England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		07/10/2015

Mrs Justice Whipple : INTRODUCTION

1. This is an appeal brought by Michael Wilson Partners (here, MWP) against the decision of Master Yoxall dated 9th June 2015. By that order, Master Yoxall granted the application of Thomas Ian Sinclair (here "TIS") and ordered "that there be a stay of execution of the Registration Order".
2. The Registration Order is the order of Master Eyre dated 19 October 2014. By that Order, Master Eyre registered various judgments as judgments and orders of the Queen's Bench Division, pursuant to the Administration of Justice Act 1920, Part 74 of the CPR, and the Reciprocal Enforcement of Judgments Order 1984.
3. The 7 judgments which are the subject of the Registration Order are costs orders made against TIS in favour of MWP, by the courts of the Bahamas, where TIS initiated proceedings against MWP which were in the end unsuccessful, thus generating the adverse costs orders. One of those judgments is a certificate of taxation, for costs in the assessed amount of US$250,000. The others are orders for costs which have yet to be taxed. The total likely value of the various "Bahamian orders" is disputed by the parties, but that dispute does not matter for the purposes of this appeal.
4. The present appeal (and indeed the existence of the Bahamian orders) arises in the context of long-running litigation. The following is intended as a summary only for present purposes. I do not detail every twist and turn in the litigation which has now been ongoing for almost a decade:

a) In June 2006, a Mr John Emmott (not a party to this appeal, but an individual who features in the underlying events) terminated his relationship with MWP, a law firm which operates in Almaty, Kazakhstan.

b) In August 2006, MWP initiated an arbitration in London against Mr Emmott, claiming that Mr Emmott had made a secret profit in relation to certain shares in a company called Max Petroleum Plc (the "Max shares"), which MWP contended belonged to it. A freezing order was obtained by MWP over Mr Emmott's assets, including the Max shares. MWP gave an undertaking in damages as a condition of the freezing order.

c) Although the freezing order related to Mr Emmott's assets, and Mr Emmott was the registered holder of the Max shares, it was TIS' contention that he, TIS, was the beneficial owner of the Max Shares (a contention which I understand was accepted in the arbitration, by means of the Second Interim Award released in February 2010). Therefore, the freezing order impacted significantly on TIS who was unable to dispose of or otherwise deal with the Max shares while they were the subject of it. For that reason, I am told, TIS funded Mr Emmott's legal costs in the arbitration (although he was not a named party to the arbitration), and involved himself in other aspects of the broader litigation against MWP.

d) In October 2006, TIS commenced proceedings in the Bahamas to confirm his ownership of the Max shares. MWP challenged the jurisdiction of that action, suggesting that the appropriate jurisdiction was England, where the arbitration was underway. In the end, TIS failed to establish jurisdiction in the Bahamas and the Bahamian action was struck out. The Bahamian costs orders which are the subject of the Registration Order relate to this piece of litigation.

e) Meanwhile, the arbitration progressed in London. The panel consisted of Lord Millett, Christopher Barry and Valerie Davies. MWP was unsuccessful in the arbitration. In September 2014, the panel determined quantum in favour of Mr Emmott, awarding him a substantial amount of damages, together with his costs of the arbitration (I am told that his costs had in fact been funded by TIS). The costs have yet to be quantified. Nothing has been paid.

f) In October 2010, MWP commenced a separate action in the High Court, seeking a declaration that the Max shares were owned beneficially by MWP and not TIS (the "Max action"). The Max action was struck out with costs, as an abuse of process given that the arbitration had already determined the issues now raised by MWP in the Max action. Costs orders in TIS' favour were made. Those costs have yet to be quantified on detailed assessment. An appeal against strike out is currently pending before the Court of Appeal, due to be heard in November 2016. The costs of the Max action are therefore at large, at least until that appeal is determined.

g) Meanwhile, on 17 October 2010, the freezing order in MWP's favour was discharged.

h) TIS seeks to enforce the undertaking in damages given by MWP. He has permission from the Commercial Court to proceed with any enquiry. TIS will contend in that enquiry that he has sustained loss and damage consequent on the freezing order, including (i) the loss of value of the Max shares which are now worth substantially less than they were at the time of the freezing order in 2006; and (ii) the costs associated with the Bahamian proceedings which were initiated by TIS to establish TIS' ownership of the Max shares. (Permission was originally granted on condition that TIS abandoned his counter claim in the Max action. I am told that TIS has now done that.)

