England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
MRS. JUSTICE PROUDMAN
HC10C01636

		Royal Courts of Justice Strand, London, WC2A 2LL
		30th July 2014

Lord Justice Briggs :

1. In May 2010 Her Majesty's Revenue & Customs ("HMRC") issued a claim against nine appellants alleging a conspiracy to defraud by unlawful means causing loss in excess of £40 million, arising from their alleged participation in MTIC fraud, relying upon some 719 transaction chains involving the import and then re-export of mobile phones into and from the UK.
2. On 19^th April 2013, Proudman J handed down judgment in relation to the claims based upon a sample of twenty-six of those transaction chains. She found that HMRC had made out its case in relation to twenty-three of those chains, and that the loss thereby caused to HMRC was £1,278,527.71. By her order made on the same day, she ordered the first to seventh appellants inclusive to pay that amount to HMRC, together with a further £150,000 as an interim payment on account of costs. She adjourned to a further hearing unresolved questions about interest, permission to appeal and directions as to the conduct of the claims arising from the outstanding 693 alleged transaction chains. I shall refer to the aggregate of the damages and the interim payment on account of costs as "the Judgment Sum".
3. The first to fifth appellants sought permission to appeal. The issues with which this judgment is concerned are:

(1) whether permission to appeal should be given subject to the condition that the Judgment Sum first be paid by those appellants;

(2) whether there should be a stay of execution of the judgment pending appeal.

Extraordinarily, these issues fell to be resolved by the full court only on the first of the three days set aside for the substantive appeal. After hearing a full day's submissions by counsel for those appellants and for HMRC, we decided that permission to appeal should be given subject to the condition that the Judgment Sum first be paid into court by 30^th September 2014, that there should be a stay of execution of the judgment in the meantime and that the stay should continue if that condition as to payment in was by then complied with. The unfortunate result of the very late determination of those issues was that the substantive appeal had to be adjourned, to be heard by the same constitution in November or December 2014, giving rise to a wholly unsatisfactory waste of two days' pre-arranged hearing time. We stated when giving our decision on those issues that written reasons would follow. This judgment contains my reasons for that decision.

4. In the barest outline, the rival contentions of the two sides (the first to fifth appellants being represented by a single legal team) may be summarised as follows. It is not in dispute that the appeal satisfies the ordinary merits test for a first appeal. HMRC submit that the appellants' conduct demonstrates the combination of a determination to resist enforcement of the judgment by any available means, coupled with a manifest intention to dissipate their dwindling resources on other litigation such that, if a condition for payment of the Judgment Sum is not imposed, HMRC will probably recover nothing on account of the judgment, even if the appeal fails. That, it is said, is a compelling reason to impose the condition. For their part the appellants say that the imposition of the condition would stifle their appeal, because they already lack the resources with which to comply with it. They add that unless execution of the judgment is stayed pending appeal, it is probable that HMRC would bring about the bankruptcy or (as appropriate) insolvent liquidation of the appellants, and stifle the appeal by that route. HMRC respond by saying first, that the appellants have failed to demonstrate that the appeal would be stifled and, secondly, that even if the appellants now lack the resources with which to satisfy the condition, this was the result of their own decision, while the application for the imposition of the condition was pending, to deploy cash which would have been available to pay the Judgment Sum in full, in a long-term loan which cannot now be recovered in time. Thus it is said that if the appeal would now be stifled by the imposition of the condition, then the appellants only have themselves to blame.
5. These submissions were developed by reference to detailed evidence and documents about the conduct and financial circumstances of the appellants and, but to a lesser extent, the conduct of HMRC in seeking to enforce the judgment. I shall have to set out the relevant facts about those matters in some detail, but I must start by introducing the parties.

