Raja v Van Hoogstraten & Ors [2006] EWHC 2564 (Ch)

Case No IHC 337/06[2006] EWHC 2564 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday, 25 th August 2006
Before
THE HONOURABLE MR JUSTICE PUMFREY
Between
RAJAClaimantVAN HOOGSTRATEN AND OTHERSDefendants
Wordwave International, a Merrill Communications CompanyPO Box 1336, Kingston-Upon-Thames KT1 1QTTel No: 020 8974 7300 Fax No: 020 8974 7301Email Address: Tape@merrillcorp.com(Official Shorthand Writers to the Court)
MR F THOMAS (instructed by Henlys) appeared for ClaimantMR R LEONARD (Instructed by Engleharts) appeared for Defendants
Judgment

A. FORM OF CLAIM

[1]This is an application by the claimant, who represents the estate of Mohammed Safir Raja, to amend the Particulars of Claim which have been served in proceedings ordered by Lightman J which have as their objective a determination of the question of whether, or to what extent, it is right that ten companies continue to be parties to the various proceedings now on foot, save to the extent that any one of them holds shares in any of the others. The companies in question are respectively: Willoughby’s Consolidated Public Limited Company; Tombstone Limited; Richmond Hotels Limited; Hamilton Palace Limited; Hamilton Property Holdings Limited; Planet Properties Limited; 42, 44, 46 First Avenue Hove Limited ; Messina Investments Limited -- an English company; Messina Investments Limited -- a company incorporated according to the laws of the British Virgin Islands; and finally a company called Pondtree Limited.[2]The issue which is to be tried in October by Lightman J is relevant to at least two questions. The first question is this: the claimant has the benefit of orders for costs presently due and owing totalling nearly £1m against Mr Van Hoogstraten, the defendant in these proceedings, which I shall describe in more detail below. The claimant is now very seriously out of pocket in this litigation, and will seek to enforce its costs award against assets of Mr Van Hoogstraten within the jurisdiction.[3]Mr Van Hoogstraten has announced his intention not, in any circumstances, to pay any of the orders for costs which may have been made against him, thereby placing himself, I have to observe, in contempt of a number of orders of Lightman J. And the claimant correspondingly contends first: that the companies themselves are beneficially owned by Mr Van Hoogstraten, and secondly: that the assets of the companies, consisting so far as relevant of properties largely located in the south of England, are beneficially owned by Mr Van Hoogstraten.[4]The second question goes back to the roots of this dispute. In his judgment of 19th December 2005, which is known in these proceedings as Raja Six, Lightman J sets out briefly the background to Mr Raja’s dispute with Mr Van Hoogstraten, and Mr Raja’s murder at Mr Van Hoogstraten’s instigation. At the time of the murder this action was on foot, and sought an account against Mr Van Hoogstraten, subsequently amended to seek damages for fraud. It was the allegation fraud that is at the centre of the story of what happened between Mr Van Hoogstraten and Mr Raja.[5]On 12th June 2006, Lightman J gave judgment in this action for the estate for declarations and enquiries and accounts in respect of certain properties, together with an order for costs, and directed an interim payment of £250,000. The structure of the order made by Lightman J is that certain properties are declared to have been charged to Mr Van Hoogstraten, or his nominees, as security for loans made by Mr Van Hoogstraten to Mr Raja. There is a declaration that those loans were fully repaid, at the latest, by 8th October 1993, and a declaration that as of 8th October 1993, all charges on properties otherwise unsold had been discharged, and that therefore, Mr Van Hoogstraten was obliged to ensure that all title deeds, blanktransfers and so on in relation to the unsold properties should be returned to Mr Raja’s estate, and that all relevant charges, inhibitions, notices of deposit and the like be released or vacated.[6]Enquiries as to the extent to which the properties had been sold have been directed, and further accounts enquiries and directions are made in respect of all dealings with properties that were unsold. There are orders for delivery up of bank transfers, which were used evidently as a mechanism for charging the various properties. Certain other heads of relief, particularly the claimants’ claims for conspiracy for breach of contract; for breach of fiduciary duty; failure to give restitution; and particular relief in respect of certain properties, was stood over generally.