Lennox Lewis v Eliades [2004] EWHC 1697 (Ch)

Case No HC04CO2072[2004] EWHC 1697 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of JusticeDate Thursday, 8 July 2004
The Strand
London WC2A
B e f o r e:
MR JUSTICE PETER SMITH
Between
LENNOX LEWISClaimant- v -
Between
ELIADESDefendant
Tape Transcription of Smith Bernal WordWave Limited,190 Fleet Street London EC4A 2AG,Tel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
MR GRIFFITHS appeared for ClaimantMR TAGER QC appeared for Defendant
J U D G M E N T

Thursday, 8 July 2004

[1]This is an application by the defendant, Managa Properties Limited (“Managa”) to discharge the order made in the Queen’s Bench division by Grigson J on 13 May of this year. By that order, which was made on a without notice basis, Grigson J appointed Simon Robert Thomas, a receiver of a charge dated 21 February 2002, registered against the title of LN249146 and a further charge against title number LN93418. The registered proprietor of both of those properties is a Mr Panos Eliades and the connection between the order that Grigson J made is this.[2]The claimant is a well-known boxer; Mr Eliades was his manager. The claimant sued Mr Eliades and associated companies in New York and on 15 March 2002 he obtained judgment against Mr Eliades for breach of fiduciary duty and racketeering. He then commenced proceedings, having first served a statutory demand based on the New York judgment, in the Queen’s Bench division to enforce that New York judgment. On 1 August 2002 Master Whittaker entered judgment for just over US$6 million plus interest and costs on a Part 24 application. That judgment was stayed pending Mr Eliades’ appeal.[3]On 28 February 2003, Dyson J dismissed his appeal. He then appealed to the Court of Appeal on 8 December 2003; that appeal was allowed in part, reducing the judgment debt to US$5,877,559.[4]In addition to appointing the receiver, by paragraph 1(3) of Grigson J’s order, Managa was restrained from receiving the Managa debts or any part or parts thereof, and restrained from releasing or giving a discharge of the Managa charges or otherwise disposing of or dealing with the Managa charges or the Managa debts. The Managa debts and charges are given by Eliades to Managa.[5]The claimant’s contention is that the beneficial owner of those debts is in fact Mr Eliades. Mr Griffiths, who appears for the claimant, says that that is not meant to infer that the documents are a sham. The essence of the claimant’s submission is that the charge and the debt are put in place on the basis that to creditors within the jurisdiction, the appearance is given that Mr Eliades’ properties within the jurisdiction are fully charged, but that their contention is that the benefit of that debt is held under a nomineeship for the benefit of Mr Eliades. Thus the monies, if any, that would be paid to discharge that debt, would be received by Managa as a nominee for Mr Eliades. It is not a sham; it might be said to be a device, whatever that might mean. Basically, the summary plea is that found, for example, in paragraph 3.2 of the particulars of claim that were served on 28 June 2004, where summarising the transactions between Managa to other companies and Mr Eliades on the other hand, show assets moving from Mr Eliades to those companies, and it appears they hold their assets as nominee for Mr Eliades. In other words, money has moved and appears as a debt, but those monies really belong to Mr Eliades.[6]The order was made on the basis of a witness statement provided by Andrew Malcolm Forbes on 23 April 2004. I should say that the claimant has already obtained charging orders over the properties the subject matter of the charges. Their concern, of course, is that if these superior charges remain in place, first the equity available for satisfaction of the judgment debt will be reduced, and second that, on a sale, it will be necessary for them to redeem the charge and that those monies will go offshore and held beneficially by Mr Eliades, thereby making less of his assets available than otherwise would be properly available if the charge were not in place.[7]Mr Forbes in his witness statement, after setting out the charges over which the application was sought and the judgment debt, then sets out his evidence which leads him to a conclusion which is summarised in paragraph 27. There are a number of properties referred to, and the common theme in respect of all those properties, he says, are transactions whereby companies formed in Cyprus deal with Mr Eliades. For example, Managa itself in 1996 purchased property 6 Bloomsbury Square, London from Mr Eliades for a price of £1.6 million. There was then a lease back, whereby Mr Eliades took a 25 year lease of that property in exchange for a rent of £100,000. Managa itself disposed of that property in 2001 to the Board of Deputies Charitable Foundation for a price of £1.925 million.[8]The two properties the subject of the charge and the application were, Mr Eliades said at a deposition in the New York proceedings on 10 January 2002, provided as security for 1.5 million lent by his brother. On his further deposition on 27 February 2002, he said the loans had been made to him by Managa, making a total of 1.9 million. This was supported by a facility letter from Managa setting out the terms of the loan to Mr Eliades.[9]There are some undoubted difficulties about Mr Eliades’ evidence in his deposition in New York. In the first deposition in the January, he said that he had no idea who Managa was. He did not know the individuals behind it, and he had not met them. He made a similar statement in respect of other companies which had an identical form of structure. For example, on 10 January 2002 in response to questions he said:
“Q. Let me move on. 6 Bloomsbury Square, did you own that property at one point? A. Yes. Q. And you sold it to Managa Properties? A. Yes. Q. Who owned Managa Properties? A. I don’t know the individuals. … Q. Did you ever have any meeting with the principals of the company? A. I don’t think I actually met with the principals of the company. Q. Remind me, who owns Bambaklutsh company? Do you know who owns that? A. Which is that? Q. That is Theydon Road, that you sold Theydon Road to. Tell me how the sale of Theydon Road came about? A. Isn’t Bambaklutsh the Katchic-Ogly family? Q. I think that is what you testified to. A. They are a Russian-based family. They are a Russian based family in Cyprus. They were after property and I sold that property I think for 300,000...”
Later on, he said he had borrowed the money from his brother who was called Christos, and he was in the import/export business but he did not know the name of his brother’s company. 6 Bloomsbury Square, did you own that property at one point? Q. And you sold it to Managa Properties? Q. Who owned Managa Properties? Q. Did you ever have any meeting with the principals of the company? Q. Remind me, who owns Bambaklutsh company? Do you know who owns that? A. Which is that?

