Lemos & Ors v Blue Diamond Investment Corporation & Ors [2017] EWHC 3595 (Ch)

[2017] EWHC 3595 (Ch)Case No BL-2017-000539Case No BL-2017-000638Case No BL-2017-000668IN THE HIGH COURT OF JUSTICETHE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESBUSINESS LIST (ChD)Venue Rolls Building, 7 Rolls Building, Fetter LaneLondon EC4A 1NLDate 14/12/2017
Before
THE HONOURABLE MR. JUSTICE MARCUS SMITH
Between
(1) DIAMANTIS MARKOS LEMOSClaimants(2) , KYRIAKOULA MARKOS LEMOSClaimant(3) MARITSA MARKOS LEMOSClaimant(4) POLYDOROS MARKOS LEMOSClaimant(5) SUNIME PLANNING SERVICES LTDClaimant(1) BLUE DIAMOND INVESTMENT CORPORATIONDefendants(2) STEGASIS INVESTMENT CORPORATIONDefendant(3) IONNAIS DIAMANTIS LEMOSDefendant(4) SHOREDITCH PROPERTY HOLDINGS LTDDefendant
Digital Transcription by Marten Walsh Cherer Ltd.,1 st Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP.Telephone No: 020 7067 2900. Fax No: 020 7831 6864 DX 410 LDEEmail: info@martenwalshcherer.comWeb: www.martenwalshcherer.com
MS. Z. BARTON (C)(instructed by Clyde & Co. LLP) for First to Fourth ClaimantsMR. T. DUTTON, QC (instructed by Nicholas & Co) for Fifth ClaimantMR. M. WARWICK, QC (instructed by Mishcon De Reya LLP) for Fourth Defendant
Judgment Approved

Introduction

[1]I have before me various applications made by three parties. I am going to refer to the parties by way of letters because, as will become apparent, this case involves, at least in substantial part, a chain of contracts for the sale of a property which I shall refer to as the “Property”, which is a property known as Boundary House, 159-161 Shoreditch High Street, London E1 6HU.[2]The Property is owned by a company known as Blue Diamond Investment Corporation. I shall refer to that company as “A”. Various shareholders of A are claimants in proceedings that are about to be commenced in this jurisdiction, and I shall refer to those four claimants as the “shareholders of A”.[3]There are two other companies: Sunime Planning Services Limited, the claimant in claim number BL-2017-00539, whom I shall refer to as “B”. The defendant in those proceedings is Shoreditch Property Holdings Limited, whom I shall refer to as “C”.[4]The essential facts before me concerning the Property are these. A has entered into a contract for the sale of the Property to B. Contracts have been exchanged, but completion is yet to take place. A deposit has been paid by B to A’s solicitor, who is holding that as stakeholder.[5]There is a second contract of sale of the Property, by B to C. Again, unsurprisingly given that completion of the sale of the Property by to B has yet to take place, there has been exchange but no completion. Again, unsurprisingly, a deposit has been paid which is held by solicitors.[6]There is in the case of this second contract of sale of the Property by B to C an obligation on C to pay further money at a later date, and I will, because that contract remains for the present confidential, say no more than that.[7]Both contracts, that is to say, the contract between A and B and the contract between B and C are subject to the usual provision requiring swift completion on notice. If, notice having been given, completion does not take place, the deposits stand forfeit.[8]The concern that has arisen after the exchange of contracts is this. Solicitors instructed by the shareholders of A have written both to B and to C indicating that it is their contention that A, in entering into the contract with B, is acting without capacity.[9]That question, I should say, is a question at least arguably one of Liberian law, A being a Liberian entity, and I proceed on that basis for the purposes of today.[10]Clearly, if A does not have the capacity to enter into a contract with B, there is, to put it no higher than this, a serious concern as to whether A can give good title of the Property to B, and equally, therefore, whether B can give good title of the Property to C.[11]This communication from the shareholders of A obviously caused serious concerns on the part of C. Those concerns were raised by C with B. C sought, but did not get, undertakings that no notice seeking completion of the sale would be issued pending resolution of this issue regarding title and capacity. C also sought, and again did not get, assurances regarding dealings with the deposit held by B’s solicitors.[12]The first of the three applications before me is an application by C against B for an injunction preventing dealing with the deposit and preventing the service of a notice requiring completion of the sale until the issue of B’s title to sell the Property is resolved.[13]The contract for the sale of the Property between B and C contains a provision obliging C to keep the terms of that contract, and indeed its existence, confidential. The existence of that contract is now well-known to a number of third parties, but its terms are not.[14]B obtained as against C an interim order restraining the disclosure of the contract between B and C to anyone, and this is the return date for that injunction. That constitutes very much the shortest of the three applications before me, and is the second application before me.[15]The third application is made ex parte on short and informal notice by the shareholders of A against: i) A. ii) A related company, B, which also holds property in the jurisdiction; and iii) A party who is involved in the affairs of A and B, a Mr. Ioannis Diamantis Lemos, otherwise known as John D. Lemos These parties constitute the three defendants in proceedings the shareholders of A seek to bring.[16]What the shareholders of A seek ex parte before me now is service out of the jurisdiction of these proceedings, which I shall come to describe in due course, and also injunctive relief regarding the property held by the defendants within the jurisdiction. So therefore, the third application before me is by the shareholders of A as against A and two other defendants, preventing dealings with, amongst other things, A’s properties in the jurisdiction, the second defendant’s properties in the jurisdiction and other monies held by them in the jurisdiction, including, obviously, the Property.[17]I have had helpful skeletons and oral submissions from the representative of the three parties before me. I have seen and read evidence from Mr. Lemos, Mr. Conway (two statements), Mr. Tucker and Mr. Waterfield (two statements).[18]I am going to deal with the three applications before me in the following way. I am going to begin by dealing with C’s application against B for an injunction regarding the deposit and the completion notice. I will then deal with the application made by the shareholders of A and then, finally, I will deal with the claim that B brings against C for the restraint of the disclosure of the contract between those two parties.