[7]By paragraphs 15 and 16 of the order, a freezing order which had been made by Peter Smith J was continued against the first defendant until after final judgment or further order in the meantime, and by paragraphs 17 and 18 Lightman J ordered that the application by two of the companies -- Hamilton Property Holdings Limited and Pondtree Limited -- to discharge Peter Smith J’s freezing order and to be adjourned to 28th June 2006 at ten in the morning, and made provision for joinder by any of the other applicant companies, which includes, I believe -- although it is not entirely clear on the face of the order -- all the companies with which I am concerned, who wished to apply for a discharge of the freezing order, to make application and adduce any evidence they wished to adduce in support of that application by 14th June 2006.[8]There was then a direction for evidence by the estate, and for a schedule of assets and liabilities of the estate, no doubt by reason of the question which might arise in relation to the adequacy of the cross-undertaking in damages. By paragraph 21 it was directed that the hearing of 28th June 2006 be limited to two grounds for discharge of the freezing order, those being whether the freezing order interfered with the normal course of business, and the ability of the estate to honour the cross-undertaking.[9]By paragraph 24 of this[10]Two other matters should be mentioned: the first is that the claimant has considered whether to initiate bankruptcy proceedings against Mr Van Hoogstraten on the basis of the unpaid orders for costs. It would unquestionably be advantageous to the claimant to be Mr Van Hoogstraten’s probable principal creditor, and to be in a position, in all likelihood, to control the activities of the creditor’s committee, and accordingly, to control the activities of his Trustee in Bankruptcy in getting in the estate. In particular, the Trustee would have the power to set aside certain transactions which might be of benefit indirectly to the claimant. The claimant has, as I was told, rejected this possibility on the ground of expense.[11]The second matter to which I should refer is that the claimant has now applied to examine Mr Van Hoogstraten as to his assets. I have already made an order for Mr Van Hoogstraten’s attendance on the first day of the hearing fixed by Lightman J for this purpose. So, even at the beginning of the hearing before Lightman J Mr Van Hoogstraten will give answers, or decline to give answers, directly relevant to the issues which fall to be decided in relation to the ownership of these assets by Lightman J.[12]Before I turn to the assets themselves, I should refer to a number of other directions that have been given by Lightman J. First; on 28th June, in accordance with the order which I have just read, a hearing took place in respect of the companies’ application to discharge the freezing order on limited grounds, which was attended, not by counsel, but by Mr Raja’s son. The application was adjourned to 19th July 2006. Paragraph 4 of the order made at this hearing provided as follows:
“It is directed that the claimant, by 10am on 17th July 2006, file and serve a separate document relating to each of the companies in which he specifies the asset, or assets, in respect of which Mr Van Hoogstraten is alleged to have a proprietary interest, or the power of disposition specifying the same, and all facts and matters and documents relied on in support of the allegation.”
[13]On 26th July Lightman J directed a hearing of the issues between 9th and 27th October listing. Between 28th June and 26th July, a tripartite correspondence between the claimant and defendant and the judge took place. On 6th July the judge sent a document to the parties, which was a response to an email sent by counsel for the claimant. This is a long and detailed document, but I should draw attention to a number of passages in it. First of all in paragraph 1 the judge says this:
“After having dealt with the abortive hearing of 28th June 2006, the judge found it surprising that the legal advisors for the estate of Mr Raja apparently thought it in order for representation of the estate to be left to Mr A S Raja (who is Mr Raja’s son). With the further three weeks delay in the hearing, it seemed to the judge that the necessary case should be made by the estate, that proprietary interest of Mr Van Hoogstraten has the necessary proprietary interest today in the shares of the companies or their assets, and he directed that material should be provided by the date of the next hearing. The judge requires the estate to provide that material. The affidavit of Mr Lightfoot (which is the affidavit upon which Peter Smith J originally made his freezing order) is not sufficient for this purpose. It may be noted that he has apparently said that he is unwilling to attend for cross-examination. It was evidence adduced for the purposes of an interlocutory application seeking to show an arguable case. The issue now is not whether the estate has an arguable case, but whether it can establish the ownership. The terms of the order made by the judge on 28th June 2006, which I have read, accordingly, must be complied with.”
