QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| MAREX FINANCIAL LIMITED
|- and -
|CARLOS SEVILLEJA GARCIA
Alain Choo Choy QC and Sophie Weber (instructed by Memery Crystal LLP) for the Respondent
Hearing dates: 24 – 25 January 2017
Crown Copyright ©
Mr Justice Knowles :
The claim advanced by Marex against Mr Sevilleja
"[Marex] claims damages against [Mr Sevilleja] for inducing or procuring the violation of [Marex's] rights under [the Judgment] dated 26 July 2013, and/or for intentionally causing loss to [Marex] by unlawful means, in particular by dissipating the assets of [the Companies] as more fully set out in the attached Particulars of Claim."
"(9) A claim is made in tort where –
(a) damage was sustained, or will be sustained, within the jurisdiction; or
(b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction.
Knowingly inducing and procuring the Companies to act in wrongful violation of Marex's rights under the Judgment
"The court will restrain a defendant and potential judgment debtor from making himself judgment-proof by dissipating his assets and may order him to give disclosure of assets in support of the injunction. But the defendant violates no legal right of the plaintiff if he makes himself judgment-proof by dissipating his assets before he is enjoined from doing so and he does not act unlawfully in failing to give disclosure before he is ordered to do so. These are measures the court adopts to protect the efficacy of its orders."
See further Saville LJ at 172 B-H.
"There is a crucial difference between cases where the defendant induces a contracting party not to perform his contractual obligations and cases where the defendant prevents a contracting party from carrying out his contractual obligations. In inducement cases the very act of joining with the contracting party and inducing him to break his contract is sufficient to found liability as an accessory. In prevention cases the defendant does not join with the contracting party in a wrong (breach of contract) committed by the latter. There is no question of accessory liability. In prevention cases the defendant acts independently of the contracting party. …"
In the present case, perhaps leaving allegations of theft aside, there is sufficient on the assumed facts and having particular regard to his relationship with and power and control over the Companies to allow the analysis that Mr Sevilleja induced and procured the Companies not to pay the Judgment Debt; and that he actively joined with the Companies to bring about that end through dissipation.
Intentionally causing loss to Marex by unlawful means
"… during the period 24 July 2013 to 12 August 2013 and following the circulation of [the Draft Judgment] to the parties, Mr Sevilleja wrongfully, and without consent of either [of the Companies] (whether through the Companies' other directors or otherwise) and acting for his own benefit and without regard to the interests of creditors of the Companies (including Marex) removed funds belonging to the Companies and totalling in excess of US$9.5 million out of England, and thereafter removed those funds out of [the Companies] altogether. In doing so, Mr Sevilleja:
a. breached the fiduciary duties that he owed to [the Companies] as those Companies' agent, director and/or attorney, in particular, by:
i. misapplying and/or misappropriating [the Companies'] funds for his own benefit and/or purposes; and
ii. allowing his personal interest in preserving the assets of [the Companies] for his own benefit to conflict with the interests of [the Companies] in retaining their funds in order to meet their obligations to creditors, including Marex;
b. breached sections 120(1) and 121 of the British Virgin Islands Business Companies Act 2004 because at all times, as a director of the Companies, Mr Sevilleja could not have acted honestly or in good faith in procuring the aforesaid transfers or honestly have believed that the said transfers were in the best interests of the Companies; nor did he exercise his powers as a director for a proper purpose, in circumstances where (i) the Companies had substantial liabilities to Marex pursuant to [the Judgment] and (ii) the Companies' funds were being removed from their accounts and control for no consideration whatsoever and with their liabilities to Marex being left wholly undischarged;
c. breached section 57 of the British Virgin Islands Business Companies Act 2004 by making unauthorised and unlawful distributions to himself as ultimate beneficial owner of the Companies by procuring the payment of sums out of the Companies to himself or for his benefit in circumstances where the Companies were, or would be as a result of such payment, fail [sic] to satisfy the solvency test; and
d. interfered with the freedom of the Companies to comply with their legal obligations to Marex by preventing them from satisfying the [Judgment Debt] that they owed to Marex pursuant to [the Judgment] and which Marex had a financial interest in the Companies complying with."
