Gerald Metals S.A. v Vasile Frank Timis [2017] EWHC 1375 (Comm)

Case No CL-2017-000018[2017] EWHC 1375 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue The Rolls Building, 7 Rolls Buildings, Fetter LaneDate Wednesday, 7 June 2017
London
EC4A 1NL
Before
MR JUSTICE KNOWLES CBE
Between
GERALD METALS S.A.Claimant-v-
Between
VASILE FRANK TIMISDefendantCLAUDIO BUEHLERDefendantKIM BENKERT-NAUDEDefendantTIMIS CORPORATIONRespondent
MR A MALEK QC, MR A GOURGEY QC, MR B FRIEDMAN and MR B WOOLGAR (instructed by Quinn Emanuel Urquhart & Sullivan LLP) appeared for ClaimantMR N KITCHENER QC and MR H SMITH (instructed by PCB Litigation LLP) appeared for Defendants
JUDGMENTWednesday, 7 June 2017
[1]MR JUSTICE KNOWLES: This is an application to continue the freezing order that was made by Mr Justice Blair against Timis Corporation. Mr Neil Kitchener QC appears for Timis Corporation and very usefully he has addressed the court first in order to take the court through the reasons why Timis Corporation contends that the freezing order should not be continued and should be discharged.[2]Amongst the contentions, on the part of Timis Corporation, are that the necessary degree of full and frank disclosure was not given by the applicant Gerald Metals SA (“Gerald”) when obtaining the original freezing order and for that reason too it has been sensible and practical to hear Mr Kitchener QC in depth first.[3]In the event, I have not needed to call on Mr Ali Malek QC for Gerald, but I have studied closely the written submissions from Mr Malek QC and his team, just as I have done in relation to Mr Kitchener QC and his team.[4]There is presently underway an arbitration in respect of a guarantee by Timis Trust to support lending by Gerald to Timis Mining Corporation SL Limited. Before this court, there are claims in deceit and conspiracy against several defendants. It is sought to extend the conspiracy claims to Timis Corporation in conjunction with the freezing relief that I have mentioned.[5]The most recent activity has been prompted by the fact that a sale by Timis Corporation of what are known as the Senegal oil interests to BP is close by. The freezing order is particularly directed to preserve the proceeds of that sale. Gerald fears that those proceeds will disappear without protection from this court and with them will disappear Gerald's chances of recovery.[6]A number of the matters the subject of focus on both sides are relevant to more than one of the areas of consideration in any decision about freezing order relief. I shall, in this relatively brief judgment, deal with them in one area or another, but my treatment should be regarded as of application across all of the areas in question.[7]I turn to the question of good arguable case. The Senegal oil interests held through Timis Corporation were effectively transferred out of the Timis Trust by shares in the company holding shares in Timis Corporation being transferred to a new trust. Why? Was it to put assets beyond the reach of Gerald or a step in that direction?[8]Or was it for another reason? To make Mrs Timis a beneficiary is another explanation that has been offered. Mr Timis and family members are beneficiaries of the new trust, although it is a matter of record that Mr Timis originally concealed the fact that his wife was a beneficiary and did so in the face of the court.[9]Mr Timis is a director of Timis Corporation and Gerald say, credibly, that he is the directing mind and will of Timis Corporation. He has not taken the point that the case that he, himself, conspired is not arguable. He had the opportunity to take that point when amendments were sought and made at an earlier stage in these proceedings. It is no criticism of him that he did not take that point, but the fact is he did not and that the allegation that he conspired remains an issue between the parties.[10]Participation by the Timis Corporation in the alleged conspiracy is said by Gerald to have taken the form of discussions, participation in discussions and the provision of information. Mr Kitchener QC says that Timis Corporation cannot have been a conspirator; that it was the subject of the conspiracy, not a participant. He used the vivid phrase that Timis Corporation was "the parcel" in an alleged game of “Pass the Parcel”. I consider, however, the position to be well arguable in this respect in favour of Gerald. Timis Corporation was not perhaps, on the face of the allegations that Gerald makes, a leader of the conspiracy but it is an arguable participant.