Background

6. The first appellant Sunico A/S ("Sunico") is a Danish company. It was found by the judge to have supplied the mobile phones used for the purposes of MTIC fraud in each of the twenty-six sample chains, with the requisite knowledge that they were to be deployed in the perpetration of a VAT fraud. Sunico is owned as to 51% by the fifth appellant M&B Holdings A/S ("M&B"), another Danish company, which is itself wholly owned by the third appellant Mr. Mangharam Harwani ("Mangharam"). The remaining 49% of Sunico is owned by the fourth appellant Abascus Holding ApS ("Abascus"), another Danish company, which is itself wholly owned by the second appellant Sunil Harwani ("Sunil"), who is Mangharam's son. They are both directors of Sunico, as had been Mrs. Beena Harwani ("Beena"), Mangharam's wife and Sunil's mother. Mention also needs to be made of another Danish company, RTN Traders ApS ("RTN"), wholly owned and controlled by Sunil's sister Kavita Harwani ("Kavita"). Although not parties to these proceedings, they played an important role in the relevant post-judgment events. In particular, RTN was the borrower under the long-term loan of cash to which I have already referred.
7. Most of the events relevant to the present issues occurred after the handing down of the judgment. Nonetheless some earlier events are material, at least by way of background. The first (in time) is that HMRC obtained worldwide freezing orders at the outset of these proceedings (coincidentally from me, at first instance), but they were later set aside, as against the appellants, as a result of breach of the disclosure duty on the without-notice application.
8. Secondly, HMRC alleged in its Particulars of Claim that some US$14.7million-odd had been paid by Sunico to the eighth defendant Dayal Shadapuri ("Dayal") in Hong Kong as a means of distributing part of the proceeds of the MTIC fraud among the conspirators. Dayal's defence alleged, with supporting evidence, that sums amounting in aggregate to slightly more than US$2 million out of those receipts were paid, on the seventh defendant's instructions, into an account in the name of Beena. By the time of the trial, Dayal had obtained summary judgment dismissing the conspiracy claim against him but, at paragraph 165, the judge found that the US$2 million-odd had indeed been paid to Beena.
9. Thirdly, notwithstanding having lost its international freezing orders, HMRC obtained Danish law pre-judgment attachments of specific assets of Sunico, M&B and Sunil in May 2010 and in April 2011. They included real property, bank accounts, goods, receivables and a car. Their estimated current realisable value is said to be £863,508. Nonetheless, the validity of those attachments, as a means of enforcement of an English judgment under the Judgments Regulation has been challenged by the appellants, and that challenge was pending in the CJEU when judgment was handed down.

Events following judgment

10. A week after the handing down of judgment, both Sunico and Abascus were placed in a Danish law liquidation process broadly similar to an English members' voluntary winding up. The appellants' Danish lawyer Mr. Michael Amstrup was appointed liquidator. HMRC was not informed of this event, which set in motion a time limit for the lodging of creditors' claims.
11. The adjourned hearing to deal with interest, permission to appeal, stay and directions as to the remaining claims was listed for hearing on 11^th and 12^th July, before the judge. Without prior notice, HMRC sought the imposition of a condition as to payment of the Judgment Sum. The judge:

(1) awarded interest;

(2) granted permission to appeal;

(3) refused a stay of execution;

(4) refused a stay of the remaining claims, and required the parties to attempt to agree directions;

(5) adjourned HMRC's application for the imposition of a condition to a further hearing.

This was, in due course, listed for hearing before the Judge on 17^th and 20^th December 2013. No minute of the orders which she had made in July was ever agreed or drawn up.

