Greenshores Properties Ltd v Andrews & Ors [2013] EWHC 3399 (QB)

Case No HQ13X03559[2013] EWHC 3399 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 07/11/2013
Before
MR JUSTICE ANDREW SMITH
Between
GREENSHORES PROPERTIES LIMITEDClaimants(1) DUNCAN ANDREWSDefendants(2) ADAM HAYESDefendant(3) CRANBROOK HOMES LIMITEDDefendant
Harris Bor (instructed by Solomon Taylor & Shaw) for ClaimantsAlaric Watson (instructed by Darlingtons Solicitors LLP) for First & Third DefendantsAdam Hayes – in person for in personHearing Hearing dates: 30 & 31 October 2013
Judgment
[1]On 30 July 2013, on an application without notice of the claimants (“GPL”), Haddon-Cave J made a freezing order in the conventional form against the three defendants in respect of assets in England and Wales up to the value of £940,000. It was initially made until a return date of 6 August 2013, but by consent the return date was adjourned and the order remains in place. The three defendants apply to discharge the order, the first defendant, Mr Duncan Andrews, and the third defendants (“CHL”) being represented by Mr Alaric Watson, and the second defendant, Mr Adam Hayes, appearing in person. The claimants were represented by Mr Harris Bor, who appeared for them before Haddon-Cave J.[2]Mr Hayes also applies to adduce forensic evidence as to the provenance of various evidence from GPL: as I shall explain, he alleges that documents put in evidence by GPL were forged. I did not hear full argument about it, and I shall invite submissions about its disposal in light of this judgment.[3]The grounds advanced by Mr Watson in support of the application are: i) That CHL do not have a good arguable case against Mr Andrews and CHL (or either of them). ii) That CHL did not make proper disclosure when they obtained the freezing order, and they misled the court. iii) That CHL have delayed in pursuing these proceedings.[4]The grounds advanced by Mr Hayes include complaints that GPL did not make proper disclosure or a fair presentation when they obtained the order (and his complaints in this regard were wider than those of the other defendants). He also said that, although he is indebted to GPL, his debt is not on the terms and did not arise in the circumstances alleged and is for less than GPL claim. Moreover he disputed that there is any proper reason to think that he will dissipate his assets or a freezing order will significantly reduce the risk that a judgment against him would go unsatisfied. (Whether or not this point was distinctly taken in Mr Hayes’ application, it was canvassed in argument and Mr Bor did not submit that I should disregard it.)[5]I can deal with the complaint of delay shortly. On the original return date, the parties all consented to an adjournment until 20 August 2012 or the nearest available date and an order that GPL should have until 11 September 2013 to service particulars of claim. On 21 August 2013, when the case was again before the court, with the parties’ consent the proceedings were stayed for 28 days so that the parties might attempt to settle their dispute. The attempts were unsuccessful. Mr Watson told me and Mr Bor agreed that particulars of claim were due on 25 September 2013. In fact they were served so late on 25 September 2013 that they are to be treated as served the next day, and therefore were late. Defences have been served, that of the Mr Andrews and CHL on 16 October 2013: the copy of Mr Hayes’ defence that is before me is unsigned, and I do not know when it was served.[6]It is, of course, incumbent upon litigants who obtain freezing orders to pursue their proceedings properly and promptly, but I do not consider that GPL have failed in that regard in any significant way. The technically late service of the pleading is no basis for discharging the freezing order, or otherwise relevant to my decisions.[7]The legal principles governing the other complaints are well established: i) A freezing order will not be granted unless the applicant can demonstrate a good arguable case, which, as Mustill J explained in Ninemia Maritime Corpn v Trave, [1983] 2 Lloyd’s Rep 600, 605, means “a case which is more than barely capable of serious argument, yet not necessarily one which the judge believes has a better than fifty per cent chance of success”. ii) On applications without notice, an applicant is obliged to make a fair presentation, and this involves an obligation not only to avoid misrepresentations but to make “full and frank disclosure of all the material facts”: R v Kensington ITC ex p Princess Edmond de Polignac, [1917] 1 KB 486, 514. That means an applicant “must disclose all the facts which could reasonably or would be taken into account by the judge in deciding whether to grant the application”: Siporex Trade SA v Comdel Commodities Ltd, [1986] 2 Lloyd’s Rep 428, 437 per Bingham J. iii) Specifically of freezing orders (then known as Mareva injunctions), in Bank Mellor v Nikpour, [1985] FSR 87,92 Donaldson LJ famously said that, “The rule requiring full disclosure seems to me to be one of the most fundamental importance, particularly in the context of the Draconian remedy of the Mareva Injunction. It is in effect … one of the law’s two ‘nuclear’ weapons. If access to such a weapon is obtained without the fullest and frankest disclosure, I have no doubt at all that it should be revoked.” iv) I explained my understanding of the general principles that apply if there has been a breach of the duty in Dar Al Arkan Real Estate Development Co v Al Refai, [2012] EWHC 3539 (Comm) at para 148 as follows:
“The principles about how the court should respond to a breach of the duties of an ex parte applicant were usefully set out by Mr Alan Boyle QC, sitting as a Deputy High Court Judge, in Arena Corporation Ltd v Peter Schroeder, [2003] EWHC 1089 (Ch) at para 213. The general rule is that the court will discharge any orders that were granted and will not renew them until trial. In Millhouse Capital UK Ltd v Sibir Energy Plc, [2008] EWHC 2614 (Ch) Christopher Clarke J said (at para 104) that "such is the importance of the duty that, in the event of any substantial breach, the Court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him". However, the court has jurisdiction, albeit one which it exercises sparingly, to continue an order or to replace an order that it discharges with a new order to similar effect. While the court must have proper regard to the need to protect from abuse the administration of justice and in particular its jurisdiction to grant orders ex parte, it will not apply the general rule so rigidly as to allow it to work injustice.” v) The principles that Mr Boyle identified include these: • “The Court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.” • “The Court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the Court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.” • “The Court can weigh the merits of the plaintiff's claim, but should not conduct a simple balancing exercise in which the strength of the [claimant’s] case is allowed to undermine the policy objective of the principle.”
