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You are here: BAILII >> Databases >> England and Wales High Court (King's Bench Division) Decisions >> Executive Authority for Air Cargo and Special Flights v Prime Education Ltd & Ors [2023] EWHC 1634 (KB) (30 June 2023) URL: https://www.bailii.org/ew/cases/EWHC/KB/2023/1634.html Cite as: [2023] EWHC 1634 (KB) |
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KING'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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Executive Authority for Air Cargo and Special Flights |
Claimant |
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- and - |
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(1) Prime Education Limited (In Liquidation) (2) Tevfik Sekerci (3) Sera Jane Sekerci (4) Prime Education Havacilik Limited Sitketi (5) York Property Suites Limited (Dissolved) |
Defendants |
____________________
The First Defendant did not appear
The Second and Third Defendants appeared in person
The Fourth Defendant did not appear
The Fifth Defendant was represented by the Third Defendant
Hearing dates: 7, 8, 15, 16, 17 & 20 December 2021
____________________
Crown Copyright ©
Mrs Justice Ellenbogen DBE:
"A clients' bank account will be opened with our bankers, HSBC. The account will be controlled by PE's accounts department and they will have instant access to the funds in this account.
A clients account is designed to hold clients' money and is protected if anything happens to the funds. For example, when EACS deposit the project value funds into the clients account, and if PE was to cease trading for whatever reason, the funds in the clients account will be protected and will always legally be the money of EACS. PE will have control of the bank account, and the money in it, however PE will be bound by strict UK laws and regulations on our conduct on this account. Withdrawals from the account will be for payments for education providers, accommodation fees and student wages. All withdrawals will be approved as per a payment schedule to be initially agreed for payments made to education and accommodation providers. This schedule will be agreed upon signing of contracts."
"Funds can only be deposited and withdrawn in GBP (£ sterling)
Funds in this account can only be used on behalf of our client (EACS) and cannot be used by PE;
In order to operate this account, PE will be bound by all relevant laws and regulations involved when holding and controlling clients' funds;
If PE was to cease training, sell the company or become bankrupt, the client account funds will be protected and returned to EACS;
For any foreign payments, GBP will need to be transferred to PE's trading account (business current account) and then international payments sent from there...;
A monthly statement of the account will be sent to EACS.
...
By opening a bank account and managing the project funds in this way will mean the following:
…
Any fees due to PE for the management of this project will be pre-agreed in a contract and paid separately directly to PE."
"The evidence PE will use to satisfy this requirement will be for EACS to transfer the full course fees to the clients account held by PE. PE will then transfer the required course fees to the course provider for each student. Receipt of these funds will be detailed in the CAS/visa support letter. The course fees for the remaining course period will be held in the clients account held by PE until payment is requested by the course provider (month 13 of the course, prior to enrolment)."
and:
"EACS must show that they [the students] have money for living costs per month, per student, for the course duration. All of these funds will be held in the clients account held by PE (in the UK) and a statement of account will be used as evidence for visa application purposes...".
"If this contract is cancelled by PE after the contract has been signed and the invoice paid by EACS, PE will refund the full monies received from EACS back to EACS. If EACS cancels the contract after it has been signed and monies have been transferred to PE, PE will refund all course fees, accommodation fees and student salaries but will not refund any fees due to PE. If EACS cancels the contract once the students have started their studies, only the course fees, accommodation fees and student salary balance remaining will be refunded back to EACS. No PE fees will be refunded."
"All students' salaries will be held in the clients account controlled by PE and transferred to the students on monthly/quarterly basis (whatever is required by EACS...)".
"We must adhere to the differing terms and conditions of each provider and these terms will be passed onto EACS. Payments made from the clients account will be in accordance with the signed course/accommodation providers."
"(i) he was continuing to hold the money from EACS, from which [Mr Rajhi] understood it would still be in [Prime Education's] client account;
(ii) he was still trying to arrange the courses;
(iii) there had been a problem in that HSBC had frozen [Prime Education's] accounts due to concerns about source of funds;
(iv) [Prime Education] was bringing a legal case against HSBC to unfreeze the funds, and expected to have access to the funds shortly; and
(v) he would provide a full written report on the project within 10 days."
a. difficulties in dealing with the Libyan students, comprising the inability of those students to provide the correct documentation so as to comply with the requirements to obtain visas and for the courses for which they were to be enrolled, and the conduct of some students, who had been rude and abusive to Prime Education's staff; and
b. HSBC's blocking of a significant number of payments out of the Euro account, in which the Transferred Money was held.
"Due to a number of changes in circumstances, it is agreed between…PE and …EACS that the following amendments are made to the original contract which was signed on 17th December 2015."
a. replacing the terms on page 9 of the 2015 Agreement (the Client Account Terms — see above):
"Page 9 of the original contract is no longer valid and it is accepted that the statements made on Page 9 of the original agreement, titled FINANCIAL MANAGEMENT, no longer form any contract between PE and EACS. PE is no longer bound by the conditions set out on page 9 of our original agreement dated 17th December 2015.
EACS's funds will NOT be held in a client's account and EACS has no right to access or request the bank statements of [Prime Education]. All funds will be held in the accounts in the name of Prime Education and or its subsidiaries. PE is bound by UK statutory banking regulations and due to the source of EACS's funds being Libyan, we are regularly investigated by our bank and a client's account has not been granted by our bank, HSBC. The purposes of such investigations could be for reasons such as anti-money laundering, anti-terrorism or fraud, to name a few. If payments of course fees or payments of student salaries are delayed due to bank procedures and standard investigatory measures, through no fault of PE, PE cannot be held accountable for any repercussions of late payments. PE will look for an alternative bank who could provide such an account but no guarantees are given as it will be unlikely any bank will offer this service.";
b. a new Cancellation Policy, which provided:
"If EACS cancels this contract for any reason, PE will NOT refund any monies to EACS and will continue the contract only for any students who are enrolled on a course of study at the time of cancellation. Any monies held by PE for those students who have not yet enrolled in the course of study will not be refunded to EACS and will become cancellation penalty monies paid to PE for the cancellation of the contract. Any balance of funds held at the time of cancellation by PE will then become the cash assets of PE and EACS will no longer have any entitlement to the funds held.
