|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Cavendish Square Holdings BV & Anor v El Makdessi  EWHC 4305 (Comm) (18 December 2012)
Cite as:  EWHC 4305 (Comm)
[New search] [Context] [View without highlighting] [Printable PDF version] [Help]
QUEEN'S BENCH DIVISION
B e f o r e :
| (1) CAVENDISH SQUARE HOLDINGS B.V.
(2) TEAM Y&R HOLDINGS HONG KONG LIMITED
|TALAL EL MAKDESSI
||Part 20 Claimant
|(1) CAVENDISH SQUARE HOLDINGS B.V
(2) WPP 2005 LIMITED
(3) TEAM Y&R HOLDINGS HONG KONG LIMITED
Part 20 Defendants
Counsel for Defendant/Part 20 Claimant: Michael Bloch QC and Camilla Bingham
Hearing Dates: 17, 18 December 2012
Crown Copyright ©
MR JUSTICE BURTON:
i) the trial which had been fixed for four to five weeks was reduced, days before it started, to four to five days.
ii) the Claimant had however fully prepared for a trial of liability. The Claimants had prepared statements of some 6 witnesses, ready to be served, and had considered some 8 million documents by way of disclosure.
iii) some £1.3 million is said to have been incurred in costs by the Claimants (and a similar amount by the Defendant) in relation to a case which could, and the Claimants assert should, have only ever been a dispute as to an issue of law which would need to resolve the disputes as to enforceability of the covenants but always dependent on undisputed fact, apart from issues of damages.
iv) the original index for the proposed trial bundle, running to 125 pages by way of index alone, was, as was a great deal else, wasted effort.
"The principal change is that your client now admits that in and following July 2007 he engaged in conduct which falls within the definition of Defaulting Shareholder. You client has until this Wednesday denied that this was the case.
As you will appreciate, the question of whether or not your client has engaged in conduct which falls within the definition of Defaulting Shareholder is an issue which has involved a very substantial amount of work by us and our clients, with respect to disclosure, the preparation of witness evidence and preparation for trial. A trial, which had originally been listed for 4-5 weeks to accommodate evidence from numerous witnesses, you now propose listing for 5 days to deal largely with legal argument only.
Had your client made his present admission, as he clearly should and could have done, when he first served his Defence (in February 2011) all of this work would have been unnecessary and your clients would not have incurred the very substantial costs of carrying it out - which, as you are aware, are in excess of £1 million. We do not see how your client could possibly maintain that he was not in a position to make his admission at the time of service of his Defence; indeed we now have very serious concerns about the Statement of Truth that he signed at that time.
You currently appear to be suggesting that the costs that have been incurred by our clients in seeking to establish that your client was a Defaulting Shareholder should be costs in the case. However, this position is untenable. Had your client made his admission at the appropriate time, these costs would not have been incurred by our clients.
We therefore invite you once again to provide us with your proposals as to the payment of the Claimants' costs unnecessarily incurred in this way."
It is apparent that the solicitors were not only making their point in relation to costs, but were also laying down a marker in relation to the Statement of Truth confirming the Defence.
"Following the service on Monday afternoon of your client's Re-Amended Defence and Part 20 Claim verified by a Statement of Truth signed by your client, our clients now intend to apply for an Order for Committal against your client.
Accordingly, we enclose our clients' Application in draft together with a copy of the Affidavit sworn by Paul Anthony Oxnard in this matter today ....
As you will know, CPR Rule 81.14(2) states that the Application for Permission must be served personally upon your client unless the Court otherwise directs. For the reasons set out in Mr Oxnard's affidavit, personal service upon your client is impractical. We trust that your client will consent to a direction that service upon your firm will suffice.
Upon receipt of such confirmation, we will arrange for the Application to be issued (together with a Consent Order relating to alternative service, for the Court's approval) and served on your firm.
Our current proposal, subject of course to the Court's direction, is that the Application for Permission to Apply for the Committal of your client would be heard at the conclusion of the Trial of this action which is due to commence on 12 November 2012.