He also observed that “There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the Court should take into account all relevant circumstances”. vi) Finally, on applications such as these the court generally avoids entering into what is sometimes called a “mini-trial”, recognising that it is not assisted by disclosure or oral evidence and that often disputed questions of fact cannot be resolved. That said, where the defendants’ business and personal lives are daily affected by a freezing order, justice can requires a careful and detailed examination of the material before it to decide whether an order (or its continuation) is justified.[8]The claim was stated on the claim form that was issued on 30 July 2013 as follows: “The Claimant asserts a circa £1 million proprietorial [sic] claim against the Defendants with respect to completion monies in the hands of the Defendants resulting from an investment by the Claimant with the Defendants in [a Development]. Completion took place in July 2013. Alternatively, the Claimant asserts a breach of trust and/or knowing receipt and/or dishonest assistance claim against the Defendants with respect to its share in the completion monies and/or a claim against the Third Defendant under s.423 of the Insolvency Act 1986. Alternatively, the Claimant seeks circa £1 million from the Defendants as a debt claim for loans made by the Claimant to the Defendants.” (At the hearing before Haddon-Cave J the claim form had not been issued, but GPL undertook to issue a claim form in the form of a draft before him, and I take it that the draft was in the form later issued.)[9]GPL is a family-owned company involved in property investments. Its shareholders are three brothers, Mr Stephen Green, Mr Trevor Green and Mr Julian Green, each of whom owns a 16% shareholding, and a family trust which owns 52% of the shares. In 2008 the directors were (or included) Mr Stephen Green and his mother, Ms Pat Green, who died on 23 October 2010. GPL plead that between September 2008 and March 2010 they advanced ten sums amounting to £483,000, of which £25,000 was repaid, and that with “fees” and interest the total indebtedness from these advances is £986,229.32.[10]According to GPL’s pleaded claim the first advance was made in September 2008 when Mr Hayes, who had known the Green family since 1993 and who carries on business as an estate agent under the style “Hayes Wilson Estates”, approached GPL’s then directors and asked GPL “to lend him and [Mr Andrews]” £100,000, explaining that “the money was to be invested in property developments on which he and [Mr Andrews] were working, through a company owned by [Mr Andrews].” He also explained that the “main development” (to which I shall refer as the “Development”) and the one for which the money was “primarily” required related to land just outside Stratford-upon-Avon. Mr Hayes said that the intention for the Development to be sold towards the end of 2008 and GPL would be paid out of the proceeds of sale, but he asked for a repayment date of 31 March 2009. Accordingly, GPL say, an advance of £100,000 was orally agreed on this basis, and the terms were reflected in an email from Mr Hayes to Mr Stephen Green dated 22 September 2008, including that the advance would incur a “fixed fee” of £16,000 and interest would be charged at a rate of 15% pa, calculated on a daily rate until repayment. The £100,000 was paid by GPL into Mr Hayes’ account on 23 September 2009.[11]The second advance is pleaded in these terms:
“In November 2008, [Mr Hayes] approached Stephen Green and Patricia Green of [GPL] for a further loan of £120,000, this time in order to progress the planning of the Development. Again, the loan was agreed orally, but its terms were reflected in an email dated 13 November 2008 from [Mr Hayes] to Stephen Green. The terms of the loan were identical to the initial loan, save that no fixed fees were charged for this loan. The loan was advanced on 28 November 2008.”
[12]The particulars of claim continue that “At about or soon after” the November advance, Mr Andrews met Mr Stephen Green at Mr Green’s request and in Mr Hayes’ presence, and that Mr Andrews said that contracts for the sale of the Development had been exchanged but that the purchaser had “sought to extract itself from” the purchase. Mr Andrews said that he proposed to buy more land to add to the development, and Mr Andrews “requested more funds to progress this scheme, which he said would make the entire Development more marketable. Stephen Green considered that [GPL] had little choice but to continue to support the project in order to recover its money”.[13]It is then pleaded that between 28 January 2008 and 13 March 2009 GPL made three further loans totalling £200,000, being: i) A loan on 28 January 2009 of £100,000 “to the Defendants through [Mr Hayes]”, with interest at 15% pa calculated on a daily basis. ii) A loan on 27 February 2009 of £50,000 “to the Defendants through [Mr Hayes]”, with interest at 15% pa calculated on a daily basis. It is pleaded that this loan “was required to assist the Defendants with an undisclosed property development” and an “uplift of £50,000 was promised if the same could be completed”. iii) A loan on 13 March 2000 of £50,000 to Mr Hayes, with interest at a rate of 2% over Bank of England base rate calculated on a daily basis. GPL plead that it was “understood” that all these loans were to be repaid by 31 March 2009 or alternatively on reasonable demand, and “agreed” that banking or transaction fees incurred by or for GPL would be payable by the recipient of the loan, that they would be included in the loan and that interest would be payable thereon.[14]It is also said that there was another loan for £25,000 that Mr Andrews sought and GPL made “via” Mr Hayes on 20 March 2009 in relation to a different development, known as “West London”, the principal of which was repaid in September 2010 but interest on which remains outstanding.[15]The Development was not sold by 31 March 2009 and the advances were not repaid. It is pleaded that “In various conversations” Mr Andrews and Mr Hayes represented that the Development was nearing completion and “promised” to pay GPL (that is to say, to repay all the advances) “out of the proceeds of sale”; and that Mr Andrews also said that he would use money from the sales of two other properties if they were completed before that of the Development, and that he “acknowledged that he was eager to clear the debt to [GPL] as soon as possible to avoid interest mounting. From this time [Mr Andrews and Mr Hayes] referred in conversations … to them and [GPL] being in a joint venture in connection with the Development. As [CHL] was [Mr Andrews’] operating vehicle, it was also understood that it was also part of the joint venture”. It is said that GPL agreed not to call in the loans and to advance further amounts “on the above basis”.