If EACS at any point wishes to cancel the contract, this must be done in writing to Prime Education and the contract can be cancelled immediately.";
c. by numbered point 6 on page 3 of the Amended Agreement:
"If there is any situation where a refund is due to EACS from PE, the monies will be refunded directly into the original source account where the original money from EACS was debited from."
"It is fair to say that this agreement is an extraordinary one. The purported effect of those amendments is to remove the security for the monies to be held as student disbursements which would have been included in the original agreement and to allow the first defendant to retain all the monies held if the claimant cancelled the contract for any reason. This is particularly extraordinary in circumstances where the value of the student disbursements was so significantly in excess of the fees chargeable by the first defendant. It frankly appears fanciful that the claimant could genuinely have intended that the first defendant should stand to obtain a windfall measured in millions of pounds."
"In addition to its educational commitments, Prime Turkey also commits to Prime UK in terms of investments below:
a. Prime Turkey shall transfer all that Prime UK has sent to it to its own account;
b. Prime Turkey shall convert all the amounts that Prime UK sends to Prime Turkey for educational and investment purposes to the expenses of the students set out in Article 2 and the investments;
c. Prime Turkey shall find the projects suitable for investment and put all of its experience in this regard to the joint venture as capital;
d. Prime Turkey has the right to use loans in cases where the amounts brought by Prime UK as an investment is not sufficient for the projects;
e. Prime Turkey is the manager for the joint projects undertaken and is obliged to inform the Prime UK representative about the works performed and the projects that it shall choose;
f. Prime Turkey shall ensure that the resource that Prime UK will send is represented by Tevfik Sekerci and Burhan Conoglu."
"Prime UK's obligations related to investment under this agreement are as follows:
a. To examine and evaluate the investment projects found by Prime Turkey;
b. To take part in the co-ordination of the investments of Prime Turkey when necessary;
c. To promote the investments made by Prime Turkey internationally;
d. To provide financial support to Prime Turkey's projects in the field of education and investment."
"The parties shall carry out profit-loss sharing as follows:
a. For each student transferred from Prime UK to Prime Turkey, the profit obtained by Prime UK will be shared in half between the parties. The profit determination shall be made according to Prime UK's agreement. Regardless of the currency of the investment partnership payments sent to Turkey by Prime UK, their Turkish Lira equivalents on the dates when they are received in Turkey are taken as the basis;
b. If the investment fund transferred to Turkey by Prime UK is converted to investment by Prime Turkey;
aa. If the value of this investment exceeds the capital invested by the parties, the investment is considered to be profitable;
bb. However, if the capital invested by the parties is not met, this is considered an investment loss.
cc. If the parties make a profit, the parties will share the profit in half."
"The parties agree that the agreement is an indefinite term co-operation and investment agreement. However they also agree that the agreement will be terminated in the following cases:
…
b. If one of the educational or investment purposes among the subject matters of the agreement is obtained, or if its obtainment/fulfillment becomes impossible, then the agreement shall continue for the other purpose.
…"
"Q. …You said that you were simply investing profits which you were hoping to make, or had made, from the educational project.
A. Yes.
Q. My suggestion is that's not what you did. You, through Prime Education and PE Turkey, simply took all of the Claimant's money and gambled with it by investing, or by putting it into Turkish property. You didn't just take the profits; you took the whole of the money. Would you agree?
A. I wouldn't call it gambling but I agree — Prime Education's money has been invested in property. However, this was not started from March 2016. It was more than a year later we decided to put Prime Education's money into property, because of tax reasons."
Mr Sekerci stated that he had never discussed with the Claimant the currency risk arising from the fact that sums paid in Euros and in Sterling had been converted into Turkish Lira almost immediately, upon transfer to PE Turkey. He had never discussed liquidity risk, stating that, in Turkey, real property could be much more easily sold than it could in the UK. He agreed that assets held in Sterling and Euros would be more liquid than would real property in Turkey, stating that the property market did not pose as much of a risk as had the conversion of the funds into Turkish Lira; "nothing close". He acknowledged that there would be some development risk, as it could not be known whether the property developments would complete. He further acknowledged that he had provided no disclosure relating to any property investment in Turkey. He gave as the reason for that that fact that he had been informed by PE Turkey's Turkish lawyers that PE Turkey should not provide documents; a decision which he had taken jointly with Mr Conoglu.
a. €12,819,000, to a Euro account in the name of PE Turkey, during the period spanning 30 March 2016 and 21 March 2017;
b. €444,500, to ESMA (a French aviation college);
c. €1,333,720, to the students attending the course at ESMA, in France.
The remaining €620,788.75, not transferred to PE Turkey, had included other fees incurred by Prime Education, including bank charges and fees payable to the latter company.
a. £1,395,480 was transferred to PE Turkey on 8 September 2017; and
b. £495,411.04 was held in Prime Education's account.
"83. Based on the facts which are not controversial (and even assuming in its favour that the Amended Agreement was valid), in my judgment Prime Education has no answer to a simple contractual claim for damages based on repudiation of either the 2015 Agreement or the Amended Agreement. In short, the suggestion that it was lawfully permitted in reliance on the Amended Agreement to appropriate substantial funds to invest them in a speculative Turkish property venture ("the Property Purchases") is fanciful.
84. My reasons for this conclusion are as follows:
(1) Even if the Amended Agreement was legally effective (and supported by consideration) and/or there was a representation giving rise to a promissory estoppel, all that either of those would have achieved was to permit Prime Education to remove the Transferred Money from the UK client account and send it to an account of either Prime Education or PE Turkey in Turkey in order to pay the aviation colleges from there.
