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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Revenue & Customs v Sunico A/S & Ors [2012] EWHC 2892 (Ch) (19 October 2012) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/2892.html Cite as: [2012] EWHC 2892 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		19/10/2012

Warren J :

1. Following my decisions granting summary judgment to the eighth defendant ("Dayal") and the ninth defendant ("Nari") in relation to the conspiracy claims against them, they now seek consequential orders (i) for costs and (ii) discharging freezing order which have been made against them.

Nari

2. Nari seeks the discharge of the freezing order made against him by HH Judge Pelling on 16 June 2010, continuing a without-notice order made by Briggs J on 8 June 2010, which in turn was a continuation of an earlier without notice order made by Briggs J on 17 May 2010. He is clearly entitled to that order since the entirety of the claim against him has been dismissed. He also seeks an order requiring the Claimants ("HMRC") to instruct its solicitors in Singapore to apply for a Mareva injunction granted in that jurisdiction to be discharged with costs. I do not consider that it is appropriate for me, at least at this stage, to make such an order. Whether and when the order of the Singapore court should be discharged, and the costs consequences of any such discharge, are matters for that court. It is open to Nari to bring the matter back before that court to obtain an appropriate order for discharge and for costs if HMRC are not willing to co-operate. There is no reason to think that they will not co-operate.
3. Mr Chivers, for HMRC, does not oppose the making of a costs order in relation to each of the main action, the application for the freezing order in this jurisdiction and the summary judgment/strike out application. He does oppose such an order being made on the indemnity basis which is the order sought by Nari. Mr Scorey (for Nari) submits as follows:

i) The pleaded case against Nari was always hopeless.

ii) Even though there might have been a case which could have been pleaded which would have stood up to a summary judgment/strike out application, that was not the pleaded case.

iii) Further, I have not allowed an amendment to raise it.

iv) These factors establish the exceptional circumstances which, in accordance with case-law, need to be shown in order for the court to make an indemnity costs order.

v) In these circumstances, I should exercise my discretion in relation to costs by making an indemnity costs order.

4. In my judgment, the circumstances, whilst not run-of-the-mill, are not so exceptional as to justify an indemnity costs order. The claim was brought by HMRC in good faith and there were arguments, which I have rejected, that the claim should have been allowed to continue. There is no need for the court to mark disapproval of the conduct of HMRC. Whilst acknowledging that other judges might take a different view, I consider that I should exercise my discretion by making an order for costs only on the standard basis in relation to all three aspects (the main action, the freezing order application and the summary judgment/strike out application).
5. That is enough to deal with the application for indemnity costs. But if I had any doubt about it, I consider that I would be entitled to take into account the way in which HMRC might have pleaded its case and which, had it been included in the original claim, would have precluded summary judgment and strike out. It was the lateness of the application which formed the main reason for refusing permission to make the amendment. It can be seen, therefore, that there was a claim which could have been made; the fact that HMRC failed to plead it and cannot now raise it has resulted in the dismissal of the claim against Nari. It is right that an order for costs should be made against HMRC but it is not proportionate to make an order on the indemnity basis.