We invite you to confirm by 4pm on 1 November 2012 that your firm will accept service of the Application on behalf of your client. If you do not do so, then we will seek to move the Court on Monday for permission to service the Application Notice upon your firm"
i) The Defendant served two witness statements. The Claimants submit that they ought, by virtue of the provisions of Part 81, to have been affidavits and not least because there had been a challenge to the Statements of Truth attached to the Defence. Rule 81 PD 14.1 of the relevant Practice Direction reads as follows:
"Written evidence in support of or in opposition to a committal application must be given by affidavit."
There is an issue, however, as to whether this applies to the application for permission as well as to the application itself. This issue has been more or less resolved by the Claimants' acceptance that I can and should read the witness statements and, if I allow the application, then the contents of the witness statements can be re-served or supplemented as affidavits.
ii) In those witness statements, the Defendant revealed the existence of without prejudice negotiations between the parties. The Claimants objected, and have not withdrawn their objection, but it has been agreed that I read the evidence as I have done. This evidence does not disclose the detailed content of such correspondence, but only the Defendant's account as to its general nature and its timing. I was not invited to strike it out. I do not however accept the submissions of Mr Bloch QC that by not dealing with it in response, in order not further to waive the privilege, the Claimant has in any way accepted the accuracy of what was said about it.
iii) Mr Bloch points out that there is no provision in the Rules for a reply affidavit by the Claimant, for which I made provision in an order, and indeed further none for any reply submissions orally by Ms Smith QC at the hearing before me. I did, in the event, give the last word orally to Mr Bloch, but I do not agree that, provided that I appreciate where the burden lies on these applications, the court should exclude any reply evidence or submissions in support of the Claimant's application.
iv) There has been a live dispute by Mr Bloch as to the content of the evidence upon which the Claimant is entitled to rely. In opening her case, Ms Smith relied not only upon the content of Mr Oxnard's affidavits but also upon the content of the pleadings in the case and in particular the Further Information of the Particulars of Claim Pursuant to the Defendant's Request, served on 28 April 2011, to which was annexed a considerable number of documents said to support the Claimants' case, mainly emails.
"There are now produced and shown to me marked 'PAO1' and 'PAO2' bundles of true copy documents. PAO1 contains various documents referred to below. PAO2 contains the body of two witness statements served in these proceedings on behalf of the Claimants, Sara Hussein Assaf dated 28 September 2012 and Assaad Douaihy dated 12 June 2012. I was responsible for proofing these witnesses and for arranging for them to sign the statements of truth to those statements, having explained to them the consequences of doing so, and I believe that they accurately set out their true accounts of the matters they describe. PAO3 is a true copy which I have had made of an audio and video recording (originally made on an iPhone by Assaad Douaihy) which I describe more fully below. The pleadings and Orders and the Claimants' other witness statements and exhibits that I refer to in this Affidavit will be made available to the Court separately on the hearing of the Claimant's applications."
"81.14.—(1) The application for permission to make a committal application must be made by a Part 8 claim form which must include or be accompanied by—
(a) a detailed statement of the applicant's grounds for bringing the committal application; and
(b) an affidavit setting out the facts and exhibiting all documents relied upon."
I shall return to this later.
"i) A person who makes a statement verified with a statement of truth or a false disclosure statement is only guilty of contempt if the statement is false and the person knew it to be so when he made it.
ii) It must be in the public interest for proceedings to be brought. In deciding whether it is the public interest, the following factors are relevant:
a) The case against the alleged contemnor must be a strong case (there is an obvious need to guard carefully against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they have a grievance);
b) The false statements must have been significant in the proceedings;
c) The court should ask itself whether the alleged contemnor understood the likely effect of the statement and the use to which it would be put in the proceedings;
d) The pursuit of contempt proceedings in ordinary cases may have a significant effect by drawing the attention of the legal profession, and through it that of potential witnesses, to the dangers of making false statements. If the courts are seen to treat serious examples of false evidence as of little importance, they run the risk of encouraging witnesses to regard the statement of truth as a mere formality.
iii) The court must give reasons but be careful to avoid prejudicing the outcome of the substantive proceedings;
iv) Only limited weight should be attached to the likely penalty;
v) A failure to warn the alleged contemnor at the earliest opportunity of the fact that he may have committed a contempt is a matter that the court may take into account."
