Barrowfen Properties Ltd v Patel & Ors [2021] EWHC 200 (Ch)

“[43] Shanta had pleaded that GUC and the Patel brothers had wanted to remove Shanta as a minority shareholder of Aumkar and that they wanted to acquire its shares at below market value. As correctly, pointed out by counsel for the defendants, even if the object of the 2005 action was to remove Shanta as a minority shareholder, it is something that is allowed by section 180(3) of the Companies Act 1965. [44] As for the fair market value of the minority shares, the High Court and the Court of Appeal addressed the issue and did not find that it was unfair. The Federal Court set aside the decision only on the issue related to the notice period given to the minority shareholder. In any event, I find it difficult to conclude that the mere act of attempting to purchase something at below market value without anything more can amount to an unlawful act that attracts liability under the tort of conspiracy to defraud or injure. Therefore, Shanta has not proved that the act of pursuing the action by GUC was unlawful in any way. [45] Shanta had also pleaded that the entire exercise of acquisition of the majority shares was a sham perpetrated by the Patel brothers and that the 8th Defendant [Mr Fochem] was a fictitious person and that it was a conspiracy to compel Shanta to give up its Aumkar shares. I find no evidence to support this allegation for the following reasons. [46] Shanta’s witnesses as I said earlier had merely echoed the pleaded case of Shanta without any proof to support this allegation. In fact, during cross-examination, PW1 [Mr N Amin] admitted that the 8th defendant [Mr Fochem] was an international vegetable trader whom he had met in person. As for PW2 [Mr P Amin], he refrained during crossexamination from stating that the 8th defendant was a fictitious person. To sum up, Shanta failed to produce any evidence of conspiracy between the Patel brothers and the High Court and the Court of Appeal addressed the issue and 7th defendant in respect of the alleged sham sale.”

“I should mention at this stage that shares in Barrington, Agromin and Makita were registered in the names of the Deceased and also that, in 1997, Girish set up a Guernsey Trust (the PD Patel Discretionary Trust) for the benefit of his two children and of which the original trustees were Yashwant and Suresh. The beneficial ownership of some of the companies referred to is in issue in other proceedings and I make no findings in that regard.”

“For the avoidance of any doubt the parties on their own behalf (and on behalf of their Related Parties) expressly acknowledge and/or agree that nothing in this agreement shall operate to settle or waive any right to sue, commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against the other party or its Related Parties any matters arising out of (i) the Barrowfen Claim, (ii) the Criminal Proceedings, or (iii) the Partnership Accounts Dispute.”

“In order to remove him forcefully, a scheme was designed to pretend to sell the entire company to a European consortium. NM Amin’s shares were 9.99% of the entire company. Section 180 of the Malaysian Corporations Act states that if there’s a buyer for 100% of the company and over 90% accept the offer, then any remainder are forced to accept the offer. The scheme was put into place under a company called Golden Uni Corporation with Sureshkaka’s friend Hienz [sic] Fochem from Germany used as the Consortium leader. As you require local Directors for any Malaysian company, we asked Auntie Teh (our longstanding staff member from Penang) to lend her daughter’s name as a Director The final Director was an admin clerk from our company secretary’s office in Tawau. All 3 people were mere nominees for us and perfectly innocent parties that had no clue as to the scheme being put in place. As NM Amin continued to refuse transfer of his shares at $2.05, Golden Uni litigated him to force the transfer under Section 180. The high court of Tawau allowed our case. The Court of Appeal upheld our case and finally NM Amin had no choice but to sell. He was duly paid at $2.05. He then appealed to the Federal Court (highest in Malaysia) and in a surprise decision, the Federal Court overturned the verdicts of both the High Court and Court of Appeal. They overturned the case on a technicality that a notice form was not given. This placed the entire company in limbo as you had a shareholder that was forced to sell his shares, but subsequently a Court decision that overturned his requirement to sell the shares in the first place. The extent of this litigation took nearly 4 years from 2005 to 2008. However now, we faced a difficult situation as we had ‘sold’ our shares (the 90.01%) to a fictitious European Consortium. As the Directors of Golden Uni, (the 3 innocent people) could now potentially face legal action, we rapidly transferred the shares (prior to Federal Court decision) to a new set of 5 companies in tax haven companies like the BVI and Seychelles, and 1 Malaysian company that my father has operated for years. After the transfer, Golden Uni was placed into liquidation during Chinese New Year when everything would be low key. This was about the time when I started contributing significantly to our Malaysian business taking on management of our palm oil mill. We now had a company that we wholly owned but could not disclose in public that we were the real owners behind the tax haven sheltered holding companies. NM Amin then started a new set of litigation to force the wind up of Aumkar and outlined to the Judge that it was a scheme to remove him and the original owners are still the current owners. To reassure the Judge, my father, Girishkaka, and Sureshkaka all had to falsely swear on oath that they were not the owners of Aumkar. As our documentation was concise and on the anomaly that it was curious why a ‘restored’ shareholder would want to wind up his own company, the Judge dismissed the case. NM Amin appealed to the Court of Appeal and subsequently to the Federal Court. Both courts luckily dismissed his appeals. This took another 4 years from 2008 to 2012. Now, NM Amin has started a new action demanding a public trial of the events to show that it was a scheme to remove him and that he is owed damages. He named Aumkar, my father, Girishkaka, Sureshkaka, Hienz [sic], the clerk in the Tawau office and Teh’s daughter in the suit. It is so shameful that we have caused innocent people to be placed on trial who know absolutely nothing about what went on.”