[16]GPL plead with regard to further loans that “From 29 December 2009 to 3 March 2010” they loaned a further £58,000 “to [Mr Andrews] on behalf of the Defendants”. Thus, the pleaded advances for which all the defendants are said to be liable amount to £428,000. However, in a table scheduled to the particulars of claim that purports to set out the advances made to the defendants by GPL, there is included another advance that is unexplained in the body of the pleading: it is listed as being of £30,000 and made on 22 April 2009 by an advance to Mr Hayes. Thus, according to the table the total amount that GPL lent to the defendants is £483,000, including the £25,000 that was repaid and to the £50,000 loan to Mr Hayes; and all three defendants are liable for these advances totalling £458,000 and associated interest and fees: Loan for £100,000 made on 22 September 2008. Loan of £120,000 made on 22 November 2008. Loan of £100,000 made on 28 January 2009. Loan of £50,000 on 27 February 2009. Loan of £30,000 on 22 April 2009. Loan of £10,000 on 29 December 2009. Loan of £10,000 on 29 December 2009. Loan of £23,000 on 19 February 2010. Loan of £15,000 on 3 March 2010. The last three loans were not made by money being transferred by GPL but by Mr Stephen Green or another company owned by him and his brother Mr Trevor Green called Max Furnishings Limited: GPL’s case is that it was “understood” that the money was being lent by and was to be repaid to GPL. The interest said to have accrued on all the loans (except the £50,000 loaned to Mr Hayes alone) is set out as £470,338.88 (including interest on the £25,000 that was repaid), and the fees are set out at £57,890.44. Hence, the total claim is for £986,229.32.[17]The Development has been sold, completion of the sale being on 10 April 2013, but according to GPL the proceeds have sale have been “largely dissipated without payment having been made to [GPL]”. According to an affidavit of Mr Andrews sworn in response to the freezing order, although the gross receipt from completion exceeded £6 million, as is confirmed by the completion statement of Darlingtons LLP Solicitors, which he exhibited, only £282,654.10 was available to him, most of which Darlingtons distributed to creditors of CHL and himself in accordance with his instructions, and from which he received the balance of £55,164.08. There is no basis to think that anything from the completion moneys was paid to Mr Hayes.[18]As Mr Bor confirmed, GPL make these claims: i) That, when the advances originally made, they were made to all three defendants and they all undertook obligations to repay them. ii) That, in the “various conversations” when the Development was said to be “nearing completion”, all the defendants promised repayment of the loans that had then been made and assumed an obligation to repay them; and GPL extended the time for repayment and made further loans on this basis. iii) That, inter alia as a result of those “various conversations”, the sale proceeds from the Development were impressed with a trust under which GPL was the (or a) beneficiary. Hence, relying on i) and ii), GPL claim in debt against each of the defendants (and also claim against CHL under section 423 of the Insolvency Act, 1986 on the basis that the “dissipation of the Development proceeds” was a fraud on its creditors, a claim that I can disregard for present purposes); and relying on iii), they claim that the defendants are liable for breach of trust, knowing assistance in breach of a trust and receipt of trust property.[19]In their defence, Mr Andrews and CHL deny that they had any dealings with GPL, or are liable for any advances made by GPL. Mr Andrews was, they plead, introduced by Mr Hayes to Mr Stephen Green in December 2009, and before then (and so when GPL plead the “various conversations” took place, or began to take place) Mr Andrews had never met Mr Stephen Green or had dealings with him. Between December 2009 and March 2010 Mr Andrews borrowed a total of £48,000 (£10,000 on 31 December 2009, £23,000 on 19 February 2010 and £15,000 on 4 March 2010) from Mr Stephen Green, but he is liable for this to Mr Green personally, and the only connection that the borrowing had with the Development is that Mr Andrews needed money in February 2010 in order to pay invoices of consultants for work in relation to it.[20]With regard to the advance of £25,000 on 20 March 2009, it is pleaded that, as Mr Andrews understands, Mr Hayes borrowed it in connection with a property project in which he hoped to participate with Mr Andrews and in order to provide security for legal fees in connection with it. It did not proceed, the £25,000 was returned to Mr Andrews (rather than Mr Hayes), and in September 2010 Mr Andrews, at Mr Hayes’ request, paid it directly to GPL.[21]In his defence Mr Hayes accepts that he borrowed these sums from GPL: £100,000 in September 2008, £120,000 in November 2008, £100,000 in January 2009, £50,000 in February 2009, £25,000 in March 2009 and £50,000 in March 2009, the £25,000 having been repaid and there being no claim in these proceedings in relation to the last advance. In his evidence in support of his application, he acknowledged that he also received the loan of £30,000 that is included only in the schedule to the particulars of claim. However, he denies that the advances were connected with Mr Andrews or the Development or any specific development. He also denies that he agreed to pay interest of 15% pa, and pleads that the agreement in respect of the advances of September 2008, November 2008, January 2009 and February 2009 was that he should pay interest of “up to 15% depending on the successful completion of the investment” and that no interest was payable on the loan of £50,000 made in March 2009.[22]Mr Hayes also pleads in his defence that certain documents relied upon by GPL are forged, specifically: i) Five emails purportedly sent by him in confirmation of the loans of £100,000 in September 2008, of £120,000 in November 2008, of £100,000 in January 2009, of £50,000 in February 2009 and of £50,000 in March 2009. ii) A letter dated 25 January 2010 that he purportedly sent.[23]These being GPL’s claims and the broad thrust of the defendants’ response to them, how was the application for a freezing order presented to Haddon-Cave J? The evidence before him was an affirmation of Mr Stephen Green. i) With regard to the first loan in September 2008 he said that Mr Hayes “approached me, my mother and my brother for GPL” for a loan to him and Mr Andrews of £100,000 “to be used primarily” for the Development. However, he also said that “It was understood at the time that the money would be invested by [Mr Hayes and Mr Andrews] in the Development immediately on receipt through a corporate entity”, He said that “we” agreed to lend Mr Hayes the money on the basis that he and Mr Andrews would pay a fee, interest and all banking fees and transfer costs; and that Mr Hayes explained that “he” needed a short term loan to progress the Development. ii) With regard to the second loan in November 2008 Mr Green said that Mr Hayes again approached “us” for a further £120,000, explaining that “he” needed the money “to advance the planning”. Mr Green does not otherwise refer to the Development and does not refer to Mr Andrews at all in this context. iii) As for other loans between January and March 2009, Mr Green said that Mr Hayes made clear that “he” needed further funds to allow him and Mr Andrews to complete the deal. He and his brother (a reference, I take it, to Mr Trevor Green) thought that, having backed Mr Hayes and Mr Andrews, they “had little choice but to see the project through”, and “We lent [Mr Hayes and Mr Andrews] a further approximate £250,000 between 28 January and 20 March 2009”. Mr Green said that “We negotiated with [Mr Hayes and Mr Andrews] on each advance including on whether or not there would be a fee but the interest rate was constantly 15%”. He also said that by March 2009 it was clear that Mr Andrews and Mr Hayes would not be able to repay the loans by 31 March 2009, but that they “insisted that we would be paid out on completion at the latest, but they made it clear that we needed to assist them to reach this point”.