against Ms Drewett a proper order in circumstances where no proceedings had been made and where none were then in contemplation against her? Is there a proper basis now for the continuation of any order against her, including the existence of any real risk of dissipation?
(1) Non-disclosure
- Mr Jarman relied upon a number of matters which he says should have been, but were not, disclosed to Mr Justice Sweeney at the without notice hearing in December. He drew my attention to various authorities, well-known in this area, emphasising the importance of full and frank disclosure by a party applying for without notice relief (see, for instance, Arena Corp. Limited v Schroeder [2003] EWCA 1089 (Ch D)).
- The first and principal non-disclosure relied on by Mr Jarman concerns the fact that Mr Taylor has since 2011 been under investigation for fraud in France. I was referred in this respect to the decision of the Juge d'Instruction [file no JICABJI210000032] dated 31 July 2015, ordering the case against Mr Taylor to proceed to trial. It is apparent from the French judge's reasons that the underlying loan guarantee transaction giving rise to the fraud charge in France (involving a complainant named Mr Gaspoz) is the same as one of the transactions relied upon by Mr Taylor in the English civil claim against Mr Terry and in respect of which he has judgment. It is not disputed that no mention was made to Sweeney J of the French criminal proceeding at the hearing last December.
- Mr Watson-Gandy, for Mr Taylor and the companies, makes two points in response: first, as between Mr Taylor and Mr Terry the issue arising out of the transaction with Mr Gaspoz in France has been determined in Mr Taylor's favour within the UK proceedings. Mr Taylor's continuing difficulty in France arises, says Mr Watson-Gandy, because Mr Terry has not returned to France to be arrested and investigated with the result that, as appears from the French judge's reasoning, there is some doubt in the minds of the authorities there as to whether he is a real person or someone made up by Mr Taylor as a (fictional) scapegoat. Second and in any event, says Mr Watson-Gandy, facts amounting to an attack on Mr Taylor's honesty were not material at the without notice hearing as the issue has been determined in his favour and judgment given.
- I am persuaded by the second of Mr Watson-Gandy's points. If there had been no judgment here then the French criminal proceeding against Mr Taylor in respect of (at least part of) the same subject matter would have been a highly material matter for the judge on the without notice application to have been told. As it is, however, given that Mr Taylor has his judgment, the fact that the underlying factual basis for that judgment is under another form of examination in another jurisdiction does not seem to me to be relevant.
- When I put this view to Mr Jarman his response was to say that the existence of proceedings in France went to the question of Mr Taylor's motivation for seeking the injunction, and in particular to the credibility of Mr Taylor's expressed belief in the risk of dissipation. Even if the existence of the French proceeding could be said to bear on the credibility of Mr Taylor's views as to risk of dissipation, I remind myself that the court's determination of risk of dissipation is an objective one, based on the facts which appear from the evidence; it does not, and should not, involve an assessment of the credibility of any expressed anxiety regarding such dissipation on the part of the person seeking the relief. Consequently the credibility of someone expressing anxiety, or an opinion, in relation to the risk of dissipation is of no relevance to the court's task of assessing whether such a risk exists.
- I can dispose of the remainder of Mr Jarman's non-disclosure points shortly. A failure to disclose that the Applicants were about to issue Insolvency Act proceedings, or to "make clear enough" that Ms Drewett was not a proper party to the order are not in my view matters of fact. As to the alleged failure to disclose Mr Taylor's "proper address" in Eze, France, this assertion by Mr Jarman appears to have been made on the (mis)understanding that Mr Taylor has been required by the conditions of his bail (or its equivalent) in France to remain at his cottage in Eze, whereas in fact Mr Taylor has paid a bail bond which permits him to come and go from Eze. The existence or quantity of telephone calls made by Mr Taylor to Mr Terry do not seem to me to be a material matter, nor do the circumstances in which Mr Terry became the owner of the house at Mile Oak Road ("Mile Oak Rd") in 2005. The Court was told of the existence of a settlement in another action between Mr Taylor and Mr Terry, likewise of Mr Terry's current place of residence in Rue de la Cite, Geneva.
(2) Risk of dissipation – Mr Terry
- The matters relied upon by Mr Watson-Gandy for a risk of dissipation are:
(i) Mr Terry is resident out of the jurisdiction in Geneva.
(ii) He is plainly experienced in international finance.
(iii) He has given a false address in the past.
(iv) The judgment against him here was for monies obtained by fraud.
(v) The transfers of valuable assets to his wife (from whom he says he separated in 2012) in 2015 following his unsuccessful appeals against judgment.
(vi) His failure, in his statement of means served in September 2015, to make any reference to his joint ownership, with Ms Drewett, of the property known as Paget, Holmdean Road ("Paget"), nor to give the name or address of that property.
