The Financial Conduct Authority v Da Vinci Invest Ltd & Ors [2017] EWHC 2220 (Ch)

[2017] EWHC 2220 (Ch)Case No HC11CO2409
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, Fetter Lane,Date 6 September 2017
London, EC4A 1NL
Before
MR. JUSTICE SNOWDEN
Between
THE FINANCIAL CONDUCT AUTHORITYClaimant(1) DA VINCI INVEST LIMITEDDefendants(2) DA VINCI INVEST PTE LIMITEDDefendant(3) MINEWORLD LIMITEDDefendant(4) SZABOLCS BANYADefendant(5) GYORGY SZABOLCS BRADDefendant(6) TAMAS PORNYEDefendant(7) BIVONAS LAW LLPDefendant
Javan Herberg QC and Simon Prichard (instructed by the FCA’s legal group) for Claimant for The First to Fifth Defendants did not appearThe Sixth Defendant appeared by telephonePaul Mitchell QC (instructed by RPC) for Seventh DefendantHearing Hearing date: 5 October 2016
Judgment Approved

Introduction

[1]By an application which was eventually issued on 4 August 2016, the Sixth Defendant (“Mr. Pornye”) applied, “To change the order of 28 April 2016” in these proceedings.[2]The order to which Mr. Pornye was referring was in fact an order made by me on 25 April 2016 (“the Unless Order”). The Unless Order had stated that unless Mr Pornye provided certain documents and information to the Claimant (“the FCA”), and to the Seventh Defendant (“Bivonas”) by 4pm on 10 May 2016, his application dated 9 December 2015 to set aside an earlier order which I had made on 6 November 2015 (“the Set Aside Application”) would automatically be dismissed.[3]Mr. Pornye had not complied with the Unless Order, and hence his application was in substance an application for relief against the automatic imposition of the sanction under the Unless Order that his Set Aside Application should be dismissed.[4]The order of 6 November 2015 was an order that I had made after the end of a lengthy trial in May 2015, imposing a financial penalty of £410,000 upon Mr. Pornye (and larger penalties upon others) under section 129 of the Financial Services and Markets Act 2000 (“FSMA”) for market abuse contrary to section 118(5) FSMA. Mr. Pornye had brought his Set Aside Application on the basis that he had not been served with the FCA’s claim and that he had not instructed Bivonas to act for him in relation to it.

