Heifer International Ltd v Christiansen & Anor [2013] EWHC 721 (TCC)

[2013] EWHC 721 (TCC)Case No HT-07-106
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 9 th April 2013
Before
MR JUSTICE AKENHEAD
Between
HEIFER INTERNATIONAL LIMITEDClaimant(1) HELGE CHRISTIANSENDefendants(2) CHRISTIANSEN ARKITEKTER KS MAA PARDefendant
Turlough Stone (instructed by Bryan Cave) for ClaimantGareth Tilley (instructed by Russell-Cooke LLP) for DefendantsHearing Hearing date: 26 March 2013
JUDGMENT

Introduction

[1]In these now very stale proceedings, issues arise as to whether a charging order placed on the Claimant’s property in Surrey should be discharged. The real issue is whether or not the debt, which related to a costs order made against the Claimant, has been or is to be considered as having been discharged.[2]The underlying dispute related to the refurbishment of a very substantial domestic property,Tor Point, Tor Lane, St Georges Hill, Weybridge in Surrey (the “property”), owned by the Claimant, Heifer International Ltd ("Heifer"), a British Virgin Islands company, which is in turn owned indirectly by or operated for the benefit of a Mr Alex Templealso known as Mr Alexsandr Aleksandrovich, a Russian national who resided in England with his wife and children and who has a shipping transportation business shipping oil.[3]The First Defendant, Mr Christiansen, is a very experienced Danish architect residing and practising primarily in Denmark although he has carried out work in other countries. The Second Defendant (“the firm”) is his firm, which is a legal entity under Danish Law owned by Mr Christiansen and under which he and his associates carry out their architectural practice in Denmark. As found by HHJ Toulmin CMG QC in this court in these proceedings in December 2007, Heifer contractually employed the firm to act as its architect in relation to this development. Mr Christiansen was not personally employed by Heifer.[4]At Heifer’s request and with its consent, a number of Danish companies and workmen were retained on the project including the Third to Fifth Defendants. Heifer authorised and then gave the First Defendant a power of attorney to enter into contracts with various companies, firms and craftsmen on behalf of the Claimant and to authorise payments for them. To that end, at least in part, it is common ground that Heifer provided money either to Mr Christiansen in his own right or on behalf of the firm to be held in a Danish bank (Spar Nord) in various different currency accounts and to be paid out for and in connection with the development.[5]The development started in earnest in 2006 but by late 2006 or at the latest by January 2007 relationships between the parties began to sour because Heifer believed that there were substantial defects in the work and possible financial irregularities. Thus it was that it issued its claim in April 2007 against Mr Christiansen, the firm and three Danish contractors involved with the mechanical and engineering services works. The claim against the three contractors was for defects which were listed in Appendix 2 to the Particulars of Claim. Following the issue of applications by the Defendants, all further proceedings against the firm and the three contractors were stayed pursuant to Section 9 of the Arbitration Act 1996 and proceedings against Mr Christiansen personally were stayed and not to be proceeded with without the Claimant giving one month's notice. This followed a lengthy and typically learned and thorough judgement from His Honour Judge Toulmin CMG QC. There followed arbitrations in Denmark and between Heifer and the firm and Mr Christiansen and Heifer and one or more of the Danish contractors. Relevant Chronology to the Current Applications[6]I will set this in tabular form: Date Event 2006 Heifer paid £1,476,432 to Mr Christiansen. At least eight payments totalling some £600,000 were paid out for work or fees as found by HHJ Toulmin CMG QC 8 January 2007 Mr Temple e-mailed Mr Christiansen saying that "all payments on [behalf of] Heifer Internationals [sic] you must make only after my written confirmation, otherwise all payments will be unauthorised" 3 April 2007 Heifer issued TCC proceedings against Mr Christiansen, the firm and 3 Danish contractors 9 August 2007 Mr Christiansen authorised payment out of Danish Bank 606,000 Danish Kroner for fees due to the firm. No authority sought from Heifer 18 December 2007 TCC handed down judgement finding that Heifer’s contract was with the firm. Proceedings stayed against 2nd to 5th Defendants 18 January 2008 Proceedings against Mr Christiansen stayed. Order that "in part payment of costs" order against Heifer, £45,000 was to be paid by 8 February 2008 by Heifer to the First and Second Defendants’ solicitors. 11 February 2008 Heifer’s solicitors wrote to Mr Christiansen’s solicitors: “As [Mr Christiansen] has admitted…he holds the Funds in Trust in three separate bank accounts in his own name at Spar Nord Bank in Denmark…Such funds could only be used if and as authorised and instructed by our client… …our client hereby authorises the release of sufficient funds from the Funds in Trust to amount of £45,000 GBP sterling in total and authorises the corresponding payment of costs to the solicitors of the First Defendant and the Second Defendant in accordance with the Order [of 18 January]” 22 February 2008 Interim Charging Order over the property made 1 May 2008 Master Leslie after contested hearing, makes Final Charging Order over the property 13 May 2008 Final Charging Order registered 6 January 2009 Issue of Chancery proceedings for the sale of the property, Master Price ordered that the proceedings be stayed "pending determination by the Danish Court of Arbitration as to whether a payment on 9th August 2007 to the firm was proper"; permission to apply 8 March 2011 Danish arbitrator issued final award dismissing Heifer’s claims against the firm and Mr Christiansen and