Hewlett Packard Enterprise Company & Ors v Sage & Anor [2017] EWHC 66 (QB)

Case No HQ15X05041[2017] EWHC 66 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20/01/2017
Before
MR JUSTICE JAY
Between
HEWLETT PACKARD ENTERPRISE COMPANY (a company incorporated in Delaware, USA)ClaimantsHEWLETT PACKARD LIMITEDClaimantHEWLETT PACKARD PAKISTAN (PRIVATE) LIMITEDClaimantHEWLETT PACKARD SINGAPORE (SALES) PTE LIMITEDClaimantPETER SAGEDefendantsWALTER JASON FARFANDefendant
Anthony Peto QC and Robert Weekes (instructed by Mishcon de Reya LLP) for Claimants/ApplicantsAndrew Maguire (instructed by JBR Morgan Solicitors) for First Defendant/RespondentHearing Hearing dates: 12 th, 13 th and 16 th January 2017
Judgment

Introduction

[1]By an Amended Application Notice filed in November 2016, the Applicants (whom I should refer to collectively as “HPE”) apply to commit the First Defendant (“Mr Sage”) for contempt of a Freezing Order and a Search Order made by Coulson J in this Court on 2nd December 2015.[2]HPE manufactures and sells computer networking and storage products. It has a worldwide operation. It claims that Mr Sage and the Second Defendant (who has not played a significant role in the litigation to date, being out of the jurisdiction and apparently evasive) conspired to defraud HPE by holding themselves out as owning, through entities which may be comprehensively designated as “Space Energy”, large solar energy facilities in the Middle East and Asia. HPE alleges that the facilities were a fiction, contrived for the fraudulent purpose amongst other things of obtaining substantial “Big Deal” discounts from HPE. The claim is in the region of $17.5m and proceedings have been instituted on that basis.[3]It is neither possible, nor right and fair, to reach any firm conclusions about the merits of the underlying claim. All that I need, and properly should, say is that on 2nd December 2015 Coulson J was satisfied that HPE had demonstrated a strong prima facie case that a fraud, or series of frauds, had been perpetrated. I have read the papers in relation to the “without notice” hearing, including in particular the transcript of the hearing and Coulson J’s judgment.[4]I will set out the salient provisions of the Freezing Order and Search Order in the context of the specific, alleged breaches perpetrated by Mr Sage, but at this introductory stage I note that these are in fairly standard form. In short, the Orders have worldwide effect; the Freezing Order contains non-dissipation provisions; both Orders contain a wide-ranging series of disclosure and delivery-up provisions; the Search Order also permits a search of his premises. I accept that when confronted with the Order on 3rd December 2015, Mr Sage must have been surprised and concerned by its draconian impact and reach. However, he had been subject to some form of Freezing Order in Dubai, imposed in March 2014; and he also confirmed in evidence that the terms of the Order were carefully explained to him by the Supervising Solicitor, Mr Robert Oakley and that he understood what was required of him.[5]As I have already said, Mr Sage was involved with Space Energy operating from, on my understanding, a base in Dubai in the UAE. Before 2015, he had been resident in that jurisdiction for a number of years. HPE claims that relevant fraudulent activity occurred between 2010 and 2013, and the evidence is that Space Energy collapsed at or shortly after the end of that period. In April 2013 Mr Sage set up another company in Dubai, Sage International FZE (“Sage International”), although it was formally based in another of the UAE, Fujairah. Sage International was the corporate vehicle for Mr Sage’s activities as an entrepreneur and motivational speaker in the world of business. The idea was that he would speak at seminars, lectures and events promoted either by Sage International itself and/or by others. One of these events was designated the “Millionaire Business School”. No doubt Mr Sage held himself out as possessing the credentials and abilities to inspire others to become extremely successful business men and women; and either ex ante or in consequence, a millionaire himself.[6]Sage International was, as I have said, initially Mr Sage’s outfit or alter ego. He was the promoter and speaker, the engine and public face of the company. Behind the scenes, pulling the financial strings, was his de facto step-mother, Ms Beverley Jill Bromige, know as Jill. She had been involved in Space Energy, in Mr Sage’s personal financial affairs, and (perhaps) other previous corporate endeavours. The evidence is that Jill Bromige was trusted implicitly by Mr Sage and had been helping him with financial and book-keeping matters since 1997, if not before. Clearly, Ms Bromige was Mr Sage’s agent for all these purposes.[7]In 2011, or thereabouts, Mr Sage developed a friendship with Lorraine Thea Thorpe, known as Thea. The friendship blossomed and she moved to Dubai in or about January 2013. Thea Thorpe claims that she started to become involved in the promotional side of the business after about six months: she was at a loose end, and had skills and experience in that domain. For reasons which are not altogether clear, and which I will need to explore more fully, Mr Sage then transferred, or purported to transfer, the whole of his interest in Sage International to Ms Thorpe in June 2014. This was before his engagement to Ms Thorpe which I am told, and accept, took place on New Year’s Eve 2014. In January 2015 Sage International took on a new CEO, Ms Carolyn Sampson, a resident of Colorado. She came to Dubai for a period of time, with a view to promoting the business more effectively and pro-actively. It is unclear how successful she was in these endeavours because inadequate financial information has been provided. Mr Sage sought to present a picture of he and his partner living on a metaphorical shoe-string controlled by Ms Sampson and Ms Bromige, but I cannot accept that this was so. One important piece of evidence to the contrary effect was that he was able to buy Ms Thorpe a diamond and sapphire engagement ring at a cost, he says, of £22,000-£23,000 (being the sterling equivalent of an amount in dirhams). There were also substantial drawings from bank accounts which have not been adequately explained.[8]Mr Sage decided to leave Dubai, with Ms Thorpe, in January 2015. They went travelling for about three months and came to the UK in April 2015, when Mr Sage’s house in Leicester was vacated by tenants. Mr Sage agrees that he left Dubai because he had lost his appeal against the Freezing Order imposed in March 2014: the underlying debt was then alleged to be $1.7m. Upon occupying his property, Mr Sage immediately put the utilities in the name of Ms Thorpe. He claimed that he did this because he was still technically resident in Dubai, but I simply do not accept that explanation. The utilities remain to this day in the name of Ms Thorpe, and I infer that Mr Sage’s purpose was to keep him – to use his phrase – “off the radar”. Put less metaphorically, his purpose was to conceal himself from creditors and the tax authorities.[9]Sage International continued its business activities outside Dubai. Mr Sage and Ms Thorpe were in Leicester; Ms Sampson in Colorado; and Ms Bromige in Spain. After ownership was apparently transferred by Mr Sage, his role was never precisely defined and no documents exist to assist me in that regard. At all events, on 22nd November 2015 Mr Sage spoke at his “Millionaire Business School” in London. I was told that this school, or seminar, was successful and that money came into the company over the following weeks. However, the paucity of disclosed financial information means that I cannot discern how much money came in and when.[10]The Freezing Order and the Search Order were served on Mr Sage on 3rd December 2015, at 8am. There is very little dispute as to what happened over the course of the day. Mr Sage was able to obtain legal advice at around 9.25am. The Supervising Solicitor gave Mr Sage generous opportunity to consider his position, reflect on the terms of the Order, and obtain further advice upon it. The search commenced at about 11.30am and was carried out by Mr Jeremy Hertzog, partner at Mischon de Reya LLP, Ms Caroline Zabeti-Targhi, a Managing Associate, Ms Melissa Donn, an Associate, and Mr John Young, an independent computer specialist.[11]Insofar as the detail of what happened during the search is relevant to HPE’s contempt allegations, I will address it at a later stage. At this juncture, I should note that it is not in dispute that Mr Sage and Ms Thorpe were polite and courteous throughout, and exhibited no hostility or lack of grace and manners. This is altogether consistent with their presentation in the witness box. Mr Young took images of their mobile phones and these were returned at about midday. Ms Thorpe left the premises to attend a pre-arranged lunch engagement, and was certainly away from it between 1 and 2 pm. During that period a substantial number of payments were made out of Mr Sage’s Lloyd’s Bank Account in Guernsey (aggregating £25,000) and his Paypal account (aggregating approximately $112,500, in two currencies). HPE contends that these payments were carried out in flagrant breach of the Freezing Order. I mention these matters at this introductory stage because potentially they are the most serious.[12]The breaches relied on by HPE are itemised in the Amended Notice of Application and Mr Hertzog’s affidavits. I will be addressing these individually. But before I do so, I should set out the law governing this application; my assessments of the witnesses; and then my findings and conclusions regarding Mr Sage’s involvement in and control of Sage International at all material times.