Then in paragraph 2

the judge enlarged upon this direction:

“Each company is entitled separately and distinctly to a statement as to which of its shares or assets it is claimed are owned by Mr van Hoogstraten or what other (if any) proprietary interest in them is held by Mr van Hoogstraten and the evidence relied on for that purpose. It may be that the exercise will not be fully complete by the date of the hearing but the Judge wishes to see exactly what has been put together for this purpose by the date of that hearing. This material is crucial not only on the question of whether the freezing order should continue but also to any claim by Mr van Hoogstraten under the cross undertaking in damages. It is important to bear in mind that, whatever the findings in respect of Mr van Hoogstraten, a case has to be established against each of the companies and there can be no guilt by association unless and until the Estate establishes that Mr van Hoogstraten has the ownership or proprietary interest in the companies shares or assets.”
At paragraph 3 he deals with the public need for examination of the judgment letter for Mr Van Hoogstraten, and it is not necessary for me to refer to any other passages in that communication.[14]After further email communication, the judge produced another document on 13th July 2006. The covering email is as follows: “Having read the recent correspondence by email the Judge now wishes to let all parties understand the position which he is taking. Please see the attachment. The attachment is now a two-page document, considerably shorter than the one to which I have previously referred, and it is as follows: A. FORM OF CLAIM I. COMPANY ASSETS[1]Each individual company against which a freezing order has been obtained is entitled to have served on it a separate document setting out clearly and distinctly:(1) those of its assets in respect of which it is alleged that Mr van Hoogstraten is the beneficial owner or has a proprietary interest and which is accordingly property on which the claimant is entitled to levy execution in respect of judgments already obtained (approximating to £900,000) or to be obtained in the future;(2) if a proprietary interest less than beneficial ownership is claimed, the nature of such proprietary interest; and(3) all facts, matters and documents relied on in support of the claim to the existence of such ownership or proprietary interest.

II. COMPANY SHARES

[2]In case of any company whose shares the claimant contends are beneficially owned or subject to a proprietary interest in favour of Mr van Hoogstraten, the company and the holders of shares in the company are entitled to have served on them a separate document setting out clearly and distinctly:(1) the shares in respect of which the claim is made;(2) if a proprietary interest less than beneficial ownership is claimed, the nature of the proprietary interest; and(3) all facts, matters and documents relied on in support of the claim to the existence of such ownership or the proprietary interest.[15]It will be observed that the document clearly divides the pleading function under the heading, “Form of Claim,” from the evidence. A criticism, I think, which might with respect have been levelled at the earlier document is that it did not do so. He accepts that references to paragraphs in Mr Lightfoot’s, or anybody else’s, written evidence can form the basis of the evidence upon which the claimant relies. But the requirement to identify all the evidence in support of the claims which the claimant makes survives, for obvious reasons.[16]Then finally, on 28th July the judge sent out one further email. It reads as follows:
“1. The Claimant is required in each case to set out in the Points of Claim:(1) the assets which it is alleged are owned by Mr van Hoogstraten or in respect of which he is alleged to have a proprietary interest;(2) the proprietary alleged; and(3) all facts, matters and documents relied on in support of the allegation. Plainly unless this requirement is fully and properly satisfied, the judge will refuse permission for this late amendment. It is essential that the application is heard as soon as possible. The issue can be tried by any judge. It is a simple question of whether or not permission should be granted to make the proposed amendment and in particular whether the allegations are sustained by the particulars.”