"(j) Following 26 March 2008 the Defendant's only involvement in the business of Carat was to assist in finding a replacement CEO and, pending his appointment, to sign cheques on behalf of the business.
"(k) In the event in 2008, Aegis appointed a Mr Harvist to replace the Defendant as chief executive officer at Carat, who was later replaced by a Mr Boulas.
"(16) In the premises, save as set out in paragraph 15(j) above, from no later than 28 April 2008 the Defendant ceased to carry on or be engaged, concerned or interested, whether in competition with the Group or at all, in any activities of Carat and by that date had fully complied with the provisions of Clause 7(5) of the agreement."
"The Defendant has not diverted or sought to divert any media buying business to Carat whether at the expense of MEC or at all. "
This was entirely deleted in the reamendment. MEC is part of the group of which the Claimants now form part.
"Hisham Maksoudian set up a new agency in Beirut, namely Adrenalin SARL ("Adrenalin") providing advertising, communications, public relations and/or media buying services in competition with the group. The Defendant's holding in Adrenalin is held beneficially on his behalf by his nephew, Elias El Makdessi. In a meeting in September 2009 between the Defendant and the Regional Creative Director of Intermarkets, Assaad Douaihy ... the Defendant revealed his intention to put his shares in the name of the nephew. "
The Third Statement reads:
"At no stage did the Defendant inform Douaihy that he intended to put shares in Adrenalin in the name of his nephew or any third party. "
i) As to the Second Statement, the evidence upon which the Claimants sought to rely was that the Defendant was involved in seeking to procure that business, which Carat had but might have lost to MEC, and which MEC was keen to obtain, was retained by Carat. The witness statement of Sara Assaf, which is exhibited to Mr Oxnard's first affidavit, upon which the Claimants rely, records that in April 2008 she was determined to obtain the Laziza media buying business for MEC, and that the Defendant was involved in making sure that it stayed with Carat and did not go to MEC. That appears to me not to show, of itself, and there is no other evidence relied upon, that the Defendant was diverting business to Carat. It may well constitute a breach of fiduciary duty, or indeed be in breach of clause 11.2 but it does not, in my judgment, constitute a case for the Claimant of diversion of business to Carat at the expense of MEC.
ii) As to the Third Statement, that does not relate to Carat, but to another area of the Defendant's alleged competition with the Claimant. Mr Douaihy taped a conversation which he had with the Defendant, which was exhibited by Mr Oxnard, and which read, in material part, as follows, purporting to record the voice of the Defendant:
"I only have one problem, my shares ... in whose name shall I put them? ... because I was going to put them in Wissam's name or maybe in Amal's name, now I will put my shares in the name of my nephew."
i) he assisted in finding a replacement CEO for Carat and pending that appointment he signed cheques on behalf of the business; and
ii) this continued after 26 March 2008, but only until June 2008 when Mr Harnist was appointed;
iii) what he did on behalf of Carat, namely as above, was his only involvement in the business of Carat after 26 March 2008, such that, from 28 April 2008, he was not concerned at all in any activities of Carat, and certainly not involved in any activities of Carat which were competitive with the Claimants or MEC.
"In March 2008 I told Mark Jamison of Aegis that I wanted to resign my position and by letter dated 26 March 2008 he accepted my resignation on the basis that I was required to give three months' notice to expire at the end of June 2008.
62. Unfortunately the recruitment of a replacement CEO did not prove straightforward and although after June 2008 I received no further salary from Carat, I continued to approve expenditure, sign cheques for the Beirut branch and answer queries directed to me for the simple reason that there was no one else around to do it and because it is in my nature to try to help people...
63. As to Aegis executives, the reality was that I had been running Carat without significant input from Aegis ever since I set up the Beirut branch in 2003. Aegis has a presence in many different countries but it could not simply re-locate an existing employee from Europe or America. What was needed was an individual who was conversant with the Middle Eastern market. On a practical level, in Lebanon only Lebanese nationals can act as signatories on bank accounts so the appointment of a foreigner would not have advanced matters.