12. The appellants having all failed to pay the Judgment Sum, HMRC issued Danish bankruptcy proceedings against the appellants which were listed for hearing on 28^th November 2013. In the meantime the CJEU handed down judgment in relation to the enforcement issue, which remitted to the Danish courts the question whether the judgment had been obtained by a sufficient exercise of state power (in the obtaining of evidence) by HMRC, so as to render it unenforceable under the Judgments Regulation. That issue remains outstanding in the Danish courts. All that can be said is that the validity of the attachments, and the scope for any enforcement of the English judgment under the Judgments Regulation, remains uncertain.
13. A bankruptcy order may be made in Denmark where it is shown that a person is unable to pay his or its debts as they fall due. HMRC's bankruptcy applications were based upon the appellants' failure to pay the Judgment Sum. It was therefore necessary for the appellants to demonstrate to the Danish bankruptcy court their ability to pay the Judgment Sum. They did so by arranging for Mr. Amstrup's client account to be credited on 25^th and 26^th November with three payments to the credit of M&B amounting in the aggregate to DKK16,650,000 (with a sterling equivalent of approximately £1,850,000), comfortably in excess of the Judgment Sum. Mr. Amstrup then flourished his client account statement recording those credits before the Danish bankruptcy court, submitting (according to an attendance note made by HMRC's Danish lawyer) that this demonstrated that his clients were not insolvent, since they had available an amount exceeding the claim on which the bankruptcy proceedings were based.
14. HMRC sought immediately to attach that cash by way of execution but, by the time it did so, the amount had been paid out of Mr. Amstrup's client account to M&B on 29^th November, and lent by M&B to RTN before HMRC could attach it in the hands of M&B. In December 2013 HMRC did obtain an attachment of the receivable due to M&B from RTN, having a sterling equivalent face value (assuming that RTN can repay in full) of £1,798,323 together with a further attachment of a receivable due to M&B from another company with a sterling equivalent face value of £360,540. The result is that, by the end of December 2013, HMRC had the uncertain benefit of attachments with an aggregate sterling face value of a little over £3 million. The uncertainties as to the real value of those attachments as security for, or a means of enforcement of, the Judgment Sum arise both because of the unresolved enforcement issue pending in the Danish courts, and because of the large uncertainty as to whether the underlying assets, if and when realised, will be worth their stated values. A further uncertainty arises from the fact that it is by no means clear that a Danish attachment preserves priority to the creditor over other creditors in an insolvent liquidation of the debtor, and there are real risks that the owners of all the relevant assets (Sunico, M&B and Sunil) are insolvent, or may become insolvent by the time that enforcement becomes possible. Further, the attachment of a receivable owed to M&B gives HMRC no say in the conduct of the affairs of M&B's debtor, which continues to be at liberty to deal with its assets as its owners and directors think fit.
15. Notwithstanding that the brief transfer into and then out of M&B (and Mr. Amstrup's client account) of the DKK16,650,000 in November 2013 was made the subject of criticism and complaint by HMRC in evidence served in these proceedings shortly thereafter, and the service of substantial evidence by the appellants in response, the appellants have thus far declined to identify, by evidence, the source of the credits to Mr. Amstrup's client account or the terms of the loan of the cash to RTN and, in particular, the date upon which that loan becomes repayable. All that is known is that it is described as a "long term loan" in RTN's accounts. Those accounts also suggest that the cash has been deployed by RTN in its on-going trading business, save to the extent that it has been used by way of loan to Sunico, with repayment guaranteed by M&B, to provide litigation funding in relation to this and other proceedings in which the appellants are involved.
16. Mr. Abbas Lakha QC for the appellant told us on instructions that the source of this cash had been the repayment by RTN to M&B of an earlier loan. In the light of the fact that the appellants advanced a positive case supported by signed witness statements, but then elected to call no evidence at trial, I am reluctant to place significant reliance on information based purely on instructions, not least because more than six months have passed during which the appellants have had the opportunity to deal in evidence with the source and deployment of the cash briefly credited to Mr. Amstrup's client account, but have evidently chosen not to do so.
17. The adjourned hearing of HMRC's application for the imposition of a condition came back before the judge, after various procedural skirmishes, on 20^th December 2013. She made detailed directions for the preparation and trial of the remaining claims. HMRC were directed to elect which transaction chains they intended to pursue, by the end of January 2014. In the event they elected to pursue some three hundred of them. Disclosure was ordered to take place by the end of June 2014. The appellants were directed to serve schedules of admissions or non-admissions in relation to each chain by 8^th September, and witness statements were ordered to be served by 3^rd November 2014. We were told that disclosure has taken place, but not inspection.
18. By 20^th December the present appeal had already been listed for a three-day hearing in July 2014, pursuant to the permission given by the judge in July 2013. Further, on 17^th December 2013 Kitchin LJ had made an interim order staying execution of the judgment pending an oral hearing about stay between the parties in 2014. The result was that, with the parties' consent, the judge revoked her permission to appeal and directed that the related questions of permission to appeal, the imposition of a condition and stay of execution all be determined by a single Lord Justice at the hearing directed by Kitchin LJ, on the undertaking of the appellants to make an application for permission to the Court of Appeal, and to seek to have to expedited with a view of an effective one day hearing in January 2014, and on HMRC's undertaking not to oppose the permission application. But most unfortunately no such hearing took place, either in January, or at all so that, when the parties belatedly re-focussed upon the outstanding issues as to permission, condition and stay, the court's only option was to direct that they be determined on the first of the three days set aside for the full appeal. It is unnecessary for me to decide whether this unfortunate state of affairs arose as a result of any breach by the appellants of their undertakings to the judge, and I leave entirely out of account in my reasons for the imposition of the condition the possibility that it may have been.
19. The appellants have served substantial evidence about their financial means, resources and on-going commitments in support of their claim that the imposition of a condition, or the withholding of a stay, would stifle this appeal. The most recent round of evidence was served only a day before this hearing, but HMRC did not object to its admission, preferring rather to focus upon its alleged inadequacies.
20. Taken at face value however, the appellants' evidence may be summarised as follows. Sunico and Abascus are insolvent, with no assets other than those which have been attached. Neither Sunil or Mangharam have significant personal assets beyond the value of their indirect interests in M&B, and Sunil has significant liabilities to other members of his family. M&B has significant assets, chief among them the receivable due from RTN. But they are all subject to attachments which, even if of dubious validity, nonetheless currently prevent their use. Further, all the appellants are alleged to face substantial contingent liabilities as the result of litigation against them, both in England (in the form of the remaining claims), in Germany and in Denmark, all of which they are defending at substantial expense, estimated in due course to be likely to exceed £4million. They say that the only source of third party funding consists of lending to Sunico by Kavita's company RTN, currently running at a sterling equivalent of £600,000, but that any further funding is dependent upon Kavita's assessment of the value of M&B's guarantee of repayment. Sunil and Mangharam deny any influence or control over Kavita's conduct, and any involvement in the business of RTN. They say that none of them have any undisclosed assets, and their response in evidence to HMRC's reliance upon the payment of US$ 2 million to Beena is to say that they have asked her about it, but that she cannot recall any such payment at all.