“At our KL meeting in 2011, everyone agreed that we would put Aumkar for sale due to the ongoing litigation and problems obtaining financing. I also informed Girishkaka that I wanted to exit our share investment in the London properties as I had no involvement managing it and we wanted our money for other purposes in Australia.”

“If there is so much mistrust and no agreement can be made to buy each other’s shares, then the only thing to do is to place all the companies into liquidation and let an independent liquidator sell the assets and distribute the funds. This bottomless pit of bickering is something I can no longer take and I now have every intention to force the liquidation of all companies via the Courts if no agreement can be reached.”

“The funds could have been raised with two clear business days’ notice, by the provision of a loan to Barrowfen, Bedford, Aumkar Plantations (the Patel family’s Malaysian business) or from Suresh personally. Further or alternatively, the funds could have been raised from an accelerated rights issue, which would have taken about two weeks to complete.”

“The contents of my draft email relating to Aumkar Plantations were not correct. My comments relating to a fictitious sale and Rajnikant, Girish and Suresh falsely swearing on oath in the Malaysian courts about the ownership of Aumkar Plantations were based on the legal documents submitted by NM Amin in his conspiracy to defraud claim against Suresh, Rajnikant, Girish and Aumkar Plantations in Malaysia that he commenced in 2013. After I sent the draft email to Suresh (the email address aumcom@singnet.com.sq is Suresh’s email address), he immediately called me at my office from his office to explain that I had completely misunderstood the situation and that there was no fictitious sale and that they had not lied on oath. I therefore did not send the draft email, until I forwarded it to Kiraj in 2018 to help explain the background to why the other Patel family members felt the need to part ways with Girish. I did not re-read the email carefully before I forwarded it to Kiraj, which is why I did not delete the references to a fictitious sale and to Rajnikant, Girish and Suresh falsely swearing on oath.”

“Bedford, then controlled and owned by Rajnikant and later controlled and owned by Rajnikant and/or Prashant, participated in the fraud referred to in the 13 May 2018 email receiving, it is reasonable to infer, full value for the shares sold alternatively the sum of approximately £2 million.”

“My work involved a detailed review of, amongst other things, the documentation exhibited at KLP2, p.1 to 851. This material covers the subject matter of the transaction in the email from Prashant to Kiraj Patel dated 13 May 2018 and in particular the changes in the ownership of Aumkar Plantations. It does not though disclose the details of the dishonest scheme that Prashant sets out in his email and I was not aware of them from anything communicated to me by Girish or anyone else.”

“PP did not participate nor have first-hand knowledge of the transaction since it occurred before he joined the Patel family business.”

“The offence is in the conspiracy to contrive (without succeeding) Girish’s admission of a claim which was false; namely, that Stevens & Bolton had conspired with Girish for him or his nominee to secure the Tooting Property at an undervalue. The evidence defeats this allegation against Stevens & Bolton.”

“(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the Court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or (c) that there has been a failure to comply with a rule, practice direction or court order.”

“18.1(1) The court may at any time order a party to— (a) clarify any matter which is in dispute in the proceedings; or (b) give additional information in relation to any such matter, whether or not the matter is contained or referred to in a statement of case. (2) Paragraph (1) is subject to any rule of law to the contrary. (3) Where the court makes an order under paragraph (1), the party against whom it is made must— (a) file his response; and (b) serve it on the other parties, within the time specified by the court. 18.2 The court may direct that information provided by a party to another party (whether given voluntarily or following an order made under rule 18.1) must not be used for any purpose except for that of the proceedings in which it is given.”

