Michael Wilson & Partners Ltd v Sinclair & Ors [2020] EWHC 1249 (Comm)

“6. MWP is an entity incorporated in the British Virgin Islands (“the BVI”). At all material times it has practised as a law firm and business consultancy with its headquarters in Kazakhstan. The ultimate beneficial owner and controller of MWP is Mr Wilson who is, or was, an English solicitor. 7. Mr Emmott, whether or not he still practises as such (it matters not), is an Australian and English qualified solicitor. 8. The dispute has its origins in an agreement dated 7 December 2001 (“the Emmott agreement”), made between Mr Emmott and MWP. The Emmott agreement was intended to create a “quasipartnership” between Mr Emmott and Mr Wilson. Mr Emmott was to receive a 33% shareholding in MWP, while Mr Wilson was to retain a 67% shareholding (via a corporate vehicle). The Emmott agreement was governed by English law and contained a London arbitration clause. 9. On 20 December 2005, Mr Emmott entered into a secret agreement with two other MWP employees, Messrs. Nicholls and Slater, providing for the establishment of a rival business (“the Temujin Partnership”). Ultimately, Mr Emmott, Mr Nicholls and Mr Slater left MWP to work at the Temujin partnership. 10. Litigation ensued in several jurisdictions, including Australia, New Zealand, the Bahamas, the BVI and this jurisdiction – and has continued to this day. We were told that, aside from the matter before us, there are some 9 sets of proceedings current in the English court and litigation is continuing in New South Wales, the BVI and New Zealand. We have little doubt that the costs by now comfortably exceed any amounts in dispute. 11. The present appeal has its origins in the London arbitration proceedings. By their Second Interim Award (“the SIA”), dated 19 February 2010, the arbitrators (Mr Berry, Lord Millett, Ms Davies) found, in summary, that Mr Emmott had satisfied the conditions for obtaining his 33% shareholding in MWP. On the other hand, he had been guilty of deliberate, serious and dishonest breaches of his fiduciary obligations to MWP. By their Third Award (Quantum) (“the TQA”), dated 5 September 2014, the arbitrators held that the quantum of the former outweighed the latter. The upshot was that MWP was ordered to pay Mr Emmott approximately £3.2 million and US$841,000. 12. Pausing here, the flavour of the dispute and the arbitrators’ overall view of the principal protagonists appears from their trenchant observations at paras. 1 and 2 of the SIA: “1. It has to be recorded at the outset of this Award, that we found neither Mr Wilson nor Mr Emmott to be witnesses on whom we could rely. On any showing Mr Wilson was truculent and evasive…..Clearly he nurses a deep sense of grievance against Mr Emmott for the conduct of which he now complains and, no doubt, for the vast expense he has incurred in various jurisdictions, and in these proceedings, in pursuit of his case. However, it is clear to us that he is unwilling even to consider that there may have been explanations which might have allayed some of his suspicions about Mr Emmott’s conduct. He was always prepared to assume a dishonest motive in any activity undertaken by Mr Emmott or others associated with him, some of whom MWP is now suing in various proceedings elsewhere. The overstatement of his own case, to the extent that certain of his evidence was simply unbelievable, made his evidence unsatisfactory and unreliable. 2. By the same token Mr Emmott’s evidence revealed….that he is a person willing to produce false, backdated, documents, that is to say forgeries, and to mislead his family trustee/bankers. He admitted in the course of his evidence that at the very least he had been less than frank with his quasi partner Mr Wilson and that he had produced wholly bogus invoices to mislead auditors and/or tax authorities. His conduct in relation to MWP at times can only be described as disgraceful.” 13. In the event, MWP did not honour the award and the Mareva was made in aid of enforcement. At the time, the TQA was still subject to challenge and, as already indicated, the Mareva contained the exception. Other terms of note included the following. By para. 7, MWP was restrained from: (1) removing from England and Wales any of his assets within the jurisdiction up to the value of £3,909,613 plus US$841, 213; and (2) disposing of, dealing with or diminishing the value of any of his assets whether within or outside the jurisdiction up to the same value. By para. 9, the Mareva applied “in particular” to a wide range of assets - including bank accounts in London, bank accounts in the Channel Islands, accounts in New South Wales, bank accounts in Almaty (Kazakhstan), together with shares, warrants and securities in a particular company, a sum held by the Court Funds Office, various sums that might be payable to MWP by way of costs orders and fees received or due to MWP. 14. In addition to the (Angel Bell) exception, there were other exceptions to the Mareva. Para. 13(1) provided an exception for spending “a reasonable sum” on legal advice and representation, subject to a requirement that MWP tell Mr Emmott’s legal representatives where the money was to come from, before any such spending. 15. Para. 13(4) provided that the Mareva “will cease to have effect” if MWP provided security in the amount of the assets frozen into court or making other provision for security agreed with Mr Emmott’s representatives. 16. Subsequently, by his order dated 26 June 2015, Burton J, inter alia, dismissed MWP’s various challenges to and appeals against the TQA and gave leave to Mr Emmott to enforce the TQA “in the same manner as a Judgement or Order of this Court”

