England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/11/2005

Mr Justice Lightman:

INTRODUCTION

1. I have before me an application by the claimant in the
   Chancery Action to reimpose a freezing order, originally made against Mr van Hoogstraten and companies with which he was connected ("the Companies") by Rimer J on the 27^th August 2002 and subsequently continued by Patten J and Peter Smith J later in 2002. I have set out in my judgment dated the 11^th November 2005 ("the Judgment") the history of the freezing order and the references to it on successive applications to me for directions in respect of the trial of a Preliminary Issue fixed to be heard on the 23^rd November 2005. I shall set out a brief résumé.
2. Neither Mr van Hoogstraten nor the Companies made any effective application for the discharge of the freezing order after it was granted but Mr van Hoogstraten made repeated complaints about it and that its continuation in force was a reason why he could not obtain legal representation on the Preliminary Issue. I have held in a series of judgments that the existence of the order was not the reason why Mr van Hoogstraten did not have legal representation: the reason was that he saw it to his advantage that he acted in person; that Mr van Hoogstraten had ample funds available to finance legal representation; and that, if the freezing order was a barrier, the court had made it clear that it would be sympathetic on a properly made application supported by proper evidence to lift the barrier so far as this was necessary. I repeatedly encouraged Mr van Hoogstraten to make such an application, but he declined to do so.
3. At the hearing on the 6^th October 2005, when Mr van Hoogstraten raised the matter of the freezing order again, I told him that as an indulgence to him I would make time available to hear a belated application in respect of the freezing order if he or the Companies wished to make one, and he and the Companies did so. I heard the Companies' application on the 1^st, 3^rd and 4^th November 2005. I had intended when I made time available for Mr van Hoogstraten's application that the hearing would be limited to the hearing of an application for the variation required to enable Mr van Hoogstraten and the Companies to raise the funds necessary to pay for Mr van Hoogstraten's legal representation on the Preliminary Issue, for that was the context in which Mr van Hoogstraten's complaint about it were made; but neither the court order nor the time estimate precluded a full scale application for the discharge of the freezing order, and Mr van Hoogstraten and the Companies applied for the full discharge of the order and I entertained that application.
4. In the course of the hearing of the application by counsel on behalf of the Companies, having read the parties' skeleton arguments and the relevant authorities, it became apparent to me that (without deciding the matter) there were strong (although as yet untested) arguments for questioning whether the freezing order should ever have been granted and whether, if it should have ever been granted, it was justifiable to grant it in the absolute terms in which it was granted. I had in mind in particular: (1) the judgment in this action of Chadwick LJ of the 21^st July 2004 (with which the other members of the Court of Appeal agreed) which set aside the grant of judgment in favour of the claimant and discharged a sequestration order granted at the claimant's instance; and (2) the judgment of Clarke LJ in Halifax plc v. Chandler [2001] EWCA 2042 Civ 1750. Chadwick LJ clearly took the view that for the reasons he gave the freezing order ought not to have been granted and Clarke LJ made plain that freezing orders (in particular against third parties) ought not to prevent dealings in the ordinary course of business. I was also troubled that the application for discharge was inevitably taking a great deal of time when that time was required for preparation for the trial due to commence on the 21^st November 2005. It was plain to me that at the least the freezing order would be likely to require modification to permit dealings by the Companies in the ordinary course of business.
5. Accordingly on the 3^rd November 2005 prior to the conclusion of the address of counsel for the Companies I told Mr Irvin, counsel for the claimant, that the claimant should consider whether to agree a modification of the freezing order and that if he unreasonably failed to do so, the claimant would be at risk as to the costs of the application before me. This was self-evident but worth reminding of.
6. Mr Irvin was plainly concerned at what I said and called for reinforcements, and on the following morning on the 4^th November 2005 Mr Irvin attended with his leader Mr Mitchell QC. Early that day negotiations commenced between counsel for both sides for an interim order to regulate affairs until after judgment on the Preliminary Issue, and late that afternoon a consent order was agreed whereby the claimant agreed to the discharge of the freezing order against the Companies and the Companies in turn agreed to give undertakings in their place in respect of the interim period. The orders were drawn up.
7. On Wednesday the 9^th November 2005 Mr van Hoogstraten proceeded with his personal application to discharge the freezing order against him. Immediately with my encouragement leading and junior counsel for the claimant and Mr van Hoogstraten entered into negotiations and the terms of a consent order were agreed that day and the consent order was signed and drawn up the following morning. The order is in two parts. In one part the claimant agreed to the discharge of the freezing order against Mr van Hoogstraten. In the other Mr van Hoogstraten gave undertakings to the court. The consent order was again an interim arrangement pending judgment on the Preliminary Issue.
8. Shortly thereafter the claimant took the view that there was a lacuna in the protection afforded by the consent order against Mr van Hoogstraten. Whilst the consent order provided adequate protection in respect of assets disclosed by Mr van Hoogstraten, the undertakings did not prevent Mr van Hoogstraten selling properties belonging to him but not disclosed in the statement of assets. The explanation proffered by the claimant for the lacuna is that the consent order was drawn up in a great hurry and leading and junior counsel did not notice it. The realisation of the omission has led to this application. The existence of the lacuna cannot of course of itself ground the application. The application had to be and was made on other grounds. Mr van Hoogstraten has been duly served with the application but has not attended or made any representation.