Background

[5]Mr. Pornye is a Hungarian citizen resident in Budapest. On 12 August 2015, after a trial that commenced on 6 May 2015 and ended on 20 May 2015, I gave judgment (the “Judgment”) in favour of the FCA against Mr. Pornye and others for market abuse: [2015] EWHC 2401 (Ch).[6]Along with two other Hungarian traders (Mr. Banya and Mr. Brad), an off-shore company that they had formed (“Mineworld”) and two other corporate defendants on whose behalf I found that the individuals were trading (“the Da Vinci companies”), I found that Mr. Pornye had engaged in practices known as "layering" and "spoofing", in which large orders were placed electronically on the stock markets without the intention that they would ever be executed. This was done to create an artificial impression of the level of demand for shares, falsely raising and lowering the prices so that shares could be bought at a lower price and sold at a higher price than would otherwise have been available.[7]In response to the FCA’s claim, a joint Defence of the three individual traders dated 27 January 2012, and a witness statement purporting to be from Mr. Pornye dated 31 January 2013, were served by Bivonas, who were solicitors who had gone onto the court record for all three traders in 2011 and had purported to act on behalf of all of them in defending the proceedings. However, neither Mr. Pornye nor the two other individuals were present or represented at the trial. Instead, as I recorded at paragraph 6 of my Judgment, on the first day of the trial I was informed that the FCA had been notified a few days earlier by Bivonas that the individual defendants were not planning to attend. On that basis, I struck out their Defence under CPR 39.3 and proceeded to hear the trial in their absence, with the allegations being contested only by the Da Vinci companies.[8]These events at the start of the trial in May 2015 followed a letter being sent by Bivonas by email and courier to Mr. Pornye on 24 April 2015 threatening to come off the record in the proceedings and giving him a deadline of 27 April 2015 to engage with them, and in particular to complete a statement of means in advance of the trial. Mr. Pornye did not respond or take any other steps in relation to that letter. This had the result that Bivonas sent Mr. Pornye a further letter by email and courier on 28 April 2015. That further letter attached an email from the FCA which stated that if Mr. Pornye did not attend the forthcoming trial and was not represented, the FCA would apply to have his Defence struck out. Again, Mr. Pornye did not respond to this letter in any way.[9]After the trial had commenced, and still not having received a response from Mr. Pornye, Bivonas made an application to come off the court record for him, which was granted by Deputy Master Mathews on 15 May 2015. This order was sent to Mr. Pornye by Bivonas on 26 May 2015, together with a copy of the order that I had made on 6 May 2015, striking out his Defence. Again, there was no response from Mr. Pornye.[10]As I have indicated, I reserved my judgment at the end of the trial and handed down my written judgment on 12 August 2015. A copy of the Judgment, together with an order which I made on the same day, was then emailed directly to Mr. Pornye by the FCA on 24 August 2015. The FCA notified Mr. Pornye that a hearing to determine consequential matters was to be fixed for a date after 7 September 2015.[11]On 7 September 2015, Mr. Pornye emailed the FCA. Mr. Pornye stated, “I am wondering why you missed to formally inform me about this case where I am a defendant supposedly. How could this [have] happened?[12]In subsequent correspondence with the FCA, Mr. Pornye also denied any knowledge of Bivonas. So, for example, his next email of 14 September 2015 to the FCA stated, “So, let’s start at the beginning. Who is Bivonas LLP? Is this a lawyer company? Sorry, but I don’t know the British law well. Can a lawyer represent me without my permission and my signature in the UK? Do you have a formal document where you can find my name and my signature? If yes, please scan for me to check them.”[13]The FCA responded by sending Mr. Pornye a copy of the email dated 9 December 2011 by which Bivonas had informed the FCA that they had confirmation that they had been instructed by him (and Mr. Brad), that they could accept service of documentation on Mr. Pornye’s behalf, and that they had returned the Acknowledgments of Service to the court indicating an intention to defend the proceedings. The FCA also provided Mr. Pornye with a copy of the Defence dated 27 January 2012 which had purportedly been signed by Mr. Pornye and by each of the other traders. Mr. Pornye’s response by email stated, “First you should know that this is not my sign[ature] on the paper. I don’t know Bivonas company. I believe that someone misled me. I checked my emails and I find an email conversation with Banya Szabolcs in where he asked me to send my personal documents (IDs, utility bills) to him because he wanted to register me to a MLM company named Unaico. This email conversation was at 27 January 2012 around when I supposedly sign a contract with this Bivonas. I think that someone abused my personal data and made document forgery. This is a crime. Of course I can prove this email conversation with Banya Szabolcs, and of course a handwriting expert will easily identify that this is not my sign[ature].”[14]On 6 October 2015, Mr. Pornye emailed Bivonas explaining that the FCA had informed him that Bivonas had filed a defence on his behalf and asking various questions. Mr. John Bechelet of Bivonas replied to him the next day, 7 October 2015, indicating that all communications with him concerning the case had been made via the other two individual defendants, Mr. Banya and Mr. Brad, and acknowledging that Mr. Pornye had not signed the statement of truth on the Defence in his (Mr. Bechelet’s) presence. Mr. Bechelet also drew Mr. Pornye’s attention to the letter dated 24 April 2015 which had been sent to him by email and courier and which had been signed for on 27 April 2015.[15]The hearing to consider matters arising from the Judgment took place on 6 November 2015. The day before, Mr. Pornye emailed an unsigned letter to me, the material parts of which were as follows (emphasis in the original), “1. As of utmost importance, I must first note that I had been unaware of the claim against me and the ongoing procedure until very recently. 2. My first encounter with present case was by way of a press article, published on a Hungarian internet news site, in which I was informed that the court had issued a judgement and imposed a penalty on me with two other Hungarian individuals. The article directly mentioned my name, that is how I became aware of the case in the first place. Subsequently I was approached by FCA in email on a private email address I use infrequently. It turns out that both FCA and the Court was aware of my resident address and identification data, but in spite of this I never received any notification concerning the procedure. 3. I had never before heard of the firm of solicitors Bivonas LLP. 4. I have never appointed Bivonas LLP or any other solicitor to represent me in present case, and I have never granted them a power of attorney to act on my behalf. 