The Legal Framework

[13]This has been helpfully set out in the opening note prepared by Mr Anthony Peto QC and Mr Robert Weekes for HPE, and was not put in issue by Mr Andrew Maguire for Mr Sage. It follows that an elaborate iteration of the governing law is not required. However, this is the appropriate stage at which to record my gratitude for Counsels’ assistance in this case. This expression of thanks must specifically recognise the measured and realistic nature of Mr Maguire’s helpful oral submissions.[14]The importance of complying with Court Orders, and of marking serious instances of deliberate non-compliance with such orders, is axiomatic: see, for example, Lord Denning MR in Z Ltd v A-Z [1982] QB 558, 572 (CA) and Lord Bingham in Customs and Excise Commissioners v Barclays Bank Plc [2007] 1 AC 181 (at paragraph 11).[15]Given the criminal or quasi-criminal nature of this jurisdiction, the Court applies the criminal standard of proof. The essential ingredients of each element of each alleged contempt must be established to the point that the Court is satisfied so that it is sure. The judgmental exercise involves a holistic consideration of all the available documentary evidence, the oral evidence the court has received, and the inferences which the court is driven to draw from that evidence. The requisite standard cannot be attained, and the burden discharged, if there exists a realistic possibility in the Court’s estimation that any posited inference is incorrect. In my view, it is unnecessary to make express reference to the refinements upon these basic principles mentioned at paragraphs31.1 and31.2 of Mr Peto’s opening note.[16]In order to establish that someone is in contempt, it is necessary to show that(i) he knew the terms of the Order,(ii) he acted (or failed to act) in a manner which involved a breach of the Order, and(iii) he knew of the factor which made his conduct a breach: see Masri v Consolidated Contractors International Company SAL [2011] EWHC 1024 (Comm), per Christopher Clarke J (at paragraph 150). Issues of motive, and of the putative contemnor believing (or not believing) that he was acting in breach of the Order, are not relevant.[17]Mr Peto advanced a series of written submissions relating to the liability of principal contemnors for the actions of their agents, but in my view these were supererogatory in the events which have arisen.