Consolidation

[19]Before I do so, however, I should say one thing about consolidation. It is clear that the dealings with the Property are central to the interests of all three of the parties before me and, when they are joined by A, as they will be, all four parties (or, perhaps more accurately, groups of parties). It is, therefore, clear that the issues regarding the sale of the Property must be dealt with and heard together.[20]However, it does seem to me that the matter goes further than this. As I will come to describe, the claim intended to be brought by the shareholders of A involves a derivative claim against the third defendant in those proposed proceedings. That claim may very well involve allegations relating to dealings with the Property. It does seem to me that it is going to be very difficult to keep the various claims made by the various parties separate, and it does, therefore, seem to me entirely appropriate that in this case I order the actions to be consolidated, and I do so.

The application by C against B

[21]I move then to the application by C against B. When seeking an interim injunction, I must be satisfied: i) First that there is a serious issue to be tried. ii) Secondly, that the injunction is necessary because damages would be an inadequate remedy for C. iii) Thirdly, that the undertaking of damages that is the price for injunctions in this jurisdiction, would be satisfactory compensation to B were the injunction to be granted. If, having considered those questions, the answer is not clear, I must generally consider the balance of convenience.[22]The application made by C is affected by the application of the shareholders of A. If that application is successful, then B concedes that C’s application cannot be resisted.[23]The reason for that is fairly clear from the facts as I have described them. If the shareholders of A are successful in obtaining an injunction preventing amongst other things dealings with the Property, then it seems to be absolutely clear that those who are seeking to obtain an interest in the Property need also to be protected. It is clear, if the injunction is given, that title cannot pass because dealings are prevented, and it seems entirely appropriate that C, the party at the end of the contractual chain, be protected in relation to the deposit paid by C and the threat of a completion notice being serviced.[24]I, therefore, consider that, certainly in light of the application as made by the shareholders of A, C’s application should be granted. I should say, however, that even without the shareholders of A’s application, the issue raised by them, even if they had not appeared before me today, clearly creates an issue as to title, and in my judgment, the letters written by the solicitors of the shareholders of A (Clyde & Co) are themselves sufficient give rise to a serious issue to be tried.[25]The balance of convenience I also find is in favour of granting a series of injunctions, not merely in favour of C against B, but, as I will come to describe, in favour of B against A (in similar terms to the injunction C obtains against B) and in favour of the shareholders of A against A.[26]So, partly contingent upon the other injunctions that I am minded to grant, I make clear that I am going to grant an order substantially in the form sought by C as against B.[27]I was asked to make it a condition of any injunction that either the purchase monies be paid in to court, or that the deposits be paid in to court.[28]The first suggestion I am not attracted by at all, because it seems to me that the question of good title is live, as I have described, and that the monies to be paid on completion are paid because one pays money on completion to get good title and that is the very question at issue. So I am not going to make that a condition of any injunction.[29]Nor do I consider it appropriate to make any order regarding the transfer of the deposits presently held by stakeholders to be paid in to court. That is because those deposits are held by presumptively reliable and trustworthy solicitors and the terms of the injunction that I have ordered in favour of C, and that I will order in favour of B, will adequately protect those deposits for the future. I consider that there is no need to cause those deposits to be passed into the hands of the court. I also have in mind, of course, that neither firm of solicitors holding those monies as stakeholder is present before me today.[30]That, therefore, disposes of the first application, the application of C against B.

