Sports Network Ltd v Calzaghe [2008] EWHC 2566 (QB)

Case No HQ08X02447[2008] EWHC 2566 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Venue Royal Courts of JusticeDate Thursday, 23 rd October 2008
Before
MR. JUSTICE COULSON_________B E T W E E N:
Between
SPORTS NETWORK LIMITED Claimant/RespondentJOE CALZAGHE CBE Defendant/Applicant_________Transcribed by BEVERLEY F. NUNNERY & COOfficial Shorthand Writers and Tape TranscribersQuality House, Quality Court, Chancery Lane, London WC2A 1HPTel: 020 7831 5627 Fax: 020 7831 7737_________MR. J. CRYSTAL (instructed by Fox Hayes, Leeds) appeared for theClaimant/Respondent.MR. I. MILL QC (instructed by Forbes Anderson Free) appeared for theDefendant/Applicant._________J U D G M E N T
[1]The defendant is a well-known boxer and the current BBC Sports Personality of the Year. The claimant is one of a number of company vehicles for the equally well-known manager and promoter, Mr. Frank Warren. The two men have until recently enjoyed a successful and profitable relationship Following the handing down of this judgment, Mr Crystal complained that I had not referred to paragraph 5 of the defendant’s second affidavit, in which he accepted that, prior to the Hopkins fight, he had been paid all monies due to him from the claimant, although he did complain about ‘very late payment’. I did not consider it necessary to record a matter that was not in issue in the judgment, there being so many matters that are in dispute, but add this footnote for the approved version for completeness. . However, they have now fallen out on two separate issues. First, there is a dispute over the sum due to the defendant arising out of his fight on 19th April 2008 against Bernard Hopkins, which the claimant company co-promoted. Secondly, there is a dispute over whether the defendant is in breach of an alleged oral agreement with the claimant in respect of the promotion of his future fights and in particular his upcoming fight next month against Roy Jones Junior in New York. The defendant has stated that this will be his last fight. 2 There are two applications by the defendant before me. The first is for an order pursuant to CPR 25.1(1)(c) that 80% of the profit collected by the claimant arising out of the Hopkins fight be paid into an account in the names of the parties' solicitors. It is an integral part of the defendant's case on this application that he has an arguable case that this money was held by the claimant on trust for him; certainly he maintains that there is a serious issue to be tried on that point. For reasons which will become apparent below, this same claim, that is to say for the preservation of what is said to be trust monies, could also be made under CPR 25.1(1)(l), save that under the latter provision the money would be paid into court rather than into a joint account. 3 The second application made by the defendant arises out CPR 25.1(1)(g), namely the provision of information in respect of property and assets held by the claimant. This application was the subject of an order dated 7th October 2008 made by Eady J., which was varied (as to time for performance only) on 8th October. At a hearing before me on 14th October, I found that the claimant had not complied with the order of Eady J. and, at the claimant's request, I modified the terms of that order in order to assist the claimant. In the teeth of the defendant's application that I make that order an unless order, I declined to do so but I did make it a final order. The defendant now contends that the claimant has not complied with the order of 14th October either and that, as a result, it is presently impossible to say whether or not there is property in accordance with CPR 25.1(1)(c) or a specified fund in accordance with CPR 25.1(1)(l) to be preserved and paid into a joint account or into court. If the defendant is right that there has been non-compliance with my final order, he seeks the sanction of an unless order in a last attempt to ensure compliance.[4]I propose to set out the relevant parts of the background in section B below, and the procedural history in section C below. In so doing I make plain that I have only summarised the vast amount of material before me, which now fills three lever arch files. I then go on in section D to address the application under CPR 25.1(1)(c) and/or (l), and at section E the alleged non-compliance with the final order under CPR 25.1(1)(g). At sections F and G below I deal respectively with the issues that arise out of the proposed unless order and the issues of costs. B. BACKGROUND 5 The defendant has been a professional boxer for 15 years, remaining unbeaten during 45 professional fights. For 11 years he was the WBO Super Middleweight World Champion, before he voluntarily relinquished the title in September 2008. For almost all this period, Mr. Warren was the defendant's manager, and the claimant, or a related company, promoted his fights.[6]By November 2007 the management contract between Mr. Warren and the defendant had expired, and the fight on 3rd November 2007 against Mikkel Kessler in Cardiff, which was a unification bout, was the last fight covered by the existing promotional agreement between the parties. The defendant's case is that he was very reluctant to enter into any further agreements with either Mr. Warren or the claimant company. However, in circumstances which are disputed, the day before that fight, on 2nd November 2007, the parties entered into an agreement in the following terms:
"1. The Unification Bout. A 12 round contest for the Unified Super Middleweight World Championship for the WBA, WBC and WBO titles on Sunday 4th November 2007 (Bout). 2. Purse. You shall receive a gross purse of £2,200,000, less deductions for the British Boxing Board of Control and the Boxing Organisation's Sanction Fees (Purse), which shall be paid to you as follows: (a) £1 million no later than six weeks after the Bout, and (b) the balance of the purse no later than eight weeks after the Bout. If either payment is not made on the dates as set out above, interest will be paid to you on the outstanding amount at the bank rate plus 3%. 3. You agree to remain exclusively promoted by me for a further fight after the Bout. 4. To the extent that there is no conflict with this letter the terms of your previous agreement, dated 8th October 2004, shall apply as if attached. 5. All purses for future fights shall be negotiated in good faith."