The Witnesses

[18]HPE called Mr Jeremy Hertzog and Ms Caroline Zabeti-Targhi to give oral evidence. Save in relation to one matter, namely a conversation which took place between Ms Zabeti-Targhi and Ms Thea Thorpe at 3.15-3.30pm on 3rd December 2015, this evidence is not significantly in dispute; and I accept it. The evidence of Mr Oakley, Mr Young and Ms Donn I have been asked to take as read.[19]Mr Sage relied on his own oral evidence as well as the evidence of Ms Thea Thorpe and Ms Jill Bromige. The bundle also contains an affidavit from Mr Clifford Harper, formerly known as Mr Colin Newby Smith, dated 29th September 2016. He was not available to give oral evidence, currently serving a term of 33 months’ imprisonment for three offences of fraud imposed on 26th October 2016. What he says is hotly contested by HPE, but could not be tested in cross-examination. In those circumstances I can give only very limited weight to his affidavit.[20]Mr Hertzog and Ms Zabeti-Targhi were honest, reasonable witnesses. They have complied with their obligations as officers of the court. In relation to the conflict between the latter’s oral evidence and Ms Thorpe’s, I unreservedly prefer Ms Zabeti-Targhi’s account. I will be coming to this later, but I note at this stage that I must still consider whether there is any realistic possibility of there having been a misunderstanding between these two witnesses.[21]At the centre of this application lies Mr Sage. He is an extremely charming, charismatic and polished individual. To be fair to him, I would not describe him as being intellectually sophisticated, but I agree with Mr Peto that he has exhibited no lack of guile and panache in his particular world, including the world of international business.[22]I was not impressed by Mr Sage’s evidence. His answers to Mr Peto’s persistent, accurate questioning could be lapidary (e.g. “correct” and “absolutely”), but when the going got tougher they became rambling, imprecise and evasive. Mr Sage was too keen to provide me with the “evolving context” and the “back story”. He laced his evidence with overly insistent claims to honesty and frankness. Eventually, he did admit to lying about what he told Mr Hertzog and his colleagues about an engagement ring, having previously asserted that this was “subjective” and that what he said about there being no ring was “technically” true. As Mr Peto’s cross-examination unfolded, Mr Sage was forced to admit to a number of breaches of the Freezing/Search Orders, but upon doing so he showed no remorse or contrition. Instead, he sought to persuade me that he was entitled retrospectively to justify his position rather than take steps to comply with the Order once contempt proceedings were served on him in July 2016. It is clear from a number of internal documents that Mr Sage has an extremely high level of self-belief, matched by immense aspirations for future personal success. He likens himself to Nelson Mandela. This self-confidence no doubt makes him a powerful teacher and presenter, but – in the absence of genuine insight – has the tendency to make him an unconvincing witness. Mr Peto submitted in writing that Mr Sage hoped to use the tools of his motivational speaking career in order to deceive the court. My overall conclusion, having reflected on all the evidence in this case over a number of days, is that Mr Sage was doing precisely that. In my judgment, Mr Sage was not a truthful witness; indeed, he was one who was prepared to lie in order to keep himself out of trouble. Furthermore, and contrary to the instruction I gave him not to discuss his evidence with Ms Thorpe, I find that he did so in relation to the engagement ring. It does not follow that I reject the entirety of Mr Sage’s evidence: to the extent that I harbour a reasonable doubt, I mention that below.[23]Ms Jill Bromige was a more difficult witness to evaluate. On the face of things, she was a more direct and less evasive witness than Mr Sage. She has considerable experience of the world and possesses a quick, sharp mind. Immediately after she concluded her evidence I confess that a modicum of doubt had entered my mind (at least as regards some of the matters her evidence had covered), and I gave expression to it last Friday afternoon. I made it absolutely clear that my judgments were still forming, and certainly had not solidified – it must have been obvious to the parties that I was already concerned about Mr Sage’s evidence. Over the weekend I read the transcript and reflected further. I was struck by a number of points which, taken cumulatively, have driven me to the conclusion that Ms Bromige was not a witness of truth; rather, she is an accomplished purveyor of untruths. She did not give a satisfactory explanation for an email address at Space Energy, purportedly relating to a “Beverley Wilson”, being in her name. Overall, her evidence that Mr Sage was not in control of Sage International after June 2014 was not credible. Most importantly, as I will address subsequently, I reject her account that there was a Skype conversation between her and Carolyn Sampson between 1 and 2 pm GMT on 3rd December 2015. I find that she lied about that conversation, which untruth serves to undermine other contentious aspects of her evidence.[24]Ms Thea Thorpe was not a remotely convincing witness. She adopted a tone of inappropriate levity and scattiness, with her voice falling in volume at key moments. She maintained that she was the sole author of her affidavit, but in my judgment that simply cannot be so. Apart from stylistic contrasts between her written and oral evidence, the former contains terminology which she does not understand. She did not really have a clue about the workings of Sage International, which in one sense was hardly surprising, but she maintained her position that this had become her company. Most importantly, as I will be addressing subsequently, I reject her account about the pledging of the engagement ring to Clifford Harper (a.k.a. Colin Newby Smith, nicknamed ‘Dodgy Col’); and I also find that she colluded with Mr Sage after he gave his evidence. Ms Thorpe’s excuse or explanation for Mr Sage’s initial lie to Mr Hertzog was the same as her partner’s. The mitigation – to the effect that it was not “technically” a lie – is not in Mr Sage’s written evidence.[25]Having set out my overall assessment of the witness evidence, I should indicate the shape and structure of the remainder of this judgment. I should deal first of all with the contempt allegation in relation to the engagement ring. I shall then set out my findings and conclusions in relation to beneficial ownership and control of Sage International. I shall then address the dissipation allegations. Finally, I shall turn to the remaining alleged contempts.