5. I hereby state that the signature alleged to be mine on the Defence filed by Bivonas LLP and dated 27 January 2012 is not my signature. 6. Also, my personal ID documents (Hungarian address card card and personal ID card) were most probably abused in order to forge a power of attorney for Bivonas LLP on my behalf. I also note here that I have the intention to pursue further action in order to discover how and by whom such forgery was committed. 7. On 27 January 2012 (which is, interestingly, the same date as the date written on the defence submitted by Bivonas LLP) I provided Mr. Banya, also a defendant in present case, with copies of my personal ID documents. The reason I did this was because he offered to assist me in selling a small investment, which, according to his explanation, required my identification, thus the copies of my IDs. I was at the that point by no means aware that my documents would be abused in a way that would result in a counterfeit power of attorney being provided to Bivonas LLP on my behalf. I attach the copy of the email in which I had sent such documents, upon Mr. Banya's request. Notably, this email also contains copies of my signature. However, I must stress again that there had never been a mention of a firm of solicitors, or Bivonas LLP, or of present case, or any form of my representation anywhere, when this email was sent, and I did not authorise him Mr. Banya or anyone else to act on my behalf in any way, or to use the copies of my IDs for any other purpose than to assist me in selling the said investment. 8. All this prevented me from actually participating in the procedure, or from presenting a defence, or from obtaining expert advice, or actually entrusting someone with my defence. 9. Subsequently Bivonas LLP stated that I was not present upon signing the defence they submitted, and also that they did not inform me directly of the proceedings. I attach their email re the above. 10. I never received any information from FCA either, concerning their claim, either prior to submitting it to the court, or after. I was also completely unaware of any procedures preceding present case. 11. As I did not take part in the procedure, and I was completely unaware of its existence until very recently, I request the Honourable Court to set aside the judgement dated 12 August 2015. … 15. I hereby state that I did not commit and was not involved with any of the alleged market abuse activities or market manipulation, and I request that the claim against me be withdrawn, and that the case be terminated without any penalties on me. ….”[16]After receiving that document, on 6 November 2015 I made an order that Mr. Pornye had until the 11 December 2015 to issue a formal application to set aside the Judgment against him. In the order I specified that, “The application must be supported by evidence, certified by a statement of truth, dealing with the extent of [Mr. Pornye’s] knowledge of and participation in these proceedings.”[17]Mr. Pornye issued the Set Aside Application on 9 December 2015. Contrary to my order of 6 November 2015, however, it was not supported by any evidence certified by a statement of truth. Instead the application attached a signed document which had clearly been derived from the earlier unsigned document which Mr. Pornye had sent me and to which I have referred in paragraph 15 above. The later signed document did not, however, include the allegations in paragraphs 6 and 7 of the earlier document as to how and when Mr. Pornye’s ID documents might have been misused by Mr. Banya. Neither did it include the denial that Mr. Pornye had engaged in any market abuse that had previously appeared in paragraph 15 of the earlier document.[18]On 4 February 2016 the FCA issued an application to join Bivonas as a defendant to the proceedings, on the basis that if it transpired that Bivonas had purported to represent Mr. Pornye in the proceedings without authority, and this caused the FCA loss, the FCA would be entitled to recover damages from Bivonas for that loss.[19]The Set Aside Application and the application for joinder of Bivonas came before me on 10 February 2016. On that date, Mr. Pornye appeared in person, accompanied by a Mr. Friedeczki and an interpreter. The hearing lasted most of the day, I took pains to explain the procedure to Mr. Pornye, and I am entirely satisfied that he understood what was proposed and what was required of him under the order that I made.[20]At the hearing I made an order joining Bivonas to the FCA’s action, and for an electronic copy of the trial bundle and transcripts to be provided to Mr. Pornye. I also gave extensive directions for all necessary steps leading to a speedy trial of Mr. Pornye’s Set Aside Application and a preliminary issue in the main action as to whether Bivonas had in fact been instructed by Mr. Pornye. The dates for that trial were to be either in May 2016 or October to December 2016, those periods having been selected and agreed so as to ensure that the issues were resolved as soon as reasonably practicable, but also for Mr. Pornye’s convenience as dates which would not clash with work which he told me that he had arranged over the summer.[21]In light of the various assertions that Mr. Pornye had previously made, and the fact that, contrary to my order of 6 November 2015, Mr. Pornye had still not produced any evidence verified by a statement of truth in support of his Set Aside Application, the order of 10 February 2016 made very clear what was required of Mr. Pornye. In particular, it included the following paragraph 8 (emphasis in the original):
“8. By 4pm on 9 March 2016, [Mr. Pornye] shall file and serve on the [FCA] and [Bivonas] (and any other parties who at that time are party to the Set-Aside Application) a witness statement, with a signed declaration at the end that [Mr. Pornye] believes the facts stated in the statement are true, in support of the Set-Aside Application. That statement should refer to all documents upon which [Mr. Pornye] intends to rely; a bundle of all the documents referred to, arranged in chronological order, should be served with the statement. The statement should set out, amongst other things: (a) How and when [Mr. Pornye] came to learn about these proceedings; (b) To the best of his knowledge, an explanation as to how a Defence and witness statement purporting to contain his signature came to be filed by [Bivonas]; (c) An explanation as to [Mr. Pornye]’s use of the e-mail account pornye@gmail.com; (d) The contact, if any, he has had with [Mr. Banya and Mr. Brad] since July 2011; (e) The circumstances in which he stopped trading with any of the First to Fifth Defendants; and (f) Any facts and matters which [Mr. Pornye] relies upon in defence of the substantive claim by the [FCA].”