“CPR 3.4(2) gives the court power to strike out a statement of case which discloses no reasonable grounds for bringing or defending a claim or a statement of case which is an abuse of process. Where, on the material before the court, there are disputed issues of fact, the court should not strike out a claim unless certain it is bound to fail: see per Peter Gibson LJ at [22] in Colin Richards & Co v Hughes [2004] EWCA Civ 226 . The test is similar but not identical to that for summary judgment where the court will not grant summary judgment, here in favour of a defendant, unless the claim has no real prospect of success. It is well established that where it is clear that there are disputed issues of fact between the parties, the court should not engage in a mini-trial of the merits at an interlocutory stage: see Civil Procedure [3.4.2]. Where a party seeks to amend a statement of case, the court will not permit an amendment unless it has a real prospect of success, so that the test is the same as for summary judgment: see Civil Procedure [17.3.6].”

“The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact “which tilts the balance and justifies an inference of dishonesty”

“It is important to bear in mind when applying the “trio of necessary considerations” described by Lord Toulson JSC in Patel (at para 101) that they are relevant not because it may be considered desirable that a given policy should be promoted but because of their bearing on determining whether to allow a claim would damage the integrity of the law by permitting incoherent contradictions. Equally such an evaluation of policy considerations, while necessarily structured, must not be permitted to become another mechanistic process. In the application of stages (a) and (b) of this trio a court will be concerned to identify the relevant policy considerations at a relatively high level of generality before considering their application to the situation before the court. In particular, I would not normally expect a court to admit or to address evidence on matters such as the effectiveness of the criminal law in particular situations or the likely social consequences of permitting a claim in specified circumstances. The essential question is whether to allow the claim would damage the integrity of the legal system. The answer will depend on whether it would be inconsistent with the policies to which the legal system gives effect. The court is not concerned here to evaluate the policies in play or to carry out a policy-based evaluation of the relevant laws. It is simply seeking to identify the policies to which the law gives effect which are engaged by the question whether to allow the claim, to ascertain whether to allow it would be inconsistent with those policies or, where the policies compete, where the overall balance lies. In considering proportionality at stage (c), by contrast, it is likely that the court will have to give close scrutiny to the detail of the case in hand. Finally, in this regard, since the overriding consideration is the damage that might be done to the integrity of the legal system by its adopting contradictory positions, it may not be necessary in every case to complete an exhaustive examination of all stages of the trio of considerations. If, on an examination of the relevant policy considerations, the clear conclusion emerges that the defence should not be allowed, there will be no need to go on to consider proportionality, because there is no risk of disproportionate harm to the claimant by refusing relief to which he or she would otherwise be entitled. If, on the other hand, a balancing of the policy considerations suggests a denial of the claim, it will be necessary to go on to consider proportionality.”

“As a result of the change in the law brought about by Patel v Mirza , the question whether a claimant must rely upon illegal conduct to establish a cause of action is no longer determinative of an illegality defence. Nevertheless, the question of reliance may have a bearing on the issue of centrality. In the present case it is significant that, as the decision at first instance on the basis of Tinsley v Milligan demonstrates, the essential facts founding the claim can be established without reference to the illegality.”

“In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant. Professor Burrows' list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases. Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties' respective culpability.” “Lord Sumption did refer to Hounga See Hounga v Allen [2014] 1 WLR 2889. , however, in the later case of Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1. He sought to explain the decision in Hounga on the basis that Ms Hounga did not rely, and did not need to rely, on the circumstances in which she had entered the United Kingdom (she had entered illegally). This is correct but she did need to rely on the fact of her employment in advancing a claim for unlawful discrimination in her dismissal from that employment. Since the employment was not legally sanctioned, she was therefore confronted with the illegality defence and, indeed, the Court of Appeal had held that the illegality of the contract of employment formed a material part of Ms Hounga's complaint and that to uphold it would be to condone the illegality. It was held in Hounga that the appellant's claim was not inextricably linked to her illegal conduct. On that account her action could not be defeated on the basis that her contract of employment was illegal. But Lord Wilson's discussion of the manner in which competing public policy considerations should be viewed, in calculating whether a defence of illegality should be permitted to defeat an otherwise viable claim, unquestionably forms part of the ratio of the decision.”