And in paragraph 2 he makes a further indication as to the manner in which the question of service upon parties interested in, or allegedly interested in, the shares should be effected.[17]I take the sum of these directions to amount to a direction:(1) to plead the particular facts so far as the material is available to the claimant, supporting the claim for ownership of the shares, and;(2) to plead a case for the ownership of the assets of the companies. I understand that at a hearing of 19th to 21st July, counsel had produced a draft points of claim, which Lightman J considered did not set out an arguable case that Mr Van Hoogstraten was the beneficial owner of the assets of the companies. He does not seem expressly to have dealt with the question of whether those particulars supported any claim to beneficial ownership of the shares, and it seems to have been assumed, at least by silence, that they did indeed do so.[18]Before me, Mr Leonard, who appeared on behalf of the companies, was not instructed to address any remarks to me on the adequacy or otherwise of the particulars in so far as a claim for beneficial ownership of the shares was concerned.[19]The amendments in question are therefore amendments which have been introduced to overcome the judge’s objection to the existing set of particulars made available on 19th July. It was suggested that they supported a claim to the assets of the companies. That explains the judge’s reference in the final email, to which I have referred above, of 28th July, to amendments, and before me now the adequacy of the amendments is challenged by Mr Leonard.[20]My task is to decide whether the particulars, as now amended, are capable of supporting a claim for beneficial entitlement to the specified assets of the companies. In each case the assets specified are the whole of the assets of the companies, and that is in compliance with the judge’s order.[21]I carry out this analysis on the footing first that it is not on the function of pleadings to prove facts, but to set out the facts which will be sought to be proved, and secondly; that the facts alleged will, if proved and un-contradicted, should -- at the lowest -- enable a court to draw the inference of beneficial ownership. Third; that the evidence to prove these facts will be proved in an admissible form by a Civil Evidence Act notice in respect of Out of Court Statements, or by reference to other admissible evidence already in the case, such as the evidence of Mr Lightfoot, or the remarks of Mr Van Hoogstraten himself during his many appearances before Lightman J. Whether Lightman’s J findings in respect of Mr Van Hoogstraten are admissible against the companies has not been discussed before me.[22]The form these pleadings take is as follows: there is first, a so-called Note and Overview, which is said to relate to all the companies collectively, and to summarise, as its title suggests, the case advanced against each of them. Secondly: in relation to each of the individual companies, there are amended points of claim. Not all the companies are alleged to hold assets beneficially owned by Mr Van Hoogstraten, and in particular, Willoughbys Consolidated Public Limited Company is not so alleged. Each of the points of claim sets out the facts known to the claimant. I suspect, having considered the documents, in large part if not in totality derived from the earlier witness statement, or witness statements, from Mr Lightfoot, and accordingly sets out all the facts known to the claimants relating to the evolution of the shareholdings in the respective companies, and the control in respect of those companies, exercised from time to time by Mr Van Hoogstraten.[23]These particulars are supplemented by allegations which are in substantially common form, which, if one takes an example in the points of claim in respect of Tombstone Limited, are to be found in paragraph 33, and with the certain consequential amendments at paragraph 34.1, and the addition of a further prayer for relief in paragraph (iii) of 34.2.[24]The common form material reflects in somewhat more detail certain allegations made in the Note and Overview. What it plainly adds by way of claim for relief are three aspects to the allegation of beneficial ownership. The first is control by Mr Van Hoogstraten over the activities of the companies as a whole. Secondly, a claim that each of the companies holds its property upon a trust for Mr Van Hoogstraten as a nominee, or resulting trustee, and thirdly, an allegation that the corporate veil should be lifted on the ground that the principal if not sole purpose of each of the companies is to hide or protect the assets of Mr Van Hoogstraten from his creditors or potential creditors.[25]Before turning to these alternative bases upon which the claim in respect of the companies’ assets is put, I must refer to the Note and Overview. As a pleading, this is an objectionably discursive and argumentative document. It intermingles allegations of fact with the evidence said to establish those facts. It contains, moreover, comment upon the facts, and repetitive discussions of the character of Mr Van Hoogstraten. But in this document there is a core of both relevant positive and negative material, the positive consisting of positive allegations of facts, and the negative consisting of statements for failure to answer requests, from which it is said that it can be inferred that Mr Van Hoogstraten is in truth, using the companies to protect his own assets.