[22]In addition, given the allegations that Mr. Pornye had made that his signature had been forged, I also made a further order in paragraph 12 which was designed to ensure that Mr. Pornye provided original documents from the relevant period containing his signature which could be made available to a handwriting expert, (emphasis in the original), “12. By 4pm on 24 March 2016, and in so far as any such documents exist, the Sixth Defendant shall provide to the Claimant original copies of up to five documents bearing his signature which were signed by him up to or in 2011.”[23]In response to paragraph 8 of this order, Mr. Pornye produced his first witness statement verified by a statement of truth on 7 March 2016. That statement ran to just over three single-spaced pages and included the following, “a. I wish to reinforce my previous statement, namely, that I have only received the first email, from Bivonas LLP in the April of 2015. In the email they were asking me for a wealth declaration. Before this, I have not received any notification from the FCA (FSA), the Court or Bivonas LPT. Nothing was sent to my address of residence or to my email address. The obtained documents prove this fact. By looking at the mailing registry of the mail box, pornye@gmail.com (provided by google); it becomes evident that I was not informed by the authorities about any kind of legal action against me. This would be necessary according to the sixth article of European Court of Human Rights. It was in the August of 2015 when the FCA first approached me with the case. b. In this point I can only reinforce my previous statements and the fact that I have not signed any contracts and also that I was in no legal relation with the [Da Vinci companies or Mineworld]. I have not asked Bivonas LLP to represent me. Up to this day, I have not given them any written or verbal authorisation. I have not made a statement in this case before the August of 2015. I did not sign the documents issued by Bivonas LLP on 2012.01.27 and on 2013.01.31. These were signed by someone else who was using my name… …. e. In my previous statements I have claimed that I had no legal connection to [the Da Vinci companies or Mineworld]. By looking at the material, it becomes evident through the statement of [the FCA], that it was someone connected to the [Da Vinci companies] who was using the pornye@gmail.com email address. [Mineworld] was not affected in this issue. From the documents I have read and the statements of [the Da Vinci Companies], it becomes evident that none of them had met me, and also that we had never signed any contracts.” In purported response to paragraph 12 of the order, Mr. Pornye attached photocopies of four documents from 2012 and 2013.[24]The contents of Mr. Pornye’s statement and its attachments caused Bivonas’s solicitors (RPC) to write to Mr. Pornye on 30 March 2016 pointing out that (in breach of the order of 10 February 2016) he had not provided copies of any of the documents referred to in his witness statement, and that the documents which he had provided in purported satisfaction of the requirements of paragraph 12 were not original documents signed by him in 2011, but were only photocopies of documents purporting to have been signed between December 2012 and December 2013. Bivonas’s solicitors indicated that if Mr. Pornye did not comply with the order of 10 February 2016, they intended to apply for an unless order. Mr. Pornye did not respond, and so on 6 April 2016, Bivonas made such an application.[25]Mr. Pornye did not appear at the hearing of that application on 25 April 2016, but sent a letter to me in Hungarian on 21 April 2016. An unofficial translation of that letter was supplied to me by the other parties, which included the following, “Since 10 February 2016, the FCA sent two USB sticks. Further, the [solicitors for] Bivonas … posted me documents and a USB stick. The FCA and the [solicitors] sent documents in the English language running to 6000 pages and 1200 pages, respectively. A mere overview of this documentation would take days and a full and detailed inspection of the same would take months even if my mother tongue were English. The full procedure is marred by an infringement of Article 6 of the European Convention on Human Rights. Everyone was aware that I do not speak English and for this reason each and every document must be sent to me in Hungarian. Over the past year alone, I have spent hundreds of thousands of HUF on translation. From this time on, I will only make submittals and conduct correspondence in the Hungarian language and I ask everyone to send their applications and letters to me in Hungarian only… The translation of the 7200 pages would cost 15-20 million HUF, and take at least 2 months for more than one translators. It is apparent from the documents sent that the FCA (FSA), Bivonas LLP, and the High Court did not inform me in any way about the proceedings and the court action until April 2015, despite them knowing my address. It can also be established that they did not send any notification, information, decision, ruling, judgement to the pornye@gmail.com email address. They did not send a single document that I was in in contact, in any way, with any of the three defendants. There is no correspondence, communication or contract in the 7000-page document bundle. It is for exactly this reason that we cannot send any other document in relation to this case, because there is no other document, other than what has already been sent by the authorities and the lawyers. The documents and their dates reveal that Bánya Szabolcs and Bivonas LLP figured out, developed and put down in writing the things that need to be done and submittals concerning me in the course of the court action. All this was carried out without me first being informed about them, and the documents written on my behalf and in my name were signed by another person, which documents were then submitted to the court by Bivonas LLP. Bivonas LLP did not send to me a single e-mail or postal mail up to April 2015, when correspondence between us commenced. Ever since they have been called upon by us and even ordered by the court to present these documents. It appears that the applications in my name were worded by Bivonas LLP and were sent to Bánya Szabolcs as claimed by him, but why did he not send them to me via any of the channels available? Summary of facts and outstanding queries To date Bivonas LLP has failed to send to me the power of attorney for my representation signed by me. It also failed to send to me an original document or an authenticated copy thereof confirming that it informed me about the FCA procedure and the court action, up to April 2015. It also failed to provide a specific answer about who the person was that signed the documents written by it in advance and who signed the confession submitted to the court. It also failed to provide an answer to date as to why I was involved in the court action on 13 July 2011 when on the day before (12 July 2011) there were still only 5 defendants? The FCA failed to answer, and it was not apparent from the documents, who opened the email in Switzerland and why they did not send the contents of those emails? Further, I request from the High Court that because forged documents were used in the procedure against me and because of procedural impropriety, it withdraws the charges against me and reimburses me for the costs incurred to date (1.4 million HUF). I can only respond to further requests in English if my translation costs to date are reimbursed (900k HUF).”