“Secondly, I should briefly address the fact that the criminal law and the Proceeds of Crime Act 2002 (“POCA”) may inevitably have some impact on the rights and duties of parties who have entered into contracts with an illegal connection. The involvement of the criminal law played a very important part in the judgment of McLachlin J in Hall v Hebert [1993] 2 SCR 159. It seems to me to have two main components. First, it is for the criminal law, not the civil law, to penalise a party or parties for entering into and/or performing a contract with an illegal component. Secondly, in so far as the civil law is fashioned by judges in a particular case, they must ensure that it is not inconsistent with the criminal law. So far as POCA is concerned, it enables the courts, through statutory powers, to do that which a common law judge cannot do, and which many might think was the best outcome in many of the more serious cases involving illegality, namely to ensure that the proceeds of crime are retained by neither party, but are paid over to the Government. This is not the occasion to discuss the effect of POCA, save to say that I would take some persuading that the common law should be influenced by the fact that POCA is or is not being invoked in any particular case, although the civil courts should not make any order, or at least permit the enforcement of any order, if its effect would run counter to the provisions of POCA or to any step which was being contemplated under POCA by the relevant authorities.”

“It is neither necessary nor desirable that consideration of the relevant policy considerations should give rise to a mini trial. They should usually be capable of being addressed as a matter of argument and at a level of generality that does not make evidence necessary, as is well illustrated by this court's decision in Hounga v Allen [2014] 1 WLR 2889.”

“So when is without prejudice correspondence admissible in the three party situation? Does this mean that Muller Muller v Linsley & Mortimer [1996] PNLR 74 remains good law in relation to settlements in mitigation of loss? What about the point made in Avonwick Avonwick Holdings Ltd v Webinvest Ltd [2014] EWCA Civ 1436 that even when there is no sufficient dispute yet existing between the parties, there may be an implied contract between them evidenced by the use of the words “without prejudice” that the correspondence be not referred to in open court: where that was analysis between the original parties to the without prejudice correspondence, would the documents be then admissible as against a third party? It is not unusual for disclosure to be sought of third party without prejudice negotiations. The position [is] still entirely uncertain.”

“From this review of the cases I would conclude that the courts have consistently emphasised the importance of allowing parties to speak freely in the course of settlement negotiations, have jealously guarded any incursion into or erosion of the without prejudice rule, and have carefully scrutinised evidence which is asserted to justify an exception to the rule. Although the unambiguous impropriety exception has been recognised, cases in which it has been applied have been truly exceptional, and (leaving aside Dora v Simper) there has been no scope for dispute about what was said, either because the statement was recorded (the admission of a dishonest claim in Hawick Jersey Ltd v Caplan) or because it was in writing (the email threats in Ferster v Ferster). I would not wish to exclude the possibility that the evidence about what was said at an unrecorded meeting may be so clear that the court is able to reach a firm conclusion about it (nor would I wish to encourage the clandestine recording of settlement meetings), but such cases are likely to be rare. Dora v Simper itself is clearly an outlier which has been criticised in later cases and, until the decision of the judge in this case, has never been followed. In my judgment its approach of asking whether one party's disputed evidence, if true, demonstrates an unambiguous impropriety is contrary to the weight of authority, wrong in principle and should not be followed.”

“There are sound reasons for this choice in addition to those already discussed. In particular, a party who is unable to adduce evidence of statements made without prejudice is no worse off so far as the evidence is concerned than if those statements had never been made or the settlement negotiations had not occurred. But a party who is drawn into satellite litigation about the admissibility of statements made without prejudice would have been much better off if he had refused to negotiate at all. Further, if what was said (or the interpretation of what was said) at a without prejudice meeting is credibly disputed on an interim application to which a test of good arguable case is applied, there will be no occasion when that dispute will be resolved. Thus in the present case, having concluded that there was a good arguable case, the judge admitted the evidence and used it as the foundation for a freezing order even though, as he acknowledged at [72], he was not in a position to decide which of the competing versions was correct, and even though the consequence of that decision is that this issue will never be determined. I cannot regard that situation as satisfactory or just, not least in view of the harm to a defendant's business which a wrongly granted freezing order may cause. As for the judge's second concern, I do not regard the fact that the test of good arguable case is used in other interim contexts as a sufficient reason to apply it to the issue of unambiguous impropriety when that issue arises at an interim stage of litigation. Rather, the position should be that the test remains one of unambiguous impropriety. Nothing less will do. That is a test which, deliberately, is difficult to satisfy but the fact that it arises on an interim application is no reason to dilute it. In view of the necessary limits to the conclusions which a court can reach at an interim stage, the existence of a credible dispute about what was said (or what was meant by what was said) may mean that a court cannot be satisfied that there has been an unambiguous impropriety and therefore does not admit the evidence, but that is simply the result of applying the test which has consistently and for good reason been held to apply. Plainly it would not be appropriate on an interim application to direct a trial of an issue to resolve such a dispute.”