[24]Mr Green then said that there came a time when, becoming increasingly concerned about the loans, “we confronted [Mr Hayes and Mr Andrews] in various telephone conversations and meetings”. The impression that Mr Hayes and Mr Andrews gave was that “completion was edging nearer” but they wanted GPL’s “further support”. Mr Green’s evidence continued: “They said that we were all in this together and would all benefit when our project came to fruition. We understood from this that we were from this point on at least a joint venture partner with AH, DA and CHL with an interest in the Development. We reported back to our accountants on what we had been told, and they asked us to have the position confirmed in writing”.[25]The evidence of Mr Green was that these exchanges took place “Towards the end of 2009/early 2010”, and that after the conversations Mr Hayes sent him the disputed letter dated 25 January 2010. However, he also said that they took place at about the same time as the loan in respect of the West London development, and it is now common ground that this was made in March 2009. This apparent contradiction would not have been apparent upon reading Mr Green’s evidence, except perhaps obliquely by referring to a table of advances exhibited to it, in which the only advance of £25,000 is given a date of 22 March 2009.[26]With regard to events in 2013, Mr Green exhibited an email dated 8 April 2013 in which Mr Hayes wrote as follows:
“I can confirm receipt of money from Mr S Green and associated company. My client Mr D Andrews hopes to conclude our arrangement in the very near future as various transactions come to a conclusion”
. He described this as an obvious reference to the Development, while accepting that Mr Hayes and Mr Andrews were “working also on other projects”, and said that the email was provided “to confirm the investment to GPL’s auditors for the preparation of our accounts”. He continued “Based on [Mr Hayes’] confirmation our auditors felt comfortable including a reference in our latest audited accounts that GPL had entered into a joint venture with an unrelated company”. He referred to a note in the accounts of GPL for the period 1 April 2011 to 30 June 2012 in relation to GPL’s debtors (“note 6”), which I consider below.[27]As I have said, completion in respect of the Development took place on 10 April 2013. According to Mr Green, “we” were told by Mr Hayes and Mr Andrews that it would take place in July 2013, a “90 day Judicial Review period” was on 5 July 2013 (the relevance of Judicial Review was not fully explained to me, and Mr Andrews described it in his evidence as “a red herring”), and “we would be paid directly out of the proceeds of sale”, which Mr Hayes and Mr Andrews told him would be about £6.5 million and were to be paid initially to Darlingtons Solicitors LLP. However later “we” were told that completion would be on 19 July 2013, but, according to Mr Green, he was told by Mr Andrews at 4.00pm that it had not taken place, but later advised that the sale was completed. He gives an account of exchanges with Mr Andrews that indicated dishonesty and evasion, which is disputed and the details of which do not directly bear upon the grounds on which the defendants apply to discharge the freezing orders.[28]Mr Bor’s skeleton argument in support of the without notice application is before me. I need say only this about it: i) The case with regard to personal liability for the loans is presented on the basis that “The claimants advanced approximately £510,000 to the Defenedants for the purpose of the Development”. No alternative case was presented that at some later stage Mr Andrews or CHL or both assumed an obligation to repay moneys initially lent to Mr Hayes. ii) It was said that Mr Hayes and Mr Andrews confirmed that GPL “had an interest in the Development and would be paid out of the proceeds of sale”, and that “The fact that the Defendants [sic: apparently an error for Claimants] held an interest in the Development was confirmed in writing by [Mr Hayes] in January 2010 and is reflected in the Claimant’s latest accounts”. With regard to the risk of dissipation, Mr Bor submitted that the court should “have regard to GPL’s assertion that it has a proprietary interest in the Development sale proceeds” and that “the court assists the preservation of trust assets”, attaching an extract from Gee on Commercial Injunctions (5th Ed) in support of that submission. In his submissions before me, Mr Bor sought to present this argument of a proprietary interest as much secondary to the claimants’ main claim in debt, but I observe that in the draft claim form before Haddon-Cave J the proprietary claim was presented as the primary claim and the claim in debt as an alternative to it. Although the proprietary claim is logically distinct to the claims in debt and not an essential ingredient in them, I cannot accept that it was really incidental to the overall picture presented on 30 July 2013.[29]Mr Watson complained that GPL did not make a fair presentation of the application for a freezing order to Haddon-Cave J because they did not fairly draw his attention to the basis of their case that Mr Andrews and CHL were liable to repay the advances, and specifically that GPL failed to put before the court: i) A letter from GPL to Mr Hayes dated 13 May 2013, and ii) Three of the five disputed emails. Mr Bor does not dispute that these documents were not before Haddon-Cave J and accepted that “in an ideal world” they would have been, but he did not accept that the failure amounted to material non-disclosure.[30]The letter of 13 May 2013 was signed by Mr Trevor Green on behalf of GPL and is headed “Our Company Accounts”. It explained that the accounts of GPL were to be audited, and that the directors were therefore “under a legal obligation to satisfy our auditors that the loan it made to you (to pass on) is both bona fide and recoverable”. There was attached to it a draft of a letter from Mr Hayes to GPL that he was asked to sign. In the event, Mr Hayes did not sign it. (According to Mr Hayes, Mr Stephen and Mr Trevor Green visited him to have the letter signed, a visit that resulted in the police being called, but I cannot resolve what happened on these applications.)[31]GPL’s letter asked Mr Hayes to confirm the following:
“(1) In 2008 my late mother, as the senior director of Greenshores Properties Limited, agreed that the company would advance you certain monies. In 2008/09 we lent you a total of £485,000, of which £25,000 has since been repaid leaving a balance of £460,000 outstanding. (2) This sum was to be advanced to a third party and repaid, initially in March 2009, together with the agreed costs of arranging and financing our company’s borrowing and interest at 15% per annum. (3) Following the world recession, it was subsequently agreed that the loan together with all costs and interest charges would be repaid when the sale of a parcel of land, beneficially owned by the third party, was completed. (4) The sale of the parcel of land has now taken place (to Taylor Wimpey) with completion expected in July; although this may be subject to delay in the unlikely event that the development is subject to a Judicial Review. All other conditions on exchange of contract have been met. (5) Once completion occurs you will be in a position to recover all monies due from the third party in full and arrange for our company’s loan to be repaid.”
