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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Eco Quest Plc v GFI Consultants Ltd & Ors [2014] EWHC 4329 (QB) (18 December 2014) URL: https://www.bailii.org/ew/cases/EWHC/QB/2014/4329.html Cite as: [2014] EWHC 4329 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London WC2A 2LL |
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B e f o r e :
Sitting as a Deputy Judge of the Queen's Bench Division
____________________
ECO QUEST PLC | Claimant | |
- and - | ||
(1) GFI CONSULTANTS LTD | ||
(2) ANDREW NATHANIEL SKEENE | ||
(3) JUNIE (also JUNIER) CONRAD OMARI BOWERS | Defendants |
____________________
Mr Philip Jones (instructed by Mackrell Turner Garrett) appeared for the Second and Third Defendants
Hearing dates: 11, 12, 18 December 2014
____________________
Crown Copyright ©
MR SALTER QC:
Introduction
The issues in the case
The parties
The claim
Belem Sky
Para Sky
The pleaded representations
At that meeting [on 5 July 2012] Mr Skeene and/or Mr Bowers:
11.1 told Mr Davies that they already held an option to buy the entirety of the Para-Sky Plantation;
11.2 told Mr Davies that they would be taking further options in their own names but which would be exercised by Maos Seguras Administracao Agricolla Ltda ("Maos Seguras");
11.3 told Mr Davies that Maos Seguras was controlled by [GFIC Title Ltd]"
11.4 gave Mr Davies a template "declaration of trust" and "certificate of declaration of trust" each to be executed by GFI once the investment had been made, giving the investor title to the plots bought ..
The following were material misrepresentations in this agreement.
13.1 A "Plot" would contain "teak trees which are approximately 8 to 9 years into a growth cycle" and would be "demarcated on the ground"
13.2 A "Plot" would be within the "Property", being the "Para-Sky Plantation" in the state of Para, Brazil and would be held by GFI's the
13.3 A "Lease" "would be of "the beneficial interests in the Plot and the teak trees thereon"
13.4 GFI would sell the claimant "a Lease in the Plot"
13.5 GFI would warrant that
13.5.1 "It will procure the acquisition of a beneficial interest in the freehold of the Plot after Maos Seguras has purchased the freehold of the plot"; and
13.5.2 "The Plot and all the plots of land surrounding it that are within the Property contain semi mature teak trees planted approximately 8 to 9 years ago"
13.6 The "Price" paid by the Claimant "may be used if needed to purchase the land in which the Plot is situated prior to GFI being able to grant any lease"
13.7 "If the Plot has not been purchased by MS so that it forms part of the Property .. within 6 months of the date of this Agreement, then the [Claimant's] money paid under .. this Agreement .. shall be returned by GFI
13.8 GFI undertook "to create the Lease after it has been granted the beneficial interest in the freehold of the Plot"
13.9 GFI would thereafter "hold the benefit of the Lease on trust for the [Claimant]" and "issue to the [Claimant] a Certificate of Declaration of Trust which will constitute evidence of the beneficial interest in the Plot. No certificate issued by any other party shall be valid"
13.10 Upon issue of such Declaration of Trust, the Claimant "agrees to grant a long-term sub- lease over the Plot to Maos Seguras which shall assume full responsibility for the management of the Plot"
13.11 "After having held the Lease for a minimum of four years the [Claimant] shall be entitled to exercise an option to surrender it to GFI in consideration for the payment by GFI of the original Price plus 5%".
20. On the dates identified in Schedule A, in respect of each of the 16 investments GFI send Mr Davies a letter which referred to the Claimant's investment in the Para Sky Plantation, and enclosed the "fully executed" Investment Agreement and Rental Agreement, the Declaration of Trust, the Certificate of Declaration of Trust and a Map of the Project identifying the Plots acquired. In each case this letter was signed on behalf of GFI by Mr Skeene and Mr Bowers.
21. Each such letter amounted to a further representation by Mr Skeene and Mr Bowers that the investments referred to had completed in the manner contemplated by the contracts and, in particular, that the Claimant had acquired a beneficial interest in a particular Plot in the Para Sky Plantation, which Plot was of the size and quality contracted. Each such letter was intended by Mr Skeene and Mr Bowers to be relied upon by the Claimant and in the making of subsequent investments was so relied on.
GFIC Title Ltd hereby certifies that (the "Investor") [EQ] has invested in the Para Sky Plantation Project in Brazil and has Plot number(s) 80-94 registered in their name.
