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England and Wales High Court (Chancery Division) Decisions
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Khawaja v Stefanova & Ors [2025] EWHC 1294 (Ch) (16 May 2025)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2025/1294.html
Cite as:
[2025] EWHC 1294 (Ch)
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Neutral Citation Number: [2025] EWHC 1294 (Ch) |
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Case No: CR-2022-004674 |
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (Ch D)
IN THE MATTER OF DERMAMED SOLUTIONS LIMITED (COMPANY NO. 11192254)
AND IN THE MATTER OF THE COMPANIES ACT 2006
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Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL |
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16 May 2025 |
B e f o r e :
MR SIMON GLEESON
____________________
Between:
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Mohammed Saleem Khawaja
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Petitioner
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- and -
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(1) Stela Stefanova (2) BiotechnologiesUK Limited (3) Dermamed Solutions Limited
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Respondents
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____________________
The Petitioner in person
The Respondent in Person
Hearing date: 16 May 2025
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HTML VERSION OF JUDGMENT APPROVED
____________________
Crown Copyright ©
Mr Simon Gleeson:
- This case is a bitter fight between two litigants in person. It results, as is so often the case, from a proposed joint venture which appears to have foundered on the rocks of acrimony. It is a dispute between Ms Stefanova and the Respondent, Mr Khawaja, concerning the latter's interest in a company called Dermamed Solutions Limited ("Dermamed").
- The primary issue between the parties was tried before HH Judge Gerald in the Central London County Court, with Judgment being given on the 6 October 2021 (Case No. H10CL008). The facts of the dispute are set out in that judgment, and I will not repeat them here – in summary, it seems that Mr Khawaja and Ms Stefanova agreed that they would go into business together to grow and develop the business of Dermamed, and that Ms Stefanova would in consequence give Mr Khawaja 50% of the share capital of Dermamed. Mrs Stefanova subsequently resiled from this agreement, denying its existence, and Mr Khawaja sued for specific performance. The Judge found that there was a binding contract between the Claimant and the First Defendant to the effect, inter alia, that the First Defendant would procure the appointment of the claimant as director of the second defendant and the issuance or transfer of 50 per cent of the share capital of the Second Defendant to the Claimant in respect of which, in principle, the claimant is entitled to specific performance. However, the Judge found that he did not have sufficient evidence before him to determine the appropriate remedy, and adjourned the hearing for further evidence on the point.
- This decision fired the starting gun on an extended legal process which has lasted since then. Mr Khawaja has obtained a freezing order against the First and Second Defendants, requiring (inter alia) the First Defendant to provide information as to her and the Second Defendant's financial position. It is not in doubt that Mrs Stefanova's response to the initial finding was to pay away Dermamed's assets and to establish a new company of her own to undertake a similar business to that of Dermamed, although she says that these actions are all capable of justification. However, she seems to have sought to conceal her actions by non-compliance with the freezing order. Her breaches of this order were persistent, flagrant and blatant, to such an extent that on 29 March 2023 she was sentenced by Richard Smith J to 8 months imprisonment for contempt (suspended), the committal order identifying no fewer than 30 separate contraventions of the order.
- In passing sentence, Richard Smith J held that the First Respondent's conduct "represented serious and contumelious flouting of the County Court orders, with the repeated need to seek the intervention of the court to secure compliance". The Judge further held that the First Respondent had provided misleading information to the Petitioner in respect of financial information (her legal fees and pension payments from the Company), as well as there being a sequence of events which indicated that she was depleting the Company whilst the County Court Proceedings were on-going, and that these were deliberate breaches of the court's orders "to avoid the disclosure of information which might otherwise have given grounds for more serious and earlier intervention by the court to". The Judge also held that a number of excuses proffered by the First Respondent for her non-compliance lacked credibility and that her deliberate conduct and prevented the Petitioner from taking earlier steps to secure his position within the Company to her own advantage and to the Petitioner's detriment.
- This is the background against which I must consider Ms Stefanova's application today for discharge of the freezing injunction, and it is fair to say that it does not provide a promising basis for that application.
- The basic principle for an application for release of an injunction is that, in the interests of preventing relitigation of decided matters, such an application can only be made where there is ""a material change of circumstances" (Thevarajah v Riordan [2016] 1 WLR 76), and an application which is made in the absence of such a material change or significant new evidence is an abuse of the process of the court.
- Ms Stefanova has two arguments in favour of such dismissal. One is that the order is now effectively functionless, since neither she nor the Company have any assets left. I think this can be seen as an application of the principle that an order should be discharged when there is no further risk of the assets being dissipated. The other is that there has been an extended delay by the claimant in pressing their claim, justifying its dismissal.
