Polly Peck International Plc v Nadir & Ors [2006] EWHC 3727 (Ch)

Case No IHC 523/05

NEUTRAL CITATION NUMBER: [2006] EWHC 3727 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Wednesday, 25 January 2006

Before

THE HONOURABLE MR JUSTICE LINDSAY

Between

POLLY PECK INTERNATIONAL PLC (In Administration)Claimant

NADIR & OTHERSDefendant

Digital Transcript of Smith Bernal Wordwave Limited

PO Box 1336 Kingston-Upon-Thames Surrey KT1 1QT

Tel No: 020 8974 7300 Fax No: 020 8974 7301

Email Address: tape@wordwave.co.uk

MISS AGNELLO (Instructed by Messrs Stephenson Harwood) appeared for Claimant

MR A AYRES (Instructed by Messrs Lane & Partners) appeared for Defendants

Judgment

[1]I have before me an application in the action CH-1991-P-No.11211 Polly Peck International Plc (In administration) (“Polly Peck”) against Asil Nadir and others. It is an application notice of 10 August 2005 and in it Mr Nadir’s solicitors ask for an order that the first defendant’s (that is his) share of a pension plan amounting to £61,000 odd, together with accrued interest in his solicitors’ firm’s client account, be paid to the firm as his solicitors in respect of legal fees. Or, in the alternative, that the terms of a Mareva order made in these proceedings on 18 December 1991 relating to payment of legal expenses should be varied to allow payment of the £61,000 odd to be paid to the present solicitors of Mr Nadir in respect of legal fees. It asks for costs and it gives reasons.

[2]The applicant before me, Mr Nadir, appears by Mr Ayres and the respondent, Polly Peck International (In administration) by Miss Agnello. Mr Ayres identified at the outset three broad questions which required an answer. Firstly, whether or not an order of Patten J had the effect of freeing the £61,000 odd from the Mareva order (which was referred to in the passage I have just read from the application notice); and, secondly, if Patten J’s order did not have that effect, whether it would be right now to subject the £61,000 not to the original form of words in the original Mareva of 1991, but instead to subject it only to the modern equivalent of those words, which, it is said, would have the effect of enabling or facilitating the payment of the £61,000 to Mr Nadir’s solicitors, Lane & Partners.

[3]If, thirdly, both those questions should be answered contrary to Mr Nadir’s interests, then Mr Ayres says that, having regard to such circumstances as are in the evidence and the purpose for which the £61,000 odd would be used, it would be right as a matter of discretion to vary the original Mareva so as to enable the money to go to Lane & Partners in respect of legal fees.

[4]Those are the three broad questions which are now before me but they cannot be understood without, I fear, quite a detailed look at the chronology.

[5]The Polly Peck case and Mr Nadir in relation to it are matters of some notoriety. They go back a long time; indeed I recollect that I had a Polly Peck case in front of me in 1993. But Mr Nadir acquired a controlling interest in Polly Peck in 1980; I think he became Chief Executive or Chairman, or certainly the moving spirit, and, no doubt in consequence of that, on 18 May 1988 a retirement benefit plan, a declaration of trust, was made, a PPI retirement benefit plan, which, although I have not seen its terms, either could or did confer substantial benefits in the future on Mr Nadir. Quite how they were drafted I know not.

[6]On 25 October 1990, Morritt J (as he then was) made an administration order as to Polly Peck and joint administrators were appointed. At first they were represented by DLA Solicitors but later and still by Stephenson Harwood.

[7]An action was begun by the joint administrators; it was the action 11211 to which I have already briefly referred. On 24 October 1991, a motion in that action was launched. Quite what it asked for I am not entirely sure but by then the action must have been in being. It is still in being, so we are talking about an action of over 14 years’ duration already. On 25 November 1991, Mr Nadir was adjudged bankrupt. Robson Rhodes or members of that firm became the trustees in bankruptcy and they were represented for a time by Messrs Linklaters.

[8]On 18 December 1991, still in action 11211, there was an application before Vinelott J and he granted what was then called Mareva relief. Relatively unusually, the relief was agreed to by consent and it was expressed to be over the determination of the motion. Whether the motion has determined I fear I have not been able to ascertain although the subject has briefly come up in argument. I think for the moment I ought to assume that, although, on the making of the Mareva, a great deal of the substance of the motion was fully dealt with, there might have been subsidiary matters that were not and one would expect costs also to have been a continuing issue. It may be (and, as I say, I shall assume) that the motion still is in being, although certainly the word “dormant” would express a degree of activity in it which would be exaggerated.

[9]The debt asserted by Polly Peck against Mr Nadir in the action was very considerable and accordingly a large limit was placed in the drafting of the Mareva. It was £378 million. The Mareva says:

“It is ordered by consent: 1. (i) That the First Defendant [Mr Nadir] be restrained and an injunction is hereby granted restraining him until after the effective determination of the Plaintiff’s Motion dated 24th October 1991 or further order in the meantime from doing, (whether by himself…”

Then it follows the usual form and it includes a prohibition on:

“… in any way howsoever dealing with (without the prior written consent of the Plaintiff’s solicitors) any of his assets”

. In other words, it was in what was then standard form.