[26]The document in question, as I have indicated, is objectionable in the respects I have identified. I have, however, taken the opportunity to work through it, and to see whether, and to what extent there are relevant and material allegations made in it. I consider, as at present advised, that paragraphs 10, 11, 12 and 12(A) to (F), 13, 20, 24, 25, 28, are, on the face of it, acceptable in a pleading, and are capable of being pleaded to, even if they do not meet the higher standards of draftsmanship. Paragraph 31 sets out a long passage from a judgment of Lightman J on the application by Mr Van Hoogstraten to discharge the freezing order against him. I consider that if this passage were turned into a positive allegation by the claimant, it would not be objectionable as a pleading. Paragraphs 32, 37, 39, 40, 41, 44, 46, 47, 49 are also, on the face of it, in my view, acceptable as pleadings.[27]Now Mr Leonard quite rightly relied upon the matter which I consider to be unacceptable in the pleading as a reason for objecting to this document as a whole. I do not think that in the particular circumstances it is quite so easy. This document forms the introductory material to the individual pleadings, to which I shall turn in a moment, and I have identified those passages in the document which I consider both to be adequate as pleadings to plead material facts, and to plead material facts which are common to each of the companies. The remainder of the case in relation to assets can be taken -- if I refer again to the proposed amended points of claim against Tombstone Limited -- to be made up by the contents, as I have indicated, in paragraph 33.[28]Now paragraph 33 starts with the general allegation:
“The claimant relies not only upon the inferences which arise from the facts and matters set out in (a) the preceding paragraph of the points of claim, and (b) the overview and note of annexed to these points of claim, but also (c), the following facts and matters applicable to all companies with which Mr Van Hoogstraten is associated.”
Then under the heading, “Particulars,” appear 12 distinct allegations:
“1. The companies hold property which Mr Van Hoogstraten has been instrumental in purchasing over many years. 2. Mr Van Hoogstraten is, on his own admission, the person responsible for the management of the companies’ affairs. 3. The pattern which emerges is of a closely connected group of companies. Directors and shareholders of the various applicant companies all come from the same tightly knit band of girlfriends, ex-girlfriends, young children, and long-time henchmen: the like of David Martin. 4. The registered offices of the companies are, except in the case of Messina Investments Limited BBI, Hamilton House, 14 The Drive, Hove. 5. Hamilton is an alias of Mr Van Hoogstraten, and the surname he has given to his various children. 6. Whether it be his children or others, or the companies, the source of the original investment can only ever be Mr Van Hoogstraten. Nobody in his family (inaudible) directors, shareholders or intended to be direct to the Van Hoogstraten empire have any original investment source, or indeed, any independent business acumen. There does not appear to be any independent commercial decision made by each company, and these entities are merely a front for Mr Van Hoogstraten holding property to his order. 7. At least one director, Caroline Williams, of a company with which Mr Van Hoogstraten was closely associated; Tombstone, is a stooge -- borrowing a description given to her by Mr Van Hoogstraten. Another is his eldest child, barely of majority age, who is learning the trade from his father. 8. Mr Van Hoogstraten will use all possible means to keep his property out of the reach of anyone who may seek to enforce the judgment debt against him. 9. The structures of the companies are merely an attempt to hide the true beneficial ownership of the shares of the applicant companies. 10. The applicant companies themselves appear to serve no independent commercial rationale. They are inter-related for no reason other than to hold property or shares in each other, and are referred to as one for the purposes of applications and asserting a value. 11. Mr Van Hoogstraten does not hesitate to boast about his wealth and his success at making money when being interviewed by the media, yet will assert to this court when it suits him, that he has no money, but to the criminal court, when that suited him, that he is extremely wealthy when trying to defeat the motive allegation in the murder case, which he has been held liable in the context of these proceedings. 12. A fax regarding the value of the companies’ assets was sent (inaudible) companies’ undertakings given in November 2005 as part of the compromise to have him released from the freezing order of August 2002. The fax was sent from the Courtlands Hotel; Mr Van Hoogstraten’s well-known headquarters. It is on the familiar old-fashioned type-face used by Mr Van Hoogstraten for all his fax communications. It purports to give the asset value of each of the companies, and to be signed by David Martin (inaudible) Mr Van Hoogstraten’s eldest son, Rhett Hamilton. Even though they are not even directors of some of the companies referred to, it is obvious that the facts emanate from Mr Van Hoogstraten himself, or at least someone acting at his direction.”