A. Isn’t Bambaklutsh the Katchic-Ogly family?

[10]By the time of the trial, as I have said, this exchange took place, this is on 6 February (page 87 of the bundle before me). After being reminded of questions that he had answered “‘Q. Did you ever have meetings with the principals of the company? A. I don’t think I actually met with the principals of the company.’ Q. Did you give those answers to my questions in your deposition? A. Yes. Q. Do you think that those were straightforward answers?” Then we have the typical US lawyer who says:
“Mr. Isser: Objection, your Honour. THE COURT: this is cross-examination, Mr Isser. He can ask it.. Q. Do you think they were straightforward answers under oath to me? A. They were answers to protect my family. Q. That is not my question, sir. Do you think they were straightforward answers? A. Yes. Q. You do? A. Yes. Q. You thought that when I asked you do you know who the owners of the company are and you said no, even though your brother was the beneficial owner of the company, that’s your view of a straightforward answer, correct? Yes or no? A. In order to protect my family -- Q. Yes or no, is that your view -- A. Yes. Q. -- of a straightforward answer? A. Yes. Q. That’s the same kind of straightforward answer that you had with respect to your testimony here, correct? The essence of the position is that the impression given by Mr Eliades was that he knew nothing about Managa, it was nothing to do with him, and it was a transaction that was apparently between somebody or a company which had no connection with him. A. I don’t think I actually met with the principals of the company.’ Q. Did you give those answers to my questions in your deposition? Q. Do you think that those were straightforward answers?”
Q. Do you think they were straightforward answers under oath to me? Q. That is not my question, sir. Do you think they were straightforward answers? Q. You do? A. In order to protect my family -- Q. Yes or no, is that your view --