[10]There was a proviso that runs to a number of pages and proviso (b): “Notwithstanding paragraph 1 of this

[11]Although the matter was, as I have indicated, framed as “by consent”, Mr Nadir was obliged to use his best endeavours to serve evidence - such evidence as he was advised in opposition to the motion - by no later than 13 January 1992. It may be that at some stage it was indicated that he did not feel able to or was not concerned to oppose the automatic continuation or was not going to fight the motion or whatever but, as I say, I come back to the fact that I am assuming that in some respect the motion still subsists. That, I think, is all I need say about the Mareva at this stage.

[12]In May 1993, Mr Nadir left the jurisdiction and, indeed, as the respondents, Polly Peck, say, it is fair to describe that as his fleeing the jurisdiction. On 12 February 1999, the administrators of Polly Peck indicated that they were ready to lodge a proof in Mr Nadir’s bankruptcy, a proof of some £262 million. A proof has been lodged (I think it was some while later) but it is disputed by Mr Nadir and has not yet been ruled on by the trustees in bankruptcy.

[13]Amongst such assets as might or might not be at the disposal of Mr Nadir was his interest in the 1988 retirement benefits plan declaration of trust. The plan trustees were unsure of to whom to pay and, if to pay, and it launched proceedings (03541) on the subject. Messrs Masons acted for the plan trustees. PPI were not a party. The trustee in bankruptcy was a party to those proceedings, as was Mr Nadir.

[14]In December 2000, Lawrence Collins J had before him an application by Mr Nadir in those proceedings for a pre-emptive costs order so, to the intent, in effect, that Mr Nadir could be represented in those proceedings knowing that, one way or another, whatever the outcome, his costs would be paid. But that application was dismissed, with costs and, I am told, some £12,000 thus is owing by Mr Nadir to the trustees in bankruptcy and perhaps, I know not, sums are also owing to the plan trustees.

[15]The plan trustees’ proceedings led to negotiations. I am told very little about them but what was proposed was that the pension monies (to call them that) were going to be split 80 per cent to the trustees in bankruptcy, 10 per cent to Mr Nadir and 10 per cent to his dependents. In that way, 80 per cent of the fund would pass to the trustee in bankruptcy. I do not know what course the negotiations took but it goes without saying and, indeed, has been said that the creditors’ committee in the bankruptcy had to consider and did consider the terms of that compromise. Quite how fully it was put to them I know not but I would have expected that what was made clear was that 10 per cent of the fund was to be paid to Mr Nadir.

[16]Amongst the members of the committee of the creditors in bankruptcy were the administrators of Polly Peck. They must have known of the plan trustees’ proceedings; they must have known of the proposed compromise and I think it would be fair to ascribe to them knowledge that the compromise required an order of court. It seems to me that is likely to have been told to them in the course of the workings of the committee of creditors. Certainly there is no evidence that the committee of creditors was not told that the compromise required court proceedings.

[17]On 11 July 2001, Mr Nadir’s solicitors wrote to the solicitor acting for the estate in bankruptcy. Mr Peter Knight, as Mr Nadir’s solicitor, writes to Mr Richard Wright at Linklaters. I do not need to read the whole of the letter but in the course of it, and talking of the proposed compromise, Mr Knight says:

“However, the point which concerns me is that whilst this would be binding on your clients and therefore the creditors of Mr Nadir’s estate, I obviously need to be satisfied that no other party will then seek to appropriate Mr Nadir’s agreed share. … I think that you and your client had dealings with the administrators and their lawyers and I would therefore expect you to be best placed to approach them and obtain their confirmation that they have no objection to the proposed settlement, that they will not treat the dealing in the monies as being a breach of the Mareva and that they will not seek to appropriate or otherwise intervene in the monies which it is intended shall come to my firm.”

[18]That was 11 July 2001. On the same day, Mr Wright of Linklaters for the trustees in bankruptcy wrote to Mr Gordon-Saker of Stephenson Harwood for Polly Peck saying this:

“With further reference to this matter can you please confirm on behalf of Polly Peck as Mr Nadir’s former employer that it has no objection to payment out by the Trustees of the Scheme of pension benefits to Mr Nadir and/or his Trustee in Bankruptcy prior to the age of 65.”

Then there is a little talk about whether 65 was the normal retirement date. What is being there asked for is that there should be no objection to payment out by the trustees of the scheme of pension benefits to Mr Nadir and/or his trustee, therefore contemplating payment out to Mr Nadir himself.

[19]I think one notices it is not merely payment by the trustees but “payment out” and, I think, in context of Mr Nadir having fled the jurisdiction, the word “out” there must be taken to contemplate at least money passing out of this jurisdiction.

[20]Again on 11 July, there is another letter by Mr Wright to answer Mr Peter Knight’s enquiry and it says this:

“Since Polly Peck have been informed of the proposed settlement and have agreed it I think they would have difficulty in saying that a settlement was a breach of the mareva injunction. Assuming that we can sort out the Trustees of the Scheme who seem to be taking a more than somewhat technical approach to this problem I will speak to Paul Gordon-Saker and ensure that he will not contend that the settlement is a breach by Mr Nadir of the mareva injunction.”