(vii) In his affidavit served in response to the freezing injunction Mr Terry refers to Intacapital as his "sole employer", yet Ms Drewett appears to have been receiving some payments (which she describes as maintenance payments from her husband) from a company called DHLA; Mr Terry's solicitor in his most recent witness statement says that Mr Terry gets commissions from both Intacapital and DHLA.
(viii) In the period October - December 2015 a total of £83,315.98 has been paid by Mr Terry into his wife's accounts, despite what he and she have previously said about maintenance payments being made of just £3,500 (or €3,500, it is not entirely clear) per month. The very recent account of a loan for £60,000 from her to him made in March 2015 lacks credibility, submits Mr Watson-Gandy.
- Mr Jarman argued that whatever Mr Terry's personal circumstances might be, all the evidence indicates that he is bringing assets into the jurisdiction and not taking them away from it. His money transferred to his wife, for instance, is paying off the mortgage on Paget (possibly also on Mile Oak Rd) and accordingly increasing the equity. The real property assets (Mile Oak Rd and Paget), if they do belong to him and not to his wife, are there and could not easily or quickly be disposed of. Furthermore, urges Mr Jarman, the proceedings against his client were started in 2012 with judgment being obtained in February 2014, yet no freezing relief was sought until just before Christmas this year. He invites me to find that the long delay, combined with the timing of the application just before Christmas so as to cause maximum distress to Mr Terry's wife and son, rendered the seeking of relief an abuse of process.
- Mr Watson-Gandy in response drew attention to the transfers in 2015 of Mile Oak Rd and Paget to Ms Drewett. It was not until after Mr Terry's statement of means in September 2015, he says, that Mr Taylor and his advisors became aware of Mr Terry's joint ownership, with his wife, of Paget which is a large house with considerable equity. The application for relief was made promptly when the enquiry agents had reported. As to dissipation, Mr Watson-Gandy submits, this is precisely what Mr Terry has done by transferring ownership of assets to his wife.
- I conclude that there is a risk of dissipation here. Mr Terry lives out of the jurisdiction, by his own account he earns very large sums of money and has, or has had, valuable assets here and elsewhere yet the judgment remains substantially unsatisfied. Records in relation to Mile Oak Rd show that he did own that house but transferred ownership to his wife last year, yet when enquiries were made of the tenants at Mile Ed Rd very recently they reported that Mr Terry (not Ms Drewett) was their landlord. Paget, the house in which his wife and son are living, is a large 5-bed property registered in the joint names of Mr Terry and Ms Drewett however after the freezing order was imposed Mr Terry produced a Declaration of Trust dated in 2015 purporting to make his wife the sole beneficial owner of the property. It is true that there has been considerable delay since Mr Taylor obtained judgment in 2013/4, but that is explained to some extent by the fact that damages had not yet been assessed, that after they were some attempts were made to negotiate regular payments in reduction of the debt, by the fact that Paget was not acquired until 2015 and that Mr Taylor was unaware until late last year that it was purchased in the joint names of Mr Terry and his wife.
(3) Just and convenient
- I am also satisfied that it is just and convenient to continue an order against Mr Terry and to specify in the order the property assets at Mile Oak Rd and Paget, also the gold Bentley registration number COGNAC. I am prepared to specify those assets in the order on the basis, discussed in Masri, that the properties, although held in the name of his wife, are arguably owned by Mr Terry. The recently-issued Insolvency Act proceedings will conclusively determine the question of ownership. The gold Bentley apparently seen at Paget by the enquiry agents will be specified in the order even though counsel for Mr Terry and Ms Drewett sought to cast doubt upon its existence. At present the balance of the evidence before me is that such a car exists and is associated with Mr Terry; if it does and is, then it is plainly an asset of value.
- The remaining named assets (an Aston Martin and a BMW 6-series, a property at Flamingo Hills in Spain and bank accounts held by Ms Drewett) will not be specified in the order, for the reasons I discuss further below in connection with Ms Drewett.
(4) The order against Ms Drewett
- In his submissions Mr Watson-Gandy accepted that the Applicants had adopted a "blunderbuss" approach at the without-notice hearing. He pointed out, however, that he had made it clear to the judge at the hearing in December that Ms Drewett was not a party to any proceedings and that none were then contemplated against her. At that time she was no more than a third party holding assets belonging to Mr Terry. Since disclosure following the order, including disclosure of the Declaration of Trust over Paget and details of payments into her bank accounts, he said, the Applicants have issued proceedings seeking to reverse transfers of assets. Mr Watson-Gandy points out that the order against Ms Drewett is now sought to protect the position pending determination of those proceedings.
- Mr Ditchburn, in a series of succinct and helpful submissions, made the following points:
(i) If at the time of seeking the order Ms Drewett was simply a third party affected by it then it was unnecessary, and wrong, to name her in the order, to seek to freeze all her assets up to the amount of the judgment debt owed by her husband and to require her to give detailed disclosure of all her assets.