Q. -- of a straightforward answer?

[11]We can actually see the true position from the information that has been obtained in respect of the companies of which Managa is one, that Managa, for example, was registered on 10 May 1999 in Cyprus. The only directors are a Stella Cacciogli, and she is given Russian nationality. The secretary is Sasa Management Limited, and the shareholders of the 1,000 issued shares are 999 shares of Sasa Management and one share of Adviso Trust Company Limited. What Mr Eliades omitted from his original answers was to draw the connection between Stella Cacciogli and himself; she is Christos’ wife, there is therefore a connection which he concealed.[12]He has said in his evidence that his brother Christos is the beneficial owner of the company, but none of the company documentation shows his interest in those companies. The shareholders are in the name of a management company and a trust company. Questions in relation to the shareholding have been answered by another organisation, Trident Properties, which still do not throw any light on the beneficial ownership of the companies.[13]This material was put forward in Mr Forbes’ first witness statement, and Mr Forbes, having put forward that material before Grigson J, drew to the court’s attention, for example the inconsistencies in Mr Eliades’ evidence as to the connection with the Cacciogli family, the interest in Managa and the other companies, and the transactions being identical in relation to the sales and the structure of the companies being same. In paragraph 27 he says:
“I have also formed the view that Mr Eliades is the beneficial owner of the charges in favour of Managa secured in Parliament Hill and Green Lane.”
[14]On 11 May Mr Forbes provided a second witness statement which was also before Grigson J, but that does not take those matters any further so far as I can see. On the basis of that material, Grigson J made the order the subject matter of the present application.[15]The order itself has a number of defects in it. When I say that I hasten not to criticise Grigson J for that. The order fails to include an undertaking in damages. An undertaking in damages is invariably required where injunctive relief is sought on an interlocutory basis. There are some exceptions, one of those, of course, is where post-judgment injunctive Mareva type relief is being sought where normally an undertaking in damages is not required because it is a method of execution. Mr Griffiths tells me, and I accept, that he thought an undertaking in damages was not necessary in this case because this was an injunction in aid of execution. He candidly concedes that decision on this part was wrong, because of course the order is sought not against the judgment debtor but against a third party and therefore he concedes the undertaking in damages should have been included, and indeed as soon as it was raised, the undertaking in damages was immediately given. I should say that there is n o doubt that the claimant can satisfy the undertaking in damages if any might arise in this case.[16]The second defect in the form of the order appears to be its failure to give a proper opportunity by way of notification to the defendants of their right to apply to vary or discharge the order in accordance with CPR 23, rule 23.9(3). There is a liberty to apply to generally given in paragraph 5 of the order and Mr Griffiths tells me that that was written in after Grigson J had given the order, but that does not comply with the strict requirements of that provision in the CPR.[17]The continuance of the order is challenged by Mr Tager QC who appears for the defendant. The order is challenged on two bases. The first basis is, in effect, that there is no evidence put forward before the court which shows any, let alone any real prospect of success or anything which raises a proper arguable case for the purpose of obtaining injunctive relief. He bases that, for a start, on paragraph 27 of Mr Forbes’ first witness statement and he makes the observation that if paragraph 27 contains an assertion, then it does not comply with the requirements of 32 PD 18 which (for those of us who do not have that immediately to mind) is the requirement to state the source of anybody’s belief. That is an adjunct, in effect, to his submission that the evidence as recounted by me in this judgment is not evidence to justify the granting of the injunction.[18]The evidence is as follows therefore. A series of transactions involving companies in Cyprus where there are the same shareholders, the same directors, the director being the sister-in-law of Mr Eliades, the same assertion, without any evidence to justify it, that Christos (the brother) is the beneficial owner of the shares, the concealment of any knowledge on the part of Mr Eliades of the people behind it, when in fact he always knew it was, on the paperwork, transactions where officers were known to him.[19]The only explanation put forward for the lies is that he wanted to protect his family. I do not think that that really is a satisfactory reason for him hiding the connection which is there to be seen between him and the companies.[20]The second basis for the application to discharge is on the grounds of material non-disclosure at the time of the application before Grigson. I will come to that later on in this judgment. After the application to discharge was made, there was a return date before Lightman J, who was then, I suspect, the interim applications judge, and was therefore unable to deal with this application because of the length of time. After that hearing, the claimant served points of claim and the defendants served a defence, the latter document being 2 July 2004.[21]The points of claim really do very little more than reiterate what Mr Forbes has said in the witness statement as summarised by me. They ask the court to infer that Mr Eliades is the beneficial owner of or has an interest in the charging debts and that can be inferred from, as I say, the common structure of the companies, the various transactions, the suggestion that they are owned by Christos. The claimants suggest (and it is really no more than a suggestion) that Christos is a man of modest means because he lives in a modest house. I am afraid the world is full of millionaires who live in modest houses. That is sometimes why they are millionaires. The various depositions, it is also alleged quite correctly, show that Mr Eliades told untruths about the interests. That is the evidence put forward to justify the contentions that the assets are held as a nominee for Mr Eliades.[22]The defendants have resisted any invitation to reveal the true position behind Managa. The defendants in its defence, for example, does not provide any of the information in relation to those allegations as summarised in the particulars of claim. Equally, the defendants declined to answer a request for information designed to see what was actually behind Managa on the formal and traditional ground that the questions sought were fishing.