[21]All this precedes the hearing on 20 July before Patten J. That was a hearing, of course, in the pension plan trustees’ proceedings. The other parties were Mr Nadir as first defendant, the trustees in bankruptcy as second defendant and representative dependents of Mr Nadir as third defendants. In fact, they were two of his children.

[22]At that hearing before Patten J, a proposed compromise was put in front of him which, as I mentioned, split the fund 80 per cent, 10 per cent and 10 per cent. But the learned judge took the view that PPI did not need to be joined as parties to those proceedings but that their opinion should be sought and that it should be noted in the minute of order. Patten J made an order in the terms requested, save that there should be amendment to allow PPI to give their consent.

[23]The order was not immediately drawn up and it should have been (and I think it was) that then further enquiries were made with respect to obtaining agreement to the compromise terms from PPI. PPI were, of course, not a party to those proceedings. On 20 July Linklaters for the trustees in bankruptcy wrote to Stephenson Harwood for PPI saying:

“With further reference to the above mentioned matter…”

That is a reference to the hearing before Patten J:

“… at the hearing before Mr Justice Patten this afternoon when the proposed compromise between the Trustees in Bankruptcy, Mr Nadir and Mr Nadir’s dependants was put before the Court the Judge asked for confirmation that Polly Peck as employer had agreed to this proposed compromise. Your clients have of course approved the settlement by sanctioning the proposed compromise as a member of the Creditors Committee.”

Pausing there, that does suggest that the actual form of compromise was known to the creditors’ committee. “I would be grateful if you could let us have a letter confirming that Polly Peck are content with this settlement.” The rest of the letter goes off on a different point.

[24]The answer that that received, or at least the subject touched upon in that letter received an answer which is to be seen in Stephenson Harwood’s letter, not to the trustees in bankruptcy but to the pension plan trustees. That letter of 31st July from Stephenson Harwood says:

“We act for the Joint Administrators of Polly Peck……. We have seen a copy of your fax to our client dated 23 July 2001. Your proposed payment to Mr Nadir of 10% of the pension fund, referred to in your fax, is caught by a Mareva injunction dated 18 December 1991 granted to the company by the Honourable Mr Justice Vinelott. We enclose a copy of the Mareva by way of notice to you.”

We enclose a copy of the Mareva by way of notice to you.”

[25]On 7 August the trustee in bankruptcy’s solicitors write to the plan trustees’ solicitors saying (and they have obviously seen a copy of the letter of 31 July):

“The letter from Stephenson Harwood is of course very disappointing. The terms of the proposed compromise between the Trustees in Bankruptcy, your clients, Mr Nadir and his dependants were put to the Creditors Committee of the bankruptcy and so I am instructed accepted unanimously. Polly Peck as a member of the Committee voted in favour. It was on that basis that we had no reason to believe that Polly Peck would not provide a letter of consent to the settlement. I will be discussing the matter with Mr Paul Gordon-Saker of Stephenson & Harwood but it seems to me that Polly Peck’s action is somewhat extraordinary because as Mr Nadir is still in bankruptcy they could not possibly retain any property which might be subject to the Mareva. If they were to do so they would in effect be taking priority to the claims of other creditors. On that basis the property subject to the Mareva would have to be handed over to the trustees in bankruptcy and, although their representative is presently on holiday, in my view the trustees in bankruptcy could not possibly not transfer those funds to Mr Nadir. The trustees have negotiated with Mr Nadir on the basis that he would obtain whatever share was agreed. The same would not be subject, for example, to a claim from the trustees in bankruptcy that such funds constituted after acquired property. We are endeavouring to sort out this matter amicably with Polly Peck. If necessary the trustee could of course apply to the Bankruptcy Court to discharge the Mareva Order.”

[26]The next letter that I need to refer to is one of 31 August and it is from Polly Peck’s administrators to Stephenson Harwood, so it is, so to speak, an internal letter and it says:

“Thank you for your letter of 29 August 2001 outlining the position with regard to the settlement negotiated by Nadir’s Trustees in Bankruptcy whereby they will receive 80% of the pension fund after payment of tax at 40%.”

So obviously the client, the administrators, had had an explanation in a letter of 29 August. Quite what it said is not before me. This letter continues, with my emphasis, as follows:

“I have briefly discussed this compromise and its implications for Polly Peck International Plc with … [then he names a representative of the joint administrator] and confirm that we are satisfied with the outcome. Accordingly, in my capacity as Joint Administrator, I hereby formally give the consent of Polly Peck International Plc, as employer to the payment out of the fund of Mr Nadir’s entitlement. Please pass this consent to the solicitors of the Trustees in Bankruptcy as necessary.”

[27]At that stage there is, I shall come back later to the words “as employer”, what appears to be a form of consent to the payment out that is proposed.