The Engagement Ring

[26]I accept Mr Sage’s evidence that he proposed to Ms Thorpe in Dubai on 31st December 2014 and that he gave her the engagement ring a couple of days later. I also accept for these purposes that he paid the sterling equivalent in dirhams of £22,000-£23,000. The ring was given to Ms Thorpe unconditionally.[27]Given my further findings regarding the engagement ring, as more fully stipulated below, the following provisions of the Search Order are relevant:(i) paragraph 20: the obligation to deliver up to HPE’s solicitors (to be held to the Order of the Court) any items of jewellery “located upon the premises” exceeding £1,000 in value;(ii) paragraph 21(d): the concomitant obligation to give information to HPE’s solicitors as to the location of any item of jewellery within the scope of the Order;(iii) paragraph 22: the additional concomitant obligation to swear an affidavit to that effect.[28]During the search of the property in Leicester on 3rd December 2015, Mr Hertzog found a valuation certificate for a diamond and pink sapphire ring and an empty ring box in Mr Sage’s safe. The valuation was given on 27th June 2015 for insurance purposes by Mr Stuart Thexton, a jeweller in Nottingham.[29]Mr Sage told Mr Hertzog that there was no ring and that he had the certificate only because he intended to have a copy of the ring, described in the certificate, made in Dubai. It was not until September 2016 that Mr Sage was to accept that this account was untrue. In my judgment, it was so obviously false as to be ludicrous. Plainly, there must have been a ring at some stage in order for Mr Thexton to be able to examine it, an empty ring box existed, and Mr Sage had not deigned to explain what had happened to it. If another ring needed to be made up, a photograph would have been required, not an insurance valuation. To the extent that it matters, I reject Mr Sage’s self-exculpatory assertion that he was caught like a deer in the headlights. Mr Sage’s conversation with Mr Hertzog took place that afternoon, several hours after the Order had been served. His first affidavit given on 8th December did not seek to correct the position.[30]Mishcon’s enquiries of Mr Thexton established the falsity of Mr Sage’s account. Then, on 14th December 2015 he swore an affidavit stating that in November 2015 Thea Thorpe gave the ring to Mr Newby Smith to settle outstanding debts to him in the sum of around £7,000.[31]This account too is an obvious fabrication and is no longer relied on in its entirety. Mr Sage agrees that the ring was not given to Mr Newby Smith in full and final settlement of any debts. There is also the obvious point that it would make no commercial sense to hand over a ring whose insurance value second-hand was £55,000 in discharge of an alleged debt that was so much lower. I wholly reject Mr Sage’s explanation (see paragraph 3 of his second affidavit) to the effect that several jewellers valued the ring at £20,000, and “less than half of that for a sale under stress”. These valuations have not been furnished in evidence. Mr Sage refers to a second-hand ring, but it was already such when valued by Mr Thexton in June 2015.[32]Mr Sage’s third account is a refinement, albeit a significantly material refinement, of the second. He and Ms Thorpe, supported by Mr Harper/Newby Smith’s affidavit, now say that the ring was pledged to Colin on terms that it would be returned on payment of the sum of £7,000. There is evidence that, in August 2016 Mr Newby Smith received the sum of £7,500 from Thea Thorpe in relation to the ring. There is also a letter from Mr Newby Smith which confirms receipt of the money. He went to Mr Sage’s premises and on both Mr Sage’s and Ms Thorpe’s accounts handed over the ring in the lounge. It was promptly replaced on Ms Thorpe’s finger.[33]During the course of the hearing I reflected that absurd evidence could nonetheless be true evidence: or, more precisely, that the Court may arrive at the position that it considers that a reasonable doubt exists. Further, it goes without saying that a judge should think long and hard before rejecting oral testimony given on oath. I have thought truly long and hard about this, but have come to the conclusion that I have been lied to.[34]Let me say at once that the strongest point in Mr Sage’s favour is that no solicitor noticed the engagement ring on Ms Thorpe’s finger when they entered the premises at approximately 11.30am on 3rd December 2015. However, by then Ms Thorpe had had ample opportunity to secrete it; and if dishonestly inclined, would have been motivated to do so. Mr Oakley’s initial interaction was with Mr Sage.[35]Both Mr Sage and Ms Thorpe agreed that Mr Newby Smith, with the soubriquet I have mentioned, is an unsavoury individual. Mr Sage claimed that he felt threatened by him. It became clear that one way or another, sufficient monies existed to pay off Mr Newby Smith, if he was really owed the money. By November 2015 Mr Sage knew that his MBS venture was going to be successful. It is simply incredible that a young woman, recently engaged, would have agreed to hand over a valuable ring (measured in currency and emotion) in such circumstances, particularly to a man like Mr Newby Smith.[36]Mr Sage asserted that Mr Newby Smith was owed the money, as wages, by the now defunct Space Energy. Strictly speaking, this was not his debt at all. If the debt did exist, Mr Sage has had ample opportunity to prove it by providing documentary evidence to that effect. None has been furnished. Instead, the one document we do have shows that Space Energy owed nothing in terms of wages to its employees (I accept the possibility that this was a deceit upon the authorities in the UAE in order to effect the liquidation of the company). More pertinently, we have no documentary evidence pointing to any claim by Mr Newby Smith that he was owed any money (in my view that omission is inexplicable) or evidencing the terms of the alleged pledge. On Mr Sage’s final version of events, the ring was valued in June 2015 as a prelude to pledging it to Mr Newby Smith. If the latter was really adamant that he should be paid, no explanation has been given as to why he did nothing for five months.[37]Both Mr Sage and Ms Thorpe agreed that the arrangement with Mr Newby Smith was “crazy”, or words to that effect, but claimed that this was a retrospective judgment. Ms Thorpe asserted that she trusted “Dodgy Col” but I did not believe her. Unfortunately, I am driven to conclude that Mr Sage has colluded with her to confect a ludicrous account which has no credibility whatsoever.[38]The discrepancy between £7,000 and the amount paid in August 2016, namely £7,500, has not been satisfactorily explained. Mr Sage’s solicitors initially said that there was no interest agreed. Ms Thorpe’s account was vague and evasive; she said that she added an amount “for a drink”. Although Mr Newby Smith was obviously given £7,500, I find that he was doing a favour for an old friend.[39]Thus, I conclude that the engagement ring was never in the possession of Mr Newby Smith. Mr Maguire submitted that it has not been proven to the criminal standard that the ring was “on the premises” on 3rd December 2015. In my judgment, it has: as a matter of irresistible inference. If the ring was not in the clutches of Mr Newby Smith, it could only have been in the possession of its rightful owner, Ms Thorpe. It was not, of course, in the safe, but that was because Ms Thorpe likes to wear it. She hid it at some convenient moment during the course of the morning of 3rd December.[40]It follows that I do find the contempts proved in relation to the obligations specifically identified by me at paragraph 27 above. I do not find that Mr Sage was in breach on the basis that he controlled the ring.[41]In one sense I can see some force in the point that these contempts are not at the highest end of seriousness in as much as I have concluded that the ring was Thea Thorpe’s and not in the ownership, possession, custody or control of Mr Sage. However, that would be to miss the point. The Search Order encompassed the ring, and that is why Mr Sage lied about it. He accepted in evidence that he was aware that the ring might be within the scope of the Order. The fact that his fiancée would have recovered the ring in due course (on the findings I have made) is no answer to these particular contempts. Moreover, the contempt has been aggravated by the compounding of the lies, both on affidavit and in the witness box. Yet further, Mr Sage has colluded with Ms Thorpe, probably after his evidence was given, to give an apparently corroborative account regarding the return of the ring in August 2016.[42]As a separate matter, Mr Sage’s and Ms Thorpe’s lies in this regard serve to damage their evidence in other respects. The fact that a witness lies about matter X does not mean that s/he must be lying about separate matter Y, but it does not help. It should be emphasised that my conclusions about the ring, applying the criminal standard of proof, do not depend on my adverse findings as to Mr Sage’s credibility in other respects: they are free-standing. I am not required to place my assessments of witness credibility into sealed compartments, but it is right to spell out my thinking in the interests of complete clarity.