The application of the shareholders of A

[31]I turn then to the second, the shareholders of A against A, which as I have said is an application made ex parte on short notice. The application is for service of proceedings out of the jurisdiction and for injunctive relief.[32]There is no claim form issued as yet, but there are very full particulars of claim in draft which I have seen.[33]Essentially, what is said is because of the conduct of various shareholders in A, that is shareholders other than the “shareholders of A” as I have defined them, holding, I understand it, 50 per cent of A, the shareholders of A have essentially been expropriated, or certainly removed from the operation of the company. What the company is doing is said to be either void or voidable, or if neither of those, the subject of the derivative claim by the shareholders of A against those who are causing the company to act in the way that it is.[34]These matters going to capacity are, as I have indicated, matters that I accept for today’s purposes are matters of Liberian law. I have been taken to evidence exhibited to the affidavit of a statement of Mr. Conway which sets out the position as a matter of Liberian law. It is clear that there is a serious issue to be tried which has reasonable prospects of success in terms of all three of the essential claims being advanced, namely that the actions of A are void; alternatively, that they are voidable; alternatively, there is a derivative claim either in addition or on its own over and above the voidness and the voidability arguments in relation to the acts of the company.[35]Which of these three broad areas of claim succeeds will have different effects on the contract for the sale of the Property. It seems fairly clear that if only the derivative claim succeeds, the question of capacity does not arise. On the other hand, if all acts of A are void, then that (certainly for today’s purposes) arguably has a very serious effect on the question of A’s capacity to effect the transaction between A and B.[36]For the purposes of today, I find, given the evidence that I have seen, there is a serious issue to be tried and I proceed, therefore, to the question of service out. That is a matter which arises only in relation to the third defendant, so I shall first address the question of the first and second defendants to the action brought by the shareholders of A.[37]The second witness statement of Mr. Conway, served on behalf of the shareholders of A, identifies the jurisdictional base as against the first and second defendants in paragraph 5 of that statement. This reads, and I quote:
“As explained in the particulars of claim, the first defendant is a company incorporated under the laws of Liberia as a special purpose vehicle for the acquisition of property. Similarly, the second defendant is a company incorporated under the laws of Liberia as a special purpose vehicle for the acquisition of 8 Luke Street, London EC2A 4XY.”
[38]I shall refer to this latter property as “Luke Street”. The Property remains the first defendant’s (A’s) principal asset, and Luke Street remains the second defendant’s principal asset. In each case the defendants are special purpose vehicles whose sole business is the ownership and letting of these properties as further set out in the witness statement of Diamantis Lemos.[39]The first and second defendants’ principal place of business is in England, and they are therefore domiciled in England within the meaning of the Judgments Regulation 2015/2012 Articles 63C and 4, such that this court has jurisdiction. They were served at the place where they carry on their business in accordance with CPR 9, namely at Boundary House and Luke Street.[40]It is therefore the case that as regards the first and second defendants there is jurisdiction as of right and I so find.[41]As regards the third defendant, I proceeded on the basis that he is resident and domiciled in Monaco, which is where his tax domicile is. This is, therefore, a case of service out under the common law and not under the Regulation. I am satisfied that a number of gateways for service out exist and that this is a case where the claimants, the shareholders of A, have a good arguable case that a number of the gateways under Practice Direction 6(b) are satisfied. Specifically, I find that Gateway 2, a claim for an injunction, and Gateway 3, that the third defendants is a necessary and proper party to persons who are already before the court as of right, are satisfied and met, and I so hold.[42]It was suggested to me that there were other gateways applicable, specifically Gateway 11, but those were ultimately not pressed on me by Ms. Barton, and I make no finding in relation to those.[43]The third question that I must consider before making an order for service out in respect of the third defendant is the balance of convenience in terms of the proper forum. Here, fairly self-evidently, most of the indicators point very strongly to an English jurisdiction. The Property, indeed all the property that is understood to be held by the first and second defendants in the shareholders’ of A action, are in England. In particular, there is real property situate in England and that is a particularly strong factor in terms of designating England as the jurisdiction.[44]What is more, given that I have consolidated these proceedings, the other parties interested in the Property are also present and litigating in England, and it seems to me that those factors constitute an overwhelming indicator that England is the proper forum for the hearing of these claims.[45]There are, I have been told and seen on the evidence, other proceedings on foot involving D3, but it seems to me that they are sufficiently separate not to add very much to the question of jurisdiction.[46]The other point to mention, but only to dismiss it, is that of course the first and second defendants are governed by Liberian law and there will be Liberian law questions which will have to be dealt with. However, these courts are well able to deal with foreign law questions, and although that is a factor not pointing in the direction of England as the jurisdiction, it is, to my mind, a minor point.