Summary of facts and outstanding queries

[26]Having considered the history of the matter and the translation of Mr. Pornye’s letter, at the hearing on 25 April 2016 I made the Unless Order which contained the following provisions (emphasis in the original), “NOTICE TO THE SIXTH DEFENDANT: IF YOU DO NOT COMPLY WITH PARAGRAPH 1 OF THIS ORDER BY 4PM ON TUESDAY 10 MAY 2016, YOUR APPLICATION DATED 9 DECEMBER 2015 TO SET ASIDE THE JUDGMENT AND ORDER AGAINST YOU WILL BE AUTOMATICALLY DISMISSED. UPON HEARING … AND UPON considering a letter to the Court from [Mr. Pornye] dated 21 April 2016 AND UPON [Bivonas]’s application dated 6 April 2016, IT IS ORDERED Service of documents referred to in [Mr. Pornye]’s statement dated 7 March 2016 1. [Mr. Pornye] must, by 4pm on Tuesday 10 May 2016:(a) Serve upon the [FCA] and [Bivonas] copies of the documents referred to in paragraphs 2 (a), (b), (c) and (d) below, or if such documents were included in the trial bundles provided by the [FCA] in electronic form to [Bivonas] pursuant to paragraph 6 of the Order of 10 February 2016, identify those documents; AND(b) Provide to the [FCA] up to five original documents bearing his signature which were signed before 31 December 2011, with copies of the said documents to be served on [Bivonas]. If [Mr. Pornye] is unable to provide any original documents, he must state in writing to the [FCA] that he has no such original documents within his possession nor can obtain possession of such original documents from third parties.(c) IF [MR. PORNYE] DOES NOT COMPLY WITH THIS PARAGRAPH 1, HIS APPLICATION DATED 9 DECEMBER 2015 (THE “SET-ASIDE APPLICATION”) SHALL BE AUTOMATICALLY DISMISSED. 2. The copy documents referred to in paragraph 1(a) above are as follows: (a) The “mailing registry of the mail box, pornye@gmail.com (provided by google)”, referred to in paragraph (a) of [Mr. Pornye]’s statement dated 7 March 2016. (b) The documents referred to in paragraph (e) of [Mr. Pornye]’s statement dated 7 March 2016 where he says, “By looking at the material, it becomes evident through the statement of the [FCA], that it was someone connected to the [Da Vinci companies] who was using the pornye@gmail.com email address”. (c) The documents referred to in paragraph (e) of [Mr. Pornye]’s statement dated 7 March 2016 where he says, “From the documents I have read… it becomes evident that none of them had met me, and also that we had never signed any contracts”.(d) The “document flow of the mailbox pornye@gmail.com” referred to in the final paragraph on page 3 of [Mr. Pornye]’s statement dated 7 March 2016, if that is different to the “mailing registry” referred to above in sub-paragraph 2(a).” UPON HEARING … AND UPON considering a letter to the Court from [Mr. Pornye] dated 21 April 2016 IT IS ORDERED

