Mitchell v Al Jaber [2021] EWHC 912 (Ch)
The High Court has had to grapple with the application of witness immunity and the unique examination process under section 236 Insolvency Act 1986. Witness immunity (or immunity from suit) provides that no witness, party, counsel or judge may be liable for words spoken or evidence given in court proceedings; it is an absolute immunity from any civil proceedings based on such conduct. Immunity was removed from barristers in 2002[1], and for expert witnesses being sued by their own clients in 2011[2], but no authority has dealt with the position of examinees under section 236 until now.
Mitchell v Al Jaber [2021] EWHC 912 (Ch) was the hearing of an amendment application made by the liquidators to plead claims including (amongst others): misrepresentation; negligent misstatement; and conspiracy, alleging that a company director had knowingly given false information to the liquidators in the course of a section 236 examination.
Accordingly, the question arose as to whether the examination was a “judicial proceeding” for the purposes of the witness immunity rule, and whether the examinee was merely giving information (which would not attract the protection of the rule), or whether they were giving evidence as a witness.
The liquidators argued that although examination itself took place in court, it lacked the hallmarks of judicial proceedings: no issue was under consideration by the court on a s236 examination to arrive at even a non-binding determination – indeed, no decision was taken by the court on the basis of the examination itself; there was no usual procedure of examination-in-chief and cross-examination; and the examination was confidential and took place in private. Nor could the examinee rely on the privilege against self-incrimination. The liquidators further argued that as case law has referred to s236 as solely providing information, and that the examinee is different from the “ordinary witness”, no immunity arose.
The respondents argued that whilst the examination itself does not resolve a dispute, it takes place in circumstances where the examinee is a party to an action, gives evidence in court and is subject to court control, which are the key elements of the immunity. The examinee gives evidence on oath, may be arrested for refusing to attend the examination, and may be committed for contempt of court for refusing to answer questions. In any event, the examination is part of wider insolvency proceedings which determine the issue of the dissolution of the company and the distribution of its assets. Accordingly, this meant that either (i) the examination was a judicial proceeding; or (ii) that it fell within the extended immunity as a preliminary step to a judicial proceeding.
The Decision
In a meticulously written judgment, Mrs Justice Joanna Smith DBE held that the witness immunity rule did not apply for the following reasons:
- Firstly, whilst a section 236 examination had many characteristics of a judicial proceeding, it was not one. The Judge held that there were too many points of difference between an ordinary judicial proceeding and the process of examination under section 236. In her view, the fact that the court during the examination was not resolving an issue or inquiring into a specific issue in dispute was fatal. Nor were there sufficient legal consequences flowing from the section 236 examination itself.
- Secondly, as the section 236 power is designed as a means for the liquidator to acquire sufficient knowledge about a company to fulfil their duties and determine their next steps, it would be inappropriate to characterise the examination as a judicial proceeding where the witness gives evidence; the authorities suggested it was a quite different procedure. There was also a need to encourage co-operation between those with knowledge of a company’s affairs and the liquidator which would be undermined if an examinee under s236 was protected, but the voluntary discloser of information was not.
- Thirdly, although some s236 examinees might come under the extended immunity, there was insufficient evidence for that to be available to the director here. It was not clear that proceedings had been contemplated when the examination took place, and the causal link between the examination as an investigatory step and the eventual proceedings was insufficient.
- Fourthly, the existence of general insolvency proceedings was not enough to make the examination a judicial proceeding, or to engage the extended immunity.
Permission to appeal has been granted, more decisions are therefore likely.
A copy of the judgment can be found here. Clare Stanley QC and Lemuel Lucan-Wilson acted for the respondent director.
[1] Arthur JS Hall v Simons [2002] 1 AC 615
[2] Jones v Kaney [2011] 2 AC 398
Dalkilic and Pekin v Pekin and Paragon Property Investments Limited [2021] EWHC 219 (Ch)
On 8 February 2021 Mrs Justice Bacon handed down judgment in Dalkilic and Pekin v Pekin and Paragon Property Investments Limited [2021] EWHC 219 (Ch), a shareholder dispute concerning the ownership of a valuable manufacturing company, Paragon Quality Foods Limited.