[28]In the next letter (the date is not entirely clear - it could be 2 September) Stephenson Harwood wrote to Linklaters saying (again with my emphasis):

“Further to your fax of 30 August I am pleased to confirm that the administrators of Polly Peck International Plc as employer consent to the payment out of the pension fund of Mr Nadir’s entitlement. They also consent to the terms of settlement negotiated between Mr Nadir’s trustees in bankruptcy, Mr Nadir and the trustees of the pension fund. I enclose a copy of a letter received from Mr A J Kent of PricewaterhouseCoopers confirming my instructions.”

So at this stage there is consent to the terms of settlement negotiated.

[29]All this of course affects, one way or another, the order of Patten J that should properly have grown out of the hearing of 20 July 2001 and it was, no doubt, this coming and going that led to the order not being sealed until 27 September 2001. In the sealed form one has, in the second page of the order, a recital that says:

“… AND the Claimant, the First Defendant, the Second Defendants, Polly Peck International Plc (in administration) and the Third Defendants having agreed to the terms set forth in the schedule hereto… it is further ordered that …”

One then comes to the substantive order.

[30]Polly Peck were still not a party to the 03541 pension plan trustees’ proceedings, but there is a recital of them having agreed to the terms set forth in the schedule thereto. After the words “it is further ordered that …” one has, of course, several pages of material. The first part that I need to refer to is (4):

“the terms of the compromise be binding on the First Defendant, Second Defendants, Third Defendants and on all the persons represented by the Third Defendants under paragraph 2 above.”

[31]Miss Agnello argues that there is a manifest conflict or inconsistency between the recital as I have just read it and that provision as to the terms being binding, but I am bound to say that I do not see the inconsistency. One is a recital and one is declaring that a contract is binding between the particular parties to the contract. They do not seem to me to be inconsistent.

[32]The terms of compromise are set out in the schedule. I do not need to read much of it, but “the fund” is defined as being “the balance of the retirement benefit account or formerly held in the name of the first defendant”, Mr Nadir. That fund was to be partitioned 80 per cent, 10 per cent and 10 per cent as I have already mentioned. Paragraph (8) of the schedule says:

“The First Defendant’s 10% share of the fund shall be applied to provide benefits under the Rules to the First Defendant on the footing that no bankruptcy occurred.”

That, as it would seem to me, was to facilitate the direct and beneficial receipt of the 10 per cent by the first defendant, Mr Nadir, without any intervention from the trustees in bankruptcy. There are then directions as to the 10 per cent being capable of being dealt with by way of a payment of 10 per cent in cash. Paragraph (10) says:

“the Claimant shall, at the request of the First Defendant, make a lump sum payment to the First Defendant representing all or any part of the capital value of the 10% share.”

Paragraph (11) says:

“All payments to the First Defendant are to be made to his solicitors.”

They then were Messrs Vizards Staples & Bannisters.

[33]So there one has a working out of the compromise. The 80/10/10 split is described and the payments contemplated are to Mr Nadir or can be to Mr Nadir and are to be made in the first place to his solicitors. One sees the recital of Polly Peck (in administration) having agreed “to the terms set forth in the schedule hereto”.

[34]I think it is an observation that is not unfair to make to say, given that Polly Peck had indicated that they thought that the Mareva was going to continue as to the 10 per cent and that they had said that, in effect, earlier, that if they had wished to insist upon that being so, they really should have made it clear, before the order was drawn up, that expressions such as “as employer” were intended in some way to be restrictive of the consent that was given.

[35]I am far from clear in my mind and the evidence is not complete, in the sense that, as will have been seen from citations already made, there are letters and faxes and conversations that took place, or may have taken place, that have not found their way into the evidence, but it is hard to absolve Stephenson Harwood from a view that, if they had wished to ensure that consent, as employer, was not full consent, then it really did behove them to make that quite clear and, if necessary, to have intervened (or have sought to intervene) and clearly to have raised the subject before Patten J’s order was sealed on 27 September.

[36]Quite how far Mr Nadir’s solicitors knew what was going on as to consent on Polly Peck’s part is unclear. It seems that Mr Knight was chiefly relying on Mr Wright of Linklaters to get the consent and to keep him informed and on 4 October 2001, Mr Wright of Linklaters wrote to Mr Peter Knight saying:

“With further reference to this matter, as you are aware Polly Peck as employer of the Polly Peck pension scheme have consented to the proposed settlement and a letter from their lawyers, Stephenson Harwood, has been sent to Masons. Accordingly the settlement is now in place. However, much to my surprise Polly Peck are still asserting their Mareva and seem to be requiring the pension fund trustees to pay the money due to your client to them. In all the circumstances we do not see how that is a proper action for Polly Peck to take. What, if anything, do you propose to do about it? Perhaps we could discuss.”

What, if anything, do you propose to do about it? Perhaps we could discuss.”

[37]On 12 October, Masons, acting for the plan trustees, wrote to Stephenson Harwood saying:

“Please find enclosed a draft copy of the Order made by Mr Justice Patten on 20 July 2001 which is in the same form as the final order. A copy of the final order will be made available to you when it is returned to us. The Order of Mr Justice Patten on 20 July 2001 (the “Settlement Order”) provides that all further proceedings in this claim be stayed except for the purpose of carrying out the terms of the Settlement Order and there is permission to apply to carry out such terms into effect. Please note that the second recital before the further order records the consent of your client and the two letters appended to the settlement order …”

That is not a reference I can take up because my copy has nothing appended to it:

“… are letters that evidence the consent that is recorded. There is no written concluded agreement other than the Settlement Order between the parties as suggested in your letter. Be that as it may, and provided that we have understood your query, it is our opinion that the Settlement Order does provide the conclusion referred to in your letter.”