This reiterates with a little but not much more detail some of the points made by the note and overview.[29]The final impression which the pleader seeks to give is that these companies have no minds of their own, or more correctly, that their controlling intelligence was Mr Van Hoogstraten and nobody else, and that they operate solely on his instruction for his benefit. Can this allegation support the inference not only that Mr Van Hoogstraten is the beneficial owner of the companies, but that the assets of the companies are his alone? In this respect I should mention that I do not regard the fact that the accounts of some of the companies that were audited would necessarily affect the inference to be drawn: it is certainly capable of doing so, but need not. The essence of the claimants’ case, based to some extent on Mr Van Hoogstraten’s own statement, is that he can control the companies to deal with their assets for his sole benefit as if the assets belonged to him.[30]This is not the place for a lengthy discussion of the various cases concerning the circumstances in which it is permissible to lift the corporate veil. The relevant law is summarised in a judgment of Cook J in Kensington v. The Republic of Congo, unreported, 28th November 2005, [2005] EWHC 2684 com. Cooke J there contrasts the basic principle emphasised in Adams v. Cape Industries [1990] Chy 433 at p.544, with cases in which in substance, truth or reality -- using the words of Robert Walker J, as he then was, in Re Polly Peck [1996] 2All ER 433 -- is such as that found to exist in Trustor AB v. Smallbone No. 2 [2001] 1WLR November 1977. The law is not clear, and I shall take the statement of principle from the analysis of Sir Andrew Morrit, the Vice Chancellor in that case. In paragraphs 14, 20, 21 and 22 of his judgment Sir Andrew Morrit said this: “Paragraph 14: Counsel for Trustor submitted that the circumstances were such as to warrant the court "piercing the corporate veil" and recognising the receipt by Introcom as the receipt by Mr Smallbone. He suggested that the authorities justified such a course in three, potentially overlapping, categories, namely (1) where the company was shown to be a facade or sham with no unconnected third party involved, (2) where the company was involved in some impropriety and (3) where it is necessary to do so in the interests of justice and no unconnected third party is involved. I was referred to Gilford Motor Co Ltd v Horne [1933] Ch 935, Jones v Lipman [1962] 1 WLR 832, Woolfson v Strathclyde Regional Council 1978 SC(HL) 90, In re A Company [1985] BCLC 333, Adams v Cape Industries plc [1990] Ch 433, Yukong Line Ltd of Korea v Rendsburg Investments Corpn of Liberia (No 2) [1998] 1 WLR 294, Ord v Belhaven Pubs Ltd [1998] BCC 607 and Mubarak v Mubarak The Times, 30 November 2000. ............................. Paragraph 20: I should also refer to some of the cases relied on by counsel for Trustor. In Gilford Motor Co Ltd v Horne [1933] Ch 935 an individual bound by a non-solicitation covenant after the termination of his employment set up in business through a limited company. The individual was held to be in breach of covenant, notwithstanding the interposition of the company, because the company was formed as the device, stratagem or mask to "the effective carrying on of a business of" the individual: see pp 956, 965 and 969. In each of the passages to which I have referred it was made plain that the conclusion was one of fact. In Jones v Lipman [1962] 1 WLR 832 an individual had contracted to sell land. Wishing to avoid his liability he transferred the land to a company he had acquired for the purpose. A decree of specific performance was made against both the individual and the company on two grounds. The first was that the individual had sufficient control of the company to compel it to perform the contract. The second, following the principle applied in Gilford Motor Co Ltd v Horne, was that the company was the creature of the first defendant, "a device and a sham, a mask which he holds before his face in an attempt to avoid recognition in the eye of equity": see [1962] 1 WLR 832, 836. In Woolfson v Strathclyde Regional Council 1978 SC (HL) 90, 96 Lord Keith of Kinkel pointed out that it was appropriate to pierce the corporate veil "only where special circumstances exist indicating that [the company] is a mere facade concealing the true facts". This principle was applied by the Court of Appeal in Adams v Cape Industries plc [1990] Ch 433, 542A-B. Adams's case was followed by the Court of