- As regards the exhaustion point, I felt that this application showcased Ms Stefanova's approach to litigation generally. It was entirely unaccompanied by any evidence as to the position either of the accounts concerned or the Company. Ms Stefanova did make some statements in her submissions as to the current cash balances in some of the accounts concerned, but there was no attempt either to present a complete picture or to indicate what the flows through those accounts were. Her application therefore relied – in effect - on her unsupported word. Given Ms. Stefanova's long record of non-disclosure and non-cooperation with disclosure obligations, I felt that I needed to approach this with an appropriate degree of skepticism. More importantly, since the progress of the case to date demonstrates a track record of Ms Stefanova's moving cash from disclosed accounts to accounts which are undisclosed in breach of the order, I think that her evidence that the disclosed accounts are now empty seems to be of itself a ground for maintaining the injunction in force as it applies to any further accounts which she may have, or may have opened, as it does.
- As regards the extended delay point, Ms Stefanova's case here is that Mr Khawaja should have pushed forward the County Court proceedings more vigorously. Here again, given the large number of application that Mrs Stefanova has made in these proceedings, this is not an argument which carries any force – Mr Khawaja can (and does) say that Ms Stefanova is trying to consume his resources by launching new actions precisely to slow down the progress which he can make in finalising judgment against her in the main proceedings. That said, if there is a further period in which Ms Stefanova makes no further applications by Mr Khawaja makes no further progress in the main action, then a court might in due course be prepared to revisit this – I think that there clearly are circumstances in which a sufficiently extended delay in prosecuting the claim with respect to which a freezing injunction was obtained might constitute a change in circumstances justifying an application for its discharge. However, any such question would be highly fact-dependent, and I do not think that such a case is even close to being made out on the facts before me.
- I note that neither of these applications are based on an argument that there has in fact been any "material change of circumstances". These proceedings are therefore an abuse of the process of the court. I am also satisfied that they are totally without merit. In this regard, I note that in R. (Grace) v Secretary of State for the Home Department [2014] EWCA Civ 1091 the Court of Appeal held that the proper test for determining whether an application is totally without merit is whether it was "bound to fail"; it is not necessary for it to be shown that the application was abusive or vexatious. I am not entirely sure whether this application is deliberately abusive or vexatious – although it does appear to be in line with Mrs Stefanova's strategy of running up costs to avoid a final determination of the matter. However, I am entirely satisfied that it was bound to fail.
- I should also note that Ms Stefanova made much at the hearing of her argument that Mr Khawaja was engaged in "stealing the company's business". I do not think that this has anything to do with the question of whether the injunction should be lifted or varied, but it may be relevant to the question of the Civil Restraint Order considered below.
Civil Restraint Order
- In any case where a judge makes an order that a particular application is totally without merit, he is required to consider whether a Civil Restraint Order is appropriate (CPR 23.12). I am satisfied in this case that Ms Stefanova's application to discharge the injunction is totally without merit. I therefore turn to the question of whether a CRO of some kind would be appropriate in this case.
- In the course of her conduct of this litigation, Ms Stefanova has accumulated a surprisingly large number of incidences of her claims being dismissed and certified as "completely without merit" or otherwise found to have been misconceived. These are listed below.
i) On 4 October 2022 Ms Stefanova issued an application in the County Court for an order requiring the Petitioner to provide evidence, for a third party be the subject of a witness summons, and to strike out the Petitioner's claim. Since the application was abandoned during the hearing the issue as to whether it should be recorded as "totally without merit" was not pursued, but HHJ Gerald recorded in the recital to the order that the application was "misconceived".
ii) On 1 December 2022 Ms Stefanova issued an application notice in the County Court by which she applied for an order to disqualify the Petitioner from acting as a director of any company; relying on a series of unevidenced allegations of fraud. This application was also withdrawn during the hearing, but was again recorded as "misconceived".
iii) On 29 March 2023 Ms Stefanova, through Counsel, during the course of the sentencing hearing for her contempt of court, withdrew her application for relief from sanctions with respect to her 24 separate contempts of court for failing to comply with the order of HHJ Parfitt dated 16 September 2022; the Judge recording the application as "totally without merit".
iv) On 7 July 2023 Ms Stefanova made an application to discharge the freezing order and for a mandatory injunction for the Petitioner to 'authorise' Ms Stefanova's salary, and on 25 September 2023 she made a further application to stay the execution of the costs order made by Mr Justice Roth; the order concerning the Petitioner's application to vary the freezing order to ensure Barclays complied with a Third Party Debt Order. Both of these applications were dismissed on 20 October 2023 by HHJ Baumgartner as totally without merit.
v) On 14 November 2023, Mr Justice Rajah dismissed Ms Stefanova's application notice dated 7 November 2023 which, in effect, sought a declaration that she had complied with HHJ Baumgartner's order dated 20 October 2023; the judge recording that the application was totally without merit.
vi) On 24 November 2023, Mr Justice Adam Johnson dismissed Ms Stefanova's application, dated 7 November 2023, which sought a prohibitory injunction against Mr Khawaja's solicitors to restraint it from sending letters to Biotech's alleged clients. The judge recorded in his order that the application was misconceived.