"49.In my opinion, and subject to one qualification, acts against a third party count as unlawful means only if they are actionable by that third party. The qualification is that they will also be unlawful means if the only reason why they are not actionable is because the third party has suffered no loss. … But the threat must be to do something which would have been actionable if the third party had suffered loss. …
51.Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant."
"269.Faced with these alternative views I am naturally hesitant. I would respectfully suggest that neither is likely to be the last word on this difficult and important area of the law. ...
270.I do not, for my part, see Lord Hoffmann's proposed test as a narrow or rigid one. On the contrary, that test (set out in para 51 of his opinion) of whether the defendant's wrong interferes with the freedom of a third party to deal with the claimant, if taken out of context, might be regarded as so flexible as to be of limited utility. But in practice it does not lack context. The authorities demonstrate its application in relation to a wide variety of economic relationships. I would favour a fairly cautious incremental approach to its extension to any category not found in the existing authorities."
No reflective loss
"Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss."
"70.It is clear from those observations, and indeed from that aspect of the decision, in Johnson that the rule against reflective loss is not limited to claims brought by a shareholder in his capacity as such; it would also apply to him in his capacity as an employee of the company with a right (or even an expectation) of receiving contributions to his pension fund. On that basis, there is no logical reason why it should not apply to a shareholder in his capacity as a creditor of the company expecting repayment of his debt. Indeed, it is hard to see why the rule should not apply to a claim brought by a creditor (or indeed, an employee) of the company concerned, even if he is not a shareholder. While it is unnecessary to decide the point, as BDC was a shareholder in Scoutvale, it is hard to see any logical or commercial reason why the rule against reflective loss should apply to a claim brought by a creditor or employee, who happens to be a shareholder, of the company, if it does not equally apply to an otherwise identical claim by another creditor or employee, who is not a shareholder in the company.
71.There are observations, which I have quoted, in the speech of Lord Millett in Johnson which appear to me strongly to reinforce the conclusion that the rule against reflective loss does indeed bar BDC's claim against Mr Parker insofar as it is based on the Loan. Thus, in the passage from his speech I have quoted at paragraph 30 above, Lord Millett does not merely refer to "shareholders" but also to "creditors". Secondly, in the passage cited in paragraph 31 above, Lord Millett emphasised that reflective loss does not only extend to "diminution of the value of the shares" and "loss of dividends", but also to "all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds". Similarly, at 67B, he said in terms that the fact that Mr Johnson was claiming, as it were, qua employee, rather than qua shareholder, made no difference. I can see no basis whatever in logic or principle as to why, if a claim qua employee is barred by the rule, a claim made qua creditor is not similarly so barred. In most cases where an employee's claim is barred by the rule against reflective loss, the employee will be a creditor of the company. It is hard to see why a creditor who is an employee should be treated differently from any other creditor of the company when it comes to applying the rule against reflective loss.
74….if a creditor (or employee) whose claim is barred by the rule against reflective loss is not repaid, he is not without remedies. If the company concerned is solvent, he can sue the company for his loss. If the company is insolvent, the creditor (or employee) can put the company into liquidation (if that has not already happened) and can either fund a claim by the liquidator against the defendant or, as Mr Gardner did in relation to BDC, he can take an assignment of the company's claim. Indeed, the creditor (or employee) could probably take an assignment of the company's claim without seeking to wind it up."
A question of contempt of Court?
"This is a judgment to which the Practice Direction supplementing CPR Part 40 applies. It will be handed down on Thursday 25 July 2013 … This draft is confidential to the parties and their legal representatives and accordingly neither the draft itself nor its substance may be disclosed to any other person or used in the public domain. The parties must take all reasonable steps to ensure that its confidentiality is preserved. No action is to be taken (other than internally) in response to the draft before judgment has been formally pronounced. A breach of any of these obligations may be treated as a contempt of court. …"
Service by an alternative method