Appeal in In re H (Restraint[31]It seems to me that it is not clear that a company which is dishonestly established for the purpose of evading anticipated liabilities for transactions entered into for the benefit of an individual is not liable to have the corporate veil lifted at the instance of any person to whom the liability in question exists. Now it is quite true that a much narrower reading of the circumstances established in the Adams case is possible, to the effect that the corporate veil would be lifted only in circumstances in which the corporate structure has been established for the purpose of avoiding a known and existing, or confidently, predicted liability. The judgment of Slade LJ in that case makes it clear that a general organisation of the affairs of a corporate group so as to minimise the exposure of each of the members of that group to potential liabilities, is a consequence of the whole structure of English company law. I do not, in the light of what the Vice-Chancellor observes in paragraph 22 of the judgment set out above, accept, however, that the dividing line can be quite so clearly drawn where it is suggested that the structure is designed with an eye to future liabilities. Where the Vice-Chancellor refers to the reliance upon an impropriety not linked to the use of the company structure to avoid or conceal liability, it seems to me that he is contemplating at least that a dishonestly constructed corporate arrangement designed to conceal, both the true ownership of assets and the true beneficiary of the exploitation of those assets, and furthermore to minimise the liability of that individual, can, if established, give rise to a successful application to go behind the corporate veil, and/or, as is often put, to lift it, or pierce it.[32]The essential element is impropriety. In this connection it is not to the point that the claimant principally relies on the strong control exercised by Mr Van Hoogstraten in the activities of the companies. The question which has to be answered is why the company structure is as it is; why the control is exercised; and why the shareholdings in the companies changed as they have changed.[33]Mr Irvin submits part of the key to the answer to this difficult question is the avarice and dishonesty of Mr Van Hoogstraten, of which, he says, there exists more than enough evidence. He submitted that Mr Van Hoogstraten would never deprive himself of the benefit of the assets under his control, and that even the circumstances of the murder of Mr Raja are evidence of that fact. He says that in truth Mr Van Hoogstraten not only does not deprive himself of the benefit of his assets, but that he treats the assets of the companies as his own in the control which he exercises over the day-to-day business of the companies. That, he says, is enough to lift the corporate veil.[34]Mr Leonard subjected the particulars, which I have read, to a searching and destructive criticism in his skeleton argument, and in his submissions to me. He says that all this is is a collection of instances of control exercised by Mr Van Hoogstraten over the activities of the companies, and that that is simply not enough, on any view, to begin to found a claim that the assets of the companies are the assets of Mr Van Hoogstraten.[35]As I have already indicated, this case is really about the limits which have to be placed on the inferences to be drawn from striking and unusual facts. Now I have considered this question with a great deal of anxiety, but I have come to the conclusion that I cannot say that the necessary inferences to establish relief cannot be drawn on the material which is set out in the various points of claim, and in those paragraphs of the note and overview, to which I have referred. I consider that these allegations should have a trial.[36]I am in considerably more doubt about the allegation of trusteeship. On its own, it would have to depend upon a clear indication that either the one or more of the companies’ properties were conveyed to them by Mr Van Hoogstraten, or alternatively, that he gave to the company the money with which they acquired the assets, but never received consideration for it. But at the time that these events, which is now some years ago, Mr Van Hoogstraten was a shareholder in most of these companies, directly or indirectly, and in those circumstances it is overwhelmingly difficult to see why the allegation of resulting trust, or a bare trusteeship, has the slightest possibility of success. In those circumstances, and at this stage, I do not think I can allow these amendments to support the allegation of bare trusteeship, or nominee-ship of the companies.[37]Finally, I say nothing at all about the possible results of Mr Van Hoogstraten’s examination as to his assets, which will take place at the beginning of the hearing before Lightman J.[38]Accordingly, I have come to the conclusion that the amendments ought to be allowed to the extent indicated. ________________________