The matter was heard in a four-week remote trial in late 2020. The Claimants were successful in their claims that they were the beneficial owners of 25% and 10% of the company respectively, based on events that took place in the 1990s and early 2000s. In addition to orders for the transfer of shares, the Claimants obtained orders for substantial payments in respect of dividends that had been declared over the years. The Defendants were also ordered to pay costs on the indemnity basis.
Bobby Friedman (led by Michael McParland QC) acted for the successful Claimants.
To download a copy of the judgment, please click here.
Dion Friedland v Charles Hickox
On 1 February 2021 the Privy Council delivered judgment in the appeal Dion Friedland v Charles Hickox in which David Phillips QC represented Mr Friedland. A copy of the judgment can be found here. Described by Lady Arden as being “the latest round in long-running litigation between Mr Dion Friedland and Mr Charles Hickox” the appeal involved the construction of a New York mediator’s Award arising out of New York commercial proceedings generated by a series of Anguillan contracts. The subject matter of the dispute was the Cap Juluca resort in Anguilla, one of the Caribbean’s premier resorts. The parties and their associated companies have now been in dispute for almost 35 years, generating litigation and hearings in Anguilla, Antigua, St Lucia, London and New York.
Estate Management and Business Development Co Ltd v Namalco Construction Services Ltd & Ors
On 11 January 2021 David Phillips KC appeared before the Court of Appeal in Port of Spain, Trinidad & Tobago, in the latest round of the hard-fought Contractors’ Conspiracy claims. David had successfully resisted the Contractors’ strike-out and related applications, Mr Justice Aboud having handed down a 122 page judgment in August 2020. Amongst the many grounds of appeal the Contractors challenged the adequacy of the pleaded case on unlawful means conspiracy, and boldly challenged the existence of the tort of an unlawful means conspiracy in Trinidad & Tobago. Further written submissions are to be filed within the next month, after which a reserved judgment will be delivered. A report of the hearing on 11 January 2021 can be found here.
Fishbourne Developments Limited v Stephens [2020] EWCA Civ 1704
The Court of Appeal has underlined the importance of the factual context and commercial common sense when interpreting the trigger for the exercise of an option over development land.
Fishbourne Developments Limited v Stephens [2020] EWCA Civ 1704 was an expedited appeal about the interpretation of an option agreement to acquire a 117-acre farm (“the Farm”) in the village of Fishbourne, near Chichester in West Sussex. The Farm comprised open fields with a cluster of farm buildings. The option was due to expire on 31 December 2020. It entitled the option holder to acquire the Farm at a 30% discount from its open market value. The trigger for the option was the obtaining of a “Planning Permission” which was defined to mean “a planning permission granted by the Local Planning Authority permitting any development of the Property”. In 2016, Fishbourne Developments Limited (“FDL”), the option holder, obtained planning permission to erect a new pitched roof on one of the existing farm buildings and in 2018 gave notice to trigger the option over the Farm on the basis that it had obtained a Planning Permission.
Argument focussed on the meaning of the words “any development of the Property”. The Judge below held that this meant the erection of new buildings involving a change of use from agricultural use of the whole, or substantially the whole, of the Farm. Accordingly he held that FDL had failed to trigger the option. FDL appealed arguing that “development” could only bear the meaning it is given in section 55 of the Town and Country Planning Act 1990, that the Judge had been wrong to construe the option consistently with a series of earlier option agreements relating to the Farm and that the Judge had also been wrong to hold that a Planning Permission had to relate to the whole or substantially the whole of the Farm: a Planning Permission over part only of the Property was sufficient, it was said.
The Court of Appeal dismissed FDL’s appeal and upheld the Judge’s interpretation. The CA interpreted the word “development” in the particular context of the Farm and of the option as a whole, and held that its meaning did not in that context encompass all of the wide range of activities within the scope of section 55 of the 1990 Act. They concluded that an interpretation that enabled the option holder to trigger the option with an inconsequential planning permission made little commercial sense in circumstances in which the option holder would be entitled to purchase the Farm at a discount of 30% from its open market value. And they held that “any development of the Property” meant that planning permission had to be obtained in relation to the whole or substantially the whole of the Property, not part only of the Property. This was consistent with the definition of “the Property” in the option and its deployment in the option as a whole, despite the fact that this required them to conclude that another term in the option must contain a mistake. The CA did not find it necessary to place reliance on the previous option agreements.
Julian Greenhill QC acted for the Respondent, Mrs Stephens, instructed by Irwin Mitchell LLP. You can read and download the judgment here.
Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd [2020] UKSC 45
On 6 November 2020 the Supreme Court handed down judgment in Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd, the first ever case in which the highest court (whether House of Lords or Supreme Court) has considered s.84(1) of the Law of Property Act 1925 – the power of the Upper Tribunal (Lands Chamber) to modify or discharge restrictive covenants. The appeal concerned the public interest limb of the most commonly relied on ground: s.84(1)(aa). The decision has important implications, legal and tactical, for developers seeking to rely on the public interest limb, and particularly the effect that a developer’s breach of the relevant covenant might have on the success of its application for modification.
Martin Hutchings QC and James McCreath acted for the appellant social housing provider and will be discussing the case in an upcoming “Hot Topic” Webinar. For further details, including how to RSVP, please click here.
To download a copy of the judgment, please click here.
Capitol Park Leeds Plc v Global Radio Services [2020] EWHC 2750 (Ch)
Capitol Park Leeds Plc v Global Radio Services [2020] EWHC 2750 was concerned with a tenant’s conditional break clause. The lease gave the tenant the right to determine it if, amongst other things, it “gave vacant possession of the Premises to the Landlord on the relevant Tenant’s Break Date”. “The Premises” was a defined term, including the original building on the property and landlord’s fixtures, whenever fixed.
The tenant started dilapidations work and in that context stripped out significant elements of the base build and landlord’s fixtures including radiators, lighting and ceiling tiles and grids. It stopped work in the hope of negotiating a settlement and surrender with the landlord, but was unable to do so. It did not replace the elements of the building which it had removed, leaving it, in the Judge’s words, “an empty shell of a building which was dysfunctional and unoccupiable”.
The tenant argued that it had complied with the break condition because it left the premises empty of people, chattels and other interests and had therefore given up vacant possession. The Judge, Deputy High Court Judge Benjamin Nolan QC, however, held that the tenant had not complied with the break condition. What it had delivered up on the break date was not “the Premises”, as that term was defined in the Lease. He also held that the tenant had not established, on the facts, that the landlord was estopped from relying on the failure to comply with the break condition.
Permission to appeal to the Court of Appeal has been granted.
Joanne Wicks QC acted for the landlord. You can read and download the final judgment here.
TN Ramnauth and Company Ltd v Estate Management and Business Development Company Ltd
In August 2020, the High Court of Trinidad and Tobago handed down a long-anticipated judgment in TN Ramnauth and Company Ltd v Estate Management and Business Development Company Ltd exploring the tort of an unlawful means conspiracy in the context of civil fraud claims brought by the government and government organisations against a large number of defendants, including former government ministers and public officials.
David Phillips QC represented the claimants in successfully resisting the procedural and substantive challenges brought against the claims.
One of the challenges that was successfully resisted was that the tort of an unlawful means conspiracy is one that is not recognised in Trinidad and Tobago – a very important decision in the context of these particular claims. Of interest beyond Trinidad and Tobago is the judge’s detailed review of the ingredients of a variety of civil fraud claims, and the level of particulars that must be pleaded to establish those claims. The decision is based on a widescale review of authorities from many Commonwealth jurisdictions, including the decision in Three Rivers, and draws those principles together in one integrated judgment.
Click here to download and read the judgment.
Raiffeisen International Bank AG v Scully Royalty Ltd – FSD 162 of 2019 (RPJ)
On 7 July 2020 Parker J, sitting in the Grand Court of the Cayman Islands, handed down his written reasons for orders that he had made earlier this year in favour of Raiffeisen International Bank AG (‘RBI’), which amongst other things continued a worldwide freezing order (“WFO”) and notification injunction against the NYSE-listed Cayman parent company, Scully Royalty Limited (“SRL”), of the MFC Group. RBI had obtained ex parte relief against SRL in September 2019 and following a hearing in January 2020, Parker J continued that relief in addition to, amongst other things, granting similar injunctions against a further Cayman company, and rejecting a jurisdiction challenge brought by a further Canadian defendant.
By way of background, RBI alleges that it is the victim of a fraudulent conspiracy intended to asset-strip the former parent company of the MFC Group against which (the former parent) RBI has the benefit of a number of guarantees. RBI claims €43.7m under one such guarantee in the underlying Cayman proceedings in which RBI seeks that a number of transfers, including of a Canadian mine, a Maltese merchant bank, and the transfer of a number of further companies by way of a dividend, are reversed to restore those assets from the new parent (SRL) to the former parent, so as to enable the debt under the guarantee to be satisfied.