dismissing the firm’s claims for fees 7 April 2011 Heifer’s Danish lawyers applied to the arbitrator for a specific ruling as to the lawfulness or propriety of the withdrawals after 8 January 2007 3 May 2011 Mr Christiansen’s and the firm’s Danish lawyers wrote to the arbitrator asking the arbitrator not to reopen the proceedings 6 May 2011 The Danish arbitrator declined to reopen the case or give a supplementary award. March 2012 Consent order in TCC proceedings that Mr Christiansen serves his defence by 16 April 2012 – no Defence yet served 30 November 2012 Heifer applied unsuccessfully to HM Land Registry to remove the restriction on the register - denied because there was still a stayed application for an Order for Sale 18 January 2013 Current application issued by Heifer to have Final Charging Order on the property discharged – sent to and received by Mr Christiansen and the firm 4 February 2013 Ramsey J at a hearing attended by the Claimant but not by the First and Second Defendants ordered that: “Unless by 4 p.m. on 5th of March 2013 [the First and Second Defendant] show cause why(i) the charging order…should not be discharged and(ii) the stay on [their] application for an order for sale ordered by Master Price…should not be lifted and that application dismissed, then forthwith thereafter and without further order –a. The Charging order…shall be discharged.b. The stay of [their] application for an order for sale…shall be lifted.c. [Their] application for an order for sale of the Property shall be dismissed…” 5 March 2013 Mr Christensen and the firm apply to strike out Heifer’s application The Contentions[7]Heifer’s argument can be put simply. It argues that there must have been at least DK606,000 in the Danish Bank account or accounts by August 2007 when Mr Christiansen caused and authorised payment out to the firm of what was said to be outstanding fees in relation to the development. By that time and since early January 2007, his authority to make payments from these accounts had been expressly withdrawn by Heifer. He acted therefore in breach of trust and those monies should have remained in the account. If they had remained in the account, there would have been enough to honour the £45,000 costs ordered by the TCC and there was the express authorisation in February 2008 for those costs to be paid out to him and the firm. In effect, because he acted in breach of trust, he should be treated as if at least £45,000 was still in the accounts perhaps on the simple basis that “equity looks on as done that which ought to have been done”.[8]The counter-arguments are also on analysis simple. Counsel for the First and Second Defendants says that as a matter of fact it is common ground that there were insufficient funds in the Danish bank accounts to pay for the £45,000 costs ordered to be paid by Heifer; that sum has not been paid and remains unpaid. It is therefore outstanding and there is therefore no good reason to discharge the Charging Order or for their application for a sale of the Property to be dismissed.[9]There is some real dispute between the parties as to whether or not in effect the Danish arbitrator addressed the issue as to the lawfulness or propriety of the payment DK606,000 in August 2007 from the Danish bank accounts. The difficulty arises because the Claimant has not provided a translation of the substantive award of the arbitrator, albeit that the Danish language award is exhibited by the Claimant’s solicitor. However, the following appears to be common ground:(a) It is clear that Heifer was seeking payments for damages which amongst other things including the recovery of the DK606,000 payment paid out in August 2007 from the Danish bank to the firm. Reference was made at least in argument to the £45,000 costs order which is referred to in the award.(b) It is accepted that the arbitrator said that in effect there was nothing due to either Heifer or to the firm or to Mr Christensen and that the claim and counterclaim were dismissed.[10]There was and remains a minor issue as to the extent to which the Danish arbitrator actually addressed the specific issue as to whether the August 2007 payment out was unlawful or improper. Mr Abildstrom, Heifer’s Danish lawyer, says in a witness statement at Paragraph 15 that the arbitrator did determine that the post-January 2007 withdrawals from the Danish bank accounts had been made but did not expressly determine that the withdrawals were unauthorised, simply finding that "Heifer had not suffered a financial loss which could be compensated in the context of its claims raised in these arbitration proceedings as a consequence of the withdrawals”. This is not a translation but is simply what Mr Abildstrom says. Counsel for the First and Second Defendants produced a translation from his clients’ Danish lawyers which is not very far away from this summary:
“With regard to Helge Christiansen’s withdrawals on the "running expenses account" (which has been established in his name, but with a prepaid amount originating from the Claimant) - after that the power of attorney had been withdrawn – the Court remarks that the Claimant has not suffered an economic loss that means that the claimant should be compensated…”