5. Against that background, we come to the present appeal. On 3 June 2015, TIS applied to the Master for a "stay of execution in respect of the Enforcement Order" pending determination of the enquiry as to damages relating to the MWP's damages undertaking. The reference to the Enforcement Order was a reference to Master Eyre's order of 19 October 2014, which I have referred to in this Judgment as the "Registration Order".
6. Master Yoxall granted that application. There is no formal transcript of the Master's judgment, but I have two good notes of his judgment (one by Counsel for MWP, Charles Samek QC, and the other by a trainee with the solicitors formerly acting for TIS). Master Yoxall's decision, and the reasons for it, seem clear. Neither Counsel suggested that reliance could not be placed on these notes and I was content to do so.

MASTER YOXALL'S JUDGMENT

7. Master Yoxall set out the background to the application. He held that he had jurisdiction to stay the execution of the Registration Order, and indeed a discretion to do so. He preferred TIS' submissions, and ordered a stay. He considered it relevant that the Bahamian costs orders were not freestanding, as could be seen from the history of the litigation which had at its core MWP's asserted proprietary right to the Max shares which had been asserted from the outset in 2006, which had now been proved wrong. Further, TIS had an arguable claim in damages which could be a substantial claim, and had costs orders in his favour from the arbitration and other proceedings. There was a fear that if the Bahamian orders were met by TIS the money would be dissipated and not be available to meet orders for costs and damages going the other way.
8. MWP now appeals that order.

GROUNDS OF APPEAL

9. MWP advances two grounds of appeal:

a) That the Master had no discretion to order a stay of execution of the Registration Order;

b) Alternatively, if he had a discretion, then the Master was wrong in exercising his discretion in the way that he did.

10. The first ground of appeal was introduced by way of amendment, under cover of an application dated 25 June 2015. Knowles J granted permission to amend by order dated 29 June 2015.

FIRST GROUND: NO DISCRETION

11. The Administration of Justice Act 1920 provides for enforcement in the United Kingdom of judgments obtained in superior courts in other British dominions. Section 9(3) provides that:

"Where a judgment is registered under this section –

a) the judgment shall, as from the date of registration, be of the same force and effect, and proceedings may be taken thereon, as if it had been a judgment originally obtained or entered up on the date of registration in the registering court;

b) the registering court shall have the same control and jurisdiction over the judgment as it has over similar judgments given by itself, but in so far only as relates to execution under this section;

…"

12. Mr Samek QC, who appeared for MWP, argued that the domestic court lacked any discretion to stay the execution of the Registration Order, as Master Yoxall had done. He accepted that the position was different for the underlying Bahamian orders, which were amenable to a stay of execution, once registered under the provisions of the 1920 Act. His argument proceeded thus: TIS had a period of 31 days to challenge the Registration Order, during which time execution was stayed (reflecting paragraph 4 of the Registration Order, which itself complied with CPR 74.6); TIS made no such application; it follows that the Registration Order has become final; there is no power in the Court to stay the execution of the Registration Order in such circumstances. He further argued that if TIS wanted to stay the execution of the Bahamian orders, TIS should have applied to the Bahamian courts where the orders were made, and not to the English courts where the Bahamian orders were registered. He further accepted that his point would have no force if the terms of Master Yoxall's Order (and indeed TIS's application for that Order) had referred to a "stay of execution in respect of the Bahamian orders which are the subject of the [Registration] Order" (added words emphasised) but the problem was the suggestion that the Registration Order itself should be stayed.
13. I do not accept Mr Samek's arguments under this ground of appeal. It is quite clear that TIS' application to Master Yoxall, and Master Yoxall's Order, related to the various Bahamian costs orders which had become the subject of the Registration Order, and in consequence of the Registration Order were now liable to be enforced against TIS within this jurisdiction. The point taken by Mr Samek is a semantic one, which was not raised before Master Yoxall. But it is clear that everyone at that hearing was proceeding on the basis that TIS was seeking to stay enforcement of the various Bahamian costs orders which were now the subject of the Registration Order.
14. In any event, I am not persuaded that the language used by TIS in its application, or by Master Yoxall in his Order, was inapt. By means of the Registration Order, the Bahamian costs orders became subject to the jurisdiction of the English Courts. It was acceptable to seek a stay of the "Registration Order" itself, rather than the various underlying judgments which have been registered by means of that Order: within this jurisdiction at least, and in the context of enforcement, they are in effect one and the same thing.