You hereby have the rights to 1.5 ha of Land, subject to the terms set out in your Investment Agreement
Valid from 27th of July until The Termination Date
The Declaration of Trust for that investment stated:
We, the undersigned, GFIC Title Ltd .. HEREBY CONFIRM that we are the registered majority shareholders of Maos Seguras Administracao Agricolla Ltda which is the registered legal owner of the Land and which forms part of the Para Sky Plantation Project she is more particularly described in the Investment Agreement
The Plot(s) named and identified overleaf form part of the Properties stop
Further we HEREBY ACKNOWLEDGE AND DECLARE that, pursuant to the Investment Agreement between [GFI] and the Investor named overleaf, we hold the Lease of the said Plot in trust for the Investor, and hereby agree to transfer, pay and deal with the said Plot in such manner as the Investor shall from time to time direct, subject only to the terms of the aforementioned Investment Agreement and Deed of Trust, and payment being made to us for any fees or disbursements which may be necessary arising from or in execution of such directions
The defence
30.1 With regard to the first set of alleged misrepresentations, they deny being present at the meeting on 5th July, averring that that meeting was between Mr Davies and Ms Best alone. They accordingly deny making any representations whatsoever at that meeting[11];
30.2 With regard to the second set of alleged misrepresentations, they deny that the sending of draft documentation amounted to the making of any representations of any kind[12];
30.3 With regard to the third set of alleged misrepresentations, they admit the making of the 16 Investment Agreements, but deny making any of the alleged representations[13]. Paragraph 15 of the Defence states that:
It is expressly denied that Mr Skeene and Mr Bowers made the alleged or any representations, alternatively actionable representations and/or that [EQ] relied on any such representations. The allegation that any such representation was made on behalf of Mr Skeene and Mr Bowers is embarrassing and denied in any event – [EQ] has nowhere alleged that any person made any such representations on behalf of Mr Skeene and Mr Bowers.
30.4 They also aver that EQ's decision to invest in Para Sky was made on 25 July 2012, so that it could not have relied on any later representations.
30.5 With regard to the Para Sky Plantation and its ownership, they state that Maos Seguras entered into agreements to purchase the plots on or about 29 June 2012, that those agreements have never been cancelled, and that "Maos Seguras has at all material times since 29 June 2012 been the owner or has been entitled to be treated as the owner of the Plantation, and has been entitled to have its ownership recorded on the public register"[14]. They aver that EQ "has purchased 35.2 ha worth of land and .. has 35.2 ha worth of teak trees"[15].
The trust claim
Non-Disclosure
.. An applicant who applies for an interim remedy without notice to the respondent is under a duty to .. disclose fully to the court all matters relevant to the application, including all matters, whether of fact or of law, which are, or may be, adverse to it ..
.. if the duty of full and fair disclosure is not observed, the court may discharge the injunction. It is no excuse for an applicant to say that they were not aware of the importance of the matters they omitted to state. Further, where the duty is not observed, the court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure ..
.. Such is the importance of the duty that, in the event of any substantial breach, the court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given them ..
Commission
43.1 An email dated 5 July 2012, sent to Mr Bowers by Ms Best, "to update you on my meeting with John Davies". That date was, of course, the date on which (according to Mr Davies) the first set of representations were made to Mr Davies by Mr Skeene and Mr Bowers at a meeting at which they too (and not just Ms Best alone) were present. This email, if genuine (and EQ does not presently accept that it is genuine) would therefore be inconsistent at least with the dating of this aspect of EQ's case. It also purports to record Mr Davies describing "the structure and entities in his business model". This model (according to Ms Best's email) involves Taurus appointing "introducers", who would feed leads (ie potential customers) into the Green Retirement Plan pension scheme. Those customers would then be sold one of 2 products: either shares in EQ, which would then invest the funds into Para Sky; or direct investments in Para Sky, with Green Retirement Plan acting as trustee.
43.2 Another email from Ms Best to Mr Bowers, this time dated 9 July 2012, in which Ms Best records Mr Davies as telling her "that he gets 27% to play with and for Money Returns he pays 17% and he gets the remaining 10%, and for Aims (now Yardstick) he pays 20% and you get the remaining 7%". This email (whose genuineness is again not accepted by EQ) records Ms Best as asking Mr Bowers to confirm that he is "happy that we just pay Taurus the full 27% and leave [Mr Davies] to distribute the amount due to his sub agents himself".
43.3 An email dated 3 January 2013 from Mr Davies to Mr Fraser, in which Mr Davies states "I attach our Invoice for Week 25" while attaching an invoice from Taurus to Investment Alternatives Ltd for "commissions due for week commencing 17 December 2012".
..we also need to put procedures in place to monitor funds received into the GFI account for Para Sky and to update Taurus accordingly stop once [Mr Skeene and Mr Bowers] confirm that the relevant land has been transferred to Maos Seguras, we will be in a position to immediately release the relevant commissions since TTI will no longer hold the funds ..