I can sufficiently summarise the draft response by saying that, unsurprisingly, essentially it would have provided the confirmation requested.[32]Mr Watson submitted that the letter is inconsistent with the case that GPL are now presenting, in particular in that: i) The letter describes lending (said to amount to £485,000, of which £460,000 had been repaid) to Mr Hayes, which he was to lend on (or pass on) to “a third party”. ii) The change “Following the world recession” was only about when the money was to be repaid. It does not suggest that others assumed an obligation for repayment, or the start of a “joint venture”, or that GPL should have a proprietary interest in the “parcel of land” or the proceeds of sale. Indeed, the letter refers to the “third party” beneficially owning the land, and Mr Hayes being in a position, on completion of its sale, “to recover all money due from the third party in full” and to arrange for GPA’s loan to be repaid from it.[33]Mr Bor argued that this letter supports GPL’s version of events, including that the monies were to be advanced to Mr Andrews and GPL, and submitted that this understanding of the letter is shared by Mr Hayes: Mr Hayes said in his witness statement in support of his application that the letter was incorrect in that the money advanced, £425,000, was not invested in the Development and that, “if GPL had lent money to one or more third parties, I am not aware of the terms of those agreements”. I do not consider that Mr Hayes’apparent interpretation of the letter provides any real support for Mr Bor’s argument, and in any case the argument does not engage with Mr Watson’s point: his submission was not that the letter is inconsistent with an account that Mr Hayes, having borrowed funds from GPL, lent the money on to Mr Andrews or CHL, but that the letter is inconsistent with GPL having a direct contractual link with Mr Andrews or CHL. Further, (apart from his submission that the proprietary claim is secondary to GPL’s main claim) Mr Bor did not answer the submission that the letter seems at odds with, and certainly lends no support to, the claim of a beneficial interest in the land or the proceeds of sale.[34]This letter, written some ten weeks before proceedings were brought, was to be provided to the auditors, and therefore it would presumably have been prepared carefully so as to give an accurate and complete explanation of the transaction. I find it difficult to reconcile with the account of the arrangements presented to Haddon-Cave J, but, even if it might be reconciled wholly or partly, it should have been drawn to his attention so that he might judge that for himself.[35]GPL presented to Haddon-Cave J the emails which GPL say (and Mr Hayes denies) were sent by Mr Hayes to GPL after the first two advances were agreed in September and November 2008. The “subject” captions of the emails were “Loan to Adam Hayes £100k [or £120k]”. They were addressed to Mr Stephen Green, Mr Trevor Green and their late mother. They are in similar terms (apart from the amount of the loan and the drawdown date), and I set out the email of 22 September 2008:
“As discussed and agreed I will borrow £100,000.00 … to be drawn down in one sum, today 22nd September 2008. I will pay a fixed fee of 16,000.00 …. I will pay interest at the rate of 15% calculated on a daily basis until the loan is repaid. Capital, interest and fixed fee costs are to be paid at the end of the term, 31st March 2009. I can confirm which bank account the money should be transferred to shortly.”