Service of documents referred to in [Mr. Pornye]’s statement dated 7 March 2016

[27]My reasons for making the Unless Order were, in essence, that Mr. Pornye had failed to comply with the requirements of the Order of 10 February 2016 under which he was required to identify and provide copies of all documents upon which he relied in support of his Set Aside Application, and to provide original documents bearing his signature that could be provided to a handwriting expert. I took the view that those requirements, which had been discussed with Mr. Pornye at the hearing in February 2016, were essential so that his allegations could be understood by the FCA and Bivonas, and his Set Aside Application could be progressed to an effective trial. Instead of complying with the 10 February order, in his witness statement Mr. Pornye had made a number of non-specific references to documents that he had obviously read, but which he did not identify further; and he had not provided any of his own original documents from the correct period that could be used for the purposes of handwriting analysis.[28]Moreover, when these obvious shortcomings had been pointed out to him in correspondence and in the application, Mr. Pornye’s reaction – in his letter dated 21 April 2016 – was to prevaricate and be evasive. Rather than provide the required information concerning documents that he had obviously already identified and mentioned in his witness statement, Mr. Pornye had claimed that he would need “each and every” document in the entire trial bundle translated into Hungarian. He had also demanded that Bivonas and the FCA should answer his questions immediately rather than in the orderly course of the proceedings.[29]In deciding to make an Unless Order I also had regard to a number of inconsistencies in Mr. Pornye’s statements and documents that had been put in evidence by solicitors for Bivonas in support of its application. Those materials potentially cast a very different light upon Mr. Pornye’s assertions, and Mr. Pornye had not addressed them satisfactorily (or at all) in his witness statement or in his letter of 21 April 2016. I shall return to those materials below.[30]In addition to being served with an English version of the Unless Order, on 29 April 2016 Bivonas’s solicitors also voluntarily (and without prejudice to their contention that this was not required) served Mr. Pornye with a Hungarian translation of the Unless Order.[31]Regrettably, Mr. Pornye did not comply with the Unless Order. Instead, the day before the time for compliance was due to expire, 9 May 2016, he emailed a document in Hungarian entitled "Kérelem" to the parties and the court. "Kérelem" translates as “Plea” or "Application", and from its appearance, the document seemed to be an informal application to vary the Unless Order.[32]I was subsequently provided by Bivonas’ solicitors with an unofficial translation of Mr. Pornye’s document which confirmed that Mr. Pornye was indeed seeking a variation of the Unless Order. The document contained (among others) the following statements, “I have informed you several times in the past that we have only received the case material from the FCA and Bivonas two months ago. The material is more than 8000 pages long. We have still not been able to go through the whole document. The translation of the full material would cost 21 million Forints, the estimate of 50 000 Pounds. The translation would take four months. We can only fulfil the points 1 a, b of the warrant of 28th of April, if we are of full knowledge regarding the case material. I wish to raise the attention of the honoured Court and the plaintiff to the 6th paragraph of the European Court of Human Rights. The plaintiff should have sent me the warrant of, February the 10th, translated to Hungarian language. Up to this day, this has not happened even though I have asked for this several times…. …. As an addition to the previous point, despite my repeated approach I have not received an answer from the plaintiff or the seventh defendant on the identity of the person who had signed the 2012 January 27. document and the 2013 January 31 witness confession in my name. Why did the seventh defendant serve this to the Court without my approval? Due to the lack of answers I have filed a report on the 6th of May at the Szeged police department; so I can find out the truth. The document was accepted by the authorities. The copy of this I attach. Until the investigation is over I cannot send the original documents to the plaintiff. I have managed to get an earlier official document with my signature on it. The scanned version of this I wish to attach. I claim that I do not have any other documents dating back from 2011 December 31. and I cannot apply for these from the third person.”[33]The assertion that Mr. Pornye could not comply with paragraphs 1 (a) and (b) of the Unless Order without “full knowledge regarding the case material” and a translation into Hungarian of all of the documents in the trial bundle was plainly not correct. The documents referred to in paragraph 1(a) and (b) were specific documents which Mr. Pornye must have already identified for himself when drafting his witness statement, together with his own documents containing original examples of his handwriting.[34]Nonetheless, having considered the translation with which I had been provided, on 20 May 2016 I ordered that the document entitled "Kérelem" would be treated as a valid application to vary the Unless Order if by 4 p.m. on 10 June 2016, Mr Pornye filed with the court and served on the other parties an English translation of the "Kérelem" document, and paid the applicable court fee. I made that order bearing in mind that Mr. Pornye had previously been perfectly able to issue his Set Aside Application in English and had paid the appropriate court fee. In my ruling, I explained, “It is implicit in Part 23 of the Civil Procedure Rules and the Practice Direction (Applications) that all applications to the Court should be in English. It is also the general rule under CPR 23.1 that an applicant for an order should file an application notice with the appropriate Court Office and pay the prescribed fee (unless he qualifies for fee remission). The requirement under Article 6(3) of the European Convention on Human Rights for the provision of an interpreter or for information to be provided in a language which a defendant understands applies only to persons charged with a criminal offence. That is not this case. In any event, [Mr. Pornye] has previously communicated in writing with the Court and the other parties in English and his main application dated 9 December 2015 to set aside the Judgment against him was written in English. [Mr. Pornye] also appeared in court on 10 February 2016 with the assistance of a litigation friend and an interpreter. [Mr. Pornye] therefore appears to be able both to produce documents written in English and has access to the assistance of persons who understand and are conversant in English. Accordingly, whatever might be decided in the future in relation to the translation of other documents for the future conduct of [Mr. Pornye]’s main application dated 9 December 2015, I do not regard it as unfair, or unduly burdensome or contrary to [Mr. Pornye]’s rights under the ECHR for [Mr. Pornye] to be required to file his own application to vary the Order of 25 April 2016 (which runs to just over 2 pages of typescript) in English and otherwise to comply with the CPR in that regard.” My expectation (as recorded in my order) was that if Mr. Pornye complied with these requirements, his "Kérelem" application would then be issued and listed to be heard in the week of 20 June 2016.[35]On 9 June 2016, the last day before the deadline of 10 June 2016, Mr. Pornye emailed to the court and the other parties an English translation of his "Kérelem" application. He did not, however, pay the court fee before the deadline of 10 June, and so no application was issued. Mr. Pornye then applied for fee remission, but failed to supply the necessary financial information to support his application, in spite of being requested to do so by the court office. This situation was eventually brought to my attention by the FCA by an email of 18 July 2016, and on 22 July 2016 I directed that unless Mr. Pornye provided the supporting documentation by 29 July 2016, his fee remission application should be rejected.[36]Mr. Pornye then supplied the necessary supporting documentation and his fee remission application was accepted. His application notice was finally issued on 4 August 2016, and was listed to be heard on 5 October 2016.[37]The hearing on 5 October 2016 was attended by all parties. Mr. Pornye indicated that he could not attend in person and arrangements were made for him to be able to make his submissions by telephone. He also sent me written submissions dated 3 October 2016.

The law

[38]The effect of failure to comply with an unless order is that the sanction prescribed by the order takes effect automatically as a result of the failure to comply with its terms: see per Lord Justice Moore-Bick in Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463.[39]In this case, it is clear that Mr. Pornye did not comply with the terms of the Unless Order by the date set out within it, namely 10 May 2016. Accordingly, and as very clearly stated by the terms of the Unless Order, the result was that Mr. Pornye’s Set Aside Application was automatically dismissed on 10 May 2016.[40]Nor did Mr. Pornye validly issue and serve an application to vary the terms of the Unless Order, either by the original deadline under the order (10 May 2016), or by the extended deadline of 10 June 2016 which I set out in my order of 20 May 2016. The consequence is that although Mr. Pornye’s application of 4 August 2016 was framed in terms of an application to vary the terms of the Unless Order, by the time it was issued, it ought to have been framed as an application for relief from sanctions under CPR 3.8(1). However (and rightly) none of the other parties took this technical point, and I am prepared to treat the application of 4 August 2016 as an application for relief from sanctions.[41]CPR Rule 3.9 provides:
"(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need – (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders."
[42]Guidance on the application of Rule 3.9 was given in Mitchell v News Group Newspapers [2013] EWCA Civ 1537 and restated in Denton v TH White [2014] EWCA Civ 906. In paragraph 24 of Denton, the Court of Appeal indicated, “A judge should address an application for relief from sanctions in three stages. The first stage is to identify and assess the seriousness and significance of the 'failure to comply with any rule, practice direction or court order' which engages rule 3.9(1). If the breach is neither serious nor significant, the court is unlikely to need to spend much time on the second and third stages. The second stage is to consider why the default occurred. The third stage is to evaluate 'all the circumstances of the case, so as to enable [the court] to deal justly with the application including [the need(a) for litigation to be conducted efficiently and at proportionate cost and(b) to enforce compliance with rules, practice directions and orders].'”