(2) In this regard, it is significant that on the Defendants' own case, the Amended Agreement provided:
"All funds will be held in accounts in the name of Prime Education and or its subsidiaries."
(3) Despite this, in his witness statement, Mr Seckerci stated that he: "...considered it prudent to invest the money in assets to be owned by [PE Turkey] and specifically [PE Turkey] decided to purchase and develop two prime sites in Istanbul...". He also explains that 53 million Turkish lira (all of it from the Transferred Money) had been so used, amounting in January 2018 to €11,723,561.
85. Accordingly, even if there was a legally effective amendment to the 2015 Agreement, this misuse of the Transferred Money constituted a clear repudiatory breach of the very terms of the Amended Agreement relied upon. Leading Counsel for EACS was right to focus on this as his best point on appeal.
86. Further, even if EACS had impliedly agreed not to seek recompense for Prime Education breaching the 2015 Agreement (by removing the Transferred Money from the client account so as to allow Prime Education to place it in an account in Turkey and run the project from there — the putative representation upon which the Defendants founded their defence of promissory estoppel), in my judgment this could not protect Prime Education from the separate and distinct breach in its taking the money out of the Turkish bank account to fund speculative property development in Turkey."
…
93. …I also do not accept that any relevant factual investigation is material to a construction of the agreement which is the sole basis relied upon for saying the Property Purchases were lawful. In short, an obligation which requires funds to be "held in the accounts in the name of Prime Education and its subsidiaries" is plainly inconsistent with a construction which imports some form of implied power to remove and use the funds (however wise the proposed investment may be).
94. These words are simple and mean what they say: they provide a measure of protection to EACS which would be undermined by giving Prime Education freedom to remove and to speculate with the funds.
95. Accordingly, even if the "trust-like" obligations imposed on Prime Education under the 2015 Agreement as regards monies transferred to it had arguably been superseded by the looser obligations of the Amended Agreement …, Prime Education has no arguable lawful basis for the use of the funds for property speculation. Its defence in relation to the Property Purchases is truly fanciful.
96. In my judgment, those Property Purchases were acts of repudiation of both the 2015 Agreement and the Amended Agreement and such breach was accepted in substance by EACS's letter of 7 December 2018, demanding a return of the sums transferred to Prime Education. At that time, EACS was not aware of the precise misapplication of the funds by way of Property Purchases but that does not preclude termination for breach under well-established contractual principles: Chitty on Contracts (33rd Edition) Vol.1 at para. 24-014.
97. This is sufficient to make good Ground 1 and to entitle EACS to judgment for damages for breach of contract in the sums €13,439,788.74 and (subject to a qualification) £1,871,560, plus interest thereon. These were sums paid over in reliance on intended performance of Prime Education's obligations. The precise quantification of the latter sum is still the subject of a dispute, which I address at the end of this judgment.
98. I have paused to consider whether judgment should not be entered on this basis given there will be a trial of the other claims. However, I do not consider it is appropriate to deny a claimant judgment in respect of an unanswerable claim. Ultimately, no convincing argument was made to me to suggest that there was any proper legal answer to the contractual claim which might emerge at trial. Prime Education's own case as to the nature of the amendments to the contractual arrangements, and the common ground on the facts, lead to it being in breach."
The issues at trial
Inducing one or more breaches of the Amended Agreement
a. whether Mr and/or Mrs Sekerci induced a breach of contract by Prime Education, knowing that the terms of the Amended Agreement required that EACS' money be held in an account in the name of Prime Education and/or in an account of a subsidiary of that company;
b. whether Mr and/or Mrs Sekerci knew that (i) moving EACS' money to PE Turkey; and/or (ii) converting it into Turkish Lira, or assets denominated in that currency, thereby exposing EACS to currency risk; and/or (iii) using such money (allegedly) to purchase property in Turkey constituted a breach of the Amended Agreement, alternatively were indifferent or reckless as to any such breach;
c. whether the acts and/or omissions of Mr and/or Mrs Sekerci were effected in order to secure economic advantage for either or both of them;
Dishonest assistance of a breach of fiduciary duty by Prime Education
d. whether Mr and/or Mrs Sekerci (i) knew that; alternatively, (ii) suspected that; alternatively, (iii) were reckless or indifferent as to whether Prime Education owed a fiduciary duty to EACS;
e. whether, through their acts or omissions, Mr and/or Mrs Sekerci consciously assisted Prime Education's breach of its fiduciary duty, or made such a breach of duty easier;
Unlawful means conspiracy
f. whether Mr and Mrs Sekerci:
i. and/or PE Turkey (acting by its director, Burhan Conoglu) deliberately combined to achieve a common end;
ii. intending to injure or harm EACS by causing it loss, to their own economic benefit;
iii. by their acts or omissions, knowingly and deliberately breached Prime Education's fiduciary obligations to EACS (being the alleged unlawful means); and
g. whether the unlawful means fell within the overall scope of their common design;
Quantum
h. the quantum of any liability established against Mr and/or Mrs Sekerci, and payable by PE Turkey. The quantum alleged to flow from each cause of action, if established, is said to be €13,349,788.74, plus £1,871,560, against which, it is said, credit will be given for £400,706.63, drawn from Prime Education's frozen bank account with HSBC.
The legal principles
Inducing breach of contract
'39. To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realize that it will have this effect. Nor does it matter that you ought reasonably to have done so...'
40. The question of what counts as knowledge for the purposes of liability for inducing a breach of contract has also been the subject of a consistent line of decisions In Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 ... Lord Denning MR said, at pp 700–701:
"Even if they did not know the actual terms of the contract, but had the means of knowledge—which they deliberately disregarded—that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless of whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not."
41. This statement of the law has since been followed in many cases and, so far as I am aware, has not given rise to any difficulty. It is in accordance with the general principle of law that a conscious decision not to inquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact: see Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd [2003] 1 AC 469. It is not the same as negligence or even gross negligence...