[7]The defendant won the fight and therefore added the WBA and WBC world titles to his WBO title. It was then decided that he would move up a weight and fight Bernard Hopkins, Ring Magazine's World Light Heavyweight Champion on 19th April 2008. 8 There is a good deal of evidence, much of it in issue, concerning the discussions and negotiations between the defendant and the claimant in respect of the latter's promotion of the Hopkins fight and the defendant's entitlement to a share of the profits. The one matter that is clear beyond doubt, because it was recorded in writing at the time, is that on 15th January 2008 the parties agreed that the profits from the Hopkins fight would be split equally between Golden Boy Productions Inc. (Hopkins's promoters) and the claimant, and that the 50% of the profits collected by the claimant would then be split on the basis that the defendant would recover 80% and the claimant would retain 20%.[9]This agreement was confirmed in an exchange of letters between those acting for the parties. On 17th January 2008 the solicitors acting for the defendant wrote in these terms:
"Re Joe Calzaghe. I write further to our meeting on 15th January 2008 in London when I was pleased to note that we were able to resolve all outstanding issues in respect of the forthcoming Hopkins fight. I presume you will want Joe to enter into an agreement with yourselves and, if that is the case, then could you please let me have the same. Alternatively, you may be happy to deal with it by way of an exchange of correspondence. I write merely to confirm the agreement, namely that you will promote Joe's forthcoming fight in Vegas with Bernard Hopkins in conjunction with Golden Boy, who will be looking after Hopkins' interests. It has been agreed between yourself and Golden Boy that profits will be split on a 50/50 basis after payment of agreed expenses and it is further agreed that in relation to yourselves and Joe, Joe will receive 80% of the net profit with yourselves retaining 20% for your promotional fee. I look forward to working with you in the future and would like to thank you for your assistance." 7. "
Thank you for your email. I am very happy for this to be agreed by this exchange of correspondence. 8. However, for the sake of good order, it should be noted that the 80/20 split is of the 50% of the profit as defined under the promotional agreement between Sports Network and Golden Boy. I trust this makes it clearer." 11 In these proceedings, it is alleged by the claimant that, in addition to the matters recorded in this exchange of letters, the defendant also agreed to let the claimant company promote his next, i.e. the fight after the Hopkins fight. This is vehemently denied by the defendant. Absolutely no record of or reference to this alleged agreement can be discerned in the papers, at least until the defendant began to chase the claimant for the money due to him from the Hopkins fight. 9. "Provided that the bout actually occurs and each of Hopkins and Calzaghe fully completes his respective obligations relating thereto and neither GBP or Hopkins on the one hand or SN or Calzaghe on the other hand is in material breach of this agreement or the bout agreement, then each of Hopkins and Calzaghe shall be entitled to receive a purse of $3 million (or such other amount as may be mutually agreed in writing by GBP and SN), less all applicable sanction fees, licensing and medical fees required, tax payments or withholdings and other similar costs, fees and expenses for each of Hopkins and Calzaghe respectively, the balance of which shall be paid, subject to the rules of the Commission, by either check immediately following the bout. SN agrees and shall cause Calzaghe to agree in writing that the payment of his purse shall be subject to the deductions set forth above. Any purse advances to Calzaghe shall be borne solely by SN and in that regard SN acknowledges that Commission rules prohibit purse advances in excess of 10% of each boxer's purse." 10. "Relationship. Nothing contained herein shall be deemed to create a joint venture, partnership, principal/agent relationship or other fiduciary relationship between any of the parties hereto, and no party is authorised or shall act towards third parties or the public in any manner that would indicate any such relationship..." 11. "I am familiar with all of the terms, covenants and conditions of the agreement and I hereby consent to the execution thereof by SN. I agree to comply with all of the terms, conditions, covenants and obligations set forth in the agreement and I agree that I will be bound by all such terms, conditions, covenants and obligations. I hereby confirm all grants of rights, representations, warranties and agreements set forth in the agreement. I agree to look solely to SN and not to GBP for the payment of compensation, provision of travel and accommodations and all other arrangements relating to the bout..." 15 The fight took place on 19th April 2008 and the defendant won. Subsequently he appointed Tenon Ltd. as his representatives to audit his share of the profits from the fight. He was paid £1 million on account and further sums were paid by the claimant in settlement of a tax liability and also to his father, Enzo Calzaghe. Thereafter, during May and early June, the defendant chased for the outstanding financial information relating to the profits. Those efforts met with little success. On 28th June 2008, however, Tenon were allowed to inspect the claimant's documents, and wrote on the same day with a lengthy list of queries. 12. "There is no such thing as Joe's purse. The agreement is for there to be a 50/50 split with Joe receiving 80% of the 50%." 17 On 20th June 2008, Tenon wrote again repeating some of the previous queries that had not been answered, and raising some new ones. There was a major disagreement as to when the defendant should have been paid. Tenon claimed that he should have been paid two days after the bout, but the claimant said that the defendant was not entitled to be paid until 60 days after the bout. Of course, by 20th June 2008, the 60 day period had expired in any event. However, no further sums were paid to the defendant. 18 With their letter of 20th June 2008 Tenon enclosed a schedule which identified the differences between the parties. By their calculation, the claimant's case was that the defendant was owed a further $3.2 million-odd, whilst the defendant maintained that he was entitled to a further $5.28 million. A revised version of the schedule attached to the letter was subsequently incorporated into the defendant's pleadings. It is a useful document because it demonstrates where the parties are agreed, or were at that time agreed, as to particular items of both income and expenditure. 19 On 25th June 2008, having still not been paid the outstanding sums, the defendant instructed his solicitors to write a claim letter. The letter also dealt with and refuted the assertions that the claimant had made in the media that it had a promotional contract in respect of the defendant's future fights. C. PROCEDURAL HISTORY 14. C1 The Pleadings 21 The claimant's points of claim served in July 2008 repeated the detailed allegations surrounding the oral agreement that were set out in the letter of 26th June. Although it also repeated the date of 5th January 2008, the points of claim has subsequently been amended, and that date has been changed to 15th January. That of course was the same day as the agreement which is the subject of the exchange of letters, and which makes no mention of it. The damages claim is effectively in two parts: a claim for "in excess of £1 million" for lost promotional revenue from the defendant's next fight against Roy Jones, and an unquantified and rather vague claim for loss of opportunity and loss of publicity. 