[47]I, therefore, find that as against the third defendant in the shareholders of A action, this is a proper case for service out, and I order that service out take place.[48]There is a question as to how service of the proceedings is to be accomplished. I have been asked in submissions by Ms. Barton to order that substituted service take place according to CPR 6.37.5(b), and it has been suggested that service occur on solicitors (TLT) who, albeit not retained in relation to this set of proceedings, are nevertheless in direct communication with the third defendant. So the proposal is that there be substituted service on TLT and also by way of an email address on the third defendant, because he has been shown to be responsive to that email address. I order that substituted service occur in those two ways.[49]I should be clear that I am going to order that copies of all these documents also be sent to the third defendant at his Monaco address. However, I want to make clear that I am not ordering this by way of service, I am simply ensuring that all routes are covered. However, for the purposes of the computation of time, it seems to me that the substituted service on TLT should be determinative.[50]I make clear that that order extends not merely to the claim form but to all of the other documents related to the claim form, apart from the injunction that is sought, and I will come to that separately next.[51]Obviously, as regards the first and second defendants to these proceedings, the intention is that they be served at their offices, and that I order is how service should take place. However, I am also going to order that copies of the materials served on the second and third defendants also be sent to TLT, because I am concerned to ensure that these proceedings be drawn to the attention of those responsible for those companies in the safest and more secure way, and I wish to ensure that one supplements the service on the officers of the second and third defendants by service on TLT.[52]That concludes all I have to say in relation to the proceedings against the defendants. I move on to the question of the injunction that is sought. I have been taken through a draft of the injunction by Ms. Barton with some care. What is sought in the interim injunction is restraints against the first and second defendants from disposing of the property that they each hold, and also as regards other property, from removing from England and Wales any monies or other assets presently in the jurisdiction. That is paragraphs 3(b) and 4(b) of the draft of the order.[53]It seemed to me that this contained the danger that assets might be transferred by the first and second defendants to the third defendant and then removed from England, and I have suggested wording to deal with this particular loophole.[54]The injunction also contains various information provisions, as is usual in freezing orders and proprietary injunctions. Clearly, I have to be satisfied in relation to the prospect of success, but that I regard as having already been considered when dealing with the jurisdictional question of service out. So far as the risk of dissipation is concerned, I am satisfied, given the evidence that I have seen, that there is a real risk of dissipation given the dealings in the past that have occurred in terms of removing assets out of the jurisdiction.[55]Clearly, apart from the removal of assets out of the jurisdiction, the injunction sought is effectively prohibitory. It aims to hold the ring until trial and to prevent dealing with the two properties held by the first and second defendants so that the authority of those companies to deal with those properties may be resolved, and it seems to me quite clear that both elements of the injunction are amply justified in this case. The risk of dissipation is clear and the prohibitory aspect of those injunctions follows on from the claim that has been advanced by the shareholders of A.[56]In terms of the balance of convenience, it seems to me clear that an injunction against what are substantially the main assets of the first and second defendants is entirely appropriate whilst the shareholder dispute is resolved, and that it will be very important to ensure that these assets are held securely pending trial.[57]Equally, it is difficult to see the prejudice that the defendants will sustain if this injunction is granted until the return date, and the reason I say that is this. As regards the Property, there are contracts in place for the selling of it. If the claim made by the shareholders of A fails and the company is allowed to deal with the properties, then we have a chain of sales ready to go and they can be completed. If not, then of course there is no prejudice.[58]So I regard it as entirely appropriate that an order in substantially the terms that I have been taken through be granted in favour of the shareholders of A against A, and that that order also be served on the defendants.[59]I have been asked to consider making a similar order for substituted service as I have done in relation to the claim and the related documents to the claim. It seems to me that it is again appropriate that I do so. The personal service of the order, which is the normal course, is in this case rather difficult to achieve in the case of the third defendant, because he is, to put it mildly, somewhat eclectic in his travel habits. It is not known whether he is at the moment in Monaco, in Greece or in America. It was speculated that he was in Greece, but there was really no certainty on the part of the shareholders of A as to where he was. In these circumstances, it does seem to me appropriate that I order that the injunction that I am about to grant be served in the same way as the claim form.[60]I should make clear that there are two aspects in which I am not prepared to grant the order. As I indicated earlier, I am not going to make an order regarding the payment of any deposits in to court.[61]Equally, for reasons that I am about to give, I am not going to order any disclosure of the contract of sale as between B and C. It is to that that I now turn.