42. The next question is what counts as an intention to procure a breach of contract. It is necessary for this purpose to distinguish between ends, means and consequences. If someone knowingly causes a breach of contract, it does not normally matter that it is the means by which he intends to achieve some further end or even that he would rather have been able to achieve that end without causing a breach... Again, people seldom knowingly cause loss by unlawful means out of simple disinterested malice. It is usually to achieve the further end of securing an economic advantage to themselves...
43. On the other hand, if the breach of contract is neither an end in itself nor a means to an end, but merely a foreseeable consequence, then in my opinion it cannot for this purpose be said to have been intended. That, I think, is what judges and writers mean when they say that the claimant must have been "targeted" or "aimed at"...
44. Finally, what counts as a breach of contract?... I think that one cannot be liable for inducing a breach unless there has been a breach. No secondary liability without primary liability...'
Dishonest assistance of a breach of fiduciary duty
(1) The fiduciary relationship
'…A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr. Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.
…
The nature of the obligation determines the nature of the breach. The various obligations of a fiduciary merely reflect different aspects of his core duties of loyalty and fidelity. Breach of fiduciary obligation, therefore, connotes disloyalty or infidelity. Mere incompetence is not enough. A servant who loyally does his incompetent best for his master is not unfaithful and is not guilty of a breach of fiduciary duty.'
'42. The question whether a person is a fiduciary is important because of the duties which follow...
43. Equity imposed stringent duties on persons who were appointed trustees of trusts: Lord Eldon is said to have held that these duties were imposed with "relentless jealousy" in order to ensure that trustees fulfilled their duties, and that trustees had to be "watched with infinite and the most guarded jealousy" (see Ex p Lacey (1802) 6 Ves Jnr 625, 626; 31 ER 1228 and note 2 to the report). The words "infinite" and "relentless" aptly indicate the capacity of equity to develop to meet new challenges. Over the years these duties were also imposed on directors, agents, solicitors and others. The term "fiduciary" is used to cover all persons subject to these duties, including trustees, and it is therefore a wider term than that of trustee.
44. There has been considerable debate as to how to define a fiduciary, but it is generally accepted today that the key principle is that a fiduciary acts for and only for another. He owes essentially the duty of single-minded loyalty to his beneficiary, meaning that he cannot exercise any power so as to benefit himself. In Bristol and West Building Society v Mothew [1998] Ch 18 Millett LJ described the duties of a fiduciary as follows:
"A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary."
45. So "the distinguishing obligation" of a fiduciary is that he must act only for the benefit of another in matters covered by his fiduciary duty. That means that he cannot at the same time act for himself.
46. If a person is a fiduciary then, as part of his core responsibility, he must not put himself into a position where his interest and that of the beneficiary conflict ("the no-conflict principle") and he must not make a profit out of his trust ("the no-profit principle"). The fiduciary is likely to owe other fiduciary duties as well, such as the duty to act in the best interests of the person to whom the duty is owed. Section 178(2) of the 2006 Act expressly makes this a fiduciary duty in the case of company directors. It is not necessary to consider whether these duties are fiduciary duties in all cases. It is not enough that a person has agreed to perform certain duties by agreement. As the Privy Council held in In re Goldcorp Exchange Ltd [1995] 1 AC 74, 98 "The essence of a fiduciary relationship is that it creates obligations of a different character from those deriving from the contract itself".
47. The Court of Appeal adopted the following test put forward by Finn J, sitting in the Federal Court of Australia, in Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22, para 177:
"... a person will be in a fiduciary relationship with another when and in so far as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest ..."
48. This formulation introduces the additional concept of reasonable expectation of abnegation of self-interest. Reasonable expectation may not be appropriate in every case, but it is, with that qualification, consistent with the duty of single-minded loyalty…
…
51. A person can be a fiduciary in relation to another party with whom he has a contractual relationship in respect of some only of his contractual obligations: see, for example, F & C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2012] Ch 613, especially at paras 212-216 and 223 per Sales J (as he then was). This is only one of the situations in which a fiduciary duty may arise. It is important to examine the very specific context in which it is said that a fiduciary duty arises. This point was made by Sales J:
"The touchstone is to ask what obligations of a fiduciary character may reasonably be expected to apply in the particular context, where the contract between the parties will usually provide the major part of the contextual framework in which that question arises." (para 223) (Emphasis added)'.
"The phrase 'fiduciary duties' is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case. Although, so far as I am aware, every fiduciary is under a duty not to make a profit from his position (unless such profit is authorised), the fiduciary duties owed, for example, by an express trustee are not the same as those owed by an agent. Moreover, and more relevantly, the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract...The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise."
'As regards the existence or imposition of fiduciary duties on a party to a commercial contract absent the existence of a trust, i.e. non-trustee or independent fiduciary duties, it is possible for these to arise where there is a relationship of trust and confidence that justifies such equitable duties in conjunction with and consistent with the relevant contractual framework. A contractual obligation to use certain property (i.e. belonging to the obligor, in the absence of any trust) for a particular economic purpose and account to the contractual counterparty (i.e. seller) for the rewards of such promised endeavour is theoretically capable of being conditioned or augmented by fiduciary duties in so far as consistent with such contractual scheme. The precise scope of any fiduciary duties must be moulded to the nature of the particular relationship and facts of the case so as to ensure that any fiduciary duties are consistent with non-fiduciary (i.e. contractual) duties: see Snell's Equity (34th ed. 2019) at 7-009 & 7-012.'