64. As a result I continued to respond to the day to day operational needs of the business well after June 2008."
i) the evidence referred to above as to the Laziza business. This took place subsequent to 26 March, but prior to 28 April 2008. Although the First Statement is somewhat ambiguous in the sense of only firmly stating what happened after 28 April, it seems to me that I cannot be satisfied that the Claimants can rely on what is now said to have occurred before 28 April, albeit subsequent to 26 March, as constituting any clear evidence that the First Statement, which I have set out, was false or knowingly false.
ii) events in February 2009, when he opened a Carat bank account: see his email of 12 February 2009 exhibited by Mr Oxnard. The email reads, in material part, as follows:
"I have opened a Carat Middle East account in Lebanon at BBAC Bank ... totally independent from Beirut operation accounts which are at our Mawarid Bank ... the BBAC account is like a holding account where we keep the extra cash available from UAE and Saudi operation and we enjoy more than 5 per cent interest. So Saudi did transfer all their profits until 31/12/2007 and wrote it as dividends instead of cash at the BBAC Bank.
The lawyers ... agreed a resolution to pay dividends up to 31/12/2007 ... shall I pay from this saving account? We have enough cash to do so ... who should we coordinate financially with in the future? Hope all is now clear."
In March 2009, according to the same series of documents relied upon by Ms Smith, the Defendant was involved in the reorganisation of Carat and was informed about, and wished luck to, a pitch by Carat for Procter & Gamble's business. Mr Harnist informed him of the proposed meeting with Procter & Gamble in Geneva on 17 March and he hoped that the Defendant would be able to be there. The Defendant responded on the same day, 12 March, wishing Mr Harnist luck and making it clear that, through an apparent clash of meetings, he would not be able to be there. In addition, there is included a contract of employment for an employee of Carat Middle East, in relation to which it seems that the Defendant was involved in March 2009, by reference to emails attached, and which was, like others, seemingly signed or intended to be signed by him as "President and Chief Executive" of Carat. Mr Oxnard in paragraph 39 of his first witness statement said as follows:
"Finally, I would add that when the Claimants gave disclosure on 20 January 2012, this included the disclosure of some 540 emails evidencing the Defendant's involvement in the activities of Carat. By way of example, the Claimants' disclosure included emails ... that showed the Defendant to have opened a bank account on behalf of Carat Middle East in Lebanon in or around February 2009, to have convened a meeting in Beirut on 19 March 2009 to discuss the reorganisation of Carat in the Middle East and to have been asked in March 2009 to sign (as the 'President and Chief Executive Officer' of Carat Middle East) employment contracts for staff of Carat in Dubai. It must have been obvious to everyone who viewed the Claimants' disclosure including the Defendant that what the Defendant had said in paragraph 16 of his Defence was patently untrue."
iii) An exchange of telexes and other documents in 2009 which are only produced, as I have discussed above, by reference to being annexed to the Further Information of the Particulars of Claim, and are objected to by Mr Bloch on that basis. Two of such emails in March 2009 from him request his correspondents to use his Carat email address, and not that at the Second Claimant. The most significant of the emails are those which inform the Defendant of a proposed pitch by Carat to seek to keep the business of Louis Vuitton on May 5 2009. He sends an email of 24 April 2009 to Mr Boulas, his successor as CEO, according to his pleading, saying as follows, in relation to his potential presence at such meeting with Louis Vuitton:
"Does my presence add value? If yes, will attend with great pleasure. If not, wish you the best of luck."
"I proposed to attend the Louis Vuitton meeting but Suzanna recommended otherwise ... I did my duty and explained all I know to Antonio [that is Mr Boulas]."
"Mr Oxnard refers in general terms to the Carat documents provided to me at the end of April 2011 and says that those documents are evidence of my ongoing involvement with Carat. It follows, he says, that I must have known that paragraphs 15 and 16of my Defence were false, but chose to repeat the falsehood when I served my Amended Defence and Counterclaim.