Beneficial Ownership/Control of Sage International

[43]The term “assets” has the following wide definition in the Freezing[44]It is clear that, before June 2014, Mr Sage was the legal and beneficial owner of Sage International, and that Ms Jill Bromige acted under his direction. I accept that Ms Bromige has a powerful, dominant personality, and that Mr Sage is not particularly interested in the minutiae of the financial nuts and bolts; but the legal position cannot be gainsaid.[45]The issue which arises concerns the apparent transfer of the legal ownership of Sage International to Ms Thorpe in June 2014. In my view, Sage International would still be an “asset” of Mr Sage if either he retained a beneficial interest in it (notwithstanding the formal legal documentation) or if Ms Thorpe habitually obeyed his instructions in relation to the company.[46]In my judgment, the purported transfer of the company to Ms Thorpe was a contrivance or fig-leaf designed to conceal the true position, which was (and is) that Sage International remains Mr Sage’s corporate alter ego. I find that Ms Thorpe held the company to Mr Sage’s order, acting as his nominee, and that he retained beneficial ownership of it. My reasons are as follows.[47]First, Mr Sage remained at all material times the product or commodity which Sage International had to offer. True it is that he had to be promoted, and the company’s financial affairs had to be managed, but these matters were all ancillary or adjectival to the main asset: Mr Sage. Ms Thorpe had no expertise in this regard and there is no evidence on which I can safely rely that she did anything to promote her partner. Her skills lie altogether elsewhere.[48]Secondly, Ms Thorpe’s marginal operational role was accepted by Mr Sage in evidence, and not seriously disputed by Mr Sage himself. As I have already pointed out, Ms Thorpe had a very sketchy idea of the operations and finances of Sage International at all material times. It is in this context that Ms Zabeti-Targhi’s evidence attains significance. Her evidence to me, as confirmed by her contemporaneous attendance note, was that Ms Thorpe told her that she had been involved when the business started around 2-3 years ago, “but then she made a few admin errors with emails and so he didn’t get her involved any more”. This, on Ms Zabeti-Targhi’s account, was in the context of the business that was running the MBS. Ms Thorpe was extremely vague about this conversation and somewhat breathily tried to paper over apparent, or alleged, cracks in her recollection. In essence, she claimed that this conversation related to Space Energy, the subject of the underlying claim, but in my judgment this does not tie in with the MBS or the stated chronology (“around 2-3 years ago”). Sage International had been set up some 2 years 8 months previously.[49]Thirdly, there was no sensible commercial reason why Mr Sage would or should have wanted to confer his sole corporate asset (on his case) on his girlfriend. She was not his fiancée in June 2014. On the other hand, if the intention was to seek to remove assets from the scope of the Freezing Order imposed in Dubai in March 2014, there was every reason to effect a share transfer. Mr Sage’s explanation that he was appealing the order, does not answer this point. Furthermore, it is to be noted that Mr Sage was hardly doing Ms Thorpe a favour if, under Dubai law, she would be personally liable for the debts of the company, and could be imprisoned for non-payment.[50]Fourthly, Mr Sage was extremely evasive when Mr Hertzog asked him about Sage International. He made airy reference to “the promoter” of the company, before eventually claiming that this was Ms Thorpe. His lack of candour is an index of the true position.[51]Fifthly, Mr Peto sought to make much of the point that the Board Resolution purporting to effect the transfer of the legal interest in Sage International from Mr Sage to Ms Thorpe does not tally with the transfer documentation in a number of respects, particularly as regards the status of Ms Thorpe as “CEO” and “General Manager” at various times. I agree that the documents do not tally, but a reasonable doubt exists as to their genuineness: in other words, I am not prepared to hold that they are forgeries. I find that the legal interest in Sage International was transferred to Ms Thorpe but that this was a sham. The company post-June 2014 was run in the same way as it had been previously. One possible reason for the discrepancy in the documentation is that Ms Carolyn Sampson could not be specified as the CEO of Sage International, because she was not resident in Dubai, and that the certificates I have seen (the originals of which are available) were backdated post-transfer. Furthermore, given that Ms Thorpe had no true operational role in the company, it is unsurprising that the labels attached to her synthetic function(s) should vary from time to time. I also accept Ms Bromige’s evidence as regards the transfer of the bank accounts into Ms Thorpe’s name some eight weeks later.[52]On the other hand, it is relevant in my view that Ms Thorpe paid nothing for the business, as the share sale agreement itself expressly records. The debts of Sage International, apparently to the tune of £10,000-£15,000, remained in the company, and were never formally novated to Ms Thorpe. Under the local law I can see that she may have become personally subrogated to the liabilities. The real point is that the absence of consideration is consistent with a sham or fig-leaf transaction.[53]Sixthly, the available documentation points to Mr Sage remaining in the cockpit. His email to Carolyn Sampson dated 2nd January 2015, using the first person singular throughout, is flatly inconsistent with this being Ms Thorpe’s company (in such circumstances he would at the very least have used the first person plural). There is documentation showing that he was intending to place Sage International within a Panamanian trust. Finally, there is internal documentation relating to Mr Sage’s vision for 2020 which is consistent only with this being his company.[54]Seventhly, it is clear that Sage International continued to use Mr Sage’s Lloyd’s Bank account in Guernsey and his personal Paypal accounts, and that its invoices directed customers to pay monies into these. There was inconsistent evidence between Mr Sage and Ms Bromige as to whether the company’s bank accounts with Mashreq Bank were frozen (Mr Sage said that they were, Ms Bromige said that they were not). I am not able to resolve that conflict on the available material, applying the criminal standard of proof. However, the fact that Ms Thorpe might have difficulty in using her personal bank accounts for this purpose, which difficulty I am prepared to accept, is a further reason why the purported transfer to her was not genuine: it was known that Mr Sage would have to remain behind the company.[55]Eighthly, Mr Peto submitted that Mr Sage and Ms Thorpe have forged a document, purportedly dated 5th September 2014, authorising the company’s use of his bank accounts at Lloyd’s, and his credit and debit cards. Pointers towards the explanation of fraud are the fact that the Paypal accounts are not mentioned at all, and that in September 2014, contrary to the document, Ms Thorpe was not the CEO of Sage International. The significance of the Paypal omission is that in August 2016, when this document was first produced, HPE was not yet alleging that assets had been dissipated out of the Paypal account in the United Kingdom. No witness could explain this omission, and Ms Bromige in particular was very surprised by it.[56]I have pondered this issue, conscious always of the rigours of the criminal standard of proof. I have already found that Mr Sage and Ms Thorpe have been prepared to give mendacious evidence on oath in other respects. If this document were genuine, one would have expected there to exist another document evidencing the basis on which Mr Sage was being remunerated – and no such document has been disclosed. Moreover, the document at issue is particularly important in as much as it appears to lend some evidential weight to Mr Sage’s defence regarding the dissipation allegations. It is not difficult to imagine that this is how Mr Sage was rationalising the issue in the summer of last year. Overall, I am driven to conclude that, had the document been contemporaneous, it would have mentioned the Paypal accounts. The absence of any reference to these is inexplicable, as Ms Bromige I believe accepted (I am not implicating her in the forgery). I hold that the September 2014 agreement was concocted by Mr Sage acting in concert with Ms Thorpe, albeit the latter under his direction, for the purpose of this litigation.[57]Ninthly, the witnesses gave inconsistent evidence regarding Mr Sage’s alleged remuneration package. Mr Sage said that he received 20% of profits, Ms Bromige said that he received 5%, and Ms Thorpe sought unconvincingly to bridge the gap between them by saying that it was 5-20%. The reason for these evidential divergences is that there was no agreement in place at all: this was, and remained, Mr Sage’s company.[58]Finally, Mr Sage was asked about an email sent by him to his secretary on 10th September 2015 reminding her that Sage International was “technically” Ms Thorpe’s company. Mr Sage’s answer to Mr Peto’s questioning on this point was evasive. I then asked Mr Sage an admittedly leading question, although not in any pointed or aggressive fashion, and the following appears on the transcript:
“[The Judge]: So isn’t the point you were making to your secretary that she should be forgiven for thinking that it was your company and therefore you needed to remind her that technically it was [the] fiancée’s company because technically her name was on the relevant document? A. Correct.”
Two matters should be noted. First, the transcript reads “her fiancée’s” company when I in fact said “the fiancée” – I marvel at the accuracy of these transcripts, but one or two mistakes arise, particularly if words are mumbled. Secondly, once I rephrased the question in a manner which pointed out what Mr Sage was admitting to, I could see from his demeanour that the penny dropped and he then changed his evidence.[59]For all these reasons, I conclude that Sage International remained under the control of Mr Sage and that Ms Thorpe held the company to his order, as his nominee. It follows that Mr Sage is in contempt of the provisions of the Freezing Order relating to the disclosure of its existence as an asset of his. It also follows, although this adds little to the gravamen of these contempts, that Mr Sage’s two affidavits sworn in December 2015, and his affidavit sworn in connection with this application in August 2016, also amount to contempts.