(2) Assistance
'…Beneficiaries are entitled to expect that those who become trustees will fulfil their obligations. They are also entitled to expect, and this is only a short step further, that those who become trustees will be permitted to fulfil their obligations without deliberate intervention from third parties. They are entitled to expect that third parties will refrain from intentionally intruding in the trustee-beneficiary relationship and thereby hindering a beneficiary from receiving his entitlement in accordance with the terms of the trust instrument. There is here a close analogy with breach of contract. A person who knowingly procures a breach of contract, or knowingly interferes with the due performance of a contract, is liable to the innocent party. The underlying rationale is the same.'
(3) Dishonesty
'…their Lordships' overall conclusion is that dishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. "Knowingly" is better avoided as a defining ingredient of the principle.'
'Before considering this issue further it will be helpful to define the terms being used by looking more closely at what dishonesty means in this context. Whatever may be the position in some criminal or other contexts … in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.
In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless. However, in the situations now under consideration the position is not always so straightforward. This can best be illustrated by considering one particular area: the taking of risks.
Taking risks
All investment involves risk. Imprudence is not dishonesty, although imprudence may be carried recklessly to lengths which call into question the honesty of the person making the decision. This is especially so if the transaction serves another purpose in which that person has an interest of his own.
This type of risk is to be sharply distinguished from the case where a trustee, with or without the benefit of advice, is aware that a particular investment or application of trust property is outside his powers, but nevertheless he decides to proceed in the belief or hope that this will be beneficial to the beneficiaries or, at least, not prejudicial to them. He takes a risk that a clearly unauthorised transaction will not cause loss. A risk of this nature is for the account of those who take it. If the risk materialises and causes loss, those who knowingly took the risk will be accountable accordingly. This is the type of risk being addressed by Peter Gibson J. in the Baden case [1993] 1 W.L.R. 509 , 574, when he accepted that fraud includes taking "a risk to the prejudice of another's rights, which risk is known to be one which there is no right to take."
This situation, in turn, is to be distinguished from the case where there is genuine doubt about whether a transaction is authorised or not. This may be because the trust instrument is worded obscurely, or because there are competing claims, … , or for other reasons. The difficulty here is that frequently the situation is neither clearly white nor clearly black. The dividing edge between what is within the trustee's powers and what is not is often not clear-cut. Instead there is a gradually darkening spectrum which can be described with labels such as clearly authorised, probably authorised, possibly authorised, wholly unclear, probably unauthorised and, finally, clearly unauthorised.
The difficulty here is that the differences are of degree rather than of kind. So far as the trustee himself is concerned the legal analysis is straightforward. Honesty or lack of honesty is not the test for his liability. He is obliged to comply with the terms of the trust. His liability is strict. If he departs from the trust terms he is liable unless excused by a provision in the trust instrument or relieved by the court. The analysis of the position of the accessory, such as the solicitor who carries through the transaction for him, does not lead to such a simple, clear-cut answer in every case. He is required to act honestly; but what is required of an honest person in these circumstances? An honest person knows there is doubt. What does honesty require him to do?
The only answer to these questions lies in keeping in mind that honesty is an objective standard. The individual is expected to attain the standard which would be observed by an honest person placed in those circumstances. It is impossible to be more specific. Knox J. captured the flavour of this, in a case with a commercial setting, when he referred to a person who is "guilty of commercially unacceptable conduct in the particular context involved:" see Cowan de Groot Properties Ltd. v. Eagle Trust Plc. [1992] 4 All E.R. 700, 761. Acting in reckless disregard of others' rights or possible rights can be a tell-tale sign of dishonesty. An honest person would have regard to the circumstances known to him, including the nature and importance of the proposed transaction, the nature and importance of his role, the ordinary course of business, the degree of doubt, the practicability of the trustee or the third party proceeding otherwise and the seriousness of the adverse consequences to the beneficiaries. The circumstances will dictate which one or more of the possible courses should be taken by an honest person. He might, for instance, flatly decline to become involved. He might ask further questions. He might seek advice, or insist on further advice being obtained. He might advise the trustee of the risks but then proceed with his role in the transaction. He might do many things. Ultimately, in most cases, an honest person should have little difficulty in knowing whether a proposed transaction, or his participation in it, would offend the normally accepted standards of honest conduct.
Likewise, when called upon to decide whether a person was acting honestly, a court will look at all the circumstances known to the third party at the time. The court will also have regard to personal attributes of the third party, such as his experience and intelligence, and the reason why he acted as he did.
Before leaving cases where there is real doubt, one further point should be noted. To inquire, in such cases, whether a person dishonestly assisted in what is later held to be a breach of trust is to ask a meaningful question, which is capable of being given a meaningful answer. This is not always so if the question is posed in terms of "knowingly" assisted. Framing the question in the latter form all too often leads one into tortuous convolutions about the "sort" of knowledge required, when the truth is that "knowingly" is inapt as a criterion when applied to the gradually darkening spectrum where the differences are of degree and not kind.'
'When dishonesty is in question, the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.'
'58. In the light of Ivey [2018] AC 391, it must in our view now be treated as settled law that the touchstone of accessory liability for breach of trust or fiduciary duty is indeed dishonesty, as Lord Nicholls so clearly explained in Tan… That is not to say, of course, that the subjective knowledge and state of mind of the defendant are unimportant. On the contrary, the defendant's actual state of knowledge and belief as to relevant facts forms a crucial part of the first stage of the test of dishonesty set out in Tan. But once the relevant facts have been ascertained, including the defendant's state of knowledge or belief as to the facts, the standard of appraisal which must then be applied to those facts is a purely objective one. The court has to ask itself what is essentially a jury question, namely whether the defendant's conduct was honest or dishonest according to the standards of ordinary decent people.