[11]As to the potential that the conspiracy was designed to put assets beyond reach, there is an important dispute that revolves around the question of the realisable value of assets of the Timis Trust, especially the value of Pan African Minerals at material times. The question includes a question about what was believed and by whom in terms of value. As the matter has continued, the number of valuations available to the court has increased. There is now a considerable range of valuations which serve to my mind to confirm first and foremost the volatility of value of the asset in question, the range of opinion about value, and the uncertainty in relation to value.[12]I am not prepared, despite being so invited by Mr Kitchener QC, to disregard the assessments of Dundee or FTI or BTG amongst these valuations, at their respective dates. But nor am I prepared to disregard them as showing in their own way that the assets with which we are here concerned are assets where views on realisable value will differ. There is, in my judgment, room for the view of valuation that comes with Gerald's contention that the motivation of the defendants was to take assets out of Gerald's range; in other words, that the value, well appreciated by the defendants, of Pan African Minerals was low rather than high.[13]The emphasis in Mr Kitchener QC's submissions has included emphasis on the importance in a conspiracy case of showing that conspirators knew and intended that Gerald would suffer loss. So far as that is concerned, it is indeed an important element, but I found, with respect, Mr Kitchener QC's submissions tending towards emphasising the possibility that the conspiracy might be unsuccessful rather than a case where omitted from the allegations of Gerald were good arguable allegations that the conspirators knew and intended that Gerald would suffer loss.[14]Finally, in relation to good arguable case, I record without hesitation that I am not prepared to rule at a hearing of this nature and at this stage that facts that would support a section 423 Insolvency Act 1986 claim could not constitute unlawful means. I was taken to a couple of passages in the authorities in this area by Mr Kitchener QC. There is a great deal more, and I emphasise the importance of looking at this aspect of the case by reference to the facts that would support a section 423 claim and not simply the question as to whether a section 423 claim in itself is the foothold. But certainly for the purpose of a hearing of this nature, where the threshold is good arguable case, Gerald has that case on this point as others.[15]Risk of dissipation is rightly of importance in relation to this matter and of course in relation to freezing order applications generally. A long way along the path of risk of dissipation is travelled by the fact that in my judgment there is here a good arguable case in conspiracy. The same facts that I have mentioned feature in my overall assessment, doing the best I can, about whether there is a risk of dissipation. There are instances where the conduct of Mr Timis, the first defendant, and Mr Buehler, the second defendant, are open to demonstrable criticism.[16]But one matter that has struck me in this matter, time and again I might add, is why there has been no greater transparency from the defendants than has been seen. When I asked, at the beginning of this hearing, Mr Kitchener QC whether there was something that Timis Corporation planned to do with the proceeds, he, perfectly properly, confined himself to the evidence in the case. He invited me to look at the evidence of Mr Riem, of the solicitors to Timis Corporation, made on 19 May 2017, where this was stated at paragraph 122:
"Timis Corporation has a majority of independent directors who have well in mind their professional obligations, including to the independent shareholders (and potential personal liabilities). I am informed by all the directors that, given the existence of a claim, they would not use the proceeds of the sale to BP, save on the advice of their BVI lawyers ..."