However, the other three emails that, according to GPL, were sent by Mr Hayes after advances were agreed were not placed before Haddon-Cave. Those about the loans of £100,000 and £50,000 dated 30 January 2009 and 2 March 2009 were headed similarly to the earlier ones (“Loan to Adam Hayes £100k [or 50k]”), and the email about the loan of £50,000 dated 13 March 2009 was headed “Loan to Adam Hayes £50k (Legal Fee)”. The first two refer to interest in the same terms as those of September and November 2008, and that of 13 March 2009 says that interest will be at 2% over Bank of England base rate. All refer to Mr Hayes borrowing money (“I confirm receipt”, “I will borrow”) and do not mention Mr Andrews or CHL. The email of 2 March 2009 states “furthermore I confirm that I will pay an additional sum of £50,000 … when (and if) the property to which this is linked is sold and I have sales proceeds from the sale following a successful completion”, but there is no other reference to the loans being connected with any property, transaction or scheme. I can confirm which bank account the money should be transferred to shortly.”[36]One significance that Mr Watson attaches to emails of 30 January 2009 and 2 March 2009 is, of course, that, in their heading and in the description of the loans, they suggest that they were made only to Mr Hayes, and not to Mr Andrews or CHL or do not indicate that anyone other than Mr Hayes was responsible for repaying them. Mr Bor submitted that it is not important for Haddon–Cave J to see them because he was shown the similar emails of September and November 2008, and, given that he still concluded that GPL had a sufficiently arguable case against Mr Andrews and CHL, the further emails would not have affected this conclusion.[37]Mr Watson suggested that Haddon-Cave J could not have had the September and November 2008 emails properly drawn to his attention because they flatly contradict GPL’s contention that the defendants were jointly and severally liable and they undermine the proprietary claim, and he submitted that, if he had assessed them, he would not have found that GPL had a sufficient case for a freezing order. I find it difficult to reconcile the two emails with the claims, but I am not prepared to infer that they were not properly presented to Haddon-Cave J: the attendance note lists six documents or categories of documents that he was shown, and these emails were the first.[38]However, I do not consider that this answers the complaint that Haddon-Cave J should have been shown the emails of 30 January and 2 March 2009. The emails of September and November 2008 were sent before Mr Andrews had Mr Stephen Green or anyone associated with GPL, and it might be thought understandable, if surprising, that Mr Hayes did not allude to Mr Andrews in them. However, on GPL’s pleaded case by the time of the emails of 30 January and 2 March 2009 Mr Andrews, Mr Hayes and Mr Stephen Green had had a meeting at Mr Andrews’ offices to discuss the Development. To my mind, this makes it distinctly more difficult to reconcile GPL’s case with these later emails than the earlier ones. It is one thing that the earlier ones did not refer to Mr Andrews when Mr. Stephen Green did not know him. It strikes me that on GPL’s case it would be distinctly odder that after the meeting and discussion Mr Hayes still wrote as if the loans were only to him without mentioning Mr Andrews or the Development. These emails should have been shown to Haddon-Cave J so that he could assess how they reflected on the GPL’s case.[39]Mr Bor had a further argument: that the three emails taken together support GPL’s case in that they show a different rate of interest charged for what a personal loan made to Mr Hayes alone from the rate charged for loans to all three defendants. I am not persuaded of this: on the contrary, to my mind the more significant points about the email of 13 March 2009 are that, if Haddon-Cave J had been shown it and GPL’s case about the loan to which it relates had been properly explained, he would have been made aware: i) That, at around the time when, on GPL’s case, they were making payments to Mr Hayes by way of loans to all three defendants, they also made a loan to Mr Hayes for which he alone was liable. This highlights the question how the parties evinced their different intentions about who was liable to repay different loans. ii) That, when Mr Green gave evidence that between 28 January 2009 and 20 March 2009 “a further approximately £250,000” was loaned to Mr Hayes and Mr Andrews, he included (as is evident from the schedule attached to the particulars of claim) the loan of £50,000 to Mr Hayes alone. As it was, the evidence about advances of some £250,000 was liable to mislead. iii) That the language used in respect of the loan that GPL accept was made only to Mr Hayes was generally similar in tone to that used in respect of loans said to have been made to all three defendants.[40]I conclude that all three emails should have been presented to and explained to Haddon-Cave J. As I have said, Mr Hayes’ case is that they were forgeries, but that is no reason for GPL not to disclose them. Whether forged or genuine, they cast doubt on the claims against Mr Andrews and CHL.[41]Mr Hayes presented further arguments that the presentation of the application to Haddon–Cave J was not a fair one and that (although he did not use this legal label) there was material non-disclosure. His first complaint was that the two emails of September and November 2008 and the letter of 25 January 2010 (the original of which, according to their solicitors’ letter of 9 October 2013, GPL have “been unable to locate”) were forged. I cannot determine on these applications whether they were.[42]Next, Mr Hayes drew attention to note 6 in the accounts, pointing out that they were signed on behalf of the directors on 19 July 2013, only shortly before the application was made to Haddon-Cave J. The balance sheet as at 30 June 2012 included debtors of £461,233, and the notes to the financial statements presented £460,000 of this sum as “amounts falling due after more than one year”. The note explained the position as follows:
“The company has entered into a joint venture with another (unquoted and unrelated) company and has advanced funds towards the funding of a property transaction. The amount advanced, less any repayments to date, amounts to £460,000 (2011: £460,000) and is included in other debtors. There is no formal security and the transaction is subject to a non-disclosure agreement. Nevertheless the directors are confident that the loan will be fully repaid in due course, together with interest and a participation in the profits of the transaction. The amounts of such interest and participation in profits has yet to be quantified and is not included in the revenue of this period.”
[43]The accounts were in the exhibit to Mr Green’s evidence that was before Haddon-Cave J. Mr Bor, understandably, could not recall specifically whether during the hearing he was taken to the accounts and in particular to note 6. I infer that he was not: the accounts are not mentioned in the attendance note which apparently carefully itemises the parts of the exhibit that the Judge was shown. However, in his evidence Mr Green referred to the accounts and identified the page at which “a joint venture with an unrelated company” was referred to in the notes. During the hearing before me three features of the note were mentioned, and I infer that they were not drawn to Haddon-Cave J’s attention: i) The non-disclosure agreement: Mr Hayes asked GPL’s solicitors for a copy of the agreement to which the accounts refer, but they replied on 9 October 2013 (without further explanation) that GPL does not have one. There is no credible evidence that there was such an agreement or explanation about when, why and by whom it was made. ii) The note that interest was yet to be quantified: on GPL’s case, the rate of interest was agreed and the amount that had accrued by 30 June 2012 was quantifiable. The note might more naturally reflect agreements for interest up to a rate of 15%, as Mr. Hayes described. iii) No claim is brought for “participation in the profits of the transaction”. It might be said that this refers to the “additional sum of £50,000” to which the (disputed) email of 2 March 2009 refers, but Mr Green’s evidence and the particulars of claim do not mention any such agreement.[44]These matters remain unexplained, and to my mind there is tension between note 6 and the case presented on the application for a freezing order. With some hesitation, I conclude that it would set too high a standard, even on an application of this kind, to characterise as material non-disclosure the failure specifically to draw these points to Haddon-Cave J’s attention. The note makes me the more circumspect about GPL’s case, but my decision does not turn on the failure to deal with it more fully on 30 July 2013.[45]Mr Hayes’ next complaint was that Haddon-Cave J was not shown an email to him from Mr Stephen Green dated 3 January 2013 (which had not formally been put in evidence on these applications, but which I received without objection from the other parties). It shows a breakdown in a once friendly relationship between them, and Mr Green wrote as follows:
“As you know you convinced us as a family into an investment which was to be finalised within a year. However, this has still not come to fruition despite the number of promises given throughout the last four/five years. You claimed a much more thorough knowledge of this deal than you actually had and you have continually hidden behind Duncan Andrews rather than do the right thing by paying us our as per your promises.”