“MWP had argued that certain moneys advanced by Mr Thomas Sinclair (“Mr Sinclair”) to Mr Emmott to fund his legal costs of the arbitration that resulted in the Award in favour of Mr Emmott but which MWP refuses to pay were due and owing by Mr Emmott to Mr Sinclair even though no demand had been made for repayment. MWP argued that this should still be the subject of a final third party debt order and paid to MWP to satisfy certain debts owed by Mr Sinclair to MWP.”

“THIS DEED is made on the [●] day of April 2007 BETWEEN: (1) THOMAS SINCLAIR of 4 Park Place, London SW1A 1LP (“Mr Sinclair”); and (2) JOHN FORSTER EMMOTT of 4 Chelwood Vachery, Millbrook Hill, Nutley, East Sussex TN22 3HR (“Mr Emmott”). RECITALS: A. MWP has commenced Arbitration Proceedings against Mr Emmott claiming breach of covenant and duties owed to MWP and in support thereof commenced the English Proceedings against Mr Emmott and Eagle wherein MWP obtained the Emmott Freezing Order and the Eagle Freezing Order over various assets, including the Shares. B. Mr Sinclair has commenced the Bahamian Proceedings in which he seeks a declaration upholding his claim to ownership of the Shares and intends to rely upon such a declaration for the purpose of applying in the English Proceedings to have the Freezing Orders discharged insofar as they relate to the Shares. C. In evidence filed in the Bahamian Proceedings, it is alleged on behalf of MWP that Mr Sinclair assisted the alleged breach of covenant and duties owed by Mr Emmott to MWP. D. Mr Emmott denies the claims made against him by MWP as does Mr Sinclair and they agree that they share a common interest in successfully defending those claims and in Mr Sinclair regaining his Shares. E. As Mr and Mrs Emmott have insufficient means to fund their Defence Costs, Mr Emmott has asked and Mr Sinclair has agreed to fund the same on the terms set out in this Deed. IT IS AGREED: 1. Interpretation 1.1 Capitalised terms appearing in the Recitals are defined in clause 1.2 below. 1.2 In this Deed: “Arbitration Proceedings” means the arbitration proceedings brought by MWP against Mr Emmott pursuant to the terms of the agreement between them dated 7 December 2001 in which MWP is believed to claim breach of covenant and duties owed by Mr Emmott to MWP; … “Defence Costs” means the reasonable legal charges, costs and expenses (including professional profit fees and disbursements together with any VAT or similar tax, duty or impost payable thereon) charged by legal advisers to Mr and Mrs Emmott in respect of their costs of advice and representation in the Proceedings; … “English Proceedings” means the proceedings brought by MWP in support of the Arbitration Proceedings in the High Court of Justice (Commercial Court, Queen’s Bench Division), bearing action number 2006 Folio 921, in which MWP seeks ancillary relief in the form of (among other things) the Freezing Order allegedly in connection with the Arbitration Proceedings; … “Proceedings” means the Arbitration Proceedings and the English Proceedings; … 2. Defence Costs 2.1 Mr Sinclair will fund the Defence Costs up to a maximum amount of £250,000. … 3. Security 3.1 Within 90 days of execution of this Deed, Mr Emmott shall procure that a second legal charge will be granted in favour of Mr Sinclair in a form acceptable to him over the property known as 4 Chelwood Vachery, Millbrook Hill, Nutley, East Sussex TN22 3HQ by way of security in respect of sums payable pursuant to this Deed. … 4. Representations, warranties and acknowledgements … 4.5 Mr Emmott represents and warrants that he has taken independent legal advice in relation to the nature and extent of his obligations pursuant to this Deed in to which he freely enters and in so doing he acknowledges that this Deed is enforceable in accordance with its terms. 5. Discharge or expiry of the Freezing Order 5.1 At any time on or after the expiry or discharge of the Emmott Freezing Order, Mr Sinclair may, by 30 days’ prior written notice, require Mr Emmott to repay any and all sums paid pursuant to clause 2.1 above, together with interest thereon calculated in accordance with clause 5.2 below. For the avoidance of any doubt, Mr Emmott shall not be under any obligation to repay those sums while the Emmott Freezing Order would prevent him from doing so or it would otherwise be unlawful for him to do so. 5.2 Interest at the Prime Rate of 8.25% per annum shall accrue monthly in arrears in respect of all sums paid pursuant to clause 3 above and shall be payable as provided for in clause 5.1 above. Interest at the 1 Year London Inter-Bank Offered Rate at the time of any default in payment shall accrue daily in arrears in respect of any overdue sums. … 7. Miscellaneous 7.1 This Deed constitutes the entire agreement between the parties in relation to its subject matter and supersedes any prior agreement whether oral or in writing. 7.2 This Deed shall not be varied, assigned or novated without the prior written consent of both parties. ”