I am not entirely clear what is going on, but it does suggest that the order of Patten J had letters appended to it and that the letters indicated consent given by Polly Peck; they were, no doubt, the letters to which I have already referred.

[38]That was 12 October. On 16 October, there is another letter from Stephenson Harwood to Masons in answer. They say:

“It is evident to us, from the terms of that order, that there is a concluded agreement between the parties to the application and that the terms of that agreement should be implemented. The fact that Mr Nadir’s payment is caught by a Mareva injunction seems to us to be immaterial to the implementation of the agreement. You raise certain points in your two letters to us of 11 October and you say that until a further order of the Court is obtained your clients will not make any payments under the settlement agreement. We can see no justification for your clients adopting that position. As we have said, the agreement is in existence and all that has happened is that the payment due to be made to Mr Nadir cannot now be made because of the terms of the mareva injunction. If Mr Nadir wishes to make an application to the Court to vary the terms of that injunction or to seek to have the payment to him made, notwithstanding the injunction, it is a matter for him to make application to the Court in the proceedings in which the injunction was obtained. You appear to be in some doubt as to the consent given by our clients to the terms of the settlement. Our client gave their consent to the proposed payments out of the Scheme as employer. They did not consent to the payment to Mr Nadir as plaintiff in the action in which the injunction was obtained. Our clients have no objection to a payment out of the pension fund being allocated to Mr Nadir. They simply say that such a payment is caught by the terms of the injunction and in due course our clients will apply to the Court for that money to be paid over to them. We do not believe there is any proper basis on which your clients should be making an application to the Court to vary the terms of the mareva injunction. As we have said, that is a matter for Mr Nadir and it is for your clients to implement now the terms of the agreed settlement on the basis that they withhold the sum due to Mr Nadir pending a further order of the Court.”

[39]It is relatively plain from the correspondence and evidence that I have touched on so far that Mr Nadir agreed to the 80/10/10 split on the footing that he would be receiving the money beneficially himself, no doubt by way of payment to his solicitors. Of course, if he had known that the money would not be at his disposition, questions would naturally arise as to whether the compromise would have been made as it was. It is pure speculation as to how it would have been made or, indeed, if it would have been made if Mr Nadir had recognised that, notwithstanding consent “as employer”, Polly Peck were nonetheless going to assert and persist in asserting that the Mareva froze the money so that it would not come to him without some further order of court. At all events that is the position that we had got to by 16 October 2001.

[40]On 15 February 2002, so some time has past, Polly Peck’s solicitors writing to the plan trustees solicitors say that:

“Once other payments have been made our clients will make an application to the Court to deal with the matter.”

I think it is not entirely clear what “the matter” is, but it is likely to be the matter as to the 10 per cent attributable to Mr Nadir. They say:

“However, it does not seem to us to be necessary that your clients [the plan trustees] should be parties to that application, which will involve only Mr Nadir.”

It looks as that stage that proceedings might relatively soon be launched to deal with the position of the 10 per cent. But that was not the case.

[41]On 18 March 2002, Mr Nadir’s solicitors, Lane & Partners by Mr Knight, wrote to Stephenson Harwood. They speak of the order of Patten J of 20 July 2001 which they say provided for, amongst other things:

“… the payment out to our client’s solicitors of a sum of money, being part of his pension plan. We understand from Messrs Masons, instructed on behalf of [the plan trustees] that you say that these monies are subject to a Mareva injunction. We further understand that the Trustee Corporation [the plan trustees] is, in the light of your representations, concerned about whether to release those monies to ourselves. Would you kindly - Would you kindly - 1. provide us with copies of the correspondence between yourselves and the Trustee Corporation or their representatives; 2. set out your reasoned arguments as to why you say that these monies are subject to a Mareva; and lastly 3. what you propose doing about the resolution of this issue. We look forward to hearing from you.”

I am told that that letter received no answer.

Would you kindly -

[42]The next stage is this: Mr Knight of Lane & Partners for Mr Nadir, met Mr Wright of Linklaters for the trustee in bankruptcy and, in the course of a letter of 31 May, Lane & Partners assured the trustees in bankruptcy (and I do not think that this has been in issue since) that any of the monies that were received representing the 10 per cent would be completely extinguished by legal costs which Mr Nadir owed. In other words, it would not be that money released to Mr Nadir or his solicitors would, in a sense, directly add new benefit to Mr Nadir but would go in payment of costs.

[43]Lane & Partners not having received an answer to their earlier enquiry made to Stephenson Harwood, wrote again on 30 July 2003. They say:

“Mr Nadir’s position is that the monies presently held at Masons are not caught by the Mareva. The reason being that 1. PPI’s consent to the Order is formally recorded in the Recitals to the Order and they have not challenged this consent.”