22 The defendant's defence and counterclaim was served on 7th August 2008. In it the defendant denies the oral agreement absolutely. The defendant also counterclaims the sum of $4.5 million said to be owing from the Hopkins fight. The pleading seeks a declaration that this sum, or whatever is the true sum due to the defendant following the taking of an account, is held by the claimant on constructive trust for the defendant. 15. C2 The Initial Correspondence 24 The defendant and his advisers became concerned that the claimant company was no longer being used by Mr. Warren as his principal vehicle for boxing promotion, with a consequential running down of the claimant's cash flow and assets. Accordingly, on 16th September 2008, the defendant's solicitors wrote a detailed letter seeking up-to-date financial information about the claimant company, and where the sums otherwise due to the defendant could be found. This request was rejected by the claimant's solicitors in a letter of 19th September and they offered no comfort at all as to the future preservation of the monies otherwise due to the defendant. 16. "Sums payable to our client pursuant to the agreement of January 18th 2008 have not been placed in a separate bank account…" 17. As we shall see, that statement was wrong. There was indeed a separate account, as the recent disclosure has demonstrated. This was therefore the first (but not the last) time on which information from the claimant and/or his advisers has proved to be inaccurate. This has helped to create the impression that the claimant has not been entirely straightforward in its dealings both with the defendant and with the court. 18. "A written undertaking from Mr. Warren that he will procure that your client pays the full amount claimed in our client's counterclaim, i.e. US$4,558,462.29, into a separate bank account within seven days of the date of this letter, to be held in escrow until the determination of the proceedings between our respective clients. Such account to be in the joint names of our respective firms, and any payment out of such account to be subject to signature of both firms or order of the court." 19. On 29th September 2008 the proposed undertaking was rejected by the claimant's solicitors. 20. C3 The Defendant's Application 27 Accordingly, in the light of this correspondence, on 7th October 2008 the defendant issued an application seeking an order for the provision of information as to property and assets under CPR 25.1(1)(g) and the preservation of property - in this case, the monies otherwise due to the defendant - under CPR 25.1(1)(c). The application was supported by an affidavit from the defendant. The application was heard by Eady J. on the same day, when the claimant was represented by Mr. Stephen Taylor Heath, the claimant's solicitor. "1. The claimant, pursuant to CPR 25.1(1)(g) is to provide by affidavit sworn by its proper officer the following information to the defendant, namely: (a). The details of the bank account or accounts under the control of the claimant in which is to be found all or any part of the sum of US$4,558,462.29, being part of the total sum received by the claimant from or on behalf of Golden Boy Promotion Inc. or otherwise by way of profits derived from the professional boxing contest between the defendant and Bernard Hopkins on 19th April 2008 ('the profit share'); (b). If and to the extent that the claimant claims no longer to control the profit share, the date on which any part of the profit share is said to have ceased to be under its control, the bank account under the control of the claimant in which that part of the profit share is said to have been located immediately prior to its transfer; the person or persons to whom control of that part of the profit share is said to have been transferred, and the circumstances in which such transfer of control is said to have occurred." 29 The following day there was a further hearing in front of Eady J. which resulted in an extension of time to the claimant in order to comply with the order. 30 In purported compliance with the order, the claimant served two affidavits sworn by Mr. Frank Warren, an affidavit sworn by Mr. Stephen Taylor Heath and two affidavits from Mr. Ed Simons, the claimant's company secretary. I think it not unfair to observe that all of these documents suffer from the same abiding flaw: they are so busy attacking particular parts of Mr. Calzaghe's affidavit that they seem to forget that their principal purpose was to supply the information required by Eady J. 24. "There is no account in which there is now to be found any income, whether described as profit share or otherwise, received by the claimant from co-promoting the Hopkins v. Calzaghe fight." 25. Taken at its face value, this appears to be saying that the sum of $3 million-odd, which even on the claimant's case is (subject to the set off) due to the defendant, has not been safeguarded and has simply been spent on other things. 26. C4 The Hearing on 14th October 2008 33 The matter came before me on 14th October 2008. Mr. Mill QC on behalf of the defendant submitted that the claimant had not complied with the order of Eady J. and that, accordingly, I would have to adjourn the hearing of the application under CPR 25.1(1)(c) until the r.25.1(1)(g) information had been provided. (a). What was the income from the Hopkins fight? (b). What was the expenditure in respect of the Hopkins fight? (c). What, taking (b) from (a), was the profit on the Hopkins fight to which the claimant was entitled to collect 50% under its agreement with Golden Boy? (d). When and how was that profit collected by the claimant and into which account or accounts was it paid? (e). If it is now said that the monies otherwise due to the defendant, the 80% of the profit collected by the claimant, has been paid out to others, either in part or in total, when and in what circumstances were such payments made and to whom? 35 The purpose of the order of Eady J. was to require the claimant to provide this information. It was a necessary first step to any order under CPR 25.1(1)(c) or indeed (l), and it was also required in order for the defendant to be able to consider whether or not to apply for a freezing order. Such information had not been provided in the documents before the court on 14th October 2008. 36 Indeed, I should say that on that occasion I did not understand Mr. Crystal to contend that there had been compliance with Eady J.'s order. The thrust of his submissions on that occasion was to persuade me to vary the original order so that it was easier for the claimant to understand and put the claimant in a better position to be able to comply with it. I acceded to his request, and I ensured before finalising the order that he was content with and understood the revised wording. "1. Paragraph 1(a) of the order of Mr. Justice Eady dated 7th October 2008 ("the 7th October order") is varied as follows: (a). The claimant is also to state in an affidavit to be sworn by a proper officer of the claimant, by reference to each item of income and expenditure specified in the schedule comprising annex 3 to the defence and counterclaim herein, whether such item was respectively paid to or paid by the claimant in whole or in part and if, to the extent that it was not so paid, to state respectively to whom or by whom it was paid and why that was the case; (b). The claimant is also to produce to the defendant's solicitors copies of the bank statements for the bank accounts identified in para.3 of the second affidavit of Edward Simons for the period from the first receipt of income by the claimant and/or the first payment of expenditure by the claimant relating to the defendant's fight dated 19th April 2008 ("the fight") to date; (c). The claimant is also to produce to the defendant's solicitors a schedule identifying by reference to entries in each such bank statement: (i) each receipt of income relating to the fight, and (ii) each item of expenditure relating to the fight, such schedule to be verified by affidavit sworn by its proper officer; (d). The claimant is also to produce to the defendant's solicitors the reconciliation documents identifying the balance payable and paid by the claimant to Golden Boy Inc. as referred to in para.5.1 of the second affidavit of Edward Simons. 