SECOND GROUND: INCORRECT EXERCISE OF DISCRETION

15. By his second ground, an alternative to the first ground, Mr Samek argues that the Master erred in the exercise of his discretion by failing to have regard to various matters.

MWP's arguments

16. Mr Samek argues that the Master should have had regard to and considered the exercise of his discretion under CPR 83.7, and that if he had done so, he would have applied the different (and more stringent) test of whether there were "special circumstances" which rendered it inexpedient to enforce the judgment or order (CPR 83.7(4)(a)); it was not permissible for the Master to apply an "open-textured" discretion. Further, Mr Samek argues that if the Master had correctly applied the narrower discretion under CPR 83.7, he would and should have concluded that there were no special circumstances such as to justify a stay. The reasons why a stay could not be justified were set out in Mr Samek's skeleton, broadly as follows: there is no suggestion that MWP is in fact going to seek to enforce the Bahamian judgments in the UK, not least because there is no evidence that TIS has any assets against which to enforce in the UK; but in any event, the Bahamian judgments related to separate proceedings in which costs have been awarded against TIS, and certainly to the extent those Bahamian orders give rise to a crystallised debt (in terms of taxed orders for costs) they should be met; there is no reason to think that any domestic Court would, in due course, order the Bahamian costs judgments to be set off against damages or costs orders obtained in this jurisdiction in TIS' favour given the discreet and free standing nature of the Bahamian proceedings; further, the enquiry as to damages has not even commenced and the existing costs orders in TIS' favour in this jurisdiction are not yet quantified, so any argument about set off is necessarily speculative and uncertain. All of this means that, on the facts, there are no special circumstances which could meet the test under CPR 83.7 and so the Master should have concluded.

What discretion was the Master exercising?

17. Mr Shepherd, who appeared for TIS, directed me to CPR 3.1 which gives the Court wide case management powers, including specifically CPR 3.1(2)(f) which contains the power to "stay the whole or any part of any proceedings or judgment either generally or until a specified date or event". Mr Shepherd argued that this was the provision relied on by Master Yoxall. CPR 83.7 is irrelevant.
18. Master Yoxall did not say in terms in his judgment (so far as the notes of that judgment record) what power he was exercising in granting TIS's application for a stay. But given the terms of the application notice, which refers in terms to CPR 3.1(2)(f), it is reasonable to infer that he was exercising the Court's inherent jurisdiction, now reflected in CPR 3.1. I approach the appeal on that footing.