Actual knowledge and blind-eye knowledge
59. The discussions of knowledge by Lord Hoffmann and Lord Millett in Twinsectra [2002] 2 AC 164 indicate that knowledge of a fact may be imputed to a person if he turns a blind eye to it, as Nelson is supposed to have done at Copenhagen, or if in legal parlance he deliberately abstains from inquiry in order to avoid certain knowledge of what he already suspects to be the case. It is convenient to use the expression "blind-eye knowledge" to denote imputed knowledge of this type. In the context of dishonest assistance for breach of trust or fiduciary duty, it was common ground before us, and we consider it correct in principle, to equate blind-eye knowledge with actual knowledge for the purposes of the first stage of the test laid down in Tan [1995] 2 AC 378 and endorsed in Barlow Clowes [2006] 1 WLR 1476 and Ivey. It is important, however, to understand the limits of the doctrine. It is not enough that the defendant merely suspects something to be the case, or that he negligently refrains from making further inquiries. As the House of Lords made clear in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2003] 1 AC 469 the imputation of blind-eye knowledge requires two conditions to be satisfied. The first is the existence of a suspicion that certain facts may exist, and the second is a conscious decision to refrain from taking any step to confirm their existence: see the speech of Lord Scott of Foscote at para 112, and the observations to similar effect of Lord Hobhouse of Woodborough at para 25. The judgments also make it clear that the existence of the suspicion is to be judged subjectively by reference to the beliefs of the relevant person, and that the decision to avoid obtaining confirmation must be deliberate.
60. Furthermore, Lord Scott (with whose speech Lord Steyn and Lord Hoffmann agreed) said, at para 116:
"In my opinion, in order for there to be blind-eye knowledge, the suspicion must be firmly grounded and targeted on specific facts. The deliberate decision must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe. To allow blind-eye knowledge to be constituted by a decision not to enquire into an untargeted or speculative suspicion would be to allow negligence, albeit gross, to be the basis of a finding of privity. ..."
As this quotation indicates, the issue in the Manifest Shipping case arose in the context of marine insurance; but the principles there stated apply with equal force to the law of accessory liability, as Lord Hoffmann's reference to the Manifest Shipping case in Twinsectra [2002] 2 AC 164 , para 22 makes clear.
61. Where the conditions for imputation of blind-eye knowledge are satisfied, a person is treated for the purposes of establishing liability for dishonest assistance as if he had actual knowledge of the relevant facts. We do not think it follows from this, however, that suspicions which fall short of constituting blind-eye knowledge are wholly irrelevant to the question whether an alleged accessory has acted dishonestly. The first stage of the test, as it is now understood, requires the court to ascertain all the relevant facts, including the knowledge and beliefs of the defendant. Even though knowledge, in this context, must now be taken to be confined to actual and blind-eye knowledge, we see no reason in principle why a person's beliefs may not include suspicions which he harbours, but which in and of themselves fall short of constituting blind-eye knowledge. The existence of such suspicions, and the weight (if any) to be attributed to them, are then matters to be taken into account at the objective second stage of the test. Or to make the same point in a different way, the existence of a legal technique for imputing constructive knowledge, if certain conditions are satisfied, should not be taken as implicitly restricting the scope of the subjective inquiry into a person's state of mind and beliefs at the first stage. The state of a person's mind is in principle a pure question of fact, and suspicions of all types and degrees of probability may form part of it, and thus form part of the overall picture to which the objective standard of dishonesty is to be applied.'
A conspiracy to injure by unlawful means
(1) Combination or agreement
'111. A further feature of the tort of conspiracy, …is that…it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O'Connor LJ in R v Siracusa (1990) 90 Cr. App. R. 340 at 349 is of assistance in this context:
Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company's name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.
Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. In a criminal case juries are often asked to decide whether the alleged conspirators were 'in it together'. That may be a helpful question to ask, but we agree with Mr Brodie that it should not be used as a method of avoiding detailed consideration of the acts which are said to have been done in pursuance of the conspiracy.
112. In most cases it will be necessary to scrutinise the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy or combination. It will be the rare case in which there will be evidence of the agreement itself.'
(2) Unlawful action
(3) Intent to injure
(4) Consequential loss or damage
The evidence received
Captain Al Banghazi
"Q: According to your investigations, has Prime Education ever said that it was not ready and willing to continue with the contract?
A: They've said they're willing to continue and train the students, but they never did.
Q: Has Prime Education ever said that it is not ready and willing to continue the contract?
A: They've said they'll continue the contract, but they never did.
Q: Can you please go to page 374. Halfway down the page, it says, 'EACS will be responsible for the following…'.
Judge: Which document is this?
D3: It's the original contract between Prime Education and EACS. Could you please read that…
….
D3: …to the end of the paragraph. Has EACS ever submitted the full required documents for each student to Prime Education?
A: Yes. We sent documents for each student.
Q: No; what I mean is, for Prime Education to apply for a course or a visa on behalf of the students, what that paragraph is talking about are the documents that EACS would gather from each individual student—their high school certificates, IELTS scores, etc. Did EACS do this and send it to Prime Education?
A: I think yes.
Q: What makes you think yes?
A: Because there is a report for each student — their name, passport number and IELTS score is in the file in Tripoli.
Q: Do you have any evidence that the documents were sent to Prime Education?
…
A: I'm not sure if the document was sent to Prime Education or not, but we have a list of students with name, passport number, and IELTS[1] score.
Q: But do you have the documents in those files with actual copies of their IELTS certificate, their medical certificates, their high school certificates?
A: Yes.
Q: And do you have the assessment results for the original assessments they would take, so we would know their level in maths and physics, which was a requirement for getting onto the course?
A: No.
Q: And do you know if those documents for each student were sent to Prime Education?
A: The list of students is still there in the office. When we transfer or choose pilots, their skill tests… Prime Education say they'll send a skill test.
Judge: Were the documents you have got on the file in Tripoli sent to Prime Education; the supporting documents, not the list of students?
A: I don't think so.
…
Q: Do you understand what Prime Education required from EACS, being the individual students' documents , which were required to progress with the contract? What you've just said is that Mr Sekerci had said to Mr Rajhi that he would continue the project, but he never did. In order for Prime Education to apply to the aviation schools and apply for student visas, Prime Education needed documents from the students — medical reports; IELTS certificates; high school certificates; criminal records…"
Judge: Let's break the question down; do you accept that, for Prime Education to continue the project and apply for student visas and to the training schools, it needed documents from the students…?