“… that the requirements for ordering a TPDO are set out in CPR Part 72.2.1 which requires that the debts which are the subject of the ITPDO must be "due and owing" and that if there are conditions to be satisfied before the debt becomes payable then it cannot be the subject of an ITPDO. 9. Mr Shepherd drew the court's attention to the Deed entered into on about 2lst May 2007 whereby Mr Sinclair agreed to make advances to assist Mr Emmott in funding the arbitration proceedings between the Claimant and Mr Emmott. Clause 5.1 of the Deed which provides for the repayment of sums advanced, and upon which Mr Emmott relies, states: "At any time after theexpiry of discharge of the Emmott Freezing Order, Mr Sinclair may, by 30days prior written notice, require Mr Emmott to repay any and all sums paidpursuant to Clause 2.1 above, together with interest thereon .. .. ". Although a signed copy of the Deed is not available a signed addendum, which specifically refers to the Deed, was executed on the 13th March 2008 which widened the basis of the advances and provides "All provisions of the Deedsave as amended by this Addendum shall apply to this Addendum mutatismutandis'. 10. Mr Shepherd submitted that, the evidence provided by the Deed witnessing the advances, was .to the effect that the agreement made between Mr Sinclair was that the debt was not payable until Mr Sinclair had given notice that he wanted to be repaid and the sum which was to be repaid. Until that occurred Mr Shepherd submits that the debt was not "due".”