Although the email might be read as suggesting that no interest was payable on the loan of £50,000 made in March 2009 (which would be inconsistent with the disputed email of 13 March 2009), this is far from clear. I therefore am not persuaded that it needed to be disclosed to Haddon-Cave J, and it does not seem to me to throw significant light on what I have to decide.[46]Mr Hayes made other complaints, but I need, I think, only specifically refer to this: Mr Stephen Green said in his witness statement, under the heading “Real risk of dissipation”, that Mr Hayes “is a person who hides behind others and refuses to take responsibility for his actions”, and referred to an email in which Mr Hayes replied to GPL’s solicitors, who had written (inter alia) that Messrs Darlingtons had denied knowledge of the dispute: in it Mr Hayes said that they did not hold proceeds of sale from the sale of the Development, and that he was taking advice about the matter and about when Mr Andrews would be back at work. Mr Hayes complains that Mr. Green’s criticism of him is unjustified, and explained that, on other occasions when he had borrowed money from the Green family and their companies, he had duly repaid. I have seen no support for Mr Green’s criticism, and I agree with Mr Hayes that his reply to the solicitors lends no real support for it. Indeed, Mr Bor relied on a completely different point to argue before me that there is a sufficient risk of dissipation of assets to justify a freezing order against Mr Hayes: that in his evidence in reply he has not explained what happened to the money that he borrowed, a point that was not, of course, available before Haddon-Cave J and which I consider later.[47]Having accepted Mr Watson’s submission that on the application before Haddon-Cave J GPL did not make proper disclosure, I come to his arguments that they did not and do not, in any event, have a good arguable case either that Mr Andrews and CHL are (or either of them is) liable to repay the loans or in support of the claim to a proprietary interest. I observe that, as far as appears from the note of the hearing produced on behalf of GPL, Haddon-Cave J considered this a “plain case for interim relief” because there was, in his view, “an arguable case in trust” and it was submitted that “the relationship might have developed into a joint venture”.[48]It is not clear to me whether Haddon-Cave J concluded that GPL had a good arguable case that, when Mr Hayes made agreements for the loans with GPL, he had (actual or ostensible) authority to enter them for Mr Andrews and CHL and that he was exercising that authority and acting as their agents (as well as on his own behalf). However, I do not consider that the evidence (either as presented to Haddon-Cave J or before me) is sufficient to support any such case, and in my judgment GPL have not made out a good arguable case in that regard. Mr Stephen Green’s evidence about the arrangements is too vague to justify it, particularly in view of the disputed emails. I also observe that in the letter of 13 May 2013 Mr Trevor Green wrote that in 2008 the agreement to lend “certain monies” was made by Mrs Pat Green, whereas Mr Stephen Green’s evidence suggests that Mr Hayes approached him, his brother and his mother and that they all made the agreements on behalf of GPL. Furthermore, Mr Green’s own evidence was only that the first advance was to be used “primarily” for the Development, and, on the face of it, it is unlikely that Mr Hayes would have been acting on behalf of CHL in borrowing money which might in part be used on other projects. Mr Bor pointed out that Mr Andrews and Mr Hayes admit that they have, or have had, business connections but that is too frail a basis to infer that Mr Andrews or CHL conferred any relevant authority on Mr Hayes. No argument of ratification was advanced.[49]What of the argument that Mr Andrews and GPL assumed responsibility for repayment of the loans in the “various conversations” and on that basis (and in consideration of these promises) time for repayment was extended and further loans made. Mr Stephen Green’s evidence simply does not provide a sufficient basis for this case to support a freezing order. On analysis, his only evidence is that Mr Andrews and Mr Hayes wanted more support and said that “we are all in this together and would benefit when our project came to fruition”. He does not even assert that Mr Andrews (or Mr Hayes) made this statement on behalf of CHL, and in any case this evidence does not support a contract of this kind.[50]In their particulars of claim GPL identifies nine considerations that are apparently said to support their case that they acquired a proprietary interest in the proceeds of sale of the Development. Before I consider them, I observe: i) That GPL have not asserted that they had a beneficial interest in the land before sale, although in GPL’s skeleton argument for the without notice hearing it might have been understood that they were doing so. ii) As Mr Bor confirmed at the hearing before me, GPL have not put a claim forward on the basis that they had an equitable charge over the land or the proceeds of sale to secure repayment of the loans. iii) Although GPL rely upon references to the Development being by way of a “joint venture”, Mr Bor acknowledged, and it is clearly the case, that there was no joint venture of the usual kind whereby GPL would share in any losses as well as any profits from it.[51]First, GPL rely on Mr Andrews and Mr Hayes confirming that GPL would be paid out of the sale proceeds and that the parties were in a joint venture. Assuming that Mr Andrews and Mr Hayes said this, their expressed intention (or promise) so to use some of the proceeds of sale does not indicate an intention to confer a proprietary interest. Mr Stephen Green does not give evidence of Mr Andrews or Mr Hayes referring to a joint venture, but only uses this expression of GPL’s understanding of what they had been told. The expression is not used by Mr Hayes in his letter of 25 January 2010 which Mr Green presented as his confirmation of the arrangement. In any case, as I have said, the parties could not have had in mind a joint venture of the usual kind.[52]Next it is said that GPL’s money was used for the Development, and that the defendants knew this. This does not mean that they had a proprietary interest of any kind.[53]Thirdly, GPL rely upon Mr Hayes’ letter of 25 January 2010, which for present purposes I shall assume to be genuine. The letter was headed “Property Investment with Undisclosed Property Investment Group”, and referred to: i) An “investment” for GPL. ii) Mr Hayes acting “as agents on behalf of both parties relating to the investment made” iii) Interest on loans at a fixed rate of 15% pa. iv) “Uplifts of up to £100,000, which shall be dependent on the final sale of the investment. I see nothing here that supports the contention that the parties agreed or intended to transfer to GPL a proprietary interest in the proceeds of sale. To my mind it is more naturally understood as referring to the terms of a simple debt.