2. Paragraph 1(b) of the 7th October order is varied so that it provides instead as follows: 'If and to the extent that the claimant relies upon payments made by it as being payments made out of money which would otherwise have been payable to the defendant in respect of the fight, the claimant is: (a) to identify each such payment by reference to its entry in the bank statements referred to in para.1(b) above; (b) to identify the person or persons to whom each such payment was made, and (c) the circumstances in which such payment was made'." 38 The purpose of this order, and in particular the request that schedules (properly verified) be provided to the defendant and to the court, was to ensure that a clear and properly documented breakdown of the relevant figures was provided, in order that the defendant would be able to have the information to which he was entitled and to which I have referred in paragraph 34 above. 39 In purported compliance with that order, the claimant served two further affidavits from Mr. Warren, which exhibited, amongst other things, bank statements referable to a number of different bank accounts set up by the claimant. In addition, there were two further affidavits sworn on behalf of the defendant: a second affidavit from the defendant himself and an affidavit from a Mr. Darren Drake. 40 Neither of the affidavits from Mr. Warren worked their way through the schedule at annex 3 to the defence and counterclaim, giving the information requested by paragraph 1(a) of the order. There is instead, in paragraph 3 of Mr. Warren's third affidavit, yet another recasting of the income and expenditure figures. Those are different to the figures provided by Mr. Simons. Some bank statements have been provided under paragraph 1(b) of the order of 14.10.08. Although it is not entirely clear, I think that it is suggested that exhibit FW3 complies with paragraph 1(c) of the order. There is now a reconciliation document under paragraph 1(d) of the order. It is also said that exhibit FW5, which consists of various manuscript markings on some of the bank statements, complies with paragraph 2 of the order of 14.10.08. 41 The bank statements referable to the claimant's main account make worrying reading for the defendant. Earlier in the year this was an account with large sums coming in and out and with a balance as large as £2 million as recently as July. But subsequently the sums going in and out have got smaller and the balance has reduced. As at 30th September there was money in the account to the tune of just £46,000-odd. 42 No explanation for this state of affairs has been provided. At one point during the argument Mr. Crystal sought to suggest a link between this decline and the defendant's decision to promote the Jones fight himself. However, there was no evidence in any of the affidavits of any such link. Furthermore, since that fight has not yet happened, it is difficult to see how there could be a link at all. The impression that I have formed is of a company in a steadily worsening financial position. Whether that is because it is being deliberately kept out of funds is an issue which arises, at least tangentially, on both limbs of this application. 43 The defendant's solicitors were concerned that the latest information still did not comply with the court's order. Two detailed letters, dated 15th and 17th October 2008, set out a range of queries and inconsistencies on the information so far provided by the claimant. 38. "Andrew, you seem like a nice guy. Stop this aggressive bullshit because it will get you nowhere. Talk to me and we will sort this out. Challenge me again and !!!!!" 39. C5 The Hearing on 21st October 2008 46 At the hearing on 21st October, Mr. Mill QC, on behalf of the defendant, again made the point that the claimant was in breach of the court order and that it was therefore difficult to pursue the application in relation to CPR 25.1(1)(c) (or 25.1(1)(l) if I considered that that was the appropriate interim remedy). He said that this was because he could still not say whether there was property or a fund in existence to be preserved or paid into court. However, he agreed to my suggestion that, subject to that point, I could decide the issue of whether, assuming that there was such property or fund, the order sought should be made. (a). Assuming either preserved property or a specified fund under CPR 25.1(1)(c) or CPR 25.1(1)(l) respectively, should an order be made under either rule? (b). Is the claimant in breach of the order of 14th October 2008? (c). If so, what sanctions should be imposed? (d). What order should be made as to the costs of the hearings before Eady J. and myself? 44. D THE APPLICATION UNDER CPR.25.1(1)(c) or 25.1(1)(l) D1. Property or Fund? 48 The defendant's original application was under CPR 25.1(1)(c), for an order for the detention, custody or preservation of "relevant property". 49 Beyond the general description of property as ‘property (including land) which is the subject of a claim or as to which any question may arise on a claim’ at CPR 25.1 (2), the word ‘property’ is not defined either in CPR Part 25 or in the glossary of the CPR. The notes at paragraphs 25.1.16 to 25.1.22 of the White Book appear to assume that, for this purpose at any rate, property is either land or something physical which can be inspected, preserved and indeed experimented upon. The relevant chapters of Blackstone's Civil Practice 2009 dealing with interim remedies, which I have found to be of considerable assistance, appear to make precisely the same assumption. 50 I have concluded that, in general terms, property under CPR 25.1(1)(c) does not mean any money in issue in the litigation. First, the word "property" is not the usual way in which one describes money, be it a company's investments or balance at the bank. Secondly, the word "property" on its own should be contrasted with the words "property and assets" in CPR 25.1(1)(g) which latter category plainly does cover investments and money in the bank. Thirdly, to find otherwise would, I think, be contrary to the assumptions made both in the White Book and Blackstone's, when I consider that those assumptions are correctly made. In addition, I note that there is no post-CPR authority for the contrary proposition. 51 I recognise that, if it could be shown that the money in question was held by one party on trust for another, the word "property" might be applicable, but, for the reasons explained below, if there was a serious issue to be tried as to whether the money in question was held on trust then, whatever the position under CPR 25.1(1)(c), it seems to me that it would be a specified fund to which r.25.1(l) would apply. 52 Nothing, I think, turns on this point in the present case. This is because, first, CPR 25.1(3) gives the court wide powers to grant interim remedies in accordance with the overriding objective whether they are expressly identified in CPR 25 Part 1 or not. Moreover, as I have indicated, CPR 25.1(1)(l) expressly refers to an order requiring the payment of a specified fund into court. 53 In my view, r.25.1(1)(l) precisely covers what the defendant wishes to achieve in the present case. The only difference, which Mr. Mill QC has indicated is of no concern to the defendant, is that under r.25.1(1)(l) the money would be paid into court rather than into a joint account. Further, as Mr. Crystal very fairly and properly accepted, there is no difference between the principles applicable to an application under r.25.1(1)(c) and an application under r.25.1(1)(l). They are both subject to the test in American Cyanamid v. Ethicon [1977] FSR 593, requiring the applicant to identify both a serious issue to be tried and a balance of convenience favouring the making of the order sought. Thus, there can be no prejudice to the claimant if I deal with the first limb of the application under r.25.1(1)(l) as opposed to r.25.1(1)(c). 45.

