Strand, London, WC2A 2LL
B e f o r e :
| RBG RESOURCES PLC (IN LIQUIDATION)
|- and -
|(1) VIREN KUMAR RASTOGI
(3) ANAND KUMAR JAIN
(4) JAY PATEL
Mr John McDonnell QC & Mr Timothy Sisley (instructed by Magwells, 6 Angel Gate, City Road, London EC1V 2PB for the Fourth Defendant
Hearing dates: 6th – 10th May 2005
Crown Copyright ©
Mr Justice Lightman:
"Is there a sufficiently arguable case of Mr Patel's breach of his obligation to the company? …
71. In my view the liquidators have raised a sufficiently arguable case that Mr Patel must have been involved in the frauds or in suppressing their discovery. The absence of a smoking gun, which Mr McDonnell relied on, may well be due to the extensive clean up which was organised in the last three months of the company's life. If, as is arguable, Mr Patel was involved in the frauds and the subsequent cover-up, one would not expect to find many of his fingerprints on any of the remaining company records.
72. The liquidators have gone beyond the generalities and have pointed to a significant number of individual events with which Mr Patel was involved which taken together, so they say, give rise to a reasonable inference that Mr Patel was involved in the frauds and hindered the investigation of them. Some of these are set out in the particulars of claim and they are the subject of lengthy evidence from Mr Shierson.
73. Mr McDonnell acknowledges that his side's spirits fell when it read Mr Shierson's evidence. It creates a telling picture, from numerous small strands, of Mr Patel's involvement. Mr Patel's response to this was in two parts. First, he accused the liquidators, and particularly Mr Shierson, of exaggeration, unfairness, paranoia, dishonesty and deliberately making selective use of material to bolster a case which he, Mr Shierson, knew was false. This is supported by Mr McDonnell who not only reiterates his client's criticisms but adds to them. At one point he suggested that Mr Shierson was 'unbalanced'. It is said that the liquidators had realised that they got the wrong man but had filed deceitful evidence so that they would not have to admit as much as this stage.
74. I have read Mr Shierson's evidence again with some care. As far as I can see the allegations of dishonesty and deliberate deceit are without any foundation…
The application to set aside the freezing order.
96. At the beginning of the hearing, I entertained considerable sympathy for the predicament in which Mr Patel found himself. There can be little doubt that the freezing order will have had a severe adverse effect upon him. However it is inevitable while he continues to be a defendant in this action that a cloud of suspicion will hang over his head. As Mr McDonnell said in his opening submissions, unless his client is able to extricate himself from the proceedings, he will be virtually unemployable. Mr McDonnell's argument is that even if his client failed on his Part 24 application, nevertheless the claims made are so weak that they are incapable of supporting such an order.
97. Initially I thought there was considerable strength in this argument. However one of the effects of the detailed examination of the allegations made against Mr Patel and his responses to them is that the claimant's case appears to be stronger than a superficial assessment of the evidence might have indicated. One of the disadvantages of applications like this is that it is possible to misconstrue the court's decision. I wish to emphasise that I am not reaching even a preliminary conclusion about Mr Patel's liability to RBG. I am not in a position to do so. Nevertheless on the material that I have been shown, some of which I have referred to above, it appears to me that the claimant has a good arguable case against him. In view of the enormous sums said to have been misappropriated from the company, the destruction of company records alleged and, if liability is proved, Mr Patel's involvement in these activities, I continue to be of the view that this is a case where a freezing order against him is appropriate."
"138 Quantum is to a large extent academic within the context of the asset disclosure provided by Mr Patel."
i) it is no part of the function of a court on an application to discontinue to attempt to reach a decision on whether or not the claim will succeed (para 11);
ii) the burden is upon the party who seeks to persuade the court that some other consequence should follow than that the claimant should bear the defendant's costs on discontinuance and the task of the court is to consider whether there is some good reason to depart from the normal order (para 24);
iii) the test to be applied is not the simple one of looking at the action as it is and seeing what is the fair and just thing to do at the moment in time (para 36);
iv) justice will normally lead to the conclusion that a defendant who defends himself at substantial expense against a claimant who changes his mind in the middle of the action for no good reason other than that he has re-evaluated the factors which have remained unchanged should be compensated in costs (para 36); and
v) it is not the law that a claimant will only be required to pay a defendant's costs on discontinuance if he is in effect surrendering and acknowledging defeat (para 37).
"23. The stance adopted on behalf of the liquidator is that it is perfectly proper to bring proceedings against a defendant for a claim which can never be met having regard to the assets available to meet it; to pursue that claim until all those assets have been expended by the defendants in defending that claim, perfectly properly; and then to walk away on the basis that the defendants are left to bear all their own costs. If that is what the law permits or requires, then I am bound to say I find that startling.
42. The question then is whether there is a good reason for departing from the normal rule. To my mind, there is no reason at all for departing from the normal rule. Indeed as it seems to me, it would be most unjust if Mr Walker was left to bear the costs of these proceedings – amounting to a sum likely to be in excess of £100,000 – simply because the liquidator has arrived late at a decision which he could and should have reached at the time when the proceedings were commenced. I do not think it is just to allow the liquidator to walk away from these proceedings leaving Mr Walker to bear his own costs, in the circumstances that the relevant factors have not changed in any material respect since the time at which proceedings were commenced. "
COSTS OF RESTRAINT ORDER
CROSS UNDERTAKING IN FREEZING ORDER