[54]Fourthly, GPL rely in their pleading on “Correspondence from [Mr Andrews and Mr Hayes] on the current state of the Development including an email dated 18 February 2010 from [Mr Andrews] to Stephen Green”. In his email of 18 February 2010 Mr Andrews simply forwarded another email from some planning consultants in which they press for payments of their fees, and Mr Andrews asked Mr Green to telephone him when he receives it.[55]Next, note 6 in the accounts: this is evidence of an unsecured loan. I have commented on the “joint venture” label.[56]Sixthly, GPL rely on an email dated 10 May 2010 to Mr Hayes in which Mr Stephen Green stated, “While I can understand [Mr Andrews’] feeling of an unsecure borrowing rate this is not how it was put to me when you first asked for money there was never any talk of this going beyond March 2009”. I do not understand how this supports a contention that GPL have a proprietary claim. It is about the original terms (when it is not said that any proprietary interest for GPL was agreed), and it suggests an arrangement for an unsecured loan.[57]Seventhly, they rely on the mail of 8 April 2013 and Mr Hayes’ reference to Mr Andrews as his “client”. This does not indicate GPL acquired a proprietary interest of any kind.[58]They also rely upon a text sent by Mr Stephen Green pressing Mr Andrews to speak to him on 19 July 2013, but that adds nothing to this allegation.[59]Finally, they refer to telephone conversations that are said to have taken place between Mr Andrews and Mr Stephen Green after the text was sent, but they too add nothing to GPL’s claim to a proprietary interest in the proceeds of sale.[60]I can see no proper basis for the proprietary claim and I cannot accept that GPL have demonstrated a good arguable case in this regard. I am driven to conclude: i) That GPL did not make proper disclosure when they obtained the freezing orders from Haddon-Cave J in that they did not disclose the three emails or the letter of 13 May 2013. ii) That in any case GPL have not demonstrated a sufficient case against Mr Andrews or CHL to support their claim.[61]As I have said, material non-disclosure on an application without notice does not necessarily mean that a freezing order will be discharged, but that is the general rule. With regard to the three considerations that Mr Boyle identified and to which I refer at paragraph 6 v) above:• GPL have not said whether or not the non-disclosure was deliberate, but there has been no explanation as to why the three emails and the letter were not disclosed. Mr Bor did at one point refer to pressure of time at the hearing before Haddon-Cave J (it began at 4.00pm), but this was not an explanation for the documents not being in evidence.• I have explained why I consider the documents important both to the claim that Mr Andrews and CHL assumed personal liabilities for the advances and to the proprietary claim.• I have concluded that GPL does not have a good arguable claim on either basis. The last point is fatal to GPL, but in any case I would have concluded that the freezing order against Mr Andrews and GPL should be discharged and not re-granted because of non-disclosure.[62]It remains to consider whether, in view of GPL’s failure to make proper disclosure, I should make a new order against Mr Hayes. His position is different because he does not dispute that he borrowed over £400,000 from GPL and has not repaid it. Mr Hayes did not specifically acknowledge that the money was due for repayment (and he was not asked this directly): he said that the money was to be repaid “as and when”. However, I cannot discern any defence to a claim in debt on the basis that the advance is not due for repayment. One corollary of this is that the documents that were not disclosed have less impact on the claim against him in debt than on the claims against the other defendants. His position is in some ways similar to that of a defendant against whom judgment has been entered. As Lawrence Collins LJ said in Masri v CC International Co Ltd SAL, [2008] EWCA 303 at para 134, “… a freezing order will be granted more readily after judgment than before: ... It is sufficient for the grant of relief that there is a real risk that the judgment will remain unsatisfied if injunctive relief is refused: Ketchum International plc v Group Public Relations Holdings Ltd, [1997] 1 WLR 4 (CA)”. Thus, even in the case of a judgment creditor, a freezing order will not be made unless the applicant has demonstrated that there is a real risk that the judgment will go unsatisfied which an injunction will significantly reduce.[63]I have concluded (at para 46 above) that there is no proper basis for Mr Stephen Green’s statement that Mr Hayes refuses to take responsibility for his actions. This was one reason that GPL presented to Haddon-Cave J that they should have a freezing order against Mr Hayes. Their other reason was that he and Mr Andrews had avoided payment “for several years on their promise that we would share in the Development and be paid from the Development”. However, I see no evidence that, even assuming that GPL were entitled to be paid when the sale was completed and that it was contemplated that CHL would put Mr Hayes in funds for that purpose, Mr Hayes was responsible, or shared the responsibility, for this not being done.[64]As I have said, Mr Bor suggested that a freezing order against Mr Hayes is justified because in his evidence in support of his application Mr Hayes said that the money that he borrowed from GPL (or at least much of it, including specifically the loan of £100,000 made in September 2008 the loan of £100,000 in January 2009 and the loan of £50,000 in February 2009) was not invested in the Development. At the same time, in his affidavit of assets in response to the order of 30 July 2013 Mr Hayes said that he had no assets worth more than £2,500 apart from his interest in his house. Mr Bor pointed out that, nevertheless, Mr Hayes has not said what became of the money that he owed. I do not consider that I can draw any inference adverse to Mr Hayes from this, particularly as he is without legal advice: the focus of the evidence that he has given in these proceedings is(i) to respond to the order and(ii) to answer the case made by GPL. It was not incumbent upon him, or directly in point, to explain how he used the money that he borrowed.[65]The decision whether to discharge the order against Mr Hayes is more finely balanced than in the case of the other defendants, but in the end I have concluded that I should grant his application. As I have said, this is the general rule in cases of material non-disclosure, the non-disclosure remains unexplained by GPL and they have not made out a sufficient case that the risk of an unsatisfied judgment will be significantly reduced.[66]I shall therefore discharge the freezing orders.