[17]I do not regard, in this matter and at this stage of things, that statement as being as open as it might be against a background of instances of what I regard as a lack of transparency on the part of the defendants in this case. Be that as it may, doing the best I can, there is present the necessary risk of dissipation.[18]Let me turn next to the subject of non-disclosure or failure to give full and frank disclosure to Mr Justice Blair when he granted the freezing order originally. There is criticism made by Timis Corporation, through Mr Kitchener QC, of a range of particular matters, especially of alleged omissions to take Mr Justice Blair to certain materials that went to the question of realisable value of Pan African Minerals and, to some degree, of the Senegal oil interests.[19]The important thing, to my mind, is that the essentials of that issue, and the fact that there was a range of evidence in connection with it, were matters squarely before the Judge. I am also not persuaded that any bad faith was present at all. I appreciate that feelings are strong between the parties in this litigation, but Timis Corporation comes near, with its list of alleged non-disclosures, to suggesting that the court on the application should have been provided with and taken to everything on valuation, when this is not the trial and where the particular obligations on a party and counsel moving without notice for freezing relief do not require things to be taken that far.[20]It is quite clear, I mention in particular, that Mr Justice Blair was told by Mr Robert Miles QC, who was then appearing for Gerald, that the evidence on which Gerald relied might be wrong; and that the Timis Trust might have sufficient assets; and that Mr Timis had previously taken the position that the trust had sufficient assets; and, this having been a point at an earlier hearing before Mr Justice Leggatt as well, that a Gerald internal valuation showed sufficient assets as well.[21]I do not propose in this brief judgment to go through each of the other areas of alleged non-disclosure. I have considered each of them with the benefit of Mr Kitchener QC's submissions and I find myself unpersuaded by them individually or collectively.[22]I turn then to the subject of prejudice in the grant or the continuation of the freezing order relief. Mr Justice Blair was particularly careful, it is apparent, to ensure that the protection by injunction in the present case was cast in the minimum terms necessary. That was the result of what was a long and thorough hearing before him.[23]The order is careful not to prevent the disposal of the Senegal oil interests themselves. The evidence that the freezing order presents a risk to the disposal itself does exist from Timis Corporation but it is highly generalised. There are no details of things said that suggest a risk to the disposal. I appreciate what is referred to about the political environment, but the evidence from Timis Corporation does not demonstrate and distinguish between the risk, in a political context, between, on the one hand, the impact of litigation and, on the other hand, the impact of a freezing order. The evidence does not demonstrate, to my satisfaction, why the commercial drivers behind the disposal should be impacted. I have to accept, of course, it is inherent in the situation in hand that there is some risk, but Gerald has provided a cross-undertaking and its worth is not in serious doubt.[24]I mention here again paragraph 122 of Mr Riem's witness statement on behalf of Timis Corporation. Depending on how I am supposed to understand what is said in that paragraph, it is certainly not being said that if the proceeds of sale are held safe that prevents Timis Corporation from doing something with those proceeds that it is prepared to disclose to the court that it has in mind to do.[25]Let me turn to other matters. I have borne closely in mind throughout my consideration of this matter its full history, including the history of the matter before Mr Justice Leggatt when freezing relief was refused at that time on then evidence and in relation to a different party. Matters have moved on and the available evidence is different, but I have considered anxiously the position that was before Mr Justice Leggatt and his conclusion.[26]I have also borne closely in mind -- and I can see, from the materials, that Mr Justice Blair bore this closely in mind as well -- the potential for this to be an attempt by Gerald to gain security when it did not contract for security. But I am satisfied that it is well arguable that Gerald's concern here is the legitimate concern of preventing an illegitimate dissipation of value, value that was part of what made the lending and the guarantee commercially realistic in the first place. I note as well that a freezing order will not give priority of the form that security would.[27]Overall, there are matters in the present case of fine balance. I am very grateful to Mr Kitchener QC for the thorough way and the robust way in which he has brought out the points that are there for Timis Corporation. There are points that are not answered or not fully answered on both sides in this case, but I do not find that surprising at this stage and in a matter of this complexity and with this history.[28]Mr Justice Blair rigorously tested matters when granting the order. It was a difficult task to present the application before him, and on my assessment that task was undertaken with the utmost responsibility by Mr Miles QC and by the legal team supporting him.[29]I do strongly regret, I add finally, that this matter could not have been dealt with by the parties agreeing simply to hold safe the proceeds of the Senegal oil interests, at least until a point came when the Timis Corporation identified something that it wished to use those proceeds for. That said, it is open to the parties not to agree and to ask the court to rule; and, having been put in that position, I do in the way I have indicated.