Court Rules permitting stay

19. The discretion under CPR 3.1 is broad. The notes in the White Book, at paragraph 3.1.7, record that the Court has an inherent jurisdiction to stay the whole or any part of the proceedings, and that the circumstances in which a stay may be appropriate are many and various.
20. The Registration Order is in my judgment a type of "proceedings or order" within CPR 3.1(2)(f). As a matter of ordinary language, CPR 3.1(2)(f) extends to the application before the Master.
21. I do not accept that the Master was constrained to exercise his discretion under CPR 83.7 or alternatively CPR 40.8A, to the exclusion of CPR 3.1. I do not accept that once a judgment becomes liable to execution, an application for stay can only be made outside CPR 3.1, or that CPR 3.1 is ousted by one or other of CPR 83.7 or CPR 40.8A.
22. In relation to CPR 83.7, the first and important point is that it only applies where the judgment debtor or other party is liable to execution of a writ of control or a warrant (see CPR 83.7(1)). In those circumstances, that party can apply to the Court for a stay of execution, and must demonstrate "special circumstances" justifying a stay. I can readily understand the argument (without reaching any conclusion on it) that once a writ of control or warrant is issued by the judgment creditor, the narrower discretion in CPR 83.7 should apply with exclusive effect, because it is specific to that situation. But MWP has not issued any writ of control or warrant. So that argument does not run. In my judgment, CPR 83.7 does not apply on its plain terms.
23. Further, I do not accept that the rules require a judgment debtor to wait until active steps are taken by the judgment creditor to enforce the debt, by issuing a writ of control or warrant, before he is entitled to come to Court to seek a stay under CPR 83.7. The better analysis is that the judgment debtor can come to Court, even where no steps have been taken towards enforcement by the judgment creditor, and seek a stay under CPR 3.1. Whether the stay is granted depends on all the facts and circumstances of the case: it is a matter of discretion.
24. CPR 40.8A gives the judgement debtor the right to come to Court to seek a stay of execution on the basis of "matters which have occurred since the date of the judgment or order" in which case the Court can grant such relief on such terms as it thinks just. But that was not the basis on which TIS put his application, and the application notice did not indicate what, if any, matters had arisen since the date of the Registration Order (which was the Order cited in the application notice) which might justify a stay. Rather, the factors relied on by TIS related to the wider picture of unfolding litigation, including the outcome of the arbitration, which pre-dated the Registration Order. I do not consider that the existence of CPR 40.8A precludes an application for a stay under CPR 3.1(2)(f). These are complementary provisions. In any event, TIS' application to the Master did not, on the facts, fit the precondition for exercise of discretion under CPR 40.8A.
25. I therefore reject Mr Samek's technical argument. I accept that the Master had discretion under CPR 3.1(2)(f) and was correct to approach the application, as he was asked to do, under that rule.

The scope of this Court's review

26. I can only interfere with the Master's exercise of discretion if I conclude that it was wrong, in the sense of disclosing some material error of principle, or if it produces an unjust result: see CPR 52.11(3). Mr Shepherd reminded me of the guidance in Tanfern Ltd v Cameron-MacDonald [2000] WLR 1311, paras 30-33. Specifically, in relation to the first limb (whether a decision of a lower court is "wrong"), it is not my role to substitute my own view, but rather to have regard to the "generous ambit within which a reasonable disagreement is possible", see G v G (Minors: Custody Appeal) [1985] 1 WLR 647, cited in Tanfern.

Conclusion

27. I do not detect any such error of principle, nor do I consider that the Master's decision leads to an unjust result. I have set out above in summary the reasons for the Master's decision. His decision reflected a perfectly reasonable response to the facts and submissions before him.
28. In my judgment, the Master exercised his discretion correctly. There is no basis for this Court to interfere. I dismiss the appeal.

SECOND GROUND: ALTERNATIVE CONCLUSION

29. If my conclusion that CPR 3.1(2)(f) applies is incorrect, and MWP is right to say that the provision which the Master should have been considering is contained in CPR 83.7 – leaving aside the fact that there is no writ of control or warrant in existence - then my conclusions would be as follows. First, I would accept that the Master made no reference to the test in CPR 83.7, and thereby misdirected himself. That would be an error of law, which would vitiate the Master's judgment. It would fall to me to exercise the CPR 83.7 discretion afresh. If asked to do so, I would conclude that there are special circumstances here which do render it inexpedient to enforce the Registration Order. Those special circumstances consist of the following factors, many of which are the same as the factors considered by Master Yoxall; but there are others as well.
30. The key feature of this case is the complex web of litigation which surrounds this application for stay. The signal event to date has been MWP's claims touching on the Max shares, which failed in the arbitration. It is important to hold the ring while the various aspects of the post-arbitration "mop up" are completed. To do otherwise would permit an unfair advantage to accrue to MWP, who would be able to "steal a march" on TIS.
31. In that context, I accept that TIS has at least three bases on which he might secure money from MWP pursuant to a Court order in the future (I put it no higher than "might"):

a) By means of the costs orders in favour of Mr Emmott in the arbitration (on the footing that TIS funded the arbitration, TIS can expect to recover some at least of his outlay);

b) By means of the enquiry as to damages (if indeed it is established that the freezing order caused loss and damage in relation to the Max shares of which TIS was the beneficial owner; alternatively, if it is shown that the Bahamian proceedings were an incident of the freezing order such that the Bahamian costs orders should now be recovered as part of those damages);

c) By means of the domestic costs orders in TIS' favour. Although there is an appeal outstanding in the Max action, and so costs are still at large, TIS has costs orders in his favour and could proceed to assessment of them.