(ii) In the absence of any claim against Ms Drewett, for example dishonest assistance or breach of trust giving rise to a money claim against her, there was no possible basis to seek to freeze assets that are hers, in respect of which there could be no claim that they remained her husband's or should be transferred back to him.
(iii) The circumstances in which the Applicants obtained disclosure from Ms Drewett (pursuant to a freezing order against her which they should not have sought or obtained) mean that the Applicants ought not be permitted to seek an order by reference to the information disclosed.
(iv) In any event, of the assets in respect of which an order was sought, the Aston Martin and the BMW 6-series are plainly hers and not her husband's (the Aston having been acquired by her long before proceedings were issued and the BMW having been purchased as her car during the marriage). As to the property in Spain, he submitted, the Applicants only know about that through the disclosure which they should not have had and in any event it was purchased in her name for €50,000 in 2005, long before the proceedings giving rise to the judgment against her husband. As to the funds in her bank accounts, this case is to be distinguished from Masri, Mr Ditchburn argued, as in that case there was a great deal of evidence of the husband using the accounts held in his wife's name when conducting his business, by contrast here there is no evidence of Mr Terry having using Ms Drewett's accounts as his own, indeed when seeking (illegitimately, in the absence of such evidence) to obtain information about her accounts the Applicants asked only for details of money coming in and expressly excluded payments out. Moreover it has never been suggested that all the money in the accounts belongs to Mr Terry, nor could it be, as Ms Drewett undeniably receives earnings and other payments into her accounts.
(v) An Insolvency Act claim seeking to reverse transfers that have been made pre-supposes that the assets are now owned by Ms Drewett and not by her husband. Accordingly a risk of dissipation by her would need to be shown before property which she owns could be injuncted.
(vi) It would not be just or convenient to continue to freeze her bank accounts as these are the accounts from which the mortgage on Mile Oak Rd and Paget are paid. It cannot be in anyone's interests for these properties to be re-possessed by the banks for a failure to make the mortgage repayments.
- Mr Watson-Gandy, in response, reiterated that what the Applicants seek is protection against dissipation of assets belonging (whether legally or beneficially) to Mr Terry. The proceedings now in the Chancery Division are to determine whether and to what extent assets which now appear to be held by Ms Drewett are in fact held on trust for her husband, or alternatively ought to be transferred back to him in order to be available to his creditors. Mr Watson-Gandy accepted that insofar as there were assets acquired by Ms Drewett before her marriage or in circumstances which could have had nothing to do with sheltering assets to avoid judgment, then he would not be entitled to include them in any freezing order.
- In my judgment, the eagerness with which the Applicants approached the seeking of freezing relief against Mr Terry misled them into an approach that targeted particular assets in a proprietary way, and thence to obtaining, wrongly, a wholesale freezing order against Ms Drewett. Although in personam freezing relief may have the effect of giving an applicant security over certain assets, a freezing order is not proprietary relief and obtaining security is not its purpose. There was no possible basis for seeking an in personam freezing order against Ms Drewett in December as there were no proceedings against her. The most that could have been done would have been to identify in the order made against Mr Terry particular assets belonging to him (although apparently held by her). She would then have been a third party affected by the order, and could have applied to un-freeze some or all of the named assets held by her. It was not appropriate to make her the subject of an order freezing all her assets up to the full amount of the judgment debt against her husband, nor to require her to make disclosure of her assets as an ancillary to the freezing order, in order to "police" it.
Conclusions re: continuing Orders
- The order against Ms Drewett will be discharged ab initio. I do not propose to make any fresh order against her in support of the recently-issued Insolvency Act proceedings as I see no current risk of dissipation by her in respect of the particular assets she holds which are the subject of those proceedings. If the Applicants obtain any further information giving them particular reason, pending the resolution of those proceedings, to suspect her of dissipating those assets then they may, if so advised, make a fresh application for relief in the Chancery Division.
- The order against Mr Terry will, for the reasons I have given, continue. Mile Oak Rd, Paget and the Bentley may be stipulated in the order as assets which remain frozen.
Variation
- At the end of the hearing yesterday Mr Jarman and Mr Watson–Gandy agreed to await the outcome of my judgment today to make written submissions in relation to Mr Terry's application to vary the order. Having now received further submissions from Mr Watson-Gandy and from Mr Jarman I have requested them to attend a further short hearing to address me on the proper form of the continuing order, and specifically whether it should continue to have worldwide effect.
- For the avoidance of any doubt the existing Order remains in force against Mr Terry in the meantime.
Costs
- I have now received written submissions from all parties on costs. I have today sent to the parties a written determination on costs as between the Applicants and Ms Dewett. I shall determine costs as between the Applicants and Mr Terry following the short further hearing this afternoon.