The legal principles applicable to the imposition of conditions and to stay of execution pending appeal

21. CPR 52.3(7) provides that:

"An order giving permission may –

(a) limit the issues to be heard; and

(b) be made subject to conditions."

This paragraph of Part 53 applies to any court with jurisdiction to give permission to appeal. CPR 52.9 provides as follows:

"(1) The appeal court may –

(a) strike out the whole or part of an appeal notice;

(b) set aside permission to appeal in whole or in part;

(c) impose or vary conditions upon which an appeal may be brought.

(2) The court will only exercise its power under paragraph (1) where there is a compelling reason for doing so."

22. There is at first sight a curious and unexplained tension between the power to impose conditions under Part 52.3(7)(b) and the power to do so under Part 52.9(1)(c), since the latter is, but the former is not, constrained by the requirement that a compelling reason for doing so be identified. Nonetheless, in the only two authorities cited to us about the principles applicable to the exercise of this power, namely Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065 and Days Medical Aids Limited v Pihsiang Machinery Manufacturing Co. Limited and ors [2004] EWCA Civ 993, the court was minded to proceed on an assumption, without deciding the point, that the compelling reason requirement applied in both cases, notwithstanding the linguistic anomaly. Counsel before us did not suggest that we should do otherwise, and for my part I am content to do so. It reflects the undoubted fact that a condition such as a requirement to pay or secure payment of the judgment debt is not routinely applied as a condition for permission to appeal. Nor is the fact that an unsuccessful defendant wishes to appeal to be taken as a routine shortcut to the need to enforce a judgment, by the obtaining of the requisite condition for payment. Something more than mere non-payment of the judgment debt needs to be shown although, as both cases show, a deliberate failure to pay by a judgment debtor with the resources to do so may be a factor supportive of the imposition of a condition.
23. Nonetheless the existence of a compelling reason is only a necessary rather than sufficient factor. Even where a compelling reason is shown, the question remains a matter for the court's discretion: see per Clarke LJ in the Hammond Suddard case at paragraph 40.
24. It is unhelpful to treat the particular circumstances identified in each of those two cases as giving rise to a compelling reason for the imposition of a condition as indicative of any more detail in the underlying legal principle. They are merely illustrations of the proper exercise of the discretion on particular facts.
25. Nonetheless the following emerged from those cases as factors which, depending on the overall circumstances, may point towards the imposition of a condition:

(1) Difficulties of enforcement of the court's judgment in a foreign jurisdiction;

(2) An apparent sufficiency of resources to enable the judgment debtor to continue to fund litigation;

(3) The absence of convincing evidence that the appellant lacks the resources, or access to the resources, which would enable it to pay the judgment debt;

(4) Inadequate disclosure by the appellant of its financial affairs, or a lack of confidence on the part of the court that it has been shown the truth;

(5) The combination of

i) A deliberate breach of an order to pay the judgment debt

ii) The refusal of a stay, and

iii) Ability to pay, but a failure to do so cynically based upon the difficulties for the respondent in enforcing the judgment in a foreign jurisdiction.

The first four of those factors emerge from the Hammond Suddard case. The last comes from the citation in the Days Medical case of paragraph 22 of the judgment of Potter LJ in Bell Electric Limited v Aweco Appliance Systems GmbH & Co KG [2003] 1All ER 344.

26. Plainly, the main factor which, if it is sufficiently demonstrated, is likely to tell against the imposition of a condition is where to do so would stifle the appeal. The concept of stifling an appeal (or claim) is well-known in the context of applications for security for costs. It needs no elucidation here, beyond the following two observations. The first is that a corporate appellant is unlikely to persuade the court that an appeal will be stifled by an order for payment or security merely by reference to its own assets. The court will wish to consider whether the company's backers or supporters have the resources and motivation with which to assist: see Calltel Telecom Limited v Revenue and Customs Commissioners [2008] STC3246, at paragraph 13. The second is that proof that the imposition of a condition for payment or security will probably stifle an appeal is only a factor against the imposition of the condition, rather than an absolute bar to it. Thus for example, where an appellant's conduct amounts to a continuing abuse of process, this may be sufficient to justify the imposition of a condition, even if that would stifle an appeal. This is because the losing party has no absolute right of appeal, but only a right to the discretionary grant of permission to appeal: see the Hammond Suddard case at paragraph 38. In the context of this case, where a present inability to comply with the condition can be shown to have been caused by an appellant deliberately putting out of its reach assets with which it might have done so, at a time when an application for the imposition of the condition was pending, then an assertion that, thereafter, the imposition of the condition would stifle the appeal may fall on stony ground, because the appellant's predicament will have been self-induced.
27. The principles applicable to an application for a stay of execution pending appeal are very well known indeed. They are concisely summarised in paragraph 22 of the judgment of Clarke LJ in the Hammond Suddard case. In short, CPR 52.7 provides that unless the appeal court or the lower court orders otherwise an appeal does not operate as a stay of execution of the orders of the lower court. The grant of a stay is discretionary. The court needs to balance the risks of injustice which may be occasioned by the grant or refusal of a stay. The obvious risk of injustice if the stay is refused is that the appeal may be stifled. The obvious risk if it is granted is that, after an unsuccessful appeal, the respondent will be unable to enforce the judgment. The risk that, if paid in the meantime, an unsuccessful respondent to the appeal may be unable to disgorge its receipt does not arise in relation to HMRC.