vii) On 12 January 2024, Mr Justice Michael Green dismissed Ms Stefanova's application, by notice dated 11 December 2023, which sought an order that the Petitioner fortify his cross-undertaking in damages given in respect of the freezing order; the judge recording the application was totally without merit and ordering Ms Stefanova to pay costs on the indemnity basis.
viii) On 10 July 2024, Lord Justice Lewison dismissed an application for permission to appeal an order of Richard Smith J (refusing a stay of execution in respect of an order of ICC Judge Mullen) as being totally without merit. Lewison LJ also certified an application seeking a stay of an order made by Roth J and an application for an extension of time for filing her appeal notice as being totally without merit. In total therefore, Lewison LJ made three certifications of "totally without merit".
ix) On 14 April 2025, ICC Judge Prentis dismissed Ms Stefanova's application for specific disclosure made in her petition proceedings, as being misconceived, and order her to pay the Respondents' costs on the indemnity basis.
x) On 7 May 2025, ICC Judge Mullen struck out Ms Stefanova's petition as being an abuse of the court's process, the Judge also recording that the petition was totally without merit.
- I have, of course, also found that her application before me today is totally without merit. I am therefore required to consider the making of a Civil Restraint Order ("CRO"). I also note that part of the evidence presented to me was that she had alienated her flat by a disposal on trust to her daughter, which seemed to me to be yet another breach of the Order. However, I was not asked to deal with the point here, and do not do so.
- Mrs Stefanova explained to me, when I asked her, that her approach to litigation was that if she felt that she was being attached through litigation, she was entitled to defend herself though litigation. It seemed to me to be clear that she took the view that the commencement of actions was, per se, a legitimate litigation tactic, and that the truth or otherwise of the matters alleged was of secondary or no importance. I also note that this theory seems to be borne out by her actions. Mr Khawaja says – I think legitimately – that unless restrained this strategy can and will be employed to stifle the litigation and to deprive him of his rights to which – it should be remembered – the initial judgement in this matter determined that he was entitled.
- The thing that I found most concerning about Ms Stefanova's presentation of her case was that she appeared to show no awareness of the fact that actions should not be commenced without some supporting evidence. It was clear to me that she was a believer in the idea of "her truth" – that she should be entitled to put forward in court any argument in which she herself believed sufficiently strongly, and that the court should judge the truth or otherwise of her position on the basis of its assessment of the strength of her belief. This position is common amongst a certain group of litigants in person. Unfortunately for them, the courts are indifferent to the strength of their belief, and deal only in evidence – and belief, no matter how strongly held, is no substitute for evidence. This is a particular issue for litigants in person generally – litigants who are represented will find that their solicitors are subject to rules – in particular the SRA guidance on "conduct in disputes" of 4 March 2022 – which provide that a solicitor should not, even if directly instructed to do so by his client, commence litigation with "insufficient investigation of their merits or of the underlying legal background" (Para 1) or make a "threat of litigation or the making of counterclaims and defence arguments for reasons that are not connected to resolving genuine disputes or advancing legal rights." (Para 2). A litigant in person is, by definition, not subject to these restrictions. Perhaps more importantly, because the system that we have polices these restrictions through costs orders after the event, there is no effective brake on the misuse of the system by those who – like Ms Stefanova – parade their impecuniosity like a badge of honour. This is, of course, exactly the problem which the CRO regime was created to address, and I think that this is an entirely appropriate case for its application.
- Mrs Sefanova's response to this goes back to her argument that Mr Khawaja has used confidential information, which he has received from her pursuant to the injunction, to set up a new business to compete with her and with the company. She accepts that she has no direct evidence of this, but argues that an inference to this effect might be drawn from certain facts. That may or may not be the case. Mr Khawaja points out that these new proceedings instigated by Ms Stefanova almost exactly replicate the proceedings which he has bought against her, and that this mirroring is itself suspicious and casts doubt on Ms Stefaonva's bona fides.
- I have no way of assessing the credibility or otherwise of Ms Stefanova's case in this regard – again, her allegations as made in court are unencumbered by direct evidence of any kind - and I cannot say that she should not be permitted to advance them if she has or can accumulate any such evidence. However, I think that this is exactly the sort of case with which the CRO regime was created to deal. The CRO regime will not prevent her from advancing any such case; it will simply require her to satisfy a judge that she has accumulated sufficient evidence to support a prima facie case before she is permitted to make any further application to court.
- I note that Ms. Stefanova's litigation tactics have extended from making applications in this case to bringing new proceedings in relation to it, so the order to be made should be an Extended Civil Restraint Order which covers any application concerning any matter involving or relating to or touching upon or leading to these proceedings. The period of the order should be 18 months – a period which should permit Mr Khawaja to obtain final judgment in the County Court proceedings which underpin this litigation.