Dissipation of Assets

[60]The relevant provisions of the Freezing Order are paragraphs 5, 6, 17(2) and 22A(i). For the purposes of the Order, the term “assets” includes any asset which Mr Sage had the power, directly or indirectly, to dispose of or deal with as if it were his own (paragraph 6), as well as “any asset held by or in the name of or under the control of [Mr Sage] irrespective of whether [he] claims not to be the beneficial owner of such assets” (paragraph 22A(i)). On the other hand, the order did not prevent Mr Sage from dealing with or disposing of his assets “in the ordinary, lawful and proper course of business” (paragraph 17(2)).[61]It is not in dispute that on 3rd December 2015 the total sum of £25,000 was paid out of Mr Sage’s Lloyd’s bank account in Guernsey, as follows:(a) the sum of £10,000 to Amex Centurion (timed at 13:43);(b) the sum of £5,000 to Barclays Platinum (timed at 13:44);(c) the sum of £10,000 to Ms Bromige. Once the sum of £4,000 paid to Mr Sage’s solicitor is taken into account, only £1,652.12 was left in the account.[62]It is further not in dispute that on the same day, at around the same time, approximately $112,500 was paid out of Mr Sage’s Paypal account to Carolyn Sampson, as follows:(a) the sum of $25,000 (timed at 13:43);(b) the sum of $25,000 (timed at 13:47);(c) the sum of $25,000 (timed at 13:50);(d) the sum of £25,000 (timed at 13:52). It is unclear how much was left in Mr Sage’s Paypal account after all these monies were paid out. There is some doubt on the oral evidence as to whether the Paypal limit on a single payment was 25,000 in pounds sterling or dollars, but it appears from the fact of the fourth payment that it must have been in sterling.[63]There can be no dispute that the payments were made out of accounts held in Mr Sage’s name and under his control. Furthermore, I have already held that Mr Sage retained control over the assets of the company. Thus, it seems to me that the real issues which arise under this rubric are, first, whether the payments were made on Mr Sage’s instructions and, secondly, whether they were made in the ordinary course of business, in settlement of bona fide obligations of the company.[64]Mr Sage’s case is that he never gave instructions to anyone on the day to make these payments, and that Ms Sampson had authorised the payment to herself of approximately $112,500, together with the other payments I have specified. There is no evidence from Ms Sampson explaining the position. After giving somewhat unclear and evasive evidence on the point, Mr Sage answered my questions in terms which indicated that he was not told of Ms Sampson’s authorisation until after 3rd December 2015.[65]It should be immediately apparent that Mr Sage’s case is both inherently implausible and based on an amazing coincidence. The payments are in round numbers, not precise amounts. They were made over a fifteen minute period which occurred five hours or so after the Freezing Order was served on Mr Sage and, coincidentally, when Ms Thorpe happened to be out of the house. There was no reason, other than to dissipate assets, to effect the payments at this point in time. Furthermore, it is extraordinary that neither Mr Sage nor Ms Thorpe were told that the payments were about to be made, or indeed had been authorised by Ms Sampson (less extraordinary, I agree, as regards Ms Thorpe, who was a cipher for her fiancé). These matters, taken in isolation, are not quite sufficient to discharge the criminal standard of proof. However, taken in conjunction with other matters, I find that the criminal standard has been discharged. My additional reasons, which are two-fold, are as follows.[66]First, the evidence concerning the circumstances in which these payments were allegedly authorised before 3rd December 2015 is, in my view, chaotic. In solicitors’ correspondence the point was made that the payments had been pre-authorised by the banks, and then effected (by them) at lunchtime on 3rd December. That contention was never remotely plausible, not least because pre-authorised payments would have been effected at the start of business that day. In any event, this is no longer Mr Sage’s case. Ms Bromige’s clear evidence to me was that she had a conversation with Carolyn Sampson at around the time of the MBS during which the latter as CEO agreed in principle to her and Ms Bromige being paid once the dust had settled following the successful event. On 2nd December 2015 there was a lengthy Skype conversation during which the various payments the subject-matter of HPE’s complaint were agreed to be disbursed. According to paragraph 16 of Ms Bromige’s affidavit, “the transfers in question were executed by myself on the 3rd December in the normal course of doing business”. She also said that they had been “pre-authorised by Carolyn the CEO the day before”. Then, in the witness box, Ms Bromige had a crystal-clear recollection of a Skype conversation she had with Carolyn Sampson on 3rd December (approximately 2:40pm Spanish time, 6:40am for Ms Sampson in Colorado) during which she discussed the payments at the same time as effecting the transfers over the internet.[67]As I have already said, I cannot accept that Ms Bromige has given truthful evidence about this matter. Had there been a Skype conversation with Ms Sampson at the time the payments were being effected, she would have remembered that when she swore her affidavit as recently as October 2016. The only reasonable inference is that Ms Bromige has fabricated this whole story in order to avail her step-son. This inference is supported by the fact that the evidence of both Ms Bromige and Mr Sage regarding the discovery of the apparently inadvertent breach of the Freezing Order was also in the same state of chaos. Had this been truly a revelation to Mr Sage, he would have a precise recollection of the circumstances in which he had learned that so much money had been paid out in breach of the Order. The further inference must be that Mr Sage got a message out to Ms Bromige to make these payments on the very day they were made.