Analysis

Imposition of a condition as to payment of the Judgment Sum

28. The first question is whether HMRC has demonstrated a compelling reason for the imposition of that condition. Mr. David Chivers QC for HMRC submitted that all the particular factors outlined in the Hammond Suddard and Days Medical cases were, upon analysis, equally applicable in the present case. He pointed to the decision of the appellants not to satisfy the judgment when M&B had the resources to do so, and to their vigorous attempts to resist enforcement, by challenges under the Judgments Regulation. He focussed upon what he described as the "trick" by which the appellants had staved off HMRC's bankruptcy applications by the momentary transfer of sufficient cash into Mr. Amstrup's client account, followed by its removal before HMRC had time to attach it. He said that in various respects (to some of which I will return) the appellants' evidence about their means, and their relationship with RTN, was incomplete and unsatisfactory, leaving the court with no sufficient assurance that there had been full and frank disclosure.
29. For the appellants, Mr. Lakha submitted first that HMRC were fully secured for the Judgment Sum by the attachments already achieved. He said that to the extent that HMRC faced any difficulties in enforcement, this was due to having litigated in England rather than in Denmark, to having lost worldwide freezing relief due to a breach of the disclosure duty, and because they had recourse to state powers in obtaining evidence for the pursuit of their claim. Above all, Mr. Lakha submitted that the evidence plainly showed that, having regard to the widespread need of the appellants for litigation funding, not merely for the appeal, but for the defence of the remaining claims and the defence of litigation in Denmark and Germany, it was obvious that the imposition of the condition would stifle the appeal. Nothing short of a stay of execution would enable the appeal to be pursued.
30. I am persuaded that there are compelling reasons for imposing a condition of payment of the judgment sum. My reasons follow.
31. First, there are in my view serious and unusual difficulties facing HMRC in enforcement of its judgment, even in a fellow EU member state which is subject to the Judgments Regulation. There appears to be no end in sight to the uncertainty as to whether the judgment will be enforceable at all in Denmark under the Judgments Regulation. For reasons already given, that appears to be an open question, and there is no evidence as to when the Danish court will find time to deal with the issues remitted to it by the CJEU. Further, even if enforcement proves possible, realisation of the assets subject to the attachments (save for sums in bank accounts) appears likely to be of uncertain value, and may be gravely affected by insolvencies of one or more of the owners of those assets. Yet further, the largest single asset by far is the receivable constituted by the long term loan to RTN. But the recovery of that loan appears dependent upon RTN's trading future (which has recently been one of profits and losses), upon the extent to which RTN's assets are lent to Sunico for litigation funding (£600,000 having been lent in the last eight months), and upon the attitude of those in control of RTN. While that appears to be Sunil's sister Kavita, his evidence that he had no involvement of any kind with RTN was easily demonstrated to be false by HMRC, by reference to documents which showed that Sunil had been actively engaged as RTN's salesman in transactions relating to electrical goods.
32. I reject Mr. Lakha's submission that HMRC has only itself to blame for any difficulties in enforcement. True it is that HMRC lost its worldwide freezing relief due to a breach of its disclosure duty, but it has done nothing post- judgment adversely to affect its rights of enforcement. I consider it fanciful to suggest that HMRC should be treated as the author of its own misfortune by using statutory powers for the obtaining of evidence (if that proves to be fatal to enforcement in Denmark). I consider it plain that HMRC cannot be said to be reliably secured for its judgment by the present attachments, for the reasons already given.
33. Secondly, this is in my view a very clear case in which the appellants through M&B (which all the other appellants jointly own and control) did have in cash resources more than sufficient to pay the Judgment Sum, in late November 2013, but on their evidence deliberately chose to put that sum out of M&B's reach by making a long-term loan of it to RTN. I have already noted how, despite ample opportunities to do so, the appellants have failed to provide evidence as to the source of that cash, the terms of the loans to RTN, or of the reasons why it was lent rather than being used to pay the Judgment Sum. By late November HMRC's application for the imposition of a condition as to payment of the Judgment Sum had been pending for nearly four months, and was due to be heard within a month. A stay of execution had been refused and the Judgment Sum was overdue for payment.