I would like to make two points clear in this regard. The first is that reading these documents as best I can, they appear to me to show nothing meaningful about my involvement with Carat. It would have been helpful if Mr Oxnard had identified what he takes from the documents. What I see is that the exchanges with Ms Assaf are all before 1 July 2008 and the two or three emails with Mr Boulos show the new Chief Executive looking for some hand holding. So what?
The second point is that Mr Oxnard is overlooking the fact that when I approved the Amended Defence and Counterclaim I was focusing my attention on the amendments which (as set out above) were very narrow and uncontroversial. I did not revisit every allegation in the Defence line by line with a microscope. I have a life beyond this litigation."
i) He submits that the bringing of the application was without warning and that the mention of the Statement of Truth in the letter of 12 October to which I have referred was in the context of costs. By calling upon the Defendant to provide a Statement of Truth for the proposed Reamended Defence and Counterclaim abandoning the previous case, the Claimants were seeking to trap the Defendant into thus confirming or supporting a case of contempt against him by reference to the Statement of Truth on the earlier pleading. So far as this latter is concerned, I find this wholly unpersuasive. Clearly a Statement of Truth was necessary for the reamended pleading before there could be the abandonment of the case as then put forward, or at least the Claimant's solicitors were entitled to form that view.
ii) Mr Bloch submits, and reveals through the evidence, that there was what he describes as a derisory without prejudice response on31 October to the Defendant's without prejudice offer of settlement of 16 October - which had clearly accompanied or been contemporaneous with its abandonment of its case - and thus that the application, previously served in draft as I have described, was intended to force the Defendant into such derisory settlement. I have not seen either the offer or the counter offer, both made at the time of and immediately after the Defendant had abandoned his case on liability and the whole shape of the case had plainly altered.
i) The contempt application was and is properly brought and a necessary warning, if warning is necessary in this kind of case, was given in the letter of 12 October, which was plainly, as appears from the letter itself, quoted above, made additionally to any point relating to costs.
ii) There is no need for further evidence by the Claimants in respect of the without prejudice negotiations, which were, she submits, wrongly referred to. The counter-offer, against the background of the abandonment of the Defendant's defence, was put in before the expiry of the Defendant's own deadline for negotiations.
iii) The Statement of Truth on the Reamended Defence and Counterclaim had no effect on the strength or otherwise of the case now being made. The timing of the application was correct, i.e. once the factual issue had fallen away and liability had been abandoned, the original defence and its Statement of Truth could be shown to be unsupportable and unsupported.
iv) The draft application was served in advance in order to see if the subsequent application for alternative service or substituted service could be avoided, but in the event the Defendant's solicitors did not agree to that course.
i) the words of Sir Richard Scott VC in Malgar at 396:
"The difficulty lies in knowing quite what mental state on the part of the accused has to be shown. But I would think that it must in every case be shown that the individual knew that what he was saying was false and that his false statement was likely to interfere with the course of justice.
The court from which permission is sought will be concerned to see that the case is one in which the public interest requires the committal proceedings to be brought. I repeat that these are not proceedings brought for the furtherance of private interests."
And at 400:
"The allegedly false statements were made in June and abandoned in July. Does this show an attempt to interfere with the course of justice of a sufficient seriousness to warrant committal proceedings?"
ii) Cox J in Kirk v Walton at paragraph 29:
"I approach the present case, therefore, on the basis that the discretion to grant permission should be exercised with great caution; that there must be a strong prima facie case shown against the Claimant, but that I should be careful not to stray at this stage into the merits of the case; that I should consider whether the public interest requires the committal proceedings to be brought; and that such proceedings must be proportionate and in accordance with the overriding objective."
iii) In KJM Superbikes Moore-Bick LJ referred in paragraph 12 to the case of Malgar and he said this:
"In [Malgar v Leach the Vice-Chancellor] declined to give permission for proceedings to be instituted against the alleged contemnors because the falsity of the statements in question could not be clearly established without trespassing on the issues in the trial and because in any event the statements themselves had not been persisted in to the point at which they were likely to affect the outcome of the proceedings. He therefore regarded the committal application as tenuous, having earlier expressed the view that in order to succeed in an application to commit for contempt in making a false statement it is necessary to show that the maker knew that what he was saying was false and that his false statement was likely to interfere with the course of justice."