Dayal

6. Dayal, like Nari, seeks the discharge of the freezing order made against him by HH Judge Pelling on 16 June 2010, continuing a without-notice order made by Briggs J on 8 June 2010. Mr Hunter (for Dayal) submits that the only basis for the making of the freezing order was the existence of the fraud claim against him and that it was only that claim (and the evidence in support of it) which justified a finding of the risk of dissipation of assets necessary to found a freezing order. Now that the fraud claim has been dismissed, there is no reason to allow the freezing order to continue.
7. Mr Chivers submits that the freezing order should be continued albeit that he accepts that it should be in a lesser amount. That amount, he submits, should be the amount passing through Dayal's account which, according to him, is the measure of Dayal's potential liability under the section 423 Insolvency Act 1986 claim. The amount is something over US$14m, the figure referred to in paragraph 121 of the Amended Particulars of Claim. He submits that there remains risk of dissipation. Although the pleaded fraud claim has been dismissed, the alternative fraud claim provides a good ground for thinking that there is a risk of dissipation notwithstanding that an amendment to plead it has been refused. Further, it is submitted that it is not known to HMRC who is in control of Dayal's assets and that there is a risk that those in control may dissipate Dayal's assets.
8. As to that, Mr Hunter responds that HMRC know that Dayal is no longer capable of managing his own assets. Whatever case of fraud might in theory be made out against him, he is not able to dissipate his own assets since he has no capacity to deal them. So far as control is concerned, Mr Hunter points out that the asset disclosure affidavit made in response to the freezing order has shown HMRC what Dayal's assets are and he submits that the clear evidence is that they are under the control of Dayal's family. There is not a shred of evidence to suggest that those controlling Dayal's assets would attempt to dissipate them.
9. My difficulty with this submission is that the evidence before me does not show clearly what Dayal's assets are or who is in control of them. At least, my attention has not been drawn to the relevant evidence of it in the bundles available for the pre-trial review. If it is the case that payments were made into and out of Dayal's account without his knowledge or consent, then it is not immediately apparent that those effecting such payments (for instance Hashu) would not be able to continue to do so. Moreover, if assets under Dayal's control are regarded by those in control of the assets as belonging to third parties, there is no reason why those persons would not allow transfer of those assets to be made to such third parties.
10. I am far from saying that Dayal is not entitled to have the freezing order discharged in its entirety. But I do not have the full picture. If Dayal wishes to have the freezing order discharged, he can make an application specifically for that purposes. I do not regard his application dated 17 September 2012 as such an application. It is true that the draft order attached to that application seeks a discharge of the freezing order, but that followed on from the order sought, that the entire action against him be dismissed. If he had achieved that, then no doubt the discharge would have followed as in the case of Nari.
11. I do not, therefore, consider that the freezing order should be discharged today, but Dayal remains free to make an application for discharge. If he does, the evidence will need to show clearly what Dayal's assets are: if there is no change from the asset disclosure in relation to the freezing order in 2010, the evidence on that aspect can be very brief. The evidence will also need to establish who is in control of those assets and that there is no risk that the persons in control will dissipate them. In particular, the court would want to know that there were no arrangements or understandings about the ownership of assets ostensibly owned by Dayal.
12. For the time being, the freezing order is to remain in place, but, as Mr Chivers accepts, it should be in a reduced sum. Mr Hunter says that it should be for a far lesser sum than the US$14m suggested by Mr Chivers: the correct figure should be no more than US$4m odd, being the total of the payments made to Dayal's account during the period of the Relevant Transaction Chains (as defined in the Amended Particulars of Claim). I do not consider that Mr Hunter is correct in that submission. The section 423 claim is, as pleaded, not restricted to sums passing into Dayal's account during the period of the Relevant Transaction Chains. It is pleaded in paragraph 129 that the payments into the account (that is to say the entirety of the amounts referred to in paragraph 125) were transactions defrauding creditors. It is also pleaded in paragraphs 129(b) and 130(a) that PT Naina's share of the conspiracy was to be paid into Dayal's account, that is to say a share of the proceeds of the entire fraud pleaded in paragraph 100 and not simply of the part derived from the Relevant Transaction Chains.
13. In my judgment, the freezing order should be continued for the time being in the sum of US$14,764,612.
14. So far as costs are concerned, Mr Hunter submits that HMRC should be ordered to pay Dayal's costs of the fraud claim, the costs of the application for the freezing order and the costs of the summary judgment application all on the indemnity basis.
15. Mr Chivers unsurprisingly suggests something entirely different. He points out that Dayal remains a party to the action albeit that the relief claimed against him is now reduced. But nearly all of the facts pleaded in support of the allegation of fraud are also relevant to the section 423 claim in order to establish PT Naina's intentions. Indeed, the only fact alleged against Dayal himself as giving rise to an inference of fraud by him in the context of a case of fraud against all the other conspirators, was the fact of the payments into his account, a fact which is admitted. I can see that, in principle, Dayal should have the costs of that part of the action against him which are attributable to the conspiracy claim. But to make an issue based order of that sort would involve an almost impossible attribution of the costs incurred by him to one claim or the other. The reality is that nearly all the work involved will have been useful to Dayal in the defence of both claims. In my judgment, it is far better that there should be an overall order in relation to the costs of the action as a whole once the outcome of the section 423 claim is know. If Dayal is successful, then it is reasonable to think that he would be entitled to an order for his costs of the action. But if he loses, HMRC will have been successful on its alternative claim and Dayal might be liable for a significant sum under section 423. In that case, the appropriate order for costs may well not be an issue based order, but an order in favour of HMRC with a percentage reduction to reflect their lack of success on the fraud claim.
16. Accordingly, I consider that Dayal's costs of the action attributable to the conspiracy claim should be reserved to the trial judge. Although this will be a matter for the trial judge, I wish to record my view that an issue based order should not attract an indemnity costs order and nor should a percentage reduction reflect that possibility.
17. Since the freezing order is not being wholly discharged at the present time but is to continue in a significant sum, I do not consider that it is appropriate to make any costs order at this stage. They should continue to be reserved.
18. On the application for summary judgment, Dayal has been partly successful and partly unsuccessful. On HMRC's application to amend, Dayal has been wholly successful. It is, I think, likely to prove extremely difficult to apportion costs between the application for summary judgment on the conspiracy claim, the application for summary judgment on the section 423 claim and the costs of the application to amend. Mr Chivers submits that I should make no order. That, in my view, does not reflect the measure of success which Dayal has achieved. I propose to order that HMRC pay Dayal three-quarters of the sum of his costs of his application for summary judgment and of his opposition to the application to amend, on the standard basis.
19. I should attempt to agree an order to reflect these decisions.