They add other arguments to that in the letter. That was 30 July 2003.

[44]Further time passes until January 2004. The trustees of the pension plan launch a claim form to which I think both Mr Nadir and Polly Peck are parties seeking to resolve how to deal with the Nadir 10 per cent but, as I understand it, PPI objected that, Polly Peck being in administration, no prior consent had been obtained and hence that the proceedings had to terminate. They were formally quite correct in so asserting, but it is a little technical. Had a more relaxed view been taken, as it could have been, the issue as to the Nadir 10 per cent could, no doubt, have been resolved in those proceedings. In the event, nothing was decided.

[45]Yet further time passes until 10 September 2004. Deputy Master Mark made an order that payment of the Nadir 10 per cent should be made to Lane & Partners’ client account pending further order or pending Polly Peck’s consent. I have not seen the learned Master’s order but, at some stage thereabouts, it was suggested that the convenient way of resolving the Nadir 10 per cent problem was by making application in the original action of 1991, 11211. On 13 September 2004, Lane & Partners write to Stephenson Harwood saying:

“Without prejudice to Mr Nadir’s assertion that the monies are not subject to the Mareva order we would remind you that we have previously stated that the provisos to the Order allow Mr Nadir to “make such payment as may be necessary in respect of his reasonable legal costs in defending this action and any other payment with the prior consent of the plaintiff’s solicitors, in any case from a current account or other source the identity of which has first been notified in writing to the plaintiff’s solicitors”

. We have previously requested that these monies be used by Mr Nadir to discharge legal costs that he has incurred and will incur. Would you please confirm whether or not it remains your client’s position that they refuse to give that consent.” I am told that letter received no answer.

[46]Yet further time passes and on 10 August 2005 the application notice which I recited at the beginning of this judgment was launched. There has been evidence filed on both sides and reference also made in the course of argument to evidence in fresh proceedings that the trustees in bankruptcy have launched because there is an application 8647 of 1991 between the trustees in bankruptcy and as first respondent, Mr Nadir, as second respondent, Polly Peck and as third respondent, another Polly Peck company. Those new proceedings by the trustee in bankruptcy were not launched until November of last year. The papers in those proceedings are relatively extensive. If one includes within the ambit of those proceedings some 24 lever arch files which earlier Polly Peck had served upon the trustees in bankruptcy as indication of the strength of the Polly Peck claim, the Polly Peck proof in the bankruptcy.

[47]That, I hope, suffices as the background to the matter. I then come to the foreground. I mentioned that there are three questions to be dealt with. I will put aside, for the moment, the first question, which is whether or not Patten J’s order freed up the £61,000 odd so that it could be received by Mr Nadir or his solicitors, and I look instead at the second and third.

[48]The second argument advanced by Mr Ayres is that the modern form of a freezing order does not limit the payability of legal costs to legal costs in whatever are the proceedings then in hand. By contrast, as I have mentioned, Vinelott J’s order authorises payments such as are necessary in respect of reasonable costs in defending this action, and that to that extent there is a contrast between the current form of order, were a freezing order to be made today in similar circumstances, and the freezing order as was made in 1991 by Vinelott J.

[49]I do not think there is anything in this argument. One makes sense of an order by way of construction of the order as it is rather than by looking at what, years later, similar orders might have contained. I do not think it is possible to say anything more on that second point.

[50]The third issue that Mr Ayres identified was one, in effect, of discretion. Assuming that I have a discretion, on application made to me, to vary Vinelott J’s 1991 order and to permit payment of costs other than in “defending this action”, would it be right now to do so?

[51]The costs which are identified in the course of the evidence include costs of other proceedings than “in defending this action”. But as it seems to me, it is not a strict pre-condition, but certainly an important factor when one is considering an application for release of funds in order to pay costs, to know what other funds could have been used by the applicant in order to pay the costs. It is not simply a question of looking to see what other assets there are in the jurisdiction and what other assets abroad; I think the approach should be more general than that. Should one, to some extent, weaken the protection given to a claimant by a Mareva or by what is now called a freezing order, without knowing what, if any, other funds could have been resorted to for costs. On that, the evidence is hopeless so far as concerns Mr Nadir’s assets.

[52]Miss Agnello raises a number of points on the issue. She says that Mr Nadir has not been co-operating with the trustees in bankruptcy and fulfilling his duties as a bankrupt. She says that the debt to Polly Peck is huge. It is some £262 million and that the only defence so far raised to it is of only £53 million and in any event is an unconvincing defence. Those are issues that, no doubt, can be gone into later. But she does say that there is no full and frank explanation of how litigation has been funded so far, even how the pension plan trustee proceedings were funded, even how today’s litigation is funded. She says there is no explanation of how, for example, his mode of life, whatever it may be, has been paid for over the years.

[53]It seems to me that before I could possibly, as a matter of entirely fresh discretion, make an order that, yes, the £61,000 could be paid out by way of satisfaction of Lane & Partners and earlier firms of solicitors’ costs, I would need to have substantial evidence to answer the sort of questions that Miss Agnello has touched on, and yet there is nothing there in that regard.