He then said:
"16. Factors such as these are likely to indicate whether the alleged contempt, if proved, is of sufficient gravity for there to be a public interest in taking proceedings in relation to it. In addition, the court will also wish to have regard to whether the proceedings would be likely to justify the resources that would have to be devoted to them.
17. In my view the wider public interest would not be served if courts were to exercise the discretion too freely in favour of allowing proceedings of this kind to be pursued by private persons. There is an obvious need to guard carefully against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they have a grievance, whether justified or not ... I would therefore echo the observation of Pumfrey J. in paragraph 16 of his judgment in Kabushiki Kaisha Sony Computer case  EWHC 1192 (Ch) at 16 that the court should exercise great caution before giving permission to bring proceedings. In my view it should not do so unless there is a strong case both that the statement in question was untrue and that the maker knew that it was untrue at the time he made it."
Finally, he states in paragraph 19 as follows:
"In some cases, of which this is an example, it may be possible to deal with an application of this kind at a much earlier stage, especially if the alleged contempt relates to a statement made for a limited purpose which has passed and has no continuing relevance to the proceedings. Although we did not hear argument on this point, I think that in general a party who considers that a witness may have committed a contempt of this kind should warn him of that fact at the earliest opportunity (as the appellant did in this case) and that a failure to do so is a matter that the court may take into account if and when it is asked to give permission for proceedings to be brought. However, it is important not to impose any improper pressure on a witness who may later be called to give oral evidence. In particular, if the alleged contemnor is to be called as a witness, an application under rule 32.24 should not be made, and if made should not be entertained by the court, until he has finished giving his evidence."
i) Both sides agree that I should exercise this jurisdiction with caution.
ii) The public interest must require committal proceedings to be brought. I shall return to this below.
iii) The facts in Malgar were that false statements had been made by a Defendant at the summary judgment stage which were in the event not pursued and not relied on at the application for summary judgment: and further substantial proceedings were continuing, leading to a full trial to come and a real risk in those circumstances that a parallel application for committal would have a prejudicial effect on a very substantial and continuing trial. The reference by Moore-Bick LJ to "trespassing on the issues in the trial' must be seen in that context and so must the point that "the statements have not been persisted in to the point which they were likely to affect the outcome of the proceedings" ie the summary judgment application. I accept Ms Smith's submission that the outcome is not necessarily limited to the outcome of the trial. In this case the outcome may be constituted by the very substantial expenditure of time and costs, even if, in the event, the case was abandoned prior to an actual trial. The question of persisting in a case has to be seen in the relevant context.
iv) No improper pressure must be imposed on someone who may be obliged subsequently to give oral evidence. In the Malgar case addressed by Moore-Bick LJ in his judgment, there was to be very substantial oral evidence. In this case, the abandonment came at a time when the Defendant had concluded that he would call no evidence at the trial on liability. I shall return to this later.
"2. For many years the courts have sought to underline how serious false and lying claims are to the administration of justice. False claims undermine a system whereby those who are injured as a result of the fault of their employer or a Defendant can receive just compensation ...
4. Quite apart from that effect on those involved in such litigation is the effect upon the court. Our system of adversarial justice depends upon openness, upon transparency and above all upon honesty. The system is seriously damaged by lying claims. It is in those circumstances that the courts have on numerous occasions sought to emphasise how serious it is for someone to make a false claim, either in relation to liability or in relation to claims for compensation as a result of liability."
i) There must be a strong case, bearing in mind that at the full hearing the contempt alleged must be proved beyond reasonable doubt, i.e. that the statement was false and was known to be false by the person who made it.
ii) The false statement must be significant in the proceedings.
iii) The court must be satisfied that the alleged contemnor knew the effect of the statement and the use to which it would be put in the proceedings.
MS SMITH: My Lord, I'm very grateful, and I'm most grateful to your Lordship for dealing with that overnight.