The judgment provides Cayman law guidance (in some instances to the relevant threshold for this stage of the proceedings) as to (a) claims pursuant to the Cayman Fraudulent Dispositions Law (“FDL”), (b) claims pursuant to the tort of unlawful means conspiracy, including as to the availability of mandatory injunctive relief, declaratory relief, and damages payable to a party other than the claimant, (c) the governing law and proper jurisdiction of both such claims, including in particular under the ‘necessary and proper party’ gateway for service out, (d) the scope of the rule against the recovery of reflective loss, (e) the threshold standard for establishing a good arguable case , (f) the test to establish a real risk of dissipation for a WFO, and (g) the terms and scope of WFO’s, including that in the circumstances there should be no maximum sum ‘cap’ on the WFOs.
Two of the more notable features of the judgment include:
- First, guidance on a number of aspects of claims pursuant to the FDL, on which there is little prior authority. The FDL was held in a number of respects to be analogous to the Insolvency Act 1986, s423, including (a) that it has extra-territorial effect, and as to the proper approach to the exercise of the court’s discretion in this regard, (b) that it can apply to set aside a dividend, and (c) that the claimant need only show that a purpose of the transfer was to defeat creditors and not that this was the sole or dominant purpose. Further, (d) setting transfers aside “to the extent necessary” pursuant to FDL, s6 may require a sum greater than that claimed by the particular creditor-claimant to be set aside, in light of the company’s insolvency and the total debts owed to the company’s creditors.
- Second, guidance as to the scope of the rule against reflective loss. This has been overtaken to some degree by the recent decision of the UKSC in Marex, assuming that is followed in Cayman as the decision of the EWCA had been (Elizabeth Houghton’s article on the UKSC decision in Marex can be found here). Prior to the UKSC decision in Marex having been handed down, Parker J found there was a good arguable case that the rule did not apply to (a) a claim that was not based on alleged breaches of duty by the company in question’s directors and was instead based on alleged corporate acts of the company in question, or (b) a claim that sought the assets in question be restored to the company, rather than damages payable to the claimant, whether by way of (i) the FDL, (ii) a mandatory injunction, or (iii) damages payable to the company. Nor did it apply to the declaratory relief sought against the eighth defendant.
The judgment of Parker J can be found here.
Tim Penny QC (appearing in the Cayman Islands) and Jamie Holmes acted with Ogier and Mishcon de Reya for RBI, the successful claimant/applicant before the Cayman Court.
TFS Stores Ltd v BMG (Ashford) Ltd & Ors [2020] EWCA Civ 833
The Court of Appeal has given important clarity and breathing space to commercial and residential tenants in its recent judgment in TFS Stores Ltd v BMG (Ashford) Ltd & Ors [2020] EWCA Civ 833 by confirming that all parts of proceedings involving a claim for possession brought by a landlord are automatically stayed.
The stay, imposed initially by Practice Direction 51Z, and now extended to 23 August 2020 by the new CPR rule 55.29, applies to all claims (apart from some claims against trespassers) “brought under Part 55”. In his earlier judgment in Hackney LBC v Okoro [2020] 4 WLR 85, the Chancellor, Sir Geoffrey Vos, emphasised that all claims initiated under Part 55 were stayed, even if they were now on appeal.
In this case, DLA Piper, instructing Joanne Wicks QC of Wilberforce Chambers and Mark Galtrey of Falcon Chambers, acted on behalf of TFS Stores Ltd, who operate 198 fragrance shops across the UK. In 2017, the landlords of six of TFS’s shops asserted that the leases had been contracted out of the protection of the Landlord and Tenant Act 1954 (‘the Act’), and so that they were entitled to possession of the premises when the contractual term expired. TFS disagreed, saying that the contracting out process had not been properly followed. At a trial last summer, the High Court found against TFS, and made orders for possession in relation to five of the shops albeit postponed until the outcome of any appeal.
The Court of Appeal gave permission to appeal and listed the appeal for 24 June 2020. The point under appeal is a very important one, since the contracting out method used by the landlords is very widely used and its validity may affect the status of tens of thousands of commercial leases.