A: All certificates and documents required for the visa and the schools are available.
Judge: Listen to the question — do you accept that, for Prime Education to continue the project and deal with those matters, it needed the documents from the students; yes or no?
A: Yes — this is normal.
Judge: Is it your evidence that those documents were provided; the underlying student documents?
A: No."
Mr Sekerci
"Q. Have you, as a director, ever held or looked after clients' money before?
A. Yes, on quite a few occasions.
Q. And, presumably, on those occasions you did not spend it on things you weren't allowed to?
A. Our other clients were obliged to and complied with their contractual duties. Neither of them took two years to gather the documents to provide them to us, Mr Davies. Those documents are still not ready. I am sure I can understand what you mean.
Q. Are you suggesting delay by the Claimant allowed you to do what you wanted with the money?
A. Doing it and getting no help from the Claimant put us in this situation."
Mrs Sekerci
"Q. …If this property could have been sold so easily, why wasn't it sold so easily and the money given to Prime Education so that it could pay the judgment [of Saini J]?
A. Because I don't believe under the judgment of Saini J that a decision was made on the Amended Agreement. From my knowledge and what I understand, the original agreement and the Amended Agreement…What I'm struggling with is we don't know whether it's a valid agreement. I don't think the agreement or invoices have been looked at in detail. I don't know what I'm trying to say.
Judge: The question is why wasn't the property sold and the money given to Prime Education so that Prime Education could pay its judgment debt.
A. Prime Education went into liquidation. For that to happen, Prime Education would need to cancel its contract with PE Turkey…
Judge: And what do you say is the relevance of the sub-contract to the question which Mr Davies asked you?
A. That power, that decision, was taken out of our hands. It had to be dealt with by the liquidators."
The parties' submissions
For EACS
For Mrs Sekerci
For Mr Sekerci
Findings of fact on disputed matters
The causes of action
Inducing a breach or breaches of contract
Dishonest assistance of a breach of fiduciary duty
Conspiracy to injure by unlawful means
Quantum
a. €13,349,788.74 (together with interest at 2% per annum, running from 15 March 2017); and
b. £1,871,560.00 (together with interest at 3% per annum, also running from 15 March 2017),
being the sums for which Saini J entered judgment against Prime Education (having taken account of sums legitimately paid to ESMA/ESMA students and the fee payable to Prime Education in connection with the ESMA element of the project). EACS is to give credit for the sum of £495,706.63 (being the total sum paid by Prime Education, on 11 March 2021, pursuant to paragraph 3 of the Saini Order, which had provided:
'In part payment of the sum ordered in paragraph 2 above[2], all sums currently held by [Prime Education] in HSBC account number…forthwith be paid…into [EACS'] Solicitors' Client Account with details as follows…').
Thus, in relation to the sum specified at sub-paragraph (b) above, from 12 March 2021 onwards, interest will be calculated on the reduced sum outstanding after credit. The lesser sum for which EACS had proposed to give credit was net of EACS' costs of the appeal before Saini J (summarily assessed in the sum of £95,197.50), which, having regard to the terms of paragraph 3 of the Saini Order, I am satisfied should not be deducted from the sum for which credit ought to be given. Judgment will be entered accordingly.
Consequential matters
Post-judgment freezing order
a. It is for EACS to satisfy the court: (1) of a good arguable case on the merits; (2) that there is a real risk of dissipation; (3) that there are assets held by, or on behalf of, the respondents to its application within the geographical scope of the proposed injunction; and (4) that, in all the circumstances, it is just and convenient to grant the order sought.
b. As EACS has obtained judgment in its favour, the first of the above requirements is met. The third requirement is not in dispute. Thus, the real issue is whether there is a real risk of unjustified dissipation. Notably, none of the respondents to the application submitted to the contrary. As Andrews LJ observed in Yu ([14] and [16]), the purpose and design of a freezing injunction is to protect against the frustration of the court process by depriving the applicant of the fruits of any judgment obtained in its favour (whether by concealment or transfer). It is not intended as a safeguard against insolvency; a means of providing security; or a standard means of securing enforcement of a judgment in favour of the applicant. The court must remain vigilant to ensure that such an order will only be granted in cases in which the evidence suffices to establish that there is a real risk of the judgment going unsatisfied by reason of unjustified dissipation and where it is just and convenient to make the order. Whilst the risk (which is not to be confused with the incentive) must be established whether the freezing order is sought prior to or after judgment, post-judgment injunctions can, in practice, be easier to obtain; the policy of the law is to enforce judgments, for which reason, it may be right that, when a judgment creditor has satisfied the court that there is a real risk of dissipation, it would require particularly strong grounds to refuse an order on the basis of justice and convenience: Yu [17]. The fact that a respondent has been guilty of dishonesty will not, without more, suffice; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated: Lakatamia Shipping Company Limited v Morimoto [2019] EWCA Civ 2203 [34]. Each case will be fact-sensitive.
c. Having regard to the nature, purpose and effect of the dishonesty and activities for which I have found Mr and Mrs Sekerci to have been responsible, I am satisfied that they demonstrate a real risk that this judgment will go unsatisfied by reason of unjustified dissipation (including by PE Turkey, of which Mr Sekerci is a director and shareholder and which has declined to participate in these proceedings). No other ground has been advanced on the basis of which the grant of a post-judgment freezing order would not be just and convenient and there is no reason independently apparent for declining an order on that basis.
a. The sums frozen reflect the judgment debt, including interest.