[68]Secondly, I am not remotely satisfied that the payments were made in the ordinary course of business. All the circumstances, as already adumbrated by me, indicate that they were not. Ms Bromige asserted that she was owed at least £10,000 in relation to Sage International before June 2014, but there is no documentary evidence to vouch this and, furthermore, the very first time this contention was made was at a late stage in her cross-examination by Mr Peto. Ms Thorpe, for what it is worth, believed that the indebtedness arose in relation to Ms Bromige’s employment by Space Energy. Mr Sage has had ample opportunity to produce contemporaneous evidence within the company proving that the sum of £10,000, a round number, was properly due and owing to Ms Bromige on 3rd December 2015, and he has conspicuously failed to do so. I decline to make any affirmative findings in his favour, even in recognition of the criminal standard of proof, in circumstances where the oral evidence is of such deplorable quality.[69]Similar points may be made as regards the sums paid to Ms Sampson, although in this regard so much more money is entailed. Mr Sage’s email to Ms Sampson is not altogether clear as to how her “profit share” was to be calculated, and when it was to be paid. Ms Bromige has provided a schedule for the purpose of this litigation which purports to show that Ms Sampson was owed in the region of $106,000 as at the end of November 2015. Given my evident concerns about the oral evidence of Ms Bromige and Mr Sage, I must accord that document nugatory weight. What Mr Sage has failed to do is disclose a contemporaneous document itemising the company’s indebtedness to Ms Sampson at all material times. Such a document must exist (indeed, Ms Bromige said that it existed), and I draw an inference adverse to Mr Sage from his failure to produce it. In my view, it is also surprising that no emails and other contemporaneous documents have been provided to me, capable of elucidating the matter. It is inconceivable that Ms Sampson, apparently owed so much money, should not have written emails to Mr Sage about it at the time. Even if the retrospective schedule were given any weight, the evidence demonstrates that Ms Sampson was overpaid on 3rd December 2015. This I ascribe to poor arithmetic in the person responsible for confecting the schedule rather than anything else. The reality is that Mr Sage has failed to discharge the evidential burden which must rest on him to show that any of these payments were made in the ordinary course of business.[70]It follows that Mr Sage is in contempt of the Freezing Order by dissipating £25,000 from his Lloyds Bank Account, and $75,000 and a further sum of £25,000 from his UK Paypal account, on 3rd December 2015. This is an extremely serious contempt, exacerbated by the lies which have been told in its aftermath.

Other Matters

[71]Given my findings thus far, the other contempts relied on by HPE are capable of being addressed quite briefly. These flow, in the main, from the more serious contempts.

Bank Accounts

[72]The detail is not substantially in dispute. At Appendix 1 to Mr Hertzog’s first affidavit helpfully appears a schedule of Mr Sage’s breaches of the Freezing Order in relation to the disclosure of the existence of bank accounts as well as failure to deliver up or procure the delivery up of bank statements. Interestingly, Mr Sage’s account with HSBC is in the name of “Sir Peter Sage”, an alleged error on the bank’s part which he has not sought to remedy. It is not disputed by Mr Maguire that, if Mr Sage controlled the company, he should have disclosed the existence of these accounts and delivered up or procured the delivery up of accompanying bank statements. His failure to do so is a contempt which I find proved.

Dropbox

[73]This contempt is admitted by Mr Sage; its seriousness is not.[74]The position now appears to be, after much vacillation and equivocation at earlier stages in the history of this case, that Mr Sage provided the password to the Dropbox account to Mr Young on 3rd December 2015. Before the computer expert sought to examine the contents of this account on 15th December 2015 (i.e. effectively, the documentary records of the company, insofar as they existed in electronic form), Mr Sage changed the password. It is not clear when he so, although he claimed at one stage in his evidence that this was on 15th December itself. Without independent corroboration I decline to accept that explanation. Mr Sage agreed that he had not been informed by Mr Young that it was acceptable to change the password. Thus, access was denied to Mr Young for a period – although this must have been relatively short because Mr Sage provided a new password to him on the same day.[75]It is not disputed that it was Mr Sage’s obligation to afford access to the Dropbox account, that this was denied and that a breach of the Search Order has occurred. The breach would be far more serious if Mr Sage deleted items in the Dropbox account between 3rd and 15th December. There is some evidence that he did, not least Ms Bromige’s evidence that contemporaneous documents exist - either written or behind a file called “dashboard” – which vouch the company’s indebtedness to its employees. I reject Mr Sage’s evidence that the metadata should confirm whether deletions took place or not; Mr Young says otherwise. On the other hand, a possible inference is that Mr Sage has refrained from disclosing these documents because to do so would have harmed his case on dissipation. Overall, it seems to me that it would be wrong to draw a specific inference adverse to Mr Sage on this issue.