Following the decision in Okoro, it seemed to TFS that the appeal should be postponed because the proceedings were stayed.
Had the proceedings simply been started as claims for possession by the landlords, there would have been no argument: such claims must be brought under Part 55 and are certainly caught by the stay. However, in this case, there were two sets of proceedings, and neither started in that way.
The first set of proceedings were brought by TFS: the contractual terms on two of the shops had expired and so if the landlords were right, they could re-enter the premises at any time. TFS issued a claim for an injunction to prevent the landlords taking possession, and for a declaration that the leases were not contracted out of the Act. The landlords counterclaimed for possession.
Shortly afterwards, the landlords brought the second set of proceedings in relation to the other four shops, where the contractual term had not yet expired. At that time the landlords were not entitled to possession on any view, and so they claimed a declaration that the leases had been validly contracted out of the Act. But by the end of the trial, the contractual terms on three of the leases had expired. The landlords threatened to apply to amend their pleadings, or to issue separate claims for possession, unless TFS agreed to possession orders being made. On the basis of the High Court’s findings there would be no defence to a possession claim, and so TFS pragmatically agreed to the making of possession orders, postponed until after the outcome of the appeal.
The result was that neither set of proceedings was initiated under Part 55, but in both sets of proceedings possession orders were made and appealed against. The question for the Court of Appeal was whether the proceedings had been “brought” under Part 55 and so were stayed, and if they were, whether the stay should be lifted.
The landlords, represented by Wayne Clark and Joe Ollech of Falcon Chambers, argued that where a claim was correctly brought under the ordinary Part 7 procedure, it did not transform into proceedings brought under Part 55 because of later events that brought a claim (or order) for possession into the proceedings.
Arnold LJ, dissenting, agreed, pointing out that Part 55 has a whole raft of procedural requirements and differences from the Part 7 regime. This point has some force: certainly it is not standard practice when counterclaiming for possession (or amending to claim possession) for all the requirements of Part 55 to be followed, and they were not followed in this case. Given the views of the majority however, this is an important practice point: when drafting counterclaims for possession it would be now be prudent to follow the Part 55 procedure to avoid any suggestion that the claim was not properly brought.
The Chancellor and Asplin LJ, however, put more store by the policy aims of the automatic stay. As the Chancellor said at [33] – [34], referring to his judgment in Arkin v Marshall [2020] EWCA Civ 620:
As Ms Wicks correctly emphasised and, as we said in Arkin at [42], the purpose of the stay “is of its nature blanket in character and does not allow for distinctions between cases where the stay may operate more or less harshly on (typically) the claimant”. At [44], we said that “[t]he blanket stay has been imposed to protect public health and the administration of justice generally”…It is clear that the policy intention was to extend the stay on possession proceedings, even though that might “act to the detriment of some small businesses”, for example these landlords. It would send entirely the wrong message if we were to continue to hear an appeal in what must properly be regarded as possession proceedings on the technical ground that a part of the claim is for a declaration as to the law underlying that claim for possession.
TFS also argued that exposing tenants to the stress and expense of opposing with applications to lift the stay would undermine an important purpose of the stay: to give tenants a period of time free from the risk of possession proceedings. Lifting the stay in this case, even to deal with the legal arguments about, would again send mixed messages and encourage further applications to lift the stay, undermining the stay.
The majority agreed (Arnold LJ would have lifted the stay), and the Chancellor was critical of the decision of Freedman J in Copeland v Bank of Scotland [2020] EWHC 1441 (QB), where the stay was lifted to hand down a reserved judgment, saying emphatically at [36]:
I do not agree that that was the appropriate course. A stay means what it says. If the proceedings are stayed, nothing can happen in court at all
It might be thought that this clear message would reach courts at all levels and provide a period of stability until the stay is lifted. However, it seems that the position is not seen quite so clearly across the judiciary: on 07 July 2020, a week after the TFS judgment, a differently constituted Court of Appeal gave judgment in Jarvis v Evans [2020] EWCA Civ 854, a second appeal against a possession order granted to a landlord against a residential tenant in Wales, which appears to have been brought under Part 55, the stay presumably having been lifted (although this is not clear from the report). Perhaps a stay does not quite mean what it says in every case, and tenants must prepare to fight more applications to lift the stay.
The full judgment can be downloaded here.