The first stage: the seriousness and significance of the breach

[43]It is, I think, clear that Mr. Pornye’s failure to comply with the Unless Order was both serious and significant. The original order of 10 February 2016 set out detailed provisions designed to bring Mr. Pornye’s Set Aside Application to a speedy trial. That procedure necessarily commenced with Mr. Pornye being obliged to set out his case in support of his application to set aside the Judgment that had, on the face of it, been regularly entered against him. It also required Mr. Pornye to indicate the documents upon which he was relying, and to provide original samples of his signature for handwriting analysis. These documents were essential for the future conduct of the Set Aside Application because they were the documents upon which Mr. Pornye based the allegations in his witness statement that it was not him but someone connected with the Da Vinci companies that had been using the pornye@gmail.com address; that he did not have any, or any formal notice of the proceedings against him; and that his signature had been forged on the Defence and witness statement by someone else. The failure by Mr. Pornye to comply fully with the February Order, which followed a hearing at which he had been present and which he plainly understood, and the Unless Order which had been translated into Hungarian for him, meant that his own Set Aside Application could not progress.[44]Moreover, as Jackson LJ indicated in British Gas Trading v Oak Cash and Carry [2016] 1 WLR 4530 at paragraph 41, “The very fact that X has failed to comply with an “unless” order (as opposed to an “ordinary” order) is undoubtedly a pointer towards seriousness and significance. This is for two reasons. First, X is in breach of two successive obligations to do the same thing. Secondly, the court has underlined the importance of doing that thing by specifying an automatic sanction in default (in this case the draconian sanction of strike out).”[45]Although Jackson LJ went on (at paragraph 42) to accept that not every breach of an “unless” order is serious and significant (giving as an example the filing of a costs budget 45 minute late), the instant case is not such a case. Mr. Pornye had still not complied with the requirements of the Unless Order by the time of the hearing in October 2016.

The second stage: the reasons for the breach

[46]Apart from the assertion that he needed, and was entitled by Article 6 of the European Convention on Human Rights to, a translation of all of the trial documents into Hungarian, neither Mr. Pornye’s application of 4 August 2016 nor his written or oral submissions specifically explained why he failed to comply with the February order or the Unless Order. Mr. Pornye’s written submissions largely repeated his denial of having been engaged in market abuse, or having been formally served with the FCA proceedings, or having instructed Bivonas or having signed the Defence or witness statement in those proceedings.[47]In his oral submissions, Mr. Pornye focussed on criticising the conduct of the FCA and Bivonas. The theme of his oral submissions was that he felt that the burden had been wrongly placed upon him to do things, that he had been the victim of what he described as “bogus evidence”, and that it should be enough that he had raised the issue of the lack of service and representation by Bivonas. Mr. Pornye submitted that once he had raised the question, it should be for the FCA to prove that he had been served in the main action, and/or that the burden should be on Bivonas to prove that he had instructed them, but that neither body had produced any relevant documents and they had not answered the questions that he had asked of them in correspondence.[48]In relation to the question of translation of the documents in the trial bundle into Hungarian, Mr. Pornye referred to Article 6 of the European Convention on Human Rights. That Article is headed “Right to a Fair Trial” and provides (in relevant part), “1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law…. … 3. Everyone charged with a criminal offence has the following minimum rights: (a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; … (e) to have the free assistance of an interpreter if he cannot understand or speak the language used in court.”[49]In my reasons for making the order of 20 May 2016 to which I have referred above, I made the point that the current proceedings are not the determination of a criminal charge against Mr. Pornye so as to engage Article 6(3) at all. They are an application by Mr. Pornye to set aside a civil judgment against him.[50]Moreover, even in relation to a criminal charge, a defendant has no right to a translation of all the documents in the case. In Hermi v Italy (2008) 46 EHRR 46, the ECHR decided that even in a criminal case, Article 6(3)(e) of the European Convention on Human Rights did not require translation of all items of written evidence or documents in a case. At paragraph 70, the European Court of Human Rights observed, “70. However, para.3(e) does not go so far as to require a written translation of all items of written evidence or official documents in the procedure. In that connection, it should be noted that the text of the relevant provisions refers to an “interpreter”, not a “translator”. This suggests that oral linguistic assistance may satisfy the requirements of the Convention. The fact remains, however, that the interpretation assistance provided should be such as to enable the defendant to have knowledge of the case against him and to defend himself, notably by being able to put before the court his version of the events….”[51]Applying this to the instant case, whatever the position might be at a later stage of the application or even if there were to be a retrial of the FCA’s claim, at the current moment Mr. Pornye is not facing a case (still less a criminal charge) against him. It is Mr. Pornye who has brought the Set Aside Application and asserted that he did not instruct Bivonas to represent him. As I indicated in the reasons for my order of 20 May 2016, until he unilaterally took the decision to start communicating in Hungarian and to demand translations of documents, Mr. Pornye was able to produce documents and communicate effectively with the Court and the other parties in written English, and he appeared at the hearing in February 2016 with his own choice of interpreter.[52]Moreover, what the Unless Order required Mr. Pornye to do was simply to identify the basis for the assertions which he had already made in his own evidence in support of his own Set-Aside Application and to produce his own original documents bearing his signature. In my judgment, Mr. Pornye was perfectly capable of doing all of that without having a translation of all of the other documents and materials in the trial bundle and there was no breach of his Article 6 rights in requiring him to do so.[53]I also do not think that Mr. Pornye gave me any other good reasons for his failure to comply with the Unless Order. The various questions which he raised of where the burden of proof might lie, and the substantive merits of the Set Aside Application, plainly could not be determined in his favour summarily. Rather, the process to be followed had been determined at a hearing in February 2016 in which Mr. Pornye participated fully, and was set out in an order which he did not appeal, and with which he complied in part. Mr. Pornye did not suggest that he did not understand what was required of him, and as I have said, the Unless Order was in any event served upon him in Hungarian. That being so, it was simply not open to Mr. Poryne unilaterally to seek to change direction and to pick and choose which parts of the orders he should comply with.[54]The only other substantive point made by Mr. Pornye was that he had been working in a holiday resort outside Budapest over the summer months and had not been able to attend to the case. I do not think that this excuses Mr. Pornye’s failure to comply with orders that should have been attended to before the summer started. The requirements of the orders were not onerous and were essential to enable the Set Aside Application to be progressed efficiently.