[54]Were I asked simply to exercise a discretion afresh, I would necessarily, as it seems to me, refuse to allow payment out of the £61,000 odd in the way that is sought.

[55]That leaves only the much more complicated question of whether the Mareva has pro tanto (that is to say, with reference to the £61,000, the 10 per cent) been one way or another already effectively varied so that the £61,000 has been released.

[56]Mr Nadir, by causing or permitting the switch from having had some form of chose in action against the pension plan trustees as to 100 per cent of his fund to instead being entitled to receive only 10 per cent of that erstwhile entitlement, obviously, in my view, made what could be described as a “dealing howsoever” with an asset of his. But that was done by way of an order of court, the order of Patten J to which I have already referred.

[57]It could be said that, going back to Vinelott J’s order, where he said that the injunction was to restrain Mr Nadir until inter alia “further order in the meantime”, he was referring only to further order in the action before him, 11211. But Vinelott J’s order does not say “further order in the meantime herein”, as is sometimes and indeed commonly said, and I do not think that it would be right to write that in, especially given that the order of Vinelott J was by consent and hence was likely to have been negotiated word by word between the parties. It was a consent order which is relatively unusual in Mareva terms.

[58]It seems to me that one can arrive at a situation in which an order made in proceedings other than 11211 can, in effect, vary the Mareva. One might perhaps take a different view of whether Patten J’s order represented a “further order” for the purposes of the Mareva, if the beneficiary of the Mareva, namely Polly Peck, had had no opportunity to know of or to suspect the existence of or to examine before it was sealed the order of Patten J. For the reasons I have given, as I went through the chronology, it does seem to me that Polly Peck had known of the terms of the compromise, even before the matter came before Patten J and a fortiori before his order was ultimately sealed.

[59]They had taken the point that they were going to insist on the Mareva continuing to bind and yet then gave their consent in terms which would have led any ordinary reader, it seems to me, to believing that consent had indeed been given. So it came about that the recital to which I have referred was called into existence.

[60]I think I am entitled and, indeed, probably required, to take that recital to be true unless and until there is an application to amend or revoke it in an application which joins the parties to the proceedings in which the recital was made. There has been, of course, as yet no such application. It is to be borne in mind that we are dealing now with a recital of, at latest, September 2001 and moreover dealing with it in circumstances in which Lane & Partners or Mr Knight had more than once raised the question of how it was to be argued that the Mareva still applied and yet had received no satisfactory answers to those questions.

[61]It seems to me that the compromise which the recital indicates was agreed on behalf of Polly Peck was one that was intended to have the effect, and in point of drafting does have the effect, of enabling Mr Nadir or his solicitors to receive the 10 per cent free of the restriction of the Mareva. Certainly, that was the basis on which, as it would seem, it was negotiated by Lane & Partners, or the current solicitors for Mr Nadir, and it is the basis which the trustee in bankruptcy also understood. As I say, it seems to me it is a view perfectly open in point of construction, looking simply at the construction of Patten J’s sealed form of order.

[62]Polly Peck has long known of the existence of Patten J’s order and, despite earlier indications that it would do something about it, has not done anything about it.

[63]It may be, in my view it would be the case, that once Patten J’s order had been made, the £61,000 could have been paid to Lane & Partners or to Mr Nadir and could have been deployed in meeting costs or, indeed, possibly in other ways, but once the matter had come before Deputy Master Marks and it had been suggested that consent should be formally sought in the 11211 action, it seems to me entirely right that the solicitors to Mr Nadir should have raised the question, as they did in the application notice which is now before me.

[64]I take the view that Polly Peck’s consent, as recorded in the order of Patten J in its sealed form, is an entirely general agreement. It does not say that it is given only in the capacity as employer of Mr Nadir and not otherwise, nor, where there has been reference to Polly Peck’s voting in the creditors’ committee, is there any note that it was a vote that was constrained in some way by Polly Peck looking only to the best interests of creditors generally and that the vote was not to be taken in any way to represent Polly Peck’s approval or acquiescence whilst looking at its own interests.

[65]I do wonder whether Polly Peck could, certainly without much greater clarity of expression, have consented under one hat but have failed to consent under another, but certainly in the absence of clear qualification in the recital in Patten J’s order, I take the consent that is there described as having been given in general.

[66]I am concerned too, as I have mentioned, about the sheer passage of time over which Polly Peck have known of the problem but have done nothing about it, notwithstanding letters as I have referred to from Lane & Partners on the subject and their lying unanswered.

[67]On the basis that the consent in Patten J’s order has the effect that I have mentioned, it would be right that I should, as it seems to me, make an order in the action 11211 authorising the payment of the £61,000 and interest that now stand in Lane’s client account to the credit of Mr Nadir, to be paid to that firm by way of satisfaction pro tanto of legal costs and disbursements owed to Mr Nadir’s solicitors. But there are one or two other points that tend to the same direction.

[68]Although this is not a point of construction, it is some comfort to me that, if the sum is paid out in the manner I have just mentioned, all of the sum is eaten up in legal fees. This is not an issue such as would lead to some direct new personal benefit to Mr Nadir. Miss Agnello rightly draws attention, as I have mentioned, to great failings on his part over a number of years and it would be a little discomforting if I was to be authorising a payment of £61,000 odd to him direct. But that is not at all the outcome, either intended or as will take place. The whole of the money will be used up in relation to legal fees, although by no means solely the legal fees in 11211.