Although this email is discussing a structure not in fact used, in which TTI would be acting as trustee, it points – argues Mr Prentis - to an agreed position (whatever the structure) that commission would only be payable once the relevant land had been transferred. Until that point, the common understanding was that the money should continue to be held on trust. Otherwise, Mr Prentis asks rhetorically, how could the money be repaid, in accordance with GFI's express contractual obligation, if the land was not acquired within 6 months?
.. The practical realities of any case before the court cannot be overlooked. By their very nature ex parte applications usually necessitate the dealing with and taking of instructions in the preparation of repeated drafts in some haste. Particularly in heavy commercial cases, the borderline between material facts and non-material fact may be a somewhat uncertain one while in no way discounting the heavy duty of candour and care that falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths ..
Green Retirement Plan
Mr Whale
65.1 The fact that Mr Whale was disputing the charges against him, and was accordingly to be presumed innocent of those charges;
65.2 The fact that the Para Sky Report was the report of a team, and not just of Mr Whale alone; and
65.3 The fact that the most crucial elements of the Para Sky Report – the alleged cancellation of the purchase and sale agreements and the non-registration of Maos Seguras as owner of the land – were proved by exhibits to the Para Sky Report, and not simply by Mr Whale's testimony;
the disclosure that Mr Whale was facing these contested charges would not (in my judgment) have altered Carr J's eventual decision.
Conclusion
Continuing the injunction and freezing injunction
When an application is made for an interlocutory injunction, in the exercise of the court's discretion an initial question falls for consideration. That is:
(1) Is there a serious question to be tried?
If the answer to that question is, "yes", then two further related questions arise; they are:
(2) Would damages be an adequate remedy for a party injured by the court's grant of, or its failure to grant, an injunction?
(3) If not, where does the "balance of convenience" lie?
The court may grant an application for a [worldwide freezing order] where the following matters are established:
(1) the claimant has a good arguable case;
(2) the claimant has satisfied the court—
(a) that there are no assets or insufficient assets within the jurisdiction to satisfy his claim; and
(b) that there are assets without the jurisdiction; and
(3) there is a real risk of dissipation or secretion of those assets so as to render any judgment which the claimant may obtain nugatory.
In addition, in exercising its discretion the court should consider whether undertakings or provisos, or a combination of both, should be requested or imposed for the purpose of protecting the defendant from oppression and for protecting the position of foreign third parties.
Good arguable case/serious issue to be tried
73.1 As to the first set of alleged mis-representations, it is plain from the contemporary emails that only Ms Best met Mr Davies on 5 July 2012. There is no evidence that Ms Best was speaking on behalf of Mr Skeene and/or Mr Bowers. In any event, the matters relied on do not amount to actionable mis-representations and/or were not relied on;
73.2 As to the second set, the sending of a specimen set of contractual documents cannot amount to an actionable mis-representation. In any event, it was (again) Ms Best who sent the documents, and she was acting for GFI, not Mr Skeene and Mr Bowers personally;
73.3 As to the third set, these were contractual promises by GFI and/or GFIC Title Ltd, not representations by Mr Skeene and/or Mr Bowers. In any event, the first set of signed documents was not sent back until after the initial four investments had been made. This shows beyond doubt that nothing in those documents was relied on in making those initial investments, and strongly suggests that there was similarly no reliance in relation to the later investments. Mr Davies's desire to dispense with TTI, and the lack of any relevant due diligence, show that EQ was prepared to invest without proof of Maos Seguras' title to the land.
73.4 In any event, Mr Davies's own evidence is that the board of EQ made its decision to invest in Para Sky on 25 July 2012, and so cannot have relied on any later representations.
73.5 In any event, the evidence shows that it is "substantially true that Maos Seguras was entitled to be treated as owner of the plantation".
Assets/risk of dissipation/discretion
.. can .. be mainained in force even after a winding up order[30] or a bankruptcy order has been made[31], provided that its purpose is to preserve the assets held by, or for, the defendant, for the creditors as a whole ..
86.1 First, the trust claim necessarily relates to assets claimed to be beneficially owned by EQ. Those assets will not form part of the assets to be dealt with in the various insolvencies. However, there may be some overlap and some uncertainty as to the position. The maintenance of the freezing injunction may therefore help to preserve assets which are properly the subject of the trust claim.
86.2 Secondly, this action involves a claim in fraud: and, under IA86 s 281(3), discharge from bankruptcy would not release Mr Skeene or Mr Bowers from the bankruptcy debt which would arise from that claim, were it to be established. The maintenance of the freezing injunction may therefore help to preserve assets (such as assets acquired after the date of the Bankruptcy Order, in relation to which the Trustee has not given notice under IA86 s 307, or any balance of income not claimed by the Trustee under an Income Payments Order under IA86 s 310).