(a) The Law

[55]On behalf of the defendant, Mr. Mill QC has relied on a number of authorities in support of his contention that, on these facts, the defendant has at the very least raised a serious issue that 80% of the money collected by the claimant from Golden Boy arising out of the Calzaghe v. Hopkins fight was held by the claimant on constructive trust for the defendant. Although Mr. Crystal is right to point out that none of those authorities involved a boxer and his promoter, it seems to me that, on the authorities cited, the relationship between the claimant and the defendant in respect of the profit share could well be that of trustee and beneficiary. 56 A trust can arise where one party, although not expressly appointed as a trustee, has assumed the duties of a trustee: see the speech of Lord Millett in Paragon Finance v. Thackerar [1999] 1 All ER 400 at 408-9. This can happen where he does not receive the trust property in his own right, but by a transaction in which both parties intend to create a trust which is not impugned by the plaintiff. 57 Mr. Crystal submitted that the correct analogy was between an employer and an employee, where the employee gets a bonus based on a profit share and where no question of trust could arise. In answer to that, Mr. Mill QC said that the better analogy was with the agency cases such as Lord Napier and Ettrick v. R.F. Kershaw Ltd. [1993] AC 713. It seems to me that, given that 50% of the profit of the fight was being collected by the claimant and that the money would then be accounted for, and 80% of it paid to the defendant, with 20% being deducted by the claimant for its own promotional fee, the agency analogy is closer to the facts of this case. (b). The Present Circumstances 59 I have concluded that there is a serious issue to be tried on the facts as to whether or not the 80% of the profits that were collected by the claimant from the Calzaghe v. Hopkins fight were held on trust by the claimant for the defendant. Indeed, although I do not consider that the defendant needs to go as far as this, I find that, for the avoidance of doubt, there is a good arguable case to that effect. My reasons on the facts are summarised below. 60 First, I find that there was at least one bank account which, contrary to the claimant's solicitor's letter of 24th September 2008 (paragraph 25 above), was created by the claimant for the express purpose of receiving income from the Calzaghe/Hopkins fight. That is the account named the "April 19 2008 account", which was of course the date of the fight. The only proper inference that I can draw is that this separate account was created for the purposes of this fight, and it was an account into which the profits collected by the claimant would then be paid. Indeed, the statements show that this is what happened, and that one of the largest payments of income, namely the £2.5 million paid by Setanta on 22nd April 2008, was paid into that account. 61 Thus, in accordance with Re Kayford, the existence of this separate account is a useful indication that the relevant relationship was one of trustee and beneficiary. That was a point that I put to Mr. Crystal during argument, in order to see whether there was a complete answer to the point which I was missing. It did not appear that there was such an answer. 62 Secondly, the agreement evidenced in the exchange of letters (paragraphs 9 and 10 above) also suggests that the defendant would or could be a beneficiary entitled to 80% of the money collected by the claimant. He was being paid a profit share, not a fee. Furthermore, the mechanism by which it was to be paid depended on the claimant collecting 50% of the profit and then deducting 20% for its own promotional fee. That suggests, at least arguably, that the monies were being collected on behalf of the defendant and that there was the relationship of trustee and beneficiary between the parties. 63 Mr. Crystal took two points in support of his contention that there was no arguable case that the money was held on trust. The first depended on an argument that since both the November 2007 agreement and the agreement with Golden Boy talked about ‘a purse’, this was clearly a fee for the fight, which could not amount to money held on trust. I considered that argument rather over-loaded the legal significance, if any, of the word "purse". Just because a boxer receives a purse does not mean, without more, that that purse is incapable of giving rise to a constructive trust. That must, so it seems to me, depend on the terms of the contract and all the other circumstances. Furthermore, this point was significantly undermined by the claimant's own letter of 16th June 2008 (paragraph 16 above) which expressly refuted the suggestion that the defendant was being paid a purse, and reiterated instead that he was due an 80/20 profit share. (a). the defendant was not a party to the agreement; (b). certain clauses of the agreement, which refer to the claimant ‘remitting’ sums to the defendant and the ‘disbursement’ of each party's profit share, might be said to be more consistent with a trust relationship than not. 51. D3 Balance of Convenience 66 Where then does the balance of convenience lie? Assuming that there is money left from the profits paid to the claimant for the Calzaghe v. Hopkins fight, would the claimant be prejudiced by paying that sum into court? No evidence of such prejudice has been provided in the many affidavits sworn on behalf of the claimant. 67 Assuming that there is a specified fund, would the defendant be prejudiced if that money were not paid into court? The answer is plainly that he would be because of the clear and obvious risk of dissipation. 68 One of the most significant features of these applications has been the way in which the defendant's initial concern about the funding and the winding down of the claimant company, and the risk that his share of the profits from the Hopkins fight would no longer be recoverable, have been proved to be accurate. I have already indicated (at paragraphs 41 and 42 above) how the claimant's main account no longer contains the money which, save for the set-off, is due to the defendant even on the claimant's own case. The statements for the 19th April 2008 account show that it was closed in September 2008. (a). At para.62(8) of the defendant's first affidavit, the point is made that another Warren company, Sports and Leisure Boxing Ltd. ("SLBL"), had been an earlier vehicle for his promotional activities before its trade, assets and liabilities were transferred to the claimant company. SLBL did not trade in 2005 and 2006, but has recently been the subject of renewed activity, with both Mr. Warren and Mr. Simons being appointed directors. The inference is obvious: that some or all of the claimant's business is, or might be, transferred to SLBL. Yet, despite dealing in detail with large parts of the defendant's affidavit, Mr. Warren has chosen not to address that point at all. (b). At paragraph 70 of his first affidavit, the defendant noted that a number of boxers previously promoted by the claimant are now being promoted by a company called Frank Warren TV Ltd. ("FWTL"). The same inference in relation to the claimant's ongoing business therefore arises. Those boxers were named. They were Amir Khan, Alex Arthur and Rickie Burns. Mr. Warren deals with the position in relation to Amir Khan but makes no mention of the other two boxers at all. Moreover, the answer in relation to Amir Khan is also not of much comfort to the defendant because it appears to relate to a separate dispute between Mr. Warren and Setanta, the rights and wrongs of which are, happily, not before me today. (c). At paragraph 65 of the defendant's first affidavit, he expresses his concern that Mr. Warren is also promoting boxing bouts as "Frank Warren trading as Sports Network Europe". Again, the suggestion, as Mr. Mill QC put it, is that Mr. Warren is ‘ducking and diving’ between different companies and legal entities, possibly to evade the claimant's legal liabilities to the defendant. Mr. Warren's affidavit states that he is acting on the advice of his accountant, which I do not doubt is right, but he does not dispel the concerns raised by the defendant on this issue. I also note, at paragraph 44 of his affidavit, that Mr. Warren accepts that he ceased trading under this name in 2002 but has recently recommenced trading using this name. (d). In essence, the defendant's concern is that Mr. Warren appears no longer to be using the claimant as the vehicle by which the boxers (who are signed up to agreements with the claimant) are promoted. In my judgment, for the reasons that I have given, Mr. Warren has not allayed that concern. Indeed, it is not unfair to say that he has been very careful in what he has said in his first affidavit where he deals with these matters. I refer in particular to paragraph 39 of that affidavit where he says:
