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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Clavis Securities Plc & Ors v Hussain & Ors  EWHC 2003 (Ch) (16 July 2021)
Cite as:  EWHC 2003 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMPANIES COURT (ChD)
IN THE MATTER OF CLAVIS SECURITIES PLC
AND IN THE MATTER OF CLAVIS OPTIONS LIMITED
AND IN THE MATTER OF INTERTRUST MANAGEMENT LIMITED
AND IN THE MATTER OF INTERTRUST CORPORATE SERVICES LIMITED
AND IN THE MATTER OF INTERTRUST DIRECTORS 1 LIMITED
AND IN THE MATTER OF INTERTRUST DIRECTORS 2 LIMITED
Fetter Lane, London, EC4A 1NL
B e f o r e :
| (1) CLAVIS SECURITIES PLC
(2) CLAVIS OPTIONS LIMITED
(3) INTERTRUST MANAGEMENT LIMITED
(4) INTERTRUST CORPORATE SERVICES LIMITED
(5) INTERTRUST DIRECTORS 1 LIMITED
(6) INTERTRUST DIRECTORS 2 LIMITED
(7) PAIVI HELENA WHITAKER
|- and -
|(1) RIZWAN HUSSAIN
(2) DIGITAL ASSET PARTNERS LTD
(3) HIGHBURY INVESTMENTS LIMITED
(4) AMANDA WATSON
(5) ANNABEL WATSON
(6) THE REGISTRAR OF COMPANIES
Ms Charlotte Cooke (instructed by Bryan Cave Leighton Paisner LLP) for the Claimants
The Defendants did not appear and were not represented
Hearing date: 15 July 2021
Crown Copyright ©
Mr David Halpern QC :
i) Should I proceed to hear the claim in the absence of the Defendants and in circumstances where they are disputing the court's jurisdiction?
ii) If so, have the Claimants established that all the steps taken by the Defendants are null and void?
iii) If so, what relief should I grant?
i) C1 is the issuer of the Notes;
ii) C2 acts as post-realisation purchase option holder;
iii) C3 provides corporate services for C1 and C2;
iv) C4 is the Share Trustee of the shares in C1 and C2 pursuant to Share Trust Deeds dated 30 May 2006 and 11 April 2006 respectively and is also the company secretary of C1 and C2; and
v) C5-7 are the directors of C1-2.
"Appointment and removal of trustees
9.1 Power of appointment The statutory power of appointing new or additional trustees as modified under this Deed shall apply to this Deed and the Trusts and shall be exercisable by the person or persons who are for the time being the Trustees.
9.2 Modifications to statutory power The statutory power of appointing new or additional trustees shall be modified as follows:
(a) where new or additional trustees are appointed for the whole or any part or parts of the Trust Fund, the appointor or appointors may appoint any person or persons as trustee or trustees, notwithstanding that such person or persons may be resident, domiciled, carrying on business or (if a body corporate) incorporated outside the United Kingdom, and the receipt of such person or persons for the whole or such part or parts of the Trust Fund as may be paid or transferred to such person or persons pursuant to such appointment shall be a good discharge to any other Trustee or Trustees accordingly;
(b) the statutory power of appointing new trustees shall be exercisable notwithstanding that a trustee remains out of the United Kingdom for more than twelve months; and
(c) the statutory power of appointing additional trustees shall be exercisable notwithstanding that one of the trustees for the time being is a trust corporation.
9.3 Retirement of a Trustee
(a) A Trustee of this Deed may retire at any time without assigning any reason and without being responsible for any costs occasioned by such retirement.
(b) A retiring Trustee shall be discharged from the trusts of this Deed even if only one trustee which is not a trust corporation thereafter is or remains a Trustee under the Trusts.
(c) The retirement of any such Trustee shall not become effective until a successor trustee is appointed, if necessary, so that there shall be a trust corporation or at least one individual to act as Trustee under the Trusts."
i) A resolution removing C4 as Share Trustee and taking receipt of the issued share capital of C1 and C2; and
ii) Resolutions removing C5-7 as directors of C1 and C2.
"we are an entity that is owned by the Islamic Republic of Pakistan and not distinct from the executive organs of the government of the State. Furthermore, we would be deemed to be property of the State Bank of Pakistan".
No evidence was given in support of that proposition. On the same day Mr Hussain had written to say that he disputed the court's jurisdiction but did not say on what grounds. No reasons for disputing the jurisdiction were given by D2 or the Fifth Defendant ("D5"). (It is not clear whether Amanda Watson is the same person as Annabel Watson, but I have assumed that they are not the same person; hence I refer to them as "D4" and "D5".)
"The court should bear in mind when, we are led to believe, there may be a hearing listed in a 3-day window commencing on 14 July 2021. In light of our right to file our application on Friday 16 July 2021, we will not be attending or be represented at this hearing."
Mr Hussain's letter contained a paragraph in almost identical terms.
i) Paragraph 22 states that:
"Mr Hussain informs me that he procured and arranged for [C4] to be appointed as the Share Trustee of the Applicants pursuant to sham [his underlining] share trust deeds … The sham share trust deeds, he states, were designed and intended to give a false impression of the rights and obligations to any third parties."