Discussion[11]Section 3(5) of the Charging Orders Act 1979 provides that the Court "may at any time… make an order discharging or varying the charging order". It is common ground that this gives the Court a discretion which is not to be exercised lightly but that a balance needs to be struck between the interests of the party whose property is charged and of the holder of the charge. There is no evidence from Heifer that there is a pressing difficulty which requires the charge to be lifted; for instance, there is no evidence that Heifer wishes to sell the property or is otherwise finding difficulty in raising funds against the property by reason of this relatively small charge; perhaps that is not surprising as the house is worth many millions of pounds.[12]There was argument as to whether the First and Second Defendants’ application was realistic but it has been accepted in argument that this is probably immaterial in the sense that, if Heifer is entitled to have the charging order discharged, there is no separate ground for striking out its application.[13]It is common ground that by February 2008 (after the Court’s costs order had been made) there were insufficient funds in the Danish bank accounts to pay for the costs ordered by the court; Mr Rea confirms that at Paragraph 10 of his statement. It is also clear that, at the hearing for the Final Charging Order, Heifer was represented by Counsel and by that stage it would have been open to Heifer to make the point that the order should not be finalised because the underlying debt (£45,000 for costs) must already be treated as having been paid; if he or she did make the point, then the final order was made by the Court in effect on the basis that it was not a good point but if the point was not made at all then Heifer has only itself to blame.[14]It follows therefore that as a matter of fact no payment was actually made (either by Heifer directly or by way of authorised release from the Danish bank account) to satisfy the costs order made against Heifer in February 2008.[15]One must then move on to consider whether or not there was a breach of trust by Mr Christiansen in August 2007 in paying out to his firm fees in relation to the development. Judged by purely English law, it might well be the case that some sort of implied or constructive trust must have been present in relation to the funds held in the Danish bank accounts and the payment out in August 2007 in breach of the authorisation to pay out may give rise to a breach of trust. However, there are two problems facing the Court. The first is that the applicable law or proper law relating to these bank accounts could well be Danish law and it is presently unclear whether Mr Christiansen’s behaviour in August 2007 would be a breach of the Danish law relating to trusts and, if so, what, if any, relief would be available. The second problem is that, even if English law applies, one needs to determine what the remedy is. It might be that damages could be an adequate remedy and, then, it might well be said that Heifer has suffered no loss because the unauthorised payments have gone to pay sums which it owed to the firm in any event.[16]I also strongly suspect (although I cannot be certain without a decent, certificated and independent translation of the award) that de facto the Danish arbitrator effectively dealt with the issue by determining that in effect the firm was in reality entitled to the DK606,000 for its fees but that there needed to be no order or declaration about unlawful or improper withdrawals from the bank account because, as both parties accept the award stated, Heifer had suffered no “economic loss” as a result. That could only be a sensible conclusion if the arbitrator was of the view in reality that it was pointless making some sort of declaration as to unlawfulness or impropriety in relation to these payments, particularly if he then went on to dismiss the claim and counterclaim. One should not judge foreign arbitral awards as if they should have been drawn up like judgements in the courts of this country. There was of course no challenge by Heifer in the Danish courts that the arbitrator had wrongfully failed to deal in effect with the issue about unlawfulness or impropriety.[17]It is still open to Heifer to seek to argue by way of proceedings in Denmark or possibly even in this country that Mr Christiansen acted in breach of trust and to seek damages. I would very much hope that, given the relatively small size of sum involved, Heifer would not think this necessary or desirable. It could seek to add this by amendment to its current Particulars of Claim which in effect seeks only an account from Mr Christiansen in relation to what was paid out and when from these accounts. Any application to amend would have to be considered on its merits.[18]For the reasons given above, I am satisfied that it would be wholly wrong to discharge the Final Charging Order let alone the application or proceedings seeking a sale on the property. I am satisfied that the First and Second Defendant have shown good and effective cause in this regard. What should happen is that Heifer should pay what it was ordered to pay back in February 2008 and should do so promptly. If the First and Second Defendants wish to apply to stay the proceedings until this is done, then that application can be considered also on the merits.[19]Whilst I indicated what the outcome would be at the close of the hearing, I have reserved this judgement. However I did say to Counsel that what remains of the TCC case was crying out for resolution and settlement by the parties. It is clear that at the very least substantial elements of the money held originally in the bank accounts were properly paid out (as held by HHJ Toulmin). The amount of the outstanding costs order relating back to February 2008 is small at least relative to the value of the property and what is likely to be the high net worth of Mr Temple. The parties have already had an extensive "outing" on a number of the matters in dispute before the Danish arbitrator and, even if there remain disgruntled feelings, the award of the arbitrator must be considered to be final at least so far as it goes. The costs likely to be incurred in pursuing these proceedings will, I suspect, be out of all proportion to what is or remains properly in issue. Decision[20]The Claimant’s application is dismissed and no order is made on the First and Second and Defendants’ application. There is to be a general extension of time for the service of the Defence pending further order and pending the parties taking a sensible and commercial look at the position as it stands.