"Whilst I would have wished to retain confidentiality with regard to the agreement reached with Sky, it would be entirely wrong to believe that the claimant's boxers are unable in any circumstances to box on the claimant's promotions. As I have said above, over 50 boxers are contracted to Sports Network Ltd." 56. Working through the double negative and the guarded language, I accept the defendant’s submission that this is hardly a ringing endorsement of the future viability of the claimant company. 70 I should say that all of the points made in the preceding paragraphs were made on behalf of the defendant at the hearing, and were not the subject of any submissions in response. It was said at the hearing by Mr. Mill QC that these points were relied on in support of his contention that the balance of convenience favoured making the order sought. Mr. Crystal, having accepted that the American Cyanamid test was the appropriate one, did not deal in his submissions with the balance of convenience at all. 57. D4 Conclusions (a). It is not appropriate to grant an application under CPR 25.1(1)(c). (b). If a fund can be shown to be in possession of the claimant representing monies that were collected by the claimant to be remitted to the defendant in consequence of the Calzaghe Hopkins fight, then an order should be made under CPR 25.1(1)(l). (c). Such an order would be appropriate because there is a serious issue to be tried as to whether any monies held by the claimant are held on trust for the defendant; indeed, as I have indicated, there is a good arguable case to that effect. (d). The balance of convenience plainly favours making such an order, particularly given the evidence of actual and potential dissipation of assets. 62. E THE CLAIMANT'S COMPLIANCE WITH THE ORDER OF 14TH OCTOBER 2005 63. E1 General 73 Mr. Mill QC, on behalf of the defendant, took the letters of 15th October and 17th October 2008 which alleged specific non-compliances with the order and from them abstracted 11 specific breaches of the order. He said that in consequence of those 11 breaches, an unless order should be made requiring the claimant to comply with the order of 14th October. During the course of argument, Mr. Crystal took issue with each of the 11 matters and denied that the claimant was in breach. He also made a number of general points. 74 I shall start with those general points first and add one of my own. I am concerned that, as sometimes happens when the parties and the court become immersed in the detail, there is a danger of losing sight of the overall purpose of the original order of Eady J. 75 Mr. Crystal's first point was to remind me that there was a difference between a failure to comply with the order, and a request for further information under CPR Part 18 arising out of information served in accordance with the order. He alleges that most, if not all, of the 11 items fall into that second category. 76 I think Mr. Crystal is right to draw that distinction and to remind the court of it, because there can be no doubt that sometimes in these ongoing disputes the court fails to stand back and see where the parties are as against the terms of the original order. The difficulty here, so it seems to me, is that the claimant's stance is somewhat undermined by the fact that they did not comply with the original order of Eady J. and have, as I have indicated, given the impression in the documents that they are not always willing to comply with orders of the court. In addition, I do consider that the claimant has spent too much time attacking the defendant in his affidavits rather than concentrating on the provision of information ordered by the court. 77 The next general point taken by Mr. Crystal is that the claimant has endeavoured to comply with the orders but has been hampered in so doing because the orders have not been clear. I am bound to refute that argument. It was a point that he made on 14th October 2008 and I expressly modified the order into a form that, on behalf of the claimant, he accepted that he understood and could comply with. 78 Some of the claimant's difficulties have been blamed on the fact that the bookkeeper to whom I have previously referred left the claimant company and that some of the information and documents sought were known only to her. I am bound to say that that is a surprising suggestion. It is rare, in my experience, for a company of the claimant's type to be dependent on a bookkeeper and, given that that explanation is nowhere provided on oath but only in correspondence, I am doubtful as to its accuracy. Similarly, I have endeavoured to make due allowance for the fact that, for example, I was told that Mr. Simons was having an eye operation last week, but I have to observe that if the claimant had complied with orders of 7th and 8th October 2008 and if his first statements had contained the necessary information, then the further round of evidence, to which I note Mr. Simons did not contribute, would not have been necessary. 79 The final general point which I would like to make is this. I have indicated at paragraph 34 above the information to which I consider that the defendant is entitled and why I think he is entitled to it. I have summarised the information provided by the claimant in response to the order of 14th October in paragraph 40 above. Can it really be said that this information gives the defendant all the answers to the questions identified in paragraph 34 to which I have said he is entitled? I do not believe that it can. The absence of the stipulated schedules and the other information, properly verified, makes the claimant's case that it complied with the order something of an uphill struggle. On that point I should perhaps add that, just as I came into court to hand down this judgment, I had a brief sight of a fifth affidavit of Mr. Warren dealing (for the first time) with the 11 points. On a very quick view of that affidavit, it confirms my view that the points made by the defendant in relation to non-compliance were indeed validly made. 64. E2 Point 1 - The $2.36 Million 81 It was submitted that, although Mr. Simons' affidavit repeatedly claimed that the claimant company had only made a profit of $7 million from the Calzaghe/ Hopkins fight, Mr. Warren's third affidavit of 16th October appeared to identify an additional item of income of $2.36 million. That was said to be by way of income from Planet Hollywood. The figure is the subject of a one line entry in Mr. Warren's affidavit, and is referred to again in one line in a schedule which is undated and the provenance of which I do not know. No bank statements or other primary documents have been identified in respect of this figure. 82 Although Mr. Crystal is right to say that references to a contra from Planet Hollywood were made in earlier documents, this is the first time that this large sum has been identified as part of the profit paid or credited to the claimant. It means that the earlier affidavits which claimed that the income was limited to $7 million (and which did not include this figure), appear to be wrong. 