ISSUES

9. The claimant submits that on the new evidence before me the court should reinstate the freezing order against Mr van Hoogstraten in respect of all of Mr van Hoogstraten's assets. The starting point on this application must be the consent order. Referring to the consent order in paragraph 17 of my judgment dated the 11^th November 2005 I recorded:

"… a compromise was reached acceptable to [the claimant and the Companies] in respect of the period until after judgment on the Preliminary Issue. Mr van Hoogstraten's application was heard on the 9^th November 2005 when (again with my encouragement) a like compromise was reached."

10. The relevant principles governing the setting aside of a consent order are set out in S v. S [2003] 3 WLR 1372 where Bracewell J said:

"[4] Grounds for setting aside a consent order

The authorities cited before me demonstrate that the grounds for setting aside a consent order fall into two categories:

(1) Cases in which it is alleged there was at the date of the order an erroneous basis of fact, eg misrepresentations or misunderstandings as to position or assets.

(2) Cases in which there has been a material or unforeseen change in circumstances after the order, so as to undermine or invalidate the basis of the consent order as in Barder v Caluori [1988] AC 20, sub nom Barder v Barder (Caluori Intervening) [1987] 2 FLR 480 and known as the supervening event.

…

[6] There is a common thread in the two categories of cases that in the first group, the court and the parties have been misled as to existing circumstances, and would not have made the order if the true state had been known. In the second group the court and the parties would not have considered the order appropriate, had it been known what was about to happen."

11. The sufficiency for this purpose of the occurrence of an unforeseen change in circumstances after the order finds support in the decision of the Court of Appeal in Republic of Kazakhstan v. Istil Group inc (The Times November 17 2005).
12. The claimant relies on both grounds set out in the judgment of Bracewell J. The first was that the court order was entered into under the erroneous basis of fact induced by the misrepresentations by Mr van Hoogstraten as to the existence on his part of a present intention to be legally represented at the trial of the Preliminary Issue, which would be facilitated by the consent order. The second was that the manifestation of the clear intention of Mr van Hoogstraten not to be legally represented or attend at the trial of the Preliminary Issue (at which he must in any ordinary circumstances be the principal witness) and not to pay a penny of any sum held to be due constituted a material change of circumstances which undermined or invalidated the basis of the consent order and entitled the court to set it aside and to grant relief going beyond that provided by the consent order.
13. I turn to the relevant evidence before me. As regards the relevant representation by Mr van Hoogstraten, I recorded the representation that he had the present intention to be legally represented in paragraphs 23 and 25 of my judgment dated the 11^th November 2005. As regards the existence of the misrepresentation and change of position support is to be found in: (1) the facts that immediately after I gave that judgment Mr van Hoogstraten told my clerk that he was leaving the country and that he would not return until next year (see paragraph 3 of my judgment dated the 17^th November 2005) and that he promptly left the country and has not returned or shown any intention to return for the trial of the Preliminary Issue or to instruct solicitors or counsel for the hearing; and (2) two witness statements by Ms Hare (the legal executive employed by the claimant's solicitors Messrs Healys) who has the conduct of this action on behalf of her firm. She states categorically in paragraph 3(2) of her affidavit dated the 15^th November 2005 that the claimant entered into the consent order in the belief induced by the representation of Mr van Hoogstraten that Mr van Hoogstraten did intend to be legally represented at the trial (which was an entirely reasonable belief to be held) and she records in paragraphs 5, 6 and 7 of her affidavit dated the 16^th November 2005 remarks made by Mr van Hoogstraten and overheard by Ms Sally Collyer (the clerk to Mr Irvin) who reported them to her. Paragraphs 6-8 of this witness statement reads as follows:

"6. The Defendant was overheard to say that he knew that Judgment had gone against [him] but that was the best thing that could happen. The Judge had fallen right into his trap. He couldn't get justice in the lower courts because he was filthy rich. He went on to say that he had no money because it was all in trust for his children so he couldn't afford to instruct counsel.

7. I am also told by Sally Collyer and verily believe that the Defendant was overheard to say, 'what the other side don't know is that I'm going tomorrow to have myself declared bankrupt so they won't get a penny out of me'.

8. I believe that these remarks, taken in the context of the Freezing Order having been discharged, indicate a clear intention on the part of the Defendant to do everything in his power to frustrate the enforcement of any Judgment that the Claimant may obtain.

…"

14. I have already held in earlier judgments that Mr van Hoogstraten has at all times had access to more than ample funds to instruct solicitors and counsel on the Preliminary Issue. The evidence now before me (in particular read against the factual background set out in my various judgments) supports the inference that Mr van Hoogstraten never intended to attend, let alone be legally represented, at the trial of the Preliminary Issue; that his references to his intention to obtain legal representation were merely pretexts to obtain adjournments and delay; and that he never had any such intention. He was not legally represented nor did he attend at the trial of the Preliminary Issue when it commenced this morning. It has been open to Mr van Hoogstraten on this application to put in evidence in rebuttal of the inference but he has declined to do so. I accordingly hold that I should set aside the consent order on grounds of misrepresentation. I likewise hold that I should set it aside on the ground that his stated decision not to attend the trial and to do all within his power to frustrate any judgment obtained against him are supervening events undermining and invalidating the basis of the consent order.
15. Accordingly after anxious consideration I have concluded that on the basis of both the grounds set out by Bracewell J I can and should by reason of the unforeseen developments that have occurred and the misrepresentation by Mr van Hoogstraten reimpose the freezing order as it existed prior to the consent order and in place of the consent order upon him but with the cap of £5 million lifted to £6 million to reflect the increase in the claimant's costs already incurred or about to be incurred in this action and potentially recoverable from him. I may add that my decision is supported by the continuing persistent default by Mr van Hoogstraten to comply with the procedural directions which I have given relating to the trial (including provision of his skeleton argument) and his refusal to pay the costs awarded against him on his several abortive applications to the Court of Appeal and to me.
16. I should for completeness refer to one matter. Last night Mr Minaides of Minaides Robson sent a fax to me requesting the opportunity to address me at 2 p.m. today to explain the circumstances leading to Mr van Hoogstraten instructing his firm and the decision of his firm to act provided that the issues relating to funding were resolved and a reasonable adjournment was obtained. Mr Minaides said that "unfortunately" he was not able to attend this morning, but would be able to attend at 2 p.m. My clerk replied by fax that the hearing of the trial would commence at 10.30 a.m. and that, if he wished to make any application he should send his skeleton argument and evidence in support to the claimant's legal representatives. Mr Minaides thereupon instructed a member of his staff to telephone my clerk to say that he was not making, or authorised by Mr van Hoogstraten to make, any application. I do not think that this intervention by Mr Minaides in any way qualifies the findings which I have made: indeed it confirms the decision of Mr van Hoogstraten not to participate in the trial.