86.3 Thirdly, it may well be that EQ has a greater incentive and/or has greater resources to ensure the proper application of Mr Skeene's and Mr Bowers' assets than their Trustee in Bankruptcy. In that connection, I note that the evidence indicates that Mr Bassford was appointed Trustee at the instigation of Mr Fraser's company, Investment Alternatives Ltd. The evidence indicates that Mr Fraser has had a long business connection with Mr Skeene and Mr Bowers, and he has provided a witness statement in support of their case. It may perhaps be that Mr Fraser and/or his company may (perfectly properly) be less inclined than EQ to instigate and/or to fund (for the benefit of creditors generally) inquiries into the whereabouts of the assets of Mr Skeene and Mr Bowers and/or into their dealings with their assets. EQ, on the other hand, has a direct incentive to pursue its tracing and other claims, not only as against GFI but also against Mr Skeene and Mr Bowers.
86.4 Fourthly, the document produced on the morning of the second day of the hearing[33] may (I put the matter no higher) indicate the possibility of activity by Mr Skeene and/or Mr Bowers which might (again, I put the matter no higher) have involved some dealing with their assets. The production of this document of itself proves nothing, one way or the other: but it does give rise to a number of questions, which Mr Jones was unable to answer.
Disposition
90.1 I dismiss the application issued on 19 September 2014 by the second and third defendants to set aside the injunction and freezing injunction on the grounds of material non-disclosure, and
90.2 I continue the injunction and freezing injunction granted by Carr J on 8 July 2014 (as varied and most recently extended by the order of HH Judge Seymour QC on 3 October 2014) until trial or further order in the meantime, subject to the variations indicated above.
Note 1 First affidavit, para 6. [Back] Note 2 Particulars of Claim para 3; Defence para 2. [Back] Note 3 Particulars of Claim para 4; Defence para 3. [Back] Note 4 First witness statements (dated 12 September 2014) of Mr Skeene and Mr Bowers. [Back] Note 5 First affidavit, paras 9 and 27-47. [Back] Note 6 First affidavit, paras 48-56. [Back] Note 7 First affidavit, para 57. [Back] Note 8 See eg Edgington v Fitzmaurice (1885) 29 Ch D 459. [Back] Note 9 [1979] Ch. 250 at 268. [Back] Note 10 Particulars of Claim para 18; Defence para 15. [Back] Note 11 Defence paragraph 10. [Back] Note 12 Defence paragraph 11 to 14. [Back] Note 13 Defence paras 15 to 17 [Back] Note 14 Defence paragraphs 21 and 22. [Back] Note 15 Defence para 19 (3). [Back] Note 16 Third witness statement paragraph 9 [Back] Note 17 Third witness statement paragraph 10 [Back] Note 18 See paragraph 19 above. [Back] Note 19 Defence paragraph 12. [Back] Note 20 See Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105, as explained by Lord Browne-Wilkinson in Westdeutsche Bank v Islington LBC [1996] AC 669 at 714-5. [Back] Note 21 I was also referred to the judgment of Jacob J in OMV Supply & Trading AG v Clarke (14 January 1999, unreported), and to the judgment of Christopher Clarke J in Re OJSC Ank Yugraneft [2009] 1 BCLC 298. [Back] Note 22 Transcript page 11 lines 4 to 6. [Back] Note 23 Fourth witness statement paragraphs 5 to 7. [Back] Note 24 Fourth witness statement paragraph 22. [Back] Note 25 Fourth witness statement paragraph 24 [Back] Note 26 First witness statement paragraphs 32 and 33. [Back] Note 27 [1988] 1 WLR 1350 at 1359. [Back] Note 28 See Sidhu v Memory Corp plc [2000] 1 WLR 1443 at 1455E-F, per Robert Walker LJ: cited in paragraph 25.3.6 of theSupreme Court Practice. [Back] Note 29 Senior Courts Act 1981 s 37 (1). [Back] Note 30 Re Claybridge Shipping SA [1997] 1 BCLC 813 [Back] Note 31 Mercantile Group (Europe) AG v Aiyela [1993] FSR 745 at 757-758, per Hobhouse J; affmd [1994] QB 366. [Back] Note 32 [1992] BCLC 746. [Back] Note 33 See paragraph 33 above. [Back] Note 34 Though I record that the Trustee’s representative, who came briefly to court during the hearing, indicated orally that the existence of the injunction had not so far interfered in practice with the Trustee’s discharge of his functions. [Back]