34. Mr. Lakha sought to submit, on instructions, that it was lent to RTN because otherwise HMRC would have attached it. That might well be true, but if it is, it implies that the loan to RTN was a device by which to shelter the cash as a litigation resource, and it is noteworthy that some £600,000 of it has apparently already been deployed by loan back to Sunico for that purpose. But a judgment debtor has no right to ring-fence money otherwise available to pay the judgment debt for the purpose of deployment to meet future litigation needs, even in this jurisdiction. Nor is the fact that one or more of the appellants may be involved in other litigation around Europe a factor of any significant weight in justifying the use of such a device to put those resources out of the reach of a judgment creditor. Indeed Mr. Lakha denied (again on instructions) that the loan was made for that purpose, and the appellants' evidence goes out of its way to stress Kavita's independence from the appellants and her freedom to decide, in her own and RTN's interests, what to do with the money lent.
35. More seriously, a supposed fear that the cash available to M&B in late November might otherwise have been attached is itself no justification for the disposal of it. HMRC's stance at that stage was that it would give credit in respect of any attachments against the amount which it was seeking by way of condition. Although its stance has in that respect changed, Mr. Chivers made it clear to us that HMRC would co-operate in the release of any attachments necessary to enable the Judgment Sum to be paid to HMRC or, as we have decided, into court. Thus a fear that the cash might have been attached amounts in reality to no more than the fear that it might be used to satisfy HMRC's judgment. But, at least in the eyes of the courts which have issued that judgment, payment of the Judgment Sum is precisely what M&B should have done with cash available for that purpose.
36. Mr. Lakha sought vainly to suggest that the arrangements under which the cash had been made available to M&B in time for the Danish bankruptcy hearing in late 2013 were such as to have prohibited M&B using it for any other purpose than a loan back to RTN. But this is in my judgment flatly contradicted by Mr. Amstrup's statement to the Danish court that he had in his client account sufficient money to satisfy the judgment upon which the bankruptcy proceedings were based. Mr. Lakha suggested that this all depended on a proper interpretation of what Mr. Amstrup may have said to the Danish court, but the attendance note made by HMRC's Danish lawyer, present at the hearing, was served upon the appellants before the end of December 2013, and has not in the following seven months been contradicted.
37. Thirdly, I am by no means satisfied that the appellants have, despite the apparent fullness of their evidence, made full and frank disclosure of all available assets. My concern is largely based upon the wholly unsatisfactory way in which Sunil and Mangharam responded in their most recently served evidence to the allegation that Beena had received some US$2 million from Sunico in the manner in which I have described. It is in my view wholly inadequate for them simply to say that they asked Beena about it and that she could not recall any receipt. Sunil, Mangharam and Beena were all directors of Sunico at the material time and Sunil was its leading light. It seems to me inconceivable that Dayal's dealings with the monies remitted to Hong Kong were otherwise than pursuant to either or both of Sunil and Mangharam's instructions. Yet they sedulously but unconvincingly fail to address what they themselves might be supposed to have recollected about the matter.
38. Mr. Lakha submitted that this finding of the judge (that US$2 million had been paid to Beena from Sunico) was about a matter which had never been pleaded by HMRC. But the same material was relied upon for the purposes of HMRC's application for the imposition of a condition. The appellants can hardly have been said to have it sprung upon them in that context, and the difficulties which they face in relation to it are difficulties which arise because of the unconvincing manner in which they have sought to deal with it in their evidence.
39. In my judgment the factors which amount to compelling reasons in this case fall fairly and squarely within the analysis of Potter LJ in the Bell Electric case. The appellants had deliberately failed to pay the Judgment Sum when it was due, and when they through M&B had the cash resources with which to do so. The appellants had by then applied for and been refused a stay. Their failure to pay was not due to financial difficulty but was, in my view, cynically based upon the practical difficulties for the respondents in seeking enforcement in a foreign jurisdiction, coupled with a deliberate putting of the available cash out of the reach of M&B, beyond the scope of an attachment, and into the hands of someone (namely Kavita) who, while professing to be under no influence from them or obligation to them, has nonetheless arranged for her company RTN to make a substantial part of it available to the appellants for litigation funding.
40. The second question is whether factors pointing against the imposition of that condition are sufficient to outweigh those compelling reasons. The only relevant candidate, if made good, would be the often-repeated submission of Mr. Lakha that to impose the condition would stifle the appeal.