He exhibits a letter from Mr Hussain dated 21 April which repeats the allegation that the Share Trust Deeds were shams and says that he (Mr Hussain) "designed and led the Clavis Programme".
ii) Paragraph 53(c) states that the directors of C1 and C2 (meaning the Defendants) intend to take steps to redeem some or all of the Notes.
"Plainly the court cannot proceed to substantively hear the Part 8 Claim when it has not first dealt properly and finally with all pending applications."
The absence of the Defendants and the jurisdictional challenge
"Although, therefore, I accept that the court does have the power to permit an application for summary judgment to be made before an outstanding challenge to the jurisdiction has been determined, it seems to me that it will be a very rare case in which the court exercises that power. In general terms, as Rix J says, the price that a claimant must pay for being able to bring foreign defendants before the court is that they have a real opportunity to decide whether or not to submit to its jurisdiction."
In that case Lewison J refused to exercise that power, firstly because there was no formal application for permission and secondly because the claim had not been pursued with due diligence (the first challenge to the jurisdiction had been made more than three months before the hearing).
i) Gloster J had previously given directions for the parties to prepare for an effective hearing of both applications and it was therefore incumbent on the defendant at least to identify the nature of his defence. He said at :
"The suggestion that he did not do so because he did not wish to be taken to have submitted to the jurisdiction of the court is without substance. Instead he adopted a deliberate tactical decision, contrary to the direction made by Gloster J, and (it must be assumed) with full knowledge of the possible consequences. I have no doubt that he did so because he knew perfectly well that he had no defence which could be put forward with any prospect of success."
ii) At  he noted that Lewison J's reasoning was principally concerned with the position of a typical foreign defendant without presence or assets in this jurisdiction and did not apply to a defendant who was resident within the jurisdiction and had assets against which any judgment may be enforced.
i) The relief sought by the Claimants is required as a matter of genuine urgency. On the Claimants' case, the Defendants have purported to seize control of C1 and C2, have had themselves registered at Companies House as directors, secretary and PSC, and have written repeatedly to Noteholders claiming that they are the genuine officers and that C4-7 are the impostors, as well as falsely claiming that serious criminal proceedings have been brought against Ms Whitaker.
ii) I am satisfied that the Claimants have not delayed unduly since 16 April. It was reasonable to write to the Defendants, and, when that failed to produce results, to write to the Registrar of Companies, before issuing these proceedings on 11 June.
iii) For the reasons set out below, the Claimants have a very strong case to which I can see no possible defence.
iv) BCLP sensibly suggested that the challenge to the jurisdiction could be made at this hearing, but it is clear from the letters quoted at paragraphs 14 and 16 above that the Defendants chose to ignore that suggestion. I am satisfied that they have made a tactical decision not to attend or to put forward any arguments either on the jurisdictional challenge or on the merits of the proceedings, and that they are seeking to use the Rules (and in particular the 14-day period within which to issue any challenge to the jurisdiction) to prevent justice from being done.
v) I am satisfied that there is no merit in Highbury's jurisdictional challenge for the following reasons:
a) The allegation that Highbury is owned by the State of Pakistan is implausible and has not been supported by any corroborative evidence.
b) This lack of evidence is especially significant, given that Highbury is a company registered in the Marshall Islands, with the consequence that no information about its shareholders is publicly available.
c) In any event, under s. 14(1) of the State Immunity Act 1978, no immunity is granted to "any entity … which is distinct from the executive organs of the government of the State and capable of suing or being sued". Highbury is plainly such an entity, notwithstanding its bare assertion to the contrary (see paragraph 13 above). As the Privy Council held in La Generale des Carrieres et des Mines v. F G Hemisphere Associates LLC  UKPC 27 at :
"Especially where a separate juridical entity is formed by the State for what are on the face of it commercial or industrial purposes, with its own management and budget, the strong presumption is that its separate corporate status should be respected, and that it and the State forming it should not have to bear each other's liabilities. It will in the Board's view take quite extreme circumstances to displace this presumption."
d) Further, s. 14(2) states that a separate entity is immune only if "the proceedings relate to anything done by it in the exercise of sovereign authority". The test depends on the character of the act and not on its motive or purpose: Tsavliris Salvage (International) Ltd -v- The Grain Board of Iraq  EWHC 612 (Comm), Gross J at . There is no evidence to indicate that the relevant acts done were in the character of an exercise of sovereign authority; Highbury's letter does not even contain an allegation to this effect.
vi) No ground whatsoever has been put forward by Mr Hussain or any of the other defendants for their challenge. Given that the proceedings seek the rectification of the register of a company in England, and that D2 has an address in London (the purported registered office of C1 and C2), it is obvious that England is the appropriate forum.
The substantive issues
"In approaching the fact finding exercise I have given myself a Lucas warning and thus reminded myself that people may not tell the truth for a number of reasons and of the points that (i) if a person has not told the truth about certain matters it does not mean that he or she is not telling the truth about other matters, and (ii) if a person has given an earlier account that is different and found (or admitted) to be untrue it does not follow that the later account is also incorrect (see R v Lucas  QB 720, in particular at 74G and F/H, and R v Middleton  TLR 293)."
The relief sought