“11. Mr Shepherd's secondary argument is that it would be wholly unjust to do other than discharge the ITPDO because of the Claimant's conduct in the present case. In this respect he submitted: a. That Mr Emmott has an arbitral award in his favour which has been made a judgment of the English High Court. Although the Claimant attempted to appeal the arbitral awards those applications have all been refused and there is no farther avenue open to the Claimant to challenge those awards. b. The Claimant has failed to pay the· sums due under the awards and the associated orders of costs, some of them on an indemnity basis. These sums have been due since June 2015. Mr Shepherd drew attention to an observation of Wallbank J in the proceedings in the BVI that it was not the case that the Claimant could not pay the outstanding sum but that it would not do. so. In these circumstances Mr Shepherd submitted that the Claimant's failure to satisfy the awards and the orders made enforcing them is a flagrant disregard of a court order amounting to contempt. c. Mr. Shepherd submitted that the Claimant was continuing to act in breach of a Freezing Order made by HHJ Mackie and varied by Sir Jeremy Cooke in 2017. The point being that the Claimant should not be spending money on legal fees without informing the Third Party as to the origin and the use of such monies. Mr Shepherd stated that his client's solicitor had asked for information on this aspect by a letter dated the 16th May 2018. The only response was dated the 18th May 2018, this stated "We have deliberately not replied . .. " so that the letter of the 1[6]th May 2018 remains effectively unanswered. d. Mr Shepherd criticised the Claimant's counsel for not bringing to the attention of the Court the decision of Blair J in Merchant InternationalCompany Limited v Natsionlna Aktsionerna Kompaniia NaftogazUkrainy and The Bank of New York Mellon [2014] EWHC 391, the decision of the Court of Appeal in the same case [2014] EWCA Civ 1603 and the decision in Dunlop & Ranken Limited v Hendal! SteelStructures Limited [1957] 3 All ER 344. He submitted that the skeleton provided by Claimant's counsel compounded the failure above because their skeleton flatly contradicted Mr Emmotts' submissions to the effect that the debt was not due or accruing due. In fact, in the light of the authorities Mr Emmott was right and Claimant's counsel was wrong. e. Mr Shepherd also submitted that there was a fundamental flaw with the concept that the making of a TPDO would effectively act as a demand on the debtor thus making the debt a payable, Mr Shepherd submitted that this would result in the Claimant being put in a better position than the judgment debtor which is not permitted, see TaurusPetroleum Limited v State Oil Marketing Company of the Ministry ofOil, Republic of Iraq [2017] UKSC 64, para.90. f. As to the quantum of the debt Mr. Emmott's 7th witness statement details what he has been loaned. On the 16th May 2018 Mr Doctor QC provided a schedule to which Mr Emmott responded on the 201h May 2018. Mr Shepherd submitted that Mr Doctor's schedule was unsupported by actual evidence and was demonstrably wrong as to £200,000 which can be seen to have been repaid as shown by Mr Emmott's witness statement dated 121h January 2018 and Mr Robinson's bank statement.”

“17. From the wording of the Deed I conclude that the terms of the Deed provided that repayment was not due until Mr Sinclair demanded payment and only then in such sum as Mr Sinclair might require. Having considered the decisions of Blair J and the Court of Appeal in Merchant InternationalCompany Limited v Natsionlna Aktsionerna Kompaniia Naftogaz Ukrainyand The Bank of New York Mellon I conclude that the wording of the Deed is sufficient, on its own, to place the "debt" outside the requirement that it must be "due or accruing due" as provided by CPR Part 72.2(1). 18. Further, although it is accepted that the whole agreement clause prevents any oral variation of the terms of the Deed nonetheless a further understanding or agreement, in this case that no such demand would be made until the arbitration proceedings had been concluded successfully and Mr Emmott had been paid by MWP, is evidence of the factual matrix against which the money had been advanced and explains why only a demand, and then only in the amounts requested, would render the debt due and owing when the demand for a specific sum is actually made. In my view this is also part of the 'context' against which a decision whether the terms of the 'debt' falls within the provisions of CPR Part 72.2(1) must be made. 19. Having come to these conclusions it follows that I consider that CPR Part 72.2(1) does not apply in respect of the sums advanced by Mr Sinclair to Mr Emmott so that the ITPDO should be discharged. ...”

“(1) Upon the application of a judgment creditor, the court may make an order (a ‘final third party debt order’) requiring a third party to pay to the judgment creditor – (a) the amount of any debt due or accruing due to the judgment debtor from the third party; or (b) so much of that debt as is sufficient to satisfy the judgment debt and the judgment creditor's costs of the application. …”

“It is well established for this purpose that the debt must either be due (in the sense of instantly payable) or accruing due (in the sense of being payable in the future but by reason of an existing obligation). As stated by Lindley LJ in Webb v Stenton (1883) 11 QBD 518 at p.527: “I should say, apart from any authority, that a debt legal or equitable can be attached whether it be a debt owing or accruing; but it must be a debt, and a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in presenti, solvendumin futuro. An accruing debt, therefore, is a debt not yet actually payable, but a debt which is represented by an existing obligation.”

“Prima facie it would be wrong in principle for garnisheeproceedings to have the effect of putting the judgment creditor in a better position as against the garnishee than the judgment debtor himself would have been.”