b. I have removed the 'Angel Bell' exception (permitting the respondents to deal with, or dispose of, their assets in the ordinary and proper course of business), which had been included within the pre-judgment order. It will sometimes, and, perhaps, usually, be inappropriate to include such a provision within a post-judgment freezing order (see Michael Wilson and 'Partners' Limited v Emmott [2019] EWCA Civ 219 [56]) and, on the facts of this case, I am satisfied that its inclusion would have been inappropriate. Unlike the position prior to judgment, EACS is now able to take steps to enforce its judgment against the respondents to the freezing order; the judgment debt is very substantial; there is no evidence regarding the current nature and requirements of any business of any judgment debtor, or the impact of the freezing order on that business. In her submissions, with which her husband concurred, Mrs Sekerci gave as the sole example of the need for the exception to be retained the fact that she and her husband would wish to sell a property in Hull, owned by a partnership of which each owns a 25% share, with the stated intention of putting the net sale proceeds towards discharge of the judgment debt. Given the terms of the order which I shall be making (see sub-paragraph (e), below), there is an alternative route to that end, which will provide suitable protection for all parties in the context of the real risk of unjustified dissipation which I have found to exist.
c. In seeking an increase in the sum which each is permitted to spend per month in ordinary living expenses (to £3,200), Mr and Mrs Sekerci point to the increase in the cost of living, and, in particular, to the imminent increase in the mortgage re-payments due on their home, following the expiry of a fixed rate. Whilst initially contending for its removal, ultimately EACS did not resist the inclusion of the relevant exception but objected to the requested increase in the sum which each of the Sekercis be permitted to spend. Its position was that: no evidence had been provided in support of that request; no such request had been made prior to judgment; and there was no obligation to include an exception to permit any ordinary living expenses in a post-judgment freezing order. Whilst I can take judicial notice of the increase in the cost of living since the living expenses excepted by Yip J were set, and have been shown evidence relating to the increase in the Sekercis' mortgage re-payments and utility bills, I am not satisfied that Mr and Mrs Sekerci will be unable to meet those increased expenses from the combined monthly sum excepted to date of £4,800, consistent with the lack of any pro-active application to vary the provision made by the pre-judgment freezing order. Post-judgment and in light of the substantial judgment debt, I am not satisfied that it is appropriate to increase the excepted expenses beyond the pre-judgment allowance. In the event that a properly constituted application to vary that allowance is made by Mr and/or Mrs Sekerci in due course, it can be considered on its merits at that time.
d. I accept EACS' submission that no cross-undertaking in damages relating to the respondents (as opposed to third parties) is required in the context of a post-judgment freezing order, where the judgment debt is so substantial; unlike the position pre-judgment, there is no question of the freezing order being discharged on the basis that it ought not to have been granted.
e. Amongst the contentious issues to which the application for a post-judgment freezing order gave rise was the extent to, and basis upon, which the respondents and third parties should be entitled to facilitate execution of the judgment debt without thereby acting in breach of the order. I was not satisfied that the wording proposed by EACS enabled third parties put on notice of the order to understand that which they might lawfully do. Mr and Mrs Sekerci submitted that, in circumstances in which the judgment debt was so substantial; was to be paid within a short period; and could only be settled following the disposal of and/or release of equity in their assets, any process which required EACS' prior consent to such dealings would be unduly restrictive and punitive and, in any event, would be no substitute for clear provisions in the order. It is important that: (1) the freezing order not be used, nor operate, as an instrument of oppression, beyond imposing the pressure to satisfy the judgment debt inherent in an order of that nature; (2) the real risk of unjustified dissipation which has justified the grant of the order be suitably met; and (3) the respondents and affected third parties be clear in what they can and cannot lawfully do. To those ends, I am satisfied that the appropriate balance is struck by the following provisions, coupled with the undertaking which (amongst others) EACS has given, at the court's invitation, set out below:
'9. (1) The Respondent and/or any third parties are permitted to deal with the Respondent's assets in order to facilitate the execution of the Ellenbogen Order, such dealings to be restricted as follows:
(a) At the Respondent's written direction, which must be copied to the Applicant's solicitors at the time at which it is given, any sums held in a bank or building society account in the name of that Respondent may be paid directly into the Applicant's solicitors' client account having the following details ('the Client Account'), in full or partial satisfaction of the Ellenbogen Order:
[account details]
(b) If the First, Second and/or Third Respondents wish to liquidate, or raise equity against, any real property, shares and/or other illiquid asset in order to satisfy the Ellenbogen Order (in whole or in part), the relevant Respondent's/s' written proposal for disposal of that asset/debt financing and payment of the net proceeds directly into the Client Account shall be submitted to the Applicant's solicitors, seeking the Applicant's prior written consent, such consent not to be unreasonably withheld, and to be given/withheld (as the case may be) as soon as reasonably practicable. In the absence of the Applicant's consent, the Respondent may submit the written proposal to a King's Bench Master for (1) determination of whether it ought to be approved; and (2) consideration of whether the Applicant's consent has been unreasonably withheld. In that latter event, the Master shall have power to make such variation (if any) to paragraph 3 of the Ellenbogen Order, concerning the interest accruing on the judgment debt, as s/he considers to be appropriate in all the circumstances.
…
Undertakings given to the Court by the Applicant
1. If the Court later finds that the Applicant has, unreasonably: (1) delayed in giving, or (2) withheld its consent under paragraph 9(1)(b) above and thereby caused loss to the Respondent (including by increasing any interest payable on the judgment debt, or part thereof), and decides that the Respondent should be compensated for that loss, the Applicant will comply with any order which the Court may make.'
f. Post-judgment freezing injunctions should be of limited duration and the judgment creditor should be encouraged to proceed with proper methods of execution: Republic of Haiti v Duvalier [1989] 1 All ER 454 (CA), at 465, per Staughton LJ. Subject to an overarching provision for discharge of the order at such time as the judgment debt has been satisfied in full, I have made provision for the court to review the order, in December of this year, and given associated directions.
Costs
Note 1 International English Language Testing System [Back] Note 2 being the sums for which judgment had been entered against Prime Education [Back]