83 That is obviously troubling in itself. In argument, I referred to the impression being created that each time the claimant calculates the profits that it was paid or credited, a different figure is produced. The defendant's reasonable entitlement to certain information set out in paragraph 34 above is not met if the claimant continues to adopt an ever-changing attitude to the figures. 84 The order of 14th October, at paragraph 1(c), required the claimant to provide a schedule identifying, by reference to entries in the bank statements, each receipt of income and each item of expenditure relating to the fight. FW3 identifies this figure as an income item but gives no further information. The inconsistencies with previous information are not explained, and no relevant bank statements are identified. It is not known when and into which account this alleged item of income could be said to have been paid. The argument raised in the letter of 20th October 2008 that the supply of such information would not be proportionate is, frankly, a nonsense, since this kind of information has always lain at the heart of this r.25.1(1)(g) application. 65. E3 Point 2 - The Calzaghe v. Hopkins account 86 A separate problem, although it is related to the previous item, occurs on the face of FW3. There is a reference there to an item of income of £929,513.17, which appears to be the sterling equivalent of some of the money paid by Planet Hollywood. The document identifies the relevant bank account for this payment as "
Calzaghe v. Hopkins 01580500 (although that number should be checked because the type is so small on the paper that I have got that it is virtually illegible) Mr. Mill QC submits that no documents of any sort relating to that bank account have been disclosed, contrary to paragraphs 1(b) and 1(c) of the order of 14th October 2008. 87 Mr. Crystal's response was to say that, since the spreadsheet had recorded the payment, and since the figure was one that had been referred to before, the claimant had complied with the order and that this was a new request in relation to existing information. 88 With respect, it seems to me that that submission cannot be right. I have identified (in paragraph 34 above) what information the defendant was entitled to and why, and that information as to income from this fight was of critical importance. I ordered the disclosure of all bank statements relating to accounts into and out of which sums relating to the fight had been paid. There is apparently an account which bears the very title of this fight, but in respect of which no documents have been provided. It seems to me, on that ground alone, the breach of the order is fundamental. 66. E4 Point 3 - Payment by Lace 67. E5 Point 4 - Receipts Into The 19th April 2008 Account 91 I have already highlighted the importance of this account to the ongoing CPR 25.1(1)(g) application. The order of 14th October at paragraph 1(c) required the claimant to produce by way of a schedule each receipt and each item of expenditure in any bank account relating to the Calzaghe Hopkins fight. There is no schedule, a point I have made before. Further, the statements provided in respect of this account show large sums coming in and going out. A whole raft of receipts are indicated, some showing receipts in six figures. These would plainly appear to relate to the fight because they are in the account that bears the date of that fight, but because the claimant has not provided the schedule that I ordered and not identified the relevant receipts, the position remains entirely unclear. 68. E6 Point 5 - The Reconciliation Statement 93 The reconciliation statement is exhibited to Mr. Warren's third affidavit at FW4. It is undated and I am not told who prepared it. It refers to a sum allegedly paid by Golden Boy to the claimant of £1.150 million and it also refers to distributions by the claimant of £25,000 anti-doping fee and £1.125 million "wire to CWA Mngmt-4/22/08". 94 In accordance with the order of 14th October these items, being allegedly one item of income and two items of expenditure, had to be identified in the relevant bank accounts and statements and would be the subject of a schedule verified by an officer of the claimant company. In fact they do not appear in any of the documents provided by the claimant and there is no schedule. 95 Mr. Crystal's answer was to say that these payments were made by Golden Boy and therefore never featured in the claimant's accounts at all. The difficulty with that is, first, that that is contrary to the way in which they are recorded in the reconciliation document. Secondly, if it were right, it should have been the subject of paragraph 1(a) of the order, which again is information that has not been provided. Thirdly, as Mr. Crystal himself realistically conceded, it might be said that it should not be for the defendant to have to work out these potential inconsistencies in the claimant's evidence for himself. 69. E7 Point 6 - The £2.5 million 97 The sum of £2.5 million is recorded in the 19th April 2008 account as having been paid in by Setanta on 22nd April 2008. That was apparently in respect of TV rights for the fight. Because this is the only item in the two page statement that has been asterisked, I understand it to be suggested (although no one has gone on oath to say this), that this was the only item in the 19th April 2008 account that was actually referable to the fight on 19th April 2008. For the reasons that I have given previously, I reject that position as contrary to common sense. 98 The statement shows that, on the same day £2 million was paid out to ‘Mr. and Mrs. Frank Warren’. None of Mr. Warren's many affidavits explain how and why this sum was paid into the joint account. That is a clear and obvious breach of the order of 14th October. The defendant wants to trace what happened to the money paid to the claimant in respect of the fight, and information in relation to the £2 million is therefore critical to that task. (a). The sum paid into the main account on 24th April was in a different and very specific amount of £1,946.989.20. No explanation for that figure and how it has been calculated has been given, or why, if this was simply a restitution of an earlier error, the figure paid in was not £2 million. (b). The sum was transferred in from a different account in the name of ‘Frank Warren’, not the account of Mr. and Mrs. Warren. The receiving and transferring accounts were therefore different. That would, at least on its face, suggest that these sums were not the same money. (c). There is no explanation in the evidence as to the alleged error, and that of course is a breach of paragraph 1(c) of the order. 100 Accordingly, I cannot conclude that the explanation offered in the letter is necessarily reliable. It may be, but in view of the differences in the figures, the differences in the receiving and transferring accounts, the unexplained precision of the sum paid into the main account, and the fact that beyond a manuscript asterisk there is nothing to indicate that the £1.9 million figure paid into the account had anything to do with this fight at all, the explanation may be wrong. 73. E8 Point 7 - The Fight Account 74. Point 8 - First Rate FX Ltd. 102 The account entitled 19th April 2008 contains a number of payments out to an account entitled "SN Ltd. fight account". No documents in respect of this account have been provided and it is not dealt with in any of the affidavits. Other payments from the same account are recorded in respect of First Rate FX Ltd. 103 The claimant has suggested in its solicitor's letter of 20th October that the fight account did not relate to the Calzaghe v. Hopkins fight but if I draw the obvious inference that the account entitled 19th April 2008 did relate to the fight, then any payments out of that account must also relate to the fight and are therefore caught by the order. The same point must apply to the payments out to First Rate FX Ltd. 75. E9 Point 9 - The Balancing Sum 105 In his second affidavit Mr. Simons referred, for the first time, to a payment of £5,457 as a balancing sum paid by the claimant to Golden Boy. This was an item of expenditure in respect of the fight and would therefore have been paid out from one of the claimant's accounts and shown on a bank statement somewhere. It has not been shown in any statement so far disclosed. Mr. Crystal was unable to explain why not and said that the item would have to be researched. 