The application by B against C

[62]The sub-sale agreement between B and C contains a provision regarding an obligation on the part of C to keep its terms confidential. Mr. Justice Birss, as I indicated earlier, granted a very short injunction ensuring that that provision was complied with by C. Various technical arguments were made as to whether in fact what C was proposing to do was in fact a breach of clause 16 of this agreement.[63]Happily, I am not called upon to deal with this matter because, whilst in court, counsel for B and C have reached an agreement as to how the order of Mr. Justice Birss can be continued. Essentially it will be continued on undertakings with certain variations to the drafting, which are immaterial for the purposes of this judgment.[64]It follows that I do not need to rule on this third application. However, it does have some bearing on the application for disclosure of this document by the shareholders of A. I am not prepared at this stage to order that the document be disclosed and to that extent, the draft order presented by the shareholders of A will have to be varied. I make clear that that is without prejudice to the issue of whether that document in due course comes to be disclosed by B in the course of these proceedings, and obviously, given the consolidation that I have ordered, the question of disclosure by C to the shareholders of A is going to arise. However, beyond that I say no more.

An injunction by B against A?

[65]The final area that I must consider is this. So far, I have granted injunctions in favour of the shareholders of A against A and two other defendants. I have also granted an injunction in favour of C as against B in relation to the deposit and the completion notice.[66]What seems to me important is that similar protection be extended by B as against A, otherwise there is a danger that A might, as against B, seek to issue a completion notice and commence dealing with the deposit.[67]I have to say, it seems to me that that risk, given the injunction that I have ordered in favour of the shareholders of A, is vanishingly small. Nevertheless, it does seem to me that it is appropriate, and Mr. Dutton Q.C., who appeared on behalf of B, I think pressed for this, that a similar injunction as against A to that which I have granted by C against B, be ordered.[68]That, I am afraid, is going to involve the commencement of proceedings as against A by B, and if we go down this route, one will have to have various orders dealing with the issue of those proceedings and their service, which is not a problem.[69]So I will say no more than this before I conclude my ruling. If B wishes the protection of these injunctions, then I am minded to grant them but subject, of course, to the procedural proprieties being observed in terms of the commencement of proceedings as against A.[70]That concludes my ruling.

SUBMISSIONS CONTINUED

[71]I have before me two applications for costs in respect of the application made by, adopting my previous terminology, B against C in respect of clause 16.1 of the second contract and also in respect of the application that C made against B for an injunction.[72]On one level, it could be said that both of the parties have had a measure of success, but equally that success has at least in part been achieved by the co-operative attitude that has pervaded these proceedings. It also seems to me that there are a number of factors that militate against my making an order for costs today.[73]First, is that this has been an altogether more complex and costly hearing because of the involvement of other parties and other applications, but one that I venture to suggest that everyone has benefited from.[74]Secondly, the elephant in the room is the fact that A is not present and here represented, and yet it may fairly be said, depending on how it turns out, that actually the reason all these costs have been incurred is the conduct of A. It seems to me that if I were minded to essentially set-off the success of C against the success of B and make a limited costs order in favour of C as against B, that might very well close out an attempted recovery of more of these costs as against another party.[75]So it seems to me that for those reasons the appropriate course is to reserve those costs actually to the conclusion of these proceedings and the judge hearing those proceedings will, I think, be able to take a view as to who is the ultimate cause of the very considerable costs that I am sure all of the parties have incurred today.[76]So that is the order that I make.