[69]Secondly, another form of comfort is that if the solicitors to Mr Nadir are paid, then, as it seems to me (although one is bound to be a little concerned that this is speculative) the chances of him being professionally represented in the new bankruptcy proceedings is likely to be greater than it would be than if no money was forthcoming in respect of past fees. To that extent it seems to me the payment that is being sought to be authorised conduces to the better administration of justice. It is difficult to see how an adequate and informed response can be made on Mr Nadir’s behalf without legal assistance.

[70]A third matter, which perhaps has only some moral force, is that it would seem to me to be unfair if Mr Nadir were now to have the £61,000 snatched away by way of the Mareva and put outside his disposition, because, having been taken through the body of evidence and the correspondence to which I have referred, it does seem to me relatively clear that the basis on which negotiations were conducted in the pension plan proceedings was that, whatever ultimately by way of percentage was attributed to Mr Nadir, it would be receivable by him and at his disposition and not therefore a sum which was to be frozen by a Mareva.

[71]I think I have dealt now with the main issues, but I ought to touch on some of the points that Miss Agnello made in the course of argument and it is perhaps neatest to do it by way of reference to her skeleton argument. She said the application is opposed by the claimant for a number of reasons, which can be summarised, then she sets out quite a large number; nine separate points. The first is that the evidence presented on behalf of Mr Nadir provides no information whatsoever about this current means and current liabilities or the previous funding provided to him by third parties. I entirely agree and I have attributed weight to that in refusing, as a matter of fresh discretion, a lifting of the Mareva in the way that Mr Ayres had asked for.

[72]Secondly, she says that the Mareva was granted in 1991 and Mr Nadir absconded from the English jurisdiction in 1993 and that at no stage had a variation been sought of the Mareva and that he, Mr Nadir, had not adequately explained the whereabouts of some valuable paintings. Again, I think that would go chiefly to the exercise of a fresh discretion which I have refused to exercise in Mr Nadir’s favour. Of course, if, as I mentioned, my view is that Patten J’s order freed the £61,000, the considerations in this second objection would be irrelevant in any case.

[73]Thirdly, she says that the fraud action against Mr Nadir is for over £262 million, that there is only £170,000 available in the bankruptcy for distribution to creditors and that costs in the bankruptcy have significantly increased due to the conduct and lack of co-operation of Mr Nadir. I see some force in that but if, in point of construction, as I have mentioned, Patten J’s order lifted the injunction quoad the £61,000, then that is immaterial.

[74]She says, quite rightly, and it is not opposed by Mr Ayres, that the claimant’s claim, that is to say Polly Peck’s claim, survives the bankruptcy by reason of section 281(3) of the Insolvency Act 1986. But, whilst I note that, at the moment the bankruptcy does subsist and again if, in point of construction, Patten J’s order freed the sum, this allegation has no material force.

[75]A fifth point taken is as to the fees claimed - I have not set them out in any detail because, as I have mentioned, they do go outside the fraud action - but again if, in point of construction, Patten J’s order does free the money, it matters not for what purpose it is freed. Then there is reference to the unsuccessful attempt to get a pre-emptive costs order that led to Mr Nadir having to pay £12,000 by way of costs. That is so. One would think it is chiefly a matter for complaint by the trustees in bankruptcy, but to some extent, that £12,000, if unpaid by Mr Nadir, will serve to reduce the dividend ultimately payable to those whose proofs in bankruptcy are accepted. But I do not see that as disturbing the only ground on which I have been in Mr Nadir’s favour.

[76]Then grounds 7, 8 and 9, are simply different forms of arguing the effect of Patten J’s order and the recital therein. I do not think I need to go over them again, save to say that Mr Gordon-Saker for Polly Peck says in his evidence that he did not consent to any variation of the Mareva to allow the sum of £61,000 to be paid to Mr Nadir for any unspecified purpose. But we have seen, in the course of going through the correspondence, the agreement as employer, which I have taken to be, in the absence of clear qualification, a general consent such as to have justified the recital, or, perhaps more properly, certainly such as to provide no ground at this stage in limiting the recital to consent only in some particular restricted way.

[77]I hope I have dealt with the main issues raised. For the reasons I have given, I authorise the payment of the £61,000 and interest standing at the moment to the credit of Mr Nadir in Lane & Partners client account, to go out of that by way of satisfaction pro tanto of the legal costs and disbursements described in the proceedings. Those costs will exhaust the fund and I make that order in the proceedings 11211. - - - - - -

Order

i) The First Defendant may make such payments as may be necessary in respect of his reasonable legal costs in defending this action and any other payment with the prior consent of the Plaintiff’s solicitors, in any case from a current account or other source the identity of which has first been notified in writing to the Plaintiff’s solicitors.” Mr Nadir was required, as was then and is still current, to set out what his assets were, whether held directly or indirectly on his behalf, and there was liberty to apply.