order

“The question whether the claimant wishes to pursue his application dated 6th January 2006, for the determination of issues regarding the first defendant’s beneficial ownership of shares and/or assets of certain companies, be adjourned to the case management conference referred to in paragraph 11 above, at which time the court will also consider applications by such companies for costs.” As I have indicated, Peter Smith J had made a freezing order in August 2002 against the assets of these companies, which are on any view very closely related with Mr Van Hoogstraten. Relief which fettered the companies’ ability to deal with their assets had been in force for some time in some form or another. The companies now say that they wish to discharge the freezing relief. They are saying they are not beneficially owned by Mr Van Hoogstraten, still less so are their assets, so Lightman J has ordered that question to be decided. Order: Realisable Property) [1996] 2 All ER 391, which was applied by Rimer J in Gencor ACP Ltd v Dalby [2000] 2 BCLC 734. These authorities plainly establish the first proposition of counsel for Trustor I referred to in paragraph 14 above. ............................................. 21: The third proposition is said to be derived from the decision in In re A Company [1985] BCLC 333. In that case a complicated structure of foreign companies and trusts was used to place the individual's assets beyond the reach of his creditors. Cumming-Bruce LJ described the structure as a facade, at p 336, but expressed the principle, at pp 337-338, to be that the court will use its powers to pierce the corporate veil if it is necessary to achieve justice irrespective of the legal efficacy of the corporate structure under consideration. The latter statement is not consistent with the views of the Court of Appeal in Adams v Cape Industries plc [1990] Ch 433, 536, where Slade LJ said: "[Counsel for Adams] described the theme of all these cases as being that where legal technicalities would produce injustice in cases involving members of a group of companies, such technicalities should not be allowed to prevail. We do not think that the cases relied on go nearly so far as this. As [counsel for Cape] submitted, save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon v A Salomon & Co Ltd [1897] AC 22 merely because it considers that justice so requires. Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities." In Ord v Belhaven Pubs Ltd [1998] BCC 607, 614-615 Hobhouse LJ expressed similar reservations. It does not appear from the reports that in either of those cases the court was referred to In re A Company [1985] BCLC 333. In those circumstances I consider that I should follow the later decisions of the Court of Appeal in Adams v Cape Industries plc [1990] Ch 433 and Ord v Belhaven Pubs Ltd [1998] BCC 607 and decline to apply so broad a proposition as that for which counsel for Trustor contends in the third principle referred to in paragraph 14 above. ..................................... 22: The second proposition also appears to me to be too widely stated unless used in conjunction with the first. Companies are often involved in improprieties. Indeed there was some suggestion to that effect in Salomon v A Salomon & Co Ltd [1897] AC 22. But it would make undue inroads into the principle of Salomon's case if an impropriety not linked to the use of the company structure to avoid or conceal liability for that impropriety was enough.” "[Counsel for Adams] described the theme of all these cases as being that where legal technicalities would produce injustice in cases involving members of a group of companies, such technicalities should not be allowed to prevail. We do not think that the cases relied on go nearly so far as this. As [counsel for Cape] submitted, save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon v A Salomon & Co Ltd [1897] AC 22 merely because it considers that justice so requires. Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under the general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities."

Cited in 1 later judgment