76. E10 Point 10 - Payments To The Defendant's Father 107 A point made repeatedly by the claimant has been the payment to the defendant's father of $205,311.40. Mr. Simons said in his second affidavit that this was paid out of the main account. Payment is agreed; however, following the belated disclosure of the relevant statements, the defendant has been unable to find any such entity in the statements from the main account, or indeed anywhere else. 77. E11 Point 11 - Paragraph 1 of the letter of 17th October 2008 "1. There has been a serious failure by your client to comply with paragraph 2 of the order of Mr. Justice Coulson dated 14th October 2008. Exhibit FW5 which purports to comply with that paragraph contains numerous bank statements which should have been marked up to show (a) the person or persons to whom payments appearing on them were made, and (b) the circumstances in which payment was made. However, in numerous cases Mr. Warren has failed to provide the information ordered. We give the following examples and should make it clear that this is not intended to be an exhaustive list but is merely intended to highlight the main omissions. 1. The statements relating to the SNL 19th April 2008 account are not marked up at all. This is despite the fact that the payment of £2½ million from Setanta was received into that account, and the whole of that amount has been disbursed from the account, including the payment of £2 million made to Mr. and Mrs. Warren the next day. Our letter to you dated 15th October 2008 highlighted this concern at point (i) on page 2, which should have caused Mr. Warren to pay particular attention to answering this particular point at least. 2. Large swathes of the statements relating to the main trading account have not been marked up at all. For example, the statements for the period from 7th February 2008 to 23rd April 2008 have not been marked up. This is despite the fact that on Mr. Warren's own evidence payment of US$1,815,000 was received from Planet Hollywood on 11th February 2008, and bankings in respect of further US$1,360,000 allegedly treated as a contra by Planet Hollywood were made during the period of February 2008 until 19th April 2008. It is clear therefore that payments out of the main trading account following receipt of these amounts must have included payments out of money which would otherwise have been payable to our client in respect of the Hopkins fight. We have prepared a schedule of significant payments falling within this period which should have been detailed as set out in paragraph 2 of Mr. Justice Coulson's

order

see schedule 1 attached. Again, this is intended to be illustrative and is not provided as an exhaustive statement of your client's obligations further to that paragraph. 3. For the period following 23rd April 2008 the bank statements have been marked up selectively. Numerous items have been missed, many of them substantial. We attached at schedule 2 a list of significant payments from 23rd April to 30th June 2008 which fall into this category. We have selected this date as it falls a few days after receipt of the two payments from Lace Video, which Mr. Warren asserts were the ones dated 23rd and 27th June 2008 which, on Mr. Warren's evidence, were the final income payments received by your client in relation to the Hopkins fight. Again, this schedule is intended to be illustrative only." 110 Mr. Mill QC says that in summary there has been a complete failure to comply with paragraph 2 of the order of 14th October 2008 and that the requests set out above have been ignored. 82. E12 - Conclusion 83. F. THE UNLESS ORDER 113 An unless order should not be made unless the court is satisfied that in all the circumstances such a sanction is appropriate. In Marcan Shipping (London) Ltd. v. Kefalas [2007] EWCA (Civ) 463, the Court of Appeal stressed that, before making an unless order, the court must consider whether such a sanction is appropriate in all the circumstances of the case. 114 For the reasons which I have set out in section E above, I consider that such an order is appropriate in the present case. Mr. Crystal realistically conceded that, if I formed the view that a number of significant breaches of the order had occurred (and I have formed such a view), I would have no real option but to make an unless order, particularly given that(a) he only narrowly avoided an unless order on 14th October,(b) the order of 14th October was expressed to be a final order. 115 The only remaining matter in relation to the unless order is therefore what the sanction should be. I would not wish at this stage to make an order where the sanction would be the debarring of the claimant from bringing the claim, since the CPR 25.1(1)(g) application goes only to the counterclaim. As I understood his submissions, Mr. Mill QC does not dissent from that approach. 116 In all the circumstances, therefore, I have concluded that the right order is that unless within a specified period the claimant complies with the order of 14th October 2008, then the following sanctions will apply: (a) judgment will be entered on the counterclaim for an account, and (b) the claimant must pay into court the sum of $2.9 million, which is the claimant's present assessment of what is owed to the defendant arising out of the Calzaghe v. Hopkins fight. (a). the only dispute on the counterclaim itself is indeed quantum; (b). the claimant's claim to be entitled to a set off depends on the alleged oral agreement (about which I have commented above) and would still require an entitlement to make an equitable set off, which may not be available because it may be successfully argued that the claim and counterclaim arise from entirely different transactions. 86. G. COSTS 87. G1 The Costs Before Eady J. 88. G2 The Costs of the Hearing on 14th October 89. G3 The Costs of the Hearing on 21st October 2008 90. G4 Basis of Assessment 121 The defendant seeks his costs on the indemnity basis. Indemnity costs are appropriate where, in the words of May L.J. (as he then was) in Reid Minty v. Taylor [2002] 1 WLR 2800, the litigation has been "conducted in a way which is unreasonable and which justifies an order of costs on an indemnity basis". Such conduct does not have to be so serious as to deserve what May L.J. called "moral condemnation". 122 In the light of this (doubtless over-long) judgment and the various points that I have made about the claimant's conduct, I have concluded that it is appropriate that the costs of the two hearings before me (14th and 21st October) should be assessed on the indemnity basis. This is because of my concerns as to the claimant's perceived evasiveness; the claimant's clear and obvious failure to comply with the court orders; the claimant's failure to respond properly or helpfully to the legitimate questions raised; and the general impression, to which I have previously referred, that the claimant is grudgingly reluctant to tell the defendant where, if anywhere, his share of the profits of the Calzaghe/Hopkins fight might be. 123 I do not believe, on the other hand, that the same criticisms could be levelled at the claimant's conduct in relation to earlier hearings. Accordingly, in relation to the hearings before Eady J, although the claimant must pay the costs of those hearings for the reasons that I have given, I am in no doubt that those costs should be assessed on the standard basis. ________

Cited in 2 later judgments