41. As to that, there is no evidence, and it is not seriously suggested, that the appellants lack the funds with which to instruct their solicitors and counsel to pursue the appeal. They were indeed briefed for what might have been a full three day appeal at the start of the hearing. Mr. Lakha's point is that the condition could not be complied with by the appellants, so that the appeal would fall away for that reason. But I am not persuaded that the appellants have demonstrated that this is probable. True it is that they say they have no immediate recourse to the largest attached item, namely the receivable payable by RTN, and that the balance of the attached items (about £830,000-odd) would be insufficient on its own to satisfy the Judgment Sum. But the appellants have failed to disclose the terms of the RTN loan, so that it is not demonstrated that repayment could not be demanded in time. If it could be then, subject only to any financial difficulties of RTN, the appellants would have the assets necessary to satisfy the judgment sum in full. Secondly, the failure to satisfy the court that there has in any event been full disclosure of assets ultimately available to Sunico or its owners means that the appellants fall short in their attempt to prove that stifling of the appeal would be probable in any event.
42. But even if the present position is that the appellants could not pay the Judgment Sum in full within a reasonable time (and our order requires it to be paid by the end of September 2014), that inability would in any event be the direct consequence of the appellants' decision that M&B should put cash available for that purpose in late November 2013 beyond its, and the other appellants', reach. It would be a case in which the real cause for the appeal being stifled was the appellants' choice, in the face of an application for the imposition of a payment condition, to put out of their reach resources with which to make that payment either immediately, or within a reasonable time. In such a case, the prospect that an appeal might be stifled by no means operates as a bar to, or even a powerful factor against, the imposition of a payment condition.
43. Mr. Lakha sought to suggest that there are, in any event, public interest reasons why this appeal ought to be heard. For that purpose he relied upon the assertion, as part of the grounds of appeal, that HMRC had, as a public authority, failed to make proper disclosure on weaknesses in part of its documentary support for its case (namely what are known as the Hawk documents) and that the judge regarded the issues relating to the Hawk documents as a main reason for her initial disposition to give permission to appeal.
44. It is in my judgment inappropriate to address the merits or significance of a pending appeal as a weighty factor in the balancing exercise relevant to the imposition of a payment condition or the grant or refusal of a stay. Generally, the court's approach is to avoid such assessments because of their propensity to generate satellite litigation. I am not persuaded that this case justifies any exception to that healthy self-denying ordinance.
45. Those are the reasons why I decided that a payment condition should be imposed. In my view, the appropriate order is for payment into court rather than to HMRC. My reason for that is that I can envisage as at least a possibility that an otherwise stifled appeal might be saved by an application that a modest proportion of the amount in court should be released to fund the appellants' legal costs of the appeal itself, but not of the other pending litigation. Indeed, modest sums have already been released from the attached assets by a process to which HMRC consented. Payment of the Judgment Sum into court would create a convenient fund for that purpose by comparison with an order that it be paid outright to HMRC.
46. I do not mean thereby positively to encourage applications by the appellants for payment out to meet the legal expenses of this appeal. As far as I can see at present (and the appellants have adduced no evidence to the contrary) their legal team is already fully funded for the prosecution of the appeal itself.

Stay of execution

47. It follows from the foregoing that I would not have granted a stay of execution, if no condition had been imposed. But I have been persuaded by Mr. Lakha that, if the condition as to payment into court is imposed, then the appellants do need or deserve protection from further enforcement measures by HMRC while they seek to raise the money to make that payment by the end of September. Further, I consider that the appellants ought to be entitled to protection, once having made that payment into court. A payment into court does not automatically prevent enforcement by a judgment creditor but, in the event that the payment is made, it seems to me that the appellants ought to be entitled to protection from double exposure, and from the risk of bankruptcy proceedings at the instance of HMRC between payment in and judgment on the appeal which would then follow.

Lord Justice Underhill:

48. I agree.

Lord Justice Patten:

49. I also agree.