[23]There is no doubt that the defendant could comply if it wished. Mr Tager QC makes the submission that it would be quite wrong to order the defendant to provide the information, and it would be quite wrong to provide the comfort of the injunction in favour of the claimant merely because the answers could easily be provided by the defendant. This is a perennial difficulty which the court faces when dealing with applications of this nature. The obtaining of injunctive relief like this put the claimant in a strong position. It is the easiest thing in the world for a claimant to say, “If there is nothing to hide, a defendant should simply provide the material.” That, in my judgment, puts an unfair pressure on a defendant and requires it to prove a negative. There is no reason why defendants should not, in appropriate cases, rest on the position of principle. The claimant has to make the case. If the evidence put forward by the claimant is not satisfactory, a defendant can say I am not going to provide the material because the proper order that should have been made was no order, where there would never have been an order in favour of the other party which the other party can then say, “It is easy enough to comply with.”[24]I have not found this an easy question to decide because, in my judgment, the arguments and the evidence is very finely balanced. I have come to the conclusion that there is a justification for the claimants seeking the relief. I base that primarily on the fact that Mr Eliades has been found to have lied about the structure of the companies in New York. I ask myself: why would he lie? I do not accept he lied to protect his family. My view would be that he would have lied to conceal any interest that he has in the companies. That is my conclusion which would lead me to believe that that is the most likely answer as to why he lied. Of course, I might be completely wrong on that, and it might be that he wished to protect his family. It might be that he wished to protect the involvement of his sister in law and her family in the property, but nevertheless it raises a questionable factor over assertions by Managa that it has nothing to do with him, and it seems to me that at this stage the inferences that could be drawn are that Mr Eliades is behind Managa and so that he is beneficially interested in the sums that would be payable to Managa in discharge of the charge and the obligation to pay.[25]There are two other factors which are relevant to the decision that I have made. The first arises on balance of convenience. It seems to me that the granting of an interlocutory injunction, notwithstanding some doubts to the contrary, is still covered by the well known principles set out in American Cyanamid v. Ethicon [1975] AC. The claimant must show that there is a real issue to be tried. In reality, that threshold is, in my judgment, a similar threshold necessary to survive a Part 24 application, in other words, the case must be more than fanciful.[26]Once that is determined, then one considers the balance of convenience. The balance of convenience in this case favours the granting of the injunction for the following reasons. First, as Lord Diplock observed in Cyanamid, when there is a argument about whether it is easier for the party who gives the undertaking in damages to pay as opposed to the party sought to be injuncted to satisfy any judgment, when one balances the relative merits, the one that can pay generally has the benefit of the relief sought. In the present case there is no doubt that Mr Lewis can satisfy any undertaking in damages that is going to be enforced in the event that the injunction is not finally proceeded with. On the other hand, to refuse the relief could allow the monies to be removed from the jurisdiction and possibly irrecoverable. That is something that could adversely affect Mr Lewis and would, if that is the correct analysis, allow Mr Eliades to remove substantial funds out of the jurisdiction. Third, the injunction sought prohibits Managa, in effect, from dealing with the benefit of the debt. The debt, if it is a genuine debt, would still be there and will be secured and continue to be secured on the property. It is difficult to see that it will suffer any loss by reason of being restrained, and even if it is, it will be covered by the undertaking in damages.[27]Given all of those matters, it seems to me Grigson J was right to grant the order that he did. I come on now to consider the question of whether I should discharge the order because of non-compliance.[28]Mr Tager QC identified in paragraph 28 of his skeleton argument, seven items of non-disclosure. Items 1, 4, 6 and 7 are not grounds for alleging non-disclosure, because they involve an acceptance by me of his submissions as to the claimant’s case, so they do not arise. The absence of the undertaking in damages, the failure to give an express reference to liberty to apply, are the only grounds that are left. In my judgment, those grounds are not sufficient to justify the discharging of the order. I say that for two reasons. The absence of the cross-undertaking in damages was remedied very quickly, and there is no evidence to show any loss was occasioned by that. I accept that Mr Griffiths made a genuine mistake and there is no real reason for visiting that mistake on the claimants by depriving them of injunctive relief, a consequence which would be wholly out of proportion to the error.[29]The second matter, the liberty to discharge is, in the context of this defendant, not significant. It might have had an impact on a party who was not sophisticated or did not have access to very experienced advice. The reality is that, unlike a freezing order which might freeze bank accounts and the like, there would have been no particular need to go back in an urgent situation. If there was, I have little doubt that the lack of any reference to an ability to apply to vary or discharge would not have stopped Mr Tager kicking open the appropriate door to obtain a hearing if there was a sufficient urgency.[30]I do have a discretion, as the authorities summarised in the White Book show, to re-impose it even if there was a breach of the requirement for disclosure at the ex parte stage. If it had reached that stage, I would have done so anyway, because it seems to me that to deprive the claimant of its relief is out of proportion to any such breaches as are established.[31]I do not accept that the claimants’ evidence failed to satisfy the requirements of CPR 3.4 at this stage. It would have been different, I accept, but for the lies that Mr Eliades told in New York. That seems to me to be the key point and raises a doubt which means that there is a case to answer, in the sense that I am satisfied that there is a serious issue to be tried as to the beneficial ownership of these assets in the hands of this defendant.[32]For those reasons I will dismiss the application.