The third stage: dealing justly with the application

[55]In Denton at paragraphs 31-45, the Court of Appeal indicated how the court should approach the third stage – namely considering how to deal justly with the application for relief from sanctions. From that explanation, I emphasise the following:
“34. Factor (a) [in CPR 3.9(1)] makes it clear that the court must consider the effect of the breach in every case. If the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, that will be a factor weighing in favour of refusing relief. Factor (b) emphasises the importance of complying with rules, practice directions and orders. This aspect received insufficient attention in the past. The court must always bear in mind the need for compliance with rules, practice directions and orders, because the old lax culture of non-compliance is no longer tolerated. 35. Thus, the court must, in considering all the circumstances of the case so as to enable it to deal with the application justly, give particular weight to these two important factors. In doing so, it will take account of the seriousness and significance of the breach (which has been assessed at the first stage) and any explanation (which has been considered at the second stage). The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted. 36. But it is always necessary to have regard to all the circumstances of the case. The factors that are relevant will vary from case to case. As has been pointed out in some of the authorities that have followed the Mitchell case [2014] 1 WLR 795, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance. …. 44. We should also make clear that the culture of compliance that the new rules are intended to promote requires that judges ensure that the directions that they give are realistic and achievable. It is no use imposing a tight timetable that can be seen at the outset to be unattainable. The court must have regard to the realities of litigation in making orders in the first place. Judges should also have in mind, when making directions, where the Rules provide for automatic sanctions in the case of default. Likewise, the parties should be aware of these consequences when they are agreeing directions. "Unless" orders should be reserved for situations in which they are truly required: these are usually so as to enable the litigation to proceed efficiently and at proportionate cost.”
[56]Applying those points the following factors seem to me to be relevant. First, Mr. Pornye’s failure to comply with the order from February and the Unless Order have prevented the Set Aside Application from being proceeded with efficiently in accordance with the directions given in February, or at proportionate cost. It is also the case (as set out in paragraphs 17, 24 and 35 above) that Mr. Pornye did not comply with other orders and directions from the court.[57]What the justice of the case requires must also take into account Mr. Pornye’s prospects for success on his Set Aside Application under CPR 39.3. In that regard it is to be noted that CPR 39.3(5) gives the court hearing the application a discretion as to whether to grant the application and provides that it should only do so if, inter alia, the applicant acted promptly when he found out that the court had exercised its power to strike out his defence or to make an order against him, and that he had a good reason for not attending the trial.[58]In the instant case the consideration of these factors calls attention to a number of statements that Mr. Pornye made to the court and to the other parties about his supposed ignorance of the proceedings against him and the circumstances in which Bivonas came to believe that they were acting for him. Those statements were patently untrue. There is also some revealing evidence adduced by Bivonas that shows that Mr. Pornye was in fact well aware of the proceedings throughout, and that he chose voluntarily not to attend the trial or even to protest that it was taking place in his absence.[59]As to the untrue statements, I have set out in paragraph 8 above how Mr. Pornye had been notified by Bivonas by email and couriered letter of the imminent trial of the FCA’s claim in April 2015. Mr. Pornye was forced to acknowledge that this was indeed the case in paragraph (a) of his witness statement of 7 March 2016 to which I have referred at paragraph 23 above. However, in his initial correspondence by email with the FCA in September 2015 (set out in paragraphs 12 and 13 above) Mr. Pornye feigned ignorance of who Bivonas were, and in both the unsigned document sent to me on 5 November 2015 (paragraph 15 above) and the signed version of the document that accompanied his Set Aside Application on 9 December 2015 (paragraph 17 above) Mr. Pornye falsely claimed that he was unaware of the proceedings against him by the FCA until he saw a press article in Hungary after the Judgment had been handed down in August 2015, and that he had never heard of Bivonas before that.[60]Further, in Mr. Pornye’s email to the FCA in September 2015 to which I referred in paragraph 13 above, and in paragraph 7 of the letter to me sent on 5 November 2015 to which I referred in paragraph 15 above, Mr. Pornye clearly sought to suggest that he had provided Mr. Banya with his personal ID documents on 27 January 2012 and that Mr. Banya had then dishonestly misused those documents. But from documents produced by Bivonas and exhibited to a witness statement of its solicitor on 6 April 2016, it is clear that Bivonas were in fact provided with copies of Mr. Pornye’s identity card by Mr. Banya on 8 December 2011, together with confirmation (from Mr. Banya) that he had sent a copy of Bivonas’ terms and conditions to Mr. Pornye and that Mr. Pornye was content that Bivonas should take instructions from Mr. Banya on behalf of all of the three individuals. Mr. Pornye has not sought to explain how (other than with his consent) Mr. Banya had obtained a copy of his identity card in December 2011.[61]Indeed, from transcripts of Skype messages and text messages which Bivonas obtained from Mr. Banya and which they exhibited (with translations) to the evidence filed in February 2016, it appears that Mr. Banya and Mr. Pornye were in regular contact concerning the FCA proceedings from shortly after the start of those proceedings in July 2011, and that this was so even though the FCA did not seek to join Mr. Pornye as a defendant to the proceedings until about the end of August 2011.[62]In particular, on 1 September 2011 Mr. Pornye sent Mr. Banya a link to an article on the FTAdviser website reporting the outcome of a hearing that had taken place before Mr. Justice Newey the previous day, 31 August 2011. At that hearing, Mr. Justice Newey had continued freezing orders against the corporate defendants and had granted injunctions against each of the corporate defendants, Mr. Banya and Mr. Brad, prohibiting them from continuing to engage in market abuse. In his Skype message concerning the FTAdviser report, Mr. Pornye commented to Mr. Banya, “It’s not a small website we’ve been featured on.”.[63]Later the same day, Mr. Pornye sent a further message, asking whether Mr. Banya had read “the BBC article”. That was a reference to an article that had appeared on the BBC News Business website under the heading, “FSA blocks Hungarians from ‘share price manipulation’”. The BBC article reported the outcome of the hearing before Mr. Justice Newey in the following terms, “The FSA has taken out a High Court injunction to stop an alleged share price scam. The markets regulator said it had taken action against three Hungarian and Swiss residents, and the Swiss and Seychelles-based companies they used. Szabolcs Banya, Tamas Pornye and Gyorgy Brad are suspected of making £1m profit via “layering” – placing bogus orders to artificially raise or lower prices. The injunction freezes their assets and blocks them from market manipulation.” The injunction freezes their assets and blocks them from market manipulation.”[64]This was the first indication that the FCA was seeking to join Mr. Pornye to the proceedings, and prompted Mr. Pornye to ask Mr. Banya, “What do you think will happen? It looks very bad. Up till now I thought I was at least safe.”[65]Subsequently, the Skype messages show Mr. Pornye discussing the case further with Mr. Banya in early April 2012, including a discussion as to whether the traders should take their case to the ECHR in Strasbourg to deny the FCA what the traders perceived as “home court” advantage.[66]As the trial of the claim neared, on 17 April 2015 Mr. Banya sent an email to the pornye@gmail.com email address attaching the statement of means provided by the FCA. Mr. Pornye replied that he did not see the point of completing it, and on 22 April 2015 Mr. Pornye sent Mr. Banya a text message stating, “I’m sorry but I won’t fill it out. You can tell them I’m having medical treatment, which could even be true. Sorry, but I don’t want to deal with this anymore. Don’t call me.”[67]I have also set out above the content of the communications from Bivonas to Mr. Pornye on 24 April 2015 reminding him of the imminent trial and urging him to engage with the process, which Mr. Pornye chose to ignore.[68]Mr. Pornye’s written submissions and evidence for the hearing before me simply ignored these documents which had been exhibited in evidence by Bivonas. When I asked Mr. Pornye at the hearing whether he had any explanation for these documents, his response was simply to suggest – without explanation - that they might have been falsified. I cannot see any basis for that suggestion. The documents are entirely consistent with the other documents and events in the case and with Mr. Pornye’s lack of response to the email and letter which he received from Bivonas in April 2015. I also cannot see (and Mr. Pornye did not suggest) why it would have been in Mr. Banya’s interests to falsify such documents to incriminate Mr. Pornye in 2015 or 2016 after he - Mr. Banya – had already been found to have committed market abuse and had been subjected to a penalty.[69]The inescapable conclusions that I draw from these matters is that far from having had no involvement with Mr. Banya and Mr. Brad, and far from having been ignorant of the proceedings taken against him by the FCA, Mr. Pornye was both involved with Mr. Banya and Mr. Brad and very well aware of the proceedings that had been taken against them from the very start in 2011. Mr. Pornye’s reaction to being mentioned in the media coverage of the injunction hearing before Mr. Justice Newey on 31 August 2011 is particularly telling. Far from being unaware what the proceedings were about or being at a loss to understand why he had become involved, Mr. Pornye’s reaction was to ask Mr. Banya what he thought would happen, to express the opinion that it looked “very bad”, and to indicate his disappointment that the FCA were now proceeding against him, because up until that date he had thought he was “safe”.[70]Moreover, and crucially, it is perfectly clear from the documents which Mr. Pornye accepts that he received from Bivonas dated 24 April 2015, that Mr. Pornye was well aware that the trial of the FCA’s claim against him was due to begin in a couple of weeks’ time and that it was important that he should engage with the process urgently. The reaction of an innocent man who had not been aware of the proceedings at that stage would surely have been to contact Bivonas or the FCA, to proclaim his innocence, and to indicate his surprise and concern that preparatory steps to trial had been taken without his consent or approval. Had that been done, the trial would almost invariably have been adjourned to enable the position to be investigated and, if it transpired that Mr. Pornye had indeed been in the dark about the proceedings, for Mr. Pornye to have adequate time to instruct new lawyers and to prepare his case.[71]Mr. Pornye’s response, however, was quite the opposite. He expressed no surprise at the imminent trial or as to the involvement of Bivonas ostensibly on his behalf, he deliberately chose to do nothing, and he permitted the trial to proceed in his absence in circumstances in which he must have been aware that very considerable time and expense would thereby be incurred by the FCA. Finally, Mr. Pornye was notified in late May 2015 by Bivonas that his Defence had been struck out and that the trial had taken place in his absence, but he still chose to do nothing or raise any issue before I delivered my reserved Judgment some three months later.[72]In those circumstances, and bearing in mind that the court has a discretion whether or not to set aside the judgment against Mr. Pornye, I cannot conceive that Mr. Pornye’s Set Aside Application could have any realistic prospect of success. Even if Mr. Pornye had not given express authority to Bivonas to accept service on his behalf or to represent him, he was plainly well aware of the FCA proceedings and of the fact that Bivonas were purporting to act for all of the traders in relation to those proceedings, and he expressed no surprise at this state of affairs when contacted by Bivonas in April 2015. In particular, Mr. Pornye did nothing to contradict the fact that Bivonas were purporting to act for him, or to dispute any of the steps that had ostensibly been taken on his behalf. Instead he stood by and opted not to make any effort to present his own version of events whilst the trial of the FCA’s allegations took place in May 2015 and whilst I was considering my reserved Judgment.[73]Given this manifest lack of merit in his underlying Set Aside Application, I do not see how it can be unjust to refuse Mr. Pornye relief from sanctions.

Conclusion

[74]Accordingly, I dismiss Mr. Pornye’s application of 4 August 2016.