Email Accounts

[76]By paragraphs 16 and 17 of the Search Order Mr Sage was required to give access to any email accounts (to the extent to which he could), to supply all email addresses and passwords, to give the usernames and passwords for any email accounts whether they contain listed items or not, and to permit the Independent Computer Specialist to make up two electronic copies of documents held on any electronic storage device, including those to which he had remote access.[77]On 3rd December 2016 Mr Sage gave details of four email accounts. It was then discovered that there were two further email accounts on his ‘phone (EMP@petersage.com and my-pa@petersage.com) which he had failed to disclose. Subsequently, it was established that Mr Sage had failed to disclose the existence of eight further email addresses on his @petersage.com domain name, as itemised at paragraph 105 of Mr Hertzog’s written statement. Mr Sage has failed to provide the passwords for those accounts, although on my understanding of his re-examination he would now be prepared to do so.[78]I heard a mass of evidence about these accounts, including who used them and when. His personal account, the details of which I will not mention in a public judgment, gives a clue to his sense of self-worth. Ultimately, however, all this evidence missed the point, for two clear reasons. First, these were all accounts associated with Mr Sage’s business activities in Sage International. Secondly, he owned the domain name and, through Ms Bromige, had administrator privileges as regards the individual usernames. It follows that I find that Mr Sage is also in contempt in relation to the email accounts I have identified.

Sanction

[79]The contempt jurisdiction is designed to uphold the authority of the Court and reaffirm the rule of law, as well as to provide an incentive for belated compliance. My powers are extremely wide, ranging from fines and sequestration, to suspended and final orders of committal to prison. Under section 14(1) of the Contempt of Court Act 1981, a committal order must be for a fixed term not exceeding 2 years, half of which (if not suspended) must be served in custody.[80]The sanction of committal to prison is reserved for cases of serious, contumacious flouting of orders of the court: see Lord Phillips MR in Gulf Azoz Shipping Company Ltd v Idisi [2001] EWCA Civ 21 (at paragraph 18).[81]In mitigation, Mr Sage has provided a written submission which was elaborated by his Counsel. Mr Maguire submitted that his client is effectively a man of good character who committed a “dreadful error” on the day, “which got out of hand”. He has had an industrious business career and carried out important charitable activities. There is a mass of testimonial evidence which supports Mr Sage in these respects and which I have considered. Committal is an order of last resort, and there are exceptional circumstances which militate in favour of a lenient approach.[82]Mr Maguire also submitted that the Freezing Order has had a significant effect on his business, and that he has to prepare for the main trial, which is due to start in March 2017. Preparations for that trial have not been completed, and could not be conducted from prison.[83]It is said that it seems clear that Ms Sampson was owed some money on 3rd December 2015, and that the breach was not therefore that serious.[84]Finally, Mr Maguire volunteered compliance with the Orders by his client in terms of provision of email accounts, passwords and bank statements.[85]I propose to have regard to the helpful guidelines itemised by Eder J in Otkritic International Investment Management Ltd v Gersamia [2015] EWHC 821 (Comm).[86]In my judgment Mr Sage’s breaches of the Freezing Order and Search Order were deliberate and extremely serious. There was little planning involved, because the opportunity did not present itself before he was served with the Order, but in my view his giving of instructions to Ms Bromige was a contumacious and brazen violation of its terms, and entailed the recruitment to this illicit task of his fiancée. That said, I doubt whether she hesitated for more than a second.[87]In terms of the breach of the Search Order, and the disclosure elements of both orders, Mr Sage’s failures have been deliberate, extensive and flagrant. His “evolving context” as regards the engagement ring contains elements of farce, were not the matter so serious in terms of the magnitude of disrespect shown to this Court. Plainly, Mr Sage took an early policy decision to distance himself from the activities of Sage International, reckoning that the very steps he had engineered in Dubai to evade the scope of the Freezing Order there would equally avail him here. All the other contempts flow from that policy decision.[88]In my judgment, it would not be correct to characterise Mr Sage’s failings as “a dreadful error”. I use, and have used, the plural – there have been numerous breaches of the Orders – rather than the singular. Mr Sage decided on the day to flout the Orders, and he consistently pursued that position thereafter.[89]Even if it were ever appropriate to suspend an immediate Order for Committal so that a contemnor might prepare for his civil trial, I am not satisfied that it would be right to follow such a course in these circumstances. The impact of my Order on the March 2017 trial will require separate consideration.[90]In my judgment, Mr Sage has shown no remorse and has had ample opportunity to comply. Late promises to comply are insufficient. As I have said, his litigation strategy has been to seek to justify his position “retrospectively”. This was a poor exercise of judgment, overly dependent as it was on Mr Sage’s imagined ability to talk himself out of a tight corner. In a commercial context he might be quite adept at doing so, but the forensic context can be particularly unforgiving.[91]The custody threshold has been easily transcended. I am not going make a suspended committal order in this case. Mr Sage is committed to prison for a period of 18 months.

Order

i) “any proprietary interest in any company or corporate body … whether held by way of shares, loan notes, bearer shares or otherwise” (paragraph 22A(a)); ii) “any right or power to deal with any property, whether through nominees, power of attorney, or by instructing another person who habitually obeys instructions” (paragraph 22A(d)); iii) “any property held by or in the name of a third party or company who habitually obeys either or both of the Respondent’s [sic] instructions in relation to dealings with such property” (paragraph 22A(e)).

Cited in 1 later judgment