32. There is plenty of litigation to come. But the prospect of recovery by TIS is not mere "speculation". Each of these bases is connected with MWP's claim over the Max shares. The prospect of recovery for TIS is real.
33. Specifically, in relation to the Bahamian costs orders, it is to be noted that they are themselves the subject of the damages claim against MWP. For that reason, if no other, it would be preferable, as matters stand, to wait and see whether those costs are recouped as damages in due course, rather than ordering them to be paid now.
34. I was told that Mr Emmott has a worldwide freezing order in place against MWP, and that any costs which are paid to MWP would get caught by that freezing order, in any event. This factor lends support to the conclusion that it would be better to stay the enforcement of the Bahamian costs orders, rather than risk wasting time recovering costs which would then simply become subject to a freezing order in Mr Emmott's favour.
35. Further still, I was told that MWP has not taken any steps to enforce the Bahamian orders against TIS within the jurisdiction, because TIS has no assets within the jurisdiction. So long as that remains the case, a stay will not prejudice MWP, nor will it create any injustice.
36. More broadly, I reject the proposition that the Bahamian costs orders (assuming they are not recouped as damages in the enquiry) would not be the subject of a possible set off against orders for costs or damages going the other way. I was shown Fearns (T/A Autopaint International) v Anglo-Dutch Pain and Chemical Co Ltd [2010] EWHC 2366 (Ch). That case demonstrates that there is a discretion to order set off between different liabilities in respect of damages or costs, in accordance with what the Court considers to be just in the particular circumstances (see para 75). The Court may well have to address set off in due course, and it cannot be said (as Mr Samek argues) that there is no likelihood of set off involving the Bahamian costs orders at the end of the day.
37. In my judgment, these factors would amount to special circumstances rendering it inexpedient to enforce the Bahamian costs orders. I would grant the stay under CPR 83.7, if that was the correct rule to deploy.

FURTHER POINTS

38. I wish to deal, finally, with a handful of other points.
39. First, Mr Samek challenged Master Yoxall's judgment on the further basis that Master Yoxall was, he said, wrongly influenced by comments made by Flaux J in related proceedings in the Commercial Court, where the possibility of a stay of the Bahamian costs orders was discussed but not fully argued. Master Yoxall said in terms that he had reached his own view and not been influenced by what the Judge said. That is the answer to Mr Samek's point. The further comment by Master Yoxall that his view was "fortified" by its coincidence with Flaux J's view was just that, a comment. It does not form part of the reasons for his judgment. Mr Samek's challenge in this respect fails on the facts.
40. Secondly, a number of witness statements were produced in advance of the appeal hearing before me. Each party objected to the statements produced by the other party. At the hearing, I was not referred to any one of them. I was not pressed on the issue of permission to rely on these witness statements. I would have declined permission: such updating of the facts as was needed was achieved by Counsel's submissions and related to the status of other proceedings, which is a matter of record.
41. Third, complaint was made by Mr Samek that the New Zealand courts had picked up on Master Yoxall's judgment and had drawn support from it in making orders in that jurisdiction. What the New Zealand courts choose to do is a matter for those Courts. It is not relevant to the issues on this appeal.
42. Fourth, I have this morning received a flurry of emails, and indeed have been privy to an embargoed judgment of the Court of Appeal in a separate but related piece of litigation. I have read that judgment and all the emails I have been sent. None of these documents make any difference to my conclusion in this appeal, which I dismiss for reasons set out above. For that reason, I have not adjourned today's hearing to deal with the Court of Appeal judgment: there was no point, it is irrelevant.

CONCLUSION

43. The appeal is dismissed.